S-4/A

   As filed with the Securities and Exchange Commission on May 15, 2002


                                                 Registration No. 333-76550

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- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                ----------------

                          Pre-Effective Amendment


                                   No. 1


                                    to

                                    FORM S-4
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

                                ----------------

                              HOST MARRIOTT, L.P.
             (Exact name of registrant as specified in its charter)

        Delaware                    7011                   52-2095412
    (State or other          (Primary Standard           (IRS Employer
    jurisdiction of              Industrial          Identification Number)
    incorporation or        Classification Code
     organization)                Number)

      For Co-Registrants, see "Table of Co-Registrants" on following page.
                              10400 Fernwood Road
                            Bethesda, Maryland 20817
                                 (301) 380-9000
    (Address, including zip code, telephone number, including area code, of
                   registrant's principal executive offices)

                             Robert E. Parsons, Jr.
                          Executive Vice President and
                            Chief Financial Officer
                              10400 Fernwood Road
                            Bethesda, Maryland 20817
                                 (301) 380-9000
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

                                   Copies to:
         Elizabeth A. Abdoo                         Scott C. Herlihy
 Senior Vice President and General                  Latham & Watkins
              Counsel                     11400 Commerce Park Drive, Suite 200
        10400 Fernwood Road                   Reston, Virginia 20191-1549
      Bethesda, Maryland 20817                       (703) 390-0900
           (301) 380-9000

                                ----------------

   Approximate date of commencement of proposed sale to the public: as soon as
practicable after this Registration Statement becomes effective.

   If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]

   If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

   If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]


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                            Table of Co-Registrants




                                                         Primary
                                          State of       Standard
                                            other       Industrial      IRS
                                        Jurisdiction  Classification  Employer
                 Name                   of Formation   Code Number     Number
                 ----                   ------------- -------------- ----------
                                                            
HMH Rivers, L.P.......................  Delaware           7011      52-2126158
HMH Marina LLC........................  Delaware           7011      52-2095412
HMC SBM Two LLC.......................  Delaware           7011      52-2095412
HMC PLP LLC...........................  Delaware           7011      52-2095412
HMC Retirement Properties, L.P........  Delaware           7011      52-2126159
HMH Pentagon LLC......................  Delaware           7011      52-2095412
Airport Hotels LLC....................  Delaware           7011      52-2095412
Chesapeake Financial Services LLC.....  Delaware           7011      52-2095412
HMC Capital Resources LLC.............  Delaware           7011      52-2095412
YBG Associates LLC....................  Delaware           7011      52-2059377
PRM LLC...............................  Delaware           7011      52-2095412
Host Park Ridge LLC...................  Delaware           7011      52-2095412
Host of Boston, Ltd...................  Massachusetts      7011      59-0164700
Host of Houston, Ltd..................  Texas              7011      52-1874034
Host of Houston 1979..................  Delaware           7011      95-3552476
Philadelphia Airport Hotel LLC........  Delaware           7011      52-2095412
HMC Hartford LLC......................  Delaware           7011      52-2095412
HMH Norfolk LLC.......................  Delaware           7011      52-2095412
HMH Norfolk, L.P......................  Delaware           7011      52-2039042
HMC Park Ridge LLC....................  Delaware           7011      52-2095412
HMC Partnership Holdings LLC..........  Delaware           7011      52-2095412
HMC Suites LLC........................  Delaware           7011      52-2095412
HMC Suites Limited Partnership........  Delaware           7011      52-1632307
Wellsford-Park Ridge HMC Hotel Limited
 Partnership..........................  Delaware           7011      52-6323494
City Center Interstate Partnership
 LLC..................................  Delaware           7011      52-2095412
Farrell's Ice Cream Parlor Restaurants
 LLC..................................  Delaware           7011      52-2095412
HMC Burlingame LLC....................  Delaware           7011      52-2095412
HMC California Leasing LLC............  Delaware           7011      52-2095412
HMC Capital LLC.......................  Delaware           7011      52-2095412
HMC Grand LLC.........................  Delaware           7011      52-2095412
HMC Hotel Development LLC.............  Delaware           7011      52-2095412
HMC Mexpark LLC.......................  Delaware           7011      52-2095412
HMC Polanco LLC.......................  Delaware           7011      52-2095412
HMC NGL LLC...........................  Delaware           7011      52-2095412
HMC OLS I L.P.........................  Delaware           7011      52-2095412
HMC RTZ Loan I LLC....................  Delaware           7011      52-2095412
HMC RTZ II LLC........................  Delaware           7011      52-2095412
HMC Seattle LLC.......................  Delaware           7011      52-2095412
HMC Swiss Holdings LLC................  Delaware           7011      52-2095412
HMC Waterford LLC.....................  Delaware           7011      52-2095412
HMH Restaurants LLC...................  Delaware           7011      52-2095412
HMH Rivers LLC........................  Delaware           7011      52-2095412
HMH WTC LLC...........................  Delaware           7011      52-2095412
HMP Capital Ventures LLC..............  Delaware           7011      52-2095412
HMP Financial Services LLC............  Delaware           7011      52-2095412
Host La Jolla LLC.....................  Delaware           7011      52-2095412
City Center Hotel Limited
 Partnership..........................  Minnesota          7011      41-1449758
MFR of Illinois LLC...................  Delaware           7011      52-2095412
MFR of Vermont LLC....................  Delaware           7011      52-2095412
MFR of Wisconsin LLC..................  Delaware           7011      52-2095412
PM Financial LLC......................  Delaware           7011      52-2095412
PM Financial LP.......................  Delaware           7011      52-2131022





                            Table of Co-Registrants




                                                        Primary
                                                        Standard
                                     State of other    Industrial      IRS
                                     Jurisdiction of Classification  Employer
                Name                    Formation     Code Number     Number
                ----                 --------------- -------------- ----------
                                                           
HMC Chicago LLC.....................    Delaware          7011      52-2095412
HMC HPP LLC.........................    Delaware          7011      52-2095412
HMC Desert LLC......................    Delaware          7011      52-2095412
HMC Hanover LLC.....................    Delaware          7011      52-2095412
HMC Diversified LLC.................    Delaware          7011      52-2095412
HMC Properties I LLC................    Delaware          7011      52-2095412
HMC Potomac LLC.....................    Delaware          7011      52-2095412
HMC East Side II LLC................    Delaware          7011      52-2095412
HMC Manhattan Beach LLC.............    Delaware          7011      52-2095412
Chesapeake Hotel Limited
 Partnership........................    Delaware          7011      52-1373476
HMH General Partner Holdings LLC....    Delaware          7011      52-2095412
HMC IHP Holdings LLC................    Delaware          7011      52-2095412
HMC OP BN LLC.......................    Delaware          7011      52-2095412
S.D. Hotels LLC.....................    Delaware          7011      52-2095412
HMC Gateway LLC.....................    Delaware          7011      52-2095412
HMC Pacific Gateway LLC.............    Delaware          7011      52-2095412
MDSM Finance LLC....................    Delaware          7011      52-2065959
HMC Market Street LLC...............    Delaware          7011      52-2095412
New Market Street LP................    Delaware          7011      52-2131023
Times Square LLC....................    Delaware          7011      52-2095412
Times Square GP LLC.................    Delaware          7011      52-2095412
HMC Atlanta LLC.....................    Delaware          7011      52-2095412
Ivy Street LLC......................    Delaware          7011      52-2095412
HMC Properties II LLC...............    Delaware          7011      52-2138453
Santa Clara HMC LLC.................    Delaware          7011      52-2095412
HMC BCR Holdings LLC................    Delaware          7011      52-2095412
HMC Palm Desert LLC.................    Delaware          7011      52-2095412
HMC Georgia LLC.....................    Delaware          7011      52-2095412
HMC SFO LLC.........................    Delaware          7011      52-2095412
Market Street Host LLC..............    Delaware          7011      52-2091669
HMC Property Leasing LLC............    Delaware          7011      52-2095412
HMC Host Restaurants LLC............    Delaware          7011      52-2095412
Durbin LLC..........................    Delaware          7011      52-2095412
HMC HT LLC..........................    Delaware          7011      52-2095412
HMC JWDC GP LLC.....................    Delaware          7011      52-2095412
HMC JWDC LLC........................    Delaware          7011      52-2095412
HMC OLS I LLC.......................    Delaware          7011      52-2095412
HMC OLS II L.P......................    Delaware          7011      52-2095412
HMT Lessee Parent LLC...............    Delaware          7011      52-2095412
HMC/Interstate Ontario, L.P.........    Delaware          7011      52-2055809
HMC/Interstate Manhattan Beach,
 L.P................................    Delaware          7011      52-2033807
Host/Interstate Partnership, L.P....    Delaware          7011      52-1948895
HMC/Interstate Waterford, L.P.......    Delaware          7011      52-2015556
Ameliatel...........................    Florida           7011      58-1861162
HMC Amelia I LLC....................    Delaware          7011      52-2095412
HMC Amelia II LLC...................    Delaware          7011      52-2095412
Rockledge Hotel LLC.................    Delaware          7011      52-2095412
Fernwood LLC........................    Delaware          7011      52-2095412




Prospectus

                       Offer to Exchange all Outstanding

                     9 1/2% Series H Senior Notes due 2007

                                      for

                     9 1/2% Series I Senior Notes Due 2007

                                       of

                              HOST MARRIOTT, L.P.

   We are offering to exchange all of our outstanding 9 1/2% Series H senior
notes for our 9 1/2% Series I senior notes. The terms of the Series I senior
notes are substantially identical to the terms of the Series H senior notes
except that the Series I senior notes are registered under the Securities Act
of 1933, as amended, and are therefore freely transferrable. The Series H
senior notes were issued on December 14, 2001 and, as of the date of this
prospectus, an aggregate principal amount of $450 million is outstanding.

 Please consider the following:          Information about the Series I
                                         senior notes:

 . Our offer to exchange the notes       . The notes will mature on January
   expires at 5:00 p.m.,                   15, 2007.
   New York City time, on June 18,
   2002. However, we may extend the      . We will pay interest on the notes
   offer.                                  at the rate of 9 1/2% per year

                                           payable on January 15 and July 15,
 . You should carefully review the         commencing July 15, 2002.
   procedures for tendering the
   Series H senior notes beginning on    . The notes are equal in right of
   page 2 of this prospectus. If you       payment to all of our
   do not follow those procedures, we      unsubordinated indebtedness and
   may not exchange your Series H          senior to all of our subordinated
   senior notes for Series I senior        obligations.
   notes.
                                         . Subsidiaries of ours have
 . We will not receive any proceeds        guaranteed the notes. These
   from the exchange offer.                subsidiaries comprise all of our
                                           subsidiaries that also guarantee
 . If you fail to tender your Series       our credit facility and certain of
   H senior notes, you will continue       our other indebtedness.
   to hold unregistered securities
   and your ability to transfer them    .  As security for the notes, we have
   could be adversely affected.            pledged the common equity
                                           interests of those of our
 . There is currently no public            subsidiaries whose interests are
   market for the Series I                 also pledged as security under our
   senior notes. We do not intend to       bank credit facility and certain
   list the Series I senior notes on       of our other indebtedness.
   any securities exchange.
   Therefore, we do not anticipate
   that an active public market for
   these notes will develop.


   Please see "Risk Factors" beginning on page 10 of this prospectus for a
discussion of certain factors that you should consider before participating in
this exchange offer.


   Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.

               The date of this prospectus is May 17, 2002.



                                    SUMMARY

   In this offering memorandum, unless identified otherwise, the words "Host
Marriott, L.P.", the "operating partnership", "we", "our", "ours" and "us"
refer only to Host Marriott, L.P. (and, where appropriate, our subsidiaries)
and not to any of the initial purchasers. The following summary contains basic
information about our business and this offering. It likely does not contain
all the information that is important to you and to your investment decision.
For a more complete understanding of the offering, we encourage you to read
this entire document and the other documents to which we refer.

                              Host Marriott, L.P.

   We are a Delaware limited partnership whose sole general partner is Host
Marriott Corporation, a Maryland corporation ("Host REIT"). We were formed in
connection with a series of transactions pursuant to which the former Host
Marriott Corporation, a Delaware corporation ("Host Marriott"), and its
subsidiaries converted their business operations to qualify as a real estate
investment trust or "REIT". We refer to this conversion in this offering
memorandum as the "REIT conversion". As a result of the REIT conversion, the
hotel ownership business formerly conducted by Host Marriott and its
subsidiaries is conducted by and through the operating partnership and its
subsidiaries, and Host Marriott was merged with and into Host REIT. Host REIT
has elected, beginning January 1, 1999, to be treated as a REIT for federal
income tax purposes.

   Our consolidated assets principally consist of 122 full-service hotel
properties containing approximately 58,000 rooms, located throughout North
America. Our hotels generally are operated under Marriott, Ritz-Carlton, Four
Seasons, Hyatt, Hilton, and Swissotel brand names. These brand names are among
the most respected and widely recognized brand names in the lodging industry.
Marriott International, Inc. ("Marriott International") manages or franchises
110 of these properties as Marriott or Ritz-Carlton branded hotels.


   Our primary business objective is to provide superior total returns to our
unitholders through a combination of distributions and appreciation in unit
price and to increase asset values. We intend to focus on increasing asset
values by selectively improving and expanding our hotels. We also intend to
selectively acquire additional existing and newly developed upscale and luxury
full-service hotels in targeted markets, primarily focusing on downtown hotels
in core business districts in major metropolitan markets and select airport and
resort/convention locations. In addition, we endeavor to achieve long-term
sustainable growth in Funds from Operations per unit, as defined by the
National Association of Real Estate Investment Trusts (i.e., net income
computed in accordance with generally accepted accounting principles, excluding
gains or losses from sales of properties, plus real estate-related depreciation
and amortization, and after adjustments for unconsolidated partnerships and
joint ventures), and cash flow. Given the current economic recession, we are
focused in the near term on maintaining appropriate liquidity by working with
the managers of our hotels to reduce property level costs, temporarily
suspending non-essential capital expenditures and limiting new investments to
those that lower our overall leverage.

   Our principal executive offices are located at 10400 Fernwood Road,
Bethesda, Maryland 20817-1109. Our telephone number is (301) 380-9000.

                              RECENT DEVELOPMENTS

Effects of September 11, 2001 Terrorist Attacks

   On September 11, 2001, several aircraft that were hijacked by terrorists
destroyed the World Trade Center Towers in New York City and damaged the
Pentagon in northern Virginia. As a result of the attacks and the collapse of
the World Trade Center Towers, our New York World Trade Center Marriott hotel
was destroyed. In addition, we sustained considerable damage to a second
property, the New York Marriott Financial Center hotel.

                                       1



   Through our manager, Marriott International, we have both property and
business interruption insurance for our two affected hotels with a major
insurer. We have restored the New York Marriott Financial Center to operating
condition and reopened the hotel on January 7, 2002. We are required under our
ground lease with the Port Authority of New York and New Jersey to rebuild the
New York World Trade Center Marriott hotel, and our insurance provides for
rebuilding of the asset at replacement cost. Our insurer is a large insurance
company with an A+ A.M. Best Rating and has accepted responsibility for the
claim. In addition we are obligated to make payments on behalf of the property,
including ground rent and debt service. We are also liable for severance
payments for employees of both hotels as well as other operating liabilities.
While we expect to receive sufficient insurance proceeds to cover all or a
substantial portion of these and other costs at both hotels and reimbursement
of lost profits, we cannot currently determine the total amount or timing of
those payments.


   Subsequent to the attacks, the Federal Aviation Administration closed United
States airspace to commercial traffic for several days. The aftermath of these
events, together with an economic recession, has adversely affected our
operations. These effects are described in greater detail below in "Recent
Industry Trends" and the "Recent Events" section of "Management's Discussion
and Analysis of Results of Operations and Financial Condition".


Recent Industry Trends

   As a result of the effects of the economic recession and the September 11,
2001 terrorist attacks, the lodging industry has experienced a significant
decline in business caused by a reduction in travel for both business and
pleasure. We currently expect that the decline in operating levels will last
into 2002.

   Room revenues at our hotels decreased during 2001 as a result of the
continuing economic recession. For the year ended December 31, 2001, our
comparable revenues per available room, or "RevPAR", decreased 13.0% due to a
decrease in occupancy of 7.7 percentage points to 70.0% combined with a decline
in the average room rate of 3.5% to $151.02. For the first quarter of 2002
RevPAR decreased 12.3% due to a decrease in occupancy of 2.4 percentage points
to 70.9% combined with a decline in the average room rate of 9.4% to $148.12.


   During the four-week period subsequent to September 11, 2001, our hotels
recorded average weekly occupancy rates of 38% to 63%. During that period, we
had a very high level of large group cancellations, which represented a loss of
approximately $70 million in future revenue, primarily affecting our luxury and
larger convention hotels. This period was not representative of the remainder
of the fourth quarter. However, our results from operations for the fourth
quarter of 2001 did reflect a 28.3% decline in RevPAR when compared to the
fourth quarter of 2000. We have been actively working with the managers of our
hotels to reduce the operating costs of our hotels as well as to provide
economic incentives to individuals and business travelers in selected markets
to increase demand. In addition, based on our assessment of the current
operating environment and in order to conserve capital, we have reduced or
suspended all non-essential capital expenditure projects.


   As a result of a gradual return to more normal levels of business, we have
begun to see modest improvements in occupancy and average room rates, though
they remain below prior year levels. However, our fourth quarter results were
significantly lower than the fourth quarter of 2000. Accordingly, the Board of
Directors of Host REIT, our general partner, did not declare a dividend on Host
REIT's common stock for the fourth quarter of 2001. Our current expectations
for our future business are described in greater detail below in "Management's
Discussion and Analysis of Results of Operations and Financial Condition".


   Due to the changes in the insurance markets arising prior to September 11,
2001 and the effects of the terrorist attacks on September 11, 2001, it has
become more difficult and more expensive to obtain insurance on our hotels. The
property insurance policy covering most of our Marriott and Ritz-Carlton-
managed properties expired May 7, 2001. Accordingly, the manager of these
properties, Marriott International, whose obligation it is to secure this
insurance, has obtained a replacement policy for these properties through April
1, 2003. We believe the coverage under this policy is generally in an amount
and covering such risk as is carried by companies owning similar properties to
ours. The replacement policy, however, provides only limited coverage against
acts of terrorism.


                                       2



   For certain of our Marriott-managed properties that have mortgage debt, the
first $500 million of our current insurance coverage is provided by a carrier
with a rating from Standard & Poors of AA- and from A.M. Best of A+XV. Three of
our loan agreements, representing debt of approximately $451 million related to
six hotel properties, require a minimum rating of AA from Standard & Poors. We
are in discussions with these lenders with regard to this requirement, but
cannot provide assurance that each of these lenders will be satisfied with the
AA- rating level of our insurance provider. While we expect to be able to
satisfactorily resolve these discussions, if we are unable to obtain insurance
coverage that complies with the covenants in these loan agreements or if the
lenders are unwilling or unable to amend or waive these covenants, we might be
required to take further actions to resolve these issues.


Compliance with the Terms of our Indebtedness

   As a result of the effects on our business of the economic recession and the
September 11, 2001 terrorist attacks, we entered into an amendment to our bank
credit facility, effective November 19, 2001, which among other things:


  .  adjusts certain financial covenants so as to require us to meet less
     stringent levels in respect of (i) a minimum consolidated interest
     coverage ratio and a minimum unsecured interest coverage ratio until
     September 6, 2002 and (ii) a maximum leverage ratio through August 15,
     2002;

  .  suspends until September 6, 2002 the minimum consolidated fixed charge
     coverage ratio test that we must meet;

  .  limits draws under the revolver portion of our bank credit facility to
     (i) $50 million in the first quarter of 2002 and (ii) up to $25 million
     in the second quarter of 2002 (but only if draws in the second quarter
     of 2002 do not cause the aggregate amount drawn in 2002 and then
     outstanding to exceed $25 million) and

  .  increases the interest rate based on higher leverage levels.

   In addition, the amendment imposes restrictions and requirements through
August 15, 2002 which include, among others:

  .  restricting our ability to pay distributions on our equity securities
     and convertible debt obligations due to Host REIT relating to its QUIPs,
     unless projections indicate such payment is necessary to maintain Host
     REIT's status as a REIT and/or unless we are below certain leverage
     levels;

  .  restricting our ability to incur additional indebtedness and requiring
     that we apply all net proceeds of permitted incurrences of indebtedness
     to repay outstanding amounts under the bank credit facility;

  .  requiring us to apply all proceeds from capital contributions to us or
     from sales of equity by us or Host REIT to repay outstanding amounts
     under the bank credit facility;

  .  requiring us to use all proceeds from the sale of assets (other than the
     Vail Marriott Mountain Resort in Vail, Colorado) to repay indebtedness
     under the bank credit facility;

  .  restricting our ability to make acquisitions and investments unless the
     asset to be acquired has a leverage ratio of 3.5 to 1.0 or below;

  .  restricting our investments in subsidiaries; and

  .  restricting our capital expenditures.

   The amendment also requires us (i) to retain in escrow the casualty
insurance proceeds that we receive from policies covering the New York World
Trade Center Marriott and the New York Marriott Financial Center until such
proceeds are applied toward the restoration of the New York Marriott Financial
Center and the construction of a new hotel to replace the New York World Trade
Center Marriott, or (ii) to apply such insurance proceeds to the payment of
amounts due to certain third parties, including the New York Trade Center
Marriott ground lessor, mortgage lender and Marriott International as manager.
Any proceeds (other than business interruption insurance proceeds) not so used
would be used to repay amounts outstanding under

                                       3


the bank credit facility. The amendment also allows us to include business
interruption proceeds that we receive from insurance coverage on the New York
World Trade Center Marriott and the New York Marriott Financial Center hotels
in our calculation of consolidated EBITDA for purposes of our financial
covenants.

   We are currently in compliance with the terms and restrictive covenants of
our bank credit facility. As a result of entering into this amendment, and
obtaining the relief from the financial covenants described above, we expect to
remain in compliance with our bank credit facility through at least August 15,
2002, the date after which our maximum leverage ratio will return to the level
that was in effect prior to this amendment. We anticipate that, if adverse
operating conditions continue at currently forecasted levels, we will not be
able to comply with the leverage ratio applicable after August 15, 2002 or
other financial tests applicable at the end of our third quarter of 2002. If we
fail to comply with the leverage ratio or any other covenant of the bank credit
facility, we would be in default under the bank credit facility.

   The proceeds from the offering of Series H senior notes and the sale of the
Pittsburgh Marriott were used to repay the outstanding balance under the credit
facility. As of March 31, 2002, no amounts were outstanding under the credit
facility. We anticipate that if we decide to redraw the amounts available under
the bank credit facility, we would have to refinance or repay our bank credit
facility or obtain another amendment from our lenders to adjust the leverage
ratio applicable after August 15, 2002 and, possibly, other financial covenants
applicable at the end of our third quarter of 2002. We intend to amend or
replace the bank credit facility prior to August 15, 2002. There can be no
assurance that we will be able to amend or replace the bank credit facility on
terms any more favorable than those currently in effect, if at all. Any default
under the bank credit facility that results in an acceleration of its final
stated maturity thereof could constitute an event of default under the
indenture with respect to all outstanding series of senior notes issued
thereunder, including the Series I senior notes offered hereby, as well as
under the indentures pursuant to which the other senior notes were issued.


   Under the indenture pursuant to which nearly all of our outstanding senior
notes were issued, we and our restricted subsidiaries are generally prohibited
from incurring additional indebtedness unless, at the time of such incurrence,
we would satisfy the requirements set forth in the "Limitations on Incurrence
of Indebtedness and Issuance of Disqualified Stock" covenant set forth in
"Description of Series I Senior Notes". One of these requirements is that,
after giving effect to any such new incurrence, on a pro forma basis, our
consolidated coverage ratio cannot be less than or equal to 2.0 to 1.0. As a
result of the effects on our business of the economic recession and the events
of September 11, 2001, we anticipate that any consolidated coverage ratio that
is calculated under the indenture after the end of our second quarter 2002, may
be less than or equal to 2.0 to 1.0. If this occurs, then we will be prohibited
from incurring indebtedness and from issuing disqualified stock under the
indenture other than the indebtedness that we and our restricted subsidiaries
are specifically permitted to incur under paragraph 4 of the "Limitation on
Incurrences of Indebtedness and Issuance of Disqualified Stock" covenant set
forth in "Description of Series I Senior Notes". Our failure to maintain a
consolidated coverage ratio of greater than 2.0 to 1.0 could limit our ability
to engage in activities that may be in our long-term best interest.


Ratings Downgrade; Rating on Series I Senior Notes

   Our Series A, Series B, Series C, Series E and Series G senior notes, as
well as certain of our other securities, are rated by Moody's Investors
Service, Inc. and Standard & Poor's Ratings Services. As a result of the
negative effects that the September 11, 2001 terrorist attacks have had on the
travel and lodging industry, Moody's and Standard & Poor's downgraded all of
our outstanding senior notes, including the Series H senior notes for which the
Series I senior notes are to be exchanged, from Ba2 to Ba3 and BB to BB-,
respectively. We believe both rating agencies will give the Series I senior
notes the same credit rating that they give our other outstanding senior notes.
We believe that the recent downgrade of our credit rating, as well as any
further downgrade that may subsequently occur, will likely adversely affect our
cost of capital.


   We can make no assurance with regard to the new ratings that the rating
agencies will assign to the Series I senior notes or any other of our rated
securities.

                                       4



                               THE EXCHANGE OFFER

  Securities to be exchanged........    On December 14, 2001, we issued $450
                                        million in aggregate principal amount
                                        of Series H senior notes in a
                                        transaction exempt from the
                                        registration requirements of the
                                        Securities Act of 1933. The terms of
                                        the Series I senior notes and the
                                        Series H senior notes are substantially
                                        identical in all material respects,
                                        except that the Series I senior notes
                                        will be freely transferable by the
                                        holders thereof except as otherwise
                                        provided in this prospectus.

  The exchange offer................    $1,000 principal amount of Series I
                                        senior notes in exchange for each
                                        $1,000 principal amount of Series H
                                        senior notes. As of the date of this
                                        prospectus, Series H senior notes
                                        representing $450 million in aggregate
                                        principal amount are outstanding.

  Registration Rights Agreement.....    We sold the Series H senior notes on
                                        December 14, 2001 in a private
                                        placement in reliance on Section 4(2)
                                        of the Securities Act. The Series H
                                        senior notes were immediately resold by
                                        their initial purchasers in reliance on
                                        Securities Act Rule 144A. In connection
                                        with the sale, we entered into a
                                        registration rights agreement with the
                                        initial purchasers requiring us to make
                                        this exchange offer. Under the
                                        registration rights agreement, we are
                                        required to cause the registration
                                        statement of which the prospectus forms
                                        a part to become effective on or before
                                        the 180th day following the date on
                                        which we issued the Series H senior
                                        notes and we are obligated to
                                        consummate the exchange offer on or
                                        before the 210th day following the
                                        issuance of the Series H senior notes.

  Expiration date...................    Our exchange offer will expire at 5:00
                                        p.m., New York City time, June 18,
                                        2002, or at a later date and time to
                                        which we may extend it.



  Withdrawal........................
                                        You may withdraw a tender of Series H
                                        senior notes pursuant to our exchange
                                        offer at any time before 5:00 p.m., New
                                        York City time, on June 18, 2002, or
                                        such later date and time to which we
                                        extend the offer. We will return any
                                        Series H senior notes that we do not
                                        accept for exchange for any reason as
                                        soon as practicable after the
                                        expiration or termination of our
                                        exchange offer.



                                       5


  Interest on the Series I senior
  notes and Series H senior notes...    Interest on the Series I senior notes
                                        will accrue from the date of the
                                        original issuance of the Series H
                                        senior notes or from the date of the
                                        last payment of interest on the Series
                                        H senior notes, whichever is later. We
                                        will not pay interest on Series H
                                        senior notes tendered and accepted for
                                        exchange.

  Conditions to our exchange
  offer.............................    Our exchange offer is subject to
                                        customary conditions which are
                                        discussed in the section of this
                                        prospectus entitled "The Exchange
                                        Offer." As described in that section,
                                        we have the right to waive some of the
                                        conditions.


  Procedures for tendering Series H
  senior notes......................    We will accept for exchange any and all
                                        Series H senior notes which are
                                        properly tendered (and not withdrawn)
                                        in the exchange offer prior to 5:00
                                        p.m., New York City time, on June 18,
                                        2002. The Series I senior notes issued
                                        pursuant to our exchange offer will be
                                        delivered promptly following the
                                        expiration date.


                                        If you wish to accept our exchange
                                        offer, you must complete, sign and date
                                        the letter of transmittal, or a copy,
                                        in accordance with the instructions
                                        contained in this prospectus and
                                        therein, and mail or otherwise deliver
                                        the letter of transmittal, or the copy,
                                        together with the Series H senior notes
                                        and all other required documentation,
                                        to the exchange agent at the address
                                        set forth in this prospectus. If you
                                        are a person holding Series H senior
                                        notes through the Depository Trust
                                        Company, or "DTC", and wish to accept
                                        our exchange offer, you may do so
                                        pursuant to the DTC's Automated Tender
                                        Offer Program, or "ATOP", by which you
                                        will agree to be bound by the letter of
                                        transmittal. By executing or agreeing
                                        to be bound by the letter of
                                        transmittal, you will represent to us
                                        that, among other things:

                                        . the Series I senior notes that you
                                          acquire pursuant to the exchange
                                          offer are being obtained by you in
                                          the ordinary course of your business,
                                          whether or not you are the registered
                                          holder of the Series H senior notes;

                                        . you are not engaging in and do not
                                          intend to engage in a distribution of
                                          Series I senior notes;

                                        . you do not have an arrangement or
                                          understanding with any person to
                                          participate in a distribution of
                                          Series I senior notes; and

                                        . you are not our "affiliate," as
                                          defined under Securities Act Rule
                                          405.

                                       6



                                        Under the registration rights agreement
                                        we may be required to file a "shelf"
                                        registration statement for a continuous
                                        offering pursuant to Rule 415 under the
                                        Securities act of 1933 in respect of
                                        the Series H senior notes, if:

                                        . we determine that we are not
                                          permitted to effect the exchange
                                          offer as contemplated by this
                                          prospectus because of any change in
                                          law or Securities and Exchange
                                          Commission policy; or

                                        . we have commenced and not consummated
                                          the exchange offer with 210 days
                                          following the date on which we issued
                                          the Series H senior notes for any
                                          reason.

  Exchange agent....................    HSBC Bank USA is serving as exchange
                                        agent in connection with the exchange
                                        offer.

  Federal income tax
  considerations....................    We believe the exchange of Series H
                                        senior notes for Series I senior notes
                                        pursuant to our exchange offer will not
                                        constitute a sale or an exchange for
                                        federal income tax purposes.

  Effect of not tendering...........    If you do not tender your Series H
                                        senior notes or if you do tender them
                                        but they are not accepted by us, your
                                        Series H senior notes will continue to
                                        be subject to the existing restrictions
                                        upon transfer. Except for our
                                        obligation to file a shelf registration
                                        statement under the circumstances
                                        described above, we will have no
                                        further obligation to provide for the
                                        registration under the Securities Act
                                        of Series H senior notes.

  Use of proceeds...................    We will not receive any cash proceeds
                                        from the issuance of the registered
                                        notes.

                                        Ratio of Earnings to Fixed Charges

                                        In the Selected Financial Data table on
                                        page 32, we present the ratio of
                                        earnings to fixed charges on a
                                        historical basis for the last five
                                        years and the first twelve weeks of
                                        2002 and 2001. As Host Marriott is our
                                        predecessor, we consider the historical
                                        financial information of Host Marriott
                                        for periods prior to the REIT
                                        conversion to be our historical
                                        financial information.


                                       7


                           THE SERIES I SENIOR NOTES

   The summary below describes the principal terms of the Series I senior
notes. Certain of the terms and conditions described below are subject to
important limitations and exceptions. For a more detailed description of the
terms and conditions of the Series I senior notes, see the section entitled
"Description of Series I Senior Notes".

Issuer........................    Host Marriott, L.P.

Securities Offered............    $450,000,000 aggregate principal amount of 9
                                  1/2% Series I senior notes due 2007.

Maturity......................    January 15, 2007.

Interest Rate.................    9 1/2% per year (calculated using a 360-day
                                  year).

Interest Payment Dates........    Payable semi-annually in arrears on January
                                  15 and July 15 of each year, beginning on
                                  July 15, 2002.

Ranking.......................    The Series I senior notes are equal in right
                                  of payment with all of our unsubordinated
                                  indebtedness and senior to all our
                                  subordinated obligations. For further
                                  information on ranking, see "Risk Factors--
                                  The Series I senior notes effectively will be
                                  junior in right of payment to some other
                                  liabilities" and "Description of Series I
                                  Senior Notes".

                                  As of March 31, 2002, as adjusted for the
                                  transactions set forth in the section "Pro
                                  Forma Financial Information of Host Marriott,
                                  L.P.", we estimate that we and our
                                  subsidiaries would have had $5.6 billion of
                                  senior debt, of which $2.3 billion would have
                                  been secured by mortgage liens on certain of
                                  our hotel properties and related assets and
                                  those of our restricted subsidiaries.


Guarantors....................    The Series I senior notes are guaranteed by
                                  100 of our direct and indirect subsidiaries,
                                  representing all of our subsidiaries that
                                  have also guaranteed our bank credit facility
                                  and our other indebtedness. For more detail,
                                  see the section "Risk Factors" under the
                                  heading "The Series I senior notes
                                  effectively will be junior in right of
                                  payment to some other liabilities". The
                                  guarantees may be released under certain
                                  circumstances. We are not generally required
                                  to cause future subsidiaries to become
                                  guarantors unless they secure our bank credit
                                  facility or our other indebtedness.

Security......................    The Series I senior notes are secured by a
                                  pledge of the common equity interests of
                                  certain of our direct and indirect
                                  subsidiaries, which common equity interests
                                  also secure, on an equal and ratable basis,
                                  our bank credit facility and approximately
                                  $2.8 billion of other outstanding senior
                                  notes, and will secure certain future
                                  unsubordinated indebtedness

                                       8



                                  ranking equal in right of payment with the
                                  Series I senior notes. For more detail, see
                                  the section "Risk Factors" under the heading
                                  "The Series I senior notes effectively will
                                  be junior in right of payment to some other
                                  liabilities".

Optional Redemption...........    The Series I senior notes will be redeemable
                                  at our option at any time, in whole but not
                                  in part, for 100% of their principal amount,
                                  plus any make-whole premium and any accrued
                                  and unpaid interest. For more datails, see
                                  the section "Description of Series I Senior
                                  Notes" under the heading "Optional
                                  Redemption".

Mandatory Offer to                If we sell certain assets or undergo certain
Repurchase....................    kinds of changes of control, we must offer to
                                  repurchase the Series I senior notes as
                                  described in the section "Description of
                                  Series I Senior Notes" under the heading
                                  "Covenants--Repurchase of Notes at the Option
                                  of the Holder upon a Change of Control
                                  Triggering Event".

Basic Covenants of the            The indenture governing the Series I senior
Indenture.....................    notes, among other things, restricts our
                                  ability and the ability of our restricted
                                  subsidiaries to:

                                  .  incur additional indebtedness;

                                  .  pay dividends on, redeem or repurchase our
                                     equity interests;

                                  .  make investments;

                                  .  permit payment or dividend restrictions on
                                     certain of our subsidiaries;

                                  .  sell assets;

                                  .  in the case of our restricted
                                     subsidiaries, guarantee indebtedness;

                                  .  create certain liens; and

                                  .  sell certain assets or merge with or into
                                     other companies.

                                  All of these limitations are subject to
                                  important exceptions and qualifications
                                  described in the section "Description of
                                  Series I Senior Notes" under the heading
                                  "Covenants".

                                       9


                                  RISK FACTORS

   You should carefully consider the following risk factors, in addition to the
other information contained in this prospectus, before deciding to tender
Series H senior notes in the exchange offer.

Series H senior notes outstanding after the exchange offer will not have
registration rights.

   If you do not exchange your Series H senior notes for Series I senior notes
pursuant to the exchange offer, your Series H senior notes will continue to be
subject to the restrictions on transfer of the Series H notes. In general, you
may not offer to sell Series H senior notes unless they are registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to the registration requirements of the Securities Act and
applicable state securities laws. If you are a broker-dealer that receives
Series I senior notes for your account in exchange for Series H senior notes,
where those Series H senior notes were acquired by you as a result of market-
making activities or other trading activities, you must acknowledge that you
will deliver a prospectus in connection with any resale of those Series I
senior notes.

   We have substantial leverage. We have now, and after the exchange offer we
will continue to have, a significant amount of indebtedness. Our substantial
indebtedness could have important consequences. It currently requires us to
dedicate a substantial portion of our cash flow from operations to payments on
our indebtedness, which reduces the availability of our cash flow to fund
working capital, capital expenditures, expansion efforts, distributions to our
partners and other general purposes. Additionally, it could:


  .  make it more difficult for us to satisfy our obligations with respect to
     the Series I senior notes;

  .  limit our ability in the future to undertake refinancings of our debt or
     obtain financing for expenditures, acquisitions, development or other
     general business purposes on terms and conditions acceptable to us, if
     at all; or

  .  affect adversely our ability to compete effectively or operate
     successfully under adverse economic conditions.

   If our cash flow and working capital were not sufficient to fund our
expenditures or service our indebtedness, we would have to raise additional
funds through:

  .  the sale of our equity;


  .  the incurrence of additional permitted indebtedness; or


  .  the sale of our assets.

   We cannot assure you that any of these sources of funds would be available
to us or, if available, would be on terms that we would find acceptable or in
amounts sufficient for us to meet our obligations or fulfill our business plan.
For example, under the terms of our bank credit facility, the proceeds from
these activities must be used to repay amounts outstanding and may not be
otherwise available for our use.

   The interest rate on the Series I senior notes is fixed, which will not
allow us to take advantage of periods of lower interest. Due to the current
economic recession and given interest costs of the Series I senior notes, we
may have periods where we do not have sufficient liquidity to make the required
interest payments. Additionally, the increased interest costs could adversely
affect our compliance with the leverage ratio under the bank credit facility.
An acceleration of outstanding amounts under the bank credit facility due to a
default thereunder will result in a default under the indenture. The effect on
our earnings of the higher interest costs may cause us to fail to comply with
the terms of the bank credit facility and the indenture.

                                       10



   The Series I senior notes effectively will be junior in right of payment to
some other liabilities. Only our subsidiaries that have guaranteed payment of
certain of our indebtedness ranking equal in priority to the Series I senior
notes, including the bank credit facility, the Series A, the Series B, the
Series C, the Series E and the Series G senior notes and future indebtedness
that is so guaranteed, have guaranteed, and are required to guarantee, our
obligations under the Series I senior notes. Although the indenture governing
the terms of the Series I senior notes places limits on the overall level of
indebtedness that non-guarantor subsidiaries may incur, the Series I senior
notes effectively will be junior in right of payment to liabilities of our non-
guarantor subsidiaries and to any debt of ours or our subsidiaries that is
secured by assets other than the equity interests in our subsidiaries securing
the Series I senior notes, to the extent of the value of such assets. Since
only those subsidiaries that guarantee the bank credit facility or certain of
our other indebtedness are required to guarantee the Series I senior notes,
there can be no assurance as to the number of subsidiaries that will be
guarantors of the Series I notes at any point in time or as to the value of
their assets or significance of their operations.

   Together with our subsidiaries, we have a significant amount of indebtedness
secured by mortgages on 31 of our hotels and related assets. The Series I
senior notes effectively will be junior in right of payment to this secured
debt to the extent of the value of the assets securing such debt. On a pro
forma basis, giving effect to the transactions set forth in the section "Pro
Forma Financial Information of Host Marriott, L.P.", as of March 31, 2002, the
amount of our and our subsidiaries' debt secured by mortgages on our hotels and
related assets was approximately $2.3 billion. The Series I senior notes will
not be secured by these assets. The Series I senior notes will be secured only
by the equity interests in our direct and indirect subsidiaries that have been
pledged in favor of our bank credit facility. This collateral will be shared
equally and ratably with holders of other indebtedness, including but not
limited to, the Series A, Series B, Series C, Series E and Series G senior
notes and certain of our other indebtedness ranking pari passu, or equal in
right of payment, with the Series I senior notes. As of March 31, 2002, as
adjusted for the transactions set forth in the section "Pro Forma Financial
Information of Host Marriott, L.P.", the amount of indebtedness (including the
Series I senior notes) secured by our equity interests in these subsidiaries
would have been $3.2 billion.


   The terms of our debt place restrictions on us and our subsidiaries,
reducing operational flexibility and creating default risks. The documents
governing the terms of our senior notes and bank credit facility contain
covenants that place restrictions on us and our subsidiaries. The activities
upon which such restrictions exist include, but are not limited to:

  .  acquisitions, merger and consolidations;

  .  the incurrence of additional debt;

  .  the creation of liens;

  .  the sale of assets;

  .  capital expenditures;

  .  raising capital;

  .  the payment of dividends; and

  .  transactions with affiliates.

   In addition, certain covenants in our bank credit facility require us and
our subsidiaries to meet financial performance tests. The restrictive covenants
in the indenture, the bank credit facility and the documents governing our
other debt (including our mortgage debt) will reduce our flexibility in
conducting our operations and will limit our ability to engage in activities
that may be in our long-term best interest. Our failure to comply with these
restrictive covenants could result in an event of default that, if not cured or
waived, could result in the acceleration of all or a substantial portion of our
debt, including the Series I senior notes.


                                       11


   As a result of the effects on our business of the economic recession and the
events of September 11, 2001, we anticipate that in the future we may fail to
comply with certain financial covenants under the documents governing certain
of our indebtedness. As a result of the effects on our business of the economic
recession and the events of September 11, 2001, we have entered into an
amendment to our bank credit facility, effective November 19, 2001, which among
other things:

  .  adjusts certain financial covenants so as to require us to meet less
     stringent levels in respect of (a) a minimum consolidated interest
     coverage ratio and a minimum unsecured interest coverage ratio until
     September 6, 2002 and (b) the maximum leverage ratio through August 15,
     2002;

  .  suspends until September 6, 2002 the minimum fixed charge coverage ratio
     test that we must meet; and

  .  limits draws under the revolver portion of our bank credit facility to
     (a) $50 million in the first quarter of 2002 and (b) up to $25 million
     in the second quarter of 2002 (but only if draws in the second quarter
     of 2002 do not cause the aggregate amount drawn in 2002 and then
     outstanding to exceed $25 million); and

  .  increases the interest rate based on higher leverage levels.

   In addition, the amendment imposes the following restrictions and
requirements through August 15, 2002 which include, among others:

  .  restricting Host REITs ability to pay dividends on equity securities and
     our convertible debt obligations unless projections indicate such
     payment is necessary to maintain its REIT status and/or unless we are
     below certain leverage levels;


  .  restricting our ability to incur additional indebtedness and requiring
     that we apply all net proceeds of permitted incurrences of indebtedness
     to repay outstanding amounts under the bank credit facility;

  .  requiring Host REIT to apply all net proceeds from capital contributions
     to us or from sales of equity by Host REIT to repay outstanding amounts
     under the bank credit facility;


  .  requiring us to use all net proceeds from the sale of assets to repay
     indebtedness under the bank credit facility;


  .  restricting our ability to make acquisitions and investments unless the
     asset to be acquired has a leverage ratio of 3.5 to 1.0 or below;

  .  restricting our investments in subsidiaries; and

  .  restricting our capital expenditures.

   The amendment also permits us (i) to retain in escrow any property insurance
proceeds that we receive from insurance policies covering the New York World
Trade Center Marriott and the New York Marriott Financial Center until such
proceeds are applied toward the restoration of the New York Marriott Financial
Center and the construction of a new hotel that replaces the New York World
Trade Center Marriott, or (ii) to apply such insurance proceeds to the payment
of amounts due to certain third parties, including the New York World Trade
Center Marriott ground lessor, mortgage lender and Marriott International as
manager. Any proceeds (other than business interruption insurance proceeds) not
so used would be used to repay amounts outstanding under the bank credit
facility. The amendment also allows us to include business interruption
proceeds that we receive for the New York World Trade Center Marriott and the
New York Marriott Financial Center hotels in our calculation of consolidated
EBITDA for purposes of our financial covenants.


   We are currently in compliance with the terms and restrictive covenants of
our bank credit facility. As a result of entering into this amendment, and
obtaining the relief from the financial covenants described above, we expect to
remain in compliance with our bank credit facility through at least August 15,
2002, the date after which our maximum leverage ratio will return to the levels
that were in effect prior to this amendment. We

                                       12



anticipate that, if adverse operating conditions continue at currently
forecasted levels, we will not be able to comply with the leverage ratio
applicable after August 15, 2002 or other financial tests applicable at the end
of our third quarter of 2002 (September 6, 2002). If we fail to comply with the
leverage ratio or any other covenant of the bank credit facility, we would be
in default under the bank credit facility to the extent we had an outstanding
balance. As of March 31, 2002 we have no amounts outstanding under our bank
credit facility.


   We anticipate that if we decide to re-draw the amounts available under the
bank credit facility, we would have to refinance or repay our bank credit
facility or obtain another amendment from our lenders to adjust the leverage
ratio applicable after August 15, 2002 and, possibly, other financial covenants
applicable at the end of our third quarter of 2002. We intend to amend or
replace the bank credit facility prior to August 15, 2002. There can be no
assurance that we will be able to amend or replace the bank credit facility on
terms any more favorable than those currently in effect, if at all. Any default
under the bank credit facility that results in an acceleration of its final
stated maturity could constitute an event of default under the indenture with
respect to all outstanding series of senior notes issued thereunder, including
the Series I senior notes.

   Under the indenture pursuant to which nearly all of our outstanding senior
notes were issued, we and our restricted subsidiaries are generally prohibited
from incurring additional indebtedness unless, at the time of such incurrence,
we would satisfy the requirements set forth in the "Limitations on Incurrence
of Indebtedness and Issuance of Disqualified Stock" covenant set forth in the
"Description of Series I Senior Notes". One of these requirements is that,
after giving effect to any such new incurrence, on a pro forma basis, our
consolidated coverage ratio cannot be less than 2.0 to 1.0. As a result of the
effects on our business of the economic recession and the September 11, 2001
terrorist attacks, we anticipate that any consolidated coverage ratio that is
calculated under the indenture after the end of our second quarter 2002 may be
less than 2.0 to 1.0. If this occurs, then we will be prohibited from incurring
indebtedness and from issuing disqualified stock under the indenture other than
the indebtedness that we and our restricted subsidiaries are specifically
permitted to incur under paragraph 4 of the "Limitation on Incurrences of
Indebtedness and Issuance of Disqualified Stock" covenant set forth in
"Description of Series I Senior Notes". Our failure to maintain a consolidated
coverage ratio of greater than or equal to 2.0 to 1.0 could limit our ability
to engage in activities that may be in our long-term best interest.


   We expect to make distributions to Host REIT even when we cannot otherwise
make restricted payments under the indenture and the bank credit facility. Even
though we expect generally to be prohibited from making restricted payments
under the indenture, based upon our estimates of taxable income for 2002, we
expect to be able to make distributions to Host REIT under the indenture and
the bank credit facility.

   Under the indenture, we are only allowed to make restricted payments if, at
the time we make such a restricted payment, we are able to incur at least $1.00
of indebtedness under the "Limitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock" covenant. If our consolidated coverage ratio
becomes less than 2.0 to 1.0, as we currently anticipate, we will not be able
to incur $1.00 of additional indebtedness and, thus, will not be able to make
any restricted payments until we comply with the covenant.

   Even when we are unable to make restricted payments during the period that
our consolidated coverage ratio is less than 2.0 to 1.0, the indenture permits
us to make permitted REIT distributions, which are any distributions (1) to
Host REIT that are necessary to maintain Host REIT's status as a REIT under the
Internal Revenue Code or to satisfy the distributions required to be made by
reason of Host REIT's making of the election provided for in Notice 88-19 (or
Treasury regulations issued pursuant thereto) if the aggregate principal amount
of all of our outstanding indebtedness (other than our convertible debt
obligations to Host REIT pertaining to its QUIPs) and that of our restricted
subsidiaries, on a consolidated basis, at such time is less than 80% of
Adjusted Total Assets (as defined in the indenture) and (2) to certain other
holders of our

                                       13


partnership units where such distribution is required as a result of, or a
condition to, the payment of distributions to Host REIT.

   We intend, during the period that we are unable to make restricted payments
under the indenture and under similar restrictions under the bank credit
facility, to continue our practice of distributing quarterly, based on our
current estimates of taxable income for any year, an amount of our available
cash sufficient to enable Host REIT to pay quarterly dividends on its preferred
stock (and, to the extent permitted under the bank credit facility, on its
common stock) in an amount necessary to satisfy the requirements applicable to
REITs under the Internal Revenue Code. In the event that we make distributions
to Host REIT in amounts in excess of those necessary for Host REIT to maintain
its status as a REIT, we will be in default under this indenture.

   We may not have the ability to raise the funds necessary to finance the
change of control offer required by the indenture. Upon the occurrence of
certain change of control events, we will be required to offer to repurchase
all outstanding Series A, Series B, Series C, Series E, Series G and Series H
senior notes and the Series I senior notes offered hereby. However, it is
possible that we will not have sufficient funds at the time of the change of
control to make the required repurchase of senior notes or that restrictions in
our bank credit facility will not allow us to make such repurchases. See
"Description of Series I senior Notes--Repurchase of Notes at the Option of the
Holder Upon a Change of Control Triggering Event".


   Our failure to repurchase any of the Series I senior notes would be a
default under the indenture for all series of senior notes issued thereunder
and also under our bank credit facility.

   The Series I senior notes or a guarantee thereof may be deemed a fraudulent
transfer. Under the federal bankruptcy laws and comparable provisions of state
fraudulent transfer laws, a guarantee of the Series I senior notes could be
voided, or claims on a guarantee of the Series I senior notes could be
subordinated to all other debts of that guarantor if, among other things, the
guarantor, at the time it incurred the indebtedness evidenced by its guarantee:

     (1) received less than reasonably equivalent value or fair consideration
  for the incurrence of such guarantee; and

     (2) either:

       (a) was insolvent or rendered insolvent by reason of such
    incurrence;

       (b) was engaged in a business or transaction for which the
    guarantor's remaining assets constituted unreasonably small capital; or

       (c) intended to incur, or believed that it would incur, debts beyond
    its ability to pay such debts as they mature.

If such circumstances were found to exist, or if a court were to find that the
guarantee were issued with actual intent to hinder, delay or defraud creditors,
the court could cause any payment by that guarantor pursuant to its guarantee
to be voided and returned to the guarantor, or to a fund for the benefit of the
creditors of the guarantor.

   In addition, our obligations under the Series H senior notes may be subject
to review under the same laws in the event of our bankruptcy or other financial
difficulty. In that event, if a court were to find that when we issued the
Series H senior notes the factors in clauses (1) and (2) above applied to us,
or that the Series I senior notes were issued with actual intent to hinder,
delay or defraud creditors, the court could void our obligations under the
Series I senior notes, or direct the return of any amounts paid thereunder to
us or to a fund for the benefit of our creditors.

                                       14


   The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, the operating
partnership or a guarantor would be considered insolvent if:

  .  the sum of its debts, including contingent liabilities, were greater
     than the fair saleable value of all of its assets; or

  .  the present fair value of its assets were less than the amount that
     would be required to pay its probable liability on its existing debts,
     including contingent liabilities, as they become absolute and mature; or

  .  it could not pay its debts as they become due.

   On the basis of historical financial information, recent operating history
and other factors, we believe that we and each of our guarantors, after giving
effect to the guarantee of the Series I senior notes, will be solvent, will
have a reasonable amount of capital for the business in which we or it is
engaged and will not have incurred debts beyond our or its ability to pay such
debts as they mature. We can offer no assurance, however, as to what standard a
court would apply in making such determinations or that a court would agree
with our conclusions in this regard.

An active trading market may not develop for the notes.

   The Series H senior notes are not listed on any securities exchange. Since
their issuance, there has been a limited trading market for the Series H senior
notes. To the extent that Series H senior notes are tendered and accepted in
the exchange offer, the trading market for untendered and tendered but
unaccepted Series H senior notes will be adversely affected. We cannot assure
you that this market will provide liquidity for you if you want to sell your
Series H senior notes.

   We will not list the Series I senior notes on any securities exchange. These
notes are new securities for which there is currently no market. The Series I
senior notes may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities,
our performance and other factors. We have been advised by Deutsche Banc Alex.
Brown that they intend to make a market in the Series I senior notes, as well
as the Series H senior notes, as permitted by applicable laws and regulations.
However, they are not obligated to do so and their market making activities may
be discontinued at any time without notice. In addition, their market making
activities may be limited during our exchange offer. Therefore, we cannot
assure you that an active market for Series I senior notes will develop.


   Our revenues and the value of our properties are subject to conditions
affecting the lodging industry. Our revenues and the value of our properties
are subject to conditions affecting the lodging industry. These include:

  .  changes in the national, regional and local economic climate;

  .  changes in business and pleasure travel;

  .  local conditions such as an oversupply of hotel properties or a
     reduction in demand for hotel rooms;

  .  the attractiveness of our hotels to consumers and competition from
     comparable hotels;

  .  the quality, philosophy and performance of the managers of our hotels;

  .  changes in room rates and increases in operating costs due to inflation
     and other factors; and

  .  the need to periodically repair and renovate our hotels.

   As a result of the effects of the economic recession and the September 11,
2001 terrorist attacks, the lodging industry has experienced a significant
decline in business caused by a reduction in travel for both business and
pleasure. We currently expect that the decline in operating levels will
continue in 2002.


                                       15



Additionally, as a result of the September 11 terrorist attacks, and the
collapse of the World Trade Center Towers, our New York World Trade Center
Marriott hotel was destroyed. We also sustained considerable damage to a second
property, the New York Marriott Financial Center hotel.


   Room revenues of our hotels have decreased during 2001 as a result of the
continuing economic recession. For the year ended December 31, 2001 our
comparable RevPAR decreased 13.0% due to a decrease in occupancy of 7.7
percentage points to 70.0% combined with a decline in the average room rate of
3.5% to $151.02. For the first quarter of 2002 RevPAR decreased 12.3% due to a
decrease in occupancy of 2.4 percentage points to 70.9% combined with a decline
in the average room rate of 9.4% to $148.12.


   During the 4-week period subsequent to the events of September 11, 2001, our
hotels recorded average weekly occupancy rates of 38% to 63%. During that
period, we had a very high level of large group cancellations in the fourth
quarter which represented approximately $70 million in future revenue primarily
affecting our luxury and larger convention hotels. The period was not
representative of the remainder of the fourth quarter. However, our results
from operations for the fourth quarter of 2001 did reflect a 28.3% decline in
RevPAR when compared to the fourth quarter of 2000. We have been actively
working with the managers of our hotels to reduce the operating costs of our
hotels, as well as to provide economic incentives to individuals and business
travelers in selected markets to increase demand. In addition, based on our
assessment of the current operating environment and to conserve capital, we
have reduced or suspended certain capital expenditure projects.


   As a result of a gradual return to more normal levels of business, we have
begun to see modest improvements in occupancy and average room rates, though
they remain below prior year levels. However, it is likely that our fourth
quarter results will be significantly lower than the prior year period. There
can be no assurance that the current economic recession will not continue for
an extended period of time and that it will not significantly affect our
operations.

   If, as a result of conditions such as those referenced above affecting the
lodging industry, our assets do not generate income sufficient to pay our
expenses, we will be unable to service our debt and maintain our properties.

   Thirty-one of our hotels and assets related thereto are subject to mortgages
in an aggregate amount of approximately $2.3 billion. If these hotels do not
produce adequate cash flow to service the debt represented by such mortgages,
the mortgage lenders could foreclose on such assets and we would lose such
assets. If the cash flow on such properties were not sufficient to provide us
with an adequate return, we could opt to allow such foreclosure rather than
making necessary mortgage payments with funds from other sources.


   Our expenses may remain constant even if our revenue drops. The expenses of
owning property are not necessarily reduced when circumstances like market
factors and competition cause a reduction in income from the property. Because
of the effects of the September 11, 2001 terrorist attacks and the current
economic recession, we are working with our managers to substantially reduce
the operating costs of our hotels. In addition, based on our assessment of the
current operating environment, and in order to conserve capital, we have
reduced or suspended certain capital expenditure projects. Nevertheless, our
financial condition could be adversely affected by the following costs:


  .  interest rate levels;

  .  debt service levels (including on loans secured by mortgages);

  .  the availability of financing;

  .  the cost of compliance with government regulation, including zoning and
     tax laws; and

  .  changes in governmental regulations, including those governing usage,
     zoning and taxes.

   If we are unable to reduce our expenses to reflect our current reduction in
revenue and the reduction that we expect in the future, our business will be
adversely affected.

                                       16


   We do not control our hotel operations, and we are dependent on the managers
of our hotels. Because federal income tax laws restrict REITs and their
subsidiaries from operating a hotel, we do not manage our hotels. Instead, we
retain third-party managers including, among others, Marriott International,
Hyatt, Four Seasons and Swissotel, to manage our hotels pursuant to management
agreements. Our income from the hotels may be adversely affected if the
managers fail to provide quality services and amenities and competitive room
rates at our hotels or fail to maintain the quality of the hotel brand names.
While HMT Lessee LLC, a taxable REIT subsidiary of ours that is the lessee of
substantially all of our full-service properties, monitors the hotel managers'
performance, we have limited specific recourse if we believe that the hotel
managers are not performing adequately. Underperformance by our hotel managers
could adversely affect our results of operations.

   Our relationships with our hotel managers are primarily contractual in
nature, although certain of our managers owe fiduciary duties to us under
applicable law. We are in discussions with various managers of our hotels
regarding their performance under management agreements for our hotels. We have
had, and continue to have, differences with the managers of our hotels over
their performance and compliance with the terms of our agreements. We generally
resolve issues with our managers through discussions and negotiations. However,
if we are unable to reach satisfactory results through discussions and
negotiations, we also occasionally may engage in litigation with our managers.
For example, we are currently engaged in litigation with Swissotel, the manager
of four of our hotels. For further information on the litigation with
Swissotel, see "Business and Properties -- Legal Proceedings -- Swissotel". If
we are unable to reach satisfactory resolution with respect to any of the
disputes, the operation of our hotels could be adversely affected.


   Our relationship with Marriott International may result in conflicts of
interest. Marriott International, a public hotel management company, and its
affiliates, manages or franchises 110 of our 122 hotels. In addition, Marriott
International manages and in some cases may own or be invested in hotels that
compete with our hotels. As a result, Marriott International may make decisions
regarding competing lodging facilities that it manages that would not
necessarily be in our best interests. Richard E. Marriott, is Host REIT's
Chairman of the Board and has served as a director of Marriott International
since 1993. He has announced his intention not to stand for reelection to the
Board of Directors of Marriott International in May 2002. His brother, J.W.
Marriott, Jr., has been a member of Host REIT's Board of Directors since 1964
and has announced that he will not stand for reelection at the end of his term
in May 2002. J.W. Marriott, Jr. also serves as an executive officer of Marriott
International. J.W. Marriott, Jr. and Richard E. Marriott beneficially owned,
as determined for securities law purposes, as of January 31, 2002,
approximately 12.7% and 12.3%, respectively, of the outstanding shares of
common stock of Marriott International. As a result, J.W. Marriott, Jr. and
Richard E. Marriott have potential conflicts of interest as Host REIT's
directors when making decisions regarding Marriott International, including
decisions relating to the management agreements involving the hotels and
Marriott International's management of competing lodging properties. For
further information on our relationship with Marriott International see
"Certain Relationships and Related Transactions".


   Host REIT's Board of Directors follows policies and procedures intended to
limit the involvement of J.W. Marriott, Jr. and Richard E. Marriott in conflict
situations, including requiring them to abstain from voting as directors on
matters which present a conflict between the companies. If appropriate, these
policies and procedures will apply to other directors and officers.

   There is no charter or by-law restriction on the amount of debt we may
incur. There are no limitations in our organizational documents or Host REIT's
organizational documents that limit the amount of indebtedness that we may
incur. However, our existing debt instruments contain restrictions on the
amount of indebtedness that we may incur. Accordingly, we could incur
indebtedness to the extent permitted by our debt agreements. If we became more
highly leveraged, our debt service payments would increase and our cash flow
and our ability to service our debt might be adversely affected.


                                       17


   Our management agreements could impair the sale or financing of our
hotels. Under the terms of the management agreements, we generally may not
sell, lease or otherwise transfer the hotels unless the transferee is not a
competitor of the manager, and the transferee assumes the related management
agreements and meets specified other conditions. Our ability to finance,
refinance or sell any of the properties may, depending upon the structure of
such transactions, require the manager's consent. If the manager does not
consent, we would be prohibited from financing, refinancing or selling the
property without breaching the management agreement.

   The acquisition contracts relating to some hotels limit our ability to sell
or refinance those hotels. For reasons relating to federal income tax
considerations of the former and current owners of approximately 20 of our
full-service hotels, we agreed to restrictions on selling some hotels or
repaying or refinancing the mortgage debt on those hotels for varying periods
depending on the hotel. We anticipate that, in specified circumstances, we may
agree to similar restrictions in connection with future hotel acquisitions. As
a result, even if it were in our best interests to sell or refinance the
mortgage debt on these hotels, it may be difficult or impossible to do so
during their respective lock-out periods.

   Our ground lease payments may increase faster than the revenues we receive
on the hotels. As of January 31, 2002, 45 of our hotels are subject to ground
leases (including the New York World Trade Center Marriott hotel ground lease
which is still in effect). These ground leases generally require increases in
ground rent payments every five years. Our ability to service our debt could be
adversely affected to the extent that our revenues do not increase at the same
or a greater rate as the increases under the ground leases. In addition, if we
were to sell a hotel encumbered by a ground lease, the buyer would have to
assume the ground lease, which could result in a lower sales price. Moreover,
to the extent that such ground leases are not renewed at their expiration, our
revenues could be adversely affected.


   We may be unable to sell properties when appropriate because real estate
investments are illiquid. Real estate investments generally cannot be sold
quickly. We may not be able to vary our portfolio promptly in response to
economic or other conditions. The inability to respond promptly to changes in
the performance of our investments could adversely affect our financial
condition and ability to service debt. In addition, there are limitations under
the federal tax laws applicable to REITs and agreements that we have entered
into when we acquired some of our properties that may limit our ability to
recognize the full economic benefit from a sale of our assets.

   We depend on our key personnel. We depend on the efforts of our executive
officers and other key personnel. While we believe that we could find
replacements for these key personnel, the loss of their services could have a
significant adverse effect on our operations. None of our key personnel have
employment agreements. We do not have or intend to obtain key-man life
insurance with respect to any of our personnel.

   Partnership and other litigation judgments or settlements could have a
material adverse effect on our financial condition. We are a party to various
lawsuits relating to previous partnership transactions, including transactions
relating to our conversion into a REIT. While we and the other defendants to
such lawsuits believe all of the lawsuits in which we are a defendant are
without merit and we are vigorously defending against such claims, we can give
no assurance as to the outcome of any of the lawsuits. If any of the lawsuits
were to be determined adversely to us or a settlement involving a payment of a
material sum of money were to occur, there could be a material adverse effect
on our financial condition.


   We may acquire hotel properties through joint ventures with third parties
that could result in conflicts. Instead of purchasing hotel properties
directly, we may invest as a co-venturer. Joint venturers often share control
over the operation of the joint venture assets. For example, through our
subsidiary Rockledge, we entered into a joint venture with Marriott
International through which the joint venture owns two limited partnerships
holding, in the aggregate, 120 Courtyard by Marriott hotels. Subsidiaries of
Marriott International

                                       18


manage these Courtyard by Marriott hotels. Actions by a co-venturer,
particularly Marriott International, could subject the assets to additional
risk, including:

  .  our co-venturer in an investment might have economic or business
     interests or goals that are inconsistent with our interests or goals;

  .  our co-venturer may be in a position to take action contrary to our
     instructions or requests or contrary to our policies or objectives; or

  .  a joint venture partner could go bankrupt, leaving us liable for its
     share of joint venture liabilities.

   Although we generally will seek to maintain sufficient control of any joint
venture to permit our objectives to be achieved, we might not be able to take
action without the approval of our joint venture partners. Also, our joint
venture partners could take actions binding on the joint venture without our
consent. For further discussion of the risks associated with entering into a
joint venture with Marriott International, see the discussion above under "Our
relationship with Marriott International may result in conflicts of interest".

   Environmental problems are possible and can be costly. We believe that our
properties are in compliance in all material respects with applicable
environmental laws. Unidentified environmental liabilities could arise,
however, and could have a material adverse effect on our financial condition
and performance. Federal, state and local laws and regulations relating to the
protection of the environment may require a current or previous owner or
operator of real estate to investigate and clean up hazardous or toxic
substances or petroleum product releases at the property. The owner or operator
may have to pay a governmental entity or third parties for property damage and
for investigation and clean-up costs incurred by the parties in connection with
the contamination. These laws typically impose clean-up responsibility and
liability without regard to whether the owner or operator knew of or caused the
presence of the contaminants. Even if more than one person may have been
responsible for the contamination, each person covered by the environmental
laws may be held responsible for all of the clean-up costs incurred. In
addition, third parties may sue the owner or operator of a site for damages and
costs resulting from environmental contamination emanating from that site.
Environmental laws also govern the presence, maintenance and removal of
asbestos. These laws require that owners or operators of buildings containing
asbestos properly manage and maintain the asbestos, that they notify and train
those who may come into contact with asbestos and that they undertake special
precautions, including removal or other abatement, if asbestos would be
disturbed during renovation or demolition of a building. These laws may impose
fines and penalties on building owners or operators who fail to comply with
these requirements and may allow third parties to seek recovery from owners or
operators for personal injury associated with exposure to asbestos fibers.

   Compliance with other government regulations can also be costly. Our hotels
are subject to various other forms of regulation, including Title III of the
Americans with Disabilities Act, building codes and regulations pertaining to
fire safety. Compliance with those laws and regulations could require
substantial capital expenditures. These regulations may be changed from time to
time, or new regulations adopted, resulting in additional or unexpected costs
of compliance. Any increased costs could have a material adverse effect on our
business, financial condition or results of operations, including reducing the
cash available for servicing debt.


   Some potential losses are not covered by insurance. We carry comprehensive
insurance coverage for general liability, property, business interruption and
other risks with respect to all of our hotels and other properties. These
policies offer coverage features and insured limits that we believe are
customary for similar type properties. Generally, the policies provide coverage
and limits on a blanket basis, combining the claims of our properties together
for evaluation against policy aggregate limits and sub-limits and, in the case
of our Marriott-managed hotels, with other Marriott-managed hotels of other
owners. Thus, for certain risks (e.g., earthquake), multiple claims from
several hotels or owners may exceed policy sub-limits. Certain other risks
(e.g., war and environmental hazards), however, may be uninsurable or too
expensive to justify insuring against. Furthermore, an insurance provider could
elect to deny or limit coverage under a claim. Should an

                                       19


uninsured loss or a loss in excess of insured limits occur, or should an
insurance carrier deny or limit coverage under a claim, we could lose all, or a
portion of, the capital we have invested in a property, as well as the
anticipated future revenue from the hotel. In that event, we might nevertheless
remain obligated for any mortgage debt or other financial obligations related
to the property.

   As discussed below in "Recent or future terrorist attacks could adversely
affect us", on September 11, 2001, terrorist attacks on the World Trade Center
Towers in New York City resulted in the destruction of our New York World Trade
Center Marriott hotel and caused considerable damage to our New York Marriott
Financial Center hotel. Although we have both property and business
interruption insurance for our two affected hotels with a major insurer through
our manager, Marriott International, from which we expect to receive business
interruption insurance and property damage insurance proceeds to cover all or a
substantial portion of the losses at both hotels, we cannot currently determine
the amount or timing of those payments. Under the terms of the New York World
Trade Center Marriott ground lease, any proceeds from the casualty portion of
the hotel claim are required to be placed in an insurance trust for the
exclusive purpose of rebuilding the hotel. As of March 1, 2002, we had received
business interruption and casualty advances from our insurers in an aggregate
amount of $17 million of which approximately $5 million was for property
insurance proceeds relating to the two hotels. Under the terms of our amended
bank credit facility, property insurance proceeds that we receive from
insurance coverage on the New York World Trade Center Marriott and New York
Marriott Financial Center are to be retained in escrow until applied as
described in "--As a result of the effects on our business of the economic
recession and the events of September 11, 2001, we anticipate that in the
future we may fail to comply with certain financial covenants under the
documents governing certain of our indebtedness" above. If the amount of such
insurance proceeds are substantially less than our actual losses or if the
payments are substantially delayed, it could have a material adverse effect on
our business.


   Recent or future terrorist attacks could adversely affect us. On September
11, 2001, several aircraft that were hijacked by terrorists destroyed the World
Trade Center Towers in New York City and damaged the Pentagon in northern
Virginia. As a result of the attacks and the collapse of the World Trade Center
Towers, our New York World Trade Center Marriott hotel was destroyed and we
sustained considerable damage to our New York Marriott Financial Center hotel.
Subsequent to the attacks, the Federal Aviation Administration closed United
States airspace to commercial traffic for several days. The aftermath of these
events, together with an economic recession, has adversely affected the travel
and hospitality industries, including the full-service hotel industry. The
impact which these terrorist attacks, or future events such as military or
police activities in the United States or foreign countries, future terrorist
activities or threats of such activities, biological or chemical weapons
attacks, political unrest and instability, interruptions in transportation
infrastructure, riots and protests, could have on our business in particular
and the United States economy, the global economy, and global financial markets
in general cannot presently be determined. It is possible that these factors
could have a material adverse effect on our business, our ability to finance
our business, our ability to insure our properties (see "--We may not be able
to obtain new insurance for our hotels or to obtain insurance at acceptable
premium levels" below), and on our financial condition and results of
operations as a whole.






   We may not be able to obtain new insurance for our hotels or to obtain
insurance at acceptable premium levels.  Due to the changes in the insurance
markets arising prior to September 11, 2001 and the effects of the terrorist
attacks on September 11, 2001, it has become more difficult and more expensive
to obtain insurance on our hotels. The property insurance policy covering most
of our Marriott and Ritz-Carlton-managed properties expired May 7, 2001.
Accordingly, the manager of these properties, Marriott International, whose
obligation it is to secure this insurance, has obtained a replacement policy
for these properties through April 1, 2003. We believe the coverage under this
policy is generally in an amount and covering such risk as is carried by
companies owning similar properties to ours. The replacement policy, however,
provides only limited coverage against acts of terrorism.



                                       20



   For certain of our Marriott-managed properties that have mortgage debt, the
first $500 million of our current insurance coverage is provided by a carrier
with a rating from Standard & Poors of AA- and from A.M. Best of A+XV. Three of
our loan agreements, representing debt of approximately $451 million related to
six hotel properties, require a minimum rating of AA from Standard & Poors. We
are in discussions with these lenders with regard to this requirement, but
cannot provide assurance that each of these lenders will be satisfied with the
AA- rating level of our insurance provider. While we expect to be able to
satisfactorily resolve these discussions, if we are unable to obtain insurance
coverage that complies with the covenants in these loan agreements or if the
lenders are unwilling or unable to amend or waive these covenants, we might be
required to repay the debt.



   Adverse consequences would apply if we failed to qualify as a
partnership. We believe that we qualify to be treated as a partnership for
federal income tax purposes. As a partnership, we are not subject to federal
income tax on our income. Instead, each of our partners is required to pay tax
on its allocable share of our income. No assurance can be provided, however,
that the Internal Revenue Service will not challenge our status as a
partnership for federal income tax purposes, or that a court would not sustain
such a challenge. If the IRS were successful in treating us as a corporation
for tax purposes, we would be subject to federal, state and local, and foreign
corporate income tax, which would reduce significantly the amount of cash
available for debt service and for distribution to our partners, including Host
REIT. In addition, our classification as a corporation would cause some of our
partners, including Host REIT, to recognize gain at least equal to such
partner's "negative capital account", and possibly more, depending upon the
circumstances. Finally, Host REIT would fail to meet the income tests and
certain of the asset tests applicable to REITs and, accordingly, would cease to
qualify as a REIT. If Host REIT fails to qualify as a REIT or we fail to
qualify as a partnership, such failure would cause an event of default under
our credit facility that could lead to an acceleration of the amounts due under
such credit facility, which in turn would constitute an event of default under
our outstanding debt securities.



   Adverse tax consequences would apply if Host REIT failed to qualify as a
REIT. We believe that Host REIT has been organized and has operated in such a
manner so as to qualify as a REIT under the Internal Revenue Code, commencing
with the taxable year beginning January 1, 1999, and Host REIT currently
intends to continue to operate as a REIT during future years. No assurance can
be provided, however, that Host REIT qualifies as a REIT or that new
legislation, Treasury Regulations, administrative interpretations or court
decisions will not significantly change the tax laws with respect to Host
REIT's qualification as a REIT or the federal income tax consequences of its
REIT qualification. If Host REIT fails to qualify as a REIT, it will be subject
to federal and state income tax, including any applicable alternative minimum
tax, on its taxable income at regular corporate rates. In addition, unless
entitled to statutory relief, Host REIT would not qualify as a REIT for the
four taxable years following the year during which REIT qualification is
lost.The additional tax burden on Host REIT would significantly reduce the cash
available for distribution to its shareholders, and Host REIT would no longer
be required to make any distributions to its shareholders. Host REIT's failure
to qualify as a REIT could reduce materially the value of its common stock and
would cause any distributions to its shareholders that otherwise would have
been subject to tax as capital gain dividends to be taxable as ordinary income
to the extent of its current and accumulated earnings and profits, or
"E&P."However, subject to limitations under the Internal Revenue Code,
corporate distributees may be eligible for the dividends received deduction
with respect to its distributions. Host REIT's failure to qualify as a REIT
also would cause an event of default under our credit facility that could lead
to an acceleration of the amounts due under the credit facility, which, in
turn,would constitute an event of default under our outstanding debt
securities.


   Our obligations to Host REIT potentially may increase our indebtedness or
cause us to liquidate investments on adverse terms. To continue to qualify as a
REIT, Host REIT currently is required to distribute to its shareholders with
respect to each year at least 90% of its taxable income, excluding net capital
gain. In addition, Host REIT will be subject to a 4% nondeductible excise tax
on the amount, if any, by which distributions made by it with respect to the
calendar year are less than the sum of 85% of its ordinary income and 95% of
its capital gain net income for that year and any undistributed taxable income
from prior periods.


                                       21



Host REIT intends to make distributions to its shareholders to comply with the
distribution requirement and to avoid the nondeductible excise tax and will
rely for this purpose on distributions from us. Host REIT's sole source of cash
to make these distributions is with respect to its partnership interest in us.
Our partnership agreement requires us to distribute to our partners an amount
of our available cash sufficient to enable Host REIT to pay shareholder
dividends that will satisfy the requirements applicable under the Internal
Revenue Code to REITs and to avoid any federal income or excise tax liability
for Host REIT. There are differences in timing between our recognition of
taxable income and our receipt of cash available for distribution due to, among
other things, the seasonality of the lodging industry and the fact that some
taxable income will be "phantom" income (which is taxable income that is not
matched by cash flow or EBITDA to us) attributable to our deferred tax
liabilities arising from certain transactions entered into by Host REIT in
years prior to the conversion of Host Marriott to a REIT. There is a distinct
possibility that these differences could require us to arrange for short-
term,or possibly long-term, borrowings or to issue additional equity to enable
us to meet this distribution requirement to Host REIT. In addition, because the
REIT distribution requirements prevent Host REIT from retaining earnings,we
effectively are prohibited from retaining earnings, as well. Accordingly, we
will generally be required to refinance debt that matures with additional debt
or equity. We cannot assure you that any of the sources of funds described
herein, if available at all, would be sufficient to meet the distribution
obligations of Host REIT, in which case we may be required to liquidate
investments on adverse terms in order to satisfy such obligations of Host REIT.


   Notwithstanding Host REIT's status as a REIT, it is subject to various taxes
on its income and property for which we are responsible for paying or
reimbursing Host REIT. Among other things, Host REIT will be required to pay
federal tax at the highest regular corporate rate upon its share of any "built-
in gain" recognized as a result of any sale before January 1, 2009, by us of
assets, including the hotels, in which interests were owned by Host REIT,
directly or indirectly, immediately prior to January 1, 1999, the first day of
Host REIT's first taxable year as a REIT. Built-in gain is the amount by which
an asset's fair market value exceeded the adjusted basis in the asset on
January 1, 1999. The total amount of gain on which we would be subject to
corporate income tax if the assets that we held at the time of the REIT
conversion were sold in a taxable transaction prior to January 1, 2009 would be
material to us. In addition, notwithstanding its status as a REIT, Host REIT
may have to pay certain state income taxes because not all states treat REITs
the same as they are treated for federal income tax purposes. Host REIT may
also have to pay certain foreign taxes to the extent we own assets or conduct
operations in foreign jurisdictions. Under the terms of the REIT conversion and
our partnership agreement, we are responsible for paying, or reimbursing Host
REIT for the payment of, any corporate income tax imposed on built-in gain, as
well as any other taxes or other liabilities, including contingent liabilities
and liabilities attributable to litigation that Host REIT may incur, whether
such liabilities are incurred by reason of activities prior to the REIT
conversion or activities subsequent thereto. Accordingly, we will pay, or
reimburse Host REIT for the payment of, all taxes incurred by Host REIT (and
any related interest and penalties), except for taxes imposed on Host REIT by
reason of its failure to qualify as a REIT or to distribute to its shareholders
an amount equal to its "REIT taxable income," including net capital gains. We
cannot assure you that any of the sources of funds described herein, if
available at all, would be sufficient to meet the tax obligations of Host REIT,
in which case we may be required to liquidate investments on adverse terms in
order to satisfy such obligations of Host REIT.


The reliability of market data included in this prospectus is uncertain.

   The market data included in this prospectus, including information relating
to our relative position in the industry, is based on independent industry
publications, other publicly available information, studies performed for us by
independent consultants or our management's good faith beliefs. Although we
believe that such independent sources are reliable, the accuracy and
completeness of such information is not guaranteed and has not been
independently verified.

                                       22


                           FORWARD-LOOKING STATEMENTS

   This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. Such statements include statements regarding our expectations, hopes or
intentions regarding the future, including our strategy, competition,
financing, indebtedness, revenues, operators, regulations and compliance with
applicable laws. We identify forward-looking statements in this prospectus by
using words or phrases such as "anticipate", "believe", "estimate", "expect",
"intend", "may be", "objective", "plan", "predict", "project", and "will be"
and similar words or phrases, or the negative thereof.

   Forward-looking statements are subject to numerous assumptions, risks and
uncertainties. Factors which may cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by us in those statements include, among
others, the following:

  . national and local economic and business conditions, including the effect
    of the terrorist attacks of September 11, 2001 on travel, that will
    affect, among other things, demand for products and services at our
    hotels, the level of room rates and occupancy that can be achieved by
    such properties and the availability and terms of financing and our
    liquidity;

  . our ability to restructure or refinance our existing bank credit facility
    in order to maintain operating flexibility and liquidity;

  . our ability to maintain the properties in a first-class manner, including
    meeting capital expenditure requirements;

  . our ability to compete effectively in areas such as access, location,
    quality of accommodations and room rate structures;

  . our degree of leverage which may affect our ability to obtain financing
    in the future;

  . our degree of compliance with current debt covenants;

  . our ability to acquire or develop additional properties and the risk that
    potential acquisitions or developments may not perform in accordance with
    expectations;

  . changes in travel patterns, taxes and government regulations which
    influence or determine wages, prices, construction procedures and costs;

  . government approvals, actions and initiatives, including the need for
    compliance with environmental and safety requirements, and changes in
    laws and regulations or the interpretation thereof;

  . the effects of tax legislative action, including specified provisions of
    the Work Incentives Improvement Act of 1999 as enacted on December 17,
    1999 (we refer to this as the "REIT Modernization Act");

  . the ability of our sole general partner, Host Marriott Corporation, to
    continue to satisfy complex rules in order for it to qualify as a REIT
    for federal income tax purposes, our ability to satisfy the rules for us
    to qualify as a partnership for federal income tax purposes, and the
    ability of certain of our subsidiaries to qualify as taxable REIT
    subsidiaries for federal income tax purposes, and our ability and the
    ability of our subsidiaries to operate effectively within the limitations
    imposed by these rules; and

  . other factors discussed below under the heading "Risk Factors" in this
    offering memorandum and in our filings with the Securities and Exchange
    Commission.

   All forward-looking statements in this prospectus are made as of the date
hereof, and we caution you not to rely on these statements without also
considering the risks and uncertainties associated with these statements and
our business that are addressed in this prospectus. Moreover, although we
believe the expectations reflected in our forward-looking statements are based
upon reasonable assumptions, we can give no assurance that we

                                       23


will attain these expectations or that any deviations will not be material.
Except as otherwise required by the federal securities laws, we disclaim any
obligations or undertaking to disseminate to you any updates or revisions to
any forward-looking statement contained in this prospectus.

                                USE OF PROCEEDS

   We will not receive any cash proceeds from the exchange of the Series H
senior notes for Series I senior notes pursuant to the exchange offer. In
consideration for issuing the Series I senior notes as contemplated by this
prospectus, we will receive in exchange Series H senior notes in like principal
amounts, which will be cancelled. Accordingly, there will not be any increase
in our outstanding indebtedness.

                                 CAPITALIZATION

   In the following table we set forth our capitalization as of March 22, 2002
on an historical basis and on a pro forma basis after giving effect to the
transactions described under "Pro Forma Financial Information of Host Marriott,
L.P." that have occurred or are expected to occur subsequent to March 22, 2002,
including the issuance of the Series H senior notes and their subsequent
exchange for the Series I senior notes, as if such transactions had occurred as
of March 22, 2002. The following table should be read in conjunction with our
audited condensed consolidated financial statements and the notes thereto as of
December 31, 2001 and and our unaudited condensed consolidated financial
statements as of March 22, 2002 and unaudited pro forma financial information
included herein.





                                                        As of  March 22, 2002
                                                       -----------------------
                                                       Historical Pro Forma(1)
                                                       ---------- ------------
                                                           (unaudited, in
                                                              millions)
                                                            
Cash and cash equivalents.............................   $  341      $  341
                                                         ======      ======
Debt
  Senior notes of the operating partnership
    7 7/8% Series A Senior Notes due 2005(2)..........   $  500      $  500
    7 7/8% Series B Senior Notes due 2008(2)..........    1,195       1,195
    8.45% Series C Senior Notes due 2008(2)...........      499         499
    8 3/8% Series E Senior Notes due 2006.............      300         300
    9 1/4% Series G Senior Notes due 2007.............      250         250
    9 1/2% Series H Senior Notes due 2007 ............      452         --
    9 1/2% Series I Senior Notes due 2007.............      --          452
    Other senior notes................................       35          35
  Mortgage debt.......................................    2,228       2,228
  Other debt..........................................      106         106
                                                         ------      ------
Total debt............................................    5,565       5,565
Convertible debt obligation to Host REIT..............      492         492
Minority interest.....................................      111         111
Limited partnership interests of third parties at
 redemption value.....................................      257         313
Cumulative redeemable preferred limited partner
 units................................................      339         339
Partners' capital.....................................    1,105       1,105
                                                         ------      ------
Total capitalization..................................   $7,869      $7,925
                                                         ======      ======


- --------

(1)  Pro forma reflects the exchange for Series I senior notes and other
     transactions that occurred subsequent to March 22, 2002 as discussed under
     "Pro Forma Financial Information of Host Marriott, L.P."

(2)  Amount is net of a discount at issuance.


                                       24


             PRO FORMA FINANCIAL INFORMATION OF HOST MARRIOTT, L.P.

   The unaudited pro forma financial information of Host Marriott, L.P. set
forth below is based on the condensed consolidated financial statements as of
and for the twelve weeks ended March 22, 2002 and for the fiscal year ended
December 31, 2001.


   All of the below transactions, except for the acquisition of the minority
interests in the San Diego Marriott Hotel & Marina, are already reflected in
our audited condensed consolidated balance sheet as of March 22, 2002 and,
therefore, no pro forma adjustments for these transactions were necessary in
the unaudited pro forma balance sheet.


   Our unaudited pro forma statements of operations reflect the transactions
described below for the twelve weeks ended March 22, 2002 and fiscal year ended
December 31, 2001 as if those transactions had been completed at the beginning
of the periods presented. Our unaudited pro forma statements of operations
which we present below include only income before extraordinary items.


   The pro forma financial statements reflect the following transactions:

 2002 Transactions:


  .  Acquisition of third party minority interests in the partnership that
     owns the San Diego Marriott Hotel and Marina for 6.9 million OP Units.

 2001 Transactions:

  .  December 19, 2001 interest rate swap agreement, effective January 15,
     2002, for $450 million notional amount that effectively converts the
     Series H senior notes fixed rate to a floating rate based on the 30 day
     LIBOR plus 450 basis points.

  .  December offering of $450 million of Series H senior notes and
     application of the net proceeds therefrom to repay $440 million on the
     bank credit facility;

  .  December sale of the Pittsburgh Marriott City Center for $15 million
     with proceeds used to pay down the bank credit facility;

  .  December sale of Vail Marriott Mountain Resort for $49 million with a
     portion of the proceeds used to repay the outstanding balance on the
     bank credit facility;

  .  September 18, 2001 draw of $250 million under the bank credit facility;

  .  August borrowing of $96.6 million to refinance the existing indebtedness
     on four of our Canadian full service hotels as well as to prepay the $88
     million mortgage note on the Ritz-Carlton, Amelia Island hotel;

  .  June purchase of all of the minority limited partnership interests held
     by Wyndham with respect to seven full-service hotels for $60 million
     borrowed under the bank credit facility. As part of this acquisition,
     the leases were acquired from Wyndham with respect to three full-service
     hotels;

  .  June acquisition by one of our subsidiaries of the lessee entity with
     respect to the San Diego Marriott Hotel and Marina from Crestline for
     approximately $4.5 million, including legal and professional fees;

  .  March issuance of $150 million of Class C preferred stock;

  .  March purchase of the voting interests representing 5% of the equity
     interest in each of Rockledge and Fernwood that were previously held by
     the Host Marriott Statutory Employee/Charitable Trust for approximately
     $2 million. Prior to this acquisition, we held a non-voting interest
     representing 95% of the equity interest in each company and accounted
     for such investments under the equity method. As a result of this
     acquisition, we now consolidate three additional full-service hotels;

  .  January acquisition by one of our subsidiaries of the equity interests
     in the lessees of 112 of our full-service hotels and the leasehold
     interests in four of our full-service hotels from Crestline for
     approximately $207 million.


                                       25




   Our unaudited pro forma financial statements do not purport to represent
what our results of operations or financial condition would actually have been
if these transactions had in fact occurred at the beginning of the periods
presented, or to project our results of operations or financial condition for
any future period including the effect on operations of September 11, 2001.

   Our unaudited pro forma financial statements are based upon available
information and upon assumptions and estimates, some of which are set forth in
the notes to the unaudited pro forma financial statements, that we believe are
reasonable under the circumstances. The unaudited pro forma financial
statements and accompanying notes should be read in conjunction with our
financial statements and "Management's Discussion and Analysis of Results of
Operations and Financial Condition" contained in this registration statement.

                                       26


                       UNAUDITED PRO FORMA BALANCE SHEET

                              March 22, 2002

                                 (in millions)




                                                    Host
                                                  Marriott      (A)
                                                    L.P.     San Diego   Pro
                                                 Historical Acquisition Forma
                                                 ---------- ----------- ------
                                                               
ASSETS
Property and equipment, net.....................   $6,939      $ 56     $6,995
Notes and other receivables, net................       54       --          54
Due from Manager................................      150       --         150
Investments in and advances to affiliates.......      137       --         137
Other assets....................................      558       --         558
Restricted Cash.................................      115       --         115
Cash and cash equivalents.......................      341       --         341
                                                   ------      ----     ------
                                                   $8,294      $ 56     $8,350
                                                   ======      ====     ======
LIABILITIES AND PARTNERS' CAPITAL
Debt............................................   $5,565      $--      $5,565
Convertible debt obligation to Host Marriott
 Corporation....................................      492       --         492
Accounts payable and accrued expenses...........      124       --         124
Other liabilities...............................      301       --         301
                                                   ------      ----     ------
Total liabilities...............................    6,482       --       6,482
                                                   ------      ----     ------
Minority interest...............................      111       --         111
Limited partnership interests of third parties
 at redemption value (representing 21.5 million
 and 28.4 million units, respectively)..........      257        56        313
Partners' Capital
  General partner...............................        1       --           1
  Cumulative redeemable preferred limited
   partner......................................      339       --         339
  Limited partner...............................    1,107       --       1,107
  Accumulated other comprehensive income........       (3)      --          (3)
                                                   ------      ----     ------
Total partners' capital.........................    1,444        56      1,444
                                                   ------      ----     ------
                                                   $8,294      $ 56     $8,350
                                                   ======      ====     ======



             See Notes to Unaudited Pro Forma Financial Statements.

                                       27



                  UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

                 For the twelve weeks ended March 22, 2002

               (in millions, except per unit amounts and ratios)




                                                    Host          (B)
                                                Marriott L.P.  San Diego   Pro
                                                 Historical   Acquisition Forma
                                                ------------- ----------- -----
                                                                 
REVENUES
Hotel property-level revenues
 Rooms........................................      $465         $--      $465
 Food and beverage............................       244          --       244
 Other........................................        55          --        55
                                                    ----         ----     ----
Total hotel property-level revenues...........       764          --       764
                                                    ----         ----     ----
Rental income.................................        26          --        26
Total revenues................................      $790         $--      $790
                                                    ----         ----     ----
OPERATING COSTS AND EXPENSES
 Rooms........................................       111          --       111
 Food and beverages...........................       175          --       175
 Hotel departmental costs and deductions......       196          --       196
 Management fees..............................        36          --        36
 Taxes, insurance and other property-level
  costs.......................................        62          --        62
 Depreciation and amortization................        84            1       85
Corporate expenses............................        13          --        13
Other expenses................................         4          --         4
                                                    ----         ----     ----
OPERATING PROFIT (LOSS).......................       109           (1)     108
Minority interest expense.....................        (5)         --        (5)
Interest income...............................         3          --         3
Interest expense..............................      (112)         --      (112)
Net gains on property transactions............         1          --         1
Equity in earnings of affiliates..............       (4)          --        (4)
                                                    ----         ----     ----
Income (loss) before income taxes.............        (8)          (1)      (9)
Provision for income taxes....................        (4)         --        (4)
                                                    ----         ----     ----
Income (loss) from continuing operations......      $(12)         $(1)    $(13)
                                                    ====         ====     ====
Less:
Distributions on preferred units(I)...........        (9)                   (9)
                                                    ----                  ----
Income before extraordinary items
 available to common unitholders..............      $(21)                 $(22)
                                                    ====                  ====
Basic earnings per unit before extraordinary
 items available to common unitholders(J).....      $.08                  $.08
                                                    ====                  ====
Ratio of earnings to fixed charges and
 preferred unit distributions.................       1.0x                  1.0x
                                                    ====                  ====



             See Notes to Unaudited Pro Forma Financial Statements.

                                       28


                  UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

                   For the year ended December 31, 2001

               (in millions, except per unit amounts and ratios)




                                                                                       (E)                    (G)
                                                                             (D)       Debt                   San
                                            Host          (B)        (C)     Sale   Issuances       (F)      Diego       (H)
                                        Marriott L.P.  San Diego   Sale of    of       and        Wyndham    Lease   Acquisition
                                         Historical   Acquisition Pittsburgh Vail  Refinancings Acquisition Purchase   of NCS
                                        ------------- ----------- ---------- ----  ------------ ----------- -------- -----------
                                                                                             
REVENUES
Hotel property-level
 revenues
 Rooms.................                    $ 2,219        $--        $(11)   $(8)      $--          $17       $34         $6
 Food and beverage.....                      1,125         --          (7)    (3)       --            9        18          2
 Other.................                        282         --         --      (5)       --            1         7          1
                                           -------       -----       ----    ---       ----         ---       ---       ----
Total hotel property-
 level revenues........                      3,626         --         (18)   (16)       --           27        59          9
Rental income..........                        128         --         --     --         --           (5)      (18)         5
                                           -------       -----       ----    ---       ----         ---       ---       ----
Total revenues.........                      3,754         --         (18)   (16)       --           22        41         14
                                           -------       -----       ----    ---       ----         ---       ---       ----
OPERATING COSTS AND
 EXPENSES
Rooms..................                        541         --          (3)    (3)       --            4         7          1
Food and beverages.....                        843         --          (6)    (2)       --            6        11          1
Hotel departmental
 costs and deductions..                        946         --          (5)    (4)       --            7        14          2
Management fees .......                        177         --         --      (1)       --            2         2        --
Taxes, insuarance and
 property-level costs..                        282         --          (1)   --         --          --        --           1
Depreciation and
 amortization..........                        378           3         (6)    (3)       --          --        --           6
Corporate expenses.....                         32         --         --     --         --          --        --         --
Lease repurchase expense..                       5         --         --     --         --          --          5        --
Other expenses.........                         19         --         --     --         --          --        --         --
                                           -------       -----       ----    ---       ----         ---       ---       ----
OPERATING PROFIT (LOSS)                        531          (3)         3     (3)       --            3         2          3
Minority interest
 expense...............                        (16)        --         --     --         --          --        --          (1)
Interest income........                         36         --         --     --         --          --        --          (3)
Interest expense.......                       (493)        --         --     --          (9)        --        --          (1)
Net gains on property transactions..             6         --         --     --         --          --        --         --
Equity in earnings of
 affiliates............                          3         --         --     --         --          --        --           2
                                           -------       -----       ----    ---       ----         ---       ---       ----
Income (loss) before
 income taxes..........                         67          (3)         3     (3)        (9)          3         2        --
Provision for income
 taxes.................                         (8)        --         --     --         --          --         (1)       --
                                           -------       -----       ----    ---       ----         ---       ---       ----
Income (loss) from
 continuing
 operations............                    $    59       $  (3)      $  3    $(3)      $ (9)        $ 3       $ 1       $--
                                           =======       =====       ====    ===       ====         ===       ===       ====
Less:
Distributions on preferred units(I)..          (32)
                                           -------
Income before extraordinary items
 available to common unitholders..         $    27
                                           =======
Basic earnings per
 share before
 extraordinary items
 available to common
 unitholders(J)........                    $   .10
                                           =======
Ratio of earnings to fixed charges and
 preferred unit distributions..               1.2x
                                           =======

                                          Pro
                                         Forma
                                        --------
                                     
REVENUES
Hotel property-level
 revenues
 Rooms.................                 $ 2,257
 Food and beverage.....                   1,144
 Other.................                     286
                                        --------
Total hotel property-
 level revenues........                   3,687
Rental income..........                     110
                                        --------
Total revenues.........                   3,797
                                        --------
OPERATING COSTS AND
 EXPENSES
Rooms..................                     547
Food and beverages.....                     853
Hotel departmental
 costs and deductions..                     960
Management fees .......                     180
Taxes, insuarance and
 property-level costs..                     282
Depreciation and
 amortization..........                     378
Corporate expenses.....                      32
Lease repurchase expense..                   10
Other expenses.........                      19
                                        --------
OPERATING PROFIT (LOSS)                     536
Minority interest
 expense...............                     (17)
Interest income........                      33
Interest expense.......                    (503)
Net gains on property transactions..          6
Equity in earnings of
 affiliates............                       5
                                        --------
Income (loss) before
 income taxes..........                      60
Provision for income
 taxes.................                      (9)
                                        --------
Income (loss) from
 continuing
 operations............                 $    51
                                        ========
Less:
Distributions on preferred units(I)..       (32)
                                        --------
Income before extraordinary items
 available to common unitholders..      $    19
                                        ========
Basic earnings per
 share before
 extraordinary items
 available to common
 unitholders(J)........                 $   .07
                                        ========
Ratio of earnings to fixed charges and
 preferred unit distributions..            1.1x
                                        ========



             See Notes to Unaudited Pro Forma Financial Statements.

                                       29




               NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

   A. Represents the adjustment to record the acquisition in April 2002 of
minority interests in the partnership which owns the San Diego Marriott Hotel
for 6.9 million OP Units:


  .  Record the increase in property at $56 million;




  .  Record the increase in limited partnership interests of third parties at
     redemption value of $56 million.


   B. Represents the depreciation expense on the increase in property and the
decrease in minority expense for the acquisition of the San Diego Marriott
Hotel.






   C. Represents the adjustment for the sale of the Pittsburgh Marriott City
Center. The loss on the sale of $3 million has been excluded since it is a non-
recurring transaction.


  .  Reduce property-level revenues by $18 million for 2001;


  .  Reduce hotel operating costs and expenses by $21 million, in fiscal year
     2001. Depreciation includes a non-recurring impairment charge of
     $5 million in fiscal year 2001 to record the hotel assets at their
     estimated fair value less costs to sell.


   D. Represents the adjustment for the sale of Vail Marriott Mountain Resort.
The gain on the sale of $15 million has been excluded since it is a non-
recurring transaction.


  .  Reduce property-level revenues by $16 million for fiscal year 2001;


  .  Reduce hotel operating costs and expenses by $13 million for fiscal year
     2001.




   E. Represents the adjustment to record interest expense and related
amortization of deferred financing fees as a result of the issuance of the
Series H senior notes and application of the proceeds therefrom to pay down the
bank credit facility, the interest rate swap agreements, the prepayment of the
Ritz-Carlton, Amelia Island Mortgage and the refinancing of the Canadian debt.
The adjustments exclude net extraordinary gains (losses) of $(1) million for
the fiscal year 2001 resulting from the early extinguishment of debt. Since the
interest rate swap agreement effectively converts fixed rate debt to a floating
rate based on LIBOR, it is sensitive to changes in interest rates. A 100 basis
point change in LIBOR will result in an additional $4.5 million
increase/decrease in interest expense. For purposes of the pro forma, we
assumed a current one month LIBOR of 1.77%.


   The following table represents the adjustment to decrease (increase)
interest expense, including amortization of deferred financing fees for the
respective periods (in millions):




                                                                     Fiscal Year
                                                                        2001
                                                                     -----------
                                                                  
   Issuance of Series H senior notes................................   $(44.8)
   Interest rate swap agreement.....................................     16.6
   Repayment of amount outstanding on bank credit facility..........     18.5
   Canadian refinancing.............................................     (3.4)
   Prepayment of Ritz-Carlton, Amelia Island mortgage...............      4.1
                                                                       ------
                                                                       $ (9.0)
                                                                       ======



   F. Represents the June 2001 purchase of all of the minority limited
partnership interests held by Wyndham with respect to seven full service hotels
for $60 million using amounts borrowed under the bank credit facility. As part
of this acquisition, the leases were acquired from Wyndham with respect to
three full-service hotels.




  .  Reduce rental income by $5 million for fiscal year 2001;


  .  Record property-level revenues of $27 million, and hotel operating costs
     and expenses of $19 million, for fiscal year 2001.


                                       30



   G. Represents the adjustment to record the acquisition, effective June 16,
2001, of the lessee entity with respect to the San Diego Marriott Hotel and
Marina from Crestline for approximately $4.5 million, including legal and
professional fees. The pro forma results of operations have been adjusted to
eliminate a non-recurring loss of approximately $4.5 million related to the
termination of the lease for financial reporting purposes:


   .  Reduce rental income by $18 million for fiscal year 2001;


   .  Record property-level revenues of $59 million, and hotel operating costs
      and expenses of $34 million fiscal year 2001;


   .  Record a provision for federal and state income taxes applicable to HMT
      Lessee of $1 million, for fiscal year 2001, using the operating
      partnership's effective tax rate;


   H. Represents the adjustment to record the consolidation of previously non-
controlled subsidiaries that were acquired in March 2001:


   .  Record property-level revenues for two full service properties of $9
      million for fiscal year 2001;


   .  Record rental income for one full service property of $5 million for
      fiscal year 2001;


   .  Record hotel operating costs and expenses of $11 million, fiscal year
      2001;




   .  Record minority interest expense of $1 million, fiscal year 2001;


   .  Reduce interest income by $3 million for fiscal year 2001, for
      intercompany debt, net of interest earned by the non-controlled
      subsidiaries;


   .  Record interest expense of $1 million, fiscal year 2001, relating to
      debt amortization at the non-controlled subsidiaries;


   .  Eliminate in consolidation equity in losses of affiliates of $2 million
      for fiscal year 2001;




   I. Represents adjustment to record dividends on 6.0 million units of Class C
cumulative redeemable preferred limited partner units which were issued during
March 2001.


   J. The historical and pro forma weighted average common OP units outstanding
was 284.3 million and 292.2 million for fiscal year 2001, and 286.0 million and
292.8 million for the twelve weeks ended March 22, 2002, respectively.


                                       31


                            SELECTED FINANCIAL DATA



   The following table presents certain selected historical financial data of
the operating partnership and Host Marriott, the predecessor to Host REIT,
which has been derived from Host Marriott's audited consolidated financial
statements for the fiscal years 1998 and 1997 and the audited consolidated
financial statements of the operating partnership for the fiscal years ended
December 31, 2001, 2000 and 1999 and the twelve weeks ended March 22, 2002 and
March 23, 2001.


   The historical information contained in the following table for our 2002,
2001,1998 and 1997 operations relate to an operating entity which owned and
operated its hotels, while during 1999 and 2000 we owned the hotels but leased
them to third-party lessees, thus receiving rental payments. As a result of the
acquisition by our wholly owned taxable REIT subsidiary of the leasehold
interests with respect to 120 of our full-service hotels, our consolidated
operations in 2002 and 2001 present property-level revenues and expenses rather
than rental income from lessees. For a comparison of hotel level sales for
fiscal years 1999 through 2001 and the twelve weeks ended March 22, 2002 and
March 23, 2001, please see the tables presenting comparable periods in our
"Managements Discussion and Analysis of Results of Operations and Financial
Condition--Results of Operations."





                                       Twelve weeks ended                 Fiscal Year
                                       ------------------- ------------------------------------------
                                       March 22, March 23,
                                         2002      2001     2001   2000   1999  1998(1)(2) 1997(1)(2)
                                       --------- --------- ------ ------ ------ ---------- ----------
                                                              (in millions, except per share data)
                                                                      
Income Statement Data:
  Revenues (3)........................     790       869   $3,754 $1,407 $1,303   $3,455     $2,830
  Income (loss) from continuing
   operations.........................     (12)       40       59    203    256      194         47
  Income (loss) before extraordinary
   items (4)..........................      (5)       40       59    203    256      195         47
  Net income..........................       1        40       57    207    285       47         50
  Net (loss) income available to
   common unitholders.................      (8)       35       25    187    279       47         50
  Basic earnings per common unit: (5)
    Income from continuing
     operations.......................    (.08)      .12      .10    .64    .86      .90        .22
    Income before extraordinary
     items............................    (.05)      .12      .10    .64    .86      .91        .22
    Net (loss) income.................    (.03)      .12      .09    .66    .96      .22        .23
  Diluted earnings per common
   unit: (5)
    Income (loss) from continuing
     operations.......................    (.08)      .12      .10    .63    .83      .84        .22
    Income before extraordinary
     items............................    (.05)      .12      .10    .63    .83      .85        .22
    Net (loss) income.................    (.03)      .12      .09    .65    .93      .27        .23
  Cash dividends per common unit (6)..     --        .26      .78    .91    .84     1.00        --
Balance Sheet Data:
  Total assets (7)....................  $8,294    $8,247   $8,334 $8,391 $8,196   $8,262     $6,141
  Debt (8)............................   6,057     5,923    6,094  5,814  5,583    5,698      3,466
  Convertible Preferred Securities....     --        --       --     --     --       --         550


- --------

(1) The Internal Revenue Code requires REITs to file their income tax return on
    a calendar year basis. Accordingly, in 1998 we changed our fiscal year end
    to December 31 for both financial and tax reporting


                                       32



   requirements. Previously, our fiscal year ended on the Friday nearest to
   December 31. As a result of this change, the results of operations for 15
   hotels not managed by Marriott International were adjusted in 1998 to
   include 13 months of operations (December 1997 through December 1998) and
   therefore are not comparable to fiscal year 1997 which included 12 months
   of operations. The additional month of operations in 1998 increased our
   revenues by $44 million.


(2) The historical financial data for fiscal years 1998 and 1997 reflect as
    discontinued operations our senior living business that we formerly
    conducted but disposed of in the spin-off of Crestline as part of the REIT
    conversion. We recorded income from the discontinued operations, net of
    taxes, of $6 million in fiscal year 1998.


(3) Historical revenues for 2000 and 1999 primarily represent rental income
    generated by our leases, primarily with Crestline. Periods prior to 1999
    represent gross hotel sales because our leases were not in effect until
    January 1, 1999. Effective January 1, 2001, we acquired ownership of the
    leasehold interests in 116 of our full-service hotels from Crestline.
    Accordingly, our results of operations for 2002 and 2001 reflect this
    acquisition by presenting hotel level revenues rather than rental income.
    Beginning with the third quarter of 2001, hotel level revenues were
    recorded for an additional four full-service hotels as a result of the
    acquisition of three leasehold interests from Wyndham and the final
    leasehold interest from Crestline. Revenues for fiscal years 2000, 1999,
    1998 and 1997 have also been adjusted to reclassify interest income, net
    gains on property transactions, and equity in earnings of affiliates below
    operating profit to be consistent with our 2002 and 2001 statement of
    operations presentation.


(4) During 2001, we recorded an extraordinary loss of $1 million in connection
    with the refinancing of the mortgage debt on our Canadian properties and
    an extraordinary loss of $1 million related to the extinguishment of the
    outstanding balance on the term loan component of the bank credit
    facility. During 2000, we recorded an extraordinary loss of $2 million in
    connection with the renegotiation of the bank credit facility, an
    extraordinary gain of $7 million on the extinguishment of $22 million of
    the Convertible debt obligation to Host REIT, and an extraordinary loss of
    $1 million representing the write-off of deferred financing fees in
    connection with the repurchase of 0.4 million shares of Host REIT's
    Convertible Preferred Securities. In 1999, we recognized a $14 million
    extraordinary gain on the renegotiation of the management agreement for
    the New York Marriott Marquis, a net extraordinary gain of $5 million
    related to the refinancing of the mortgage debt for eight properties, a $2
    million extraordinary loss related to prepayments on the bank credit
    facility, and a net extraordinary gain of $12 million on the
    extinguishment of $53 million of the convertible debt obligation to Host
    REIT, including the write-off of deferred financing fees in connection
    with the repurchase of 1.1 million shares of Convertible Preferred
    Securities. In 1998, we recognized a $148 million extraordinary loss, net
    of taxes, on the early extinguishment of debt. In 1997, we recognized a $3
    million extraordinary gain, net of taxes, on the early extinguishment of
    debt.


(5) Basic earnings per common unit is computed by dividing net income
    available to common unitholders by the weighted average number of common
    units outstanding. Diluted earnings per common unit is computed by
    dividing net income available to common unitholders as adjusted for
    potentially dilutive securities, by the weighted average number of common
    units outstanding plus other dilutive securities. Diluted earnings per
    unit has not been adjusted for the impact of the Convertible Preferred
    Securities for 2002, 2001, 2000, 1999 and 1997, as they are anti-dilutive.


(6) 2001 cash distributions per common unit reflect quarterly cash
    distributions of $0.26 per common unit paid on April 13, July 13, and
    October 12, 2001. As previously discussed, Host REIT's Board of Directors
    did not declare a fourth quarter 2001 distribution. 2000 cash
    distributions per common unit reflect quarterly cash distributions of
    $0.21, $0.21, $0.23, and $0.26 per common unit. 1999 cash distributions
    per common unit reflect a quarterly cash distribution of $0.21 per common
    unit. 1998 cash distributions per common unit reflect the cash portion of
    a special distribution paid on February 10, 1999. This special
    distribution entitled unitholders of record on December 28, 1998 to elect
    to receive either $1.00 in cash or .087 of a share of common stock for
    each outstanding share of our common stock owned by such shareholder on
    the record date. Cash totaling approximately $73 million and approximately
    11.5 million shares were subsequently issued during 1999.


(7) Total assets for fiscal year 1997 include $236 million related to net
    investment in discontinued operations.


(8) Consists of long term debt (which includes senior notes, secured senior
    notes, mortgage debt, other notes, capital lease obligations, a revolving
    bank credit facility and the Convertible debt obligation to Host REIT).

                                      33



                            HOST MARRIOTT, L.P.


                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF


               RESULTS OF OPERATIONS AND FINANCIAL CONDITION




Overview


   Host Marriott, L.P. ("Host LP" or the "Operating Partnership"), a Delaware
limited partnership, operating through an umbrella partnership structure with
Host Marriott Corporation ("Host REIT") as the sole general partner, is
primarily the owner of hotel properties. Host REIT operates as a self-managed
and self-administered real estate investment trust ("REIT") with its operations
conducted solely through us and our subsidiaries. As of December 31, 2001, Host
REIT owned approximately 92% of our outstanding OP Units.




Recent Events


   Due to the changes in the insurance markets arising prior to September 11,
2001 and the effects of the terrorist attacks on September 11, 2001, it has
become more difficult and more expensive to obtain insurance on our hotels. The
property insurance policy covering most of our Marriott and Ritz-Carlton-
managed properties expired May 7, 2001. Accordingly, the manager of these
properties, Marriott International, whose obligation it is to secure this
insurance, has obtained a replacement policy for these properties through April
1, 2003. We believe the coverage under this policy is generally in an amount
and covering such risk as is carried by companies owning similar properties to
ours. The replacement policy, however, provides only limited coverage against
acts of terrorism.




   For certain of our Marriott-managed properties that have mortgage debt, the
first $500 million of our current insurance coverage is provided by a carrier
with a rating from Standard & Poors of AA- and from A.M. Best of A+XV. Three of
our loan agreements, representing debt of approximately $451 million related to
six hotel properties, require a minimum rating of AA from Standard & Poors. We
are in discussions with these lenders with regard to this requirement, but
cannot provide assurance that each of these lenders will be satisfied with the
AA- rating level of our insurance provider. While we expect to be able to
satisfactorily resolve these discussions, if we are unable to obtain insurance
coverage that complies with the covenants in these loan agreements or if the
lenders are unwilling or unable to amend or waive these covenants, we might be
required to take further actions to resolve these issues.


   We continue to work with the Port Authority of New York and New Jersey and
the Lower Manhattan Development Corporation as they decide how the World Trade
Center site in New York will be redeveloped. We anticipate that it will be
several years before these issues are resolved. We are also working closely
with our insurance companies to resolve our claims related to the destruction
of the Marriott World Trade Center and the damage to the New York Marriott
Financial Center, including insurance payments for property damage as well as
business interruption. We substantially repaired damage to the New York
Marriott Financial Center and reopened the hotel on January 7, 2002.


   During 2002, we expect to receive business interruption proceeds for what we
believe we would have made absent the terrorist attacks, although the actual
receipt of some of these proceeds may not happen before December 31, 2002. In
addition, special restrictive accounting rules developed for the World Trade
Center disaster may delay our ability to recognize a portion of the business
interruption advances as income until we resolve certain contingencies with our
insurance providers. Since September 11, 2001, the Company has received $25
million in business interruption insurance with respect to the two hotels, $13
million of which was received subsequent to March 22, 2002.


Lodging Performance


   In the first quarter of 2002, RevPAR for comparable hotels decreased
approximately 12.3% when compared to the same period in 2001. The decline is
the result of a decrease in average occupancy of 2.4 percentage points and the
decline of average room rates of 9.4%. However, the changes in RevPAR varied

                                       34



across the country. For example, comparable RevPAR for our Washington, DC
Metro area that includes 11 properties was down 19.2%, primarily as a result
of a decrease in average room rates of 15.1%. Several cities such as
Philadelphia and New York outperformed the portfolio as a whole. RevPAR for
our three hotels in Philadelphia was up 7% for the quarter reflecting strong
convention business in the city. New York has begun to show signs of recovery
and was only down 9.7%. The six properties in San Francisco, which is heavily
dependent on the technology industry were, down 27.9% in RevPAR for the
quarter. San Antonio also had a slight increase in RevPAR of 1.4% as the three
hotels in the city benefited from a recently completed convention center.




   The chart below sets forth performance information for our comparable
properties as of March 22, 2002:





                                                               2002      2001
                                                              -------   -------
                                                                  
Comparable Full-Service Hotels (1)
Number of properties.........................................     118       118
Number of rooms..............................................  56,297    56,297
Average daily rate........................................... $148.12   $163.48
Occupancy percentage.........................................    70.9%     73.3%
REVPAR....................................................... $105.08   $119.85
REVPAR % change..............................................   (12.3)%


- --------

(1) Consists of 118 properties owned, directly or indirectly, by us for the
   first quarter of 2002 and 2001, respectively, excluding properties with
   non-comparable operating environments as a result of acquisitions,
   dispositions, property damage and expansions and development projects.


   The chart below sets forth some performance information for our entire
portfolio of full-service hotels as of March 22, 2002:




                                                               2002(1)   2001
                                                              -------   -------
                                                                  
Number of properties.........................................     122       122
Number of rooms..............................................  58,008    58,008
Average daily rate........................................... $148.55   $165.51
Occupancy percentage.........................................    70.7%     73.4%
REVPAR....................................................... $105.04   $121.43
REVPAR % change..............................................   (13.5)%


- --------

   (1) 2002 includes results for the Ritz Carlton, Naples Golf Resort which
opened in January of 2002.


   During the first quarter of 2002, we continued to work actively with our
hotel managers in an effort to operate our hotels more efficiently by
maintaining the reduced levels of operating expenses that we had achieved as
of December 31, 2001. Our efforts to control costs have been very successful
in holding margins to a slight decline despite the drop in RevPAR. This result
has been primarily due to a decrease in labor costs at the hotels,
productivity improvements, lower utility costs, lower incentive management
fees and strong food and beverage results. As the economic recovery continues
and we return to more-normal operating levels, we believe we will maintain
some of the long-term efficiencies achieved and our margins will improve.


   Distributions. Our policy on cash distributions generally has been to
distribute the minimum amount necessary for Host REIT to maintain REIT status,
which is generally an amount equal to its taxable income. As a result of the
economic downturn, our operating results, and thus, taxable income, has been
greatly reduced, and accordingly, Host REIT has not declared a dividend on its
common stock and therefore we have not made a cash distribution on our OP
Units. Host REIT expects to reinstate the dividend on its common stock late
this year if it continues to see improvement in operations. It is our
intention to continue to pay distributions on preferred limited partner units.
On March 19, 2002, Host REIT's Board of Directors declared a quarterly
distribution of $0.625 per Class A, B and C preferred limited partner unit for
the first quarter of 2002. The preferred unit distribution was paid on April
15, 2002.


                                      35



   Credit Facility and Senior Notes. Our bank credit facility contains certain
financial covenants related to, among other things, maintaining certain levels
of tangible net worth and certain ratios of EBITDA to interest and fixed
charges, total debt to EBITDA, interest coverage or secured debt and
unencumbered EBITDA as a percentage of total EBITDA. Effective November 19,
2001, we amended our bank credit facility to modify these covenants through
August 15, 2002, among other things. This amendment also has resulted in
reducing the availability under the credit facility to $25 million for the
second quarter of 2002 and placed additional restrictions on our ability to use
proceeds from the issuance of debt or equity, pay dividends to certain holders
of our capital stock, make acquisitions or investments, or to use the proceeds
from asset sales. As of March 22, 2002, there was no outstanding balance under
the credit facility.


   We have $3.2 billion of senior notes outstanding as of March 22, 2002. Under
the indenture, pursuant to which senior notes were issued, there are covenants
that could restrict our ability to incur indebtedness, make investments in
other entities, and make certain distributions to our equity holders. These
restrictions would take effect if, after giving effect to any new increase of
debt on a pro forma basis, our consolidated coverage ratio is less than 2.0 to
1.0. As a result of the effects on our business of the economic recession and
the events of September 11, 2001, we anticipate that any consolidated coverage
ratio that is calculated under the indenture after the end of each quarter in
2002 may be less than 2.0 to 1.0. If this occurs, then Host REIT will be
prohibited from incurring indebtedness and from issuing certain types of stock
with certain redemption terms (other than certain types of debt specifically
permitted under the indenture) and Host REIT would be prohibited from declaring
or paying dividends on its capital stock, other than to the extent required to
maintain its status as a REIT.




   Management and Other Agreements. The Company currently is negotiating
changes to the management and other agreements with Marriott International and
its affiliates. If made, the changes, which remain subject to the consent of
various lenders to the properties and other third parties, would be effective
December 29, 2001. The proposed changes would result in reductions in incentive
management fees on the portfolio of Marriott-managed hotels, reduce certain
expenses to the property, lower our working capital requirements, clarify the
circumstances and conditions under which Marriott International and its
affiliates may earn a profit on transactions with the hotels, and provide
greater approval rights over budgets and capital expenditures. The Company is
also negotiating to expand the pool of hotels that are subject to an existing
agreement that allows us to sell certain assets without a Marriott
International management agreement, and to revise the method for determining
the number of hotels that may be sold without a Marriott International
management agreement or a franchise agreement, in each case, without the
payment of a termination fee. There can be no assurance that the negotiations
will be successful, that the changes will be made in substantially the form
described or that we will receive the necessary consents to implement these
changes.


   Marriott International currently has the right to purchase up to 20 percent
of the Host REIT's outstanding stock upon certain changes in control of Host
Marriott. In connection with the Company's negotiations with Marriott
International on changes to the management agreements, we have agreed to
terminate this right and clarify existing provisions in the management
agreements that currently limit the Company's ability to sell a hotel or the
company to a competitor of Marriott International.


Results of Operations


   Our historical revenues for 2000 and 1999 represent rental income on leases
of our hotels. Expenses during 2000 and 1999 represent specific owner costs,
including real estate and property taxes, property insurance and ground and
equipment rent. Beginning January 1, 2001, we reported gross property level
sales from the majority of our hotels and, accordingly, our expenses included
all property level costs including depreciation, management fees, real and
personal property taxes, ground building and equipment rent, property insurance
and other costs due to changes in the REIT tax laws which enabled the
subsequent acquisition by the TRS of leases on our hotels previously leased to
third parties (see Business and Properties, "Operating Structure"). As a
result, our 2001 results are not comparable to the historical reported amounts
for 2000 and 1999.


First Quarter 2002 Compared to First Quarter 2001


   Revenues. Hotel sales decreased $75 million, or 8.9%, to $764 million for
the twelve weeks ended March 22, 2002. This decline reflects the continued
demand weakness in the lodging industry.


                                       36



   Rental income decreased $8 million, or 23.5%, to $26 million for the twelve
weeks ended March 22, 2002. Rental income for the twelve weeks ended March 22,
2002 and March 23, 2001 includes: 1) lease income from our HPT leases of $15
million for both periods, 2) lease income from full-service properties of $10
million and $18 million, respectively, and 3) office building rental income of
$1 million for both periods. As of March 23, 2001, we had five full-service
properties that received lease income. We repurchased the lessee entities with
respect to four of those properties in June 2001, terminating the leases for
financial reporting purposes. As a result, we currently record rental income
with respect to only one full-service property.


   Operating Costs and Expenses. Operating costs and expenses decreased $43
million, or 5.9%, to $681 million for the twelve weeks ended March 22, 2002.
This decline is the result of our efforts to control operating costs at the
hotels and the overall decline in demand.


   Rental Expense. Corresponding expenses for the rental income described above
for the twelve weeks ended March 22, 2002 and March 23, 2001 include rental
expense relating to our HPT leases of $16 million for both periods and office
building expenses of $1 million for both periods. These expenses are included
in taxes, insurance and other property-level expenses on the consolidated
statement of operations.


   Depreciation and Amortization. Depreciation and amortization expense
increased $7 million or 9% for the first quarter of 2002 versus the first
quarter of 2001, reflecting an increase in depreciable assets. The increase in
depreciation expense reflects the consolidation of three hotels and other
equipment as a result of the acquisition of the voting interests in Rockledge
Hotel Properties, Inc. during April 2001. The increase is also the result of
$286 million in capital expenditures during 2001 and $47.9 million in the first
quarter of 2002.


   Operating Profit. Operating profit decreased $40 million, or 27%, to $109
million for the twelve weeks ended March 22, 2002. Operating profit decreased
due to a decline in revenues and the continued weakness in the lodging
industry.


   Corporate Expenses. Corporate expenses increased $5 million for the first
quarter of 2002 versus the first quarter of 2001, primarily as a result of
grants of restricted stock to senior executives that adjust based on changes in
the market value of Host REIT's common stock. The restricted stock grants are
subject to term requirements and company and individual peerformance
requirements in order to vest. Cash corporate expense declined $701,000 during
the first quarter of 2002 compared to the first quarter of 2001.




   Minority Interest Expense. For the twelve weeks ended March 22, 2002 and
March 23, 2001, respectively, we recognized minority interest expense of $5
million and $7 million. The decline is a reflection of the decrease in our
results of operations as described above.


   Equity in Earnings (Loss) of Affiliates. For the twelve weeks ended March
22, 2002, equity in loss of affiliates was $4 million compared to equity in
earnings of affiliates of $2 million during the twelve weeks ended March 23,
2001. The decrease primarily reflects our equity share in operating losses on
investments in CBM Joint Venture, LLC and JWDC Limited Partnership.


   Discontinued Operations. During January of 2002, we transferred the St.
Louis Marriott Pavilion to the mortgage lender in a non-cash transaction. In
accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," which we adopted January 1, 2002, a gain, net of tax, of $7
million relating to the write-off of certain assets and liabilities and loss
from operations was recorded as discontinued operations.


   Extraordinary Gain. During the twelve weeks ended March 22, 2002, we
recorded an extraordinary gain, net of tax, of $6 million representing the
extinguishment of debt on the St. Louis Marriott Pavilion, which we transferred
to the mortgage lender.


   Net Income. Our net income was $1 million for the first quarter of 2002
compared to $40 million for the first quarter of 2001. Basic and diluted
earnings (loss) per common unit were $(.03) for 2002, compared to $.12 in 2001.
The decrease is primarily due to hotel sales declines as a result of the
continued demand weakness in the lodging industry.


                                       37



   Net Income (Loss) Available to Common Unitholders. The net loss available to
common unitholders was $8 million for the first quarter of 2002, a decrease of
$43 million over the same period in 2001. The decrease reflects the previously
discussed decrease in net income as well as the increase in distributions on
preferred units due to the issuance of approximately 6.0 million shares of
Class C preferred units during the second quarter of 2001.


Fiscal Year 2001 Compared to Fiscal Year 2000


   Revenues. Revenues increased $2.4 billion, or 171%, to approximately $3.8
billion for 2001. As discussed above, our revenues and operating profit are not
comparable to 2000, due to the acquisition of the lessee entities by the TRS.
Rental income decreased $1.3 billion, or 91%, to $126 million for 2001 versus
2000, reflecting the purchase of the leasehold interests from Crestline with
respect to 116 hotels by the TRS effective January 1, 2001 and the purchase of
four additional lessee entities (three of the lessee entities were purchased
from Wyndham, while the other was purchased from Crestline) effective June 16,
2001. Rental


income for 2001 includes: 1) lease income from our HPT leases of $77 million,
2) lease income earned on five full-service properties of $29 million, 3) lease
income earned on certain FF&E of $14 million and 4) office building rental
income of $6 million. For 2002, rental income will include the HPT leases
income, rent from the one remaining full-service hotel and the office building
leases.


   The table below presents gross hotel sales for the years ended December 2001
and 2000. For 2000, gross hotel sales were used as the basis for calculating
rental income. The data is presented in order to facilitate an investor's
understanding and comparative analysis of the operations of our properties.




                                                              Year Ended
                                                       -------------------------
                                                       December 31, December 31,
                                                           2001         2000
                                                       ------------ ------------
                                                             (in millions)
                                                              
   Hotel sales
     Rooms............................................    $2,550       $2,877
     Food and beverage................................     1,173        1,309
     Other............................................       306          323
                                                          ------       ------
       Total hotel sales..............................    $4,029       $4,509
                                                          ======       ======



   The $480 million decrease in hotel sales for the year ended December 31,
2001 primarily reflects the decrease in REVPAR for our properties of 13.7% to
$105.96. Room sales also declined as a result of the loss of sales from the New
York Marriott World Trade Center and the New York Marriott Financial Center due
to the terrorist acts of September 11. The declines were partially offset by
incremental revenues provided by the 500-room expansion at the Orlando
Marriott, which was placed in service in June 2000, and the addition of three
hotels as a result of our consolidation of Rockledge and Fernwood as of March
24, 2001.


   The aforementioned decline in REVPAR for the year ended December 31, 2001
compared to the year ended December 31, 2000, of 13.7% to $105.96, was due to
the economic recession and the effects of the September 11, 2001 terrorist
attacks. The decrease is attributable to a decrease in occupancy of 7.7
percentage points and a 4.1% decrease in room rates for the year. As a result
of decreased hotel sales, our hotel managers implemented cost cutting measures
and revenue enhancement programs at the property level during the second
quarter in order to stabilize house profit. These measures include increasing
labor efficiency particularly at the managerial level and in the food and
beverage area at the hotels, reducing discretionary expenses in rooms, food and
beverage, and repairs and maintenance and reducing energy consumption. These
cost cutting measures served to stabilize the profit margins during the second
and third quarters, however, due to continued declines in RevPAR during the
third and fourth quarters, profit margins on our entire portfolio of hotels
decreased 3.0 percentage points for the year ended December 31, 2001.


                                       38



   Other Property-level Expenses. Other property-level owner expenses primarily
consist of property taxes, insurance, and ground and equipment rent. These
expenses increased $6 million, or 2%, to $282 million, for the year ended
December 31, 2001. The increase was primarily due to additional expenses
required as the lessee of the properties. Included in other property-level
expenses is $72 million and $74 million for rental expense on our HPT leases
for 2001 and 2000, respectively.


   Depreciation and Amortization. Depreciation and amortization increased $47
million, or 14%, to $378 million during 2001 primarily reflecting an increase
in depreciable assets. The increase in depreciation expense reflects the
consolidation of three hotels and other equipment as a result of the purchase
of the voting interests in Rockledge and Fernwood. The transaction caused an
increase in depreciable assets of $206 million. The increase in depreciation
expense is also the result of $286 million and $379 million in capital
expenditures in 2000 and 2001, respectively.


   Corporate Expenses. Corporate expenses decreased by $10 million, or 24%, as
a result of our efforts to curb costs in the wake of a more difficult operating
environment during 2001 and a decrease in compensation expense related to
employee stock plans.


   Lease Repurchase Expense. In connection with the definitive agreement with
Crestline in November 2000 for the purchase of the leasehold interests with
respect to 116 hotels, by the TRS, we recorded a nonrecurring loss provision of
$207 million. In 2001, as a result of the purchase of four additional leasehold
interests by the TRS, we recognized a loss of $5 million.


   Minority Interest. Minority interest decreased by $11 million to $16 million
for 2001, primarily due to allocation of the Mexico partnership's minority
interest income. The Mexico partnership was not consolidated until second
quarter of 2001.


   Interest Expense. For the year ended December 31, 2001, interest expense
increased 6% to $493 million, compared to the year ended December 31, 2000,
primarily due to the issuance in October of 2000 of $250 million 9 1/4% Series
F Senior notes, which was primarily used to fund the purchase of the Crestline
lessee entities and for general corporate purposes.


   Interest Income. Interest income decreased $4 million, or 10%, for the year
ended December 31, 2001, when compared to the year ended December 31, 2000. The
decrease was due to the elimination of notes receivable as a result of the
consolidation of Rockledge on March 24, 2001, the elimination of working
capital notes receivable in connection with the acquisition of the leasehold
interests in 120 hotels, as well as a decrease in the average cash balance
during the year. The decrease was partially offset by interest on a note
relating to the 1994 sale of 26 Fairfield Inns that is recorded under the cost
recovery method.


   Equity in Earnings of Affiliates. For the year ended December 31, 2001,
equity in earnings of affiliates decreased $22 million, or 88%, to $3 million.
The decrease is due to the consolidation of Rockledge and Fernwood on March 24,
2001 as a result of the purchase of the 5% voting interests in both entities.


   Income Tax Benefit. For the year ended December 31, 2001, we recorded an
income tax provision of $8 million, a change of $106 million, from the $98
million income tax benefit in 2000. The change is primarily due to the $82
million benefit taken during 2000 due to the recognition of the income tax
asset as a result of the purchase of the leasehold interests with respect to
120 hotels. Also, during 2001 and 2000, we favorably resolved certain tax
matters and recognized $16 million and $32 million, respectively, related
thereto as a benefit to our tax provision.


   Extraordinary (Loss) Gain. We recorded an extraordinary loss of $2 million
in 2001 and an extraordinary gain of $4 million in 2000. During 2001 and 2000,
we had losses of $1 million and $2 million, respectively, representing the
write-off of deferred financing costs and certain fees paid to our lender in
connection with renegotiations of the bank credit facility.


                                       39



   In 2001, we recorded an extraordinary loss of $1 million, representing the
write-off of deferred financing costs in connection with the refinancing of the
mortgage debt of our Canadian properties.


   During the first quarter of 2000, we extinguished approximately $22 million
of the convertible debt obligation to Host REIT through the purchase of 0.4
million shares of Host REIT's Convertible Preferred Securities on the open
market. We recorded an extraordinary gain of $7 million on this transaction,
based on the discount at which we purchased the Convertible Preferred
Securities. We also recorded an extraordinary loss of $1 million representing
the write-off of deferred financing costs in connection with the early
extinguishments.


   Net Income. Our net income was $57 million in 2001 compared to net income of
$207 million in 2000. Basic and diluted earnings per common unit were $.09 and
$.09, respectively, for 2001, compared to $.66 and $.65, respectively, in 2000.


   Net Income Available to Common Unitholders. Our net income available to
common unitholders was $25 million in 2001, a decrease of $162 million when
compared to the same period in 2000. The decrease reflects distributions of $32
million in 2001 on the preferred limited partner units issued in March of 2000.


Fiscal Year 2000 Compared to Fiscal Year 1999


   Revenues. Revenues increased $97 million, or 7%, to approximately $1.5
billion for 2000. Gross hotel sales, which is used in the determination of
rental income for 2000, increased $231 million or 5% over 1999 amounts as is
shown in the following table.





                                                              Year Ended
                                                       -------------------------
                                                       December 31, December 31,
                                                           2000         1999
                                                       ------------ ------------
                                                             (in millions)
                                                              
   Hotel Sales(1)
     Rooms............................................    $2,877       $2,725
     Food and beverage................................     1,309        1,258
     Other............................................       323          295
                                                          ------       ------
       Total sales....................................    $4,509       $4,278
                                                          ======       ======


- --------

(1) Gross hotel sales do not represent our reported revenues for 2000 and 1999,
    but are used to compute our reported rental income.


   Rental income increased $95 million, or 7% to approximately $1.4 billion for
2000, primarily driven by the growth in room revenues generated per available
room or RevPar, completion of the new Tampa Waterside Marriott in February
2000, and the opening of a 500-room expansion at the Orlando World Center
Marriott in June 2000, partially offset by the sale of five properties (1,577
rooms) in 1999. RevPAR increased 5.4% to $122.43 in 2000 for our hotels.
Average room rates increased approximately 5.6%, while average occupancy
decreased less than one percentage point for 2000.


   Depreciation and Amortization. Depreciation and amortization increased $38
million or 13% during 2000, reflecting an increase in depreciable assets, which
is primarily the result of capital projects placed in service in 2000,
including the Tampa Waterside Marriott and expansion at the Orlando World
Center Marriott, partially offset by net asset disposals of approximately $174
million in connection with the sale of five hotels during 1999.


   Other Property-level Expenses. Property-level expenses primarily consist of
property taxes, insurance, and ground and equipment rent. These expenses
increased $8 million, or 3%, to $272 million for 2000, primarily due to an
increase in ground lease expense, which is commensurate with the increase in
hotel sales, and an increase in equipment rent expense due to technology
initiatives at the hotels during 2000.


                                       40



   Minority Interest. Minority interest expense increased $6 million to $27
million for 2000, primarily reflecting the improved property-level results, as
previously discussed, to include those properties that are not wholly-owned by
us.


   Interest Expense. Interest expense decreased less than 1% to $466 million in
2000, primarily due to the $75 million reduction in the convertible debt
obligation to Host REIT during the fourth quarter of 1999 and first quarter of
2000, and the decrease in the outstanding balance of the bank credit facility
during 2000 compared to 1999, partially offset by the issuance of the Series F
senior notes in October 2000.


   Corporate Expenses. Corporate expenses increased $8 million to $42 million
for 2000, resulting primarily from an increase in compensation expense related
to employee stock plans.


   Loss on Litigation Settlement. In connection with a proposed settlement for
litigation related to seven limited service partnerships discussed above, we
recorded a non-recurring charge of $40 million during the fourth quarter of
1999.


   Lease Repurchase Expense. In connection with the execution of a definitive
agreement with Crestline in November 2000 for the termination of the Crestline
leases through the purchase and sale of the Crestline Lessee Entities by our
TRS for $207 million in cash, we recorded a non-recurring loss provision of
$207 million during the fourth quarter of 2000.


   Income Tax Benefit. In connection with the lease repurchase expense
recognized during the fourth quarter of 2000, we recognized an income tax
benefit of $82 million, because for income tax purposes, the acquisition is
recognized as an asset that will be amortized over the remaining term of the
leases. In addition, during 2000 we favorably resolved certain tax
contingencies and reversed $32 million of our net tax liabilities into income
through the tax provision during the year ended December 31, 2000.


   Extraordinary Gain (Loss). During 2000, we recorded an extraordinary loss of
approximately $2 million representing the write off of deferred financing costs
and certain fees paid to our lender in connection with the renegotiation of the
bank credit facility.


   During the first quarter of 2000, we extinguished approximately $22 million
of the convertible debt obligation to Host REIT through the purchase of 0.4
million shares of Host REIT's Convertible Preferred Securities on the open
market. We recorded an extraordinary gain of $7 million on this transaction,
based on the discount at which we purchased the Convertible Preferred
Securities. We also recorded an extraordinary loss of $1 million representing
the write-off of deferred financing costs in connection with the early
extinguishment.


   In connection with the refinancing of the mortgage and renegotiation of the
management agreement on the New York Marriott Marquis hotel, we recognized an
extraordinary gain of $14 million on the forgiveness of debt in the form of
accrued incentive management fees during 1999.


   An extraordinary loss of $3 million representing the write-off of deferred
financing fees occurred in July 1999 when the mortgage debt for eight
properties, including the New York Marriott Marquis hotel, was refinanced. In
connection with this refinancing, the interest rate swap agreements associated
with some of the original debt were terminated and an extraordinary gain of $8
million was recognized.


   An extraordinary loss of $2 million representing the write-off of deferred
financing fees occurred during the fourth quarter of 1999 when prepayments
totaling $225 million were made to permanently reduce the outstanding balance
of the term loan portion of the Bank Credit Facility to $125 million.


   During the fourth quarter of 1999, we extinguished approximately $53 million
of the convertible debt obligation to Host REIT through the purchase of 1.1
million shares of Host REIT's Convertible Preferred Securities on the open
market. We recorded an extraordinary gain of $14 million on this transaction,
based on the discount at which we purchased the Convertible Preferred
Securities. We also recorded an extraordinary loss of $2 million representing
the write-off of deferred financing fees in connection with the extinguishment.

                                       41



   Net Income. Our net income in 2000 was $207 million, compared to $285
million in 1999. Basic and diluted earnings per common unit was $.66 and $.65,
respectively, for 2000, compared to $.96 and $.93, respectively, in 1999.


   Net Income Available to Common Unitholders. Our net income available to
common unitholders in 2000 was $187 million, compared to $279 million in 1999,
reflecting distributions of $20 million in 2000 on the preferred limited
partner units which were issued during the second half of 1999.


Liquidity and Capital Resources


   During the first quarter of 2002, we continued our focus on maintaining
liquidity and a strong balance sheet. At March 22, 2002, we had $341 million of
cash on hand, no outstanding debt on our credit facility and no significant
debt maturities until 2005. Although we do not believe we will need to access
the bank credit facility during 2002, we are currently negotiating a new long-
term facility with a new lender group that will be smaller but with less
restrictive covenants than our existing agreement.




   During 2000 and 2001, we focused on maintaining the strength and flexibility
of our balance sheet in order to allow us the opportunity to selectively choose
investment alternatives that will further enhance unitholder value. As a result
September 11, 2001, we have focused on implementing cost controls, limiting
capital expenditures and maintaining our liquidity.


   The acquisitions made in January 2001 and June 2001 of the Crestline and
Wyndham lessee entities enable us to better control our portfolio of hotels and
were accretive to our earnings and cash flow during 2001. There can be no
guarantee, however, that we will benefit from similar favorable results in the
future.


   As a result of several key actions taken by us in the fourth quarter of
2001, including amending our bank credit facility, issuing $450 million of
senior notes and selling two hotels, we had $352 million of cash at year end,
no outstanding debt on our bank credit facility and no significant debt
maturities until 2005. Although we do not believe we will need to access the
bank credit facility during 2002, we are seeking to implement a new long-term
facility that will be smaller but with less restrictive covenants than our
existing agreement.


   Cash from Operations. Cash and cash equivalents were $352 million and $313
million at December 31, 2001 and 2000, respectively. Cash from operations
decreased $253 million to $281 million in 2001, primarily reflecting declining
results of operations due to the 13% decrease in RevPAR for our comparable
properties as previously discussed, in addition to the $208 million paid in
2001 for the purchase of the leasehold interests with respect to 120 of our
hotels. We reported a decrease in cash and cash equivalents of $11 million
during the twelve weeks ended March 22, 2002 compared to the same period in
2001. Cash from (used in) operations was $59 million through the first quarter
of 2002 and $(148) million through the first quarter of 2001. The change in
cash from operations is primarily a result of the payment in January 2001 of
$204 million to purchase our hotel leases from Crestline Capital Corporation.


   Cash from Investing Activities. Cash used in investing activities was $279
million and $448 million in 2001 and 2000, respectively. Cash used in investing
activities includes capital expenditures of $286 million and $379 million and
cash payments for acquisitions of $63 million and $40 million in 2001 and 2000,
respectively. Cash used in investing activities during 2001 was partially
offset by cash provided by the sale of two hotels of $60 million, discussed
below. Cash used in investing activities was $48 million and $78 million
through the first quarter of 2002 and 2001, respectively. Cash used in
investing activities through the first quarter includes capital expenditures
and other investments of $48 million and $81 million for 2002 and 2001,
respectively. Based on our assessment of the current operating environment and
to conserve capital, we will continue our disciplined approach to capital
expenditures during the remainder of 2002, focusing on property maintenance and
selected improvements to maintain high quality standards. We anticipate
spending $185 million in 2002 for capital expenditures.


   Property and equipment balances include $74.1 million and $148.9 million for
construction in progress as of March 22, 2002 and December 31, 2001,
respectively. The balance as of March 22, 2002 primarily relates to


                                       42



the development of various expansion and development projects. During January
2002, we opened the 295-room Ritz-Carlton, Naples Golf Resort in Naples,
Florida, at a development cost of approximately $75 million.


   As previously discussed, during January 2002, we transferred the St. Louis
Marriott Pavilion to the mortgage lender in a non-cash transaction. In
accordance with SFAS 144, "Accounting for the Impairment or Disposal of Long-
Lived Assets," we treated the disposition as discontinued operations.


   Capital expenditures include contributions to property improvement funds,
which have been established for certain of our hotels pursuant to the
management agreement in order to provide for the replacement of furniture,
fixtures and equipment as well as non-routine repairs and maintenance which are
normally capitalized. Contributions to the property improvement funds are
generally 5% of gross hotel sales. Capital expenditures also include the costs
for expansion and development projects that are funded through loans such as
the Orlando World Center Marriott that was completed during 2000.


   The following table summarizes significant investing activities which were
completed during 2001 and 2000 (in millions).





                                                                                                            Sale/
                                                                                                          (Purchase)
Transaction Date                                   Description of Transaction                               Price
- ----------------         -------------------------------------------------------------------------------  ----------
                                                                                                    
2001
 March.................. Purchase of the 5% voting interest in Rockledge and Fernwood (1)                    $ (2)
 April.................. Addition of a spa facility at The Ritz-Carlton, Naples (2)                           (26)
 June................... Purchase of Wyndham limited partner interests (3)                                    (60)
 June................... Addition of a spa facility at the Marriott Harbor Beach Resort (8)                    (8)
 December............... Sale of Vail Marriott Mountain Resort and the Pittsburgh City Center Marriott         65
2000
 May.................... Purchase of non-controlling partnership interest in JWDC Limited Partnership (4)    $(40)
 June................... Additions to the Orlando World Center Marriott (5)                                   (88)
 October................ Purchase of 50% interest in Courtyard by Marriott Joint Venture (6)                  (90)


- --------

(1)  The voting interests were previously held by the Host Marriott Statutory
     Employee/Charitable Trust. Prior to the acquisition we held a 95% non-
     voting interest in each company. As a result of the acquisition we now
     consolidate three additional full-service hotels.


(2)  During 2001, a total of $5 million of the development cost was expended.


(3)  The limited partner interests relate to 7 full-service hotels, and as a
     part of the transaction, the leases were acquired from Wyndham with
     respect to three of the hotels.


(4)  The partnership owns the 772-room JW Marriott Hotel located on
     Pennsylvania Avenue in Washington, DC.


(5)  Includes the addition of a 500-room tower and 15,000 square feet of
     meeting space. During 2000, a total of $39 million of the development cost
     was expended.


(6)  See below for discussion.


   In December 2000, a joint venture formed by us (through non-controlled
subsidiaries) and Marriott International acquired the partnership interests in
CBM I and CBM II, two partnerships owning 120 hotels for an aggregate payment
of approximately $372 million plus interest and legal fees, of which Rockledge
paid approximately $90 million. The joint venture acquired the partnerships by
acquiring partnership units pursuant to a tender offer for such units followed
by a merger of each of CBM I and CBM II with subsidiaries of the joint venture.
The joint venture financed the acquisition with mezzanine indebtedness borrowed
from Marriott International, cash and other assets contributed by us (through
our non-controlled subsidiaries) including Rockledge's existing general partner
and limited partner interests in the partnerships, and cash contributed by
Marriott International. We own a 50% interest in the joint venture and account
for it on the equity method because we do not control it.



                                       43



   For purposes of our investment analysis and the charge for litigation
settlements in our 1999 financial statements, we estimated the value of the
planned investment in the Courtyard joint venture based upon: (1) estimated
post-acquisition cash flows, including anticipated changes in the related hotel
management agreements to be made contemporaneously with the investment; (2) the
joint venture's new capital structure; and (3) estimates of prevailing discount
rates and capitalization rates reflected in the market at that time. The amount
of post-settlement equity of the Courtyard joint venture was considerably lower
than the pre-acquisition equity due to additional indebtedness post-acquisition
offset by the impact of changes to the management agreements made
contemporaneously with the transaction. The investment in the Courtyard joint
venture was consummated late in the fourth quarter of 2000. The Courtyard joint
venture has recorded its investment in the partnership units at $363 million,
which reflected estimated fair value based on: (1) pre-acquisition cash flows;
(2) the pre-acquisition capital structure; and (3) prevailing discount rates
and capitalization rates in December 2000. The factors giving rise to the
differences between our 1999 assessment based on post-acquisition cash flows
and the joint venture purchase accounting based on pre-acquisition cash flows
did not materially affect our previous assessment of expense related to
litigation.


   Due to a number of factors, the equity values used in the purchase
accounting for the joint venture's investment were different from limited
partner unit estimates included in the CBM I and CBM II Purchase Offer and
Consent Solicitations prepared in early 2000. The solicitations reported that
the value of limited partner units based on an assumed 20 percent discount rate
would be $254 million. The difference between this and the purchase accounting
entry by the Courtyard joint venture is primarily attributed to: (1) the
investment's being consummated almost one year subsequent to the time the
original estimates were prepared ($30 million); and (2) a lower discount rate
(17 percent) and capitalization rate reflecting changes in market conditions
and capital structure versus the date at which the estimates in the
solicitations were prepared ($79 million).


   Although we may from time to time sell assets for strategic reasons or to
realize unique market conditions, the factors driving the change in value for
the CBM I and CBM II properties did not have a material impact on other
properties owned by us because our strategy is to buy and hold investments in
real estate. As investments in real estate are accounted for on a historical
basis, the impact of changes in market conditions are not reflected in the
financial statements.


   Property and equipment balances include $149 million and $135 million for
construction in progress as of December 31, 2001 and December 31, 2000,
respectively. The balance as of December 31, 2001, primarily relates to the
development of the Ritz-Carlton, Naples Golf Resort, which opened on January 4,
2002.


   Cash from/used in Financing Activities. Cash provided by financing
activities was $37 million in 2001 and cash used by financing activities was
$50 million in 2000. Cash used in financing activities was $22 million through
the first quarter of 2002 and cash provided by financing activities was $25
million through the first quarter of 2001, respectively. Cash used in financing
activities primarily related to the payment of $9 million in preferred unit
distributions and the repayment of $8 million in debt.


   As of December 31, 2001, our total consolidated debt was approximately $6.1
billion. Our debt is comprised primarily of $3.2 billion in unsecured senior
notes, $2.3 billion in non-recourse mortgage debt and the $492 million
convertible debt obligation to Host REIT.


   As a result of the repayment of the outstanding balance on the credit
facility with the proceeds from the Series H senior notes we have substantially
reduced all of our near term maturities, with $148 million in principal
payments due during 2002 and $294 million in principal payments due over the
next three years. The weighted average interest rate of all our debt is
approximately 8.2%, and our current average maturity is six years.
Additionally, 98% of our debt has a fixed rate of interest as of December 31,
2001. However, in order to reduce interest rate risk by taking advantage of
low, short-term interest rates and to maintain a mix of floating and fixed rate
debt, we entered into an interest rate swap agreement (described below),
effective in January 2002, to convert the fixed rate of the Series H senior
notes to a floating rate. If the swap agreement had been effective as of
December 31, 2001, the percentage of fixed rate debt would have been 90%. We do
not have a


                                       44



specific goal relative to our level of variable or fixed interest rate debt. We
will continue to evaluate each debt offering in regards to the type and timing
of payments, maturity date and its overall effect on earnings. We entered into
a separate cap arrangement in January 2002 to limit our exposure to interest
rate increases on this floating rate swap (described below).


   The following table summarizes significant financing activity except for the
bank credit facility and non-cash equity transactions (all of which are
discussed below) for fiscal years 2001 and 2000 (in millions):





 Transaction                                        Transaction Interest Rate at
    Date          Description of Transaction          Amount        12/31/01
 -----------      --------------------------        ----------- ----------------
                                                       
 2001
 --          Payment of Class A, B and C
             cumulative redeemable preferred
             limited partner unit
             distributions(1)                            (28)          --
 --          Payment of OP Unit distributions           (298)          --
 March       Issuance of Class C cumulative
             redeemable preferred limited
             partner units(1)                            143         10.00%
 August      The Ritz Carlton, Amelia Island
             mortgage loan                               (88)          --
 August      Canadian mortgage loan(2)                  96.6          4.82%
 October     San Antonio Marriott Riverwalk
             mortgage loan                             (16.5)          --
 December    Issuance of Series H Senior Notes(3)     $  450          9.50%
 2000
 --          Repurchase of equity instruments(4)         (62)          --
 --          Payment of Class A and B cumulative
             redeemable preferred limited
             partner unit distributions                  (19)          --
 --          Payment of OP Unit distributions           (241)          --
 February    Harbor Beach Marriott Mortgage(5)            84          8.58%
 February    Harbor Beach Marriott Mortgage(5)           (80)         9.13%
 October     Issuance of Series F Senior Notes(6)        250          9.25%


- --------

(1) On March 27, 2001, we sold approximately 6.0 million units of 10% Class C
    cumulative redeemable preferred units ("Class C Preferred Units") with a
    par value of $0.01 for net proceeds of $143 million. Holders of the Class C
    Preferred Units are entitled to receive cumulative cash distributions at a
    rate of 10% per year of the $25 per unit liquidation preference.
    Distributions are payable quarterly in arrears commencing April 15, 2001,
    on which date pro rata distributions of $0.03 per Class C Preferred Unit
    were paid. We paid two other quarterly distributions of $0.625 per share in
    2001, and on December 5, 2001, the Board of Directors declared the fourth
    quarter distribution of $0.625, which was paid in January 2002.


(2) Proceeds from the Canadian mortgage were used to repay the mortgage debt on
    the Ritz Carlton, Amelia Island and the Toronto Eaton Centre. See below for
    further discussion.


(3)  Proceeds from the Series H senior notes were used to repay the outstanding
     balance on the credit facility. Additionally, we entered into an interest
     rate swap agreement with regards to this principle balance, as is
     discussed below.


(4)  For the year ended December 31, 2000, we purchased approximately 4.9
     million shares of common stock, 0.4 million shares of the Convertible
     Preferred Securities, and 0.3 million OP Units for approximately $62
     million.


(5)  These transactions represent the refinancing of the prior $80 million
     mortgage debt on the Harbor Beach Marriott Hotel.


(6)  Proceeds from the Series F senior notes were used to partially fund the
     buyback of leases from Crestline and litigation dealing with our Courtyard
     partnerships. During March of 2001, the Series F senior notes were
     exchanged on a one-for-one basis for Series G senior notes, which are
     freely transferable.


   We have a bank credit facility, which we entered into in 1998 and have
subsequently modified in May 2000 and November 2001. The original facility was
for $1.25 billion and matured in three years. In May 2000 the borrowing
capacity under the facility was reduced to $775 million. As previously
discussed, the last modification to the facility was in November 2001, which
reduced the available capacity to $50 million during


                                       45



the first quarter of 2002 and $25 million during the second quarter of 2002,
and temporarily amended certain covenants as a result of the economic recession
and the events of September 11, 2001. Borrowings under the facility bear
interest currently at the Eurodollar rate plus 225 basis points. Additionally,
the interest rate fluctuates based on our leverage ratio. Borrowings under the
facility averaged $248 million in 2001 and $153 million in 2000 and were used
for the purchase of outside partnership interests in our hotels, to partially
fund the purchase of the leasehold interests by the TRS, as well as general
corporate purposes. As of December 31, 2001 there are no outstanding borrowings
under the facility.


   Historically, our debt has primarily been fixed rate including all of the
previous series of senior notes. We have increased the amount of our exposure
to variable rate instruments on the issuance of our Series H senior notes by
using derivative products. On December 20, 2001, we entered into a 5-year
interest rate swap agreement, which is effective January 15, 2002 and matures
January 2007. Under the swap, we receive fixed-rate payments at 9.5% and pay
floating-rate payments based on one-month LIBOR plus 450 basis points, on a
$450 million notional amount. The fair value of the interest rate swap
agreement was zero at inception. Under SFAS 133 we have entered into an
interest rate swap which is designated as a fair value hedge. The requirements
for hedge accounting having been met, the swap is recorded at fair value on the
balance sheet with changes in the fair value recorded to the carrying value of
the Series H debt. Additionally, the amounts paid or received under the swap
agreement will be recognized over the life of the agreement as an adjustment to
interest expense.


   On January 4, 2002, in a separate agreement with a different counter party,
we purchased for approximately $3.5 million an interest rate cap with the same
notional amount which caps the floating interest rate at 14%. Under SFAS 133
the cap does not qualify for hedge accounting, and therefore, will be marked to
market and the gains and losses from changes in the market value of the cap
will be recorded in other income or expense in the current period. For the
first quarter, we recognized $1.1 million of expense related to the interest
rate cap. The market value of the cap is determined by a multi-variable model,
similar to the Black-Scholes option pricing model. The market value can change
based on time, LIBOR rates and the volatility of the LIBOR rates. We do not
believe that changes in the market value will materially affect the financial
statements.


   On August 30, 2001, certain Canadian subsidiaries entered into financing
agreements pursuant to which they borrowed $96.6 million due August 2006 at a
variable rate of LIBOR plus 275 basis points. The Calgary Marriott, Toronto
Airport Marriott, Toronto Marriott Eaton Centre, and Toronto Meadowvale Delta
hotels serve as collateral. Since the mortgage loan on these Canadian
properties is denominated in U.S. Dollars and the functional currency of the
Canadian subsidiary is the Canadian Dollar, we purchased derivative instruments
for hedging of the foreign currency investment. Therefore, the subsidiaries
entered into 60 separate currency forward contracts to buy U.S. dollars at a
fixed price. These forward contracts hedge the currency exposure of converting
Canadian dollars to U.S. dollars on a monthly basis to make debt service
payments. This swap has been designated as a cash flow hedge of the principal
payments, and the forward contracts are recorded at fair value on the balance
sheet with offsetting changes recorded in accumulated other comprehensive
income. The fair value of the forward contracts is recorded each period. As of
December 31, 2001, the fair value of these contracts was $1.5 million and were
recorded in other assets.


   On February 7, 2001, May 7, 2001 and May 29, 2001, Blackstone and affiliates
("Blackstone") converted 12.5 million, 10.0 million and 18.2 million OP Units,
respectively, to Host REIT common shares and immediately sold them to an
underwriter for sale on the open market. As a result of the transactions,
Blackstone now owns approximately 1% of our outstanding OP Units and Host REIT
increased its OP Unit ownership to 92%. We received no proceeds as a result of
the transactions.




FFO and EBITDA


   We consider Comparative Funds From Operations ("Comparative FFO"), which
consists of Funds From Operations, as defined by the National Association of
Real Estate Investment Trusts, adjusted for significant non-recurring items
detailed in the chart below, and our consolidated earnings before interest
expense, income taxes,


                                       46



depreciation, amortization and other non-cash items (including contingent rent)
("EBITDA") to be indicative measures of our operating performance due to the
significance of our long-lived assets. Comparative FFO and EBITDA are also
useful in measuring our ability to service debt, fund capital expenditures and
expand our business. Furthermore, management believes that Comparative FFO and
EBITDA are meaningful disclosures that will help shareholders and the
investment community to better understand our financial performance, including
comparing our performance to other real estate investment trusts. However,
Comparative FFO and EBITDA as presented may not be comparable to amounts
calculated by other companies. This information should not be considered as an
alternative to net income, operating profit, cash from operations, or any other
operating or liquidity performance measure prescribed by accounting principles
generally accepted in the United States. Cash expenditures for various long-
term assets, interest expense (for EBITDA purposes only) and income taxes have
been, and will be incurred which are not reflected in the EBITDA and
Comparative FFO presentations.


   Comparative FFO available to common unitholders decreased $54 million, or
43%, to $72 million for the first quarter of 2002 over the first quarter of
2001. The following is a reconciliation of income (loss) from continuing
operations to Comparative FFO (in millions):





                                                            Twelve Week Ended
                                                           -------------------
                                                           March 22, March 23,
                                                             2002      2001
                                                           --------- ---------
                                                               
   Funds from Operations
   Income (loss) from continuing operations...............   $(12)     $ 32
     Depreciation and amortization........................     83        76
     Partnership adjustments..............................      6        16
                                                             ----      ----
   Funds from operations of Host LP.......................     77       124
     Effective on funds from operations of SAB 101........      1         7
     Effective impact of lease repurchase.................      3        --
                                                             ----      ----
   Comparative funds from operations of Host LP...........     81       131
     Dividends on preferred stock.........................     (9)       (5)
                                                             ----      ----
   Comparative funds from operations of minority partners
    of Host LP............................................   $ 72      $126
                                                             ====      ====





   Comparative FFO available to common unitholders decreased $194 million, or
32%, to $420 million in 2001 over 2000. The following is a reconciliation of
income before extraordinary items to Comparative FFO (in millions):





                                                            Year Ended
                                                     -------------------------
                                                     December 31, December 31,
                                                         2001         2000
                                                     ------------ ------------
                                                            
   Funds from Operations
   Income before extraordinary items................     $ 59         $203
     Depreciation and amortization..................      370          322
     Other real estate activities...................       (2)          (3)
     Partnership adjustments........................       26           17
                                                         ----         ----
   Funds from operations of Host LP.................      453          539
     Effective impact of lease repurchase...........       15          125
     Tax benefit unrelated to ongoing operations....      (16)         (30)
                                                         ----         ----
   Comparative funds from operations of Host LP.....      452          634
     Dividends on preferred stock...................      (32)         (20)
                                                         ----         ----
   Comparative funds from operations of Host LP
    available to common unitholders.................     $420         $614



   EBITDA decreased $149 million, or 14%, to $949 million in 2001 from $1,098
million in 2000. Hotel EBITDA decreased $160 million, or 14%, to $959 million
in 2001 from $1,119 million in 2000, reflecting the decrease in hotel operating
results during 2001. As previously discussed, 2001 hotel EBITDA primarily
reflects the revenues and expenses generated by the hotels, whereas 2000 hotel
EBITDA primarily reflects rental income from lessees.


                                       47



   The following schedule presents the components of our EBITDA as well as a
reconciliation of EBITDA to income before extraordinary items (in millions):




                                                             Twelve Weeks Ended
                                                             -------------------
                                                             March 22, March 23,
                                                               2002      2001
                                                             --------- ---------
                                                                 
   Income (loss) from continuing operations................    $(12)     $ 32
    Effect on revenue of SAB 101...........................       1         7
    Interest expense.......................................     105       103
    Dividends on Convertible Preferred Securities..........       7         7
    Depreciation and amortization..........................      84        77
    Minority interest expense..............................       5        15
    Income taxes...........................................       4         3
    Equity in (earnings)/losses of affiliates..............       4        (2)
    Other non-cash charges, net............................       7        (4)
                                                               ----      ----
   EBITDA of Host LP.......................................    $205      $238
                                                               ====      ====



   Our interest coverage, defined as EBITDA divided by cash interest expense,
was 2.0 times and 2.3 times for the 2002 and 2001 twelve week periods,
respectively. The ratio of earnings to fixed charges was 1.0 to 1.0 through the
first quarter of 2002 and 1.4 to 1.0 through the first quarter of 2001. We
reported a ratio of earnings to fixed charges of 1.2 to 1.0 for the full year
2001.





                                                              Year Ended
                                                       -------------------------
                                                       December 31, December 31,
                                                           2001         2000
                                                       ------------ ------------
                                                              
   EBITDA
     Hotels...........................................    $ 959        $1,119
     Office buildings and other investments...........       14            13
     Interest income..................................       36            40
     Corporate and other expenses.....................      (60)          (74)
                                                          -----        ------
   EBITDA of Host LP..................................    $ 949        $1,098
                                                          =====        ======


                                                              Year Ended
                                                       -------------------------
                                                       December 31, December 31,
                                                           2001         2000
                                                       ------------ ------------
                                                              
   EBITDA of Host L.P. ...............................    $ 949        $1,098
     Interest expense.................................     (493)         (466)
     Income tax (expense) benefit.....................       (8)           98
     Depreciation and amortization....................     (378)         (331)
     Minority interest expense........................      (16)          (27)
     Lease repurchase expense.........................       (5)         (207)
     Other non-cash changes, net......................       10            38
                                                          -----        ------
       Income before extraordinary items..............    $  59        $  203
                                                          =====        ======



   Our interest coverage, defined as EBITDA divided by cash interest expense,
was 2.0 times, 2.4 times, and 2.2 times for 2001, 2000, and 1999, respectively.
The ratio of earnings to fixed charges was 1.2 to 1.0, 1.2 to 1.0, and 1.5 to
1.0 in 2001, 2000, and 1999, respectively.


   Leases. In addition to our full-service hotels, we also lease some property
and equipment under noncancelable operating leases, including the long-term
ground leases for some of our hotels, generally with


                                       48



multiple renewal options. The leases related to the 53 Courtyard properties and
18 Residence Inn properties sold during 1995 and 1996, are nonrecourse to us
and contain provisions for the payment of contingent rentals based on a
percentage of sales in excess of stipulated amounts. We remain contingently
liable on some leases related to divested non-lodging properties. Such
contingent liabilities aggregated $57 million at December 31, 2001. However,
management considers the likelihood of any substantial funding related to these
divested properties' leases to be remote.


   Inflation. Our hotel lodging properties have been impacted by inflation
through its effect on increasing costs and on the managers' ability to increase
room rates. Unlike other real estate, hotels have the ability to change room
rates on a daily basis, so the impact of higher inflation often can be passed
on to customers. However, the current weak economic environment has resulted in
a decline in demand and has restricted our managers' ability to raise room
rates to offset rising costs.


   Critical Accounting Policies. Our consolidated financial statements include
accounts of the company and all majority owned subsidiaries. The preparation of
financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities at the
date of our financial statements, and the reported amounts of revenues and
expenses during the reporting period. While we do not believe the reported
amounts would be materially different, application of these policies involves
the exercise of judgment and the use of assumptions as to future uncertainties
and, as a result, actual results could differ from these estimates. All of our
significant accounting policies are disclosed in footnote 1 to the audited
financial statements. The following represent certain critical accounting
policies that require the use of business judgment or significant estimates to
be made.


  .  Revenue Recognition from the sale of real estate. Gains on the sale of
     real estate are affected by exposure to continuing involvement with
     properties sold and the structure of specific transactions.


  .  Minority Interest. The allocation of income between us and outside
     investors for properties that are not wholly owned is generally based on
     stated percentage of ownership by outside interests. However, judgment
     can be required when structures of agreements provide for different
     allocations among investors for profits, losses, certain costs,
     distributions from operations and distributions on liquidations or when
     changes in the allocation ratios are required at specified times or upon
     the occurrence of certain events.


  .  Management Fees. Incentive management fees due to managers are accrued
     when earned, whether or not paid, based on stated formulas in management
     agreements. However, judgment can be required during interim reporting
     periods as a result of the change in allocation ratios at specified
     times or upon the occurrence of certain events.


  .  Consolidation policies. Judgment is required with respect to
     consolidation of partnership and joint venture entities in the
     evaluation of control including assessment of the importance of rights
     and privileges of the partners. Currently, we have investments in
     entities that in the aggregate own 161 hotel properties and a golf
     course, which we record using the equity method of accounting. The debt
     on these investments is non-recourse to the company and the effect of
     the results of operations is not material. For further detail on our
     unconsolidated entities see footnote 4 to the audited financial
     statements.


   New Accounting Standards. In October 2001, the Financial Accounting
Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets" which replaces SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The standard provides guidance beyond that previously specified in Statement
121 to determine when a long-lived asset should be classified as held for sale,
among other things. This Statement is effective for fiscal years


                                       49



beginning after December 15, 2001. Additionally, in February 2002 the Financial
Accounting Standards Board resolved an implementation issue regarding SFAS No.
144 dealing with the treatment of sales of properties. Under the new
guidelines, gains and losses from the dispositions of investment properties and
the properties' historical operations for periods beginning in 2002 will be
treated as discontinued operations, and therefore, be classified separately
from income from continuing operations. Historically, we have occasionally
disposed of properties that were not consistent with the overall quality of our
portfolio or presented unique opportunities to realize the asset's value, and
we may dispose of additional assets from time to time in the future. This
statement would require us to reclassify results for any future dispositions
previously included in continuing operations to discontinued operations for all
periods presented, although net income would not be affected and periods prior
to adoption would not be affected.


   In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 sets forth new standards on business combinations,
eliminating the pooling treatment of accounting for business combinations. SFAS
No. 142 requires additional disclosure of identifiable intangible assets, and
requires that they be segregated from goodwill. Additionally, the statement
requires that goodwill no longer be amortized over 40 years, and that it is
instead impaired as the fair value of the goodwill declines. We have not
accounted for any of our business combinations using the pooling method of
accounting and do not have a material amount of goodwill or intangible assets
at year-end 2001. These statements are effective for fiscal years beginning
after December 15, 2001. We will adopt SFAS Nos. 141 and 142 in 2002 and do not
believe implementation of the statements will have a material effect.


   In February 2002, the Financial Accounting Standards Board issued an
exposure draft which would rescind SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt. The rescission, which would apply to periods subsequent
to December 31, 2001, would eliminate the requirement that all gains and losses
from the extinguishment of debt be classified as extraordinary items, unless it
can be considered unusual in nature and infrequent in occurrence. As a result
of the rescission, we would no longer classify gains and losses from the
extinguishment of debt as extraordinary items and would adjust prior years
accordingly.


   In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Statement
establishes accounting and reporting standards requiring that every derivative
instrument (including specified derivative instruments embedded in other
contracts) be recorded in the balance sheet measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement. SFAS No.
133 was implemented on January 1, 2001.


Quantitative and Qualitative Disclosures about Market Risk


Interest Rate Sensitivity


   The table below provides information about the company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates, including interest rate swaps and debt obligations.
For debt obligations, the table presents scheduled maturities and related
weighted average interest rates by expected maturity dates. For interest rate
swaps, the table presents notional amounts and weighted average interest rates
by expected (contractual) maturity dates. Weighted average interest rates are
based on implied forward rates in the yield curve as of December 31, 2001.
Notional amounts are used to calculate the


                                       50





contractual payments to be exchanged under the contract. Weighted average
variable rates are presented in U.S. dollar equivalents, which is the company's
reporting currency.





                                        Expected Maturity Date
                             ---------------------------------------------------
                                                           There-          Fair
                             2002  2003  2004  2005  2006  after   Total  Value
                             ----  ----  ----  ----  ----  ------  ------ ------
                                            ($ in millions)
                                                  
Liabilities
Debt:
 Fixed Rate................. $148  $ 66  $ 78  $568  $565  $4,080  $5,505 $4,963
  Average Interest Rate.....  8.1%  8.1%  8.1%  8.1%  8.0%    7.9%
 Variable Rate..............
  Canadian mortgage......... $  1  $  2  $  1  $  1  $ 92  $  --   $   97 $   97
  Average Interest Rate.....  6.3%  8.4%  8.9%  9.2%  9.4%    --
                                                                   ------
 Total Debt.................                                       $5,602
Interest Rate Derivatives
 Interest Rate Swaps(1).....
  Fixed to Variable......... $ --  $ --  $ --  $ --  $ --  $  450  $  450
  Average Pay Rate..........  8.0% 10.1% 10.7% 11.0% 11.1%   11.3%
  Average Receive Rate......  9.5%  9.5%  9.5%  9.5%  9.5%    9.5%


- --------

(1)  The swap agreement became effective on January 15, 2002.


   As of December 31, 2001, approximately 98% of our debt bears interest at
fixed rates. Effective January 15, 2002, we entered an interest rate swap
agreement, and, as a result, the percentage of our debt bearing interest at a
fixed rate decreased to 90%. This debt structure largely mitigates the impact
of changes in the rate of inflation on future interest costs. We have some
financial instruments that are sensitive to changes in interest rates,
including our bank credit facility. The interest rate on our bank credit
facility, which had no outstanding balance at December 31, 2001 and $150
million at December 31, 2000, is based on various LIBOR terms plus a spread.
The weighted average interest rate for the facility was 4.4% for the year ended
December 31, 2001 and 9.0% for the year ended December 31, 2000. The credit
facility was repaid in full in December 2001 with the net proceeds from the
offering of the Series H senior notes and a portion of the proceeds from the
sale of two properties. The weighted average interest rate for the facility was
zero percent for the quarter ended March 22, 2002. There were no amounts
outstanding onthe credit facility during the first quarter and as of March 22,
2002.


   Subsequent to the Series H senior note offering, we entered into an interest
rate swap agreement that effectively converts the $450 million notional amount
from a fixed rate to a floating rate based on 30 day LIBOR plus 450 basis
points. A change in the LIBOR rate of 100 basis points will result in an
additional $4.5 million increase or decrease in interest expense. As discussed
earlier, the swap has been designated as a hedge and changes in the interest
rate over the life of the agreement are recorded as an adjustment to interest
expense. Changes in the fair value of the swap and the notes are reflected in
the balance sheet as offsetting changes and have no income statement effect.


   In January 2002, in addition to the swap agreement, we have entered into a
separate interest rate cap agreement with a different counter party that has a
notional amount of $450 million and caps our floating rate interest expense at
14%. Changes in interest rates will affect the fair value of the cap. The gains
or losses from the changes in the market value of the cap will be recorded in
other income or expense in the current period.


Exchange Rate Sensitivity


   The table below summarizes information on instruments and transactions that
are sensitive to foreign currency exchange rates, including foreign currency
forward exchange agreements. For foreign currency


                                       51



forward exchange agreements, the table presents the notional amounts and
weighted average exchange rates by expected (contractual) maturity dates. These
notional amounts generally are used to calculate the contractual payments to be
exchanged under the contract.





                                            Expected Maturity Date
                              --------------------------------------------------
                                                            There-         Fair
                              2002  2003  2004  2005  2006  after  Total  Value
                              ----- ----- ----- ----- ----- ------ ------ ------
                                               ($ in millions)
                                                  
Anticipated Transactions and
 Related Derivative
 Foreign Currency Forward
  Exchange Agreements
  Contract Amount...........  $ 7.1 $ 8.3 $ 8.9 $ 9.2 $97.0  $--   $130.5 $132.0
  Average Contractual
   Exchange Rate............   1.55  1.56  1.56  1.57  1.57   --



   On August 30, 2001, our Canadian subsidiaries entered into a mortgage loan
pursuant to which they borrowed $96.6 million (denominated in US dollars) at a
variable rate of LIBOR plus 275 basis points. In addition, the subsidiaries
entered into currency forward contracts to hedge the currency exposure of
converting Canadian dollars to US dollars on a monthly basis to cover debt
service payments. This swap has been designated as a cash flow hedge of the
principal payments, and the forward contracts are recorded at fair value on the
balance sheet with offsetting changes recorded in accumulated other
comprehensive income. The weighted average interest rate for this mortgage loan
was 5.5% for the year ended December 31, 2001. The fair value of the forward
contracts was $1.5 million at December 31, 2001. The weighted average interest
rate for this mortgage debt was 4.7% for the qurater ended March 22, 2002.




                          Business and Properties


Introduction


   We are a limited partnership owning full-service hotel properties, whose
sole general partner is Host Marriott Corporation, a Maryland corporation
("Host REIT"). As of March 1, 2002, we own 122 hotels representing
approximately 58,000 rooms located throughout North America. Most of our hotels
are operated under brand names that are among the most respected and widely
recognized in the lodging industry--including the Marriott, Ritz-Carlton, Four
Seasons, Hilton, Hyatt and Swissotel brand names.


   Our primary business objective is to provide superior total returns to our
unitholders through a combination of distributions, appreciation in net asset
value per unit, and growth in funds from operations, or FFO, by focusing on
aggressive asset management and disciplined capital allocation. FFO is defined
by the National Association of Real Estate Investment Trusts as net income
computed in accordance with GAAP, excluding gains or losses from sales of
properties, plus real estate-related depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures.


   We were formed in connection with Host REIT's efforts to convert its
business operations to qualify as a real estate investment trust, or "REIT,"
for federal income tax purposes. As part of this conversion, which we refer to
as the REIT conversion, on December 29, 1998, Host Marriott and various of its
subsidiaries contributed substantially all of their assets to us and we assumed
substantially all of their liabilities. The hotel ownership business formerly
conducted by Host Marriott and its subsidiaries is conducted by and through
Host Marriott, L.P. and our subsidiaries, and Host Marriott was merged with and
into Host REIT. Host REIT owns approximately 92% of Host Marriott, L.P.


   In this report, we refer to ourselves as "Host Marriott, L.P.," the
"operating partnership," or "Host L.P.," to our sole general partner (excluding
its subsidiaries) as "Host REIT" and its predecessor, Host Marriott, a Delaware
corporation, as "Host Marriott."


   The address of our principal executive office is 10400 Fernwood Road,
Bethesda, Maryland, 20817. Our phone number is 301-380-9000.


                                       52



The Lodging Industry


   The lodging industry in the United States consists of both private and
public entities, which operate in an extremely diversified market under a
variety of brand names. Competition in the industry is based primarily on the
level of service, quality of accommodations, convenience of locations and room
rates. In order to cater to a wide variety of tastes and needs, the lodging
industry is broadly segmented into six categories: luxury, upper-upscale,
upscale, midscale (with and without food and beverage service) and economy.
Most of our hotels operate in urban markets in either the luxury lodging
segment (represented by such brand names as Ritz-Carlton and Four Seasons) and
the upper-upscale lodging segment (represented by such brand names as Marriott,
Hilton, Hyatt, Swissotel, Crowne Plaza, Doubletree, Renaissance and Westin).
Although the competitive position of each of our hotel properties varies by
market, we believe that our properties compare favorably to their competitive
set in their respective markets.


   A common measure used by the industry to evaluate the operations of a hotel
is "Revenue per available room," or "RevPAR," which is defined as the product
of the average daily room rate charged and the average daily occupancy
achieved. RevPAR does not include food and beverage or other ancillary revenues
such as parking, telephone or other guest services generated by the property.
The lodging industry experienced significant RevPAR declines in 2001 compared
to 2000 due to the sluggish economy that was intensified by the September 11,
2001 terrorist attacks. We believe that the lodging industry will continue to
experience RevPAR declines at least through the first half of 2002. From 1991
through 1997, the upper-upscale sector of the lodging industry benefited from a
favorable supply/demand imbalance, driven in part by low construction levels
combined with high gross domestic product, or GDP, growth. However, beginning
in 1998, supply has moderately outpaced demand, causing slight declines in
occupancy rates in the sector in which we operate, although room rates
continued to increase through 2000. The relative balance between supply and
demand growth in the industry and the segments in which we operate may be
influenced by a number of factors, including growth of the economy, interest
rates, unique local considerations and the relatively long lead time to develop
urban, convention and resort hotels. The current amount of excess supply growth
in the upper-upscale and luxury portions of the full-service segment of the
lodging industry has been much less severe than that experienced in the lodging
industry in other economic downturns. Growth in room supply in the upper-
upscale sector continued in 2001, while room demand declined during the year.
We believe that during 2002, the rate of supply growth will begin to decrease
as the lack of availability of development financing slows new construction.
However, demand decreased substantially in 2001 because of the economic
recession, and the decline was deepened by the terrorist attacks on September
11, 2001. We believe that demand will remain below historical levels at least
during the first half of 2002, but should begin to grow toward the end of 2002
and continue in 2003 if the economy strengthens.


   According to Smith Travel Research, RevPAR for hotels operating in the
upper-upscale and luxury segments decreased 12% for the year ended December 31,
2001 when compared to the year ended December 31, 2000. This decrease resulted
from decreases in occupancy and average daily rate for this period of 10% and
2%, respectively. Our portfolio of hotels has experienced an overall decline in
RevPAR that is consistent with the results of our segment as a whole.


Business Strategy


   Our primary business objective is to provide superior total returns to our
unitholders through a combination of distributions, appreciation in net asset
value per unit, and growth in FFO, a frequently used measure in the real estate
industry. In order to achieve this objective we employ the following
strategies:


  .  we acquire existing upper-upscale and luxury full-service hotels as
     market conditions permit, including hotels operated by leading
     management companies which satisfy our investment criteria such as
     Marriott, Ritz-Carlton, Four Seasons, Hyatt, and Hilton. Such
     acquisitions may be completed through


                                       53



   various means including transactions involving entities in which we are
   already a partner, public and private portfolio transactions, single asset
   transactions and by entering into joint ventures when we believe our
   return on investment will be maximized by doing so;


  .  we seek to maximize the value of our existing portfolio through
     aggressive asset management, by working with the managers of our hotels
     to reduce the operating costs of our hotels and increase revenues, as
     well as by completing selective capital improvements and expansions that
     are designed to improve operations;


  .  we selectively expand existing properties and develop new upper-upscale
     and luxury full-service hotels operated by leading management companies
     that we believe satisfy our investment criteria and employ transaction
     structures which mitigate our risk; and


  .  we seek to recycle capital through opportunistic asset sales and
     selective disposal of non-core assets, including older assets with
     significant capital needs, assets that are at a competitive risk given
     potential new supply, or assets in slower-growth markets.


   Our acquisition strategy focuses on hotels operating in the upper-upscale
and luxury full-service segments of the market. We believe these market
segments will continue to offer opportunities over time to acquire assets at
attractive multiples of cash flow and at discounts to replacement value. Our
acquisition criteria continues to focus on:


  .  properties in locations that are difficult to duplicate with high costs
     for market entry by prospective competitors, such as hotels located in
     urban, airport and resort/convention locations;


  .  properties operated under premium brand names, such as Marriott, Ritz-
     Carlton, Four Seasons, Hilton, and Hyatt; and


  . underperforming hotels that can be improved by conversion to high quality
    brands;


   We believe we are well-qualified to pursue our acquisition and development
strategy. Management has extensive experience in acquiring and financing
lodging properties and believes its industry knowledge, relationships and
access to market information provide a competitive advantage with respect to
identifying, evaluating and acquiring lodging properties, as well as improving
and maintaining the quality of the hotel assets.


   Our acquisition efforts since 1998 have been limited and primarily focused
on acquiring the interests of limited or joint venture partners, consolidating
our ownership of assets already included in the portfolio and purchasing the
lessee interests that were created as part of the REIT conversion. We are
exploring acquisitions with an emphasis on transactions that can be
accomplished, at least in part, through the issuance of operating partnership
units such that our overall debt ratios are improved. Recently, our
acquisitions have been limited due to the lack of availability of suitable
candidates that complement our portfolio of upper-upscale and luxury hotels and
provide an attractive return on our investments, increased price competition
for upper-upscale and luxury hotels, and capital limitations due to weak equity
markets for REIT stocks. We expect that lack of liquidity will ultimately cause
some property owners to make some of their properties available for sale;
however, the timing of these potential sales is uncertain. We believe that
acquisitions that meet our criteria will provide the highest and best use of
our capital.


   Our asset management team, which consists of professionals with extensive
industry knowledge and relationships, focuses on maximizing the value of our
existing portfolio through working with our managers to reduce operating costs
at our hotels and to provide economic incentives to individual and business
travelers in selected markets in order to increase demand; monitoring property
and brand performance; pursuing expansion and repositioning opportunities;
overseeing capital expenditure budgets and forecasts; assessing return on
investment expenditure opportunities; and analyzing competitive supply
conditions in each market.


                                       54



   In addition to acquiring and maintaining superior assets, a key part of our
strategy is to have the hotels managed by leading management companies. As of
March 1, 2002, 101 of our 122 properties were managed by subsidiaries of
Marriott International as Marriott or Ritz-Carlton brand hotels and an
additional eight hotels are part of Marriott International's full-service hotel
system through franchise agreements. The remaining hotels are managed by
leading management companies including Four Seasons, Hyatt and Swissotel. In
general, we believe that these premium brands have consistently outperformed
the industry. Demonstrating the strength of our portfolio, our comparable
properties, consisting of 116 hotels, owned directly or indirectly by us for
the entire 2001 and 2000 fiscal years (excluding nine hotels with non-
comparable operating environments as a result of acquisitions, dispositions,
property damage, and expansion and development projects), generated 24% and 26%
RevPAR premiums over other similar brands in the upper-upscale and luxury
segment for fiscal years 2001 and 2000, respectively, based on information from
Smith Travel Research.


Operating Structure


   Host REIT, our sole general partner, manages all aspects of our business.
This includes decisions with respect to sales and purchases of hotels, our
financing, the leasing of the hotels, and capital expenditures for the hotels
subject to the terms of the leases and the management agreements. Together with
Host REIT, we continue, in an UPREIT structure, the full-service hotel
ownership business formerly conducted by Host Marriott and its subsidiaries.
We, or one or more of our subsidiaries, own all of our hotels.


   Host Marriott and its subsidiaries and affiliates consummated a series of
transactions in order to qualify as a REIT for federal income tax purposes for
the fiscal year beginning January 1, 1999 (a process which we refer to as the
REIT conversion). During 1998, Host Marriott reorganized its hotels and certain
other assets so that they would be owned us and our subsidiaries. Host Marriott
and its subsidiaries received a number of operating partnership interests, or
OP Units, equal to the number of then outstanding shares of Host Marriott
common stock, and we and our subsidiaries assumed substantially all of the
liabilities of Host Marriott and its subsidiaries. As a result of this
reorganization, Host REIT is our sole general partner. OP Units owned by
holders other than Host REIT are redeemable at the option of the holders,
generally commencing one year after the issuance of their OP Units. Upon
redemption of an OP Unit, a holder would receive cash from us in an amount
equal to the market value of one share of Host REIT common stock. However, in
lieu of a cash redemption by us, Host REIT has the right to acquire any OP Unit
offered for redemption directly from the holder thereof in exchange for one
share of Host REIT common stock. As of May 1, 2002, Host REIT owned
approximately 90% of our outstanding OP Units.


   Due to certain tax laws restricting REITs from deriving revenues directly
from the operations of hotels, as part of the REIT conversion, the hotel
properties were leased by us and our subsidiaries to third party lessees that,
in turn, assumed or entered into agreements with Marriott International and
other hotel operators to conduct the day-to-day management of the hotels.
During 1999 and 2000, approximately 95% of our hotels were leased to Crestline
Capital Corporation and its subsidiaries.


   The REIT Modernization Act, which was enacted in December 1999, amended the
tax laws to permit REITs, effective January 1, 2001, to lease hotels to a
subsidiary that qualifies as a taxable REIT subsidiary, and to own all of the
voting stock of such subsidiary. The earnings of the taxable REIT subsidiary
are subject to normal corporate level federal and state income taxes.


   Effective January 1, 2001, a wholly owned taxable REIT subsidiary of ours,
HMT Lessee LLC (the "TRS") acquired from Crestline the equity interests in the
lessees of 112 of our hotels and the leasehold interests in four hotels for
$207 million in cash, including approximately $6 million of legal fees and
transfer taxes. In connection with that transaction, we recorded a non-
recurring, pre-tax loss related to the termination of the leases for financial
reporting purposes of $207 million during the fourth quarter of 2000, net of an

                                       55



$82 million tax benefit which we have recorded as a deferred tax asset, because
for income tax purposes, the transaction is recorded as an acquisition of
leasehold interests that will be amortized over the remaining term of the
leases.


   During June 2001, we completed two other transactions, which resulted in the
acquisition by the TRS of our remaining four leases held by third parties.
Effective June 16, 2001, we acquired the lease for the San Diego Marriott Hotel
and Marina by purchasing the lessee equity interest from Crestline for $2.7
million net of an income tax benefit of $1.8 million. Also in June 2001, in
connection with the acquisition from Wyndham International, Inc. of the
minority limited partnership interests in five partnerships holding seven
hotels, we acquired the leases for three hotels: the San Diego Marriott Mission
Valley, the Minneapolis Marriott Southwest, and the Albany Marriott.


   Prior to the effectiveness of the REIT Modernization Act, we held a 95% non-
voting interest in two taxable subsidiaries, Rockledge Hotel Properties, Inc.
("Rockledge") and Fernwood Hotel Assets, Inc. ("Fernwood"), that held assets in
which, under REIT rules, we could not own a controlling interest. As a result
of the effectiveness of the REIT Modernization Act, we were able to acquire the
remaining 5% economic interest and 100% of the voting interest in these
subsidiaries for $2 million. The purchase was consummated in April of 2001,
and, as a result, we now consolidate these subsidiaries.


   The acquisition of the leases through taxable REIT subsidiaries enables us
to better control our portfolio of hotels and was accretive to our earnings and
cash flows. There can be no guarantee, however, that we will benefit from
similar favorable results in the future. Further, on a consolidated basis our
results of operations will reflect the revenues and expenses, including taxes
paid by the taxable REIT subsidiaries, generated by these hotels rather than
rental income.


   We also consolidate seven entities in which we have a controlling financial
interest. At December 31, 2001, these entities own, in the aggregate, 8 hotels,
with $842 million in assets and $400 million in debt, all of which is non-
recourse to Host Marriott. Our ownership in these entities varies from 50.5% to
97.5%.


Lodging Property Portfolio


   Overview. Our lodging portfolio, as of March 1, 2002, consists of 122 upper-
upscale and luxury full-service hotels containing approximately 58,000 rooms.
Our hotel lodging properties represent quality upper-upscale and luxury assets
in the full-service segment and are operated under various premium brands
including Marriott, Ritz-Carlton, Four Seasons, Hilton, Hyatt, and Swissotel.


   The following chart details our portfolio by brand:





                                                                   Number
                                                                     of
   Brand                                                           Hotels Rooms
   -----                                                           ------ ------
                                                                    
   Marriott managed...............................................   91   46,383
   Marriott franchised............................................    8    2,321
   Ritz-Carlton...................................................   10    3,831
   Hyatt..........................................................    4    2,214
   Swissotel......................................................    4    1,970
   Four Seasons...................................................    2      608
   Other brands...................................................    3      682
                                                                    ---   ------
                                                                    122   58,009
                                                                    ===   ======



   Our hotels average approximately 475 rooms. Twelve of our hotels have more
than 750 rooms. Hotel facilities typically include meeting and banquet
facilities, a variety of restaurants and lounges, swimming pools, gift shops
and parking facilities. Our hotels primarily serve business and pleasure
travelers and group meetings


                                       56



at locations that are generally well situated with significant barriers to
entry by competitors. These locations include downtown areas of major
metropolitan cities, airports and resort/convention locations where there are
limited or no development sites and suburban areas near business corridors. The
average age of the properties is 18 years, although many of the properties have
had substantial renovations or major additions.


   To maintain the overall quality of our lodging properties, each property
undergoes refurbishments and capital improvements on a regularly scheduled
basis. Typically, refurbishing has been provided at intervals of five years,
based on an annual review of the condition of each property. For fiscal years
2001, 2000 and 1999 we spent $230 million, $271 million and $211 million,
respectively, on capital improvements to existing properties. As a result of
these expenditures, we expect to maintain high-quality rooms, restaurants and
meeting facilities at our properties. During the current economic downturn we
are conserving funds by temporarily suspending certain major capital
expenditures.


   Acquisitions. Recently, our acquisitions have been limited due to the lack
of availability of suitable candidates that complement our portfolio of upper-
upscale and luxury hotels and provide an attractive return on our investments,
increased price competition for upper-upscale and luxury hotels, and capital
limitations due to weak equity markets for REIT stocks. During the three-year
period from 1996 through 1998, we acquired 77 full-service hotels, but since
1998 our acquisitions have primarily focused on acquiring the interests of
limited or joint venture partners, consolidating our ownership of assets
already included in the portfolio and repurchasing the lessee interests that
were created as part of our REIT conversion. We believe that acquisitions that
meet our criteria will provide the highest and best use of our capital.


   During 2001, we acquired outstanding minority interests in seven hotels from
Wyndham for $60 million. In addition, we acquired the voting interests
representing 5% of the equity interests in two previously non-controlled
subsidiaries for approximately $2 million. During 2000, we acquired a non-
controlling partnership interest in JWDC Limited Partnership, which owns the
772-room J.W. Marriott Hotel in Washington, D.C., for $40 million and have the
option to purchase the outstanding interests beginning in 2002. Also during
2000, we invested with Marriott International in the Courtyard joint venture
described below in "Business and Properties--Other Real Estate Investments."
During 1999, our acquisitions were limited to the purchase of minority
interests in two hotels where we had previously acquired the controlling
interests, for a total consideration of approximately $14 million.


   Through subsidiaries we currently own four Canadian and two Mexican
properties, with 2,548 rooms. International acquisitions are limited due to the
difficulty in meeting our stringent return criteria. However, we intend to
continue to evaluate acquisition opportunities in Canada and other
international locations. We will acquire international properties only when we
believe such acquisitions offer satisfactory returns after adjustments for
currency and country risks.


   Dispositions. We will also consider from time to time selling hotels that do
not fit our long-term strategy or otherwise meet our ongoing investment
criteria, including, for example, hotels in some smaller or slower growth
markets, hotels that require significant future capital improvements and other
underperforming assets. We typically reinvest the net proceeds from any
property sales into upper-upscale and luxury hotels more consistent with our
strategy or otherwise apply such net proceeds in a manner consistent with our
investment strategy (which has included open market purchases of Host REIT's
common stock, OP Units, Host REIT's convertible redeemable preferred securities
and other securities). Under the terms of our amended bank credit facility into
which we entered into in late 2001, we are required to use the net proceeds
from any sale of hotel properties to repay amounts due, if any, under our bank
credit facility. As of March 1, 2002, we have no


                                       57



borrowings under our credit facility. The following table summarizes our
dispositions from January 1, 1999 through March 1, 2002 (in millions, except
number of rooms):





                                                                      Pre-tax
                                                                        Gain
                                                                       (Loss)
                                                            Total        on
Property                             Location     Rooms Consideration Disposal
- --------                         ---------------- ----- ------------- --------
                                                          
1999 Dispositions
Minneapolis/Bloomington
 Marriott....................... Bloomington, MN   479      $ 35        $10
Saddle Brook Marriott........... Saddle Brook, NJ  221        15          3
Marriott's Grand Hotel Resort
 and Golf Club.................. Point Clear, AL   306        28         (2)
The Ritz-Carlton, Boston........ Boston, MA        275       119         15
El Paso Marriott................ El Paso, TX       296         1         (2)
2001 Dispositions
Vail Marriott Mountain Resort... Vail, CO          349        50         15
Pittsburgh City Center
 Marriott....................... Pittsburgh, PA    402        15         (3)



   During January 2002, we transferred one of our non-core properties, the St.
Louis Marriott Pavilion hotel, to the mortgage lender. Due to the original
management agreement and debt structure of this partnership, we had not been
receiving any cash flow after payments of debt service from this property. We
recorded a reversal of deferred management fees and the operations of the hotel
prior to the sale of $7 million, net of taxes of 4.6 million, as a gain on
disposal in discontinued operations. In addition, we recorded the difference
between the debt extinquished and the fair value of the assets surrendered of
$6 million, net of taxes of $3.6 million, as an extraordinary item.


   Development Projects. During 2000 and 2001, we focused our energies on
increasing the value of our current portfolio with selective investments,
expansions at existing hotels and a limited amount of new development projects.
Concurrent with the slowdown in the economy, we had evaluated the timing and
size of many of our capital projects. For 2001, we had anticipated spending
approximately $350 million in total capital expenditures, including $225
million in replacement and renewal expenditures. Subsequent to September 11,
however, we temporarily suspended certain major capital expenditures. As a
result of the actions taken, our capital expenditures for 2001, not including
new investments such as the Ritz-Carlton, Naples Golf Resort, were $230
million. Based on expected business conditions, we anticipate that our capital
spending will be approximately $185 million in 2002. Over the past three years,
our capital spending has focused on properly maintaining and enhancing the
values of our existing hotels. As a result of the regular attention we have
paid to maintaining our assets at a high standard and the high quality of our
assets, we believe that these capital reductions are achievable during this
period without materially affecting the long-term value of our portfolio. For
the four-year period beginning in 1998, we have spent $1.3 billion on capital
expenditures, including $798 million in replacement and renewal expenditures.
As the industry recovers, we plan to continue our strategy of pursuing capital
expenditure projects designed to enhance the value of our hotels.


   In January 2002, we opened the 295-room Ritz-Carlton, Naples Golf Resort,
which is approximately 2 miles from our existing Ritz-Carlton, Naples hotel, at
a development cost of approximately $75 million. The golf resort has 15,000
square-feet of meeting space, four food and beverage outlets, and full access
to 36 holes of a Greg Norman-designed golf course surrounding the hotel. The
newly created golf resort, as well as the 50,000 square-foot world-class
beachfront spa facility, which opened in April 2001 at a cost of $26 million,
will operate in concert with the 463-room Ritz-Carlton, Naples and will offer
travelers an unmatched resort experience. Further, given the close proximity of
the properties to each other, we hope to benefit from cost efficiencies and the
ability to capture larger groups.


   Also, during June 2001, we completed the addition of a 20,000 square foot
oceanfront spa to the Marriott Harbor Beach Resort at a development cost of $8
million.


   During 2000, we completed construction of a 717-room full-service Marriott
hotel adjacent to the convention center in downtown Tampa, Florida. The hotel
(completed at a development cost of approximately


                                       58



$104 million, excluding a $16 million tax subsidy by the City of Tampa,
Florida) opened for business on February 19, 2000 and includes 45,000 square
feet of meeting space, three restaurants and a 30-slip marina as well as many
other amenities.


   At the Orlando World Center Marriott Resort, the addition of a 500-room
tower and 15,000 square feet of meeting space was placed in service in June
2000 at an approximate development cost of $88 million, making this hotel the
largest in the Marriott system with 2,000 rooms and over 200,000 square feet of
meeting space. We have also renovated the property's golf course, added a
multi-level parking deck, and upgraded and expanded several restaurants.


   We also accomplished various projects to enhance revenues, control expenses
and enhance technology at the hotels. In 2001, we reached an agreement with a
national parking management company to act as an advisor to us regarding
methods to maximize revenues from the parking facilities throughout our entire
portfolio. During 2000, we added approximately 36,000 square feet of new
meeting space and 200 premium-priced rooms to the portfolio, and approved new
parking contracts at four of our properties. We authorized utility conservation
efforts including energy management strategies at five properties, the closing
of several unprofitable food and beverage outlets, and the development of a
program to review labor models. We also approved and implemented internet
connectivity solutions and in-room portal and entertainment options to better
meet the technology needs of our customers.


   Portfolio Performance. The chart below sets forth performance information
for our comparable properties as of December 31, 2001:





                                                                2001     2000
                                                               -------  -------
                                                                  
   Comparable Full-Service Hotels(1)
   Number of properties.......................................     116      116
   Number of rooms............................................  53,580   53,580
   Average daily rate......................................... $151.02  $156.50
   Occupancy percentage.......................................    70.0%    77.7%
   RevPAR..................................................... $105.71  $121.55
   RevPAR % change............................................  (13.0)%


- --------

(1) Consists of 116 properties owned, directly or indirectly, by us for the
    entire 2001 and 2000 fiscal years, respectively, excluding nine properties
    with non-comparable operating environments as a result of acquisitions,
    dispositions, substantial property damage, or major expansion and
    development projects.


   The chart below presents some performance information for our entire
portfolio of full-service hotels as of December 31, 2001:





                                                      2001(1)   2000    1999(2)
                                                      -------  -------  -------
                                                               
   Portfolio of Full-Service Hotels
   Number of properties..............................     122      122      121
   Number of rooms...................................  58,385   58,370   57,086
   Average daily rate................................ $151.68  $158.24  $149.51
   Occupancy percentage..............................    69.9%    77.6%    77.7%
   RevPAR............................................ $105.96  $122.72  $116.13


- --------

(1) Includes the operating results of the New York World Trade Center Marriott
    which was destroyed on September 11, 2001, the Vail Marriott Mountain
    Resort and Pittsburgh City Center Marriott which were sold in December 2001
    and the St Louis Pavilion Marriott which was transferred to the lender
    during January of 2002.


(2) Includes the operating results for five properties, which were sold at
    various times throughout 1999, through the date of sale.


                                       59



   The following table presents performance information for our comparable
properties for the first quarter of 2002 and 2001:


                           Comparable by Region





                                As of              Twelve Weeks Ended            Twelve Weeks Ended
                            March 22, 2002           March 22, 2002                March 23, 2001
                         -------------------- ----------------------------- -----------------------------
                                                                                                          Percent
                                              Average   Average             Average   Average             Change
                            No. of     No. of  Daily   Occupancy             Daily   Occupancy              in
                         Properties(a) Rooms   Rate   Percentages RevPAR(b)  Rate   Percentages RevPAR(b) RevPAR
                         ------------- ------ ------- ----------- --------- ------- ----------- --------- -------
                                                                               
Atlanta.................       15       6,543 $142.84    69.2%     $98.78   $157.35    72.8%     $114.60   (13.8)%
DC Metro................       13       4,995  134.90    62.8       84.74    159.07    65.1       103.54   (18.2)
Florida.................       13       7,594  173.41    79.7      138.15    192.56    80.7       155.38   (11.1)
International...........        4       1,636   94.21    64.0       60.31    101.09    69.1        69.83   (13.6)
Mid-Atlantic............        9       6,221  176.77    76.2      134.69    190.85    75.5       144.17    (6.6)
Mountain................        8       3,310  128.20    68.5       87.84    124.20    73.3        91.09    (3.6)
New England.............        6       2,279  117.02    57.9       67.81    133.77    60.9        81.49   (16.8)
North Central...........       15       5,394  112.40    62.0       69.64    127.39    64.3        81.95   (15.0)
Pacific.................       23      11,812  157.25    70.5      110.88    181.21    74.5       135.04   (17.9)
South Central...........       12       6,513  140.37    78.7      110.50    146.97    79.3       116.57    (5.2)
                              ---      ------ -------    ----      ------   -------    ----      -------   -----
All Regions.............      118      56,297  148.12    70.9%     105.08    163.48    73.3%      119.85   (12.3)%
                              ===      ====== =======    ====      ======   =======    ====      =======   =====



   The following table presents performance information for our comparable
properties by geographic region for 2001 and 2000:





                               As of               Year Ended                  Year Ended
                         December 31, 2001      December 31, 2001           December 31, 2000
                         ----------------- --------------------------- ---------------------------
                                           Average   Average           Average   Average
                           No. of   No. of  Daily   Occupancy           Daily   Occupancy
                         Properties Rooms   Rate   Percentages RevPAR   Rate   Percentages RevPAR
                         ---------- ------ ------- ----------- ------- ------- ----------- -------
                                                                   
Comparable Full-Service
 Hotels (1)
Atlanta.................     15      6,542 $150.80    65.0%    $ 98.02 $151.11    72.7%    $109.82
DC Metro................     13      4,995  150.67    67.9      102.26  152.54    76.5      116.68
Florida.................     11      4,878  160.52    71.7      115.15  157.33    77.1      121.28
International...........      4      1,636  102.04    71.8       73.28  108.26    74.8       80.94
Mid-Atlantic............      9      6,221  189.43    77.5      146.77  209.40    81.8      171.23
Mountain................      8      3,310  110.02    66.2       72.79  114.25    74.1       84.64
New England.............      6      2,279  144.62    66.2       95.78  158.21    77.8      123.11
North Central...........     15      5,394  131.20    66.9       87.80  136.98    75.6      103.53
Pacific.................     23     11,812  163.96    68.9      112.98  169.60    80.7      136.83
South Central...........     12      6,513  132.32    75.5       99.91  133.97    78.9      105.71
                            ---     ------ -------    ----     ------- -------    ----     -------
   All regions..........    116     53,580 $151.02    70.0%    $105.71 $156.50    77.7%    $121.55
                            ===     ====== =======    ====     ======= =======    ====     =======


- --------

(1) Consists of 116 properties owned, directly or indirectly, by us for the
    entire 2001 and 2000 fiscal years, respectively, excluding nine properties
    with non-comparable operating environments as a result of acquisitions,
    dispositions, substantial property damage, or major expansion and
    development projects.


   Our properties have reported annual increases in RevPAR in every year since
1993 except the year just ended. Based upon data provided by Smith Travel
Research, our comparable properties have an approximate 6 and 7 percentage
point occupancy premium for fiscal years 2001 and 2000, respectively, and an
approximate 24% and 26% RevPAR premium over similar brands in the upper-upscale
and luxury segments for fiscal years 2001 and 2000, respectively. We believe
the hotel brands in the upper-upscale and luxury full-service segment that are
most representative of our overall portfolio of full-service hotels are Ritz
Carlton; Marriott; Four Seasons; Crowne Plaza; Doubletree; Hyatt; Hilton;
Radisson; Renaissance; Sheraton; Westin; and Wyndham.


   Historically, our hotels have experienced relatively high occupancy rates,
which along with strong demand for full-service hotel rooms have allowed the
managers of our hotels to increase average daily room rates by selectively
raising room rates for certain types of bookings and by minimizing, in
specified cases, discounted group business. For the year ended December 31,
2001, as a percentage of total rooms sold, transient business comprised 58%,
and group business, including contract business, comprised 42%.


                                       60



   The occupancy rates and average daily rates commanded by our properties in
2001 and 2000 exceeded both the industry as a whole and the upper-upscale and
luxury full-service segment. The attractive locations of our hotels, the
limited availability of new building sites for new construction of competing
full-service hotels, and the lack of availability of financing for new full-
service hotels has allowed us to maintain RevPAR and average daily rate
premiums over our competitors in these service segments. For our comparable
hotels, average daily rates increased 6.3% in 2000. The increase in average
daily rate helped generate a strong increase in comparable hotel RevPAR of 6.6%
for the same period. However, for 2001, operations for our comparable
properties declined with average occupancy and RevPAR decreasing 7.7 percentage
points and 13.0%, respectively. Furthermore, because our lodging operations
have a high fixed-cost component, increases/decreases in RevPAR generally yield
greater percentage increases/decreases in our earnings and cash flows. As a
result of the decline in operations in 2001, we have been working with our
managers to achieve cost reductions at the properties that have slowed the
decrease in operating margins. These cost reduction efforts have been
accelerated since the events of September 11. The efforts were successful based
on the ratio of RevPAR to EBITDA calculated for both the year and the fourth
quarter. While RevPAR declined 28% for the fourth quarter, margins were only
down 5.0 percentage points, resulting in a ratio of RevPAR to EBITDA decline of
only 1.4 times. Similarly, while RevPAR declined 13% for the full year, margins
were only down 2.9 percentage points, resulting in a ratio of RevPAR to EBITDA
decline of only 1.5 times. For the first quarter 2002, margins were only down
0.2 percentage points, resulting in a ratio of RevPAR to EBITDA decline of 0.9
times. Although some of these savings will not be permanent, we do believe that
we have achieved meaningful long-term efficiencies. Also, as a result of our
acquisition in 2001 of the lessee entities and/or leasehold interests, changes
in earnings and cash flow at those properties now have a direct effect on our
consolidated earnings and cash flows. See "Business and Properties--Operating
Structure."


   The economic trends affecting the hotel industry and the overall economy
will be a major factor in the operating partnership's ability to generate
growth in hotel revenues. Additionally, the abilities of the managers to curb
operating costs while continuing to maintain high quality hotels will have a
material impact on future hotel level sales and operating profit growth. If the
current economic conditions continue, operations may decline further in 2002.


   Foreign Operations. During 2000 and 1999, our foreign operations consisted
of four full-service hotel properties located in Canada. Effective in the
second quarter of 2001, with the acquisition of a controlling voting interest
in Rockledge, we own a controlling interest in a partnership that owns two
full-service hotel properties in Mexico and, as a result, began consolidating
the operations of those hotel properties. During 2001, 2000, and 1999,
respectively, 98% of total revenues were attributed to sales within the United
States, and the remaining 2% of total revenues were attributed to foreign
countries.


   Competition. We compete with other hotel owners through the ownership of
premium branded hotels in downtown/urban, airport, and resort locations. Our
competitors include Starwood Hotels and Resorts, Hilton Hotel Corporation,
Wyndham International, FelCor Lodging Trust, and MeriStar Hospitality
Corporation.


   We believe that our properties will continue to enjoy competitive advantages
arising from their participation in the Marriott, Ritz-Carlton, Four Seasons,
Hilton, Hyatt and Swissotel hotel brand systems. The national marketing
programs and reservation systems of each of these managers, as well as the
advantages of strong customer preference for these upper-upscale and luxury
brands should also help these properties to maintain or increase their premium
over competitors in both occupancy and room rates. Repeat guest business is
enhanced by guest rewards programs offered by Marriott, Hilton, Hyatt and
Swissotel. Each of the managers maintains national reservation systems that
provide reservation agents with complete descriptions of the rooms available
and up-to-date rate information from the properties. Our website
(www.hostmarriott.com) currently permits users to connect to the Marriott,
Ritz-Carlton, Four Seasons, Hilton and Hyatt reservation systems to reserve
rooms in our hotels.


                                       61



   Seasonality. Our hotel sales have traditionally experienced moderate
seasonality. Additionally, hotel revenues in the fourth quarter reflect sixteen
weeks of results compared to twelve weeks for the first three quarters of the
fiscal year. As a result of the events of September 11, 2001 and the subsequent
decline in the economy, the fourth quarter 2001 dispersion rate was 6
percentage points below that of 1999 and 2000. During 1999 and 2000, the hotel
sales were not recorded in our revenues, as most of our hotels were leased to
third parties. However, hotel sales were used to calculate rental income.
Average hotel sales by quarter for the years 1999 through 2001 for our lodging
properties are as follows:





                                                  First  Second   Third  Fourth
   Year                                          Quarter Quarter Quarter Quarter
   ----                                          ------- ------- ------- -------
                                                             
   1999.........................................    22%     24%     21%     33%
   2000.........................................    21      25      21      33
   2001.........................................    24      27      22      27
                                                   ---     ---     ---     ---
   Average......................................    22%     25%     22%     31%
                                                   ===     ===     ===     ===



                                       62



   Hotel Properties. The following table sets forth the location and number of
rooms of our 122 hotels as of March 1, 2002. All of the properties are
currently leased to our wholly owned taxable REIT subsidiaries, unless
otherwise indicated. Each hotel is operated as a Marriott brand hotel unless
otherwise indicated by its name.





Location                            Rooms
- --------                            -----
                                 
Arizona
 Mountain Shadows Resort...........   337
 Scottsdale Suites.................   251
 The Ritz-Carlton, Phoenix.........   281
California
 Coronado Island Resort(1).........   300
 Costa Mesa Suites.................   253
 Desert Springs Resort and Spa.....   884
 Fullerton(1)......................   224
 Hyatt Regency, Burlingame.........   793
 Manhattan Beach(1)................   380
 Marina Beach(1)...................   370
 Newport Beach.....................   586
 Newport Beach Suites..............   254
 Ontario Airport...................   299
 Sacramento Airport(3).............    85
 San Diego Hotel and Marina(1)(2).. 1,356
 San Diego Mission Valley(2).......   350
 San Francisco Airport.............   684
 San Francisco Fisherman's Wharf...   285
 San Francisco Moscone Center(1)... 1,498
 San Ramon(1)......................   368
 Santa Clara(1)....................   755
 The Ritz-Carlton, Marina del
  Rey(1)...........................   304
 The Ritz-Carlton, San Francisco...   336
 Torrance..........................   487
Colorado
 Denver Southeast(1)...............   590
 Denver Tech Center................   625
 Denver West(1)....................   305
Connecticut
 Hartford/Farmington...............   380
 Hartford/Rocky Hill(1)............   251
Florida
 Fort Lauderdale Marina............   580
 Harbor Beach Resort(1)(2)(3)......   637
 Jacksonville(1)...................   256
 Miami Airport(1)..................   782
 Miami Biscayne Bay(1).............   605
 Orlando World Center Resort....... 2,000
 Palm Beach Gardens................   279
 Singer Island Hilton..............   223
 Tampa Airport(1)..................   295
 Tampa Waterside...................   717
 Tampa Westshore(1)................   309
 The Ritz-Carlton, Amelia Island...   449
 The Ritz-Carlton, Naples..........   463
 The Ritz-Carlton, Naples Golf
  Resort...........................   295
Georgia
 Atlanta Marriott Marquis.......... 1,671
 Atlanta Midtown Suites(1).........   254
 Atlanta Norcross..................   222
 Atlanta Northwest.................   401
 Atlanta Perimeter(1)..............   400
 Four Seasons, Atlanta.............   244
 Grand Hyatt, Atlanta..............   438





Location                                                              Rooms
- --------                                                              -----
                                                                   
Georgia (continued)
 JW Marriott Hotel at Lenox(1).......................................   371
 Swissotel, Atlanta..................................................   348
 The Ritz-Carlton, Atlanta...........................................   444
 The Ritz-Carlton, Buckhead..........................................   553
Illinois
 Chicago/Deerfield Suites............................................   248
 Chicago/Downers Grove Suites........................................   254
 Chicago/Downtown Courtyard..........................................   337
 Chicago O'Hare......................................................   681
 Chicago O'Hare Suites(1)............................................   256
 Swissotel, Chicago..................................................   630
Indiana
 South Bend(1).......................................................   300
Louisiana
 New Orleans......................................................... 1,290
Maryland
 Bethesda(1).........................................................   407
 Gaithersburg/Washingtonian Center...................................   284
Massachusetts
 Boston/Newton.......................................................   430
 Hyatt Regency, Cambridge............................................   469
 Swissotel, Boston...................................................   498
Michigan
 The Ritz-Carlton, Dearborn..........................................   308
 Detroit Livonia.....................................................   224
 Detroit Romulus.....................................................   245
 Detroit Southfield..................................................   226
Minnesota
 Minneapolis City Center.............................................   583
 Minneapolis Southwest(2)............................................   321
Missouri
 Kansas City Airport(1)..............................................   382
New Hampshire
 Nashua..............................................................   251
New Jersey
 Hanover.............................................................   353
 Newark Airport(1)...................................................   591
 Park Ridge(1).......................................................   289
New Mexico
 Albuquerque(1)......................................................   411
New York
 Albany(2)...........................................................   359
 New York Financial Center...........................................   504
 New York Marquis(1)................................................. 1,944
 Swissotel, The Drake................................................   494
North Carolina
 Charlotte Executive Park............................................   298
 Greensboro/Highpoint(1).............................................   299
 Raleigh Crabtree Valley.............................................   375
 Research Triangle Park..............................................   224
Ohio
 Dayton..............................................................   399
Oklahoma
 Oklahoma City.......................................................   354
 Oklahoma City Waterford.............................................   197



                                       63





Location                      Rooms
- --------                      -----
                           
Oregon
 Portland....................   503
Pennsylvania
 Four Seasons, Philadelphia..   364
 Philadelphia Convention
  Center(1)(2)............... 1,408
 Philadelphia Airport(1).....   419
Tennessee
 Memphis.....................   403
Texas
 Dallas/Fort Worth Airport...   492
 Dallas Quorum(1)............   547
 Houston Airport(1)..........   565
 Houston Medical Center(1)...   386
 JW Marriott Houston.........   514
 Plaza San Antonio(1)........   252
 San Antonio Rivercenter(1).. 1,001
 San Antonio Riverwalk(1)....   512
Utah
 Salt Lake City(1)...........   510
Virginia
 Dulles Airport(1)...........   368
 Fairview Park...............   395
 Hyatt Regency, Reston.......   514





Location                                                             Rooms
- --------                                                            -------
                                                                 
Virginia (continued)
 Key Bridge(1).....................................................     586
 Norfolk Waterside(1)..............................................     404
 Pentagon City Residence Inn.......................................     299
 The Ritz-Carlton, Tysons Corner(1)................................     398
 Washington Dulles Suites..........................................     254
 Westfields........................................................     335
 Williamsburg......................................................     295
Washington
 Seattle SeaTac Airport............................................     459
Washington, DC
 Washington Metro Center...........................................     456
Canada
 Calgary...........................................................     380
 Toronto Airport(2)................................................     423
 Toronto Eaton Center(1)...........................................     459
 Toronto Delta Meadowvale..........................................     374
Mexico
 JW Marriott Hotel, Mexico City (2)(3).............................     312
 Mexico City Airport Hotel (2)(3)..................................     600
                                                                    -------
TOTAL..............................................................  58,009
                                                                    =======


- --------

(1)  The land on which this hotel is built is leased under one or more long-
     term lease agreements.


(2)  This property is not wholly owned by the operating partnership.


(3)  This property is not leased to the TRS.


Other Real Estate Investments


   In addition to our 122 full-service hotels, we maintain investments in
general and/or limited partner interests in partnerships that in the aggregate
own 2 full-service hotels and 158 limited service hotels, as well as other real
estate investments, the operations of which we do not consolidate. During 2001,
our EBITDA from these partnership investments was less than 1% of our total
EBITDA. Typically, we and certain of our subsidiaries manage our investments
and, through a combination of general and limited partnership and limited
liability company interests, conduct the venture's or partnership's business.
As of December 31, 2001, the combined balance sheets of these investments
included approximately $1.7 billion in assets and $1.3 billion in debt,
principally mortgages. All partnership investments in which we do not own a
controlling interest are accounted for using the equity method, and,
accordingly, do not consolidate the debt or assets on our balance sheet. All of
the debt of those partnerships is non-recourse to us and our subsidiaries.


   The hotels owned by the partnerships are currently operated under management
agreements with Marriott International or its subsidiaries. As the general
partner, we oversee and monitor Marriott International and its subsidiaries'
performance pursuant to these agreements. Additionally, we are responsible for
the payment of partnership obligations from partnership funds, preparation of
financial reports and tax returns and communications with lenders, limited
partners and regulatory bodies. As the general partner, we are reimbursed for
the cost of providing these services subject to limitations in certain cases.
Cash distributions provided from these partnerships are tied to the overall
performance of the underlying properties and the overall level of debt.
Distributions from these partnerships to us were $8.8 million in 2001 and $1.3
million in 2000. There were no distributions in 1999.


   On March 1, 2002, we mailed a consent solicitation to the limited partners
of Marriott Residence Inn Limited Partnership, in which we own a 1% general
partnership interest, relating to the sale of the partnership to a third party.
The partnership owns 15 Residence Inn hotels. We have received sufficient votes
as of March 20, 2002 to approve the sale subject to normal and customary
closing conditions, and we anticipate the sale to close during the second
quarter of 2002. Additionally, we are currently in discussions to sell the
Marriott


                                       64



Residence Inn II Limited Partnership, which owns 23 Residence Inn hotels,
including our 1% general partnership interest. The proceeds to us from the sale
of these partnerships, if any, would not be material.


   Effective August 16, 2001, we sold our limited partnership interests in the
Fairfield Inn Limited Partnership for an immaterial amount and withdrew as
general partner, eliminating any further role in the partnership. Additionally,
Mutual Benefit/Marriott Hotel Associates-I L.P., a partnership of which Host
REIT is general partner and the owner of the Richmond Marriott Hotel, filed for
Chapter 11 bankruptcy protection in December 2001. Host REIT is currently in
discussions with the City of Richmond, other independent parties, and the
primary lender regarding restructuring the partnership.


   As a result of the consolidation of Rockledge during March 2001, we own a
49% interest in the partnership that owns the 36-hole Greg Norman-designed golf
course surrounding our Ritz-Carlton, Naples Golf Resort. As previously
discussed, during 2000 we acquired a non-controlling interest in the
partnership that owns the 772-room J.W. Marriott Hotel in Washington, D.C. for
$40 million. This partnership has $95 million in debt that is non-recourse to
Host Marriott.


   Courtyard Joint Venture. In March 2000, Rockledge formed a joint venture
with Marriott International to acquire and hold the partnership interests in
the Courtyard by Marriott Limited Partnership ("CBM I") and Courtyard by
Marriott II Limited Partnership ("CBM II"), which together own 120 Courtyard by
Marriott properties totaling 17,559 rooms. The formation of the joint venture
and the acquisition of the CBM I and CBM II partnership interests was effected
as part of a settlement of litigation brought against Host Marriott and
Marriott International by CBM I and CBM II limited partners. For our 50%
interest in the joint venture the operating partnership and Rockledge
contributed $90 million and the CBM I and CBM II partnership interests that we
already owned. The joint venture acquired the partnership interests in CBM I
and CBM II for an aggregate payment in cash of $372 million, which was funded
by our cash contribution together with Marriott International's cash
contribution and $200 million of non-recourse mezzanine debt provided by
Marriott International to the joint venture. Additionally, the joint venture
has approximately $735 million of debt, all of which is non-recourse to and not
guaranteed by Host Marriott, that consists of the following: 1) the $287
million mortgage maturing April 2012 requiring monthly payments of principal
and interest at a fixed interest rate of 7.865% which is secured by the 50
hotels owned by CBM I; 2) the $127 million senior notes maturing February 2008
requiring semiannual interest payments at a fixed interest rate of 10.75% (the
notes are secured by a first priority pledge of CBM II of its general and
limited partnership interests); 3) the $321 million multi-class commercial
mortgage pass-through certificates maturing January 2013 requiring monthly
payments of principal and interest at weighted average interest rate of 7.8%,
which is secured by first priority mortgage liens on the 69 hotels owned by CBM
II. Each of the joint venture's 120 hotels is operated by Marriott
International pursuant to long-term management agreements. Since we do not
control the Courtyard joint venture, we record our investment using the equity
method of accounting.


   HPT Leases. Prior to 1997, we divested certain limited-service hotel
properties through the sale and leaseback of 53 Courtyard properties and 18
Residence Inn properties to Hospitality Properties Trust ("HPT"). The Courtyard
and Residence Inn properties are subleased to subsidiaries of Crestline under
sublease agreements and are managed by Marriott International under long-term
management agreements. Revenues for these 71 properties of $77 million, $83
million and $80 million for 2001, 2000 and 1999, respectively, are reflected in
our rental income. Rental payments to HPT totaled $72 million, $74 million and
$71 million for 2001, 2000 and 1999, respectively.


   Other Real Estate Activities. We conduct lease activity related to
approximately 249,000 square feet of office space in four buildings that we own
in Atlanta, Chicago and San Francisco which is included in rental income in our
statements of operations. Additionally, we have lease and sublease activity
relating to Host Marriott's former restaurant operations for which we remain
contingently liable. As of December 31, 2001, the expected sublease rental
income for the restaurant operations exceeded our contingent lease liability.
We also have guarantees related to certain divested restaurant properties. The
guarantees totaled $57 million and $68


                                       65



million as of December 31, 2001 and 2000, respectively. We consider the
likelihood of any payments under any of these lease guarantees or contingencies
to be remote.


   During 2001, we recorded interest on a note relating to the 1994 sale of 26
Fairfield Inns under the cost recovery method.


   For a more detailed discussion of our other real estate investments, which
includes a summary of the outstanding debt balances of our affiliates, see Note
4 to the Consolidated Financial Statements, "--Investments in and Receivables
from Affiliates."


Environmental and Regulatory Matters


   Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under, or in such property. Such laws may impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. In addition, certain environmental laws and
common law principles could be used to impose liability for release of
asbestos-containing materials, and third parties may seek recovery from owners
or operators of real properties for personal injury associated with exposure to
released asbestos-containing materials. Environmental laws also may impose
restrictions on the manner in which property may be used or business may be
operated, and these restrictions may require expenditures. In connection with
our current or prior ownership or operation of hotels, we may be potentially
liable for any such costs or liabilities. Although we are currently not aware
of any material environmental claims pending or threatened against us, we can
offer no assurance that a material environmental claim will not be asserted
against us.


Material Agreements


   Our hotels are managed and operated by third parties pursuant to management
agreements with our subsidiaries to which we have leased our hotels. The
initial term of our management agreements is generally 15 to 20 years in length
with multiple renewal terms. As of March 1, 2002, 101 of our hotels are managed
by Marriott International or its affiliates as Marriott or Ritz-Carlton hotels.
The following is a brief summary of the material terms typical to our current
management agreements, an example of which has been filed with the Securities &
Exchange Commission as an exhibit to this report.


  . General. Under each management agreement, the manager provides complete
    management services to the applicable lessee with respect to management
    of such lessee's hotels.


  . Operational services. The managers have sole responsibility and exclusive
    authority for all activities necessary for the day-to-day operation of
    the hotels, including establishing all room rates, processing
    reservations, procuring inventories, supplies and services, providing
    periodic inspection and consultation visits to the hotels by the
    managers' technical and operational experts and promoting and publicizing
    of the hotels. The manager receives compensation in the form of a base
    management fee and an incentive management fee, typically calculated as
    percentages of gross revenues and operating profits, respectively. The
    incentive management fee typically is paid only after an agreed upon
    return has been paid to our lessee subsidiary from the remaining profit
    to the hotel.


  . Executive supervision and management services. The managers provide all
    managerial and other employees for the hotels, review the operation and
    maintenance of the hotels, prepare reports, budgets and projections,
    provide other administrative and accounting support services to the
    hotel, such as planning and policy services, financial planning,
    divisional financial services, risk planning services, product planning
    and development, employee planning, corporate executive management,
    legislative and governmental representation and certain in-house legal
    services; and protect trademarks, trade-names and service marks. The
    manager also provides a national reservations system.


                                       66





  . Chain services. The management agreements require the manager to furnish
    chain services that are furnished generally on a central basis. Such
    services include: (1) the development and operation of computer systems
    and reservation services, (2) regional management and administrative
    services, regional marketing and sales services, regional training
    services, manpower development and relocation costs of regional personnel
    and (3) such additional central or regional services as may from time to
    time be more efficiently performed on a regional or group level. Costs
    and expenses incurred by the manager in providing such services are
    allocated among all hotels managed by the manager or its affiliates.


  . Working capital and fixed asset supplies. Our management agreements
    typically require us to maintain working capital for each hotel and to
    fund the cost of fixed asset supplies such as linen and other similar
    items. We are also responsible for providing funds to meet the cash needs
    for the hotel operations of the hotels if at any time the funds available
    from hotel operations are insufficient to meet the financial requirements
    of the hotels.


  . FF&E replacements. The management agreements generally provide that once
    each year the manager will prepare a list of furniture, fixtures and
    equipment (FF&E) to be acquired and certain routine repairs to be
    performed in the next year and an estimate of the funds that are
    necessary therefor, subject to our review or approval. Under the
    agreement, we are required to provide to the manager all necessary FF&E
    for the operation of the hotels (including funding any required FF&E
    replacements). For purposes of funding the FF&E replacements, a specified
    percentage of the gross revenues of the hotel is deposited by the manager
    in an escrow account (typically 5%). However, for 38 of our hotels, we
    have entered into an agreement with Marriott International to allow us to
    fund such expenditures directly as incurred from a consolidated account
    subject to maintaining a balance of the greater of $15 million or 40% of
    the total contributions made in the prior year to the reserve account at
    all times in the account used for such expenditures.


  . Building alterations, improvements and renewals. The management
    agreements require the manager to prepare an annual estimate of the
    expenditures necessary for major repairs, alterations, improvements,
    renewals and replacements to the structural, mechanical, electrical,
    heating, ventilating, air conditioning, plumbing and vertical
    transportation elements of each hotel. In addition to the foregoing, the
    management agreements generally provide that the manager may propose such
    changes, alterations and improvements to the hotel as are required, in
    the manager's reasonable judgment, to keep the hotel in a competitive,
    efficient and economical operating condition.


  . Sale of the hotel. Most of the management agreements limit our ability to
    sell, lease or otherwise transfer the hotels unless the transferee is not
    a competitor of the manager, and unless the transferee assumes the
    related management agreements and meets specified other conditions.


  . Service marks. During the term of the management agreements, the service
    mark, symbols and logos currently used by the manager, such as Marriott
    International, Ritz-Carlton, Four Seasons, Hyatt and Swissotel, may be
    used in the operation of the hotel. Any right to use the service marks,
    logo and symbols and related trademarks at a hotel will terminate with
    respect to that hotel upon termination of the management agreement with
    respect to such hotel.


  . Termination fee. Most of the management agreements provide that if the
    management agreement is terminated prior to its full term due to
    casualty, condemnation or the sale of the hotel, the manager would
    receive a termination fee.


  . Termination for failure to perform. Most of the management agreements may
    be terminated based upon a failure to meet certain financial performance
    criteria, subject to the manager's right to prevent such termination by
    making specified payments to us based upon the shortfall in such
    criteria.


   We are currently negotiating with Marriott International certain changes to
the management and other agreements for our Marriott-managed hotels. If made,
the changes, which remain subject to the consent of various lenders to the
properties and other third parties, would be effective as of December 29, 2001.
There can be no assurance that the negotiations will be successful, that the
changes will be made in substantially the form


                                       67



described below or that we will receive the necessary consents to implement the
amendments. The amendments to the management agreements that are under
discussion include the following:


  .Providing additional approval rights relating to the annual operating
   budgets and FF&E estimates;


  . Reducing certain expenses to the properties and lowering our working
    capital requirements;


  . Clarifying the circumstances and conditions under which Marriott
    International and its affiliates may earn a profit on transactions with
    the hotels, in addition to the amounts that Marriott International earns
    through its base and incentive management fees;


  . Enhancing territorial restrictions for certain hotels;


  . Reducing the incentive management fees that we pay on our portfolio of
    Marriott-managed hotels;


  . Expanding the pool of hotels that are subject to an existing agreement
    that allows us to sell certain assets without a Marriott International
    management agreement, and revising the method for determining the number
    of hotels that may be sold without a Marriott International management
    agreement or a franchise agreement, and, in each case, without the
    payment of a termination fee; and


  . Terminating Marriott International's right to purchase up to 20% of each
    class of Host REIT's outstanding voting shares upon certain changes of
    control and clarifying existing provisions in the management agreements
    that limit our ability to sell a hotel or our company to a competitor of
    Marriott International.


Employees


   We have 199 employees at March 1, 2002, including approximately 14 employees
who are covered by a collective bargaining agreement that is subject to review
and renewal on a regular basis. We believe that we and our managers generally
have good relations with labor unions and have not experienced any material
business interruptions as a result of labor disputes.


Non-competition agreements

   We agreed with Crestline that until December 31, 2003, we would not
purchase, finance or otherwise invest in senior living communities, or act as
an agent or consultant with respect to any of the foregoing activities, except
for acquisitions of communities which represent an immaterial portion of a
merger or similar transaction or for minimal portfolio investments in other
entities. In connection with the acquisition of the Crestline Lessee Entities,
the non-competition agreement was terminated effective January 1, 2001 and
thereafter.

   We agreed with Marriott International that until June 21, 2007, we would not
operate, manage or franchise (as franchisor) senior living facilities or
invest, finance or act as an agent or consultant with respect to any of the
foregoing activities, except for acquisitions of entities engaged in such
operating, management or franchising activities if such activities are
terminated or divested with 12 months of such acquisition or for minimal
portfolio investments in such entities and except for operating or managing
senior living facilities for a transitional period or up to 12 months in
connection with a change in the operator or manager of such facility.

Legal Proceedings

   We believe all of the lawsuits in which we are a defendant, including the
following lawsuits, are without merit and we intend to defend vigorously
against such claims; however, no assurance can be given as to the outcome of
any of the lawsuits.


   We believe all of the lawsuits in which we are a defendant, including the
following lawsuits, are without merit and we intend to defend vigorously
against such claims; however, no assurance can be given as to the outcome of
any of the lawsuits.


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   Marriott Hotel Properties II Limited Partnership (MHP II). Limited partners
of MHP II filed putative class action lawsuits in Palm Beach County Circuit
Court on May 10, 1996, Leonard Rosenblum, as Trustee of the Sylvia Bernice
Rosenblum Trust, et. al. v. Marriott MHP Two Corporation, et. al., Case No. CL-
96-4087-AD, and, in the Delaware Court of Chancery on April 24, 1996, Cary W.
Salter, Jr., et. al. v. MHP II Acquisition Corp., et. al., respectively,
against Host REIT and certain of its affiliates alleging that the defendants
violated their fiduciary duties and engaged in fraud and coercion in connection
with the 1996 tender offer for MHP II units and with our acquisition of MHP II
during the 1998 REIT conversion. The plaintiffs in these actions are seeking
unspecified damages.


   In the Florida case, the defendants removed the case to the United States
District Court for the Southern District of Florida and, after hearings on
various procedural motions, the District Court remanded the case to state court
on July 25, 1998.


   In the Delaware case, the Delaware Court of Chancery initially granted the
plaintiffs' motion to voluntarily dismiss the case with the proviso that the
plaintiffs could refile in the aforementioned action in federal court in
Florida. After the District Court's remand of the Florida action back to
Florida state court, two of the three original Delaware plaintiffs asked the
Court of Chancery to reconsider its order granting their voluntary dismissal.
The Court of Chancery refused to allow the plaintiffs to join the Florida
action and, instead, reinstated the Delaware case, now styled In Re Marriott
Hotel Properties II Limited Partnership Unitholders Litigation, Consolidated
Civil Action No. 14961. On January 29, 1999, Cary W. Salter, one of the
original plaintiffs, alone filed an Amended Consolidated Class Action Complaint
in the Delaware action. On January 24, 2000, the Delaware Court of Chancery
issued a memorandum opinion in which the court dismissed all but one of the
plaintiff's claims, which remaining claim concerns the adequacy of disclosure
during the initial tender offer. On October 22, 2001, we entered into a
settlement agreement with respect to the two above-referenced cases. At a
fairness hearing held on February 22, 2002, the Florida court gave final
approval to the settlement. The Court of Chancery subsequently dismissed the
Delaware case. All appeal periods have expired and the settlement has been
consummated.


   A subsequent lawsuit, Accelerated High Yield Growth Fund, Ltd., et al. v.
HMC Hotel Properties II Limited Partnership, et. al., C.A. No. 18254NC, was
filed on August 23, 2000 in the Delaware Court of Chancery by the MacKenzie
Patterson group of funds, one of the three original Delaware plaintiffs,
against Host REIT and certain of its affiliates alleging breach of contract,
fraud and coercion in connection with the acquisition of MHP II during the 1998
REIT conversion. The plaintiffs allege that our acquisition of MHP II by merger
in connection with the REIT conversion violated the partnership agreement and
that our subsidiary acting as the general partner of MHP II breached its
fiduciary duties by allowing the merger to occur. The settlement referenced
above resolves all claims of MHP II's limited partners against Host REIT and
its affiliates with the exception of the claims of the MacKenzie Patterson
group. The MacKenzie Patterson group elected to opt out of the settlement class
with respect to its 28 limited partner units. Discovery is proceeding in this
case.


   Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P. ("O'Hare
Suites"). On October 5, 2000, Joseph S. Roth and Robert M. Niedelman, limited
partners in O'Hare Suites, filed a putative class action lawsuit, Joseph S.
Roth, et al., v. MOHS Corporation, et al., Case No. 00CH14500, in the Circuit
Court of Cook County, Illinois, Chancery Division, against Host REIT, Host LP,
Marriott International, and MOHS Corporation, a subsidiary of Host LP and a
former general partner of O'Hare Suites. The plaintiffs allege that an improper
calculation of the hotel manager's incentive management fees resulted in
inappropriate payments in 1997 and 1998, and, consequently, in an inadequate
appraised value for their limited partner units in connection with the
acquisition of O'Hare Suites during the 1998 REIT conversion. The plaintiffs
are seeking damages of approximately $13 million. On August 28, 2001, the
plaintiffs filed a third amended complaint, which did not include Marriott
International as a defendant. We responded by filing a motion to dismiss based
on the plaintiffs' lack of standing to bring a derivative action under Rhode
Island law. At a hearing held on


                                       69



December 10, 2001, the court denied this motion and we sought leave to file an
appeal. Although the court granted leave to appeal on March 15, 2002, the
appellate court declined to entertain the appeal. Discovery is proceeding in
this action.


   Swissotel. On June 22, 2001, Swissotel Management (USA) L.L.C. ("Swissotel")
filed a lawsuit against Host REIT, and five of our subsidiaries, regarding the
hotel management agreements between Swissotel and BRE/Swiss LLC, dated August
1, 1997 (the "Management Agreements"). The Management Agreements relate to the
Swissotel hotels in Atlanta, Boston, Chicago, and New York (the "Hotels").


   On January 18, 2001, we informed Swissotel that reports received from
engineering consultants hired by us to inspect the New York hotel established
that Swissotel failed to meet its responsibilities to operate and maintain the
New York hotel in accordance with a first-class hotel standard. In response to
this notice, Swissotel filed a lawsuit seeking declaratory relief, but later
agreed to arbitrate the matter as required by the management agreement for the
New York hotel. On May 18, 2001, we informed Swissotel that a performance
shortfall existed under the Management Agreements for fiscal year 2000. A week
later, on May 25, 2001, we declared that Swissotel was in default under the
Management Agreements due to deficiencies in its accounting practices. In
addition, we informed Swissotel that we were withholding our consent to the
sale of its management business to Raffles International. Notwithstanding this
latter notice, Swissotel and Raffles closed on their proposed transaction
during the first week of June.


   In response to the performance shortfall and accounting notices, Swissotel
filed a second lawsuit seeking declarations that it is not in violation of the
Management Agreements. In addition, Swissotel has demanded arbitration of those
issues which are arbitrable under the Management Agreements. Swissotel argues
that its accounting practices were, and are, in accordance with the
requirements of the Management Agreements. Swissotel also claims that the
performance of the Hotels in fiscal year 2000 exceeded the performance standard
described in the Management Agreements. Swissotel maintains that the May 18 and
25 letters have no force and effect, and that no event of default can be
declared under the Management Agreements. On July 25, 2001, the defendants
filed answers to the complaint and counterclaims against Swissotel and Raffles
for breach of contract and tortuous interference, respectively. In addition, we
responded to the arbitration demand by denying that any of the issues raised by
Swissotel are arbitrable under the Management Agreements. Swissotel filed an
amended complaint on August 14, 2001. We subsequently participated in
settlement discussions with Swissotel and entered into a confidentiality
agreement and a standstill agreement which, unless extended, will expire on May
17, 2002. Absent settlement or an extension of the standstill agreement, our
response to Swissotel's amended complaint will be due on June 7, 2002.



Certain Policies

   The following is a discussion of our and Host REIT's policies with respect
to distributions, investments, financing, lending, conflicts of interest and
certain other activities. Our policies with respect to these activities are
determined by the Board of Directors of Host REIT and may be amended or revised
from time to time at the discretion of the Board of Directors, except that
changes in certain policies with respect to conflicts of interest must be
consistent with legal and contractual requirements.

  Investment Policies

   Investments in Real Estate or Interests in Real Estate. Host REIT is
required to conduct all of its investment activities through us. Our investment
objectives are to

  .  achieve long-term sustainable growth in FFO per OP Unit and cash flow;

  .  maximize the value of our existing portfolio through an aggressive asset
     management program which focuses on selectively improving and expanding
     our hotels;

                                       70


  .  acquire additional existing and newly developed upscale and luxury full
     service hotels in targeted markets (primarily focusing on downtown
     hotels in core business districts in major metropolitan markets and
     select airport and resort/convention locations);

  .  complete our current development and expansion program, and selectively
     develop and construct upscale and luxury full service hotels;

  .  recycle capital through opportunistic asset sales and selective
     dispositions of noncore assets; and

  .  opportunistically pursue other real estate investments.

   Our business primarily focuses on upscale and luxury full service hotels.
Where appropriate, and subject to REIT qualification rules and limitations
contained in our partnership agreement, we may sell certain of our hotels.

   We also may participate with other entities in property ownership through
joint ventures or other types of co-ownership. Equity investments may be
subject to existing mortgage financing and other indebtedness or such financing
or indebtedness may be incurred in connection with acquiring investments. Any
such financing or indebtedness will have priority over our equity interest in
such property.

   Investments in Real Estate Mortgages. While we will emphasize equity real
estate investments, we may, in our discretion, invest in mortgages and other
similar interests. We do not intend to invest to a significant extent in
mortgages or deeds of trust, but may acquire mortgages as a strategy for
acquiring ownership of a property or the economic equivalent thereof, subject
to the investment restrictions applicable to REITs. In addition, we may invest
in mortgage-related securities and/or may seek to issue securities representing
interests in such mortgage-related securities as a method of raising additional
funds.

   Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities and Other Issuers.  Subject to the percentage ownership limitations
and gross and asset income tests necessary for REIT qualification, we also may
invest in securities of other entities engaged in real estate activities or
invest in securities of other issuers, including for the purpose of exercising
control over such entities. We may acquire all or substantially all of the
securities or assets of other REITs or similar entities where such investments
would be consistent with our investment policies. No such investments will be
made, however, unless the Board of Directors determines that the proposed
investment would not cause either Host REIT or us to be an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.

  Financing Policies

   Neither our nor Host REIT's organizational documents contain restrictions on
incurring debt. The indenture described in this prospectus under "Description
of Series I Senior Notes" and our existing bank credit facility impose
limitations on the incurrence of indebtedness. The indenture limits the amount
of debt that we may incur if, immediately after giving effect to the incurrence
of such additional debt, the aggregate principal amount of all of our and our
subsidiaries on a consolidated basis is greater than 65% of our undepreciated
total assets on the date of such incurrence. We may, from time to time, reduce
our outstanding indebtedness by repurchasing a portion of such outstanding
indebtedness, subject to certain restrictions contained in our partnership
agreement and the terms of our outstanding indebtedness. We will from time to
time reevaluate our borrowing policies in light of then current economic
conditions, relative costs of debt and equity capital, market conditions,
market values of properties, growth and acquisition opportunities and other
factors. Consequently, our financing policy is subject to modification and
change. We may waive or modify our borrowing policy without notice to, or vote
of, the holders of any of our securities or any securities of Host REIT.

                                       71


   To the extent that the Host REIT Board of Directors determines to seek
additional capital, we or Host REIT may raise such capital through equity
offerings, debt financing or retention of cash flow or a combination of these
methods. As long as we are in existence, the net proceeds of all equity capital
raised by Host REIT will be contributed to us in exchange for OP Units, which
will dilute the ownership interest of our limited partners.

   In the future, we may seek to extend, expand, reduce or renew our existing
credit facility, or obtain new credit facilities or lines of credit, subject to
our general policy relating to the ratio of debt-to-total market
capitalization, for the purpose of making acquisitions or capital improvements
or providing working capital or meeting the taxable income distribution
requirements for REITs under the Internal Revenue Code. In the future, we and
Host REIT also may determine to issue securities senior to the common shares or
OP Units, including preferred shares and debt securities (either of which may
be convertible into common shares or OP Units or may be accompanied by warrants
to purchase common shares or OP Units).

   We have not established any limit on the number or amount of mortgages that
may be placed on any single hotel or on its portfolio as a whole, although our
objective is to reduce its reliance on secured indebtedness.

  Lending Policies

   We may consider offering purchase money financing in connection with the
sale of a hotel where the provision of such financing will increase the value
we receive for the hotel sold.

  Policies With Respect to Other Activities

   We may, but do not presently intend to, make investments other than as
previously described. Host REIT will make investments only through us. We and
Host REIT have authority to offer our securities and to repurchase or otherwise
reacquire our securities and may engage in such activities in the future. We
and Host REIT also may make loans to joint ventures in which we may participate
in the future to meet working capital needs. We do not, and Host REIT does not,
intend to engage in trading, underwriting, agency distribution or sale of
securities of other issuers. Host REIT's policies with respect to such
activities may be reviewed and modified from time to time by Host REIT's Board
of Directors without notice to, or the vote of, the holders of any securities
of Host REIT or us.

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                                   MANAGEMENT

Executive Officers and Directors of Host REIT

   The following table sets forth certain information with respect to persons
who are the directors and executive officers of Host REIT, our sole general
partner. Host REIT currently has a vacancy on its Board of Directors due to the
death of R. Theodore Ammon. Mr. Ammon had served on the Board since 1992, and
most recently was Chair of its Audit Committee.




Name                               Age              Position With Host REIT
- ----                               ---              -----------------------
                                 
Richard E. Marriott(1)...........   63 Chairman of the Board of Directors
Christopher J. Nassetta..........   39 Director, President and Chief Executive Officer
Robert M. Baylis.................   63 Director
Terence C. Golden................   57 Director
Ann McLaughlin Korologos.........   60 Director
J.W. Marriott, Jr.(1)............   69 Director
John G. Schreiber................   55 Director
Harry L. Vincent, Jr. ...........   82 Director
                                       Executive Vice President and Chief Financial
Robert E. Parsons, Jr. ..........   46 Officer
                                       Executive Vice President--Acquisitions and
James F. Risoleo.................   46 Development
                                       Executive Vice President and Chief Operating
W. Edward Walter.................   46 Officer
Elizabeth A. Abdoo...............   43 Senior Vice President, General Counsel and
                                       Corporate Secretary
                                       Senior Vice President--Taxes and General Tax
Richard Burton...................   46 Counsel
John A. Carnella.................   38 Senior Vice President and Treasurer
Donald D. Olinger................   43 Senior Vice President and Controller


- --------
(1)  Richard E. Marriott and J.W. Marriott, Jr. are brothers.

   The following is a biographical summary of the experience of the persons who
are the directors and executive officers of Host REIT.

   Richard E. Marriott. Mr. Richard E. Marriott has been a Director of Host
Marriott Corporation, now Host REIT, since 1979 and is a Director of Marriott
International, Inc. (from which he has announced he will resign in May 2002)
and the Polynesian Cultural Center, and he is Chairman of the Board of First
Media Corporation. Mr. Marriott also serves on the Federal City Counsel, the
Board of Associates for Gallaudet University and the National Advisory Council
of Brigham Young University. He is a past President of the National Restaurant
Association. In addition, Mr. Marriott is the President and a Trustee of the
Marriott Foundation for People with Disabilities. Mr. Marriott joined Host
Marriott Corporation in 1965 and has served in various executive capacities. In
1984, he was elected Executive Vice President, and in 1986, he was elected Vice
Chairman of the Board of Directors. In 1993, Mr. Marriott was elected Chairman
of the Board. Mr. Marriott's term as a director of Host REIT will expire at the
2004 annual meeting of shareholders.


   Christopher J. Nassetta. Mr. Nassetta has been a Director of Host Marriott
Corporation, now Host REIT, since 1999 and became the President and Chief
Executive Officer of Host REIT in May 2000. He also serves on the Board of
Trustees of Prime Group Realty Trust and as a member of the McIntire School of
Commerce Advisory Board for the University of Virginia. From 1995 until May
2000, he served as Executive Vice President and was elected Chief Operating
Officer of Host Marriott Corporation in 1997. Prior to joining Host, Mr.
Nassetta served as President of Bailey Realty Corporation from 1991 until 1995.
He had previously served as Chief Development Officer and in various other
positions with The Oliver Carr Company from 1984 through 1991. Mr. Nassetta's
term as a Director of Host REIT will expire at the 2004 annual meeting of
shareholders.

   Robert M. Baylis. Mr. Baylis has been a Director of Host Marriott
Corporation, now Host REIT, since 1996 and is the retired Vice Chairman of CS
First Boston. Prior to his retirement, Mr. Baylis was Chairman

                                       73


and Chief Executive Officer of CS First Boston Pacific, Inc. Mr. Baylis is also
a director of New York Life Insurance Company, Covance Inc., Gildan Activewear,
Inc., PartnerRe Ltd., and Credit Suisse First Boston (USA), Inc. He is also an
overseer of the University of Pennsylvania Museum, a director of The
International Forum, an executive education program of the Wharton School, and
a member of the Advisory Council of the Economics Department of Princeton
University. Mr. Baylis's term as a Director of Host REIT will expire at the
2003 annual meeting of shareholders.

   Terence C. Golden. Mr. Golden has been a Director of Host Marriott
Corporation, now Host REIT, since 1995 and served as President and Chief
Executive Officer of Host REIT from 1995 until his retirement in May 2000. He
also serves as Chairman of Bailey Realty Corporation and Bailey Capital
Corporation and various affiliated companies. In addition, Mr. Golden is a
Director of American Classic Voyages Co., Cousins Properties, Inc., Potomac
Electric Power Company, The Morris and Gwendolyn Cafritz Foundation and the
District of Columbia Early Childhood Collaborative. He is also Chairman of the
Federal City Council. Prior to coming to Host REIT, Mr. Golden had served as
chief financial officer of The Oliver Carr Company and was a Founder and
National Managing Partner of Trammel Crow Residential Companies. He has also
served as Administrator of the U.S. General Services Administration and as
Assistant Secretary of the U.S. Department of the Treasury. Mr. Golden's term
as a Director of Host REIT will expire at the 2003 annual meeting of
shareholders.

   Ann McLaughlin Korologos. Ms. Korologos has been a Director of Host Marriott
Corporation, now Host REIT, since 1993 and currently is Senior Advisor to
Benedetto, Gartland & Company, Inc., an investment banking firm in New York.
She formerly served as President of the Federal City Council from 1990 until
1995 and as Chairman of The Aspen Institute from 1996 until August 2000. Ms.
Korologos has served with distinction in several U.S. Administrations in such
positions as Secretary of Labor and Under Secretary of the Department of the
Interior. She also serves as a Director of AMR Corporation, Fannie Mae, Kellogg
Company, Microsoft Corporation, Donna Karan International, Inc., Vulcan
Materials Company and Harman International Industries, Inc. Ms. Korologos's
term as a Director of Host REIT will expire at the 2003 annual meeting of
shareholders.

   J.W. Marriott, Jr. Mr. J.W. Marriott, Jr. has been a Director of Host
Marriott Corporation, now Host REIT, since 1964 and is Chairman of the Board
and Chief Executive Officer of Marriott International, Inc., and a Director of
General Motors Corporation and the Naval Academy Endowment Trust. He also
serves on the Board of Directors of Georgetown University and on the Board of
Trustees of the National Geographic Society. He serves on the Executive
Committee of the World Travel & Tourism Council and is a member of the Business
Council. Mr. Marriott's term as a Director of Host REIT will expire at the 2002
annual meeting of shareholders, and he has announced that he will not stand for
re-election to the Board of Directors.


   John G. Schreiber. Mr. Schreiber has been a Director of Host Marriott
Corporation, now Host REIT, since 1998 and is President of Centaur Capital
Partners, Inc. and a senior advisor and partner of Blackstone Real Estate
Advisors, L.P., an affiliate of The Blackstone Group L.P. Mr. Schreiber serves
as a Trustee of AMLI Residential Properties Trust and as a Director of JMB
Realty Corporation, The Brickman Group, Ltd. and a number of mutual funds
advised by T. Rowe Price Associates, Inc. Prior to his retirement as an officer
of JMB Realty Corporation in 1990, Mr. Schreiber was Chairman and CEO of
JMB/Urban Development Company and an Executive Vice President of JMB Realty
Corporation. Mr. Schreiber's term as a Director of Host REIT will expire at the
2002 annual meeting of shareholders.

   Harry L. Vincent, Jr. Mr. Vincent has been a Director of Host Marriott
Corporation, now Host REIT, since 1969 and is a retired Vice Chairman of Booz-
Allen & Hamilton, Inc. He also served as a Director of Signet Banking
Corporation from 1973 until 1989. Mr. Vincent's term as a Director of Host REIT
will expire at the 2002 annual meeting of shareholders at which time he will
retire from the Board of Directors.


   Robert E. Parsons, Jr. Mr. Parsons joined the Corporate Financial Planning
staff of Host Marriott Corporation, now Host REIT, in 1981 and was made
Assistant Treasurer in 1988. In 1993, Mr. Parsons was

                                       74


elected Senior Vice President and Treasurer of Host Marriott Corporation, and
in 1995, he was elected Executive Vice President and Chief Financial Officer of
Host Marriott Corporation. Mr. Parsons is now Executive Vice President and
Chief Financial Officer of Host REIT.

   James F. Risoleo. Mr. Risoleo joined Host Marriott Corporation, now Host
REIT, in 1996 as Senior Vice President for Acquisitions, and he was elected
Executive Vice President in May 2000. He is responsible for Host Marriott's
development, acquisition and disposition activities. Prior to joining Host
Marriott, Mr. Risoleo served as Vice President of Development for Interstate
Hotels Corporation, then the nation's largest independent hotel management
company. Before joining Interstate, he was Senior Vice President at
Westinghouse Financial Services. Mr. Risoleo is a member of the Pennsylvania
Bar Association.

   W. Edward Walter. Mr. Walter joined Host Marriott Corporation, now Host
REIT, in 1996 as Senior Vice President for Acquisitions, and he was elected
Treasurer in 1998, Executive Vice President in May 2000 and Chief Operating
Officer in 2001. Prior to joining Host Marriott, Mr. Walter was a partner with
Trammell Crow Residential Company and the President of Bailey Capital
Corporation, a real estate firm that focused on tax-exempt real estate
investments. Mr. Walter is a member of the District of Columbia Bar
Association.

   Elizabeth A. Abdoo. Ms. Abdoo joined Host REIT in June 2001 as Senior Vice
President and General Counsel. She was elected Corporate Secretary in August
2001. Prior to joining Host REIT, Ms. Abdoo was an attorney in the legal
department of Orbital Sciences Corporation serving as Senior Vice President and
Assistant General Counsel from January 2000 to May 2001 and prior to that as
Vice President and Assistant General Counsel since 1996.

   Richard Burton. Mr. Burton joined Host Marriott in 1996 as Senior Vice
President--Taxes and General Tax Counsel. Prior to joining our company, Mr.
Burton was Senior Tax Counsel at Mobil Oil Corporation, and prior to that was
with the law firm of Sutherland, Asbill & Brennan.


   John A. Carnella. Mr. Carnella joined Host Marriott in 1997 as Senior Vice
President for Acquisitions. In 1998, he moved to our Treasury Department and
was elected Treasurer in 2001. Prior to joining Host Marriott, Mr. Carnella was
an investment banker with Lazard Freres & Co. and, most recently, he served as
a Senior Vice President with the investment banking division of National
Westminster Bank.


   Donald D. Olinger. Mr. Olinger joined Host Marriott Corporation, now Host
REIT, in 1993 as Director--Corporate Accounting. Later in 1993, Mr. Olinger was
promoted to Senior Director and Assistant Controller. He was promoted to Vice
President--Corporate Accounting in 1995. In 1996, he was elected Senior Vice
President and Corporate Controller. Mr. Olinger is now Senior Vice President
and Corporate Controller of Host REIT. Prior to joining Host Marriott
Corporation, Mr. Olinger was with the public accounting firm of Deloitte &
Touche LLP.

Committees of the Board of Directors

   The Board of Directors of Host REIT, our general partner, has established
the following committees:

   Audit Committee. The Audit Committee is composed of four Directors who are
not our employees or employees of Host REIT, namely, Robert M. Baylis (Chair),
Harry L. Vincent, Jr., Ann McLaughlin Korologos and John G. Schreiber. The
Audit Committee meets as a committee at least four times a year;


  . meets with the independent auditors, management representatives and
    internal auditors;


  . recommends to the Board of Directors appointment of independent auditors;


  . approves the scope of audits and other services to be performed by the
    independent and internal auditors;


  . considers whether the performance of any professional service by the
    auditors other than services provided in connection with the audit
    function could impair the independence of the outside auditors;


  . reviews the results of internal and external audits, the accounting
    principles applied in financial reporting, and financial and operational
    controls;


                                       75



  . reviews interim financial statements each quarter before the company
    files its Form 10-Q with the Securities and Exchange Commission; and


  . reviews audited financial statements each year before the company files
    its annual report on Form 10-K with the Securities and Exchange
    Commission.


   Compensation Policy Committee. The Compensation Policy Committee is composed
of four Directors who are not our employees or employees of Host REIT, namely,
John G. Schreiber (Chair), Robert M. Baylis, Ann McLaughlin Korologos and Harry
L. Vincent, Jr. The Compensation Policy Committee's functions include
recommendations on policies and procedures relating to senior officers'
compensation and various employee stock plans, and approval of individual
salary adjustments and stock awards in those areas.


   Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee is composed of four Directors who are not our employees or
employees of Host REIT, namely, Ann McLaughlin Korologos (Chair), Harry L.
Vincent, Jr., John G. Schreiber and Robert M. Baylis. It considers candidates
for election as Directors and is responsible for keeping abreast of and making
recommendations with regard to corporate governance in general. In addition,
the Nominating and Corporate Governance Committee fulfills an advisory function
with respect to a range of matters affecting the Board of Directors and its
Committees, including the making of recommendations with respect to
qualifications of Director candidates, compensation of Directors, the selection
of committee chairs, committee assignments and related matters affecting the
functioning of the Board.


   Host REIT may from time to time form other committees as circumstances
warrant. Such committees will have authority and responsibility as delegated by
the Board of Directors.

Compensation of Directors

   Directors who are also our officers or officers of Host REIT receive no
additional compensation for their services as Directors. Directors who are not
officers receive an annual retainer fee of $30,000 as well as an attendance fee
of $1,250 for each shareholders' meeting, meeting of the Board of Directors or
meeting of a committee of the Board of Directors, regardless of the number of
meetings held on a given day, they attend. The chair of each committee of the
Board of Directors receives an additional annual retainer fee of $1,000, except
for the chair of the Compensation Policy Committee, Mr. Schreiber, who receives
an additional annual retainer fee of $6,000. The chair of the Compensation
Policy Committee receives a higher annual retainer fee because of the
additional duties, which include for example, the annual performance appraisal
of the chief executive officer on behalf of the Board, although the final
appraisal is determined by the Board. Any individual Director receiving these
fees may elect to defer payment of all such fees or any portion thereof
pursuant to Host REIT's Executive Deferred Compensation Plan and/or Host REIT's
Non-Employee Directors' Deferred Stock Compensation Plan. Directors will also
be reimbursed for travel expenses and other out-of-pocket costs incurred in
attending meetings, and they also receive, with certain exceptions,
complimentary rooms, food and beverage and other hotel services when visiting
properties controlled by us or managed by Marriott International.


   Directors who are not also our officers or officers of Host REIT (other than
J.W. Marriott, Jr.) receive an annual award of deferred shares of Host REIT
common stock equal in value to the amount of the annual retainer fee (currently
$30,000) paid to non-employee Directors. This annual award of deferred shares
is distributed immediately following the annual meeting of Host REIT
shareholders. In 2001, each such award was for 2,250 shares. Host REIT's Non-
Employee Directors' Deferred Stock Compensation Plan permits participants to be
credited with dividend equivalents which are equal in value to the dividends
paid on Host REIT common stock. In addition, in 1997, the following Directors
of Host REIT received special one-time awards of Host REIT common stock in the
amounts indicated: Mr. Baylis, 7,000 shares; Ms. Korologos, 7,000 shares and
Mr. Vincent, 7,000 shares. The special one-time awards of Host REIT common
stock vest at the rate of 10% per year of a Director's service on the Board,
with credit given for each year of service already completed, and will also
become fully vested upon the death or disability of the Directors.


                                       76


Executive Compensation

   The table below sets forth a summary of the compensation paid by Host
Marriott, now Host REIT, for the last three fiscal years to the persons who
served as Host Marriott's Chief Executive Officer in 2001 and to the four
additional most highly compensated persons serving as executive officers of
Host Marriott at the end of Host Marriott's fiscal year 2001 (the "Named
Executive Officers").


                           Summary Compensation Table




                                       Annual Compensation       Long-Term Compensation
                                 ------------------------------- -----------------------
                                                    Other Annual  Restricted
                                                    Compensation Stock Awards    LTIP       All Other
   Name and Principal     Fiscal Salary(1) Bonus(2)    (3)(4)       (5)(6)    Payouts(7) Compensation(8)
        Position           Year     ($)      ($)        ($)          ($)         ($)           ($)
   ------------------     ------ --------- -------- ------------ ------------ ---------- ---------------
                                                                    
Richard E. Marriott.....   2001   336,000   84,000    320,878             0          0       16,821
 Chairman of the Board     2000   320,000  192,000    440,221       312,947          0       28,980
                           1999   307,008  150,434    262,548             0          0       26,111

Christopher J.
 Nassetta...............   2001   800,000  350,720          0             0          0       47,696
 President and Chief       2000   624,584  794,684          0     2,586,763          0       69,271
 Executive Officer         1999   500,006  536,106          0             0    947,318       48,363

Robert E. Parsons, Jr...   2001   467,250  217,178          0             0          0       30,012
 Executive Vice            2000   445,000  534,000          0       812,991          0       53,995
 President and Chief       1999   424,996  455,681          0             0    947,318       42,672
 Financial Officer

W. Edward Walter........   2001   429,810  211,466          0       764,902          0       23,192
 Executive Vice            2000   330,209  348,300          0     1,506,058          0       30,625
 President and Chief       1999   279,075  264,792          0             0    590,625       29,632
 Operating Officer

James F. Risoleo........   2001   346,233  163,076          0       399,900          0       13,587
 Executive Vice            2000   279,296  296,000          0       990,704          0       33,546
 President--Acquisitions   1999   228,332  326,984     88,716             0    450,000       23,339
 and Development


- --------

(1) Salary amounts include base salary earned and paid in cash during the
    fiscal year as well as the amount of base salary deferred at the election
    of the named executive officer under Host REIT's Executive Deferred
    Compensation Plan.


(2) The bonus consists of the cash bonus earned pursuant to Host REIT's 1997
    Comprehensive Stock and Cash Incentive Plan. It was either paid subsequent
    to the end of each fiscal year or deferred under the Executive Deferred
    Compensation Plan.


(3) The amounts set forth in this column for Mr. Marriott include $132,150,
    $125,100 and $110,700 in 2001, 2000 and 1999, respectively, for the
    allocation of company personnel costs for non-company business, and
    $152,110, $213,185 and $120,174 in 2001, 2000 and 1999, respectively, for
    additional cash compensation to cover taxes payable for all other
    compensation in this column.


(4) The amount set forth in this column for Mr. Risoleo represents the
    forgiveness of a loan made to Mr. Risoleo related to his relocation
    expenses in 1996.


(5) Restricted stock awards are subject to various general restrictions, such
    as continued employment, as well as several performance restrictions.
    Holders of restricted stock receive dividends and exercise voting rights on
    their restricted shares. The named executive officers have agreed that any
    cash dividends on the shares of restricted stock shall, after withholding
    for or payment of any taxes due on the dividends, be reinvested in shares
    of Host REIT's common stock either through a dividend reinvestment program
    or otherwise.


                                       77



(6) Seventy percent of the restricted shares awarded in 1998 and 2000 have
    performance restrictions and thirty percent have general restrictions
    conditioned upon continued employment. The performance criteria established
    by the Compensation Policy Committee are based upon (i) the measurement of
    the annual total return to the company's shareholders (Shareholder Return
    Performance) and (ii) either (a) for 2001 and 2000, the company's achieving
    specific earnings targets set by the Compensation Policy Committee, or (b)
    for 1999, the relative performance of Host REIT's stock measured against a
    published peer index. The total number of restricted and deferred shares
    held by each named executive officer as of the end of the 2001 fiscal year
    and the aggregate value of those shares at such time were as follows: Mr.
    Marriott, 156,781 shares valued at $1,451,792; Mr. Nassetta, 600,000 shares
    valued at $5,556,000; Mr. Parsons, 365,145 shares valued at $3,381,243; Mr.
    Walter, 330,716 shares valued at $3,062,430; and Mr. Risoleo, 186,668
    shares valued at $1,728,546.


(7) In 1999, the Compensation Policy Committee determined that the time and
    performance criteria set forth in the long-term incentive plan established
    in 1996 for Mr. Nassetta, Mr. Parsons, Mr. Risoleo and Mr. Walter had been
    met. Accordingly, the restricted shares awarded under such long-term
    incentive plan vested and the restrictions were released.


(8) This column represents Host REIT's matching contributions made under its
    Retirement and Savings Plan and our Executive Deferred Compensation Plan.
    Under the Retirement and Savings Plan, Host REIT contributed $5,100 for
    each of the named executive officers in 2001. The amounts contributed under
    the Executive Deferred Compensation Plan for 2001 for each named executive
    officer were as follows: Mr. Marriott, $10,721; Mr. Nassetta, $42,596; Mr.
    Parsons, $24,912; Mr. Walter, $18,092; and Mr. Risoleo, $8,487. For Mr.
    Marriott, this column also includes the amount of the taxable economic
    benefit to Mr. Marriott as a result of our purchase of certain life
    insurance policies for the benefit of a trust established by Mr. Marriott.
    For 2001, such taxable economic benefit to Mr. Marriott was $345.


Aggregated Stock Option/SAR Exercises and Year-End Value


   The table below sets forth, on an aggregated basis:


  . information regarding the exercise of options to purchase Host REIT
    common stock (and shares of common stock of Marriott International, Inc.,
    which Host REIT has previously spun off) by each of the named executive
    officers listed above on the Summary Compensation Table;


  . information regarding the exercise of stock appreciation rights ("SARs")
    in Host REIT common stock by each of the named executive officers listed
    above on the Summary Compensation Table; and


  . the value on December 31, 2001 of all unexercised options and stock
    appreciation rights held by such individuals.


   Christopher J. Nassetta, W. Edward Walter and James F. Risoleo do not have
any options to purchase stock in either of the companies listed in the
following table. Richard E. Marriott is the only executive officer who holds
stock appreciation rights in Host REIT common stock. In 1998, Mr. Marriott
entered into an agreement with Host REIT which canceled all of his then
outstanding options to purchase Host REIT common stock and replaced them with
stock appreciation rights on equivalent economic terms.


                                       78



           Aggregated Stock Option/SAR Exercises In Last Fiscal


                  Year And Fiscal Year-End Option Values





                                                               Number of           Value of Unexercised
                                                           Shares Underlying           In-the-Money
                                      Shares           Unexercised Options/SARs       Options/SARs at
                                     Acquired            at Fiscal Year End(2)      Fiscal Year End(3)
                                        on     Value             (#)                        ($)
                                     Exercise Realized ------------------------- -------------------------
Name                      Company(1)   (#)      ($)    Exercisable Unexercisable Exercisable Unexercisable
- ----                      ---------- -------- -------- ----------- ------------- ----------- -------------
                                                                        
Richard E. Marriott.....       HM        0        0       66,685          0         491,809         0
                               MI        0        0      122,634          0       4,402,838         0
                                       ---      ---      -------        ---       ---------       ---
                            TOTAL        0        0      189,319          0       4,894,647         0

Robert E. Parsons, Jr...       HM        0        0       14,637          0         102,057         0
                               MI        0        0            0          0               0         0
                                       ---      ---      -------        ---       ---------       ---
                            TOTAL        0        0       14,637          0         102,057         0


- --------

(1) "HM" represents options to purchase or SARs in Host REIT common stock. "MI"
    represents options to purchase Marriott International, Inc. common stock.


(2) The number and terms of these options reflect several adjustments made as a
    result of our spin-off of Marriott International in October 1993; our spin-
    off of Host Marriott Services Corporation in December 1995; the spin-off of
    Marriott International from Sodexho Marriott Services Corporation in March
    1998; and Host Marriott's conversion into a real estate investment trust
    (and the related spin-off of Crestline Capital Corporation) in December
    1998, each in accordance with the applicable employee benefit plans
    covering those options. These adjustments preserved, but did not increase
    or decrease, the economic value of the options.


(3) These figures are based on a per share price for Host REIT common stock of
    $9.26 and a per share price for Marriott International, Inc. common stock
    of $40.96. These prices reflect the average of the high and low trading
    prices on the New York Stock Exchange on December 31, 2001.



Employment Arrangements

   Certain of the terms and conditions of employment of Host REIT's executive
officers, including all of the executive officers named in the Summary
Compensation Table above, are governed by a written "Key Executives/Termination
of Employment" policy. The policy provides a basic framework to govern the
termination of employment under specific circumstances. This policy is not a
binding contract and can be changed by Host REIT unilaterally at any time. The
terms of the policy are subject to the approval of the Board of Directors or
the Chief Executive Officer/President as applicable.


1998 Employee Benefits Allocation Agreement

   As part of the REIT conversion, we entered into an Employee Benefits and
Other Employment Matters Allocation Agreement along with Host REIT and
Crestline ("1998 Employee Benefits Allocation Agreement"). The 1998 Employee
Benefits Allocation Agreement governs the allocation of responsibilities with
respect to various compensation, benefits and labor matters. Under the 1998
Employee Benefits Allocation Agreement, Crestline assumed certain liabilities
relating to covered benefits and labor matters with respect to individuals who
were employed by Host Marriott or its affiliates before they became employed by
Crestline or its affiliates ("Transferred Employees") and we assumed certain
other liabilities relating to employee benefits and labor matters. The 1998
Employee Benefits Allocation Agreement also governs the treatment of awards
under the Host Marriott Corporation and Host Marriott, L.P. Comprehensive Stock
and Cash Incentive Plan, formerly called the Host Marriott Corporation 1993
Comprehensive Stock Incentive Plan (the "Comprehensive Stock Incentive Plan"),
as part of the REIT conversion. The 1998 Employee Benefits Allocation Agreement
required Crestline to establish the Crestline Capital Corporation 1998
Comprehensive Stock Incentive Plan to

                                       79


grant awards of Crestline common stock. Additionally, the 1998 Employee
Benefits Allocation Agreement provided that we adopt the Comprehensive Stock
Incentive Plan.

Comprehensive Stock Incentive Plan

   Host REIT sponsors the Comprehensive Stock Incentive Plan for purposes of
attracting and retaining highly qualified employees. As of December 31, 2001,
Host REIT had approximately 15 million shares of Host REIT common stock
reserved for issuance pursuant to the Comprehensive Stock Incentive Plan. As
part of the REIT conversion, we adopted the Comprehensive Stock Incentive Plan.
Shares of Host Marriott common stock issued or reserved under the Comprehensive
Stock Incentive Plan before the REIT conversion have been exchanged for Host
REIT Common Shares and Crestline common stock, according to the terms of the
1998 Employee Benefits Allocation Agreement.


   Under the terms of the Comprehensive Stock Incentive Plan, we may award
eligible full-time employees (1) options to purchase Host REIT common stock,
(2) deferred shares of Host REIT common stock, (3) restricted shares of Host
REIT common stock, (4) stock appreciation rights, (5) special recognition
awards or (6) other equity-based awards, including but not limited to, phantom
shares of Host REIT common stock, performance shares of Host REIT common stock,
bonus shares of Host REIT common stock, dividend equivalent units or similar
securities or rights.

   The awarding of options to purchase Host REIT common stock under the
Comprehensive Stock Incentive Plan is expected to continue. Options granted to
our officers and key employees or officers and key employees of Host REIT will
have an exercise price of not less than the fair market value on the date of
grant. Incentive stock options granted under the Comprehensive Stock Incentive
Plan expire no later than 10 years after the date of grant and non-qualified
stock options expire up to 15 years after the date of grant.

   Under the terms of the Comprehensive Stock Incentive Plan, Host REIT may
award deferred shares of Host REIT common stock to eligible full-time
employees. Deferred shares may be granted as part of a bonus award or deferred
stock agreement. Host REIT intends to award deferred shares of Host REIT Common
Shares under the Comprehensive Stock Incentive Plan. Deferred shares generally
vest over ten years in annual installments commencing one year after the date
of grant.

   The Comprehensive Stock Incentive Plan also provides for the issuance of
restricted shares of Host REIT common stock to officers and key executives
which are typically distributed over a three-year period in annual installments
based on continued employment and the attainment of certain performance
criteria.

   Under the terms of the Comprehensive Stock Incentive Plan, Host REIT may
grant bonus awards to eligible full-time employees. Bonus awards may be part of
a management incentive program which pays part of the annual performance bonus
awarded to managers and other key employees in shares of Host REIT common
stock. Holders of bonus awards vest in the shares covered by their award over
ten years in annual installments commencing one year after grant. Unless the
holder of a bonus award elects otherwise, vested shares are distributed in 10
consecutive, approximately equal, annual installments.

   The Comprehensive Stock Incentive Plan authorizes Host REIT to grant SARs to
eligible full-time employees. SARs awarded under the Comprehensive Stock
Incentive Plan give the holder the right to an amount equal to the appreciation
in the value of the Host REIT common stock over a specified price. SARs may be
paid in the Host REIT common stock, cash or other form or combination form of
payout.

   Under the Comprehensive Stock Incentive Plan, Host REIT may award an
eligible full-time employee or officer a Special Recognition Award. Special
Recognition Awards may be paid in the form of Host REIT common stock or an
option to purchase Host REIT common stock at an amount not less than fair
market value on the date of grant.


                                       80


Stock Purchase Plan

   Host REIT sponsors the Host Marriott, L.P. Employee Stock Purchase Plan (the
"Stock Purchase Plan"). Under the terms of the Stock Purchase Plan, an
individual who is: (1) an active eligible employee on the last day of the prior
plan year, (2) working more than 20 hours per week and (3) customarily employed
more than five months in a calendar year may, at the end of the plan year,
purchase Host common stock through contributions or payroll deductions at a
price equal to 90% of the fair market value on either the first or last day of
such plan year, whichever is lower. A participant may elect to contribute up to
10% of his or her compensation per year.

401(k) Plan

   Host REIT sponsors the Host Marriott, L.P. Retirement and Saving Plan (the
"401(k) Plan"). The 401(k) Plan has received a favorable ruling from the IRS as
to its tax-qualified status. We assumed the 401(k) Plan as part of the REIT
conversion. The 401(k) Plan is available to all eligible employees immediately
upon their date of hire. A participant may elect to contribute from 1% to 15%
of his or her compensation to the 401(k) Plan. Each year, we will make a fixed
matching contribution equal to 50% of the first 6% of the compensation
contributed to the 401(k) Plan by employees. In addition, we may make a
discretionary contribution, in an amount, if any, determined annually by the
Board of our general partner (Host REIT) to the 401(k) Plan for the benefit of
eligible employees.

   Under the terms of the 401(k) Plan, participants may elect to invest part or
all of their plan benefits in Host REIT common stock. As part of the REIT
conversion, all shares of Host Marriott common stock held under the 401(k) Plan
have been converted to Host REIT Common Shares.

Directors' Deferred Compensation Plan

   Host REIT sponsors the Host Marriott Corporation Non-Employee Directors'
Deferred Stock Compensation Plan (the "Deferred Compensation Plan") for
purposes for attracting and retaining qualified non-employee Directors. Under
the terms of the Deferred Compensation Plan, a non-employee Director may elect
to defer payment of part or all of his or her Directors' fees from Host REIT
until such individual is no longer a member of the Board. Currently, fees that
are deferred under the Deferred Compensation Plan are converted into shares of
Host REIT common stock using the fair market value of such shares on the date
of deferral. In addition, the Deferred Compensation Plan provides for annual
grants of deferred shares of Host REIT common stock equal to the amount of the
annual cash retainer fee paid to non-employee Directors. This award is
distributed immediately following each annual meeting. The Deferred
Compensation Plan also permits participants to be credited with dividend
equivalents which are equal in value to the dividends paid on Host REIT common
stock.

Limitation of Liability and Indemnification

   The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its shareholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) acts committed in bad faith or active and
deliberate dishonesty established by a final judgment as being material to the
cause of action. The charter of Host REIT contains such a provision which
eliminates such liability to the maximum extent permitted by Maryland law.

   The charter of Host REIT authorizes it, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (1) any
present or former director or officer or (2) any individual who, while a
director of Host REIT and at the request of Host REIT, serves or has served
another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or any other enterprise from and against any claim
or liability to

                                       81


which such person may become subject or which such person may incur by reason
of his or her status as a present or former Director or officer of Host REIT.
The bylaws of Host REIT obligate it, to the maximum extent permitted by
Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
director or officer who is made party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a director or officer
of Host REIT and at the request of Host REIT, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a trustee, director, officer
or partner of such corporation, real estate investment trust, partnership,
joint venture, trust, employee benefit plan or other enterprise and who is made
a party to the proceeding by reason of his service in that capacity, against
any claim or liability to which he may become subject by reason of such status.
The charter and bylaws also permit Host REIT to indemnify and advance expenses
to any person who served as a predecessor of Host REIT in any of the capacities
described above and to any employee or agent of Host REIT or a predecessor of
Host REIT. The bylaws require Host REIT to indemnify a director or officer who
has been successful, on the merits or otherwise, in the defense of any
proceeding to which he is made a party by reason of his service in that
capacity.

   The MGCL permits a Maryland corporation to indemnify and advance expenses to
its directors, officers, employees and agents. The MGCL permits a corporation
to indemnify its present and former directors and officers, among others,
against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may
be made a party by reason of their service in those or other capacities unless
it is established that (a) the act or omission of the director or officer was
material to the matter giving rise to the proceeding and (i) was committed in
bad faith or (ii) was the result of active and deliberate dishonesty, (b) the
director or officer actually received an improper personal benefit in money,
property or services or (c) in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or omission
was unlawful. However, under the MGCL, a Maryland corporation may not indemnify
for an adverse judgment in a suit by or in the right of the corporation. In
accordance with the MGCL, the bylaws of Host REIT require it, as a condition to
advancing expenses, to obtain (1) a written affirmation by the director or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by Host REIT as authorized by the bylaws and (2)
a written statement by or on his behalf to repay the amount paid or reimbursed
by Host REIT if it is ultimately determined that the standard of conduct was
not met.

   The Host Marriott, L.P. Partnership Agreement also provides for
indemnification of Host REIT and its officers and trustees to the same extent
that indemnification is provided to officers and directors of Host REIT in its
charter, and limits the liability of Host REIT and its officers and directors
to Host Marriott, L.P. and its respective partners to the same extent that the
liability of the officers and directors of Host REIT to Host REIT and its
shareholders is limited under Host REIT's charter. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling the registrant pursuant to the foregoing
provisions, Host REIT has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.

Indemnification Agreements

   Each of Host REIT and Host Marriott, L.P. have entered into or will enter
into indemnification agreements with each of its directors and officers, as
applicable. The indemnification agreements require, among other things, that
Host REIT and/or Host Marriott, L.P. indemnify their directors and officers to
the fullest extent permitted by law and advance to their directors and officers
all related expenses, subject to reimbursement if it is subsequently determined
that indemnification is not permitted.

                                       82


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Relationships Between Host REIT, Host Marriott, L.P. and Marriott International



   Prior to October 8, 1993, we and Marriott International, Inc. were operated
as a single consolidated company. On October 8, 1993, in connection with the
issuance of a special dividend, the consolidated company's businesses were
split between Host Marriott Corporation and Marriott International. Thereafter,
we retained the lodging real estate business and the airport/toll road
concessions business, while Marriott International took the lodging and service
management businesses. On December 29, 1995, we distributed the airport/toll
road concessions business to our shareholders.


   Richard E. Marriott, the Chairman of our Board, beneficially owns
approximately 12.3% of the outstanding shares of common stock of Marriott
International, and J.W. Marriott, Jr., who is currently one of our Directors
(although he has announced that he will not stand for re-election to our Board
at the end of his current term, which expires in May 2002), beneficially owns
approximately 12.7% of the outstanding shares of common stock of Marriott
International. In addition, J.W. Marriott, Jr. serves as Chairman of the Board
and Chief Executive Officer of Marriott International, and Richard E. Marriott
serves as a director of Marriott International, although he has announced that
he will resign from Marriott International's board of directors in May 2002. By
reason of their ownership of such shares of common stock and their current
positions as directors of Marriott International, they could be deemed in
control of Marriott International within the meaning of the federal securities
laws. Other members of the Marriott family might also be deemed control persons
of Marriott International by reason of their ownership of shares of Marriott
International and/or their relationship to other family members.


   Our ongoing relationships with Marriott International can be divided into
three general categories:


  .   The distribution agreement and the related agreements stemming from our
      separation into two separate companies;


  .   The lodging management and franchise agreements relating to our
      properties; and


  .   Acquisition financing and joint ventures.


 Distribution Agreement and Related Agreements


   In connection with the separation of our business from that of Marriott
International, we entered into a distribution agreement with Marriott
International which allocated the assumption of liabilities and cross-
indemnities so that each company shouldered the financial and legal
responsibility for its respective business. This distribution agreement has
been amended from time to time. Under this distribution agreement, Marriott
International has the right to purchase up to 20% of each class of our voting
stock (determined after assuming full exercise of the right) at its then fair
market value (based on an average of trading prices during a specified period).
This purchase right is effective until June 2017, but only upon the occurrence
of certain specified events generally involving a change or potential change in
our control. This purchase right can be exercised for a 30-day period following
the date on which a person or group of affiliated persons has (1) become the
beneficial owner of 20% or more of the total voting power of the then
outstanding shares of our common stock, or (2) announced a tender offer for 30%
or more of the total voting power of the then outstanding shares of our common
stock. We have granted Marriott International an exception to the ownership
limitations in our charter so that it can fully exercise its purchase right,
but the purchase right remains subject to certain ownership limitations
applicable to REITs generally. In connection with our negotiations with
Marriott International on changes to our lodging management agreements
described below, however, we are discussing the termination of this purchase
right and the clarification of the existing provisions in the management
agreements that currently limit our ability to sell a hotel or the Company to a
competitor of Marriott International.


   We have entered into other agreements with Marriott International in
connection with the business separation which govern our ongoing relationships.
These other agreements include:


                                       83



   Tax Sharing Agreement. We entered into a tax sharing agreement with Marriott
International that defines the parties' rights and obligations with respect to:


  .   deficiencies and refunds of federal, state and other income or
      franchise taxes relating to our businesses for tax years prior to the
      separation; and


  .   certain of our tax attributes after the separation.


   We have agreed to cooperate with each other and to share information in
preparing tax returns and in dealing with other tax matters.


   Administrative Services Agreements and Office Space Lease. We have entered
into certain agreements with Marriott International in which Marriott
International has agreed to provide certain continuing administrative services
for us and our subsidiaries. In addition, we sublease office space from
Marriott International. These services and the sublease are provided on market
terms and conditions. In 2001, we paid Marriott International $2 million for
such services and office space. In general, the administrative services
agreements continue from year to year unless terminated by either party, and
therefore they remain in place at least through the end of 2002. We plan to
terminate the sublease in August 2002 upon our relocation to new office space.


 Lodging Management and Franchise Agreements


   Marriott International and certain of its subsidiaries entered into
management agreements with us and certain of our subsidiaries to manage the
Marriott Hotels, Resorts and Suites, Ritz-Carlton Hotels, Courtyard hotels and
Residence Inns owned or leased by us and our subsidiaries. Marriott
International also entered into franchise agreements with us and certain of our
subsidiaries. The franchise agreements allow us to use the Marriott brand,
associated trademarks, reservation systems and other related items in
connection with nine Marriott hotels for which we have entered into operating
agreements with hotel management companies other than Marriott International.
In 2001, we and our subsidiaries paid $168 million in the aggregate in
management and franchise fees to Marriott International.


   In addition, certain of our subsidiaries are partners in several
unconsolidated partnerships that owned 161 lodging properties as of December
31, 2001. These properties are operated by Marriott International or certain of
its subsidiaries under long-term agreements. Our subsidiaries typically serve
as the general partners in such partnerships. In 2001, those partnerships paid
fees of $40 million to Marriott International under those agreements. The
partnerships also paid $22 million in rent to Marriott International in 2001
for leases of land upon which certain of the partnerships' hotels are located.


   We are currently negotiating with Marriott International certain changes to
the management agreements for our Marriott-managed hotels. If made, the
changes, which remain subject to the consent of various lenders to the
properties and other third parties, would be effective as of December 29, 2001.
There can be no assurance that the negotiations will be successful, that the
changes will be made in substantially the form described below or that we will
receive the necessary consents to implement the amendments. The amendments to
the management agreements that are under discussion include the following:


  .   Providing additional approval rights relating to the annual operating
      budgets and estimates for expenditures;


  .   Reducing certain expenses to the properties and lowering our working
      capital requirements;


  .   Clarifying the circumstances and conditions under which Marriott
      International and its affiliates may earn a profit on transactions with
      our properties, in addition to the amounts that Marriott International
      and its affiliates earn through their base and incentive management
      fees;


  .   Enhancing territorial restrictions on Marriott International and its
      affiliates with respect to certain of our properties;


                                       84



  .   Reducing the incentive management fees that we pay on our portfolio of
      Marriott-managed hotels;


  .   Expanding the pool of hotels that are subject to an existing agreement
      that allows us to sell certain assets without a Marriott International
      management agreement, and revising the method for determining the
      number of hotels that may be sold without a Marriott International
      management agreement or a franchise agreement and, in each case,
      without the payment of a termination fee; and


  .   Terminating Marriott International's right to purchase up to 20% of
      each class of our outstanding voting shares upon certain changes of
      control and clarifying existing provisions in the management agreements
      that limit our ability to sell a hotel or the Company to a competitor
      of Marriott International.


 Acquisition Financing and Joint Venture


   Marriott International has provided to us financing for a portion of the
cost of acquiring properties to be operated or franchised by Marriott
International. It is possible that Marriott International may from time to time
provide this type of financing in the future. In 2001, Marriott International
did not provide us with any new acquisition financing, although one of our
subsidiaries remains indebted to Marriott International for acquisition
financing from prior years. The amount of such indebtedness at December 31,
2001 was $25 million.


   During 2000, we, through our affiliates, formed a joint venture with
Marriott International, the "Courtyard Joint Venture," to acquire the
partnership interests in Courtyard by Marriott Limited Partnership and
Courtyard by Marriott II Limited Partnership for an aggregate payment of
approximately $372 million plus interest and legal fees, of which we and one of
our subsidiaries paid approximately $90 million. The Courtyard Joint Venture
acquired 120 Courtyard by Marriott properties totaling 17,559 rooms and
financed the acquisition with $200 million in non-recourse mezzanine
indebtedness borrowed from Marriott International and with cash and other
assets contributed by our affiliates and by Marriott International. A
subsidiary of Marriott International continues to manage these 120 hotels under
long-term management agreements. This investment was consummated in settlement
of litigation involving these two limited partnerships, in which we, through
our affiliates, served as general partner, rather than as a strategic
initiative.


Relationship between Crestline Capital Corporation and Host Marriott


   As part of the REIT conversion, we made certain taxable distributions to our
shareholders on December 29, 1998, including the distribution of substantially
all of the shares of common stock of Crestline Capital Corporation, which was
formerly one of our wholly owned subsidiaries. Crestline became a separate
publicly traded company at that time.


   Richard E. Marriott, the Chairman of our Board of Directors, and J.W.
Marriott, Jr., one of our Directors, beneficially own approximately 5.5% and
4.5%, respectively, of the outstanding shares of common stock of Crestline. In
addition, John G. Schreiber, one of our Directors, is a senior advisor and
partner of Blackstone Real Estate Advisors L.P., an affiliate of Blackstone
Real Estate Associates. A series of partnerships, persons and entities
affiliated with Blackstone Real Estate Associates owns in the aggregate 8.8% of
the outstanding shares of common stock of Crestline.


   In connection with this distribution of Crestline common stock, we entered
into a distribution agreement with Crestline, which provided for, among other
things:


  .   the distribution of shares of Crestline to our shareholders;


  .   the division of certain assets and liabilities between Crestline and
      us;


  .   the contribution to Crestline of our interest in 31 senior living
      communities;


  .   the transfer to Crestline of our 25% interest in Swissotel Management
      (USA) L.L.C., which we had acquired from the Blackstone Entities;


                                       85



  .   a guarantee by us on certain Crestline debt obligations;


  .   the contingent right for a period of ten years to allow us to purchase
      Crestline's interest in Swissotel Management (USA) L.L.C. at fair
      market value if the tax laws are changed so that we could own such
      interest without jeopardizing our status as a REIT;


  .   subject to certain exceptions, the assumption of liabilities and cross-
      indemnities designed to allocate to Crestline financial and legal
      responsibilities arising out of or in connection with the business of
      the senior living communities; and


  .   certain other agreements governing the relationship between Crestline
      and us following the Crestline distribution.


   Under the federal tax law in effect at the time of the REIT conversion, a
REIT could not earn income from the operation of hotels but could receive
rental income by leasing hotels. Therefore, the operating partnership and its
subsidiaries leased virtually all of their hotel properties to certain
subsidiaries of Crestline. Generally, there was a separate Crestline hotel
lessee for each hotel property; however, there was a separate lessee for each
group of hotel properties if that group had a separate mortgage financing or
had additional partners in its ownership structure. Each of the lessees was a
limited liability company or limited partnership, whose purpose was limited to
acting as lessee under an applicable lease. Our or our subsidiaries' hotel
management agreements, therefore, were assigned to the Crestline hotel lessees
for the term of the applicable leases. Although the lessees had primary
liability under the management agreements while the leases were in effect, the
operating partnership retained primary liability for certain obligations and
contingent liability under the management agreements for all other obligations
that the lessees did not perform.


   In December 1999, the REIT Modernization Act was passed, effective for
taxable years beginning after December 31, 2000, which significantly amended
the REIT laws applicable to us. As discussed above, prior to that time, REITs
were restricted from deriving revenues directly from the operations of hotels.
Under the REIT Modernization Act, however, beginning January 1, 2001 (i) we
were permitted to lease our hotels to a subsidiary that is taxable as a
corporation and that elects to be treated as a "taxable REIT subsidiary" rather
than to a third party such as Crestline, and (ii) we could own all of the
voting stock of such taxable REIT subsidiary. Consequently, effective January
1, 2001, through an indirect taxable REIT subsidiary, we purchased from
Crestline for $207 million the Crestline lessee entities that owned the
leasehold interests with respect to all but one of our full-service hotels that
were leased to Crestline. In June 2001, we acquired from Crestline the one
remaining lessee entity.


   Limited-Service Hotel Subleases. We lease 71 limited-service hotels under
the Residence Inn and Courtyard brands from Hospitality Properties Trust, Inc.
These leases have initial terms expiring through 2010 for the Residence Inn
properties and 2012 for the Courtyard properties. They are renewable at our
option. In connection with the Crestline distribution, subsidiaries of
Crestline entered into sublease agreements with us for these limited-service
hotels. The terms of the subleases will expire simultaneously with the
expiration of the initial term of the Hospitality Properties Trust leases. If
we elect to renew the leases, Crestline can elect to renew the subleases for
the corresponding renewal term.


   Each sublease contains generally the same terms as the Hospitality
Properties Trust leases. The Hospitality Properties Trust leases require the
lessee to pay rent equal to:


  .   a fixed minimum rent, less the cost of any repairs, maintenance,
      renovations or replacements of the hotel; and


  .   an additional rent based upon a specified percentage of gross revenues
      to the extent they exceed gross revenues from a base year.


   In addition, the leases require the lessee to pay all repair and maintenance
costs, impositions, utility charges, insurance premiums and all fees payable
under the hotel management agreements. Under the


                                       86



subleases, subsidiaries of Crestline are required to pay us rent equal to the
minimum rent due under the leases plus an additional rent based on a percentage
of revenues. To the extent the reserves for replacements to furnishings,
fixtures and equipment are insufficient to meet the hotel's capital expenditure
requirements, Hospitality Properties Trust is required to fund the shortfall.
Crestline guarantees the rent payable under the subleases up to a maximum of
$30 million. The Crestline subsidiaries that are parties to the subleases were
capitalized with $30 million in notes from Crestline payable on demand. In
2001, Crestline paid us an aggregate amount of $77 million in rent under the
subleases, out of which amount we paid Hospitality Properties Trust $72 million
in rent under the principal leases.


   We may terminate all of the subleases upon payment of a termination fee.
This fee is equal to the fair market value of Crestline's leasehold interests
in the remaining term of the subleases using a discount rate of five percent.
The subleases currently remain in place, however, and were unaffected by our
acquisition of the Crestline lessee entities.


   Tax Sharing Agreement. We entered into a tax sharing agreement with
Crestline which defines each party's rights and obligations with respect to:


  . deficiencies and refunds of federal, state and other income or franchise
    taxes relating to Crestline's business for taxable years before the
    Crestline distribution; and


  . certain tax attributes of Crestline after the Crestline distribution.


Generally, the result is that we are responsible for filing consolidated
returns and paying taxes for periods until the date of the Crestline
distribution. Crestline is responsible for filing returns and paying taxes for
later periods. The tax sharing agreement remains in place and was unaffected by
our acquisition of the Crestline lessee entities.


Relationship between the Blackstone Entities and Host Marriott


   In conjunction with the REIT conversion, in December 1998 the operating
partnership acquired 12 upscale and luxury full-service hotels, a mortgage loan
secured by a thirteenth hotel, and certain other assets from The Blackstone
Group L.P. and a series of partnerships, persons and other entities affiliated
with Blackstone Real Estate Associates. We refer to this group of entities as
the Blackstone Entities. As part of the Blackstone acquisition, we and the
operating partnership entered into a contribution agreement with the Blackstone
Entities. This agreement provided that an affiliate of the Blackstone Entities
had the right to designate one person to be included in the slate of Directors
nominated for election to our Board of Directors as long as the Blackstone
Entities owned at least 5% of all of the outstanding operating partnership
units (including those operating partnership units held by us and our
subsidiaries). The Blackstone Entities designated John G. Schreiber, one of our
Directors who was re-elected to the Board at the 1999 annual meeting of
shareholders. Mr. Schreiber is a senior advisor and partner of Blackstone Real
Estate Advisors L.P., an affiliate of the Blackstone Entities.


   In addition, the Blackstone contribution agreement provides that the
operating partnership units beneficially owned by the Blackstone Entities (and
their permitted transferees) are redeemable for cash or, at our election, for
our common stock. We granted to the Blackstone Entities (and their permitted
transferees) certain registration rights with respect to shares of our common
stock obtained upon conversion of the Blackstone operating partnership units.
In a series of transactions during the first half of 2001, the Blackstone
Entities exercised these conversion and registration rights with respect to a
very large majority of the operating partnership units they previously held,
and they simultaneously disposed of the shares of common stock obtained upon
the conversion of the operating partnership units. After completion of this
series of transactions, the Blackstone Entities held less than 1.1% of all of
the outstanding operating partnership units. Consequently, the Blackstone
Entities no longer have the right to designate one person to be included in the
slate of Directors nominated for election to our Board of Directors. The Board
has decided, however, to nominate Mr. Schreiber for re-election at the 2002
annual meeting of shareholders because of his outstanding service as a
Director.


                                       87



   The Blackstone contribution agreement also grants the Blackstone Entities an
exemption from the ownership limitations contained in the operating
partnership's partnership agreement. It also contains standstill provisions
which prohibit the Blackstone Entities from engaging in certain activities with
respect to the operating partnership and us. For example, the Blackstone
Entities may not take any actions in opposition to our Board of Directors. In
addition, the Blackstone Entities' ability to acquire and dispose of our voting
securities is restricted.


   In addition to the contribution agreement, we entered into another agreement
with the Blackstone Entities which restricts our ability, without the consent
of the Blackstone Entities, to transfer our interests in the hotels and other
assets acquired from the Blackstone Entities if such a transfer would create
adverse tax consequences to the Blackstone Entities. These restrictions
terminate on December 30, 2003 with respect to 50% of the assets acquired from
the Blackstone Entities, and they terminate in their entirety on the earlier of
(i) December 30, 2008 or (ii) the date on which the Blackstone Entities have
redeemed all of their operating partnership units pursuant to the contribution
agreement.



                                       88


                               THE EXCHANGE OFFER

Purpose and effect

   We sold the Series H senior notes on December 14, 2001. In connection with
that issuance, we entered into the registration rights agreement, which
requires us to file a registration statement under the Securities Act of 1933
with respect to the Series I senior notes. Upon the effectiveness of that
registration statement, we are required to offer to the holders of the Series H
senior notes the opportunity to exchange their Series H senior notes for a like
principal amount of Series I senior notes, which will be issued without a
restrictive legend and which generally may be reoffered and resold by the
holder without registration under the Securities Act.

   The registration rights agreement further provides that we must use our
reasonable best efforts to consummate the exchange offer on or before the 210th
day following the date on which we issued the Series H senior notes.

   Except as provided below, upon the completion of the exchange offer, our
obligations with respect to the registration of the Series H senior notes and
the Series I senior notes will terminate. A copy of the registration rights
agreement has been filed as an exhibit to the registration statement of which
this prospectus is a part, and the summary in this prospectus of its material
provisions is not complete and is qualified in its entirety by reference to the
actual agreement. Except as set forth below, following the completion of the
exchange offer holders of Series H senior notes not tendered will not have any
further registration rights and those Series H senior notes will continue to be
subject to restrictions on transfer. Accordingly, the liquidity of the market
for the Series H senior notes could be adversely affected upon consummation of
the exchange offer.

   In order to participate in the exchange offer, you must represent to us,
among other things, that:

  . the Series I senior notes you acquire pursuant to the exchange offer are
    being obtained in the ordinary course of your business;

  . you are not engaging in and do not intend to engage in a distribution of
    the Series I senior notes;

  . you do not have an arrangement or understanding with any person to
    participate in a distribution of the Series I senior notes; and

  . you are not our "affiliate," as defined under Securities Act Rule 405.

   Pursuant to the registration rights agreement we will be required to file a
"shelf" registration statement for a continuous offering pursuant to Securities
Act Rule 415 in respect of the Series H senior notes if:

  . we determine that we are not permitted to effect the exchange offer as
    contemplated hereby because of any change in applicable law or Securities
    and Exchange Commission policy; or

  . we have commenced and not consummated the exchange offer within 210 days
    following the date on which we issued the Series H senior notes for any
    reason.

   Other than as set forth above, no holder will have the right to participate
in the shelf registration statement or to otherwise require that we register
their Series H senior notes under the Securities Act.

   Based on an interpretation by the SEC Staff set forth in no-action letters
issued to third parties unrelated to us, we believe that, with the exceptions
set forth below, Series I senior notes issued to you pursuant to the exchange
offer in exchange for Series H senior notes may be offered for resale, resold
and otherwise transferred by you, unless you are our "affiliate" within the
meaning of Securities Act Rule 405 or a broker-dealer who purchased
unregistered notes directly from us to resell pursuant to Rule 144A or any
other available exemption promulgated under the Securities Act, without
compliance with the registration and prospectus delivery provisions of the
Securities Act; provided that the Series I senior notes are acquired in the
ordinary course of business of the holder and the holder does not have an
arrangement or understanding with any person to participate in the distribution
of Series I senior notes. We have not requested and do not intend to request
that the SEC issue to us a no-action letter in connection with this Exchange.

                                       89


   If you tender in the exchange offer for the purpose of participating in a
distribution of the Series I senior notes, you cannot rely on this
interpretation by the SEC Staff and you must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. If you are a broker-dealer that receives Series I
senior notes for your own account in exchange for Series I senior notes, where
those notes were acquired by you as a result of market-making activities or
other trading activities, you must acknowledge that you will deliver a
prospectus in connection with any resale of such Series I senior notes. If you
are a broker-dealer who acquired Series H senior notes directly from us and not
as a result of market-making activities or other trading activities, you may
not rely on the Staff's interpretations discussed above or participate in the
exchange offer and must comply with the prospectus delivery requirements of the
Securities Act in order to sell the Series I senior notes.

Consequences of failure to exchange

   Following the completion of the exchange offer, you will not have any
further registration rights for Series H senior notes that you did not tender.
All Series H senior notes not tendered in the exchange offer will continue to
be subject to restrictions on transfer. Accordingly, the liquidity of the
market for Series H senior notes could be adversely affected upon completion of
the exchange offer.

Terms of the exchange offer

   Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all Series H senior
notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on June 18, 2002, or such date and time to which we extend the offer. We
will issue $1,000 principal amount of Series I senior notes in exchange for
each $1,000 principal amount of outstanding Series H senior notes accepted in
the exchange offer. Holders may tender some or all of their Series H senior
notes pursuant to the exchange offer. However, Series H senior notes may be
tendered only in integral multiples of $1,000 in principal amount.


   The form and terms of the Series I senior notes are substantially the same
as the form and terms of the Series H senior notes except that the Series I
senior notes have been registered under the Securities Act and will not bear
legends restricting their transfer. The Series I senior notes will evidence the
same debt as the Series H senior notes and will be issued pursuant to, and
entitled to the benefits of, the same indenture pursuant to which the Series H
senior notes were issued.

   As of the date of this prospectus, Series H senior notes representing $450
million in aggregate principal amount were outstanding and there was one
registered holder, a nominee of the DTC. This prospectus, together with the
letter of transmittal, is being sent to that registered holder and to you and
others based on our belief that you have beneficial interests in the Series H
senior notes. We intend to conduct the exchange offer in accordance with the
applicable requirements of the Securities Exchange Act of 1934 and the rules
and regulations of the SEC.

   We will be deemed to have accepted validly tendered Series H senior notes
when, as, and if we have given oral or written notice thereof to the exchange
agent. The exchange agent will act as your agent for the purpose of receiving
the Series I senior notes from us. If any of your tendered Series H senior
notes are not accepted for exchange because of an invalid tender, the
occurrence of the other events set forth in this prospectus or otherwise,
certificates for any such unaccepted Series H senior notes will be returned,
without expense, to you as promptly as practicable after June 18, 2002, unless
we extend the exchange offer.


   If you tender Series H senior notes in the exchange offer, you will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of
Series H senior notes pursuant to the exchange offer. We will pay all charges
and expenses, other than certain applicable taxes, in connection with the
exchange offer.


                                       90


Expiration date; extensions; amendments

   The expiration date will be 5:00 p.m., New York City time, on June 18, 2002,
unless, in our sole discretion, we extend the exchange offer, in which case the
expiration date will mean the latest date and time to which the exchange offer
is extended. In order to extend the exchange offer, we will notify the exchange
agent of any extension by oral or written notice prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.


   We reserve the right, in our sole discretion:

  . to delay accepting any Series H senior notes, to extend the exchange
    offer or, if any of the conditions to the exchange offer set forth below
    under "--Conditions to the exchange offer" have not been satisfied, to
    terminate the exchange offer, by giving oral or written notice of such
    delay, extension or termination to the exchange agent; or

  . to amend the terms of the exchange offer in any manner.

   In the event that we make a material or fundamental change to the terms of
the exchange offer, we will file a post-effective amendment to the registration
statement.

Procedures for tendering

   Only a holder of Series H senior notes may tender the Series H senior notes
in the exchange offer. To tender in the exchange offer you must either (1)
complete, sign, and date the letter of transmittal, or a copy thereof, have the
signatures thereon guaranteed if required by the letter of transmittal, and
mail or otherwise deliver the letter of transmittal or copy to the exchange
agent prior to the expiration date or (2) comply with the book-entry
requirements which are discussed below under "--Book Entry Transfer". In
addition:

  . certificates for Series H senior notes must be received by the exchange
    agent along with the letter of transmittal prior to the expiration date;

  . a timely confirmation of a book-entry transfer of those Series H senior
    notes, if that procedure is available, into the exchange agent's account
    at DTC pursuant to the procedure for book-entry transfer described below,
    must be received by the exchange agent on or prior to the expiration
    date; or

  . you must comply with the guaranteed delivery procedures described below.

   To be tendered effectively, the letter of transmittal and other required
documents must be received by the exchange agent on or prior to the expiration
date. Its address is given below under "--Exchange Agent".

   A tender of your Series H senior notes that is not withdrawn before the
expiration date will constitute an agreement between you and us in accordance
with the terms and subject to the conditions set forth in this prospectus and
in the letter of transmittal.

   The method of delivery of Series H senior notes and the letter of
transmittal and all other required documents to the exchange agent is at your
election and risk. Instead of delivery by mail, we recommend that you use an
overnight or hand delivery service. In all cases, you should allow sufficient
time to assure delivery to the exchange agent before the expiration date. You
should not send any letter of transmittal or Series H senior notes to us. You
may request your respective brokers, dealers, commercial banks, trust companies
or nominees to effect these transactions for you.

   If you are a beneficial owner whose Series H senior notes are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
and you wish to tender, you should contact the registered holder promptly and
instruct the registered holder to tender on your behalf. If you wish to tender
on your own behalf, you must, prior to completing and executing the letter of
transmittal and delivering your Series H senior notes, either make appropriate
arrangements to register ownership of the unregistered notes in your name or
obtain a properly completed bond power from the registered holder. The transfer
of registered ownership may take considerable time.

                                       91


   Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an eligible institution unless the Series H
senior notes tendered pursuant thereto are tendered:

  . by a registered holder who has not completed the box entitled "Special
    Delivery Instructions" on the letter of transmittal; or

  . for the account of an eligible institution.

   If signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, the guarantee must be by any
eligible guarantor institution that is a member of, or participant in, the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, referred to
as an "eligible institution".

   If the letter of transmittal is signed by a person other than the registered
holder of any Series H senior notes listed therein, the Series H senior notes
must be endorsed or accompanied by a properly completed bond power, signed by
the registered holder as that registered holder's name appears on the Series H
senior notes.

   If the letter of transmittal or any Series H senior notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence
satisfactory to us of their authority to so act must be submitted with the
letter of transmittal unless waived by us.

   All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Series H senior notes will be
determined by us in our sole discretion, which determination will be final and
binding. We reserve the absolute right to reject any and all Series H senior
notes not properly tendered or any Series H senior notes that would, in the
opinion of counsel, be unlawful to accept. We also reserve the right to waive
any defects, irregularities or conditions of tender as to particular Series H
senior notes. Our interpretation of the terms and conditions of the exchange
offer (including the instructions in the letter of transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Series H senior notes must be cured within such time
as we will determine. Although we intend to notify you of defects or
irregularities with respect to tenders of Series H senior notes, neither we,
the exchange agent, nor any other person will incur any liability for failure
to give such notification. Your tender of Series H senior notes will not be
deemed to have been made until such defects or irregularities have been cured
or waived. Any Series H senior notes received by the exchange agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the exchange agent to you, unless
otherwise provided in the letter of transmittal, as soon as practicable
following June 18, 2002, unless we extend the exchange offer.


   In addition, we reserve the right in our sole discretion to purchase or make
offers for any Series H senior notes that remain outstanding after the
expiration date or to terminate the exchange offer and, to the extent permitted
by applicable law, purchase Series H senior notes in the open market, in
privately negotiated transactions, or otherwise. The terms of any such
purchases or offers could differ from the terms of the exchange offer.

   In all cases, issuance of Series I senior notes for Series H senior notes
that are accepted for exchange pursuant to the exchange offer will be made only
after timely receipt by the exchange agent of certificates for the notes or a
timely book-entry confirmation of such Series H senior notes into the exchange
agent's account at DTC, a properly completed and duly executed letter of
transmittal (or, with respect to the DTC and its participants, electronic
instructions in which you acknowledge your receipt of and agreement to be bound
by the letter of transmittal) and all other required documents. If any tendered
Series H senior notes are not accepted for any reason set forth in the terms
and conditions of the exchange offer or if unregistered notes are submitted for
a greater principal amount than you desire to exchange, such unaccepted or non-
exchanged notes will be returned without expense to you (or, in the case of
Series H senior notes tendered by book-entry

                                       92


transfer into the exchange agent's account at the DTC pursuant to the book-
entry transfer procedures described below, such nonexchanged notes will be
credited to an account maintained with DTC) as promptly as practicable after
the expiration or termination of the exchange offer.

   If you are a broker-dealer that receives Series I senior notes for your own
account in exchange for Series H senior notes, where your Series H senior notes
were acquired by you as a result of market-making activities or other trading
activities, you must acknowledge that you will deliver a prospectus in
connection with any resale of those Series I senior notes.

Book-entry transfer

   The exchange agent will make a request to establish an account in respect of
the Series H senior notes at DTC for purposes of the exchange offer within two
business days after the date of this prospectus, and any financial institution
that is a participant in DTC's systems may make book-entry delivery of Series H
senior notes being tendered by causing DTC to transfer the Series H senior
notes into the exchange agent's account at DTC in accordance with its transfer
procedures. However, although delivery of Series H senior notes may be effected
through book-entry transfer at DTC, the letter of transmittal or copy thereof,
with any required signature guarantees and any other required documents, must,
in any case other than as set forth in the following paragraph, be transmitted
to and received by the exchange agent on or prior to the expiration date or the
guaranteed delivery procedures described below must be complied with.

   DTC's Automated Tender Offer Program, or "ATOP", is the only method of
processing exchange offers through DTC. To accept the exchange offer through
ATOP, participants in DTC must send electronic instructions to DTC through
DTC's communication system in lieu of sending a signed, hard copy letter of
transmittal. DTC is obligated to communicate those electronic instructions to
the exchange agent. To tender Series F senior notes through ATOP, the
electronic instructions sent to DTC and transmitted by DTC to the exchange
agent must contain the character by which the participant acknowledges its
receipt of and agrees to be bound by the letter of transmittal.

Guaranteed delivery procedures

   If you are a registered holder of the Series H senior notes and you desire
to tender your notes and the notes are not immediately available, or time will
not permit your Series H senior notes or other required documents to reach the
exchange agent before the expiration date, or the procedure for book-entry
transfer cannot be completed on a timely basis, you may effect a tender if:

  . the tender is made through an eligible institution;

  . prior to the expiration date, the exchange agent receives from such
    eligible institution a properly completed and duly executed letter of
    transmittal (or a facsimile thereof) and notice of guaranteed delivery,
    substantially in the form provided by us (by telegram, telex, facsimile
    transmission, mail or hand delivery), setting forth your name and address
    and the amount of Series H senior notes tendered, stating that the tender
    is being made thereby and guaranteeing that within three New York Stock
    Exchange, Inc. trading days after the date of execution of the notice of
    guaranteed delivery, the certificates for all physically tendered
    unregistered notes, in proper form for transfer, or a book- entry
    confirmation, as the case may be, will be deposited by the eligible
    institution with the exchange agent; and

  . the certificates for all physically tendered Series H senior notes, in
    proper form for transfer, or a book-entry confirmation, as the case may
    be, are received by the exchange agent within three NYSE trading days
    after the date of execution of the notice of guaranteed delivery.

Withdrawal rights

   You may withdraw tenders of Series H senior notes at any time prior to 5:00
p.m., New York City time, on the expiration date.

                                       93


   For a withdrawal of your tender of Series H senior notes to be effective, a
written or (for DTC participants) electronic ATOP transmission notice of
withdrawal must be received by the exchange agent prior to 5:00 p.m., New York
City time, on the expiration date. Any notice of withdrawal must:

  . specify the name of the person having deposited the Series H senior notes
    to be withdrawn;

  . identify the Series H senior notes to be withdrawn, including the
    certificate number or numbers and principal amount of the Series H senior
    notes;

  . in the case of a written notice of withdrawal, be signed in the same
    manner as the original signature on the letter of transmittal by which
    the Series H senior notes were tendered (including any required signature
    guarantees) or be accompanied by documents of transfer sufficient to have
    the trustee register the transfer of the Series H senior notes into the
    name of the person withdrawing the tender; and

  . specify the name in which any Series H senior notes are to be registered,
    if different from that of the person having deposited the Series H senior
    notes.

   All questions as to the validity, form, and eligibility (including time of
receipt) of such notices will be determined by us. Our determination will be
final and binding on all parties. Any Series H senior notes so withdrawn will
be deemed not to have been validly tendered for exchange for purposes of the
exchange offer. Any Series H senior notes which you tender for exchange but
which are not exchanged for any reason will be returned to you without cost to
you as soon as practicable after withdrawal, rejection of tender, or
termination of the exchange offer. Properly withdrawn Series H senior notes may
be retendered by following one of the procedures discussed above under "--
Procedures for Tendering" at any time on or prior to the expiration date.

Conditions to the exchange offer

   Notwithstanding any other provision of the exchange offer, we are not
required to accept for exchange, or to issue Series I senior notes in exchange
for, any Series H senior notes and may terminate or amend the exchange offer
if, at any time before the acceptance of Series H senior notes for exchange or
Series I senior notes for Series H senior notes, (1) we determine that the
exchange offer violates applicable law, any applicable interpretation of the
staff of the Commission or any order of any governmental agency or court of
competent jurisdiction, (2) any action or proceeding has been instituted or
threatened in any court or before any governmental agency with respect to the
exchange offer which, in our judgment, might impair our ability to proceed with
the exchange offer or have a material adverse effect on us, or (3) we determine
that there has been a material change in our business or financial affairs
which, in our judgment, would materially impair our ability to consummate the
exchange offer.

   The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in our sole
discretion. Our failure to exercise any of the foregoing rights at any time
will not be deemed a waiver of any such right and each such right will be
deemed an ongoing right which may be asserted at any time and from time to
time.

   In addition, we will not accept for exchange any Series H senior notes
tendered, and no Series I senior notes will be issued in exchange for any
Series H senior notes, if at such time any stop order will be threatened or in
effect with respect to the registration statement of which this prospectus
constitutes a part or the qualification of the indenture under the Trust
Indenture Act of 1939, as amended. In any such event we are required to use
every reasonable effort to obtain the withdrawal of any stop order at the
earliest possible time.

Exchange Agent

   All executed letters of transmittal should be directed to the exchange
agent. HSBC Bank USA has been appointed as exchange agent for the exchange
offer. Questions, requests for assistance and requests for

                                       94


additional copies of this prospectus or of the letter of transmittal should be
directed to the exchange agent addressed as follows:

                                 HSBC Bank USA

   By Hand Or Overnight Delivery:                         By Registered Or
             Lower Level                                   Certified Mail:
          One Hanson Place                                Lower Level
      Brooklyn, New York 11243                         One Hanson Place
        Attn: Issuer Services                      Brooklyn, New York 11243
                                                      Attn: Issuer Services

                                 By facsimile:
                          (eligible institutions only)

                                 (718) 488-4488

                            Attn: Paulette Shaw


                               For information or
                           confirmation by telephone:

                                 (718) 488-4475

   Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand or by overnight delivery service.

Fees and expenses

   We will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail; however, additional solicitations may be made in person or by telephone
by our officers and employees. We will pay the estimated cash expenses to be
incurred in connection with the exchange offer. We estimate such expenses to be
$300,000, which includes fees and expenses of the exchange agent, accounting,
legal, printing and related fees and expenses.

Transfer taxes

   You will not be obligated to pay any transfer taxes in connection with your
tender of Series H senior notes. However, if you instruct us to register Series
I senior notes in the name of, or request that Series H senior notes not
tendered or not accepted in the exchange offer be returned to, a person other
than yourself, you will be responsible for the payment of any applicable
transfer tax thereon.

                                       94


                      DESCRIPTION OF SERIES I SENIOR NOTES

   We will issue the Series I senior notes pursuant to an indenture dated as of
August 5, 1998, by and among Host Marriott, L.P., the Subsidiary Guarantors
signatory thereto and HSBC Bank USA (formerly Marine Midland Bank), as trustee,
as amended or supplemented from time to time (the "Indenture"). The terms of
the Indenture include those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended. The following description is a summary
of the material provisions of the Indenture and the related amended and
restated pledge and security agreement, dated as of August 5, 1998 and amended
and restated as of May 31, 2000, as further amended on March 1, 2001 (the
"Pledge Agreement"), which governs property securing, among other things, the
obligations on the Series I senior notes. It does not restate those agreements
in their entirety. We urge you to read the Indenture and the Pledge Agreement
because they, and not this description, define your rights as holders of these
Series I senior notes. You may obtain copies of the Indenture and the Pledge
Agreement from Host Marriott, L.P. upon request. The Indenture is also listed
as an exhibit to the registration statement on Form S-4 of which this
prospectus is a part, file no. 333-76550. You can find out how to obtain these
documents by looking at the section of this prospectus titled "Where You can
Find More Information". You can find the definitions of certain terms used in
this description under the subheading "Certain Definitions".


General

   The Series I senior notes will be limited to $450,000,000 aggregate
principal amount and will mature on January 15, 2007. Interest on the Series I
senior notes will accrue at the rate of 9 1/2% per annum and will be payable
every six months in arrears on January 15 and July 15, commencing on July 15,
2002. We will make each interest payment to the holders of record of the Series
I senior notes on the immediately preceding January 1 and July 1.

   The Series A senior notes, the Series B senior notes, the Series C senior
notes, the Series E senior notes, the Series G senior notes and the Series H
senior notes are, and the Series I senior notes offered hereby will be, senior,
general obligations of the Operating Partnership. The Series A through Series H
senior notes are, and the Series I senior notes offered hereby will be
initially, secured by a pledge of all the Capital Stock of certain of our
subsidiaries, which Capital Stock also equally and ratably secures our
obligation under the Credit Facility, the Series A through Series H senior
notes, and certain other Indebtedness ranking on an equitable and ratable basis
with the Series I senior notes. See "--Security". The Series A through Series H
senior notes are, and the Series I senior notes offered hereby will be, pari
passu with all of our other existing and future unsubordinated Indebtedness and
will rank senior to all of our subordinated obligations. The Series A through
Series H senior notes are, and the Series I senior notes offered hereby will
be, jointly and severally guaranteed on a senior basis by the Subsidiary
Guarantors. The Guarantee of the Subsidiary Guarantors with respect to the
senior notes, and the pledges of equity interests, are subject to release upon
satisfaction of certain conditions.

   Interest on any series of senior notes issued under the Indenture is or will
be calculated on the basis of a 360-day year consisting of twelve 30-day
months. The Series I senior notes will be issued only in fully registered form,
without coupons, in denominations of $1,000 and integral multiples thereof.
Principal of, premium, if any, and interest on the Series H senior notes will
be payable at the office or agency of the Operating Partnership maintained for
such purpose, in the Borough of Manhattan, The City of New York. Except as
provided below, at our option payment of interest may be made by check mailed
to the holders of any Series I senior notes at the addresses set forth upon our
registry books; provided, however, holders of certificated Series I senior
notes will be entitled to receive interest payments (other than at maturity) by
wire transfer of immediately available funds, if appropriate wire transfer
instructions have been received in writing by the trustee not less than 15 days
prior to the applicable interest payment date. Such wire instructions, upon
receipt by the trustee, will remain in effect until revoked by such holder. No
service charge will be made for any registration of transfer or exchange of
Series I senior notes, but we may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. Until we
designate otherwise our office or agency will be the corporate trust office of
the trustee presently located at 452 Fifth Avenue, New York, New York 10018.

                                       96


Guarantees

   The Series A through Series H senior notes and the Series I senior notes
offered hereby will be fully and unconditionally guaranteed as to principal,
premium, if any, and interest, jointly and severally, by the Subsidiary
Guarantors. If the Operating Partnership defaults in the payment of the
principal of, or premium, if any, or interest on, a guaranteed series of senior
notes issued under the Indenture when and as the same shall become due, whether
upon maturity, acceleration, call for redemption, Change of Control, offer to
purchase or otherwise, without the necessity of action by the trustee or any
holder, the Subsidiary Guarantors shall be required promptly to make such
payment in full. The Indenture provides that the Subsidiary Guarantors will be
released from their obligations as guarantors under such series of senior notes
under certain circumstances. The obligations of the Subsidiary Guarantors will
be limited in a manner intended to avoid such obligations being construed as
fraudulent conveyances under applicable law.

   Each current and future Restricted Subsidiary of the Operating Partnership
that subsequently guarantees any Indebtedness (the "Guaranteed Indebtedness")
of the Operating Partnership (each a "Future Subsidiary Guarantor") will be
required to guarantee the Series I senior notes offered hereby and any other
series of senior notes guaranteed under the Indenture. If the Guaranteed
Indebtedness is (A) pari passu in right of payment with the senior notes, then
the guarantee of such Guaranteed Indebtedness shall be pari passu in right of
payment with, or subordinated in right of payment to, the Subsidiary guarantee
or (B) subordinated in right of payment to the senior notes, then the guarantee
of such Guaranteed Indebtedness shall be subordinated in right of payment to
the Subsidiary Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated in right of payment to the senior notes.

   Subject to compliance with the preceding paragraph, the Indenture also
provides that any guarantee by a Subsidiary Guarantor shall be automatically
and unconditionally released upon (1) the sale or other disposition of Capital
Stock of the Subsidiary Guarantor, if, as a result of such sale or disposition,
such Subsidiary Guarantor ceases to be a Subsidiary of the Operating
Partnership, (2) the consolidation or merger of any such Subsidiary Guarantor
with any Person other than the Operating Partnership or a Subsidiary of the
Operating Partnership, if, as a result of such consolidation or merger, such
Subsidiary Guarantor ceases to be Subsidiary of the Operating Partnership, (3)
a Legal Defeasance or Covenant Defeasance, or (4) the unconditional and
complete release of such Subsidiary Guarantor from its guarantee of all
Guaranteed Indebtedness.

Security

   The obligations of the Operating Partnership to pay the principal of,
premium, if any, and interest on the Series I senior notes are secured by a
pledge of the Capital Stock of certain of our direct and indirect subsidiaries,
which pledge is, and will be, shared equally and ratably with the Credit
Facility, the Series A through Series G senior notes and certain other of our
Indebtedness ranking pari passu in right of payment with the Series I senior
notes, including, unless otherwise provided for in the applicable supplemental
indenture, any series of senior notes issued under the Indenture in the future.
The Indenture also provides that, unless otherwise provided in a supplemental
indenture with respect to a series of senior notes, the Capital Stock of each
Restricted Subsidiary that is subsequently pledged to secure the Credit
Facility will also be pledged to secure each such series of senior notes on an
equal and ratable basis with respect to the Liens securing the Credit Facility
and any other pari passu Indebtedness secured by such Capital Stock, provided,
however, that any shares of the Capital Stock of any Restricted Subsidiary will
not be and will not be required to be pledged to secure any such series of
senior notes if the pledge of or grant of a security interest in such shares is
prohibited by law. Bankers Trust Company (the administrative agent under the
Credit Facility) currently serves as the collateral agent with respect to such
stock pledge, subject to replacement in certain circumstances. So long as the
Credit Facility is in effect, the lenders under the Credit Facility will have
the right to direct the manner and method of enforcement of remedies with
respect to the stock pledge. Any proceeds realized on a sale or disposition of
collateral would be applied first to expenses of, and other obligations owed
to, the collateral agent, second, pro rata to outstanding principal and
interest of the secured Indebtedness, and third, pro rata to other secured
obligations.

                                       97


   Upon the complete and unconditional release of the pledge of any such
Capital Stock in favor of the Credit Facility, the pledge of such Capital Stock
as collateral securing the notes shall be released; provided that should the
obligations of the Operating Partnership under the Credit Facility subsequently
be secured by a pledge of such Capital Stock at any time, the Operating
Partnership must cause such Capital Stock to be pledged ratably and with at
least the same priority for the benefit of holders of the Series I senior
notes.

Ranking

   The Series A through Series H senior notes are, and the Series I senior
notes offered hereby will be, senior, general obligations of the Operating
Partnership, ranking pari passu in right of payment with any other outstanding
or future unsubordinated Indebtedness of the Operating Partnership, including,
without limitation, the obligations of the Operating Partnership under the
credit facility. The Series A through Series H senior notes are, and the Series
I senior notes offered hereby will be, senior to all subordinated obligations
of the Operating Partnership. Each of the Subsidiary Guarantees of the Series A
through Series H senior notes and any other series of guaranteed senior notes,
including the Series I senior notes offered hereby, will rank pari passu with
all current and future unsubordinated Indebtedness, and senior to all current
and future subordinated Indebtedness, of the Subsidiary Guarantors. Holders of
the Series I senior notes will be direct creditors of the Subsidiary Guarantors
by virtue of such Guarantees of the Series I senior notes.

Optional Redemption

   Upon not less than 30 nor more than 60 days' notice, the Operating
Partnership may redeem the Series I senior notes in whole but not in part at
any time at a redemption price equal to 100% of the principal amount thereof
plus the Make-Whole Premium, together with accrued and unpaid interest thereon,
if any; to the applicable redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on an interest
payment date that is on or prior to the applicable redemption date). No sinking
fund is provided for the Series I senior notes.

Notice

   Any notice to the holders of Series I senior notes of such a redemption need
not set forth the redemption price of such Series I senior notes but need only
set forth the calculation thereof as described in the immediately preceding
paragraph. The redemption price, calculated as aforesaid, should be set forth
in an Officer's Certificate delivered to the trustee no later than one Business
Day prior to the redemption date.

   Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each holder of Series I
senior notes to be redeemed at its registered address.

   Series I senior notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on
Series I senior notes called for redemption.

Certain Definitions

   Set forth below are certain defined terms used in the covenants and other
provisions of the Indenture. Reference is made to the Indenture for the full
definition of all such terms as well as any other capitalized term used herein
for which no definition is provided.

   "Acquired Indebtedness" means Indebtedness or Disqualified Stock of a
Person:

     (1) existing at the time such Person becomes a Restricted Subsidiary of
  the Company or

     (2) assumed in connection with an Asset Acquisition and not incurred in
  connection with or in contemplation or anticipation of such event

   provided that Indebtedness of such Person which is redeemed, defeased
(including the deposit of funds in a valid trust for the exclusive benefit of
holders and the trustee thereof, sufficient to repay such Indebtedness in

                                       98


accordance with its terms), retired or otherwise repaid at the time of or
immediately upon consummation of the transactions by which such Person becomes
a Restricted Subsidiary or such Asset Acquisition shall not be Acquired
Indebtedness.

   "Adjusted Total Assets" means, for any Person, the Total Assets for such
Person and its Restricted Subsidiaries as of any Transaction Date, as adjusted
to reflect the application of the proceeds of the Incurrence of Indebtedness
and issuance of Disqualified Stock on the Transaction Date.

   "Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by
contract, or otherwise; provided that:

     (1) a beneficial owner of 10% or more of the total voting power normally
  entitled to vote in the election of directors, managers or trustees, as
  applicable, shall for such purposes be deemed to constitute control

     (2) the right to designate a member of the Board of a Person or a Parent
  of that Person will not, by itself, be deemed to constitute control, and

     (3) Marriott International and its Subsidiaries shall not be deemed to
  be Affiliates of the Company or its Parent or Restricted Subsidiaries.

   "Asset Acquisition" means:

     (1) an investment by the Company or any of its Restricted Subsidiaries
  in any other Person pursuant to which such Person shall become a Restricted
  Subsidiary or shall be merged or consolidated into or with the Company or
  any of its Restricted Subsidiaries or

     (2) an acquisition by the Company or any of its Restricted Subsidiaries
  from any other Person that constitutes all or substantially all of a
  division or line of business, or one or more real estate properties, of
  such Person.

   "Asset Sale" means any sale, transfer or other disposition (including by way
of merger, consolidation or sale-leaseback transaction) in one transaction or a
series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of:

     (1) all or any of the Capital Stock of any Restricted Subsidiary
  (including by issuance of such Capital Stock)

     (2) all or substantially all of the property and assets of an operating
  unit or business of the Company or any of its Restricted Subsidiaries or

     (3) any other property and assets of the Company or any of its
  Restricted Subsidiaries (other than Capital Stock of a Person which is not
  a Restricted Subsidiary) outside the ordinary course of business of the
  Company or such Restricted Subsidiary and, in each case, that is not
  governed by the covenant of the indenture entitled "Consolidation, Merger
  and Sale of Assets"

   provided that "Asset Sale" shall not include:

       (a) sales or other dispositions of inventory, receivables and other
    current assets

       (b) sales, transfers or other dispositions of assets with a fair
    market value not in excess of $10 million in any transaction or series
    of related transactions

       (c) leases of real estate assets

       (d) Permitted Investments (other than Investments in Cash
    Equivalents) or Restricted Investments made in accordance with the
    "Limitation on Restricted Payments" covenant

                                       99


       (e) any transaction comprising part of the REIT Conversion and

       (f) any transactions that, pursuant to the "Limitation of Asset
    Sales" covenant, are defined not to be an "Asset Sale."

   "Average Life" means at any date of determination with respect to any debt
security, the quotient obtained by dividing:

     (1) the sum of the products of:

       (a) the number of years (calculated to the nearest one-twelfth) from
    such date of determination to the date of each successive scheduled
    principal (or redemption) payment of such debt security and

       (b) the amount of such principal (or redemption) payment

   by:

     (2) the sum of all such principal (or redemption) payments.

   "Blackstone Acquisition" means the acquisition by the Operating Partnership
from The Blackstone Group, a Delaware limited partnership, and a series of
funds controlled by Blackstone Real Estate Partners, a Delaware limited
partnership, of certain hotel properties, mortgage loans and other assets
together with the assumption of related Indebtedness.

   "Board" means:

     (1) with respect to any corporation, the board of directors of such
  corporation or any committee of the board of directors of such corporation
  authorized, with respect to any particular matter, to exercise the power of
  the board of directors of such corporation

     (2) with respect to any partnership, any partner (including, without
  limitation, in the case of any partner that is a corporation, the board of
  directors of such corporation or any authorized committee thereof) with the
  authority to cause the partnership to act with respect to the matter at
  issue

     (3) in the case of a trust, any trustee or board of trustees with the
  authority to cause the trust to act with respect to the matter at issue

     (4) in the case of a limited liability company (an "LLC"), the managing
  member, management committee or other Person or group with the authority to
  cause the LLC to act with respect to the matter at issue, and

     (5) with respect to any other entity, the Person or group exercising
  functions similar to a board of directors of a corporation.

   "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.

   "Capital Contribution" means any contribution to the equity of the Company
for which no consideration is given, or if given, consists only of the issuance
of Qualified Capital Stock (or, if other consideration is given, only the value
of the contribution in excess of such other consideration).

   "Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, or other equivalents (however designated, whether
voting or non-voting), including partnership interests, whether general or
limited, in the equity of such Person, whether outstanding on the Closing Date
or issued thereafter, including, without limitation, all Common Stock,
Preferred Stock and Units.

   "Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such Person.

                                      100


   "Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease as reflected on the balance sheet
of such Person in accordance with GAAP.

   "Cash Equivalent" means:

     (1) securities issued or directly and fully guaranteed or insured by the
  United States of America or any agency or instrumentality thereof (provided
  that the full faith and credit of the United States of America are pledged
  in support thereof)

     (2) time deposits, bankers acceptances and certificates of deposit and
  commercial paper issued by the Parent of any domestic commercial bank of
  recognized standing having capital and surplus in excess of $500 million
  and commercial paper issued by others rated at least A-2 or the equivalent
  thereof by S&P or at least P-2 or the equivalent thereof by Moody's

     (3) marketable direct obligations issued by the District of Columbia or
  any state of the United States of America or any political subdivision or
  public instrumentality thereof bearing (at the time of investment therein)
  one of the two highest ratings obtainable from either S&P or Moody's and

     (4) liquid investments in money market funds substantially all of the
  assets of which are securities of the type described in clauses (1) through
  (3) inclusive

provided that the securities described in clauses (1) through (3) inclusive
have a maturity of one year or less after the date of acquisition.

   "Change of Control" means:

     (1) any sale, transfer or other conveyance, whether direct or indirect,
  of all or substantially all of the assets of the Company or Host or Host
  REIT (for so long as Host or Host REIT is a Parent of the Company
  immediately prior to such transaction or series of related transactions),
  on a consolidated basis, in one transaction or a series of related
  transactions, if, immediately after giving effect to such transaction, any
  "person" or "group" (as such terms are used for purposes of Sections 13(d)
  and 14(d) of the Exchange Act, whether or not applicable) other than an
  Excluded Person is or becomes the "beneficial owner," directly or
  indirectly, of more than 50% of the total voting power in the aggregate
  normally entitled to vote in the election of directors, managers, or
  trustees, as applicable, of the transferee

     (2) any "person" or "group" (as such terms are used for purposes of
  Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable)
  other than an Excluded Person is or becomes the "beneficial owner,"
  directly or indirectly, of more than 50% of the total voting power in the
  aggregate of all classes of Capital Stock of the Company (or Host or Host
  REIT for so long as Host or Host REIT is a Parent of the Company
  immediately prior to such transaction or series of related transactions)
  then outstanding normally entitled to vote in elections of directors,
  managers or trustees, as applicable

     (3) during any period of 12 consecutive months after the Issue Date (for
  so long as Host or Host REIT is a Parent of the Company immediately prior
  to such transaction or series of related transactions), Persons who at the
  beginning of such 12-month period constituted the Board of Host or Host
  REIT (together with any new Persons whose election was approved by a vote
  of a majority of the Persons then still comprising the Board who were
  either members of the Board at the beginning of such period or whose
  election, designation or nomination for election was previously so
  approved) cease for any reason to constitute a majority of the Board of
  Host or Host REIT, as applicable, then in office or

     (4) Host REIT ceases to be a general partner of the Operating
  Partnership or ceases to control the Company

provided, however, that neither:

     (x) the pro rata distribution by Host to its shareholders of shares of
  the Company or shares of any of Host's or Host REIT's other Subsidiaries
  nor

     (y) the REIT Conversion (or any element thereof)

shall, in and of itself, constitute a Change of Control for purposes of this
definition.

                                      101


   "Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Rating Decline.

   "Closing Date" means August 5, 1998.

   "Code" means the Internal Revenue Code of 1986, as amended.

   "Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting), which have no preference on liquidation or with respect
to distributions over any other class of Capital Stock, including partnership
interests, whether general or limited, of such Person's equity, whether
outstanding on the Closing Date or issued thereafter, including, without
limitation, all series and classes of common stock.

   "Company" means Host Marriott, L.P., and its successors and assigns (and,
from the Issue Date to the consummation of the Merger, HMH Properties, Inc.,
and its successors and assigns).

   "Consolidated" or "consolidated" means, with respect to any Person, the
consolidation of the accounts of the Restricted Subsidiaries (including those
of the Non-Consolidated Restricted Entities) of such Person with those of such
Person; provided that:

     (1) "consolidation" will not include consolidation of the accounts of
  any other Person other than a Restricted Subsidiary of such Person with
  such Person and

     (2) "consolidation" will include consolidation of the accounts of any
  Non-Consolidated Restricted Entities, whether or not such consolidation
  would be required or permitted under GAAP

(it being understood that the accounts of such Person's Consolidated
Subsidiaries shall be consolidated only to the extent of such Person's
proportionate interest therein).

   The terms "consolidated" and "consolidating" have correlative meanings to
the foregoing.

   "Consolidated Coverage Ratio" of any Person on any Transaction Date means
the ratio, on a pro forma basis, of:

     (1) the aggregate amount of Consolidated EBITDA of such Person
  attributable to continuing operations and businesses (exclusive of amounts
  attributable to operations and businesses permanently discontinued or
  disposed of) for the Reference Period

  to:

     (2) the aggregate Consolidated Interest Expense of such Person
  (exclusive of amounts attributable to operations and businesses permanently
  discontinued or disposed of, but only to the extent that the obligations
  giving rise to such Consolidated Interest Expense would no longer be
  obligations contributing to such Person's Consolidated Interest Expense
  subsequent to the Transaction Date) during the Reference Period

  provided that for purposes of such calculation:

       (a) acquisitions of operations, businesses or other income-producing
    assets (including any reinvestment of disposition proceeds in income-
    producing assets held as of and not disposed on the Transaction Date)
    which occurred during the Reference Period or subsequent to the
    Reference Period and on or prior to the Transaction Date shall be
    assumed to have occurred on the first day of the Reference Period

       (b) transactions giving rise to the need to calculate the
    Consolidated Coverage Ratio shall be assumed to have occurred on the
    first day of the Reference Period

       (c) the incurrence of any Indebtedness or issuance of any
    Disqualified Stock during the Reference Period or subsequent to the
    Reference Period and on or prior to the Transaction Date (and

                                      102


    the application of the proceeds therefrom to the extent used to
    refinance or retire other Indebtedness or invested in income-producing
    assets held as of and not disposed on the Transaction Date) shall be
    assumed to have occurred on the first day of such Reference Period and

       (d) the Consolidated Interest Expense of such Person attributable to
    interest on any Indebtedness or dividends on any Disqualified Stock
    bearing a floating interest (or dividend) rate shall be computed on a
    pro forma basis as if the average rate in effect from the beginning of
    the Reference Period to the Transaction Date had been the applicable
    rate for the entire period, unless such Person or any of its
    Subsidiaries is a party to an Interest Swap or Hedging Obligation
    (which shall remain in effect for the 12-month period immediately
    following the Transaction Date) that has the effect of fixing the
    interest rate on the date of computation, in which case such rate
    (whether higher or lower) shall be used.

   "Consolidated EBITDA" means, for any Person and for any period, the
Consolidated Net Income of such Person for such period adjusted to add thereto
(to the extent deducted from net revenues in determining Consolidated Net
Income), without duplication:

     (1) the sum of:

       (a) Consolidated Interest Expense

       (b) provisions for taxes based on income (to the extent of such
    Person's proportionate interest therein)

       (c) depreciation and amortization expense (to the extent of such
    Person's proportionate interest therein)

       (d) any other noncash items reducing the Consolidated Net Income of
    such Person for such period (to the extent of such Person's
    proportionate interest therein)

       (e) any dividends or distributions during such period to such Person
    or a Consolidated Subsidiary (to the extent of such Person's
    proportionate interest therein) of such Person from any other Person
    which is not a Restricted Subsidiary of such Person or which is
    accounted for by such Person by the equity method of accounting (other
    than a Non-Consolidated Restricted Entity), to the extent that:

        1 such dividends or distributions are not included in the
      Consolidated Net Income of such Person for such period and

        2 the sum of such dividends and distributions, plus the aggregate
      amount of dividends or distributions from such other Person since
      the Issue Date that have been included in Consolidated EBITDA
      pursuant to this clause (e), do not exceed the cumulative net income
      of such other Person attributable to the equity interests of the
      Person (or Restricted Subsidiary of the Person) whose Consolidated
      EBITDA is being determined

       (f) any cash receipts of such Person or a Consolidated Subsidiary of
    such Person (to the extent of such Person's proportionate interest
    therein) during such period that represent items included in
    Consolidated Net Income of such Person for a prior period which were
    excluded from Consolidated EBITDA of such Person for such prior period
    by virtue of clause (2) of this definition and

       (g) any nonrecurring expenses incurred in connection with the REIT
    Conversion

  minus:

     (2) the sum of:

       (a) all non-cash items increasing the Consolidated Net Income of
    such Person (to the extent of such Person's proportionate interest
    therein) for such period and

       (b) any cash expenditures of such Person (to the extent of such
    Person's proportionate interest therein) during such period to the
    extent such cash expenditures did not reduce the Consolidated Net
    Income of such Person for such period and were applied against reserves
    or accruals that constituted

                                      103


    noncash items reducing the Consolidated Net Income of such Person (to
    the extent of such Person's proportionate interest therein) when
    reserved or accrued

all as determined on a consolidated basis for such Person and its Consolidated
Subsidiaries (it being understood that the accounts of such Person's
Consolidated Subsidiaries shall be consolidated only to the extent of such
Person's proportionate interest therein).

   "Consolidated Interest Expense" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case on a
consolidated basis) of:

     (1) interest expensed or capitalized, paid, accrued, or scheduled to be
  paid or accrued (including, in accordance with the following sentence,
  interest attributable to Capitalized Lease Obligations but excluding the
  amortization of fees or expenses incurred in order to consummate the sale
  of the notes issued under the indenture or to establish the Credit
  Facility) of such Person and its Consolidated Subsidiaries during such
  period, including:

       (a) original issue discount and noncash interest payments or
    accruals on any Indebtedness

       (b) the interest portion of all deferred payment obligations and

       (c) all commissions, discounts and other fees and charges owed with
    respect to bankers' acceptances and letters of credit financings and
    Interest Swap and Hedging Obligations, in each case to the extent
    attributable to such period and

     (2) dividends accrued or payable by such Person or any of its
  Consolidated Subsidiaries in respect of Disqualified Stock (other than by
  Restricted Subsidiaries of such Person to such Person or, to the extent of
  such Person's proportionate interest therein, such Person's Restricted
  Subsidiaries);

provided, however, that any such interest, dividends or other payments or
accruals (referenced in clauses (1) or (2)) of a Consolidated Subsidiary that
is not Wholly Owned shall be included only to the extent of the proportionate
interest of the referent Person in such Consolidated Subsidiary.

   For purposes of this definition:

     (x) interest on a Capitalized Lease Obligation shall be deemed to accrue
  at an interest rate reasonably determined by the Company to be the rate of
  interest implicit in such Capitalized Lease Obligation in accordance with
  GAAP and

     (y) interest expense attributable to any Indebtedness represented by the
  guaranty by such Person or a Restricted Subsidiary of such Person of an
  obligation of another Person shall be deemed to be the interest expense
  attributable to the Indebtedness guaranteed.

   "Consolidated Net Income" means, with respect to any Person for any period,
the net income (or loss) of such Person and its Consolidated Subsidiaries for
such period, determined on a consolidated basis (it being understood that the
net income of Consolidated Subsidiaries shall be consolidated with that of a
Person only to the extent of the proportionate interest of such Person in such
Consolidated Subsidiaries); provided that:

     (1) net income (or loss) of any other Person which is not a Restricted
  Subsidiary of the Person, or that is accounted for by such specified Person
  by the equity method of accounting (other than a Non-Consolidated
  Restricted Entity), shall be included only to the extent of the amount of
  dividends or distributions paid to the specified Person or a Restricted
  Subsidiary of such Person

     (2) the net income (or loss) of any other Person acquired by such
  specified Person or a Restricted Subsidiary of such Person in a pooling of
  interests transaction for any period prior to the date of such acquisition
  shall be excluded

     (3) all gains and losses which are either extraordinary (as determined
  in accordance with GAAP) or are either unusual or nonrecurring (including
  any gain from the sale or other disposition of assets or from the issuance
  or sale of any Capital Stock) shall be excluded and

     (4) the net income, if positive, of any of such Person's Consolidated
  Subsidiaries other than Consolidated Subsidiaries that are not Subsidiary
  Guarantors to the extent that the declaration or payment

                                      104


  of dividends or similar distributions is not at the time permitted by
  operation of the terms of its charter or bylaws or any other agreement,
  instrument, judgment, decree, order, statute, rule or governmental
  regulation applicable to such Consolidated Subsidiary shall be excluded;
  provided, however, in the case of exclusions from Consolidated Net Income
  set forth in clauses (2), (3) and (4), such amounts shall be excluded only
  to the extent included in computing such net income (or loss) on a
  consolidated basis and without duplication.

   "Consolidated Subsidiary" means, for any Person, each Restricted Subsidiary
of such Person (including each Non-Consolidated Restricted Entity).

   "Conversion Date" means December 29, 1998.

   "Credit Facility" means the credit facility established pursuant to the
Credit Agreement, dated as of August 5, 1998 among the Company, Host, certain
other Subsidiaries party thereto, the lenders party thereto, Bankers Trust
Company, as Arranger and Administrative Agent, and Wells Fargo Bank, N.A., The
Bank of Nova Scotia and Credit Lyonnais New York Branch, as Co-Arrangers,
together with all other agreements, instruments and documents executed or
delivered pursuant thereto or in connection therewith, in each case as such
agreements, instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified or restructured from time to time
(including by way of adding Subsidiaries of the Company as additional borrowers
or guarantors thereof), whether by the same or any other agent, lender or group
of lenders.

   "Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.

   "Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.

   "Disqualified Stock" means except as set forth below, with respect to any
Person, Capital Stock of that Person that by its terms or otherwise is:

     (1) required to be redeemed on or prior to the Stated Maturity of the
  notes for cash or property other than Qualified Capital Stock

     (2) redeemable for cash or property other than Qualified Capital Stock
  at the option of the holder of such class or series of Capital Stock at any
  time prior to the Stated Maturity of the notes or

     (3) convertible into or exchangeable mandatorily or at the option of the
  holder for Capital Stock referred to in clause (1) or (2) above or
  Indebtedness of the Company or a Restricted Subsidiary having a scheduled
  maturity prior to the Stated Maturity of the notes

provided that any Capital Stock that would not constitute Disqualified Stock
but for provisions thereof giving holders thereof the right to require such
Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the Stated Maturity of
the notes shall not constitute Disqualified Stock if the "asset sale" or
"change of control" provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions contained in
"Limitation on Asset Sales" and "Repurchase of Notes at the Option of Holders
upon a Change of Control Triggering Event" covenants described below and such
Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such notes as are required to be repurchased pursuant to the
"Limitation on Asset Sales" and "Repurchase of Notes at the Option of Holders
upon a Change of Control Triggering Event" covenants described below.

   With respect to Capital Stock of a Restricted Subsidiary, only the amount
thereof issued to Persons (other than the Company or any of its Restricted
Subsidiaries) in excess of such Persons' Pro Rata Share of such Capital Stock
shall be deemed to be Disqualified Stock for purposes of determining the amount
of Disqualified Stock of the Company and its Restricted Subsidiaries.

                                      105


   Notwithstanding anything to the contrary contained in this definition:

     (a) the QUIPs are not Disqualified Stock

     (b) any Capital Stock issued by the Operating Partnership to Host REIT
  shall not be deemed to be Disqualified Stock solely by reason of a right by
  Host REIT to require the Company to make a payment to it sufficient to
  enable Host REIT to satisfy its concurrent obligation with respect to
  Capital Stock of Host REIT, provided such Capital Stock of Host REIT would
  not constitute Disqualified Stock, and

     (c) no Capital Stock shall be deemed to be Disqualified Stock as the
  result of the right of the holder thereof to request redemption thereof if
  the issuer of such Capital Stock (or the Parent of such issuer) has the
  right to satisfy such redemption obligations by the issuance of Qualified
  Capital Stock to such holder.

   "E&P Distribution" means:

     (1) one or more distributions to the shareholders of Host and/or Host
  REIT of:

       (a) shares of SLC and

       (b) cash, securities or other property, with a cumulative aggregate
    value equal to the amount estimated in good faith by Host or Host REIT
    from time to time as being necessary to assure that Host and Host REIT
    have distributed the accumulated earnings and profits (as referenced in
    Section 857(a)(2)(B) of the Code) of Host as of the last day of the
    first taxable year for which Host REIT's election to be taxed as a REIT
    is effective; and

     (2) the distributions from the Operating Partnership to:

       (a) Host REIT necessary to enable Host REIT to make the
    distributions described in clause (1) and

       (b) holders of Units (other than Host REIT) required as a result of
    or a condition to such distributions made pursuant to clause (2)(a).

   "Excluded Person" means, in the case of the Company, Host, Host REIT or any
Wholly Owned Subsidiary of Host or Host REIT.

   "Exempted Affiliate Transaction" means:

     (1) employee compensation arrangements approved by a majority of
  independent (as to such transactions) members of the Board of the Company

     (2) payments of reasonable fees and expenses to the members of the Board

     (3) transactions solely between the Company and any of its Subsidiaries
  or solely among Subsidiaries of the Company

     (4) Permitted Tax Payments

     (5) Permitted Sharing Arrangements

     (6) Procurement Contracts

     (7) Operating Agreements

     (8) Restricted Payments permitted under the "Limitation on Restricted
  Payments" covenant and

     (9) any and all elements of the REIT Conversion.

   "Existing Senior Notes" means amounts outstanding from time to time of:

     (1) the 9 1/2% Senior Secured Notes due 2005 of the Company;

     (2) the 8 7/8% Senior Notes due 2007 of the Company;

     (3) the 9% Senior Notes due 2007 of the Company; and

     (4) the 9 1/4% Senior Notes due 2007 of the Company;

in each case not in excess of amounts outstanding immediately following the
Issue Date, less amounts retired from time to time.

                                      106


   "Fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined:

     (1) in good faith by the Board of the Company or the applicable
  Subsidiary involved in such transaction or

     (2) by an appraisal or valuation firm of national or regional standing
  selected by the Company or such Subsidiary, with experience in the
  appraisal or valuation of properties or assets of the type for which fair
  market value is being determined.

   "Fifty Percent Venture" means a Person:

     (1) in which the Company owns (directly or indirectly) at least 50% of
  the aggregate economic interests

     (2) in which the Company or a Restricted Subsidiary participates in
  control as a general partner, a managing member or through similar means
  and

     (3) which is not consolidated for financial reporting purposes with the
  Company under GAAP.

   "FF&E" means furniture, fixtures and equipment, and other tangible personal
property other than real property.

   "Funds From Operations" for any period means the Consolidated Net Income of
the Company and its Restricted Subsidiaries for such period excluding gains or
losses from debt restructurings and sales of property, plus depreciation of
real estate assets and amortization related to real estate assets and other
non-cash charges related to real estate assets, after adjustments for
unconsolidated partnerships and joint ventures plus minority interests, if
applicable (it being understood that the accounts of such Person's Consolidated
Subsidiaries shall be consolidated only to the extent of such Person's
proportionate interest therein).

   "GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States of America.

   "Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly Guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person:

     (1) to purchase or pay (or advance or supply funds for the purchase or
  payment of) such Indebtedness of such other Person (whether arising by
  virtue of partnership arrangements, or by agreements to keep-well, to
  purchase assets, goods, securities or services (unless such purchase
  arrangements are on arm's-length terms and are entered into in the ordinary
  course of business), to take-or-pay, or to maintain financial statement
  conditions or otherwise) or

     (2) entered into for purposes of assuring in any other manner the
  obligee of such Indebtedness of the payment thereof or to protect such
  obligee against loss in respect thereof (in whole or in part)

provided that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.

   "HMH Properties" means HMH Properties, Inc, a Delaware corporation, which
was merged into the Operating Partnership on December 16, 1998.

   "Host" means Host Marriott Corporation, a Delaware corporation and the
indirect Parent of the Company on the Issue Date, and its successors and
assigns.

                                      107


   "Host REIT" means Host Marriott Corporation, a Maryland corporation and the
successor by merger to Host, which is the sole general partner of the Operating
Partnership following the REIT Conversion, and its successors and assigns.

   "Host REIT Merger" means the merger of Host with and into Host REIT, with
Host REIT surviving the merger, which merger occurred on December 29, 1998.

   "Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to (including
as a result of an acquisition), or become responsible for, the payment of,
contingently or otherwise, such Indebtedness (including Acquired Indebtedness);
provided that neither the accrual of interest nor the accretion of original
issue discount shall be considered an Incurrence of Indebtedness.

   "Indebtedness" of any Person means, without duplication:

     (1) all liabilities and obligations, contingent or otherwise, of such
  Person:

       (a) in respect of borrowed money (whether or not the recourse of the
    lender is to the whole of the assets of such Person or only to a
    portion thereof)

       (b) evidenced by bonds, notes, debentures or similar instruments

       (c) representing the balance deferred and unpaid of the purchase
    price of any property or services, except those incurred in the
    ordinary course of its business that would constitute ordinarily a
    trade payable to trade creditors

       (d) evidenced by bankers' acceptances

       (e) for the payment of money relating to a Capitalized Lease
    Obligation or

       (f) evidenced by a letter of credit or a reimbursement obligation of
    such Person with respect to any letter of credit

     (2) all net obligations of such Person under Interest Swap and Hedging
  Obligations and

     (3) all liabilities and obligations of others of the kind described in
  the preceding clause (1) or (2) that such Person has guaranteed or that is
  otherwise its legal liability or which are secured by any assets or
  property of such Person.

   "Interest Swap and Hedging Obligation" means any obligation of any Person
pursuant to any interest rate swaps, caps, collars and similar arrangements
providing protection against fluctuations in interest rates. For purposes of
the Indenture, the amount of such obligations shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such obligation had terminated at the
end of such fiscal quarter, and in making such determination, if any agreement
relating to such obligation provides for the netting of amounts payable by and
to such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in each such case,
the amount of such obligations shall be the net amount so determined, plus any
premium due upon default by such Person.

   "Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including without limitation by way of Guarantee or
similar arrangement, but excluding advances to customers in the ordinary course
of business that are, in conformity with GAAP, recorded as accounts receivable
on the consolidated balance sheet of the Company and its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other property (tangible or intangible) to others or any payment for property
or services solely for the account or use of others, or otherwise), or any
purchase or acquisition of Capital Stock, bonds, notes, debentures or other
similar instruments issued by, such Person and shall include the designation of
a Restricted Subsidiary to be an Unrestricted Subsidiary or a Non-Consolidated
Entity.


                                      108


   For purposes of the definition of "Unrestricted Subsidiary" and the
"Limitation on Restricted Payments" covenant described below:

     (1) "Investment" shall include the proportionate share of the Company
  and its Restricted Subsidiaries in the fair market value of the assets (net
  of liabilities (other than liabilities to the Company or any of its
  Restricted Subsidiaries)) of any Restricted Subsidiary at the time such
  Restricted Subsidiary is designated an Unrestricted Subsidiary or Non-
  Consolidated Entity

     (2) the proportionate share of the Company and its Restricted
  Subsidiaries in the fair market value of the assets (net of liabilities
  (other than liabilities to the Company or any of its Restricted
  Subsidiaries)) of any Unrestricted Subsidiary or Non-Consolidated Entity at
  the time that such Unrestricted Subsidiary or Non-Consolidated Entity is
  designated a Restricted Subsidiary shall be considered a reduction in
  outstanding Investments and

     (3) any property transferred to or from an Unrestricted Subsidiary or
  Non-Consolidated Entity shall be valued at its fair market value at the
  time of such transfer.

   "Investment Grade" means a rating of the notes by both S&P and Moody's, each
such rating being in one of such agency's four highest generic rating
categories that signifies investment grade (i.e., currently BBB--(or the
equivalent) or higher by S&P and Baa3 (or the equivalent) or higher by
Moody's); provided in each case such ratings are publicly available; provided,
further, that in the event Moody's or S&P is no longer in existence for
purposes of determining whether the notes are rated "Investment Grade," such
organization may be replaced by a nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) designated by
the Company, notice of which shall be given to the Trustee.

   "Issue Date" means August 5, 1998.

   "Lien" means any mortgage, pledge, security interest, encumbrance, lien,
privilege, hypothecation, other encumbrance or charge of any kind (including,
without limitation, any conditional sale or other title retention agreement or
lease in the nature thereof or any agreement to give any security interest)
upon or with respect to any property of any kind now owned or hereinafter
acquired.

   "Limited Partner Note" means an unsecured note of the Operating Partnership
which a limited partner of a Public Partnership elected to receive at the time
of the Partnership Mergers instead of or in exchange for Units.

   "Make-Whole Premium" means, with respect to any note at any redemption date,
the excess, if any, of (a) the present value of the sum of the principal amount
and premium, if any, that would be payable on such note on its maturity date
and all remaining interest payments (not including any portion of such payments
of interest accrued as of the redemption date) to and including such maturity
date, discounted on a semi-annual bond equivalent basis from such maturity date
to the redemption date at a per annum interest rate equal to the sum of the
Treasury Yield (determined on the Business Day immediately preceding the date
of such redemption), plus 50 basis points, over (b) the principal amount of the
note being redeemed.

   "Merger" means the merger of HMH Properties with and into the Operating
Partnership, with the Operating Partnership as the surviving entity, which
merger occurred on December 16, 1998.

   "Moody's" means Moody's Investors Service, Inc. and its successors.

   "Net Cash Proceeds" means:

     (1) with respect to any Asset Sale other than the sale of Capital Stock
  of a Restricted Subsidiary, the proceeds of such Asset Sale in the form of
  cash or Cash Equivalents, including payments in respect of deferred payment
  obligations (to the extent corresponding to the principal, but not
  interest, component thereof) when received in the form of cash or Cash
  Equivalents (except to the extent such obligations are

                                      109


  financed or sold with recourse to the Company or any of its Restricted
  Subsidiaries) and proceeds from the conversion of other property received
  when converted to cash or Cash Equivalents, net of:

       (a) brokerage commissions and other fees and expenses (including
    fees and expenses of counsel and investment bankers) related to such
    Asset Sale

       (b) provisions for all Taxes (including Taxes of Host REIT) actually
    paid or payable as a result of such Asset Sale by the Company and its
    Restricted Subsidiaries, taken as a whole

       (c) payments made to repay Indebtedness (other than Indebtedness
    subordinated in right of payment to the notes or a Subsidiary
    Guarantee) or any other obligations outstanding at the time of such
    Asset Sale that either (I) is secured by a Lien on the property or
    assets sold; or (II) is required to be paid as a result of such sale

       (d) amounts reserved by the Company and its Restricted Subsidiaries
    against any liabilities associated with such Asset Sale, including,
    without limitation, pension and other post-employment benefit
    liabilities, liabilities related to environmental matters and
    liabilities under any indemnification obligations associated with such
    Asset Sale, all as determined on a consolidated basis in conformity
    with GAAP, and

       (e) unless Taxes thereon are paid by Host REIT as set forth in
    clause (b) above, amounts required to be distributed as a result of the
    realization of gains from Asset Sales in order to maintain or preserve
    Host REIT's status as a REIT

(provided, however, that with respect to an Asset Sale by any Person other
than the Company or a Wholly Owned Subsidiary, Net Cash Proceeds shall be the
above amount multiplied by the Company's (direct or indirect) percentage
ownership interest in such Person) and

     (2) with respect to any issuance or sale of Capital Stock, the proceeds
  of such issuance or sale in the form of cash or Cash Equivalents, including
  payments in respect of deferred payment obligations (to the extent
  corresponding to the principal, but not interest, component thereof) when
  received in the form of cash or Cash Equivalents (except to the extent such
  obligations are financed or sold with recourse to the Company or any of its
  Restricted Subsidiaries) and proceeds from the conversion of other property
  received when converted to cash or Cash Equivalents, net of attorney's
  fees, accountant's fees, underwriters' or placement agents' fees, discounts
  or commissions and brokerage, consultant and other fees incurred in
  connection with such issuance or sale and net of tax paid or payable as a
  result thereof (provided, however, that with respect to an issuance or sale
  by any Person other than the Company or a Wholly Owned Subsidiary, Net Cash
  Proceeds shall be the above amount multiplied by the Company's (direct or
  indirect) percentage ownership interest in such Person).

   "Net Investments" means, with respect to any referenced category or group
of Investments:

     (1) the aggregate amount of such Investments made by the Company and its
  Restricted Subsidiaries (to the extent of the Company's proportionate
  interest in such Restricted Subsidiaries) on or subsequent to the Issue
  Date

  minus:

     (2) the aggregate amount of any dividends, distributions, sales proceeds
  or other amounts received by the Company and its Restricted Subsidiaries
  (to the extent of the Company's proportionate interest in such Restricted
  Subsidiaries) in respect of such Investments on or subsequent to the Issue
  Date

and, in the event that any such Investments are made, or amounts are received,
in property other than cash, such amounts shall be the fair market value of
such property.

   "Non-Conforming Assets" means various assets (principally comprising
partnership or other interests in hotels which are not leased, certain
international hotels in which Host or its Subsidiaries own interests, and
certain FF&E relating to hotels owned by the Operating Partnership and its
Subsidiaries) which assets, if owned by the Operating Partnership, could
jeopardize Host REIT's status as a REIT.

                                      110


   "Non-Consolidated Entity" means a Non-Controlled Entity or a Fifty Percent
Venture which is neither a Non-Consolidated Restricted Entity nor an
Unrestricted Subsidiary.

   "Non-Consolidated Restricted Entity" means a Non-Controlled Entity or a
Fifty Percent Venture which has been designated by the Company (by notice to
the Trustee) as a Restricted Subsidiary and which designation has not been
revoked (by notice to the Trustee). Revocation of a previous designation of a
Non-Controlled Entity or a Fifty Percent Venture as a Non-Consolidated
Restricted Entity shall be deemed to be a designation of such entity to be a
Non-Consolidated Entity.

   "Non-Controlled Entity" means a taxable corporation in which the Operating
Partnership owns (directly or indirectly) 90% or more of the economic interest
but no more than 9.9% of the Voting Stock and whose assets consist primarily of
Non-Conforming Assets.

   "Offering" means the offering of the notes for sale by the Company.

   "Officer's Certificate" means a certificate signed on behalf of the Company,
a Guarantor or Subsidiary Guarantor, as applicable, by an officer of the
Company, a Guarantor or Subsidiary Guarantor, as applicable, who must be the
principal executive officer, the principal financial officer, the treasurer or
the principal accounting officer of the Company, Guarantor or Subsidiary
Guarantor, as applicable.

   "Old Notes" means the approximately $35 million aggregate principal amount
of four series of Indebtedness of Host outstanding on the Issue Date.

   "Operating Agreements" means the asset or property management agreements,
franchise agreements, lease agreements and other similar agreements between the
Company, any Subsidiary Guarantor or any of their respective Restricted
Subsidiaries, on the one hand, and Marriott International, SLC or another
entity engaged in and having pertinent experience with the operation of such
similar properties, on the other, relating to the operation of the real estate
properties owned by the Company, any Subsidiary Guarantor or any of their
respective Restricted Subsidiaries, provided that the management of the Company
determines in good faith that such arrangements are fair to the Company and to
such Restricted Subsidiary.

   "Operating Partnership" means Host Marriott, L.P., a Delaware limited
partnership.

   "Parent" of any Person means a corporation which at the date of
determination owns, directly or indirectly, a majority of the Voting Stock of
such Person or of a Parent of such Person.

   "Partnership Mergers" means the merger of one of more Subsidiaries of the
Operating Partnership into one or more of the Public Partnerships.

   "Paying Agent" means, until otherwise designated, the Trustee.

   "Permitted Investment" means any of the following:

     (1) an Investment in Cash Equivalents

     (2) Investments in a Person substantially all of whose assets are of a
  type generally used in a Related Business (an "Acquired Person") if, as a
  result of such Investments:

       (a) the Acquired Person immediately thereupon is or becomes a
    Restricted Subsidiary of the Company or

       (b) the Acquired Person immediately thereupon either (I) is merged
    or consolidated with or into the Company or any of its Restricted
    Subsidiaries and the surviving Person is the Company or a Restricted
    Subsidiary of the Company or (II) transfers or conveys all or
    substantially all of its assets to, or is liquidated into, the Company
    or any of its Restricted Subsidiaries

                                      111


     (3) an Investment in a Person, provided that:

       (a) such Person is principally engaged in a Related Business

       (b) the Company or one or more of its Restricted Subsidiaries
    participates in the management of such Person, as a general partner,
    member of such Person's governing board or otherwise, and

       (c) any such Investment shall not be a Permitted Investment if,
    after giving effect thereto, the aggregate amount of Net Investments
    outstanding made in reliance on this clause (3) subsequent to the Issue
    Date would exceed 5% of Total Assets

     (4) Permitted Sharing Arrangement Payments

     (5) securities received in connection with an Asset Sale so long as such
  Asset Sale complied with the Indenture including the covenant "Limitation
  on Asset Sales" (but, only to the extent the fair market value of such
  securities and all other non-cash and non-Cash Equivalent consideration
  received complies with clause (2) of the first paragraph of the "Limitation
  on Asset Sales" covenant)

     (6) Investments in the Company or in Restricted Subsidiaries of the
  Company

     (7) Permitted Mortgage Investments

     (8) any Investments constituting part of the REIT Conversion and

     (9) any Investments in a Non-Consolidated Entity, provided that (after
  giving effect to such Investment) the total assets (before depreciation and
  amortization) of all Non-Consolidated Entities attributable to the
  Company's proportionate ownership interest therein, plus an amount equal to
  the Net Investments outstanding made in reliance upon clause (3) above,
  does not exceed 20% of the total assets (before depreciation and
  amortization) of the Company and its Consolidated Subsidiaries (to the
  extent of the Company's proportionate ownership interest therein).

   "Permitted Lien" means any of the following:

     (1) Liens imposed by governmental authorities for taxes, assessments or
  other charges where nonpayment thereof is not subject to penalty or which
  are being contested in good faith and by appropriate proceedings, if
  adequate reserves with respect thereto are maintained on the books of the
  Company in accordance with GAAP

     (2) statutory liens of carriers, warehousemen, mechanics, materialmen,
  landlords, repairmen or other like Liens arising by operation of law in the
  ordinary course of business, provided that:

       (a) the underlying obligations are not overdue for a period of more
    than 30 days and

       (b) such Liens are being contested in good faith and by appropriate
    proceedings and adequate reserves with respect thereto are maintained
    on the books of the Company in accordance with GAAP

     (3) Liens securing the performance of bids, trade contracts (other than
  for borrowed money), leases, statutory obligations, surety and appeal
  bonds, performance bonds and other obligations of a like nature incurred in
  the ordinary course of business

     (4) easements, rights-of-way, zoning, similar restrictions and other
  similar encumbrances or title defects which, singly or in the aggregate, do
  not in any case materially detract from the value of the property, subject
  thereto (as such property is used by the Company or any of its Restricted
  Subsidiaries) or interfere with the ordinary conduct of the business of the
  Company or any of its Restricted Subsidiaries

     (5) Liens arising by operation of law in connection with judgments, only
  to the extent, for an amount and for a period not resulting in an Event of
  Default with respect thereto

     (6) pledges or deposits made in the ordinary course of business in
  connection with workers' compensation, unemployment insurance and other
  types of social security legislation and

     (7) Liens securing on an equal and ratable basis the notes and any other
  Indebtedness.

                                      112


   "Permitted Mortgage Investment" means an Investment in Indebtedness secured
by real estate assets or Capital Stock of Persons (other than the Company or
its Restricted Subsidiaries) owning such real estate assets provided that:

     (1) the Company is able to consolidate the operations of the real estate
  assets in its GAAP financial statements

     (2) such real estate assets are owned by a partnership, LLC or other
  entity which is controlled by the Company or a Restricted Subsidiary as a
  general partner, managing member or through similar means or

     (3) the aggregate amount of such Permitted Mortgage Investments
  (excluding those referenced in clauses (1) and (2) above), determined at
  the time each such Investment was made, does not exceed 10% of Total Assets
  after giving effect to such Investment.

   "Permitted REIT Distributions" means a declaration or payment of any
dividend or the making of any distribution:

     (1) to Host REIT that is necessary to maintain Host REIT's status as a
  REIT under the Code or to satisfy the distributions required to be made by
  reason of Host REIT's making of the election provided for in Notice 88-19
  (or Treasury regulations issued pursuant thereto), if:

       (a) the aggregate principal amount of all outstanding Indebtedness
    (other than the QUIPs Debt) of the Company and its Restricted
    Subsidiaries on a consolidated basis at such time is less than 80% of
    Adjusted Total Assets of the Company and

       (b) no Default or Event of Default shall have occurred and be
    continuing and

     (2) to any Person in respect of any Units, which distribution is
  required as a result of or a condition to the distribution or payment of
  such dividend or distribution to Host REIT provided that such Person's
  investment in the Operating Partnership in consideration of which such
  Person received such Units shall have been consummated in a transaction
  determined by the Company to be fair to the Operating Partnership as set
  forth in an Officer's Certificate for Investments in an amount less than
  $50 million and as set forth in a Board Resolution for Investments equal to
  or greater than such amount.

   "Permitted REIT Payments" means, without duplication, payments to Host REIT
and its Subsidiaries that hold only Qualified Assets in an amount necessary
and sufficient to permit Host REIT and such Subsidiaries to pay all of their
operating expenses and other general corporate expenses and liabilities
(including any reasonable professional fees and expenses).

   "Permitted Sharing Arrangements" means any contracts, agreements or other
arrangements between the Company and/or one or more of its Subsidiaries and a
Parent of the Company and/or one or more Subsidiaries of such Parent, pursuant
to which such Persons share centralized services, establish joint payroll
arrangements, procure goods or services jointly or otherwise make payments
with respect to goods or services on a joint basis, or allocate corporate
expenses (other than taxes based on income) (provided that (i) such Permitted
Sharing Arrangements are, in the determination of management of the Company,
the Subsidiary Guarantors, or their Restricted Subsidiaries in the best
interests of the Company, the Subsidiary Guarantors, or their Restricted
Subsidiaries and (ii) the liabilities of the Company, the Subsidiary
Guarantors and their Restricted Subsidiaries under such Permitted Sharing
Arrangements are determined in good faith and on a reasonable basis).

   "Permitted Sharing Arrangements Payment" means payments under Permitted
Sharing Arrangements.

   "Permitted Tax Payments" means payment of any liability of the Company,
Host, Host REIT or any of their respective Subsidiaries for Taxes.

   "Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.


                                      113


   "Preferred Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated, whether
voting or non-voting), which have a preference on liquidation or with respect
to distributions over any other class of Capital Stock, including preferred
partnership interests, whether general or limited, or such Person's preferred
or preference stock, whether outstanding on the Closing Date or issued
thereafter, including, without limitation, all series and classes of such
preferred or preference stock.

   "Private Partnership" means a partnership (other than a Public Partnership)
or limited liability company that owns one or more full service hotels and
that, prior to the REIT Conversion, was partially but not Wholly Owned by Host
or one of its Subsidiaries.

   "Private Partnership Acquisition" means the acquisition by the Operating
Partnership or a Restricted Subsidiary thereof from unaffiliated partners of
certain Private Partnerships of partnership interests in such Private
Partnerships in exchange for Units or the assets of such Private Partnerships
by merger or conveyance in exchange for Units.

   "Procurement Contracts" means contracts for the procurement of goods and
services entered into in the ordinary course of business and consistent with
industry practices.

   "Pro Rata Share" means "PRS" where:

     PRS equals CR divided by TC multiplied by OPTC

  where:

     CR equals the redemption value of such Capital Stock in the issuing
  Restricted Subsidiary held in the aggregate by the Company and its
  Restricted Subsidiaries,

     TC equals the total contribution to the equity of the issuing Restricted
  Subsidiary made by the Company and its Restricted Subsidiaries, and

     OPTC equals the total contribution to the equity of the issuing
  Restricted Subsidiary made by other Persons.

   "Public Partnerships" mean, collectively:

     (1) Atlanta Marriott Marquis II Limited Partnership, a Delaware limited
  partnership (with which HMC Atlanta Merger Limited Partnership was merged)

     (2) Desert Springs Marriott Limited Partnership, a Delaware limited
  partnership (with which HMC Desert Merger Limited Partnership was merged)

     (3) Hanover Marriott Limited Partnership, a Delaware limited partnership
  (with which HMC Hanover Merger Limited Partnership was merged)

     (4) Marriott Diversified American Hotels, L.P., a Delaware limited
  partnership (with which HMC Diversified Merger Limited Partnership was
  merged)

     (5) Marriott Hotel Properties Limited Partnership, a Delaware limited
  partnership (with which HMC Properties I Merger Limited Partnership was
  merged)

     (6) Marriott Hotel Properties II Limited Partnership, a Delaware limited
  partnership (with which HMC Properties II Merger Limited Partnership was
  merged)

     (7) Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P., a Rhode
  Island limited partnership (with which HMC Chicago Merger Limited
  Partnership was merged)

     (8) Potomac Hotel Limited Partnership, a Delaware limited partnership
  (with which HMC Potomac Merger Limited Partnership was merged) and

     (9) Marriott Suites Limited Partnership, a Delaware limited partnership
  (with which MS Merger Limited Partnership was merged)

or, as the context may require, any such entity together with its Subsidiaries,
or any of such Subsidiaries.

                                      114


   "Qualified Assets" means:

     (1) Capital Stock of the Company or any of its Subsidiaries or of other
  Subsidiaries of the Guarantors substantially all of whose sole assets are
  direct or indirect interests in Capital Stock of the Company and

     (2) other assets related to corporate operations of the Guarantors which
  are de minimus in relation to those of the Guarantors and their Restricted
  Subsidiaries, taken as a whole.

   "Qualified Capital Stock" means any Capital Stock of the Company that is not
Disqualified Stock and, when used in the definition of "Disqualified Stock,"
also includes any Capital Stock of a Restricted Subsidiary, Host REIT or any
Parent of the Company that is not Disqualified Stock.

   "Qualified Exchange" means:

     (1) any legal defeasance, redemption, retirement, repurchase or other
  acquisition of then outstanding Capital Stock or Indebtedness of the
  Company issued on or after the Issue Date with the Net Cash Proceeds
  received by the Company from the substantially concurrent sale of Qualified
  Capital Stock or

     (2) any exchange of Qualified Capital Stock for any then outstanding
  Capital Stock or Indebtedness issued on or after the Issue Date.

   "QUIPS" means the 6 3/4% Convertible Preferred Securities issued by Host
Marriott Financial Trust, a statutory business trust.

   "QUIPs Debt" means the $567 million aggregate principal amount of 6 3/4%
convertible subordinated debentures due 2026 of Host, held by Host Marriott
Financial Trust, a statutory business trust.

   "Rating Agencies" means (i) S&P and (ii) Moody's or (iii) if S&P or Moody's
or both shall not make a rating of all of the notes publicly available, a
nationally recognized securities rating agency or agencies, as the case may be,
selected by the Company, which shall be substituted for S&P or Moody's or both,
as the case may be.

   "Rating Category" means currently:

     (1) with respect to S&P, any of the following categories: BB, B, CCC,
  CC, C and D (or equivalent successor categories)

     (2) with respect to Moody's, any of the following categories: Ba, B,
  Caa, Ca, C and D (or equivalent successor categories) and

     (3) the equivalent of any such category of S&P or Moody's used in
  another Rating Agency.

   In determining whether the rating of the notes has decreased by one or more
gradations, gradations within Rating Categories (currently + and - for S&P, 1,
2 and 3 for Moody's or the equivalent gradations for another Rating Agency)
shall be taken into account (e.g., with respect to S&P, a decline in a rating
from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one
gradation).

   "Rating Date" means the date which is 90 days prior to the earlier of:

     (1) a Change of Control and

     (2) the first public notice of the occurrence of a Change of Control or
  of the intention by the Company to effect a Change of Control.

   "Rating Decline" means the occurrence, on or within 90 days after the
earliest to occur of:

     (1) a Change of Control and

                                      115


     (2) the date of the first public notice of the occurrence of a Change of
  Control or of the intention by any Person to effect a Change of Control
  (which period shall be extended so long as the rating of the notes is under
  publicly announced consideration for possible downgrade by any of the
  Rating Agencies), of:

       (a) in the event the notes are rated by either Moody's or S&P on the
    Rating Date as Investment Grade, a decrease in the rating, of the notes
    by either of such Rating Agencies to a rating that is below Investment
    Grade or

       (b) in the event the notes are rated below Investment Grade by both
    Rating Agencies on the Rating Date, a decrease in the rating of the
    notes by either Rating Agency by one or more gradations (including
    gradations with Rating Categories as well as between Rating Categories).

   "Real Estate Assets" means real property and all FF&E associated or used in
connection therewith.

   "Reference Period" with regard to any Person means the four full fiscal
quarters ended immediately preceding any date upon which any determination is
to be made pursuant to the terms of the securities or the indenture.

   "Refinancing Indebtedness" means Indebtedness or Disqualified Stock:

     (1) issued in exchange for, or the proceeds from the issuance and sale
  of which are used substantially concurrently to repay, redeem, defease,
  refund, refinance, discharge or otherwise retire for value, in whole or in
  part, or

     (2) constituting an amendment, modification or supplement to, or a
  deferral or renewal of ((1) and (2) above are, collectively, a
  "Refinancing"), any Indebtedness or Disqualified Stock in a principal
  amount or, in the case of Disqualified Stock, liquidation preference, not
  to exceed the sum of:

       (a) the reasonable and customary fees and expenses incurred in
    connection with the Refinancing

    plus

       (b) the lesser of:

         1. the principal amount or, in the case of Disqualified Stock,
      liquidation preference, of the Indebtedness or Disqualified Stock so
      refinanced and

         2. if such Indebtedness being refinanced was issued with an
      original issue discount, the accreted value thereof (as determined
      in accordance with GAAP) at the time of such Refinancing

provided that Refinancing Indebtedness (other than a revolving line of credit
from a commercial lender or other Indebtedness whose proceeds are used to
repay a revolving line of credit from a commercial lender to the extent such
revolving line of credit or other Indebtedness was not put in place for
purposes of evading the limitations described in this definition) shall:

     (x) not have an Average Life shorter than the Indebtedness or
  Disqualified Stock to be so refinanced at the time of such Refinancing and

     (y) be subordinated in right of payment to the rights of holders of the
  notes if the Indebtedness or Disqualified Stock to be refinanced was so
  subordinated.

   "REIT Conversion" means the various transactions which were carried out in
connection with Host's conversion to a REIT, as generally described in the S-4
Registration Statement, including without limitation:

     (1) the contribution to the Operating Partnership and its Subsidiaries
  of substantially all of the assets (excluding the assets of SLC) held by
  Host and its other Subsidiaries

     (2) the assumption by the Operating Partnership and/or its Subsidiaries
  of substantially all of the liabilities of Host and its other Subsidiaries
  (including, without limitation, the QUIPs Debt and the Old Notes)

                                      116


     (3) the Partnership Mergers

     (4) the Private Partnership Acquisitions

     (5) the issuance of Limited Partner Notes in connection with the
  foregoing

     (6) the Blackstone Acquisition

     (7) the contribution, prior to or substantially concurrent with the
  Conversion Date, to Non-Controlled Entities of Non-Conforming Assets

     (8) the leases to SLC or Subsidiaries of SLC of the hotels owned by the
  Operating Partnership and its Subsidiaries

     (9) the Host REIT Merger

     (10) the E&P Distribution and

     (11) such other related transactions and steps, occurring prior to or
  substantially concurrent with or within a reasonable time after the
  Conversion Date as may be reasonably necessary to complete the above
  transactions or otherwise to permit Host REIT to elect to be treated as a
  REIT for Federal income tax purposes.

   "Related Business" means the businesses conducted (or proposed to be
conducted) by the Company and its Restricted Subsidiaries as of the Closing
Date and any and all businesses that in the good faith judgment of the Board of
the Company are materially related businesses or real estate related
businesses. Without limiting the generality of the foregoing, Related Business
shall include the ownership and operation of lodging properties.

   "Restricted Investment" means, in one or a series of related transactions,
any Investment, other than a Permitted Investment.

   "Restricted Payment" means, with respect to any Person (but without
duplication):

     (1) the declaration or payment of any dividend or other distribution in
  respect of Capital Stock of such Person or the Parent or any Restricted
  Subsidiary of such Person

     (2) any payment on account of the purchase, redemption or other
  acquisition or retirement for value of Capital Stock of such Person or the
  Parent or any Restricted Subsidiary of such Person

     (3) other than with the proceeds from the substantially concurrent sale
  of, or in exchange for, Refinancing Indebtedness, any purchase, redemption,
  or other acquisition or retirement for value of, any payment in respect of
  any amendment of the terms of or any defeasance of, any Subordinated
  Indebtedness, directly or indirectly, by such Person or the Parent or a
  Restricted Subsidiary of such Person prior to the scheduled maturity, any
  scheduled repayment of principal, or scheduled sinking fund payment, as the
  case may be, of such Indebtedness

     (4) any Restricted Investment by such Person and

     (5) the payment to any Affiliate (other than the Company or its
  Restricted Subsidiaries) in respect of taxes owed by any consolidated group
  of which both such Person or a Subsidiary of such Person and such Affiliate
  are members

provided, however, that the term "Restricted Payment" does not include:

     (a) any dividend, distribution or other payment on or with respect to
  Capital Stock of the Company to the extent payable solely in shares of
  Qualified Capital Stock

     (b) any dividend, distribution or other payment to the Company, or to
  any of the Subsidiary Guarantors, by the Company or any of its Restricted
  Subsidiaries

     (c)  Permitted Tax Payments

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     (d) the declaration or payment of dividends or other distributions by
  any Restricted Subsidiary of the Company, provided such distributions are
  made to the Company (or a Subsidiary of the Company, as applicable) on a
  pro rata basis (and in like form) with all dividends and distributions so
  made

     (e) the retirement of Units upon conversion of such Units to Capital
  Stock of Host REIT

     (f) any transactions comprising part of the REIT Conversion

     (g) any payments with respect to Disqualified Stock or Indebtedness at
  the stated time and amounts pursuant to the original terms of the
  instruments governing such obligations

     (h) Permitted REIT Payments and

     (i) payments in accordance with the existing terms of the QUIPS

and provided, further, that any payments of bona fide obligations of the
Company or any Restricted Subsidiary shall not be deemed to be Restricted
Payments solely by virtue of the fact of another Person's co-obligation with
respect thereto.

   "Restricted Subsidiary" means any Subsidiary of the Company other than (i)
an Unrestricted Subsidiary or (ii) a Non-Consolidated Entity.

   "S-4 Registration Statement" means the registration statement of the
Operating Partnership on Form S-4, filed with the Commission on June 2, 1998,
as amended and supplemented.

   "Secured Indebtedness" means any Indebtedness or Disqualified Stock secured
by a Lien (other than Permitted Liens) upon the property of the Company, the
Subsidiary Guarantors or any of their respective Restricted Subsidiaries.

   "Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" of the Company within the meaning of Rule 1-02(w) of Regulation S-X
promulgated by the Commission as in effect as of the Issue Date.

   "SLC" means HMC Senior Communities, Inc., a Delaware corporation, and its
successor Crestline Capital Corporation, a Maryland corporation, and its
successors and assigns.

   "S&P" means Standard & Poor's Ratings Services and its successors.

   "Stated Maturity" means:

     (1) with respect to any debt security, the date specified in such debt
  security as the fixed date on which the final installment of principal of
  such debt security is due and payable and

     (2) with respect to any scheduled installment of principal of or
  interest on any debt security, the date specified in such debt security as
  the fixed date on which such installment is due and payable.

   "Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary Guarantor that is expressly subordinated in right of payment to the
notes or a Subsidiary Guarantee thereof, as applicable.

   "Subsidiary" means, with respect to any Person:

     (1) any corporation, association or other business entity of which more
  than 50% of the voting power of the outstanding Voting Stock is owned,
  directly or indirectly, by such Person, by such Person and one or more
  Subsidiaries of such Person or by one or more Subsidiaries of such Person,
  or the accounts of which would be consolidated with those of such Person in
  its consolidated financial statements in accordance with GAAP, if such
  statements were prepared as of such date

     (2) any partnership:

       (a) in which such Person or one or more Subsidiaries of such Person
    is, at the time, a general partner and owns alone or together with the
    Company a majority of the partnership interest or

                                      118


       (b) in which such Person or one or more Subsidiaries of such Person
    is, at the time, a general partner and which is controlled by such
    Person in a manner sufficient to permit its financial statements to be
    consolidated with the financial statements of such Person in
    conformance with GAAP and the financial statements of which are so
    consolidated

     (3) any Non-Controlled Entity and

     (4) any Fifty Percent Venture.

   "Subsidiary Guarantee" means a Guarantee by each Subsidiary Guarantor for
payment of principal, premium and interest on the notes by such Subsidiary
Guarantor. Each Subsidiary Guarantee will be a senior obligation of the
Subsidiary Guarantor and will be full and unconditional regardless of the
enforceability of the notes and the indenture.

   "Subsidiary Guarantors" means:

     (1) the current Subsidiary Guarantors identified in the following
  sentence and

     (2) any Future Subsidiary Guarantors that become Subsidiary Guarantors
  pursuant to the terms of the indenture

but in each case excluding any Persons whose guarantees have been released
pursuant to the terms of the indenture.

   The current Subsidiary Guarantors are:
  (1) Airport Hotels LLC
  (2) Host of Boston, Ltd.
  (3) Host of Houston, Ltd.
  (4) Host of Houston 1979
  (5) Chesapeake Financial Services LLC
  (6) City Center Interstate Partnership LLC
  (7) HMC Retirement Properties, L.P.
  (8) HMH Marina LLC
  (9) Farrell's Ice Cream Parlour Restaurants LLC
  (10) HMC Atlanta LLC
  (11) HMC BCR Holdings LLC
  (12)  HMC Burlingame LLC
  (13) HMC California Leasing LLC
  (14) HMC Capital LLC
  (15) HMC Capital Resources LLC
  (16) HMC Park Ridge LLC
  (17) HMC Partnership Holdings LLC
  (18) Host Park Ridge LLC
  (19) HMC Suites LLC
  (20) HMC Suites Limited Partnership
  (21) PRM LLC

  (22) Wellsford-Park Ridge HMC Hotel Limited Partnership

  (23) YBG Associates LLC
  (24) HMC Chicago LLC
  (25) HMC Desert LLC
  (26) HMC Palm Desert LLC

                                      119


  (27)MDSM Finance LLC
  (28)HMC Diversified LLC
  (29)HMC East Side II LLC
  (30)HMC Gateway LLC
  (31)HMC Grand LLC
  (32)HMC Hanover LLC
  (33)HMC Hartford LLC
  (34)HMC Hotel Development LLC
  (35)HMC HPP LLC

  (36)HMC IHP Holdings LLC

  (37)HMC Manhattan Beach LLC
  (38)HMC Market Street LLC
  (39)New Market Street LP
  (40)HMC Georgia LLC
  (41)HMC Mexpark LLC
  (42)HMC Polanco LLC
  (43)HMC NGL LLC
  (44)HMC OLS I L.P.
  (45)HMC OP BN LLC
  (46)HMC Pacific Gateway LLC
  (47)HMC PLP LLC
  (48)Chesapeake Hotel Limited Partnership
  (49)HMC Potomac LLC
  (50)HMC Properties I LLC
  (51)HMC Properties II LLC
  (52)HMC RTZ Loan I LLC
  (53)HMC RTZ II LLC
  (54)HMC SBM Two LLC
  (55)HMC Seattle LLC
  (56)HMC SFO LLC
  (57)HMC Swiss Holdings LLC
  (58)HMC Waterford LLC
  (59)HMH General Partner Holdings LLC
  (60)HMH Norfolk LLC
  (61)HMH Norfolk, L.P.
  (62)HMH Pentagon LLC
  (63)HMH Restaurants LLC
  (64)HMH Rivers LLC
  (65)HMH Rivers, L.P.
  (66)HMH WTC LLC
  (67)HMP Capital Ventures LLC
  (68)HMP Financial Services LLC
  (69)Host La Jolla LLC
  (70)City Center Hotel Limited Partnership
  (71)Times Square LLC

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  (72)Ivy Street LLC
  (73)Market Street Host LLC
  (74)MFR of Illinois LLC
  (75)MFR of Vermont LLC
  (76)MFR of Wisconsin LLC
  (77)Philadelphia Airport Hotel LLC
  (78)PM Financial LLC
  (79)PM Financial LP
  (80)HMC Property Leasing LLC
  (81)HMC Host Restaurants LLC
  (82)Santa Clara HMC LLC
  (83)S.D. Hotels LLC
  (84)Times Square GP LLC
  (85)Durbin LLC
  (86)HMC HT LLC
  (87)HMC JWDC GP LLC
  (88)HMC JWDC LLC
  (89)HMC OLS I LLC
  (90)HMC OLS II L.P.
  (91)HMT Lessee Parent LLC
  (92)HMC/Interstate Ontario, L.P.
  (93)HMC/Interstate Manhattan Beach, L.P.
  (94)Host/Interstate Partnership, L.P.
  (95)HMC/Interstate Waterford, L.P.
  (96)Ameliatel
  (97)HMC Amelia I LLC
  (98)HMC Amelia II LLC
  (99)Rockledge Hotel LLC and
  (100)Fernwood Hotel LLC

   "Subsidiary Indebtedness" means, without duplication, all Unsecured
Indebtedness (including Guarantees (other than Guarantees by Restricted
Subsidiaries of Secured Indebtedness)) of which a Restricted Subsidiary other
than a Subsidiary Guarantor is the obligor. A release of the Guarantee of a
Subsidiary Guarantor which remains a Restricted Subsidiary shall be deemed to
be an Incurrence of Subsidiary Indebtedness in amount equal to the Company's
proportionate interest in the Unsecured Indebtedness of such Subsidiary
Guarantor.

   "Tax" or "Taxes" means all Federal, state, local, and foreign taxes, and
other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto, imposed by any domestic or foreign governmental authority responsible
for the administration of any such taxes.

   "Total Assets" means the sum of:

     (1) Undepreciated Real Estate Assets and

     (2) all other assets (excluding intangibles) of the Company, the
  Subsidiary Guarantors, and their respective Restricted Subsidiaries
  determined on a consolidated basis (it being understood that the accounts
  of Restricted Subsidiaries shall be consolidated with those of the Company
  only to the extent of the Company's proportionate interest therein).

                                      121


   "Total Unencumbered Assets" as of any date means the sum of:

     (1) Undepreciated Real Estate Assets not securing any portion of Secured
  Indebtedness and

     (2) all other assets (but excluding intangibles and minority interests
  in Persons who are obligors with respect to outstanding secured debt) of
  the Company, the Subsidiary Guarantors and their respective Restricted
  Subsidiaries not securing any portion of Secured Indebtedness, determined
  on a consolidated basis (it being understood that the accounts of
  Restricted Subsidiaries shall be consolidated with those of the Company
  only to the extent of the Company's proportionate interest therein).

   "Transaction Date" means, with the respect to the Incurrence of any
Indebtedness or issuance of Disqualified Stock by the Company or any of its
Restricted Subsidiaries, the date such Indebtedness is to be Incurred or such
Disqualified Stock is to be issued and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.

   "Treasury Yield" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two Business Days prior to the
date fixed for redemption (or, if such Statistical Release is no longer
published, any publicly available source of similar data)) most nearly equal to
the then remaining average life of the notes, provided that if the average life
of the notes is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury yield shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the average life of the notes is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.

   "Undepreciated Real Estate Assets" means, as of any date, the cost (being
the original cost to the Company, the Subsidiary Guarantors or any of their
respective Restricted Subsidiaries plus capital improvements) of real estate
assets of the Company, the Subsidiary Guarantors and their respective
Restricted Subsidiaries on such date, before depreciation and amortization of
such real estate assets, determined on a consolidated basis (it being
understood that the accounts of Restricted Subsidiaries shall be consolidated
with those of the Company only to the extent of the Company's proportionate
interest therein).

   "Units" means the limited partnership units of the Operating Partnership.

   "Unrestricted Subsidiary" means any Subsidiary of the Company that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of the Company in the manner provided below. The Board of the Company may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary, unless such
Subsidiary owns any Capital Stock of the Company, the Subsidiary Guarantors or
any of their respective Restricted Subsidiaries (other than the designated
Subsidiary and any other Subsidiary concurrently being designated as an
Unrestricted Subsidiary); provided that:

     (1) any Guarantee by the Company, the Subsidiary Guarantors or any of
  their respective Restricted Subsidiaries (other than the designated
  Subsidiary and any other Subsidiary concurrently being designated as an
  Unrestricted Subsidiary) of any Indebtedness of the Subsidiary being so
  designated shall be deemed an "Incurrence" of such Indebtedness and an
  "Investment" by the Company, the Subsidiary Guarantors or such Restricted
  Subsidiaries at the time of such designation

     (2) either:

       (a) the Subsidiary to be so designated has total assets of $1,000 or
    less or

       (b) if such Subsidiary has assets greater than $1,000, such
    designation would not be prohibited under the "Limitation on Restricted
    Payments" covenant described below and

     (3) if applicable, the Incurrence of Indebtedness and the Investment
  referred to in clause (1) of this proviso would be permitted under the
  "Limitation on Incurrences of Indebtedness and Issuances of Disqualified
  Stock" and "Limitation on Restricted Payments" covenants.

                                      122


   The Board of the Company may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that:

     (1) no Default or Event of Default shall have occurred and be continuing
  at the time of or after giving effect to such designation and

     (2) all Liens, Indebtedness and Disqualified Stock of such Unrestricted
  Subsidiary outstanding immediately after such designation would, if
  Incurred, granted or issued at such time, have been permitted to be
  Incurred, granted or issued and shall be deemed to have been Incurred,
  granted or issued for all purposes of the indenture.

   Any such designation by the Board of the Company shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an Officer's Certificate certifying that
such designation complied with the foregoing provisions.

   "Unsecured Indebtedness" means any Indebtedness or Disqualified Stock of the
Company, the Subsidiary Guarantors or any of their respective Restricted
Subsidiaries that is not Secured Indebtedness.

   "Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting, members of the governing body of such Person.

   "Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other
than any director's qualifying shares or Investments by individuals mandated by
applicable law) by such Person and/or one or more Wholly Owned Subsidiaries of
such Person.

Covenants

   The following covenants apply to the Series I senior notes being offered
pursuant to this prospectus:

 Repurchase of Notes at the Option of the Holder Upon a Change of Control
 Triggering Event

   Upon the occurrence of a Change of Control Triggering Event, each holder of
notes will have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's notes
pursuant to the unconditional, irrevocable offer to purchase described below
(the "Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon to
the date of purchase (the "Change of Control Payment") on a date that is not
more than 45 Business Days after the occurrence of such Change of Control
Triggering Event (the "Change of Control Payment Date").

   On or before the Change of Control Payment Date, the Company will:

     (1) accept for payment notes or portions thereof properly tendered
  pursuant to the Change of Control Offer;

     (2) deposit with the Paying Agent cash sufficient to pay the Change of
  Control Payment (together with accrued and unpaid interest) of all notes so
  tendered; and

     (3) deliver to the trustee notes so accepted together with an Officer's
  Certificate listing the aggregate principal amount of the notes or portions
  thereof being purchased by the Company.

   The Paying Agent will promptly mail to the holders of notes so accepted
payment in an amount equal to the Change of Control Payment, and the trustee
will promptly authenticate and mail or deliver (or cause to be transferred by
book entry) to such holders a new note equal in principal amount to any
unpurchased portion of the note surrendered; provided that each such new note
will be in a principal amount of $1,000 or an integral

                                      123


multiple thereof. Any notes not so accepted will be promptly mailed or
delivered by the Company to the holder thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the consummation thereof.

   The provisions of the indenture relating to a Change of Control Triggering
Event may not afford the holders protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger, spin-off or similar
transaction that may adversely affect holders, if such transaction does not
constitute a Change of Control Triggering Event, as defined. In addition, the
Company may not have sufficient financial resources available to fulfill its
obligation to repurchase the notes upon a Change of Control Triggering Event.

   Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Securities Exchange Act of 1934, as amended, and the rules thereunder and all
other applicable Federal and state securities laws.

 Limitation on Incurrences of Indebtedness and Issuance of Disqualified Stock

   (1) Except as set forth below, neither the Company, the Subsidiary
Guarantors nor any of their respective Restricted Subsidiaries will, directly
or indirectly, Incur any Indebtedness (including Acquired Indebtedness) or
issue any Disqualified Stock. Notwithstanding the foregoing sentence, if, on
the date of any such Incurrence or issuance, after giving effect to, on a pro
forma basis, such Incurrence or issuance and the receipt and application of the
proceeds therefrom:

     (a) the aggregate amount of all outstanding Indebtedness (other than the
  QUIPs Debt) and Disqualified Stock of the Company, the Subsidiary
  Guarantors and their respective Restricted Subsidiaries (including amounts
  of Refinancing Indebtedness outstanding pursuant to paragraph (4)(c) hereof
  or otherwise), determined on a consolidated basis (it being understood that
  the amounts of Indebtedness and Disqualified Stock of Restricted
  Subsidiaries shall be consolidated with that of the Company only to the
  extent of the Company's proportionate interest in such Restricted
  Subsidiaries), without duplication, is less than or equal to 65% of
  Adjusted Total Assets of the Company; and

     (b) the Consolidated Coverage Ratio of the Company would be greater than
  or equal to 2.0 to 1, the Company and its Restricted Subsidiaries may Incur
  such Indebtedness or issue such Disqualified Stock.

   (2) In addition to the foregoing limitations set forth in (1) above, except
as set forth below, the Company, the Subsidiary Guarantors and their Restricted
Subsidiaries will not Incur any Secured Indebtedness or Subsidiary
Indebtedness. Notwithstanding the foregoing sentence, if, immediately after
giving effect to the Incurrence of such additional Secured Indebtedness and/or
Subsidiary Indebtedness and the application of the proceeds thereof, the
aggregate amount of all outstanding Secured Indebtedness and Subsidiary
Indebtedness of the Company, the Subsidiary Guarantors and their Restricted
Subsidiaries (including amounts of Refinancing Indebtedness outstanding
pursuant to paragraph (4)(c) hereof or otherwise), determined on a consolidated
basis (it being understood that the amounts of Secured Indebtedness and
Subsidiary Indebtedness of Restricted Subsidiaries shall be consolidated with
that of the Company only to the extent of the Company's proportionate interest
in such Restricted Subsidiaries), without duplication, is less than or equal to
45% of Adjusted Total Assets of the Company, the Company and its Restricted
Subsidiaries may Incur such Secured Indebtedness and/or Subsidiary
Indebtedness.

   (3) In addition to the limitations set forth in (1) and (2) above, the
Company, the Subsidiary Guarantors and their Restricted Subsidiaries will
maintain at all times Total Unencumbered Assets of not less than 125% of the
aggregate outstanding amount of the Unsecured Indebtedness (other than the
QUIPs Debt) (including amounts of Refinancing Indebtedness outstanding pursuant
to paragraph (4)(c) hereof or otherwise) determined on a consolidated basis (it
being understood that the Unsecured Indebtedness of the Restricted Subsidiaries
shall be consolidated with that of the Company only to the extent of the
Company's proportionate interest in such Restricted Subsidiaries).

                                      124


   (4) Notwithstanding paragraphs (1) or (2), the Company, the Subsidiary
Guarantors and their respective Restricted Subsidiaries (except as specified
below) may Incur or issue each and all of the following:

     (a) Indebtedness outstanding (including Indebtedness issued to replace,
  refinance or refund such Indebtedness) under the Credit Facility at any
  time in an aggregate principal amount not to exceed $1.5 billion, less any
  amount of such Indebtedness permanently repaid as provided under the
  "Limitation on Asset Sales" covenant (including that, in the case of a
  revolver or similar arrangement, such commitment is permanently reduced by
  such amount);

     (b) Indebtedness or Disqualified Stock owed:

       a) to the Company; or

       b) to any Subsidiary Guarantor; provided that any event which results
    in any Restricted Subsidiary holding such Indebtedness or Disqualified
    Stock ceasing to be a Restricted Subsidiary or any subsequent transfer
    of such Indebtedness or Disqualified Stock (other than to the Company or
    a Subsidiary Guarantor) shall be deemed, in each case, to constitute an
    Incurrence of such Indebtedness or issuance of Disqualified Stock not
    permitted by this clause (b);

     (c) Refinancing Indebtedness with respect to outstanding Indebtedness
  (other than Indebtedness Incurred under clause (a), (b), (d), (f) or (h) of
  this paragraph) and any refinancings thereof;

     (d) Indebtedness:

       (i) in respect of performance, surety or appeal bonds Incurred in the
    ordinary course of business;

       (ii) under Currency Agreements and Interest Swap and Hedging
    Obligations; provided that such agreements:

        (A) are designed solely to protect the Company, the Subsidiary
      Guarantors or any of their Restricted Subsidiaries against
      fluctuations in foreign currency exchange rates or interest rates;
      and

        (B) do not increase the Indebtedness of the obligor outstanding,
      at any time other than as a result of fluctuations in foreign
      currency exchange rates or interest rates or by reason of fees,
      indemnities and compensation payable thereunder; or

       (iii) arising from agreements providing for indemnification,
    adjustment of purchase price or similar obligations, or from Guarantees
    or letters of credit, surety bonds or performance bonds securing any
    obligations of the Company, the Subsidiary Guarantors or any of their
    Restricted Subsidiaries pursuant to such agreements, in any case
    Incurred in connection with the disposition of any business, assets or
    Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by
    any Person acquiring all or any portion of such business, assets or
    Restricted Subsidiary for the purpose of financing such acquisition), in
    an amount not to exceed the gross proceeds actually received by the
    Company, the Subsidiary Guarantors and their Restricted Subsidiaries on
    a consolidated basis in connection with such disposition;

     (e) Indebtedness of the Company, to the extent the net proceeds thereof
  are promptly:

       (i) used to purchase all of the notes tendered in a Change of Control
    Offer made as a result of a Change of Control; or

       (ii) deposited to defease the notes as described below under "Legal
    Defeasance and Covenant Defeasance";

     (f) Guarantees of the notes and Guarantees of Indebtedness of the
  Company or any of the Subsidiary Guarantors by any of their respective
  Restricted Subsidiaries; provided the guarantee of such Indebtedness is
  permitted by and made in accordance with the terms of the Indenture at the
  time of the incurrence of such underlying Indebtedness or at the time such
  guarantor becomes a Restricted Subsidiary;

     (g) Indebtedness evidenced by the notes and the Guarantees thereof and
  represented by the indenture up to the amounts issued pursuant thereto as
  of the Issue Date;

     (h) the QUIPs Debt;

                                      125


     (i) Limited Partner Notes; and

     (j) Indebtedness Incurred pursuant to the Blackstone Acquisition and any
  Indebtedness of Host, its Subsidiaries, a Public Partnership or a Private
  Partnership incurred in connection with the REIT Conversion.

   (5) For purposes of determining any particular amount of Indebtedness under
this covenant:

     (a) Indebtedness Incurred under the Credit Facility on or prior to the
  Issue Date shall be treated as Incurred pursuant to clause (a) of paragraph
  (4) of this covenant; and

     (b) Guarantees, Liens or obligations with respect to letters of credit
  supporting Indebtedness otherwise included in the determination of such
  particular amount shall not be included as additional Indebtedness. For
  purposes of determining compliance with this covenant, in the event that an
  item of Indebtedness meets the criteria of more than one of the types of
  Indebtedness described in the above clauses, the Company, in its sole
  discretion, shall classify such item of Indebtedness as being Incurred
  under only one of such clauses.

   Indebtedness or Disqualified Stock of any Person that is not a Restricted
Subsidiary of the Company, which Indebtedness or Disqualified Stock is
outstanding at the time such Person becomes a Restricted Subsidiary of the
Company (including by designation) or is merged with or into or consolidated
with the Company or a Restricted Subsidiary of the Company, shall be deemed to
have been Incurred or issued at the time such Person becomes a Restricted
Subsidiary of the Company or is merged with or into or consolidated with the
Company, or a Restricted Subsidiary of the Company, and Indebtedness or
Disqualified Stock which is assumed at the time of the acquisition of any asset
shall be deemed to have been Incurred or issued at the time of such
acquisition.

 Limitation on Liens

   Neither the Company, the Subsidiary Guarantors, nor any Restricted
Subsidiary shall secure any Indebtedness under the Credit Facility by a Lien or
suffer to exist any Lien on their respective properties or assets securing
Indebtedness under the Credit Facility unless effective provision is made to
secure the notes equally and ratably with the Lien securing such Indebtedness
for so long as Indebtedness under the Credit Facility is secured by such Lien.

 Limitation on Restricted Payments

   The Company and the Subsidiary Guarantors will not, and the Company and the
Subsidiary Guarantors will not permit any of their respective Restricted
Subsidiaries to, directly or indirectly, make a Restricted Payment if, at the
time of, and after giving effect to, the proposed Restricted Payment:

     (1) a Default or Event of Default shall have occurred and be continuing;

     (2) the Company could not Incur at least $1.00 of Indebtedness under
  paragraph (1) of the "Limitation on Incurrence of Indebtedness and Issuance
  of Disqualified Stock" covenant; or

     (3) the aggregate amount of all Restricted Payments (the amount, if
  other than in cash, the fair market value of any property used therefor)
  made on and after the Issue Date shall exceed the sum of, without
  duplication:

       (a) 95% of the aggregate amount of the Funds From Operations (or, if
    the Funds From Operations is a loss, minus 100% of the amount of such
    loss) accrued on a cumulative basis during the period (taken as one
    accounting period) beginning on the first day of the fiscal quarter in
    which the Issue Date occurs and ending on the last day of the last
    fiscal quarter preceding the Transaction Date;

       (b) 100% of the aggregate Net Cash Proceeds received by the Company
    after the Issue Date from the issuance and sale permitted by the
    Indenture of its Capital Stock (other than Disqualified Stock) to a
    Person who is not a Subsidiary of the Company including from an
    issuance to a Person

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    who is not a Subsidiary of the Company of any options, warrants or
    other rights to acquire Capital Stock of the Company (in each case,
    exclusive of any Disqualified Stock or any options, warrants or other
    rights that are redeemable at the option of the holder, or are required
    to be redeemed, prior to the Stated Maturity of the notes), and the
    amount of any Indebtedness (other than Indebtedness subordinate in
    right of payment to the notes) of the Company that was issued and sold
    for cash upon the conversion of such Indebtedness after the Issue Date
    into Capital Stock (other than Disqualified Stock) of the Company, or
    otherwise received as Capital Contributions;

       (c) an amount equal to the net reduction in Investments (other than
    Permitted Investments) in any Person other than a Restricted Subsidiary
    after the Issue Date resulting from payments of interest on
    Indebtedness, dividends, repayments of loans or advances, or other
    transfers of assets, in each case to the Company or any of its
    Restricted Subsidiaries or from the Net Cash Proceeds from the sale of
    any such Investment (except, in each case, to the extent any such
    payment or proceeds are included in the calculation of Funds From
    Operations) or from designations of Unrestricted Subsidiaries or Non-
    Consolidated Entities as Restricted Subsidiaries (valued in each case
    as provided in the definition of "Investments");

       (d) the fair market value of noncash tangible assets or Capital
    Stock (other than that of the Company or its Parent) representing
    interests in Persons acquired after the Issue Date in exchange for an
    issuance of Qualified Capital Stock; and

       (e) the fair market value of noncash tangible assets or Capital
    Stock (other than that of the Company or its Parent) representing
    interests in Persons contributed as a Capital Contribution to the
    Company after the Issue Date.

   Notwithstanding the foregoing, the Company may make Permitted REIT
Distributions.

   The Company estimates that as of September 7, 2001, the sum of the amounts
referenced in clauses (a) through (e) above was approximately $3.6 billion.

 Limitation on Dividend and Other Payment Restrictions Affecting Subsidiary
 Guarantors

   The Company and the Subsidiary Guarantors will not create or otherwise cause
or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Subsidiary Guarantor to:

     (1) pay dividends or make any other distributions permitted by
  applicable law on any Capital Stock of such Subsidiary Guarantor held by
  the Company or its Restricted Subsidiaries;

     (2) pay any Indebtedness owed to the Company or any Subsidiary
  Guarantor;

     (3) make loans or advances to the Company or any Subsidiary Guarantor;
  or

     (4) transfer its property or assets to the Company or any Subsidiary
  Guarantor.

   The foregoing provisions shall not prohibit any encumbrances or
restrictions:

     (1) imposed under the indenture as in existence immediately following
  the Issue Date or under the Credit Facility, and any extensions,
  refinancings, renewals or replacements of such agreements; provided that
  the encumbrances and restrictions in any such extensions, refinancings,
  renewals or replacements are no less favorable in any material respect to
  the holders than those encumbrances or restrictions that are then in effect
  and that are being extended, refinanced, renewed or replaced;

     (2) imposed under any applicable documents or instruments pertaining to
  any Secured Indebtedness (and relating solely to assets constituting
  collateral thereunder or cash proceeds from or generated by such assets);

     (3) existing under or by reason of applicable law;

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     (4) existing with respect to any Person or the property or assets of
  such Person acquired by the Company or any Restricted Subsidiary, existing
  at the time of such acquisition and not incurred in contemplation thereof,
  which encumbrances or restrictions are not applicable to any Person or the
  property or assets of any Person other than such Person or the property or
  assets of such Person so acquired;

     (5) in the case of clause (4) of the first paragraph of this covenant,
  (a) that restrict in a customary manner the subletting, assignment or
  transfer of any property or asset that is a lease, license, conveyance or
  contract or similar property or asset, (b) existing by virtue of any
  transfer of, agreement to transfer, option or right with respect to, or
  Lien on, any property or assets of the Company or any Restricted Subsidiary
  not otherwise prohibited by the indenture or (c) arising or agreed to in
  the ordinary course of business, not relating to any Indebtedness, and that
  do not, individually or in the aggregate, detract from the value of
  property or assets of the Company or any Restricted Subsidiary in any
  manner material to the Company and its Restricted Subsidiaries, taken as a
  whole;

     (6) with respect solely to a Restricted Subsidiary and imposed pursuant
  to an agreement that has been entered into for the sale or disposition of
  all or substantially all of the Capital Stock of, or property and assets
  of, such Restricted Subsidiary;

     (7) contained in the terms of any Indebtedness or any agreement pursuant
  to which such Indebtedness was issued if (a) the encumbrance or restriction
  applies only in the event of a payment default or a default with respect to
  a financial covenant contained in such Indebtedness or agreement, (b) the
  encumbrance or restriction is not materially more disadvantageous to the
  holders of the notes than is customary in comparable financings (as
  determined by the Company) and (c) the Company determines that any such
  encumbrance or restriction will not materially affect its ability to make
  principal or interest payments on the notes, or

     (8) in connection with and pursuant to permitted refinancings thereof,
  replacements of restrictions imposed pursuant to clause (4) of this
  paragraph that are not more restrictive than those being replaced and do
  not apply to any other Person or assets other than those that would have
  been covered by the restrictions in the Indebtedness so refinanced.

   Nothing contained in this covenant shall prevent the Company, the Subsidiary
Guarantors or any of their respective Restricted Subsidiaries from:

     (a) creating, incurring, assuming or suffering to exist any Permitted
  Liens or Liens not prohibited by the "Limitation on Liens" covenant; or

     (b) restricting the sale or other disposition of property or assets of
  the Company or any of its Restricted Subsidiaries that secure Indebtedness
  of the Company or any of its Restricted Subsidiaries in accordance with the
  terms of such Indebtedness or any related security document.

 Limitation on Transactions with Affiliates

   Neither the Company, the Subsidiary Guarantors, nor any of their respective
Restricted Subsidiaries will be permitted to, directly or indirectly, enter
into, renew or extend any transaction or series of transactions (including,
without limitation, the purchase, sale, lease or exchange of property or
assets, or the rendering of any service) with any Affiliate of the Company or
any of its Restricted Subsidiaries ("Affiliate Transactions"), other than
Exempted Affiliate Transactions, except upon fair and reasonable terms no less
favorable to the Company, the Subsidiary Guarantor or such Restricted
Subsidiary than could be obtained, at the time of such transaction or, if such
transaction is pursuant to a written agreement, at the time of the execution of
the agreement providing therefor, in a comparable arm's length transaction with
a Person that is not an Affiliate.

   The foregoing limitation does not limit, and shall not apply to:

     (1) transactions approved by a majority of the Board of the Company;

     (2) the payment of reasonable and customary fees and expenses to members
  of the Board of the Company who are not employees of the Company;

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     (3) any Restricted Payments not prohibited by the "Limitation on
  Restricted Payments" covenant or any payments specifically exempted from
  the definition of Restricted Payments; and

     (4) Permitted REIT Payments.

   Notwithstanding the foregoing, any Affiliate Transaction or series of
related Affiliate Transactions, other than Exempted Affiliate Transactions and
any transaction or series of related transactions specified in any of clauses
(2) through (4) of the preceding paragraph:

     (a) with an aggregate value in excess of $10 million must first be
  approved pursuant to a Board Resolution by a majority of the Board of the
  Company who are disinterested in the subject matter of the transaction; and

     (b) with an aggregate value in excess of $25 million, will require the
  Company to obtain a favorable written opinion from an independent financial
  advisor of national reputation as to the fairness from a financial point of
  view of such transaction to the Company, such Subsidiary Guarantor or such
  Restricted Subsidiary, except that in the case of a real estate transaction
  or related real estate transactions with an aggregate value in excess of
  $25 million but not in excess of $50 million, an opinion may instead be
  obtained from an independent, qualified real estate appraiser that the
  consideration received in connection with such transaction is fair to the
  Company, such Subsidiary Guarantor or such Restricted Subsidiary.

 Limitation on Asset Sales

   The Company and the Subsidiary Guarantors will not, and the Company and the
Subsidiary Guarantors will not permit any of their respective Restricted
Subsidiaries to, consummate any Asset Sale, unless:

     (1) the consideration received by the Company, the Subsidiary Guarantor
  or such Restricted Subsidiary is at least equal to the fair market value of
  the assets sold or disposed of as determined by the Board of the Company,
  in good faith; and

     (2) at least 75% of the consideration received consists of cash, Cash
  Equivalents and/or real estate assets; provided that, with respect to the
  sale of one or more real estate properties, up to 75% of the consideration
  may consist of indebtedness of the purchaser of such real estate properties
  so long as such Indebtedness is secured by a first priority Lien on the
  real estate property or properties sold; and provided that, for purposes of
  this clause (2) the amount of:

       (a) any Indebtedness (other than Indebtedness subordinated in right
    of payment to the notes or a Subsidiary Guarantee) that is required to
    be repaid or assumed (and is either repaid or assumed by the transferee
    of the related assets) by virtue of such Asset Sale and which is
    secured by a Lien on the property or assets sold; and

       (b) any securities or other obligations received by the Company, any
    Subsidiary Guarantor or any such Restricted Subsidiary from such
    transferee that are immediately converted by the Company, the
    Subsidiary Guarantor or such Restricted Subsidiary into cash (or as to
    which the Company, any Subsidiary Guarantor or such Restricted
    Subsidiary has received at or prior to the consummation of the Asset
    Sale a commitment (which may be subject to customary conditions) from a
    nationally recognized investment, merchant or commercial bank to
    convert into cash within 90 days of the consummation of such Asset Sale
    and which are thereafter actually converted into cash within such 90-
    day period)

will be deemed to be cash.

   In the event that the aggregate Net Cash Proceeds received by the Company,
any Subsidiary Guarantors or such Restricted Subsidiaries from one or more
Asset Sales occurring on or after the Closing Date in any period of 12
consecutive months exceed 1% of Total Assets (determined as of the date closest
to the commencement of such 12 month period for which a consolidated balance
sheet of the Company and its Restricted Subsidiaries has been filed with the
Securities and Exchange Commission or provided to the trustee pursuant to the

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"Reports" covenant), then prior to 12 months after the date Net Cash Proceeds
so received exceeded 1% of Total Assets, the Net Cash Proceeds may be:

     (1) invested in or committed to be invested in, pursuant to a binding
  commitment subject only to reasonable, customary closing conditions, and
  providing such Net Cash Proceeds are, in fact, so invested, within an
  additional 180 days:

       (a) fixed assets and property (other than notes, bonds, obligations
    and securities) which in the good faith reasonable judgment of the
    Board of the Company will immediately constitute or be part of a
    Related Business of the Company, the Subsidiary Guarantor or such
    Restricted Subsidiary (if it continues to be a Restricted Subsidiary)
    immediately following such transaction;

       (b) Permitted Mortgage Investments; or

       (c) a controlling interest in the Capital Stock of an entity engaged
    in a Related Business;

  provided that concurrently with an Investment specified in clause (c), such
  entity becomes a Restricted Subsidiary; or

     (2) used to repay and permanently reduce Indebtedness outstanding under
  the Credit Facility (including that, in the case of a revolver or similar
  arrangement, such commitment is permanently reduced by such amount).

   Pending the application of any such Net Cash Proceeds as described above,
the Company may invest such Net Cash Proceeds in any manner that is not
prohibited by the Indenture. Any Net Cash Proceeds from Asset Sales that are
not applied or invested as provided in the first sentence of this paragraph
(including any Net Cash Proceeds which were committed to be invested as
provided in such sentence but which are not in fact invested within the time
period provided) will be deemed to constitute "Excess Proceeds."

   Within 30 days following each date on which the aggregate amount of Excess
Proceeds exceeds $25 million, the Company will make an offer to purchase from
the holders of the notes and holders of any other Indebtedness of the Company
ranking pari passu with the notes from time to time outstanding with similar
provisions requiring the Company to make an offer to purchase or redeem such
Indebtedness with the proceeds from such Asset Sale, on a pro rata basis, an
aggregate principal amount (or accreted value, as applicable) of notes and such
other Indebtedness equal to the Excess Proceeds on such date, at a purchase
price in cash equal to 100% of the principal amount (or accreted value, as
applicable) of the notes and such other Indebtedness, plus, in each case,
accrued interest (if any) to the Payment Date. To the extent that the aggregate
amount of notes and other senior Indebtedness tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. If the aggregate principal
amount (or accreted value, as applicable) of notes and such other Indebtedness
tendered pursuant to an Asset Sale Offer exceeds the amount of Excess Proceeds,
the notes to be purchased and such other Indebtedness shall be selected on a
pro rata basis. Upon completion of such Offer to Purchase, the amount of Excess
Proceeds shall be reset at zero.

   Notwithstanding, and without complying with, any of the foregoing
provisions:

     (1) the Company, the Subsidiary Guarantors and their respective
  Restricted Subsidiaries may, in the ordinary course of business, convey,
  sell, lease, transfer, assign or otherwise dispose of inventory acquired
  and held for resale in the ordinary course of business;

     (2) the Company, the Subsidiary Guarantors and their respective
  Restricted Subsidiaries may convey, sell, lease, transfer, assign or
  otherwise dispose of assets pursuant to and in accordance with the
  "Consolidation, Merger and Sale of Assets" and "Limitation on Merger of
  Subsidiary Guarantors and Release of Subsidiary Guarantors" covenants in
  the indenture;

     (3) the Company, the Subsidiary Guarantors and their respective
  Restricted Subsidiaries may sell or dispose of damaged, worn out or other
  obsolete property in the ordinary course of business so long as such
  property is no longer necessary for the proper conduct of the business of
  the Company, the Subsidiary Guarantor or such Restricted Subsidiary, as
  applicable; and

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     (4) the Company, the Subsidiary Guarantors and their respective
  Restricted Subsidiaries may exchange assets held by the Company, the
  Subsidiary Guarantor or a Restricted Subsidiary for one or more real estate
  properties and/or one or more Related Businesses of any Person or entity
  owning one or more real estate properties and/or one or more Related
  Businesses; provided that the Board of the Company has determined in good
  faith that the fair market value of the assets received by the Company are
  approximately equal to the fair market value of the assets exchanged by the
  Company.

   No transaction listed in clauses (1) through (4) inclusive shall be deemed
to be an "Asset Sale."

 Limitation on Merger of Subsidiary Guarantors and Release of Subsidiary
 Guarantors

   No Subsidiary Guarantor shall consolidate or merge with or into (whether or
not such Subsidiary Guarantor is the surviving Person) another Person (other
than the Company or another Subsidiary Guarantor), unless:

     (1) subject to the provisions of the following paragraph, the Person
  formed by or surviving any such consolidation or merger (if other than such
  Subsidiary Guarantor) assumes all the obligations of such Subsidiary
  Guarantor pursuant to a supplemental indenture in form reasonably
  satisfactory to the trustee, pursuant to which such Person shall
  unconditionally and fully guarantee, on a senior basis, all of such
  Subsidiary Guarantor's obligations under such Subsidiary Guarantor's
  Guarantee under the indenture on the terms set forth in the indenture; and

     (2) immediately before and immediately after giving effect to such
  transaction on a pro forma basis, no Default or Event of Default shall have
  occurred or be continuing.

   Notwithstanding the foregoing, the Guarantee of the notes by a Subsidiary
Guarantor shall be automatically released upon:

     (a) The sale or other disposition of Capital Stock of such Subsidiary
  Guarantor if, as a result of such sale or disposition, such Subsidiary
  Guarantor ceases to be a Subsidiary of the Company;

     (b) the consolidation or merger of any such Subsidiary Guarantor with
  any Person other than the Company or a Subsidiary of the Company if, as a
  result of such consolidation or merger, such Subsidiary Guarantor ceases to
  be Subsidiary of the Company;

     (c) a Legal Defeasance or Covenant Defeasance; or

     (d) the unconditional and complete release of such Subsidiary Guarantor
  from its Guarantee of all Guaranteed Indebtedness.

 Limitation on Status as Investment Company

   The indenture prohibits the Company and its Restricted Subsidiaries from
being required to register as an "investment company" (as that term is defined
in the Investment Company Act of 1940, as amended).

Covenants upon Attainment and Maintenance of an Investment Grade Rating

   The covenants "--Limitation on Liens," "--Limitation on Restricted
Payments," "--Limitation on Dividend and other Payment Restrictions Affecting
Subsidiary Guarantors," "--Limitation on Transactions with Affiliates" and "--
Limitation on Asset Sales," will not be applicable in the event, and only for
so long as, the Series I senior notes are rated Investment Grade.

Reports

   Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
trustee and to each holder, within 15 days after it is or would have been
required to file such with the Commission, annual and quarterly financial
statements substantially

                                      131


equivalent to financial statements that would have been included in reports
filed with the Commission if the Company were subject to the requirements of
Section 13 or 15(d) of the Exchange Act, including, with respect to annual
information only, a report thereon by the certified independent public
accountants of the Company, as such would be required in such reports to the
Commission, and, in each case, together with a management's discussion and
analysis of financial condition and results of operations which would be so
required. Whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability and will make such information
available to securities analysts and prospective investors upon request.

Events of Default

   An Event of Default with respect to any series of senior notes issued under
the Indenture is defined as:

     (1) the failure by the Company to pay any installment of interest on the
  senior notes of that series as and when the same becomes due and payable
  and the continuance of any such failure for 30 days;

     (2) the failure by the Company to pay all or any part of the principal
  of, or premium, if any, on, the notes of that series when and as the same
  becomes due and payable at maturity, redemption, by acceleration or
  otherwise;

     (3) the failure by the Company, a Guarantor or any Subsidiary Guarantor
  to observe or perform any other covenant or agreement contained in the
  senior notes of that series or the Indenture with respect to that series of
  senior notes and, subject to certain exceptions, the continuance of such
  failure for a period of 30 days after written notice is given to the
  Company by the trustee or to the Company and the trustee by the holders of
  at least 25% in aggregate principal amount of the senior notes of that
  series outstanding;

     (4) certain events of bankruptcy, insolvency or reorganization in
  respect of the Company or any of its Significant Subsidiaries;

     (5) a default in (a) Secured Indebtedness of the Company or any of its
  Restricted Subsidiaries with an aggregate principal amount in excess of 5%
  of Total Assets, or (b) other Indebtedness of the Company or any of its
  Restricted Subsidiaries with an aggregate principal amount in excess of $50
  million, in either case, (A) resulting from the failure to pay principal or
  interest when due (after giving effect to any applicable extensions or
  grace or cure periods) or (B) as a result of which the maturity of such
  Indebtedness has been accelerated prior to its final Stated Maturity;

     (6) final unsatisfied judgments not covered by insurance aggregating in
  excess of 0.5% of Total Assets, at any one time rendered against the
  Company or any of its Significant Subsidiaries and not stayed, bonded or
  discharged within 60 days; and

     (7) any other Event of Default with respect to note of that series,
  which is specified in a Board Resolution, a supplemental indenture or an
  Officer's Certificate, in accordance with the indenture.

   The Indenture provides that if a Default occurs and is continuing, the
trustee must, within 90 days after the occurrence of such default, give to the
holders written notice of such default; provided that the trustee may withhold
from holders of the senior notes notice of any continuing Default or Event of
Default (except a Default or Events of Default relating to the payment of
principal or interest on the senior notes of that series) if it determines
that withholding notice is in their interest.

   If an Event of Default with respect to the senior notes of any series
occurs and is continuing (other than an Event of Default specified in clause
(4), above, relating to the Company), then either the trustee or the holders
of 25% in aggregate principal amount of the senior notes of that series then
outstanding, by notice in writing to the Company (and to the trustee if given
by holders) (an "Acceleration Notice"), may declare all principal, determined
as set forth below, and accrued interest thereon to be due and payable
immediately. If an Event of Default specified in clause (4) above relating to
the Company occurs, all principal and accrued interest thereon will be
immediately due and payable on all outstanding senior notes of such series
without any declaration or other act on the part of trustee or the holders.
The holders of a majority in aggregate principal amount of senior

                                      132


notes of any series generally are authorized to rescind such acceleration if
all existing Events of Default with respect to the senior notes of such series,
other than the non-payment of the principal of, premium, if any, and interest
on the senior notes of that series which have become due solely by such
acceleration, have been cured or waived. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding senior notes
of a series may direct the trustee in its exercise of any trust or power with
respect to such series.

   The holders of a majority in aggregate principal amount of the senior notes
of a series at the time outstanding may waive on behalf of all the holders any
default with respect to such series, except a default with respect to any
provision requiring supermajority approval to amend, which default may only be
waived by such a supermajority with respect to such series, and except a
default in the payment of principal of or interest on any senior note of that
series not yet cured or a default with respect to any covenant or provision
which cannot be modified or amended without the consent of the holder of each
outstanding senior note of that series affected.

   Subject to the provisions of the Indenture relating to the duties of the
trustee, the trustee will be under no obligation to exercise any of its rights
or powers under the Indenture at the request, order or direction of any of the
holders, unless such holders have offered to the trustee reasonable security or
indemnity. Subject to all provisions of the Indenture and applicable law, the
holders of a majority in aggregate principal amount of the senior notes of any
series at the time outstanding will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the trustee,
or exercising any trust or power conferred on the trustee, with respect to such
series.

Consolidation, Merger and Sale of Assets

   The Company will not merge with or into, or sell, convey, or transfer, or
otherwise dispose of all or substantially of its property and assets (as an
entirety or substantially as an entirety in one transaction or a series of
related transactions) to any Person or permit any Person to merge with or into
the Company, unless:

     (1) either the Company shall be the continuing Person or the Person (if
  other than the Company) formed by such consolidation or into which the
  Company is merged or that acquired such property and assets of the Company
  shall be an entity organized and validly existing under the laws of the
  United States of America or any state or jurisdiction thereof and shall
  expressly assume, by a supplemental indenture, executed and delivered to
  the trustee, all of the obligations of the Company, on the notes and under
  the indenture;

     (2) immediately after giving effect, on a pro forma basis, to such
  transaction, no Default or Event of Default shall have occurred and be
  continuing; and

     (3) the Company will have delivered to the trustee an Officer's
  Certificate and an Opinion of Counsel, in each case stating that such
  consolidation, merger or transfer and such supplemental indenture complies
  with this provision and that all conditions precedent provided for herein
  relating to such transaction have been complied with.

   Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company, in accordance with the foregoing, the successor
Person formed by such consolidation or into which the Company is merged or to
which such transfer is made, shall succeed to, be substituted for, and may
exercise every right and power of the Company under the Indenture with the same
effect as if such successor Person had been named therein as the Company and
the Company shall be released from the obligations under the Series I senior
notes and the Indenture.

Legal Defeasance and Covenant Defeasance

   The Company may, at its option, elect to have its obligations and the
obligations of the Guarantors and Subsidiary Guarantors discharged with respect
to the outstanding senior notes of any series ("Legal Defeasance"). Such Legal
Defeasance means that the Company shall be deemed to have paid and discharged

                                      133


the entire indebtedness represented, and the Indenture shall cease to be of
further effect as to all outstanding senior notes of such series and Guarantees
thereof, except as to:

     (1) rights of holders to receive payments in respect of the principal
  of, premium, if any, and interest on such senior notes when such payments
  are due from the trust funds;

     (2) the Company's obligations with respect to such senior notes
  concerning issuing temporary senior notes, registration of senior notes,
  mutilated, destroyed, lost or stolen senior notes, and the maintenance of
  an office or agency for payment and money for security payments held in
  trust;

     (3) the rights, powers, trust, duties, and immunities of the trustee,
  and the Company's, the Guarantors' and the Subsidiary Guarantors'
  obligations in connection therewith; and

     (4) the Legal Defeasance provisions of the Indenture.

   In addition, the Company may, at its option and at any time, elect, with
respect to any series of senior notes, to have the obligations of the Company,
the Guarantors and the Subsidiary Guarantors released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any failure to comply with such obligations shall not constitute a
Default or Event of Default with respect to the senior notes of such series. In
the event Covenant Defeasance occurs, certain events (not including non-
payment, bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the senior notes of such series.

   In order to exercise either Legal Defeasance or Covenant Defeasance, with
respect to any series of senior notes:

     (1) the Company must irrevocably deposit with the trustee, in trust, for
  the benefit of the holders of the senior notes of such series, U.S. legal
  tender, noncallable government securities or a combination thereof, in such
  amounts as will be sufficient, in the opinion of a nationally recognized
  firm of independent public accountants, to pay the principal of, premium,
  if any, and interest on such senior notes on the stated date for payment
  thereof or on the redemption date of such principal or installment of
  principal of, premium, if any, or interest on such senior notes;

     (2) in the case of the Legal Defeasance, the Company shall have
  delivered to the trustee an opinion of counsel in the United States
  reasonably acceptable to trustee confirming that (A) the Company has
  received from, or there has been published by the Internal Revenue Service,
  a ruling or (B) since the date of the Indenture, there has been a change in
  the applicable Federal income tax law, in either case to the effect that,
  and based thereon such opinion of counsel shall confirm that, the holders
  of such senior notes will not recognize income, gain or loss for Federal
  income tax purposes as a result of such Legal Defeasance and will be
  subject to Federal income tax on the same amounts, in the same manner and
  at the same times as would have been the case if such Legal Defeasance had
  not occurred;

     (3) in the case of Covenant Defeasance, the Company shall have delivered
  to the trustee an opinion of counsel in the United States reasonably
  acceptable to such trustee confirming that the holders of such senior notes
  will not recognize income, gain or loss for Federal income tax purposes as
  a result of such Covenant Defeasance and will be subject to Federal income
  tax on the same amounts, in the same manner and at the same times as would
  have been the case if such Covenant Defeasance had not occurred;

     (4) no Default or Event of Default shall have occurred with respect to
  such series and be continuing on the date of such deposit or insofar as
  Events of Default from bankruptcy or insolvency events are concerned, at
  any time in the period ending on the 91st day after the date of deposit;

     (5) such Legal Defeasance or Covenant Defeasance shall not result in a
  breach or violation of, or constitute a default under the Indenture or any
  other material agreement or instrument to which the Company or any of its
  Restricted Subsidiaries is a party or by which the Company or any of its
  Restricted Subsidiaries is bound;

     (6) the Company shall have delivered to the trustee an Officer's
  Certificate stating that the deposit was not made by the Company with the
  intent of preferring the holders of such senior notes over any other

                                      134


  creditors of the Company or with the intent of defeating, hindering,
  delaying or defrauding any other creditors of the Company or others; and

     (7) the Company shall have delivered to the trustee an Officer's
  Certificate stating that the conditions precedent provided for have been
  complied with.

Amendments, Supplements and Waivers

   The Indenture contains provisions permitting the Company, the Guarantors,
the Subsidiary Guarantors and the trustee to enter into a supplemental
indenture for certain limited purposes without the consent of the holders.
Subject to certain limited exceptions, modifications and amendments of the
Indenture or any supplemental indenture with respect to any series may be made
by the Company, the Guarantors, the Subsidiary Guarantors and the trustee with
the consent of the holders of not less than a majority in aggregate principal
amount of the outstanding senior notes of such series (except that any
amendments or supplements to the provisions relating to security interests or
with respect to the Guarantees of the Subsidiary Guarantors shall require the
consent of the holders of not less than 66 2/3% of the aggregate principal
amount of the senior notes of such series at the time outstanding); provided
that no such modification or amendment may, without the consent of each holder
affected thereby:

     (1) change the Stated Maturity of the principal of, or any installment
  of interest on, any senior note;

     (2) reduce the principal amount of, or premium, if any, or interest on,
  any senior note;

     (3) change the place of payment of principal of, or premium, if any, or
  interest on, any senior note;

     (4) impair the right to institute suit for the enforcement of any
  payment on or after the Stated Maturity (or, in the case of a redemption,
  on or after the Redemption Date) of any senior note;

     (5) reduce the above-stated percentages of outstanding senior notes the
  consent of whose holders is necessary to modify or amend the Indenture;

     (6) waive a default in the payment of principal of, premium, if any, or
  interest on the senior notes (except a rescission of acceleration of the
  securities of any series and a waiver of the payment default that resulted
  from such acceleration);

     (7) alter the provisions relating to the redemption of the senior notes
  at the option of the Company;

     (8) reduce the percentage or aggregate principal amount of outstanding
  senior notes the consent of whose holders is necessary for waiver of
  compliance with certain provisions of the Indenture or for waiver of
  certain defaults; or

     (9) make the senior notes subordinate in right of payment to any other
  Indebtedness.

No Personal Liability of Partners, Stockholders, Officers, Directors

   No recourse for the payment of the principal of, premium, if any, or
interest on any of the Series H senior notes or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company, the Guarantors or the Subsidiary
Guarantors in the Indenture, or in any of the Series I senior notes or because
of the creation of any Indebtedness represented thereby, shall be had against
any incorporator, partner, stockholder, officer, director, employee or
controlling Person of the Company, the Guarantors or the Subsidiary Guarantors
or of any successor Person thereof, except as an obligor or guarantor of the
Series I senior notes pursuant to the Indenture. Each holder, by accepting the
Series I senior notes, waives and releases all such liability.

Concerning the Trustee

   The Indenture provides that, except during the continuance of a Default, the
trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the trustee will use the same degree of care and skill in
its exercise of the rights

                                      135


and powers vested in it under the Indenture as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.

   The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein, contain limitations on the rights of the
trustee, should it become a creditor of the Company or the Guarantors, to
obtain payment of claims in certain cases or to realize on certain property
received by it in respect of any such claims, as security or otherwise. The
trustee is permitted to engage in other transactions; provided that if it
acquires any conflicting interest, it must eliminate such conflict or resign.

Book-Entry; Delivery; Form and Transfer

   The Series I senior notes initially will be in the form of one or more
registered global notes without interest coupons. Upon issuance, the global
notes will be deposited with the trustee, as custodian for DTC in New York, New
York, and registered in the name of DTC or its nominee for credit to the
accounts of DTC's direct participants and indirect participants (each as
defined in the following section "Depository Procedures").

   Transfer of beneficial interests in any global notes will be subject to the
applicable rules and procedures of DTC and its direct participants or indirect
participants, which may change from time to time.

   The global notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the global notes may be
exchanged for notes in certificated form in certain limited circumstances. See
"Transfer of Interests in Global Notes for Certificated Notes".

   Initially, the trustee will act as paying agent and registrar. The notes may
be presented for registration of transfer and exchange at the offices of the
registrar.

Depository Procedures

   DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations, called the "direct
participants", and to facilitate the clearance and settlement of transactions
in those securities between direct participants through electronic book-entry
changes in accounts of participants. The direct participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Access to DTC's system is also available to other entities
that clear through or maintain a direct or indirect custodial relationship with
a direct participant, called the "Indirect Participants". DTC may hold
securities beneficially owned by other persons only through the direct
participants or indirect participants and such other person's ownership
interest and transfer of ownership interest will be recorded only on the
records of the direct participant and/or indirect participant and not on the
records maintained by DTC.

   DTC has also advised us that, pursuant to DTC's procedures, (1) upon
issuance of the Global Notes, DTC will credit the accounts of the direct
participants with portions of the principal amount of the global notes, and (2)
DTC will maintain records of the ownership interests of such direct
participants in the global notes and the transfer of ownership interests by and
between direct participants, DTC will not maintain records of the ownership
interests of, or the transfer of ownership interest by and between, indirect
participants or other owners of beneficial interests in the global notes.
Direct participants and indirect participants must maintain their own records
of the ownership interests of, and the transfer of ownership interests by and
between, indirect participants and other owners of beneficial interests in the
global notes.

   Investors in the global notes may hold their interests therein directly
through DTC if they are direct participants in DTC or indirectly through
organizations that are direct participants in DTC. All ownership interests in
any global notes may be subject to the procedures and requirements of DTC.


                                      136


   The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that
they own. This may limit or curtail the ability to transfer beneficial
interests in a global note to such persons. Because DTC can act only on behalf
of direct participants, which in turn act on behalf of indirect participants
and others, the ability of a person having a beneficial interest in a Global
Note to pledge such interest to persons or entities that are not direct
participants in DTC, or to otherwise take actions in respect of such interests,
may be affected by the lack of physical certificates evidencing such interests.
For certain other restrictions on the transferability of the notes, see "--
Transfers of Interests in Global Notes for Certificated Notes".

   Except as described in "--Transfers of Interests in Global Notes for
Certificated Notes" owners of beneficial interests in the global notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders thereof under the indenture for any purpose.

   Under the terms of the Indenture, we, the subsidiary guarantors and the
trustee will treat the persons in whose names the Series I senior notes are
registered (including Series I senior notes represented by global notes) as the
owners thereof for the purpose of receiving payments and for any and all other
purposes whatsoever. Payments in respect of the principal, premium, liquidated
damages, if any, and interest on global notes registered in the name of DTC or
its nominee will be payable by the trustee to DTC or its nominee as the
registered holder under the Indenture. Consequently, none of us, the subsidiary
guarantors or the trustee or any agent of ours, the subsidiary guarantors or
the trustee has or will have any responsibility or liability for (1) any aspect
of DTC's records or any direct participant's or indirect participant's records
relating to or payments made on account of beneficial ownership interests in
the global notes or for maintaining, supervising or reviewing any of DTC's
records or any direct participant's or Indirect Participant's records relating
to the beneficial ownership interests in any global note or (2) any other
matter relating to the actions and practices of DTC or any of its direct
participants or indirect participants.

   DTC has advised us that its current payment practice (for payments of
principal, interest and the like) with respect to securities such as the notes
is to credit the accounts of the relevant direct participants with such payment
on the payment date in amounts proportionate to such direct participant's
respective ownership interests in the global notes as shown on DTC's records.
Payments by direct participants and indirect participants to the beneficial
owners of the notes will be governed by standing instructions and customary
practices between them and will not be the responsibility of DTC, the trustee,
us or the subsidiary guarantors. None of us, the subsidiary guarantors or the
trustee will be liable for any delay by DTC or its direct participants or
indirect participants in identifying the beneficial owners of the notes, and we
and the trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the notes for
all purposes.

   The global notes will trade in DTC's "Same-Day Funds Settlement System" and,
therefore, transfers between direct participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between indirect participants who hold an interest through a
direct participant will be effected in accordance with the procedures of such
direct participant but generally will settle in immediately available funds.

   DTC has advised that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more direct participants to
whose account interests in the global notes are credited and only in respect of
such portion of the aggregate principal amount of the notes as to which such
direct participant or direct participants has or have given direction. However,
if there is an Event of Default under the notes, DTC reserves the right to
exchange global notes (without the direction of one or more of its direct
participants) for legended notes in certificated form, and to distribute such
certificated forms of notes to its direct participants. See "--Transfers of
Interests in Global Notes for Certificated Notes".


                                      137


   The information in this section concerning DTC and its book-entry system has
been obtained from sources that we believe to be reliable, but we take no
responsibility for its accuracy.

Transfers of Interests in Global Notes for Certificated Notes

   An entire global note may be exchanged for definitive notes in registered,
certificated form without interest coupons if (1) DTC (x) notifies us that it
is unwilling or unable to continue as depository for the global notes and we
thereupon fail to appoint a successor depository within 90 days or (y) has
ceased to be a clearing agency registered under the Exchange Act, (2) we, at
our option, notify the trustee in writing that we elect to cause the issuance
of certificated notes or (3) upon the request of the trustee or holders of a
majority of the
outstanding principal amount of notes, there shall have occurred and be
continuing a Default or an Event of Default with respect to the notes. In any
such case, we will notify the trustee in writing that, upon surrender by the
direct participants and indirect participants of their interest in such global
note, certificated notes will be issued to each person that such direct
participants and indirect participants and DTC identify as being the beneficial
owner of the related notes.

   Beneficial interests in global notes held by any direct participant or
indirect participant may be exchanged for certificated notes upon request to
DTC, by such direct participant (for itself or on behalf of an indirect
participant), and to the trustee in accordance with customary DTC procedures,
certificated notes delivered in exchange for any beneficial interest in any
global notes will be registered in the names, and issued in any approved
denominations, requested by DTC on behalf of such direct participants or
indirect participants (in accordance with DTC's customary procedures).

   None of us, the subsidiary guarantors or the trustee will be liable for any
delay by the holder of any global notes or DTC in identifying the beneficial
owners of notes, and we and the trustee may conclusively rely on, and will be
protected in relying on, instructions from the holder of the global note or DTC
for all purposes.

Same Day Settlement and Payment

   The Indenture will require that payments in respect of the Series I senior
notes represented by the global notes (including principal, premium, if any,
interest and liquidated damages, if any) be made by wire transfer of
immediately available same day funds to the accounts specified by the holder of
interests in such global note. With respect to certificated notes, we will make
all payments of principal, premium, if any, interest and liquidated damages, if
any, by wire transfer of immediately available same day funds to the accounts
specified by the holders thereof or, if no such account is specified, by
mailing a check to each such holder's registered address. We expect that
secondary trading in the certificated notes will also be settled in immediately
available funds.

                                      138


                      DESCRIPTION OF CERTAIN INDEBTEDNESS

Bank Credit Facility

   General

   Pursuant to an amended and restated credit agreement dated as of May 31,
2000, as further amended, among Deutsche Bank Securities, Inc., as arranger and
sole bookrunner, Credit Lyonnais New York Branch as syndication agent and co-
agent, The Bank of Nova Scotia, as documentation agent and co-agent, Bank of
America, N.A., Societe Generale (Southwest Agency) and Wells Fargo Bank, N.A.,
as senior managing agents and certain other agents, we currently have a bank
credit facility with an aggregate commitment amount of $25 million. The bank
credit facility matures in August, 2003. The debt under the bank credit
facility is guaranteed by certain of our existing and future subsidiaries and
is secured by pledges of equity interests of many of our existing and future
subsidiaries. Borrowings under the bank credit facility rank equal in right of
payment with all outstanding Series A, Series B, Series C, Series E and Series
G senior notes issued under the indenture, the Other Senior Notes (as defined
below) and all other existing and future senior indebtedness of the operating
partnership.


   We must pay a quarterly unused commitment fee, which is based on the
percentage of the revolving loan commitments that are outstanding and this fee
ranges from 0.25% to 0.50% (annually) of the unused portion of the revolving
loan commitments.

   As of December 1, 2001 we had $460 million outstanding under our bank credit
facility ($150 under the term loan and $310 million under the revolver). After
giving pro forma effect to the offering of Series H senior notes and the
subsequent exchange for Series I senior notes and the use of proceeds to repay
indebtedness under the bank credit facility and to the other transactions
described above in "Pro Forma Financial Statements of Host Marriott, L.P.", we
no longer have any amounts outstanding under the bank credit facility.

   Interest

   Amounts outstanding under the bank credit facility bear interest at a rate
determined by the sum of (a) a margin rate determined by our leverage ratio
plus, (b) at our option, either (1) a base rate (which is the higher of (i) 1/2
of 1% above the federal funds rate and (ii) the prime rate (as set by Bankers
Trust Co.)) or (2) a eurodollar rate (which is (i) the quotation for
eurodollars (as set by Bankers Trust Co.) divided by (ii) 100% minus the stated
maximum rate of reserve requirements under the Federal Reserve System). All of
our borrowings are currently using the eurodollar option. The indebtedness
under the bank credit facility currently has a weighted average interest rate
of 4.379%.

   Financial Covenants

   The bank credit facility requires us to maintain compliance with the
following financial covenants (all on a consolidated basis):

  . minimum interest coverage ratio (which is the ratio of our EBITDA to
    interest expense);

  . minimum unsecured interest coverage ratio (which is the ratio of our
    unencumbered EBITDA to unsecured interest expense);

  . minimum fixed charge coverage ratio (which is the ratio of our EBITDA to
    our fixed charges, including interest, interest on QUIPS, preferred stock
    dividends and required FF&E reserves);

  . a minimum tangible net worth;

  . maximum leverage ratio (which is the ratio of our total debt to EBITDA);

  . minimum unencumbered EBITDA ratio (which is the ratio of our unencumbered
    EBITDA to total EBITDA); and

  . increases the interest rate based on leverage ratios.

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The measures utilized in our financial covenants referenced above represent
terms that are defined in the bank credit facility. Our "unencumbered EBITDA"
represents our EBITDA attributable to assets which are not subject to secured
debt or EBITDA from assets that are owned by subsidiaries that have not
incurred types of debt specified in the bank credit facility.

   Other Covenants

   The bank credit facility also imposes customary restrictions on our ability
to:

  . incur additional indebtedness and liens;

  . enter into certain acquisitions, investments, mergers or joint ventures;

  . pay certain dividends;

  . enter into certain transactions with affiliates;

  . sell assets (and the use of the proceeds therefrom);

  . make certain capital expenditures.

   Recent amendment to bank credit facility

   As a result of the effects on our business of the economic recession and the
terrorist attacks of September 11, 2001, we have entered into an amendment to
the bank credit facility, effective November 19, 2001, which among other
things:

  . adjusts certain financial covenants so as to require us to meet less
    stringent levels in respect of (a) a minimum consolidated interest
    coverage ratio and a minimum unsecured interest coverage ratio until
    September 6, 2002 and (b) the maximum leverage ratio through August 15,
    2002;

  . suspends until September 6, 2002 the minimum fixed charge coverage ratio
    test;

  . limits draws under the revolver portion of our bank credit facility to
    (a) $50 million in our first quarter of 2002 and (b) up to $25 million in
    our second quarter of 2002 (but only if draws in the second quarter of
    2002 do not cause the aggregate amount drawn in 2002 and then outstanding
    to exceed $25 million); and

  . increases the interest rate based on higher leverage levels.

   In addition, the amendment imposes restrictions and requirements through
August 2002 which include, among others:

  . restricting our ability to pay distributions on our equity securities and
    our convertible debt securities due to Host REIT related to its QUIPs
    unless our projections indicate that such payment will be necessary to
    maintain Host REIT's status as REIT and/or unless we are below certain
    leverage levels;

  . restricting our ability to incur additional indebtedness and requiring
    that we apply all net proceeds of permitted incurrences of indebtedness
    to repay outstanding amounts under the bank credit facility;

  . requiring us to apply all net proceeds from capital contributions to us
    or from sales of equity by us or Host REIT to repay outstanding amounts
    under the bank credit facility;

  . requiring us to use all net proceeds from the sale of assets (other than
    our Vail Marriott Mountain Resort), to repay indebtedness under the bank
    credit facility;

  . restricting our ability to make acquisitions and investments unless the
    acquisition has a leverage ratio of 3.5 to 1.0 or below;

  . restricting our investments in subsidiaries; and

  . restricting our capital expenditures.

                                      140


   The amendment also permits us (i) to retain in escrow the casualty insurance
proceeds that we receive from insurance coverage on the New York World Trade
Center Marriott and the New York Marriott Financial Center until such proceeds
are applied toward the restoration of the New York Marriott Financial Center
and the construction of a new hotel to replace the New York World Trade Center
Marriott, or (ii) to apply such insurance proceeds to the payment of amounts
due to certain third parties, including the New York World Trade Center
Marriott ground lessor, mortgage lender and Marriott International as manager.
Any proceeds (other than business interruption insurance proceeds) not so used
would be used to repay amounts outstanding under the bank credit facility. The
amendment also allows us to include business interruption proceeds that we
receive from insurance coverage on the New York World Trade Center Marriott and
the New York Marriott Financial Center hotels in our calculation of
consolidated EBITDA for purposes of our financial covenants.

   After giving pro forma effect to the use of proceeds from the offering of
Series H senior notes to repay amounts due under the bank credit facility and
to other transactions described below in "Pro Forma Financial Information of
Host Marriott, L.P.", we no longer have any amounts outstanding under our bank
credit facility. We are currently in compliance with the terms and restrictive
covenants of our bank credit facility. As a result of entering into this
amendment, and obtaining the relief from the financial covenants described
above, we expect to remain in compliance with our bank credit facility through
August 15, 2002, the date after which the maximum leverage ratio will return to
the level that was in effect prior to this amendment. We anticipate that, if
adverse operating conditions continue at currently forecasted levels, we will
not be able to comply with the leverage ratio applicable after August 15, 2002
and other financial covenants applicable at the end of our third quarter of
2002. If we fail to comply with the leverage ratio or any other covenant of the
bank credit facility, we would be in default under the bank credit facility.

   We anticipate that if we decide to redraw the amounts available under the
bank credit facility, we would have to refinance or repay our bank credit
facility or obtain another amendment from our lenders to adjust the leverage
ratio applicable after August 15, 2002 and, possibly, other financial covenants
applicable at the end of our third quarter of 2002. We intend to amend or
replace the bank credit facility prior to August 15, 2002. There can be no
assurance that we will be able to amend or replace the bank credit facility on
terms any more favorable than those currently in effect (if at all). Any
default under the bank credit facility that results in an acceleration of its
final stated maturity thereof could constitute an event of default under the
indenture with respect to all outstanding series of senior notes issued
thereunder, including the Series H senior notes offered hereby, as well as
under the indentures pursuant to which the other senior notes were issued.

Senior Notes

   We have approximately $3.2 billion of various series of unsecured senior
notes outstanding, with maturity dates ranging from August 2005 to December
2008. We have Series A, Senior B, Series C, Series E, Series G and Series H
senior notes, which were issued under the same indenture as the Series I senior
notes offered hereby. The indenture contains financial covenants restricting
our ability to incur indebtedness, grant liens on our assets, acquire or sell
or make investments in other entities, and make certain distributions to our
equity holders. For a description of the material provisions of the indenture,
see the section "Description of Series I Senior Notes" above. Additionally, we
have $27 million in aggregate principal amount of three series of senior notes
outstanding under other indentures.

Secured Senior Debt

   In addition, together with our subsidiaries, we have a significant amount of
indebtedness (consisting primarily of mortgage debt) secured by our assets and
the assets of our subsidiaries. The Series I senior notes effectively will be
junior in right of payment to this secured debt to the extent of the value of
the assets securing such debt. On a pro forma basis, giving effect to the
transactions set forth in the section, "Pro Forma Financial Information of Host
Marriott, L.P.", as of September 7, 2001, the amount of this secured debt was
approximately $2.3 billion.

                                      141


            MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE

                       CERTAIN FEDERAL TAX CONSIDERATIONS

   The following is a summary of the material United States federal income tax
consequences (a) expected to result to holders whose original notes are
exchanged for the exchanged notes in this exchange offer and (b) relevant to
the ownership and disposition of the exchange notes by persons who hold the
notes as a capital asset, generally for investment, as defined in section 1221
of the Internal Revenue Code of 1986, as amended. This summary does not
consider state, local or foreign tax laws. In addition, it does not include all
of the rules which may affect the United States tax treatment of your
investment in the notes. For example, special rules not discussed herein may
apply to you if you are:

  .  a broker-dealer or a dealer in securities or currencies;

  .  an S corporation

  .  a bank, thrift or other financial institution;

  .  a regulated investment company or a real estate investment trust;

  .  an insurance company;

  .  a tax-exempt organization;

  .  subject to the alternative minimum tax provisions of the Internal
     Revenue Code;

  .  holding the notes as a part of a hedge, straddle, conversion or other
     risk reduction or constructive sale transaction;

  .  holding the notes through a partnership or similar pass-through entity;

  .  a person with a "functional currency" other than the U.S. dollar; or

  .  a United States expatriate.

   The discussion is based on the following materials, all as of the date
hereof:

  .  the Internal Revenue Code;

  .  current, temporary and proposed Treasury Regulations promulgated under
     the Internal Revenue Code;

  .  the legislative history of the Internal Revenue Code;

  .  current administrative interpretations and practices of the Internal
     Revenue Service; and

  .  court decisions.

   Legislation, judicial decisions, or administrative changes may be
forthcoming that could effect the accuracy of the statements included in this
summary, possibly on a retroactive basis. We have not requested, and do not
plan to request, any rulings from the Internal Revenue Service concerning the
tax consequences of exchange of the original notes for the exchange notes or
the purchase, ownership or disposition of the exchange notes. The statements
set forth below are not binding on the Internal Revenue Service or any court.
Thus, we can provide no assurance that the statements set forth below will not
be challenged by the Internal Revenue Service, or that they would be sustained
by a court if they were so challenged.

   We urge you to consult your own tax advisor concerning the tax consequences
of the exchange of the original notes for the exchange notes and of holding and
disposing of the exchange notes, including the United States federal, state,
local and other tax consequences and potential changes in the tax laws.

The Exchange

   The exchange of the original notes for the exchange notes in the exchange
offer will not be treated as an "exchange" for federal income tax purposes,
because the exchange notes will not be considered to differ

                                      142


materially in kind or extent from the original notes. Accordingly, the exchange
of original notes for exchange notes will not be a taxable event to holders for
federal income tax purposes. Moreover, the exchange notes will have the same
tax attributes as the original notes and the same tax consequences to holders
as the original notes have to holders, including without limitation, the same
issue price, adjusted issue price, adjusted tax basis and holding period.
Therefore, references to "notes" apply equally to the exchange notes and the
original notes.

United States Holders

   If you are a "United States Holder", as defined below, this section applies
to you and summarizes certain United States federal income tax consequences of
the ownership and disposition of the notes. Otherwise, the next section, "Non-
United States Holders", applies to you. You are a "United States Holder" if you
hold notes and you are:

  .  a citizen or resident of the United States;

  .  a corporation or other entity taxable as a corporation created or
     organized in or under the law of the United States, any state thereof or
     the District of Columbia;

  .  an estate the income of which is subject to United States federal income
     tax regardless of its source;

  .  a trust, if either (i) a court within the United States is able to
     exercise primary supervision over the administration of the trust, and
     one or more United States persons have the authority to control all
     substantial decisions of the trust or (ii) the trust was in existence on
     August 20, 1996, was treated as a United States person on that date and
     has elected to be treated as a United States person at all times
     thereafter; or

  .  otherwise subject to United States federal income tax on your worldwide
     income on a net income basis.

   If a partnership or other entity taxable as a partnership holds the notes,
the tax treatment of a partner will generally depend on the status of the
partner and the activities of the partnership. Such partner should consult its
tax advisors as to the tax consequences.

 Payments of Interest

   You must generally include the interest on the notes in ordinary income:

  .  when it accrues, if you use the accrual method of accounting for United
     States federal income tax purposes; or

  .  when you receive it, if you use the cash method of accounting for United
     States federal income tax purposes.

 Market Discount

   If a United States Holder acquires a note at a cost that is less than the
issue price of the notes, the amount of such difference is treated as "market
discount" for federal income tax purposes, unless such difference is less than
...0025 multiplied by the stated redemption price at maturity multiplied by the
number of complete years to maturity (from the date of acquisition). The issue
price of the notes equals the first price at which a substantial amount of the
notes were sold for money, excluding sales to underwriters, placement agents or
wholesalers.

   Under the market discount rules of the Internal Revenue Code, you are
required to treat any gain on the sale, exchange, retirement or other
disposition of, a note as ordinary income to the extent of the accrued market
discount that has not previously been included in income. Thus, principal
payments and payments received upon the sale or exchange of a note are treated
as ordinary income to the extent of accrued market discount that has not
previously been included in income. If you dispose of a note with market
discount in certain otherwise nontaxable transactions, you must include accrued
market discount as ordinary income as if you had sold the note at its then fair
market value.

                                      143


   In general, the amount of market discount that has accrued is determined on
a ratable basis. A United States Holder may, however, elect to determine the
amount of accrued market discount on a constant yield to maturity basis. This
election is made on a note-by-note basis and is irrevocable.

   With respect to notes with market discount, you may not be allowed to deduct
immediately a portion of the interest expense on any indebtedness incurred or
continued to purchase or to carry the notes. A United States Holder may elect
to include market discount in income currently as it accrues, in which case the
interest deferral rule set forth in the preceding sentence will not apply. This
election will apply to all debt instruments that a United States Holder
acquires on or after the first day of the first taxable year to which the
election applies and is irrevocable without the consent of the Internal Revenue
Service. A United States Holder's tax basis in a note will be increased by the
amount of market discount included in the holder's income under the election.

 Amortizable Bond Premium

   If a United States Holder purchases a note for an amount in excess of the
stated redemption price at maturity, the holder will be considered to have
purchased the note with "amortizable bond premium" equal in amount to the
excess. Generally, a United States Holder may elect to amortize the premium as
an offset to interest income otherwise required to be included in income in
respect of the note during the taxable year, using a constant yield method
similar to that described above, over the remaining term of the note. Under
Treasury Regulations, the amount of amortizable bond premium that a United
States Holder may deduct in any accrual period is limited to the amount by
which the holder's total interest inclusions on the note in prior accrual
periods exceed the total amount treated by the holder as a bond premium
deduction in prior accrual periods. If any of the excess bond premium is not
deductible, that amount is carried forward to the next accrual period. A United
States Holder who elects to amortize bond premium must reduce the holder's tax
basis in the note by the amount of the premium used to offset interest income
as set forth above. An election to amortize bond premium applies to all taxable
debt obligations then owned and thereafter acquired by the United States Holder
and may be revoked only with the consent of the Internal Revenue Service.

 Sale or Other Taxable Disposition of the Notes

   You must recognize taxable gain or loss on the sale, exchange, redemption,
retirement or other taxable disposition of a note. The amount of your gain or
loss equals the difference between the amount you receive for the note (in cash
or other property, valued at fair market value), minus the amount, if any,
attributable to accrued but unpaid interest on the note, minus your adjusted
tax basis in the note. Your tax basis in a note will initially equal the price
you paid for the note and will be subsequently increased by market discount
previously included in income in respect of the note and will be reduced by any
amortizable bond premium in respect of the note which has been taken into
account.

   Your gain or loss will generally be capital gain or loss note except as
described under "Market Discount" above. The capital gain or loss will be long-
term capital gain or loss, if you have held the notes for more than one year.
Otherwise, it will be short-term capital gain or loss. Payments attributable to
accrued but unpaid interest which you have not yet included in income will be
taxed as ordinary interest income. The deductibility of capital losses is
subject to limitations.

 Backup Withholding and Information Reporting

   Backup withholding at a rate of up to 31% may apply when you receive
interest payments on a note or proceeds upon the sale or other disposition of a
note. Certain holders, including among others, corporations, financial
institutions and certain tax-exempt organizations, are generally not subject to
backup withholding. In

                                      144


addition, backup withholding will not apply to you if you provide your social
security number or other taxpayer identification number in the prescribed
manner unless:

  .  the Internal Revenue Service notifies us or our agent that the taxpayer
     identification number provided is incorrect;

  .  you fail to report interest and dividend payments that you receive on
     your tax return and the Internal Revenue Service notifies us or our
     agent that backup withholding is required; or

  .  you fail to certify under penalties of perjury that backup withholding
     does not apply to you.

   If backup withholding applies to you, you may use the amount withheld as a
refund or credit against your United States federal income tax liability as
long as you provide the required information to the Internal Revenue Service.
United States Holders should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedures for
obtaining the exemption.

   We will be required to furnish annually to the Internal Revenue Service and
to holders of notes information relating to the amount of interest paid on the
notes. Some holders, including corporations, financial institutions and certain
tax-exempt organizations, are generally not subject to information reporting.

Non-United States Holders

   As used herein, a "Non-United States Holder" is a person or entity that, for
United States federal income tax purposes, is not a United States Holder.

 Payments of Interest

   If you are a Non-United States Holder, interest paid to you will not be
subject to United States federal income taxes or withholding taxes if the
interest is not effectively connected with your conduct of a trade or business
within the United States, and you:

  .  do not actually or constructively own a 10% or greater interest in our
     capital or profits;

  .  are not a controlled foreign corporation with respect to which we are a
     "related person" within the meaning of section 864(d)(4) of the Internal
     Revenue Code;

  .  are not a bank receiving interest pursuant to a loan agreement entered
     into in the ordinary course of your trade or business, and

  .  you provide appropriate certification.

   You can generally meet the certification requirement by providing a properly
executed Form W-8BEN or appropriate substitute form to us, or our paying agent.
If you hold the notes through a financial institution or other agent acting on
your behalf, you may be required to provide appropriate documentation to your
agent. Your agent will then generally be required to provide appropriate
certifications to us or our paying agent, either directly or through other
intermediaries. Special certification rules apply to foreign partnerships,
estates and trusts, and in certain circumstances certifications as to foreign
status of partners, trust owners or beneficiaries may have to be provided to us
or our paying agent.

   If you do not qualify for an exemption under these rules, interest income
from the notes may be subject to withholding tax at the rate of 30% (or lower
applicable treaty rate) at the time it is paid. The payment of interest
effectively connected with your United States trade or business, however, would
not be subject to a 30% withholding tax so long as you provide us or our agent
an adequate certification (currently on Form W-8ECI), but such interest would
be subject to United States federal income tax on a net basis at the rates
applicable to United States persons generally. In addition, if you are a
foreign corporation and the payment of interest is effectively connected with
your United States trade or business, you may also be subject to a 30% (or
lower applicable treaty rate) branch profits tax.

                                      145


 Sale or Other Taxable Disposition of Series H Senior Notes

   If you are a Non-United States Holder, you generally will not be subject to
United States federal income tax on any amount which constitutes capital gain
upon retirement or disposition of a note, unless:

  .  your investment in the note is effectively connected with your conduct
     of a United States trade or business; or

  .  you are a nonresident alien individual and are present in the United
     States for 183 or more days in the taxable year within which such sale
     or other taxable disposition takes place and certain other requirements
     are met.

   If you have a United States trade or business and the investment in the
notes is effectively connected with that trade or business, the payment of the
sale proceeds with respect to the notes would be subject to United States
federal income tax on a net income basis at the rate applicable to United
States Holders generally. In addition, foreign corporations may be subject to a
30% (or lower applicable treaty rate) branch profits tax if the investment in
the note is effectively connected with the foreign corporation's United States
trade or business.

 Backup Withholding and Information Reporting

   No backup withholding or information reporting will generally be required
with respect to interest paid to Non-United States Holder of notes if the
beneficial owner of the note provides the certification described above in
"Non-United States Holder--Payments of Interest" or is an exempt recipient and,
in each case, the payor does not have actual knowledge or reason to know that
the beneficial owner is a United States Holder.

   Information reporting requirements and backup withholding tax generally will
not apply to any payments of the proceeds of the sale of a note effected
outside the United States by a foreign office of a foreign broker (as defined
in applicable Treasury Regulations). However, unless such broker does not have
actual knowledge or reason to know that the beneficial owner is a United States
Holder and has documentary evidence in its records that the beneficial owner is
a Non-United States Holder and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption, information reporting but
not backup withholding will apply to any payment of the proceeds of the sale of
a note effected outside the United States by such broker if it:

  .  is a United States person, as defined in the Internal Revenue Code;

  .  derives 50% or more of its gross income for certain periods from the
     conduct of a trade or business in the United States;

  .  is a controlled foreign corporation for United States federal income tax
     purposes; or

  .  is a foreign partnership that, at any time during its taxable year, has
     50% or more of its income or capital interests owned by United States
     persons or is engaged in the conduct of a United States trade or
     business.

   Payments of the proceeds of any sale of a note effected by the United States
office of a broker will be subject to information reporting and backup
withholding requirements, unless the beneficial owner of the note provides the
certification described above in "Non-United States Holders--Payments of
Interest" or otherwise establishes an exemption.

   If you are a Non-United States Holder of notes, you should consult your tax
advisor regarding the application of information reporting and backup
withholding in your particular situation, the availability of an exemption
therefrom and the procedures for obtaining the exemption, if available. Any
amounts withheld from payment to you under the backup withholding rules will be
allowed as a refund or credit against your federal income tax liability,
provided that the required information is furnished to the Internal Revenue
Service.

                                      146


                              PLAN OF DISTRIBUTION

   If you are a broker-dealer that receives Series I senior notes for your own
account pursuant to the exchange offer, you must acknowledge that you will
deliver a prospectus in connection with any resale of such Series I senior
notes. This prospectus, as it may be amended or supplemented from time to time,
may be used in connection with resales of Series I senior notes received in
exchange for Series H senior notes where such Series H senior notes were
acquired as a result of market-making activities or other trading activities.
To the extent any broker-dealer participates in the exchange offer and so
notifies us, we have agreed that we will make this prospectus, as amended or
supplemented, available to that broker-dealer for use in connection with
resales, and will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
those documents in the letter of transmittal.

  . We will not receive any proceeds from any sale of Series I senior notes
    by broker-dealers.

  . Series I senior notes received by broker-dealers for their own account
    pursuant to the exchange offer may be sold from time to time in one or
    more transactions in the over-the-counter market, in negotiated
    transactions, through the writing of options on the Series I senior notes
    or a combination of such methods of resale, at prevailing market prices
    at the time of resale, at prices related to such prevailing market prices
    or at negotiated prices.

  . Any resale may be made directly to purchasers or to or through brokers or
    dealers who may receive compensation in the form of commissions or
    concessions from any such broker-dealer or the purchasers or any such
    Series I senior notes.

  . Any broker-dealer that resells Series I senior notes that were received
    by it for its own account pursuant to the exchange offer and any broker
    or dealer that participates in a distribution of such Series I senior
    notes may be deemed to be an "underwriter" within the meaning of the
    Securities Act, and any profit on any such resale of Series I senior
    notes and any commissions or concessions received by any such persons may
    be deemed to be underwriting compensation under the Securities Act.

  . The letter of transmittal states that, by acknowledging that it will
    deliver and by delivering a prospectus, a broker-dealer will not be
    deemed to admit that it is an "underwriter" within the meaning of the
    Securities Act.

   We have agreed to pay all expenses incident to the exchange offer (other
than commissions and concessions of any broker-dealer), subject to certain
prescribed limitations, and will provide indemnification against certain
liabilities, including certain liabilities that may arise under the Securities
Act, to broker-dealers that make a market in the Series H senior notes and
exchange Series H senior notes in the exchange offer for Series I senior notes.

   By its acceptance of the exchange offer, any broker-dealer that receives
Series I senior notes pursuant to the exchange offer hereby agrees to notify us
prior to using the prospectus in connection with the sale or transfer of Series
I senior notes. It also agrees that, upon receipt of notice from us of the
happening of any event which makes any statement in this prospectus untrue in
any material respect or which requires the making of any changes in this
prospectus in order to make the statements therein not misleading or which may
impose upon us disclosure obligations that may have a material adverse effect
on us (which notice we agree to deliver promptly to such broker-dealer), such
broker-dealer will suspend use of this prospectus until we have notified such
broker-dealer that delivery of this prospectus may resume and has furnished
copies of any amendment or supplement to this prospectus to such broker-dealer.

                                      147


                                 LEGAL MATTERS

   Certain legal matters relating to the Series I senior notes were passed upon
for us by Latham & Watkins, Reston, Virginia.


                                    EXPERTS

   The audited consolidated financial statements and schedule of Host Marriott,
L.P., CCHP I Corporation, CCHP II Corporation, CCHP III Corporation and CCHP IV
Corporation included in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.

                      WHERE YOU CAN FIND MORE INFORMATION

   This prospectus is part of a Registration Statement on Form S-4 we have
filed with the Commission under the Securities Act of 1933, as amended. This
prospectus does not contain all of the information set forth in the
registration statement. For further information about us and the notes, you
should refer to the registration statement. In this prospectus we summarize
material provisions of contracts and other documents to which we refer you.
Since this prospectus may not contain all of the information that you may find
important, you should review the full text of these documents. We have filed
these documents as exhibits to our registration statement.

   We are subject to the informational reporting requirements of the Securities
Exchange Act of 1934, as amended, and file annual, quarterly and special
reports, proxy statements and other information with the Commission. You may
read and copy any reports, proxy statements and other information we file at
the public reference room of the Commission, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-
800-SEC-0300 for further information. In addition, the Commission maintains a
website (http:/www.sec.gov) that contains such reports, proxy statements and
other information filed by the Company. In addition, you may inspect reports
and other information we file at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.

   You should rely only on the information incorporated by reference or
provided in this prospectus and any supplement. We have not authorized anyone
else to provide you with different information. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the dates on the front of these documents.

                                      148


                         INDEX TO FINANCIAL STATEMENTS

   The following financial information is included on the pages indicated:

                        Historical Financial Statements

Host Marriott, L.P.



                                                                            Page
                                                                            ----
                                                                         
Report of Independent Public Accountants..................................   F-3
Consolidated Balance Sheets as of December 31, 2001 and 2000..............   F-4
Consolidated Statements of Operations for the Fiscal Years Ended December
 31, 2001, 2000 and 1999..................................................   F-5
Consolidated Statements of Shareholders' Equity, Partners' Capital and
 Comprehensive Income for the Fiscal Years Ended December 31, 2001, 2000
 and 1999.................................................................   F-6
Consolidated Statements of Cash Flows for the Fiscal Years Ended December
 31, 2001, 2000 and 1999..................................................   F-7
Notes to Consolidated Financial Statements................................   F-8

Lease Pool Financial Statements
- -------------------------------

 Pool A:
 -------
Report of Independent Public Accountants..................................  F-44
Consolidated Balance Sheets as of December 29, 2000 and December 31,
 1999.....................................................................  F-45
Consolidated Statements of Operations for the Fiscal Years Ended December
 29, 2000 and December 31, 1999...........................................  F-46
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended
 December 29, 2000 and December 31, 1999..................................  F-47
Consolidated Statements of Cash Flows for the Fiscal Years Ended December
 29, 2000 and December 31, 1999...........................................  F-48
Notes to Consolidated Financial Statements................................  F-49

 Pool B:
 -------
Report of Independent Public Accountants..................................  F-55
Consolidated Balance Sheets as of December 29, 2000 and December 31,
 1999.....................................................................  F-56
Consolidated Statements of Operations for the Fiscal Years Ended December
 29, 2000 and December 31, 1999...........................................  F-57
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended
 December 29, 2000 and December 31, 1999..................................  F-58
Consolidated Statements of Cash Flows for the Fiscal Years Ended December
 29, 2000 and December 31, 1999...........................................  F-59
Notes to Consolidated Financial Statements................................  F-60

 Pool C:
 -------
Report of Independent Public Accountants..................................  F-65
Consolidated Balance Sheets as of December 29, 2000 and December 31,
 1999.....................................................................  F-66
Consolidated Statements of Operations for the Fiscal Years Ended December
 29, 2000 and December 31, 1999...........................................  F-67
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended
 December 29, 2000 and December 31, 1999..................................  F-68
Consolidated Statements of Cash Flows for the Fiscal Years Ended December
 29, 2000 and December 31, 1999...........................................  F-69
Notes to Consolidated Financial Statements................................  F-70




                                      F-1



 Pool D:


                                                                        
Report of Independent Public Accountants.................................  F-75
Consolidated Balance Sheets as of December 29, 2000 and December 31,
 1999....................................................................  F-76
Consolidated Statements of Operations for the Fiscal Years Ended December
 29, 2000 and December 31, 1999..........................................  F-77
Consolidated Statements of Shareholders' Equity for the Fiscal Years
 Ended December 29, 2000 and December 31, 1999...........................  F-78
Consolidated Statements of Cash Flows for the Fiscal Years Ended December
 29, 2000 and December 31, 1999..........................................  F-79
Notes to Consolidated Financial Statements...............................  F-80

Host Marriott, L.P.

Condensed Consolidated Balance Sheets--March 22, 2002 and December 31,
 2001....................................................................  F-84
Condensed Consolidated Statements of Operations--Twelve Weeks Ended March
 22, 2002 and March 23, 2001.............................................  F-85
Condensed Consolidated Statements of Cash Flows--Twelve Weeks Ended March
 22, 2002 and March 23, 2001.............................................  F-86
Notes to Condensed Consolidated Financial Statements.....................  F-88




                                      F-2



                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Host Marriott Corporation as General Partner to Host Marriott L.P.:


   We have audited the accompanying consolidated balance sheets of Host
Marriott, L.P. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of operations, partners' capital and
comprehensive income, and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements and the schedule referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.


   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.


   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Host
Marriott, L.P. and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.


   Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule included at pages S-1 to S-
3 is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.


                                          Arthur Andersen LLP


Vienna, Virginia


February 25, 2002


                                      F-3



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


                        CONSOLIDATED BALANCE SHEET


                        December 31, 2001 and 2000





                                                                 2001    2000
                                                                ------  ------
                                                                (in millions)
                                                                  
                            ASSETS
Property and equipment, net.................................... $6,999  $7,110
Notes and other receivables, net (including amounts due from
 affiliates of $6 million and $164 million, respectively)......     54     211
Due from manager...............................................    141     --
Investments in affiliates......................................    142     128
Other assets...................................................    532     504
Restricted cash................................................    114     125
Cash and cash equivalents......................................    352     313
                                                                ------  ------
                                                                $8,334  $8,391
                                                                ======  ======
             LIABILITIES AND SHAREHOLDERS' EQUITY
Debt
  Senior notes................................................. $3,235  $2,790
  Mortgage debt................................................  2,261   2,275
  Convertible debt obligation to Host Marriott Corporation.....    492     492
  Other........................................................    106     257
                                                                ------  ------
                                                                 6,094   5,814
Accounts payable and accrued expenses..........................    121     381
Other liabilities..............................................    320     312
                                                                ------  ------
    Total liabilities..........................................  6,535   6,507
                                                                ------  ------
Minority interest..............................................    108     139
Limited partnership interests of third parties at redemption
 value (representing 21.6 million units and 63.6 million units
 at December 31, 2001 and 2000, respectively)..................    194     823
Partners' capital
  General partner..............................................      1       1
  Cumulative redeemable preferred limited partner..............    339     196
  Limited partner..............................................  1,162     726
  Accumulated other comprehensive income (loss)................     (5)     (1)
                                                                ------  ------
    Total partners' capital....................................  1,497     922
                                                                ------  ------
                                                                $8,334  $8,391
                                                                ======  ======



              See Notes to Consolidated Financial Statements.


                                      F-4



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


                   CONSOLIDATED STATEMENTS OF OPERATIONS


               Years Ended December 31, 2001, 2000 and 1999


              (in millions, except per common share amounts)





                                                          2001    2000    1999
                                                         ------  ------  ------
                                                                
REVENUES
 Hotel sales
 Rooms.................................................  $2,219  $  --   $  --
 Food and beverage.....................................   1,125     --      --
 Other.................................................     282     --      --
                                                         ------  ------  ------
   Total hotel sales...................................   3,626     --      --
 Rental income.........................................     126   1,398   1,303
 Other operating income................................       2       9       0
                                                         ------  ------  ------
   Total revenues......................................   3,754   1,407   1,303
                                                         ------  ------  ------
OPERATING COSTS AND EXPENSES
 Rooms.................................................     541     --      --
 Food and beverage.....................................     843     --      --
 Hotel department costs and deductions.................     946     --      --
 Management fees and other.............................     177     --      --
 Property-level expenses...............................     282     276     268
 Depreciation and amortization.........................     378     331     293
 Corporate expenses....................................      32      42      34
 Loss on litigation settlement.........................     --      --       40
 Lease repurchase expense..............................       5     207     --
 Other.................................................      19      24      11
                                                         ------  ------  ------
OPERATING PROFIT.......................................     531     527     657
 Minority interest.....................................     (16)    (27)    (21)
 Interest income.......................................      36      40      39
 Interest expense......................................    (493)   (466)   (469)
 Net gains on property transactions....................       6       6      28
 Equity in earnings of affiliates......................       3      25       6
                                                         ------  ------  ------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES..      67     105     240
 Benefit (provision) for income taxes..................      (8)     98     (10)
 Benefit from change in tax status.....................     --      --       26
                                                         ------  ------  ------
INCOME BEFORE EXTRAORDINARY ITEM.......................      59     203     256
 Extraordinary (loss) gain on extinguishment of debt...      (2)      4      29
                                                         ------  ------  ------
NET INCOME.............................................  $   57  $  207  $  285
                                                         ======  ======  ======
 Less: Distributions on preferred limited partner
  units to Host Marriott...............................     (32)    (20)     (6)
                                                         ------  ------  ------
NET INCOME AVAILABLE TO COMMON UNITHOLDERS.............  $   25  $  187  $  279
                                                         ======  ======  ======
BASIC EARNINGS PER COMMON UNIT:
 Earnings before extraordinary item....................  $  .10  $  .64  $  .86
 Extraordinary (loss) gain.............................    (.01)    .02     .10
                                                         ------  ------  ------
BASIC EARNINGS PER COMMON UNIT.........................  $  .09  $  .66  $  .96
                                                         ======  ======  ======
DILUTED EARNINGS PER COMMON UNIT:
 Earnings before extraordinary item....................  $  .10  $  .63  $  .83
 Extraordinary (loss) gain.............................    (.01)    .02     .10
                                                         ------  ------  ------
DILUTED EARNINGS PER COMMON UNIT.......................  $  .09  $  .65  $  .93
                                                         ======  ======  ======



              See Notes to Consolidated Financial Statements.


                                      F-5



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


               CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL


                         AND COMPREHENSIVE INCOME


               Years Ended December 31, 2001, 2000 and 1999


                               (in millions)





   Class
   A, B,
   and C                                                                                   Accumulated
  referredP     Common OP                                       Preferred                     Other
   Units          Units                                          Limited  General Limited Comprehensive Comprehensive
 Otstandingu   Outstanding                                       Partner  Partner Partner Income (Loss) Income (Loss)
- -----------    -----------                                      --------- ------- ------- ------------- -------------
                                                                                   
      --          225.6    Balance, December 31, 1998..........    --         1      767       (4)           --
      --            --     Net income..........................    --       --       285       --            285
      --            --     Other comprehensive income (loss):
                           Unrealized loss on HM Services          --       --       --          4             4
                           common stock........................
                           Foreign currency translation            --       --       --          3             3
                           adjustment..........................
                           Reclassification of gain realized on
                           HM Services common stock--net
                           income..............................    --       --       --        (1)           (1)
                                                                                                            ----
      --            --     Comprehensive income................                                             $291
                                                                                                            ====
      --            3.6    Units issued to Host Marriott for
                           the comprehensive stock and employee
                           stock purchase plans................    --       --         8       --
      --            0.5    Redemptions of limited partnership
                           interests of third parties..........    --       --       (3)       --
      --            --     Distributions on OP Units...........    --       --     (245)       --
      --            --     Distributions on Preferred Limited      --       --       (6)       --
                           Partner Units.......................
      --          (0.4)    Adjustment to special dividend......    --       --       (4)       --
      --          (5.8)    Repurchases of OP Units.............    --       --      (50)       --
      --            --     Market adjustment to record
                           Preferred OP Units and OP Units of
                           third parties at redemption value...    --       --       370       --
      8.2           --     Issuance of Preferred OP Units......    196      --       --        --
  -------------------------------------------------------------------------------------------------------------------
      8.2         223.5    Balance, December 31, 1999..........   $196      $ 1   $1,122      $  2
      --            --     Net income..........................    --       --       207       --            207
      --            --     Other comprehensive income (loss):
                           Foreign currency translation            --       --       --        (2)           (2)
                           adjustment..........................
                           Reclassification of gain realized on
                           HM Services common stock--net
                           income..............................    --       --       --        (1)           (1)
                                                                                                            ----
      --            --     Comprehensive income................                                             $204
                                                                                                            ====
      --            2.0    Units issued to Host Marriott for
                           the comprehensive stock and employee
                           stock purchase plans................    --       --        15       --
      --            0.7    Redemptions of limited partnership
                           interests of third parties..........    --       --       (3)       --
      --            --     Distributions on OP Units...........    --       --     (259)       --
      --            --     Distributions on Preferred Limited      --       --      (21)       --
                           Partner Units.......................
      --          (4.9)    Repurchases of OP Units.............    --       --      (44)       --
      --            --     Market adjustment to record
                           Preferred OP Units and OP Units of
                           third parties at redemption value...    --       --     (291)       --
  -------------------------------------------------------------------------------------------------------------------
      8.2         221.3    Balance, December 31, 2000..........   $196      $ 1   $  726      $(1)
      --            --     Net income..........................    --       --        57       --             57
      --            --     Other comprehensive income (loss):
                           Foreign currency translation            --       --       --        (3)           (3)
                           adjustment..........................
                           Reclassification of gain realized on
                           HM Services common stock--net
                           income..............................    --       --       --        (1)           (1)
                                                                                                            ----
      --            --     Comprehensive income................                                             $ 53
                                                                                                            ====
      --            0.3    Units issued to Host Marriott for
                           the comprehensive stock and employee
                           stock purchase plans................    --       --         4       --
      --          (0.5)    Cancellation of Units issued to Host
                           Marriott for shares granted to
                           employees...........................    --       --       --        --
      --           42.1    Redemptions of limited partnership               --       547       --
                           interests of third parties..........    --
      --            --     Distributions on OP Units...........    --       --     (222)       --
      --            --     Distributions on Preferred Limited      --       --      (32)       --
                           Partner Units.......................
      6.0           --     Issuance of Preferred OP Units......    143      --       --        --
      --            --     Market adjustment to record
                           Preferred OP Units and OP Units of
                           third parties at redemption value...    --       --        82       --
  -------------------------------------------------------------------------------------------------------------------
     14.2         263.2    Balance, December 31, 2001..........   $339      $ 1   $1,162      $(5)
  -------------------------------------------------------------------------------------------------------------------



              See Notes to Consolidated Financial Statements.


                                      F-6



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


                   CONSOLIDATED STATEMENTS OF CASH FLOWS


               Years Ended December 31, 2001, 2000 and 1999


                               (in millions)





                                                          2001   2000    1999
                                                          -----  -----  -------
                                                             (in millions)
                                                               
OPERATING ACTIVITIES
Income from continuing operations.......................  $  59  $ 203  $   256
Adjustments to reconcile to cash from operations:
 Depreciation and amortization..........................    378    331      293
 Income taxes...........................................    (24)   (47)     (66)
 Amortization of deferred income........................     (4)    (4)      (4)
 Net gains on property transactions.....................     (2)    (2)     (24)
 Equity in earnings of affiliates.......................     (3)   (25)      (6)
 Purchase of leasehold interests........................   (208)   --       --
 Other..................................................      5     14       10
 Changes in operating accounts:
 Other assets...........................................     83     (3)     (55)
 Other liabilities......................................     (3)    67      (44)
                                                          -----  -----  -------
 Cash from operations...................................    281    534      360
                                                          -----  -----  -------
INVESTING ACTIVITIES
Proceeds from sales of assets...........................     60    --       195
Acquisitions............................................    (63)   (40)     (29)
Capital expenditures:
 Capital expenditures for renewals and replacements.....   (206)  (230)    (197)
 New investment capital expenditures....................    (56)  (108)    (150)
 Other Investments......................................    (24)   (41)     (14)
Notes receivable collections, net.......................     10      6       19
Affiliate notes receivable issuances and collections,
 net....................................................    --     (39)     --
Other...................................................    --       4      --
                                                          -----  -----  -------
 Cash used in investing activities......................   (279)  (448)    (176)
                                                          -----  -----  -------
FINANCING ACTIVITIES
Issuances of debt.......................................    968    540    1,345
Debt prepayments........................................   (703)  (278)  (1,397)
Cost of extinguishment of debt..........................    --     --        (2)
Scheduled principal repayments..........................    (55)   (39)     (34)
Issuances of OP Units...................................      3      4        5
Issuances of preferred limited partner units............    143    --       196
Distributions on common OP Units........................   (298)  (241)    (258)
Distributions on preferred limited partner units........    (28)   (19)      (2)
Redemption or repurchase of OP Units for cash...........    --     (47)     (54)
Repurchases of Convertible Preferred Securities.........    --     (15)     (36)
Other...................................................      7     45     (106)
                                                          -----  -----  -------
 Cash from (used in) financing activities...............     37    (50)    (343)
                                                          -----  -----  -------
(INCREASE) DECREASE IN CASH AND CASH EQUIVALENTS........     39     36     (159)
CASH AND CASH EQUIVALENTS, beginning of year............    313    277      436
                                                          -----  -----  -------
CASH AND CASH EQUIVALENTS, end of year..................  $ 352  $ 313  $   277
                                                          =====  =====  =======



Supplemental schedule of noncash investing and financing activities:


   Approximately 612,000 cumulative redeemable preferred limited partnership
units valued at $76 million were issued during 1999 in connection with the
acquisition of minority interests in two hotels.


              See Notes to Consolidated Financial Statements.


                                      F-7



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Summary of Significant Accounting Policies


 Description of Business


   Host Marriott, L.P. ("Host LP," or the "Operating Partnership"), a Delaware
limited partnership, operating through an umbrella partnership structure with
Host Marriott Corporation ("Host REIT") as the sole general partner, is
primarily the owner of hotel properties. Host REIT operates as a self-managed
and self-administered real estate investment trust ("REIT") with its operations
conducted solely through an operating partnership, Host Marriott, L.P. ("Host
LP"), and its subsidiaries.


   The Work Incentives Improvement Act of 1999 ("REIT Modernization Act")
amended the tax laws to permit REITs, effective January 1, 2001, to lease
hotels to a subsidiary that qualifies as a taxable REIT subsidiary. Prior to
the REIT Modernization Act, certain tax laws restricted REITs from deriving
revenues directly from the operations of hotels, consequently on January 1,
1999, Host REIT leased substantially all of its hotels to subsidiaries of
Crestline Capital Corporation ("Crestline") and certain other lessees as
further discussed at Note 9. However, with the inception of the REIT
Modernization Act, a wholly owned subsidiary of Host LP, HMT Lessee LLC (the
"TRS"), which has elected to be treated as a taxable REIT subsidiary for
federal income tax purposes, acquired certain subsidiaries owning the leasehold
interests with respect to 120 of the Company's full-service hotels (the "Lessee
Entities") from Crestline and Wyndham International, Inc. and affiliates
("Wyndham"). As a result of the acquisitions, the Company's operating results
reflect property-level revenues and expenses rather than rental income from
lessees with respect to those 120 full-service properties from the effective
dates of the acquisitions. Two of the properties were sold in December of 2001.


   As of December 31, 2001, the Company owned, or had controlling interests in,
122 upper-upscale and luxury, full-service hotel lodging properties generally
located throughout the United States, Canada and Mexico operated primarily
under the Marriott, Ritz-Carlton, Four Seasons, Hilton, Hyatt and Swissotel
brand names. Of these properties, 109 are managed or franchised by Marriott
International, Inc. and its subsidiaries ("Marriott International").


 Basis of Presentation


   On December 15, 1998, shareholders of Host Marriott Corporation, ("Host
Marriott"), a Delaware corporation and the predecessor to Host REIT, approved a
plan to reorganize Host Marriott's business operations through the spin-off of
Host Marriott's senior living business as part of Crestline and the
contribution of Host Marriott's hotels and certain other assets and liabilities
to a newly formed Delaware limited partnership, Host LP. Host Marriott
Corporation, a newly formed Maryland corporation elected to be treated,
effective January 1, 1999, as a REIT and is the sole general partner of the
Operating Partnership. Host Marriott and its subsidiaries' contribution of its
hotels and certain assets and liabilities to the Operating Partnership and its
subsidiaries in exchange for units of partnership interest in the Operating
Partnership ("OP Units") was accounted for at Host Marriott's historical basis.
As of December 31, 2001, Host REIT owned approximately 92% of the Operating
Partnership.


   In these consolidated financial statements, the "Company" or "Host Marriott"
refers to Host Marriott Corporation before, and Host LP after Host Marriott
Corporation's conversion to a REIT (the "REIT conversion"). Host Marriott
Corporation is presented as the predecessor to the Operating Partnership since
the Operating Partnership and its subsidiaries received substantially all of
the continuing operations, assets and liabilities of Host Marriott Corporation
and its subsidiaries.


 Principles of Consolidation


   The consolidated financial statements include the accounts of the Company
and its subsidiaries and controlled affiliates. The Company consolidates
entities in which it owns a controlling financial interest (when


                                      F-8



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


it owns over 50% of the voting shares of another company or, in the case of
partnership investments, when the company owns the general partnership
interest). In all cases, the Company considers the impact on the Company's
financial control or the ability of minority shareholders or other partners to
participate or block management decisions. All material intercompany
transactions and balances have been eliminated.


 Use of Estimates in the Preparation of Financial Statements


   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.


 Revenues


   Revenue from operations of the Company's hotels not leased to third parties
is recognized when the services are provided. As previously discussed, the
Company, through the TRS, acquired the Lessee Entities in 2001, and as a
result, the Company no longer leases the properties to a third party, or
receives rental income with respect to those 120 properties. Therefore, the
Company's consolidated results of operations for 2001 primarily reflect
property-level revenues and expenses.


   The Company's 2000 and 1999 revenues primarily represent the rental income
from its leased hotels. The rent due under each lease is the greater of base
rent or percentage rent, as defined. Percentage rent applicable to room, food
and beverage and other types of hotel revenue varies by lease and is calculated
by multiplying fixed percentages by the total amounts of such revenues over
specified threshold amounts. As of year end 2000 and 1999, all annual
thresholds were achieved.


 Accounting for the Impact of the September 11, 2001 Terrorist Acts


   The Company is entitled to receive business interruption insurance as a
result of the discontinuation of operations of the World Trade Center Marriott
and the New York Marriott Financial Center, both of which were affected by the
terrorist attacks on September 11, 2001. Income resulting from business
interruption insurance will not be recognized until all contingencies related
to the insurance recoveries are resolved. To the extent that the Company incurs
expenses related to the hotels, principally the ground rent due for the World
Trade Center Marriott, for which the Company is still liable and for which it
is entitled to recovery under the insurance contract, a receivable will be
recognized, if it can be demonstrated that it is probable that the receivable
will be realized. The Company also has property insurance for these hotels and
while it is expected that insurance proceeds will be sufficient to cover all or
a substantial portion of the costs at both hotels, no determination has been
made as to the total amount or timing of those payments. The $129 million net
book value of the World Trade Center Marriott hotel has been written off and a
corresponding receivable recorded for the property insurance proceeds due under
the terms of the insurance contract, which the Company believes is probable of
receipt. The Company believes the replacement cost of the property is
substantially in excess of the hotel's previously recorded net book value.
Currently, no gain or loss has been recorded.


 Earnings Per Unit


   Basic earnings per unit is computed by dividing net income less
distributions on preferred limited partner units and preferred OP Units by the
weighted average number of common units outstanding. Diluted earnings per unit
are computed by dividing net income less distributions on preferred limited
partner interest and


                                      F-9



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


preferred OP Units as adjusted for potentially dilutive securities, by the
weighted average number of common units outstanding plus other potentially
dilutive securities. Dilutive securities may include units distributed to Host
REIT for Host REIT common shares granted under comprehensive stock plans and
the Convertible Preferred Securities. Dilutive securities may also include
those common and preferred OP Units issuable or outstanding that are held by
minority partners which are assumed to be converted. Diluted earnings per unit
was not adjusted for the impact of the Convertible Preferred Securities for
2001, 2000 and 1999 as they were anti-dilutive. In December 1998, the Company
declared the Special Dividend (See discussion at Note 7--"Equity and Partners'
Capital") and, in 1999, the Company distributed 11.5 million shares to existing
shareholders in conjunction with the Special Dividend. The weighted average
number of units outstanding and the basic and diluted earnings per computations
have been restated to reflect these shares as outstanding for all periods
presented.


   A reconciliation of the number of units utilized for the calculation of
diluted earnings per unit follows (in millions, except per share amounts):





                                                                   Year Ended
                       ----------------------------------------------------------------------------------------------------
                                     2001                              2000                              1999
                       --------------------------------  --------------------------------  --------------------------------
                                                  Per                               Per                               Per
                         Income        Units      Unit     Income        Units      Unit     Income        Units      Unit
                       (Numerator) (Denominator) Amount  (Numerator) (Denominator) Amount  (Numerator) (Denominator) Amount
                       ----------- ------------- ------  ----------- ------------- ------  ----------- ------------- ------
                                                                                          
Net income...........     $ 57         284.3     $ .20      $207         284.2     $ .73      $285         291.6     $ .98
 Distributions on
  preferred
 limited partner
  units and
 preferred OP Units..      (32)          --       (.11)      (20)          --       (.07)       (6)          --       (.02)
                          ----         -----     -----      ----         -----     -----      ----         -----     -----
Basic earnings
 available to
 unitholders per
 unit................     $ 25         284.3     $ .09      $187         284.2     $ .66      $279         291.6     $ .96
 Assuming
  distribution of
  units to Host
  Marriott
  Corporation for
  Host Marriott
  Corporation common
  shares granted
  under the
  comprehensive stock
  plan, less shares
  assumed purchased
  at average market
  price..............      --            4.1       --        --            4.2      (.01)      --            5.3      (.02)
 Assuming conversion
  of Preferred OP
  Units..............      --            --        --        --            0.6       --        --            0.3       --
 Assuming issuance of
  minority OP Units
  issuable under
  certain purchase
  agreements.........      --            --        --        --            --        --          7          10.9      (.01)
 Assuming conversion
  of Convertible
  Preferred
  Securities.........      --            --        --        --            --        --        --            --        --
                          ----         -----     -----      ----         -----     -----      ----         -----     -----
 Diluted Earnings per
  Unit...............     $ 25         288.4     $ .09      $187         289.0     $ .65      $286         308.1     $ .93
                          ====         =====     =====      ====         =====     =====      ====         =====     =====



 International Operations


   The consolidated statements of operations include the following amounts
related to non-U.S. subsidiaries and affiliates: revenues of $62 million, $25
million and $24 million, and income before income taxes of $6 million, $6
million and $8 million in 2001, 2000 and 1999, respectively.


 Property and Equipment


   Property and equipment is recorded at cost. For newly developed properties,
cost includes interest, ground rent and real estate taxes incurred during
development and construction. Replacements and improvements are capitalized,
while repairs and maintenance are expensed as incurred.


                                      F-10



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally 40 years for buildings and three to ten
years for furniture and equipment. Leasehold improvements are amortized over
the shorter of the lease term or the useful lives of the related assets.


   Gains on sales of properties are recognized at the time of sale or deferred
to the extent required by accounting principles generally accepted in the
United States. Deferred gains are recognized as income in subsequent periods
as conditions requiring deferral are satisfied or expire without further cost
to the Company.


   In cases where management is holding for sale particular hotel properties,
the Company assesses impairment based on whether the estimated sales price
less costs of disposal of each individual property to be sold is less than the
net book value. A property is considered to be held for sale when the Company
has made the decision to dispose of the property. Otherwise, the Company
assesses impairment of its real estate properties based on whether it is
probable that undiscounted future cash flows from each individual property
will be less than its net book value. If a property is impaired, its basis is
adjusted to its fair market value.


 Cash and Cash Equivalents


   The Company considers all highly liquid investments with a maturity of 90
days or less at the date of purchase to be cash equivalents.


 Minority Interest


   Minority interest consists of limited partnership interests in consolidated
investments of $108 million and $139 million at December 31, 2001 and 2000,
respectively.


 Deferred Charges


   Financing costs related to long-term debt are deferred and amortized over
the remaining life of the debt.


 Other Comprehensive Income


   The components of total accumulated other comprehensive income in the
balance sheet are as follows (in millions):





                                                                     2001  2000
                                                                     ----  ----
                                                                     
   Net unrealized gains............................................. $  6  $ 7
   Foreign currency translation adjustment..........................  (11)  (8)
                                                                     ----  ---
   Total accumulated other comprehensive income (loss).............. $ (5) $(1)
                                                                     ====  ===



 Derivative Instruments


   The Company attempts to maintain a reasonable balance between fixed- and
floating-rate debt, using interest rate swaps and caps, to keep financing
costs as low as possible. If the requirements for hedge accounting are met,
amounts paid or received under these agreements are recognized over the life
of the agreements as adjustments to interest expense, and the fair value of
the derivatives is recorded on the accompanying balance sheet, with offsetting
adjustments or charges recorded to the underlying debt. Otherwise the
instruments are marked to market, and the gains and losses from the changes in
the market value of the contracts are recorded in other income. Upon early
termination of an interest rate swap or cap, gains or losses are deferred and
amortized as adjustments to interest expense of the related debt over the
remaining period covered by the terminated swap or cap.


                                     F-11



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The Company is also subject to exposure from fluctuations in foreign
currencies relating to the four properties operated in Canada and two
properties in Mexico. To manage the exposure to changes in the Canadian
exchange rate, the Company uses foreign exchange forward contracts. Gains and
losses on contracts that meet the requirements for hedge accounting are
recorded on the balance sheet at fair value, with offsetting changes recorded
to accumulated other comprehensive income. Contracts that do not meet these
requirements are marked to market and included in other income each period.


 Concentrations of Credit Risk


   Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents.
The Company maintains cash and cash equivalents with various high credit-
quality financial institutions. The Company performs periodic evaluations of
the relative credit standing of these financial institutions and limits the
amount of credit exposure with any one institution.


   On January 1, 1999, subsidiaries of Crestline became the lessees of
virtually all the hotels and, as such, their rent payments were the primary
source of the Company's revenues during 2000 and 1999. As a result of the
acquisition of the Crestline Lessee Entities during January 2001 (Note 2), the
third party credit concentration with Crestline ceased to exist. Effective
January 1, 2001 the Company leases substantially all of the hotels to the TRS.


 Application of New Accounting Standards


   In October 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" which
replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets SFAS
No. 121 to determine when a long-lived asset should be classified as held for
sale, among other things. Those criteria specify that the asset must be
available for immediate sale in its present condition, subject only to terms
that are usual and customary for sales of such assets, and the sale of the
asset must be probable, and its transfer expected to qualify for recognition as
a completed sale, within one year. This Statement is effective for fiscal years
beginning after December 15, 2001. Additionally, in February 2002 the Financial
Accounting Standards Board resolved an implementation issue regarding SFAS No.
144 dealing with the treatment of sales of properties. Under the new
guidelines, gains and losses from the dispositions of investment properties and
the properties' historical operations for periods beginning in 2002 will be
treated as discontinued operations, and therefore, be classified separately
from income from continuing operations. Historically, the Company has
occasionally disposed of properties that were not consistent with the overall
quality of their portfolio or presented unique opportunities to realize the
asset's value, and the Company may dispose of additional assets from time to
time in the future. This statement would require reclassification of results
for any future dispositions previously included in continuing operations to
discontinued operations for all periods presented, although net income would
not be affected.


   In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Other intangible
Assets." SFAS No. 141 sets forth new standards on business combinations,
eliminating the pooling treatment of accounting for business combinations. SFAS
No. 142 requires additional disclosure of identifiable intangible assets, and
requires that they may be segregated from goodwill. Additionally, the statement
requires that goodwill no longer be amortized over 40 years, and that it is
instead impaired as the fair value of the goodwill declines. The Company has
not accounted for any of our business combinations using the pooling method of
accounting and does not have a material amount of goodwill or intangible assets
at year-end 2001. These statements are effective for fiscal years beginning
after December 15, 2001. The Company will implement SFAS Nos. 141 and 142 in
2002 and does not believe the statements will materially impact the Company.

                                      F-12



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   In 2002, the Financial Accounting Standards Board issued an exposure draft
which would rescind SFAS No. 4, Reporting Gains and Losses from Extinguishment
of Debt. The rescission, which would apply to periods subsequent to December
31, 2001, would eliminate the requirement that gains and losses from the
extinguishment of debt be classified as extraordinary items, unless it can be
considered unusual in nature and infrequent in occurrence. As a result, the
Company would no longer classify gains and losses from the extinguishment of
debt as extraordinary items and will adjust prior years accordingly.


   In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The standard
establishes accounting and reporting standards requiring that derivative
instruments (including specified derivative instruments embedded in other
contracts) be recorded in the balance sheet measured at fair value. The
standard requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement. The Company
implemented SFAS No. 133 in 2001.


2. Lease Repurchase


   Effective January 1, 2001, the Company, through the TRS, acquired from
Crestline the entities ("Crestline Lessee Entities") owning the leasehold
interests with respect to 116 full-service hotel properties owned by the
Company for $207 million in cash, including $6 million of legal and
professional fees and transfer taxes, effectively terminating the leases for
financial reporting purposes. In connection therewith, during the fourth
quarter of 2000 the Company recorded a non-recurring, pre-tax loss of $207
million net of a tax benefit of $82 million which the Company recognized as a
deferred tax asset because, for income tax purposes, the acquisition is
recognized as an asset that will be amortized over the next six years. The
transaction was consummated effective January 1, 2001.


   On June 16, 2001, the Company consummated another agreement with Crestline
for the acquisition of their lease agreement with respect to San Diego Marriott
Hotel and Marina (the "San Diego Hotel"). The purchase price was $4.5 million,
including $1.8 million of legal and professional fees. The TRS acquired the
lease by purchasing the lessee entity, effectively terminating the lease for
financial reporting purposes.


   On June 28, 2001, the Company consummated an agreement to purchase
substantially all the minority limited partnership interests held by Wyndham
with respect to seven full-service hotels for $60 million. As part of this
acquisition, the leases were acquired from Wyndham with respect to the San
Diego Marriott Mission Valley, the Minneapolis Marriott Southwest, and the
Albany Marriott by the TRS, effectively terminating the leases for financial
reporting purposes. For purposes of purchase accounting no amounts were
attributed to the leases themselves, as the leases had no value. The entire
purchase price was allocated to the minority limited partner interests
purchased.


   As a result of these acquisitions, the Company's consolidated results of
operations, from the effective dates of the transactions, will present
property-level revenues and expenses rather than rental income from lessees
with respect to those 120 full-service properties. Two of these properties were
sold in December of 2001.


                                      F-13



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


3. Property and Equipment


   Property and equipment consists of the following as of December 31:





                                                                2001     2000
                                                               -------  -------
                                                                (in millions)
                                                                  
   Land and land improvements................................. $   696  $   685
   Buildings and leasehold improvements.......................   7,039    6,986
   Furniture and equipment....................................     944      793
   Construction in progress...................................     149      135
                                                               -------  -------
                                                                 8,828    8,599
   Less accumulated depreciation and amortization.............  (1,829)  (1,489)
                                                               -------  -------
                                                               $ 6,999  $ 7,110
                                                               =======  =======



   Interest cost capitalized in connection with the Company's development and
construction activities totaled $8 million in 2001, $8 million in 2000, and $7
million in 1999.


   In accordance with SFAS 121, "Accounting for Long-Lived Assets and Long-
Lived Assets to be Disposed of," the Company wrote-down three properties, one
of which was sold in December 2001, considered held-for-sale to estimated fair
value, resulting in a charge of $13 million in 2001. There were no asset
writedowns in 2000.


4. Investments in and Receivables from Affiliates


   Investments in and receivables from affiliates consist of the following:




                                           As of December 31, 2001
                         --------------------------------------------------------------
                         Ownership
                         Interests Investment   Debt                 Assets
                         --------- ---------- --------    -----------------------------
                                      (in millions)
                                              
CBM Joint Venture LLC
 (a)....................     50%     $ 87.1   $  935.9(b) 120 Courtyard Hotels
JWDC Limited
 Partnership............   54.6%       35.7       95.3    JW Marriott, Washington, D.C.
Tiburon Golf Ventures,
 L.P. (a)...............     49%       18.1        --     36-hole golf course
Marriott Residence Inn
 Limited Partnership
 (a)....................      1%        0.6       92.6    15 Residence Inns
Marriott Residence Inn
 II Limited Partnership
 (a)....................      1%        0.4      132.2    23 Residence Inns
                                     $141.9   $1,256.0
                                     ======   ========
Notes and other
 receivables from
 affiliates, net........             $  6.3
                                     ======

                                           As of December 31, 2000
                         --------------------------------------------------------------
                         Ownership
                         Interests Investment   Debt                 Assets
                         --------- ---------- --------    -----------------------------
                                      (in millions)
                                              
JWDC Limited
 Partnership............     50%     $ 38.7   $   95.3    JW Marriott, Washington, D.C.
Rockledge Hotel
 Properties, Inc. (a)...     95%       87.3    1,434.5
Fernwood Hotel Assets,
 Inc....................     95%        2.3        --     --
                                     $128.3   $1,529.8
                                     ======   ========
Notes and other
 receivables from
 affiliates, net........             $163.7
                                     ======



                                      F-14



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


- --------

(a) As of December 31, 2000, CBM Joint Venture LLC, Tiburon Golf Ventures,
    L.P., Marriott Residence Inn Limited Partnership and Marriott Residence Inn
    II Limited Partnership were equity investments of Rockledge Hotel
    Properties, Inc. See discussion below.


(b) Includes investment in 120 Courtyard hotels, 38 Residence Inns, 50
    Fairfield Inns (partnership interest was sold during 2001), and the JW
    Marriott, Washington, D.C.


   On May 16, 2000, the Company acquired for $40 million in cash a non-
controlling interest in the JWDC Limited Partnership, which owns the JW
Marriott Hotel, a 772-room hotel located on Pennsylvania Avenue in Washington,
D.C. In 2002, we have the option to purchase the 44.4% limited partner interest
of one of the partners for the lesser of $5.8 million or the fair value of the
interest, whichever is greater. Additionally, on or after April 1, 2003, HMC
JWDC GP, our wholly owned subsidiary, Quad-JWM LLC, the other general partner,
have the right to require the partnership to purchase the 1% general partner
interest held by Quad-JWM LLC for the lesser of $375,000 or fair value of the
interest. As of December 31, 2001, the fair value of both interests is less
than $1 million.


   In connection with the REIT conversion, Rockledge Hotel Properties, Inc.
("Rockledge") and Fernwood Hotel Assets, Inc. (together, "Non-Controlled
Subsidiaries") were formed to own various assets contributed by the Company to
the Operating Partnership, the direct ownership of which by the Company could
jeopardize Host REIT's status as a REIT. In exchange for the contribution of
these assets to the Non-Controlled Subsidiaries, the Operating Partnership
received non-voting common stock of the Non-Controlled Subsidiaries,
representing 95% of the total economic interests therein. On March 24, 2001,
the Company acquired, through a taxable REIT subsidiary, all of the voting
common stock representing the remaining 5% of the total economic interest of
the Non-Controlled Subsidiaries from the Host Marriott Statutory
Employee/Charitable Trust. As a result of the acquisition, the Company began
consolidating Rockledge and Fernwood effective March 24, 2001 and therefore
they are no longer accounted for as equity investments.


   During December 2000, a newly created joint venture (the "Joint Venture")
formed by Rockledge and Marriott International acquired the partnership
interests in two partnerships that collectively own 120 limited service hotels
for approximately $372 million plus interest and legal fees, of which Rockledge
paid approximately $90 million. Previously, both partnerships were operated by
Rockledge as sole general partner. The Joint Venture acquired the two
partnerships by acquiring partnership units pursuant to a tender offer for such
units followed by a merger of the two partnerships with and into subsidiaries
of the Joint Venture. The Joint Venture financed the acquisition with $200
million of mezzanine indebtedness borrowed from Marriott International and with
cash and other assets contributed by Rockledge and Marriott International,
including Rockledge's existing general partner and limited partner interests in
the partnerships. Additionally, the joint venture has approximately $735
million of debt, all of which is non-recourse to and not guaranteed by Host
Marriott, that consists of the following: 1) The $287 million mortgage maturing
April 2012 requiring monthly payments of principal and interest at a fixed
interest rate of 7.865% which is secured by the 50 hotels owned by CBM I. 2)
The $127 million senior notes maturing February 2008 requiring semiannual
interest payments at a fixed interest rate of 10.75% secured by a first
priority pledge of CBM II of its general and limited partnership interests. 3)
The $321 million multi-class commercial mortgage pass-through certificates
maturing January 2013 requiring monthly payments of principal and interest at
weighted average interest rate of 7.8%, which is secured by first priority
mortgage liens on the 69 hotels owned by CBM II. Each of the joint venture's
120 hotels is operated by Marriott International pursuant to long-term
management agreements. Rockledge, currently a consolidated, wholly owned
subsidiary of the Company, through its subsidiaries, owns a 50% non-controlling
interest in the Joint Venture and records the investment under the equity
method.


                                      F-15



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   As a result of the consolidation of Rockledge, our investments include a
49% interest in Tiburon Golf Ventures, L.P., which owns the 36-hole Greg
Norman-designed golf course surrounding the Ritz-Carlton, Naples Golf Resort.
Additionally, we now consolidate the operations of two hotels located in
Mexico City, Mexico, in which we own a controlling interest.


   Receivables from affiliates are reported net of reserves of $7 million at
December 31, 2001 and 2000. There were no repayments in 2001, while repayments
were $3 million in 2000 and $2 million in 1999. There were no additional
fundings in 2001, 2000, and 1999.


   The Company's pre-tax income from affiliates includes the following:





                                                                  2001 2000 1999
                                                                  ---- ---- ----
                                                                  (in millions)
                                                                   
   Interest income from loans to affiliates (1).................. $ 4  $10  $11
   Equity in net income..........................................   3   25    6
                                                                  ---  ---  ---
                                                                  $ 7  $35  $17
                                                                  ===  ===  ===


- --------

(1)  This interest income relates to loans to Rockledge prior to their
     consolidation on March 24, 2001.


   Combined summarized balance sheet information for the Company's affiliates
follows as of December 31:





                                                                2001      2000
                                                               ------    ------
                                                               (in millions)
                                                                   
   Property and equipment, net................................ $1,490    $1,821
   Other assets...............................................    196       330
                                                               ------    ------
     Total assets............................................. $1,686    $2,151
                                                               ======    ======
   Debt, principally mortgages................................ $1,256(1) $1,530
   Other liabilities..........................................     76       231
   Equity.....................................................    354       390
                                                               ------    ------
     Total liabilities and equity............................. $1,686    $2,151
                                                               ======    ======


- --------

(1)  The 2001 debt balances were not funded by the Company and are non-
     recourse to the Company.


   Combined summarized operating results for the Company's affiliates follow:




                                                           2001   2000   1999
                                                           -----  -----  -----
                                                             (in millions)
                                                                
   Hotel revenues......................................... $ 638  $ 850  $ 897
   Operating expenses:
   Cash charges (including interest)....................... (524). (695). (711)
   Depreciation and other non-cash charges................  (107)  (127)  (137)
                                                           -----  -----  -----
   Income before extraordinary items......................     7     28     49
   Extraordinary items....................................   --      68    --
                                                           -----  -----  -----
   Net income............................................. $   7  $  96  $  49
                                                           =====  =====  =====



                                     F-16



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Loss on Litigation Settlement


   In connection with the settlement of litigation involving seven limited
partnerships in which the Company or its subsidiaries serve as general partner,
the Company recorded a non-recurring charge of $40 million during the fourth
quarter of 1999. The loss is classified as the loss on litigation settlement on
the consolidated statements of operations.


5. Debt


   Debt consists of the following:





                                                                   2001   2000
                                                                  ------ ------
                                                                  (in millions)
                                                                   
Series A senior notes, with a rate of 7 7/8% due August 2005..... $  500 $  500
Series B senior notes, with a rate of 7 7/8% due August 2008.....  1,195  1,194
Series C senior notes, with a rate of 8.45% due December 2008....    499    498
Series E senior notes, with a rate of 8 3/8% due February 2006...    300    300
Series G senior notes, with a rate of 9 1/4% due October 2007....    250    250
Series H senior notes, with a rate of 9 1/2% due January 15,
 2007............................................................    452    --
Senior secured notes, with a rate of 9 1/2% due May 2005.........     12     13
Senior notes, with an average rate of 9 3/4% maturing through
 2012............................................................     27     35
                                                                  ------ ------
  Total senior notes.............................................  3,235  2,790
                                                                  ------ ------
Mortgage debt (non-recourse) secured by $3.4 billion of real
 estate assets, with an average rate of 7.9% at December 31,
 2001, maturing through February 2023............................  2,261  2,275
Line of credit, with a variable rate of Eurodollar plus 2.25%
 (4.39% at December 31, 2001)....................................    --     150
Other notes, with an average rate of 7.36% at December 31, 2001,
 maturing through December 2017..................................     90     90
Capital lease obligations........................................     16     17
                                                                  ------ ------
  Total other....................................................    106    257
                                                                  ------ ------
                                                                   5,602  5,322
Convertible debt obligation to Host Marriott Corporation (See
 Note 6).........................................................    492    492
                                                                  ------ ------
                                                                  $6,094 $5,814
                                                                  ====== ======



 Senior Notes


   The Company currently has six series of Senior Notes outstanding all of
which have been issued under the same indenture. The indenture contains certain
financial covenants that, in the event of a default, would prohibit the Company
from incurring additional indebtedness. These covenants include a ratio test of
aggregate debt to total assets to be less than 65% on a pro forma basis and a
consolidated coverage ratio of EBITDA to interest expense of 2.0 to 1.0.
Failure to meet these covenants would limit the company's ability to incur
additional debt and make dividend payments except to the extent required for
Host REIT to maintain REIT status. As of December 31, 2001 the Company is in
compliance with these covenants.


   In December 2001, the Company issued $450 million of 9 1/2% Series H senior
notes due in 2007. The proceeds were used to repay the term loan and pay down
the revolver portion of the bank credit facility. The December 31, 2001 balance
of the Series H senior notes includes an adjustment for the fair market value
of the related interest rate swap agreement as discussed below.


                                      F-17



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   In October 2000, the Company issued $250 million of 9 1/4% Series F senior
notes due in 2007. The proceeds were used for the $26 million repayment of the
outstanding balance on the revolver portion of the bank credit facility,
settlement of certain litigation, and to partially fund the acquisition of the
Crestline Lessee Entities. The notes were exchanged in the first quarter of
2001 for Series G senior notes on a one-for-one basis, which are freely
transferable by the holders.


   In February 1999, the Company issued $300 million of 8 3/8% Series D notes
due in 2006. The debt was used to refinance, or purchase, approximately $299
million of debt acquired in the partnership mergers, including a $40 million
variable rate mortgage and an associated swap agreement, which was terminated
by incurring a termination fee of $1 million. The notes were exchanged in
August 1999 for Series E Senior notes on a one-for-one basis, which are freely
transferable by the holders.


   Bank Credit Facility. The Company has a bank credit facility, which was
entered into in 1998 and has subsequently been modified in June 2000 and
November 2001. The original facility was for $1.25 billion and matured in three
years. In June 2000, the borrowing capacity under the facility was reduced to
$775 million. The last modification to the facility was in November 2001, which
reduced the available capacity to $50 million. The bank credit facility
contains covenants restricting the ability of the Company and certain of its
subsidiaries to incur indebtedness, grant liens on their assets, acquire or
sell assets or make investments in other entities, and make certain
distributions to equity holders of Host REIT and the Operating Partnership. The
bank credit facility also contains certain financial covenants relating to,
among other things, maintaining certain levels of tangible net worth and
certain ratios of EBITDA to interest and fixed charges, total debt to EBITDA,
unencumbered assets to unsecured debt, and secured debt to total debt.
Borrowings under the facility bear interest currently at the Eurodollar rate
plus 225 basis points. The interest rate on the facility fluctuates based on
the company's leverage ratio. Borrowings under the facility averaged $248
million in 2001 and $153 million in 2000. As of December 31, 2001 there are no
outstanding borrowings under the facility. During 2001, 2000 and 1999, the
Company recognized extraordinary losses of approximately $1 million, $2
million, and $2 million, respectively, representing the write-off of deferred
financing costs.


   As a result of the economic recession and the events of September 11, 2001
the operations of our hotels were severely impacted. Certain covenants of the
bank credit facility have been temporarily amended and currently require the
Company, among other items, to: 1) meet less stringent levels in respect to
minimum consolidated interest coverage ratio and minimum unsecured interest
coverage ratio until September 6, 2002 and a maximum leverage ratio through
August 15, 2002, 2) suspends until September 6, 2002 the minimum consolidated
fixed charge coverage ratio test, 3) limits draws under the revolver portion to
$50 million in the first quarter of 2002 and up to $25 million in the second
quarter of 2002 (but only if draws in the second quarter of 2002 do not cause
the aggregate amount drawn in 2002 and then outstanding to exceed $25 million
and 4) increases the interest rate charged for borrowing based on higher
leverage levels. The covenants also restrict our ability to: 1) make equity
distributions, 2) incur additional indebtedness, 3) acquire assets, 4) make
investments in subsidiaries and 5) make capital expenditures. The Company is
currently in compliance with all of these covenants.


 Mortgage Debt


   In October 2001, the Company prepaid the remaining mortgage debt of $16.5
million on the San Antonio Marriott Riverwalk which was due to mature January
1, 2002.


   During January 2002, we transferred one of our non-core properties, the St.
Louis Marriott Pavilion, to the mortgage lender. In the first quarter of 2002,
we wrote off the remaining $13 million of property and


                                      F-18



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


equipment, eliminated $37 million of mortgage debt and related liabilities and
recorded a non-cash gain of approximately $24 million.


   In August 2001, a Canadian subsidiary of the Company entered into a
financing agreement pursuant to which it borrowed $96.6 million due August 2006
at a variable rate of LIBOR plus 275 basis points. The Calgary Marriott,
Toronto Airport Marriott, Toronto Marriott Eaton Centre, and Toronto Delta
Meadowvale hotels serve as collateral. The proceeds from this financing were
used to refinance existing indebtedness on these hotels as well as to repay the
$88 million mortgage note on The Ritz-Carlton, Amelia Island hotel. The Company
recorded an extraordinary loss of $1 million during 2001 related to this
refinancing.


   In February 2000, the Company refinanced the $80 million mortgage on
Marriott's Harbor Beach Resort property in Fort Lauderdale, Florida. The new
mortgage is for $84 million, at a rate of 8.58%, and matures in March 2007.


   In August 1999, the Company made a prepayment of $19 million to pay down in
full the mezzanine mortgage on the Marriott Desert Springs Resort and Spa. In
September 1999, the Company made a prepayment of $45 million to pay down in
full the mortgage note on the Philadelphia Four Seasons Hotel.


   In July 1999, the Company entered into a financing agreement pursuant to
which it borrowed $665 million due 2009 at a fixed rate of 7.47% with eight
hotels serving as collateral. The proceeds from this financing were used to
refinance existing mortgage indebtedness maturing at various times through
2000, including approximately $590 million of outstanding variable rate
mortgage debt. The Company recorded an extraordinary gain of $5 million during
1999 related to this refinancing.


   In June 1999, the Company refinanced the debt on the San Diego Marriott
Hotel and Marina. The mortgage is $195 million with a term of 10 years at a
rate of 8.45%. In addition, the Company entered into a mortgage for the
Philadelphia Marriott expansion in July 1999 for $23 million at an interest
rate of approximately 8.6%, maturing in 2009.


 Derivative Instruments


   The mortgage loan on the Canadian properties is denominated in U.S. dollars
and the functional currency of the Canadian subsidiaries is the Canadian
dollar. The subsidiaries have entered into 60 separate currency forward
contracts to buy U.S. dollars at a fixed price. These forward contracts hedge
the currency exposure of converting Canadian dollars to U.S. dollars on a
monthly basis to cover debt service payments. The fair value of the contracts
on December 31, 2001 was $1.5 million.


   On December 20, 2001, we entered into a 5-year interest rate swap agreement,
which is effective January 15, 2002 and matures January 2007. Under the swap,
we receive fixed-rate payments of 9.5% and pay floating-rate payments based on
one-month LIBOR plus 450 basis points, on a $450 million notional amount. The
fair value of the interest rate swap agreement was zero at inception. Under
SFAS 133 we have designated the interest rate swap as a fair value hedge, and
the amounts paid or received under the swap agreement will be recognized over
the life of the agreement as an adjustment to interest expense. On January 4,
2002, in a separate agreement with a different counter party, we purchased for
approximately $3.5 million an interest rate cap with the same notional amount
which caps the floating interest rate at 14%. Under SFAS 133 the cap represents
a derivative that will be marked to market and the gains and losses from
changes in the market value of the cap are to be recorded in other income or
expense in the current period.


                                      F-19



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   During 1999, the Company terminated its then outstanding interest rate swap
agreements and recognized an extraordinary gain of approximately $8 million.


 Aggregate Debt Maturities


   Aggregate debt maturities at December 31, 2001 are (in millions), excluding
the convertible debt obligation to Host Marriott:



                                                                   
   2002................................................................. $  148
   2003.................................................................     67
   2004.................................................................     79
   2005.................................................................    570
   2006.................................................................    656
   Thereafter...........................................................  4,073
                                                                         ------
                                                                          5,593
   Discount on senior notes.............................................     (7)
   Capital lease obligation.............................................     16
                                                                         ------
                                                                         $5,602
                                                                         ======

   


 Cash Paid for Interest


   Cash paid for interest for continuing operations, net of amounts
capitalized, was $470 million in 2001, $450 million in 2000, and $451 million
in 1999. Deferred financing costs, which are included in other assets, amounted
to $99 million and $108 million, net of accumulated amortization, as of
December 31, 2001 and 2000, respectively. Amortization of deferred financing
costs totaled $22 million, $15 million, and $17 million in 2001, 2000, and
1999, respectively.


6. Convertible Debt Obligation to Host Marriott Corporation


   The obligation for the $492 million of 6 3/4% Convertible Subordinated
Debentures (the "Debentures") as of December 31, 2001 and 2000 has been
included in these financial statements as debt of the Company because upon the
REIT Conversion the Operating Partnership assumed primary liability for
repayment of the Debentures of Host Marriott underlying the Convertible
Preferred Securities (defined below) of the Host Marriott Financial Trust (the
"Issuer"), a wholly-owned subsidiary trust of Host Marriott. The common
securities of Host Marriott Financial Trust were not contributed to the
Operating Partnership and therefore Host Marriott Financial Trust is not
consolidated by the Operating Partnership. Upon conversion by a Convertible
Preferred Securities holder, Host Marriott will issue shares of its common
stock which will be delivered to such holder. Upon the issuance of such shares
by Host Marriott, the Operating Partnership will issue to Host Marriott the
number of OP Units equal to the number of shares of the Host Marriott common
stock issued in exchange for the Debentures.


   In December 1996, Host Marriott Financial Trust (the "Issuer"), a wholly
owned subsidiary trust of the Company, issued 11 million shares of 6 3/4%
convertible quarterly income preferred securities (the "Convertible Preferred
Securities"), with a liquidation preference of $50 per share (for a total
liquidation amount of $550 million). The Convertible Preferred Securities
represent an undivided beneficial interest in the assets of the Issuer. The
payment of distributions out of moneys held by the Issuer and payments on
liquidation of the Issuer or the redemption of the Convertible Preferred
Securities are guaranteed by the Company to the extent the Issuer has funds
available therefor. This guarantee, when taken together with the Company's
obligations under


                                      F-20



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


the indenture pursuant to which the Debentures (defined below) were issued,
the Debentures, the Company's obligations under the Trust Agreement and its
obligations under the indenture to pay costs, expenses, debts and liabilities
of the Issuer (other than with respect to the Convertible Preferred
Securities) provides a full and unconditional guarantee of amounts due on the
Convertible Preferred Securities. Proceeds from the issuance


of the Convertible Preferred Securities were invested in 6 3/4% Convertible
Subordinated Debentures (the "Debentures") due December 2, 2026 issued by the
Company. The Issuer exists solely to issue the Convertible Preferred
Securities and its own common securities (the "Common Securities") and invest
the proceeds therefrom in the Debentures, which is its sole asset. Separate
financial statements of the Issuer are not presented because of the Company's
guarantee described above; the Company's management has concluded that such
financial statements are not material to investors as the Issuer is wholly
owned and essentially has no independent operations.


   Each of the Convertible Preferred Securities and the related debentures are
convertible at the option of the holder into shares of Company common stock at
the rate of 3.2537 shares per Convertible Preferred Security (equivalent to a
conversion price of $15.367 per share of Company common stock). The Issuer
will only convert Debentures pursuant to a notice of conversion by a holder of
Convertible Preferred Securities. During 2001 and 2000, 400 shares and 325
shares were converted into common stock, respectively. During 1999, no shares
were converted into common stock. The conversion ratio and price were adjusted
to reflect the impact of the distribution and the Special Dividend.


   Holders of the Convertible Preferred Securities are entitled to receive
preferential cumulative cash distributions at an annual rate of 6 3/4%
accruing from the original issue date, commencing March 1, 1997, and payable
quarterly in arrears thereafter. The distribution rate and the distribution
and other payment dates for the Convertible Preferred Securities will
correspond to the interest rate and interest and other payment dates on the
Debentures. The Company may defer interest payments on the Debentures for a
period not to exceed 20 consecutive quarters. If interest payments on the
Debentures are deferred, so too are payments on the Convertible Preferred
Securities. Under this circumstance, the Company will not be permitted to
declare or pay any cash distributions with respect to its capital stock or
debt securities that rank pari passu with or junior to the Debentures.


   Subject to certain restrictions, the Convertible Preferred Securities are
redeemable at the Issuer's option upon any redemption by the Company of the
Debentures after December 2, 1999. Upon repayment at maturity or as a result
of the acceleration of the Debentures upon the occurrence of a default, the
Convertible Preferred Securities are subject to mandatory redemption.


   In connection with consummation of the REIT Conversion, we assumed primary
liability for repayment of the Debentures of Host REIT underlying the
Convertible Preferred Securities. Upon conversion by a Convertible Preferred
Securities holder, Host REIT will issue shares of Host REIT common stock,
which will be delivered to such holder. Upon the issuance of such shares by
Host REIT we will issue to Host REIT a number of OP Units equal to the number
of shares of Host REIT common stock issued in exchange for the Debentures.


   The Company repurchased .4 million shares of the Convertible Preferred
Securities in 2000 as part of the share repurchase program described below in
Note 7. No shares of the Convertible Preferred Securities were repurchased in
2001.



                                     F-21



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


7. Equity and Partners' Capital


   284.7 million and 284.9 million common OP units were outstanding, of which
Host REIT held 263.2 million and 221.3 million, as of December 31, 2001 and
2000, respectively. In addition 14.2 million and 8.2 million preferred limited
partner units were outstanding as of December 31, 2001 and 2000.


   We paid quarterly cash distributions of $0.26 for the first three quarters
of 2001. As a result of the declining operations, no distributions were made
for the fourth quarter of 2001. Due to liquidity concerns related to the
current economic conditions and the impact of the September 11, 2001 terrorist
attacks it is uncertain at this time when distributions will commence. For
2000, we paid quarterly cash distributions of $0.21, $0.21, $0.23, and $0.26.


   During 1999, approximately 586,000 Class TS cumulative redeemable preferred
operating partnership units and approximately 26,000 Class AM cumulative
redeemable preferred operating partnership units (together the "Preferred OP
Units") were issued in connection with the acquisition of minority interests in
two hotels. The Preferred OP Units are convertible into OP Units on a one-for-
one basis, subject to adjustment in specified events, at any time beginning one
year after acquisition, and after conversion to OP Units are redeemable for
cash or at Host REIT's option, Host REIT common shares. The Company has the
right to convert the Preferred OP Units to OP Units two years from the date of
issuance. Preferred OP Unitholders are entitled to receive a preferential cash
distribution of $0.21 per quarter. During 2000, all of the Class TS Preferred
OP Units and approximately 7,000 of the Class AM Preferred OP Units were
converted by the holders to common OP Units. During 2000, 593,000 Preferred OP
Units were converted by their respective holders to common OP Units. Only
19,000 Preferred OP Units were outstanding as of December 31, 2001 and 2000.


   In September 1999, the Board of Directors of Host Marriott Corporation
approved the repurchase, from time to time on the open market and/or in
privately negotiated transactions, of up to 22 million of the outstanding
shares of the common stock, operating partnership units, or a corresponding
amount of the Convertible Preferred Securities, which are convertible into a
like number of shares of common stock, based on the appropriate conversion
ratio. Such repurchases will be made at management's discretion, subject to
market conditions, and may be suspended at any time at the Company's
discretion. For the year ended December 31, 2000, the Company repurchased 4.9
million common shares, 0.4 million shares of the Convertible Preferred
Securities and 0.3 million OP Units for a total investment of $62 million.
Since inception of the program, the Company has spent, in the aggregate,
approximately $150 million to retire approximately 16.2 million equivalent
units on a fully diluted basis.


   In August 1999, Host REIT sold 4.16 million shares of 10% Class A preferred
stock, in November 1999, Host REIT sold 4.0 million shares of 10% Class B
preferred stock and in March 2001, Host REIT sold 6.0 million shares of 10%
Class C preferred stock. The Operating Partnership, in turn, issued equivalent
securities, the Class A Preferred Units, Class B Preferred Units, and Class C
Preferred Units ("Class A, B and C Preferred Units"), to Host REIT. Holders of
the preferred stock are entitled to receive cumulative cash dividends at a rate
of 10% per annum of the $25.00 per share liquidation preference, payable
quarterly in arrears commencing October 15, 1999 and January 15, 2000 and April
15, 2001 for the Class A, Class B and Class C preferred stock, respectively.
After August 3, 2004, April 29, 2005, and March 27, 2006, Host REIT has the
option to redeem the Class A Preferred Stock, Class B Preferred Stock, and
Class C Preferred Stock, respectively, for $25.00 per share, plus accrued and
unpaid dividends to the date of redemption. The Class A, B and C Preferred
Units rank senior to the OP Units and the Preferred OP Units, and on a parity
with each other. The preferred unitholders generally have no voting rights.
Accrued preferred distributions at December 31, 2001 were $8.8 million.


                                      F-22



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The Contribution and related transactions resulted in the exchange of 217.1
million OP Units for substantially all of the assets and liabilities of Host
Marriott Corporation.


   In conjunction with the REIT Conversion, the Company issued approximately
73.5 million OP Units which are convertible into cash or shares of Host
Marriott common stock, at Host Marriott's option. Approximately 21.6 million
and 63.6 million of the OP Units were outstanding as of December 31, 2001 and
2000, respectively.


   On May 29, May 7 and February 7, 2001, Blackstone and affiliates converted
18.2 million, 10.0 million and 12.5 million OP Units, respectively, to Host
REIT common shares and immediately sold them to an underwriter for sale on the
open market. As a result, Host REIT now owns approximately 92% of the
outstanding OP Units. The Company received no proceeds as a result of this
transaction.


   Host Marriott Corporation issued 11.5 million shares of common stock as part
of the Special Dividend and 8.5 million shares of common stock in exchange for
8.5 million OP Units issued to certain limited partners in connection with the
Partnership Mergers (Note 13). Also, as part of the REIT Conversion, Host
Marriott Corporation changed its par value from $1 to $0.01 per share. The
change in par value did not affect the number of shares outstanding.


 Special Dividend


   On December 18, 1998, in connection with the Company's REIT conversion, the
Board of Directors declared a special dividend which entitled shareholders of
record on December 28, 1998 to elect to receive either $1.00 in cash or .087 of
a share of common stock of Host REIT for each outstanding share of Host REIT's
common stock owned by such shareholder on the record date (the "Special
Dividend"). Cash totaling $73 million and 11.5 million shares of common stock
that were elected in the Special Dividend were paid and/or issued in 1999.


8. Income Taxes


   The Operating Partnership is not a tax paying entity. However, the Operating
Partnership under the Operating Partnership Agreement is required to reimburse
Host REIT for any tax payments Host REIT is required to make. Accordingly, the
tax information included herein represents disclosures regarding Host REIT. As
a result of the requirement of the Company to reimburse Host REIT for these
liabilities, such liabilities and related disclosures are included in the
Company's financial statements.


   In December 1998, the Company restructured itself to enable the Company to
qualify for treatment as a REIT effective January 1, 1999, pursuant to the U.S.
Internal Revenue Code of 1986, as amended. In general, a corporation that
elects REIT status and meets certain tax law requirements regarding
distribution of its taxable income to its shareholders as prescribed by
applicable tax laws and complies with certain other requirements (relating
primarily to the nature of its assets and the sources of its revenues) is not
subject to Federal income taxation on its operating income to the extent it
distributes at least 90% (95% for tax years prior to 2001) of its taxable
income. In 2001 and 2000, the Company distributed 100% of its taxable income to
its common and preferred shareholders. Dividends to common shareholders totaled
$.78 and $.91 per outstanding share in 2001 and 2000, respectively. Of the 2001
common stock dividend, $.49 was taxable as ordinary income, $.04 was taxable as
a capital gain and the remaining $.25 was a return of capital. The entire 2000
distribution was taxable as ordinary income. Accordingly, the Company does not
believe that it will be liable for current income taxes at the Federal level or
in most of the states in which it operates. However, the Company is required to

                                      F-23



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


pay taxes on "built-in gains" on sales of certain of its assets, if any.
Additionally, the Company's consolidated taxable REIT subsidiaries are subject
to Federal and state income tax. The consolidated income tax provision
includes, primarily, the tax provision related to the operations of the TRS,
Rockledge, Fernwood and international taxes at the Operating Partnership, as
well as each of their respective subsidiaries.


   In order to qualify as a REIT for federal income tax purposes, among other
things, the Company was required to distribute all of its accumulated earnings
and profits ("E&P") to its stockholders in one or more taxable dividends prior
to December 31, 1999. To accomplish the requisite distributions of accumulated
E&P, the Company made distributions consisting of approximately 20.4 million
shares of Crestline valued at $297 million, $73 million in cash, and
approximately 11.5 million shares of Host Marriott stock valued at $138
million.


   Where required, deferred income taxes are accounted for using the asset and
liability method. Under this method, deferred income taxes are recognized for
temporary differences between the financial reporting bases of assets and
liabilities and their respective tax bases and for operating loss and tax
credit carryforwards based on enacted tax rates expected to be in effect when
such amounts are realized or settled. However, deferred tax assets are
recognized only to the extent that it is more likely than not that they will
be realized based on consideration of available evidence, including tax
planning strategies and other factors.


   Total deferred tax assets and liabilities at December 31, 2001 and December
31, 2000 were as follows:





                                                                    2001   2000
                                                                    -----  ----
                                                                       (in
                                                                    millions)
                                                                     
   Deferred tax assets............................................. $  77  $ 82
   Deferred tax liabilities........................................  (110)  (54)
                                                                    -----  ----
     Net deferred income tax (liability)/asset..................... $ (33) $ 28
                                                                    =====  ====



   The tax effect of each type of temporary difference and carryforward that
gives rise to a significant portion of deferred tax assets and liabilities as
of December 31, 2001 and December 31, 2000 were as follows:





                                                                    2001   2000
                                                                    -----  ----
                                                                       (in
                                                                    millions)
                                                                     
   Investment in hotel leases...................................... $  69  $ 82
   Safe harbor lease investments...................................   (21)  (23)
   Property and equipment..........................................    (6)  --
   Investments in affiliates.......................................   (60)  --
   Deferred gains..................................................   (23)  (31)
   Other...........................................................     6   --
   Alternative minimum tax credit carryforwards....................     2   --
                                                                    -----  ----
     Net deferred income tax (liability) asset..................... $ (33) $ 28
                                                                    =====  ====



                                     F-24



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The provision (benefit) for income taxes consists of:





                                                               2001  2000  1999
                                                               ----  ----  ----
                                                               (in millions)
                                                                  
   Current --Federal.........................................  $(11) $(29) $ 26
      --State................................................     3     2     3
      --Foreign..............................................     4     6     3
                                                               ----  ----  ----
                                                                 (4)  (21)   32
                                                               ----  ----  ----
   Deferred--Federal.........................................     9   (66)  (37)
      --State................................................     2   (11)  (11)
      --Foreign..............................................     1   --    --
                                                               ----  ----  ----
                                                                 12   (77)  (48)
                                                               ----  ----  ----
                                                               $  8  $(98) $(16)
                                                               ====  ====  ====

   On July 20, 2001, the United States Court of Appeals for the Fourth Circuit
affirmed a lower court ruling that allowed the Company to carryback a 1991
specified liability loss to the tax years 1984 and 1985 resulting in a net
income tax refund of $16 million. The Company recorded the refund as a benefit
to the provision in 2001. In addition, the Company settled with the Internal
Revenue Service all other outstanding issues for the tax years through 1998.
The Company made net payments to the IRS of approximately $19 million in 2001
and $14 million in 1999 related to these settlements.

   A reconciliation of the statutory Federal tax expense to the Company's
income tax expense follows:


                                                               2001  2000  1999
                                                               ----  ----  ----
                                                               (in millions)
                                                                  
   Statutory Federal tax.....................................  $ 23  $ 37  $ 84
   Nontaxable income of REIT.................................    (9)  (37)  (84)
   Built-in-gain tax.........................................   --     (1)    5
   State income taxes, net of Federal tax benefit............     5     2     2
   Tax benefit from acquisition of leases....................   --    (82)  --
   Tax contingencies.........................................   (16)  (23)  (26)
   Tax on foreign source income..............................     5     6     3
                                                               ----  ----  ----
     Income tax expense......................................  $  8  $(98) $(16)
                                                               ====  ====  ====



   Cash paid for income taxes, including IRS settlements, net of refunds
received, was $24 million, $30 million, and $50 million in 2001, 2000 and 1999,
respectively.


9. Leases


   Hotel Leases. Prior to 2001, the Company leased its hotels (the "Leases") to
one or more third party lessees (the "Lessees"), primarily subsidiaries of
Crestline, due to federal income tax law restrictions on a REIT's ability to
derive revenues directly from the operation of a hotel. Effective January 1,
2001, the REIT Modernization Act amended the tax laws to permit REITs to lease
hotels to a subsidiary that qualifies as a taxable REIT subsidiary.
Accordingly, the TRS acquired the Crestline Lessee Entities owning the
leasehold interests with respect to 116 of the Company's full-service hotels
during January 2001 and acquired the Lessee Entities owning the leasehold
interest with respect to four of the Company's full-service hotels from
Crestline (one lease) and Wyndham (three leases) during June of 2001. As a
result, the Company's revenues now reflect hotel level sales instead of rental
income.


                                      F-25



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Each Lessee is responsible for paying all of the expenses of operating the
applicable hotel(s), including all personnel costs, utility costs and general
repair and maintenance of the hotel(s). The Lessee also is responsible for all
fees payable to the applicable manager, including base and incentive management
fees, chain services payments and franchise or system fees, with respect to
periods covered by the term of the Lease. The Company also remains liable under
each management agreement.


   The Company is responsible for paying real estate taxes, personal property
taxes (to the extent the Company owns the personal property), casualty
insurance on the structures, ground lease rent payments, required expenditures
for FF&E (including maintaining the FF&E reserve, to the extent such is
required by the applicable management agreement) and other capital
expenditures.


   Crestline Guarantees. During 1999 and 2000, Crestline and certain of its
subsidiaries, as lessees under virtually all of the hotel leases, entered into
limited guarantees of the Lease obligations of each Lessee. The full-service
hotel leases were grouped into four lease pools (determined on the basis of the
term of the particular Lease with all leases having generally the same lease
term placed in the same "pool"). As a result of the acquisition of the Lessee
Entities in 2001 by the TRS, there no longer is a third party credit
concentration. Separate financial statements for the years ended December 31,
2000 and 1999 for each of the four lease pools in which the Company's hotels
were organized are presented in Item 8 of this Annual Report on Form 10-K.


   The Company sold the existing working capital to the applicable Lessee upon
the commencement of the Lease at a price equal to the fair market value of such
assets. The purchase price was represented by a note evidencing a loan that
bore interest at a rate of 5.12%. As of December 31, 2000 and 1999, the note
receivable from Crestline for working capital was $91 million and $90 million,
respectively. In connection with the acquisitions of the Lessee Entities, the
working capital was acquired by the TRS.


   Hospitality Properties Trust Relationship. In a series of related
transactions in 1995 and 1996, the Company sold and leased back 53 of its
Courtyard properties and 18 of its Residence Inns to Hospitality Properties
Trust ("HPT"). These leases, which are accounted for as operating leases and
are included in the table below, have initial terms expiring through 2012 for
the Courtyard properties and 2010 for the Residence Inn properties, and are
renewable at the option of the Company. Minimum rent payments are $51 million
annually for the Courtyard properties and $17 million annually for the
Residence Inn properties, and additional rent based upon sales levels are
payable to the owner under the terms of the leases.


   In connection with the REIT Conversion, the Company sublet the HPT hotels
(the "Subleases") to separate sublessee subsidiaries of Crestline
("Sublessee"), subject to the terms of the applicable HPT Lease. The term of
each Sublease expires simultaneously with the expiration of the initial term of
the HPT lease to which it relates and automatically renews for the
corresponding renewal term under the HPT lease, unless either the HPT lessee
(the "Sublessor") elects not to renew the HPT lease, or the Sublessee elects
not to renew the Sublease at the expiration of the initial term provided,
however, that neither party can elect to terminate fewer than all of the
Subleases in a particular pool of HPT hotels (one for Courtyard by Marriott
hotels and one for Residence Inn hotels). Rent payable by Crestline under the
Sublease consists of the minimum rent payable under the HPT lease and an
additional percentage rent payable to the Company. The percentage rent payable
by the Sublessor is sufficient to cover the additional rent due under the HPT
lease, with any excess being retained by the Sublessor. The rent payable under
the Subleases is guaranteed by Crestline, up to a maximum amount of $30 million
which amount is allocated between the two pools of HPT hotels.


   Other Lease Information. A number of the Company's leased hotel properties
also include long-term ground leases for certain hotels, generally with
multiple renewal options. Certain leases contain provisions for


                                      F-26



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


the payment of contingent rentals based on a percentage of sales in excess of
stipulated amounts. Future minimum annual rental commitments for all non-
cancelable leases for which the Company is the lessee are as follows:





                                                               Capital Operating
                                                               Leases   Leases
                                                               ------- ---------
                                                                 (in millions)
                                                                 
     2002.....................................................  $  6    $  108
     2003.....................................................     6       104
     2004.....................................................     6       101
     2005.....................................................     1        97
     2006.....................................................     1        95
     Thereafter...............................................   --      1,164
                                                                ----    ------
     Total minimum lease payments.............................    20    $1,669
                                                                        ======
     Less amount representing interest........................    (4)
                                                                ----
       Present value of minimum lease payments................  $ 16
                                                                ====



   Certain of the lease payments included in the table above relate to
facilities used in the Company's former restaurant business. Most leases
contain one or more renewal options, generally for five or 10-year periods.
Future rentals on leases have not been reduced by aggregate minimum sublease
rentals from restaurants and HPT subleases of $48 million and $722 million,
respectively, payable to the Company under non-cancellable subleases.


   In conjunction with the refinancing of the mortgage of the New York Marriott
Marquis in 1999, the Company also renegotiated the terms of the ground lease.
The renegotiated ground lease provides for the payment of a percentage of the
hotel sales (3% in 1998, 4% in 1999 and 5% thereafter) through 2017, which is
to be used to amortize the then existing deferred ground rent obligation of
$116 million. The Company has the right to purchase the land under certain
circumstances. The balance of the deferred ground rent obligation was $65
million and $77 million at December 31, 2001 and 2000, respectively, and is
included in other liabilities on the consolidated balance sheets.


   The Company remains contingently liable on certain leases relating to
divested non-lodging properties. Such contingent liabilities aggregated $57
million at December 31, 2001. However, management considers the likelihood of
any substantial funding related to these leases to be remote.


   Rent expense consists of:





                                                                 2001 2000 1999
                                                                 ---- ---- ----
                                                                 (in millions)
                                                                  
   Minimum rentals on operating leases.......................... $107 $107 $106
   Additional rentals based on sales............................   32   36   29
                                                                 ---- ---- ----
                                                                 $139 $143 $135
                                                                 ==== ==== ====



10. Employee Stock Plans


   In connection with the REIT conversion, the Company assumed the employee
obligations of Host REIT. Upon the exercise of stock options in Host REIT
common stock, Host REIT will issue shares of its common stock in return for the
issuance of an equal number of OP Units of the Company. Accordingly, these
liabilities and related disclosures are included in the Company's consolidated
financial statements.


                                      F-27



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   At December 31, 2001, Host REIT maintained two stock-based compensation
plans, including the comprehensive stock plan (the "Comprehensive Plan"),
whereby Host REIT may award to participating employees (i) options to purchase
Host REIT's common stock, (ii) deferred shares of Host REIT's common stock and
(iii) restricted shares of Host REIT's common stock, and the employee stock
purchase plan (the "Employee Stock Purchase Plan"). Total shares of common
stock reserved and available for issuance under the Comprehensive Plan at
December 31, 2001 were approximately 15 million.


   Employee stock options may be granted to officers and key employees with an
exercise price not less than the fair market value of the common stock on the
date of grant. Non-qualified options generally expire up to 15 years after the
date of grant. Most options vest ratably over each of the first four years
following the date of the grant. In connection with the Marriott International
distribution in 1993, Host Marriott issued an equivalent number of Marriott
International options and adjusted the exercise prices of its options then
outstanding based on the relative trading prices of shares of the common stock
of the two companies.


   In connection with the Host Marriott Services ("HM Services") spin-off in
1995, outstanding options held by current and former employees of the Company
were redenominated in both Company and HM Services stock and the exercise
prices of the options were adjusted based on the relative trading prices of
shares of the common stock of the two companies. Pursuant to the distribution
agreement between the Company and HM Services, the Company originally had the
right to receive up to 1.4 million shares of HM Services' common stock or an
equivalent cash value subsequent to exercise of the options held by certain
former and current employees of Marriott International. On August 27, 1999,
Autogrill Acquisition Co., a wholly owned subsidiary of Autogrill SpA of Italy,
acquired Host Marriott Services Corporation. Since HM Services is no longer
publicly traded, all future payments to the Company will be made in cash, as HM
Services Corporation has indicated that the receivable will not be settled in
Autogrill SpA stock. As of December 31, 2001 and 2000, the receivable balance
was approximately $6.4 million and $8.8 million, respectively, which is
included in other assets in the accompanying consolidated balance sheets.


   The Company continues to account for expense under its plans according to
the provisions of Accounting Principle Board Opinion 25 and related
interpretations as permitted under SFAS No. 123. Consequently, no compensation
cost has been recognized for its fixed stock options under the Comprehensive
Plan and its Employee Stock Purchase Plan.


   For purposes of the following disclosures required by SFAS No. 123, the fair
value of each option granted has been estimated on the date of grant using an
option-pricing model with the following weighted average assumptions used for
grants in 2001 and 2000, respectively: risk-free interest rates of 5.2% and
5.1%, volatility of 37% and 32%, expected lives of 12 years, and dividend yield
of $0.78 per share and $0.91 per share. The weighted average fair value per
option granted during the year was $2.73 in 2001 and $1.06 in 2000. Pro forma
compensation cost for 2001, 2000 and 1999 would have reduced net income by
approximately $855,000, $811,000 and $919,000, respectively. Basic and diluted
earnings per share on a pro forma basis were not impacted by the pro forma
compensation cost in 2001, 2000 and 1999.


   The effects of the implementation of SFAS No. 123 are not representative of
the effects on reported net income in future years because only the effects of
stock option awards granted in 1997 and subsequent years have been considered.


   A summary of the status of the Host REIT's stock option plans that have been
approved by the stockholders for 2001, 2000 and 1999 follows. Host REIT does
not have stock option plans that have not been approved by the Company's
stockholders:



                                      F-28



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)





                                      2001                         2000                         1999
                          ---------------------------- ---------------------------- ----------------------------
                                           Weighted                     Weighted                     Weighted
                             Shares        Average        Shares        Average        Shares        Average
                          (in millions) Exercise Price (in millions) Exercise Price (in millions) Exercise Price
                          ------------- -------------- ------------- -------------- ------------- --------------
                                                                                
Balance, at beginning of
 year...................       4.2           $ 5            4.9           $  4           5.6           $  3
Granted.................       1.4             8             .6            .10            .6             10
Exercised...............       (.6)            4           (1.2)             3          (1.3)             3
Forfeited/Expired.......       (.1)            8            (.1)            10           --             --
                               ---                         ----                         ----
Balance, at end of
 year...................       4.9           $ 6            4.2           $  5           4.9           $  4
                               ===                         ====                         ====
Options exercisable at
 year-end...............       2.9                          3.2                          4.2
                               ===                         ====                         ====



   The following table summarizes information about stock options at December
31, 2001:





                               Options Outstanding                    Options Exercisable
                 ----------------------------------------------- ------------------------------
                               Weighted Average
   Range of         Shares        Remaining     Weighted Average    Shares     Weighted Average
Exercise Prices  (in millions) Contractual Life  Exercise Price  (in millions)  Exercise Price
- ---------------  ------------- ---------------- ---------------- ------------- ----------------
                                                                
   $ 1 -  3           2.0              5              $ 2             2.0            $ 2
     4 -  6            .2              7                6              .2              6
     7 -  9           1.6             14                8              .4              8
    10 - 12           1.0             14               11              .2             11
    13 - 19            .1             11               18              .1             18
                      ---                                             ---
                      4.9                                             2.9
                      ===                                             ===



   Deferred stock incentive plan shares granted to officers and key employees
after 1990 generally vest over 10 years in annual installments commencing one
year after the date of grant. Certain employees may elect to defer payments
until termination or retirement. Host REIT accrues compensation expense for the
fair market value of the shares on the date of grant, less estimated
forfeitures. In 2001, 2000 and 1999, 23,000, 20,000 and 11,000 shares were
granted, respectively, under this plan. The compensation cost that has been
charged against income for deferred stock was not material in 2001, 2000 and
1999. The weighted average fair value per share granted during each year was
$12.99 in 2001, $9.44 in 2000 and $14.31 in 1999.


   Host REIT from time to time awards restricted stock shares under the
Comprehensive Plan to officers and key executives to be distributed over the
next three years in annual installments based on continued employment and the
attainment of certain performance criteria. Host REIT recognizes compensation
expense over the restriction period equal to the fair market value of the
shares on the date of issuance adjusted for forfeitures, and where appropriate,
the level of attainment of performance criteria and fluctuations in the fair
market value of Host REIT's common stock. In 2001, 2000 and 1999, 130,000,
889,000, and 3,203,000 shares of restricted stock plan shares were granted to
certain key employees under these terms and conditions. Approximately 593,000
and 106,000 shares were forfeited in 2001 and 2000, respectively. Host REIT
recorded compensation expense of $7.6 million, $11 million and $7.7 million in
2001, 2000 and 1999, respectively, related to these awards. The weighted
average grant date fair value per share granted during each year was $12.82 in
2001, $8.87 in 2000 and $12.83 in 1999. Under these awards 2,010,000 shares
were outstanding at December 31, 2001.


   In 1998, 568,408 stock appreciation rights ("SARs") were issued under the
Comprehensive Plan to certain directors of Host REIT as a replacement for
previously issued options that were cancelled during the


                                      F-29



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


year. The conversion to SARs was completed in order to comply with ownership
limits applicable to Host REIT upon conversion to a REIT. The SARs are fully
vested and the grant prices range from $1.20 to $5.13. In 2001, 2000 and 1999,
Host REIT recognized compensation (income) expense for outstanding SARs as a
result of fluctuations in the market price of Host REIT's common stock of
$(1.2) million, $1.4 million and $(2.7) million, respectively.


   Under the terms of the Employee Stock Purchase Plan, eligible employees may
purchase common stock through payroll deductions at 90% of the lower of market
value at the beginning or market value at the end of the plan year.


11. Profit Sharing and Postemployment Benefit Plans


   The Company contributes to profit sharing and other defined contribution
plans for the benefit of employees meeting certain eligibility requirements and
electing participation in the plans. The amount to be matched by the Company is
determined annually by the Board of Directors. The Company provides medical
benefits to a limited number of retired employees meeting restrictive
eligibility requirements. Amounts for these items were not material in 1999
through 2001.


12. Acquisitions and Dispositions


   Effective March 24, 2001, the Company purchased the 5% voting interests in
each of Rockledge and Fernwood that were previously held by the Host Marriott
Statutory Employee/Charitable Trust for approximately $2 million. Prior to this
acquisition, the Company held a 95% non-voting interest in each company and
accounted for such investments under the equity method. As a result of this
acquisition, the Company holds 100% of the voting and non-voting interests in
Rockledge and Fernwood, and its consolidated results of operations will reflect
the revenues and expenses generated by the two taxable corporations, and its
consolidated balance sheets will include the various assets, including,
primarily, three full-service hotels and certain limited service hotel
partnership interests, including the Joint Venture interest. The Company's
acquisition, including certain joint venture interests, totaled approximately
$356 million in assets and $262 million in liabilities, including $54 million
of third party debt.


   On June 28, 2001, the Company consummated an agreement to purchase
substantially all the minority limited partnership interests held by Wyndham
with respect to seven full-service hotels for $60 million. As part of this
acquisition, the leases were acquired from Wyndham with respect to three hotels
by the TRS, effectively terminating the leases for financial reporting
purposes. The entire purchase price was allocated to the minority limited
partner interests purchased.


   During January 2002, the Company transferred one of our non-core properties,
the St. Louis Marriott Pavilion hotel, to the mortgage lender. Due to the
original structure of this deal, the Company has not received any cash flow
after payments of debt service from this property since the original spin-off
in 1993. In the first quarter of 2002, the Company will write off the remaining
$13 million of property and equipment, eliminate $37 million of mortgage debt
and related liabilities and record a non-cash gain of approximately $22
million.


   In 1999, the Company acquired the remaining unaffiliated partnership
interests in two full-service hotels by issuing approximately 612,000
cumulative preferred OP Units and paid cash of approximately $6.8 million.
During 2000, the holders of approximately 593,000 cumulative preferred OP Units
converted to common OP Units on a one-for-one basis.



                                      F-30



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   During February 2002, we filed a shelf registration statement for 1.1
million common shares to be issued to a minority partner in the San Diego
Marina Marriott Hotel in exchange for certain interests in the San Diego
partnership. On March 15, 2002, this minority partner sold the 1.1 million
common shares to an underwriter for resale on the open market. Concurrent with
the issuance of the common shares, the Operating Partnership issued to us an
equivalent number of OP Units. This transaction did not materially impact our
ownership percentage in the Operating Partnership. We received no proceeds as a
result of these transactions.


   Subsequent to this exchange, other minority partners in the San Diego hotel
have notified us of their intent to exchange additional interests in the San
Diego partnership for approximately 6.8 million OP Units. We expect these
exchanges to close during the second quarter. After completion of these
exchanges the minority partner will own 10% of the interest in the San Diego
hotel.


   During 2001, 2000 and 1999, respectively, approximately 42,054,000, 652,000
and 467,000 OP Units were redeemed for Host REIT common stock, respectively. In
2000 and 1999 an additional 360,000 and 233,000 OP Units were redeemed for $3
million and $2 million in cash, respectively. No OP Units were redeemed for
cash in 2001.


   During 2001, the Company disposed of two hotels (751 rooms) for a total
consideration of $65 million and recognized a net gain of $12 million. During
1999, the Company disposed of 5 hotels (1,577 rooms) for a total consideration
of $198 million and recognized a net gain of $24 million. There were no
dispositions in 2000.


13. Fair Value of Financial Instruments


   The fair values of certain financial assets and liabilities and other
financial instruments are shown below:





                                                    2001            2000
                                               --------------- ---------------
                                               Carrying  Fair  Carrying  Fair
                                                Amount  Value   Amount  Value
                                               -------- ------ -------- ------
                                                        (in millions)
                                                            
   Financial assets
     Receivables from affiliates..............  $    6  $    6  $  164  $  166
     Notes receivable.........................      48      48      47      44
     Other....................................       6       6       9       9
   Financial liabilities
     Debt, net of capital leases and
      Convertible Debt Obligation to Host
      Marriott................................   5,586   5,512   5,305   5,299
     Convertible Debt Obligation to Host
      Marriott................................     492     349     492     432



   Receivables from affiliates, notes and other financial assets are valued
based on the expected future cash flows discounted at risk-adjusted rates.
Valuations for secured debt are determined based on the expected future
payments discounted at risk-adjusted rates. The fair value of the bank credit
facility and other notes are estimated to be equal to their carrying value.
Senior notes and the Convertible Debt Obligation to Host Marriott are valued
based on quoted market prices.


14. Marriott International Distribution and Relationship with Marriott
International


   The Company and Marriott International (formerly a wholly owned subsidiary,
the common stock of which was distributed to the Company's shareholders on
October 8, 1993) have entered into various


                                      F-31



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


agreements including the management of the majority of the company's hotels
including franchised properties; financing for joint ventures including the
acquisition in 1996 of two full-service properties for which Marriott
International provided $29 million of debt financing and $28 million in
preferred equity and the 2000 acquisition of two partnerships owning 120
limited service hotels (see below); and certain limited administrative
services.


   The Company currently is in the process of negotiating changes to the
management and other agreements with Marriott International and its affiliates.
If made, the changes, which remain subject to the consent of various lenders to
the properties and other third parties, would be effective December 29, 2001.
The proposed changes would result in reductions in incentive management fees on
the portfolio of Marriott-managed hotels, reduce certain expenses to the
property, lower our working capital requirements, clarify the circumstances and
conditions under which Marriott International and its affiliates may earn a
profit on transactions with the hotels, and provide greater approval rights
over budgets and capital expenditures. The Company is also negotiating to
expand the pool of hotels that are subject to an existing agreement that allows
us to sell certain assets without a Marriott International management
agreement, and to revise the method for determining the number of hotels that
may be sold without a Marriott International management agreement or a
franchise agreement, in each case, without the payment of a termination fee.
There can be no assurance that the negotiations will be successful, that the
changes will be made in substantially the form described or that we will
receive the necessary consents to implement these changes.


   Marriott International currently has the right to purchase up to 20 percent
of the Company's outstanding stock upon certain changes in control of Host
Marriott. In connection with the Company's negotiations with Marriott
International on changes to the management agreements, we are discussing
terminating this right and clarifying existing provisions in the management
agreements that currently limit the Company's ability to sell a hotel or the
company to a competitor of Marriott International.


   During December 2000, the newly created Joint Venture formed by Rockledge
and Marriott International acquired the partnership interests in two
partnerships that collectively own 120 limited service hotels for approximately
$372 million plus interest and legal fees (see Note 4). The Joint Venture
financed the acquisition with mezzanine indebtedness borrowed from Marriott
International and with cash and other assets contributed by Rockledge and
Marriott International. Rockledge and Marriott International each own a 50%
interest in the Joint Venture.


   As a result of the consolidation of Rockledge, we now have a controlling
interest in the entity Elcrisa S.A. de C.V. that owns two hotels located in
Mexico City, Mexico. Marriott International holds the remaining interest of
Elcrisa S.A. de C.V. and is the manager of the hotels.


   In 2001, the Company, as the lessee, paid to Marriott International $162
million in hotel management fees and $6 million in franchise fees. In 2000 and
1999, the fees were paid by Crestline and Wyndham, as the lessees, and totaled
$240 million and $218 million, respectively. In 2000 and 1999, the Company paid
to Marriott International $0.2 million and $0.3 million, respectively, in
guarantee fees pursuant to certain debt service guarantees provided by Marriott
International. No guarantee fees were paid in 2001. In 2001, 2000, and 1999,
the Company paid to Marriott International $2 million, $2 million, and $3
million, respectively, for certain administrative services and office space.


15. Hotel Management Agreements


   Of the Company's hotels, 101 are subject to management agreements under
which Marriott International or one of their subsidiaries manages the Company's
hotels, generally for an initial term of 15 to 20 years with


                                      F-32



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


renewal terms at the option of Marriott International of up to an additional 16
to 30 years. The agreements generally provide for payment of base management
fees that are generally 3 percent of sales and incentive management fees
generally equal to 20% to 50% of operating profit (as defined in the
agreements) over a priority return (as defined) to the Company, with total
incentive management fees not to exceed 20% of cumulative operating profit, or
20% of current year operating profit. In the event of early termination of the
agreements, Marriott International will receive additional fees based on the
unexpired term and expected future base and incentive management fees. The
Company has the option to terminate certain management agreements if specified
performance thresholds are not satisfied. No agreement with respect to a single
lodging facility is cross-collateralized or cross-defaulted to any other
agreement and a single agreement may be canceled under certain conditions,
although such cancellation will not trigger the cancellation of any other
agreement.


   Pursuant to the terms of the agreements, Marriott International furnishes
the hotels with certain chain services which are generally provided on a
central or regional basis to all hotels in the Marriott International hotel
system. Chain services include central training, advertising and promotion, a
national reservation system, computerized payroll and accounting services, and
such additional services as needed which may be more efficiently performed on a
centralized basis. Costs and expenses incurred in providing such services are
required to be allocated among all domestic hotels managed, owned or leased by
Marriott International or its subsidiaries on a fair and equitable basis. In
addition, the Company's hotels also participate in the Marriott Rewards
program. The cost of this program is charged to all hotels in the Marriott
hotel system.


   The Lessees are obligated to provide the manager with sufficient funds,
generally 5% of revenue, to cover the cost of (a) certain non-routine repairs
and maintenance to the hotels which are normally capitalized; and (b)
replacements and renewals to the hotels' property and improvements. Under
certain circumstances, the lessee will be required to establish escrow accounts
for such purposes under terms outlined in the agreements. To the extent the
lessee is not required to fund such amounts into escrow accounts, the lessee
remains liable to make such fundings in the future. As of December 31, 2001,
the Company is obligated under its management agreements to fund FF&E
requirements in excess of amounts placed in restricted cash accounts of $37
million.


   The Lessees assumed franchise agreements with Marriott International for 8
hotels. Pursuant to these franchise agreements, the Lessee generally pays a
franchise fee based on a percentage of room sales and food and beverage sales
as well as certain other fees for advertising and reservations. Franchise fees
for room sales vary from four to six percent of sales, while fees for food and
beverage sales vary from two to three percent of sales. The terms of the
franchise agreements are from 15 to 30 years.


   The Lessees hold management agreements with The Ritz-Carlton Hotel Company,
LLC ("Ritz-Carlton"), an affiliate of Marriott International, to manage ten of
the Company's hotels. These agreements have an initial term of 15 to 25 years
with renewal terms at the option of Ritz-Carlton of up to an additional 10 to
40 years. Base management fees vary from two to five percent of sales and
incentive management fees are generally equal to 20% of available cash flow or
operating profit, as defined in the agreements and funding of the contractual
amount is not required in the current year.


   The Lessees also hold management agreements with hotel management companies
other than Marriott International and Ritz-Carlton for 21 of the Company's
hotels (8 of which are franchised under the Marriott brand). These agreements
generally provide for an initial term of 10 to 20 years with renewal terms at
the option of either party or, in some cases, the hotel management company of
up to an additional one to 15 years. The agreements generally provide for
payment of base management fees equal to one to four percent of sales.
Seventeen of the 21 agreements also provide for incentive management fees
generally equal to 10 to 25 percent of available cash flow, operating profit,
or net operating income, as defined in the agreements.



                                      F-33



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


16. Relationship with Crestline Capital Corporation


   The Company and Crestline entered into various agreements in connection with
the conversion to a REIT in 1998.


 Distribution Agreement


   Crestline and the Company entered into a distribution agreement (the
"Distribution Agreement"), which provided for, among other things, (i) the
distribution of shares of Crestline; (ii) the division between Crestline and
the Company of certain assets and liabilities; (iii) the transfer to Crestline
of the 25% interest in the Swissotel management company acquired in the
Blackstone Acquisition and (iv) certain other agreements governing the
relationship between Crestline and the Company. Crestline also granted the
Company a contingent right to purchase Crestline's interest in Swissotel
Management (USA) L.L.C. at fair market value in the event the tax laws are
changed so that the Company could own such interest without jeopardizing its
status as a REIT.


   Subject to certain exceptions, the Distribution Agreement provides for,
among other things, assumptions of liabilities and cross-indemnities designed
to allocate to Crestline, effective as of the date of the distribution,
financial responsibilities for liabilities arising out of, or in connection
with, the business of the senior living communities.


   Crestline also had other agreements in connection with the distribution
related to asset management services as well as non-competition agreements.
These agreements were terminated effective January 1, 2001 in connection with
the acquisition of the Crestline Lessee Entities.


17. Geographic and Business Segment Information


   The Company operates one business segment, hotel ownership. The Company's
hotels are primarily operated under the Marriott or Ritz-Carlton brands,
contain an average of approximately 475 rooms as of December 31, 2001, as well
as supply other amenities such as meeting space and banquet facilities; a
variety of restaurants and lounges; gift shops and swimming pools. They are
typically located in downtown, airport, suburban and resort areas throughout
the United States. As of December 31, 2000 and 1999, the Company's foreign
operations were limited to four Canadian hotel properties. Effective March 24,
2001, the Company purchased the 5% voting interest in Rockledge, and, as a
result, foreign operations of the Company included two properties in Mexico
City, Mexico. There were no intercompany sales between the foreign properties
and the Company. The following table presents revenues and long-lived assets
for each of the geographical areas in which the Company operates (in millions):




                           2001                2000                1999
                    ------------------- ------------------- -------------------
                             Long-lived          Long-lived          Long-lived
                    Revenues   Assets   Revenues   Assets   Revenues   Assets
                    -------- ---------- -------- ---------- -------- ----------
                                                   
United States......  $3,692    $6,800    $1,382    $6,991    $1,279    $6,987
International......      62       199        25       119        24       121
                     ------    ------    ------    ------    ------    ------
  Total............  $3,754    $6,999    $1,407    $7,110    $1,303    $7,108
                     ======    ======    ======    ======    ======    ======




                                      F-34



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


18. Quarterly Financial Data (unaudited)





                                                        2001
                                       ---------------------------------------
                                        First  Second   Third  Fourth   Fiscal
                                       Quarter Quarter Quarter Quarter   Year
                                       ------- ------- ------- -------  ------
                                       (in millions, except per unit amounts)
                                                         
Revenues..............................  $869    $988    $848   $1,049   $3,754
Income (loss) before income taxes.....    43      67      (9)     (34)      67
Income (loss) before extraordinary
 items ...............................    40      55      (9)     (27)      59
Net income (loss).....................    40      55     (10)     (28)      57
Net income (loss) available to
 unitholders..........................    35      46     (19)     (37)      25
Basic earnings (loss) per unit:
  Income (loss) before extraordinary
   items..............................   .12     .16    (.06)    (.13)     .10
  Net income (loss)...................   .12     .16    (.07)    (.13)     .09
Diluted earnings (loss) per unit:
  Income (loss) before extraordinary
   items..............................   .12     .16    (.06)    (.13)     .10
  Net income (loss)...................   .12     .16    (.07)    (.13)     .09


                                                        2000
                                       ---------------------------------------
                                        First  Second   Third  Fourth   Fiscal
                                       Quarter Quarter Quarter Quarter   Year
                                       ------- ------- ------- -------  ------
                                       (in millions, except per unit amounts)
                                                         
Revenues..............................  $175    $186    $227   $  819   $1,407
Income (loss) before income taxes.....   (73)    (64)    (17)     259      105
Income (loss) before extraordinary
 items................................   (74)    (66)    (21)     364      203
Net income (loss).....................   (69)    (68)    (21)     365      207
Net income (loss) available to
 unitholders..........................   (74)    (73)    (27)     361      187
Basic earnings (loss) per unit:
  Income (loss) before extraordinary
   items..............................  (.28)   (.26)   (.09)    1.26      .64
  Net income (loss)...................  (.26)   (.26)   (.09)    1.27      .66
Diluted earnings (loss) per unit:
Income (loss) before extraordinary
 items................................  (.28)   (.26)   (.09)    1.13      .63
Net income (loss).....................  (.26)   (.26)   (.09)    1.14      .65



   During 2000, contingent rental revenue was deferred on the balance sheet
until certain revenue thresholds were realized. All contingent rental revenue
previously deferred was recognized and therefore has no impact on the full year
2000 revenues, net income, or earnings per share.


   For all years presented, the first three quarters consist of 12 weeks each
and the fourth quarter includes 16 weeks. The sum of the basic and diluted
earnings (loss) per common share for the four quarters in all years presented
differs from the annual earnings per unit due to the required method of
computing the weighted average number of units in the respective periods.


19. Supplemental Guarantor and Non-Guarantor Subsidiary Information


   All subsidiaries of the Company guarantee the Senior Notes except those
owning 42 of the Company's full service hotels and HMH HPT RIBM LLC and HMH HPT
CBM LLC, the lessees of the Residence Inn and Courtyard properties,
respectively. The separate financial statements of each guaranteeing subsidiary
(each, a "Guarantor Subsidiary") are not presented because the Company's
management has concluded that such financial statements are not material to
investors. The guarantee of each Guarantor Subsidiary is full and


                                      F-35



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


unconditional and joint and several and each Guarantor Subsidiary is a wholly
owned subsidiary of the Company.


   The following condensed combined consolidating financial information sets
forth the financial position as of December 31, 2001 and 2000 and results of
operations and cash flows for the three fiscal years in the period ended
December 31, 2001 of the parent, Guarantor Subsidiaries and the Non-Guarantor
Subsidiaries:


                                      F-36



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


       Supplemental Condensed Combined Consolidating Balance Sheets


                               (in millions)


                             December 31, 2001





                                   Guarantor   Non-Guarantor
                          Parent  Subsidiaries Subsidiaries  Eliminations Consolidated
                          ------  ------------ ------------- ------------ ------------
                                                           
Property and equipment,
 net....................  $1,111     $2,135       $3,753       $   --        $6,999
Investments in
 affiliate..............   2,651      2,004          --         (4,513)         142
Notes and other
 receivables............     704         96          156          (902)          54
Rent receivable.........       2         17           25           (44)         --
Due from manager........      (5)         9          137           --           141
Other assets............     118        210          256           (52)         532
Restricted cash.........      22          3           89           --           114
Cash, cash equivalents
 and marketable
 securities.............     222         52           78           --           352
                          ------     ------       ------       -------       ------
  Total assets..........  $4,825     $4,526       $4,494       $(5,511)      $8,334
                          ======     ======       ======       =======       ======
Debt....................  $2,545     $1,293       $2,532       $  (768)      $5,602
Convertible debt
 obligation to Host
 Marriott...............     492        --           --            --           492
Other liabilities.......      96        216          359          (230)         441
                          ------     ------       ------       -------       ------
  Total liabilities.....   3,133      1,509        2,891          (998)       6,535
Minority interests......       1        --           107           --           108
Limited partner interest
 of third parties at
 redemption value.......     194        --           --            --           194
Partners' capital.......   1,497      3,017        1,496        (4,513)       1,497
                          ------     ------       ------       -------       ------
  Total liabilities and
   partners' capital....  $4,825     $4,526       $4,494       $(5,511)      $8,334
                          ======     ======       ======       =======       ======

                               December 31, 2000


                                   Guarantor   Non-Guarantor
                          Parent  Subsidiaries Subsidiaries  Eliminations Consolidated
                          ------  ------------ ------------- ------------ ------------
                                                           
Property and equipment,
 net....................  $1,181     $2,253       $3,676       $   --        $7,110
Investments in
 affiliate..............   2,550      1,947          --         (4,369)         129
Notes and other
 receivables............     593         55          152          (589)         211
Rent receivable.........      12         12           41           --            65
Other assets............     122        155          222           (60)         439
Restricted cash.........      14          6          105           --           125
Cash, cash equivalents
 and marketable
 securities.............     244         45           24           --           313
                          ------     ------       ------       -------       ------
  Total assets..........  $4,716     $4,473       $4,220       $(5,018)      $8,391
                          ======     ======       ======       =======       ======
Debt....................  $2,250     $1,247       $2,259       $  (434)      $5,322
Convertible debt
 obligation to Host
 Marriott...............     492        --           --            --           492
Other liabilities.......     226        376          306          (215)         693
                          ------     ------       ------       -------       ------
  Total liabilities.....   2,968      1,623        2,565          (649)       6,507
Minority interests......       3        --           136           --           139
Limited partner interest
 of third parties at
 redemption value.......     823        --           --            --           823
Partners' capital.......     922      2,850        1,519        (4,369)         922
                          ------     ------       ------       -------       ------
  Total liabilities and
   partners' capital....  $4,716     $4,473       $4,220       $(5,018)      $8,391
                          ======     ======       ======       =======       ======



                                      F-37



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Supplemental Condensed Combined Consolidating Statements of Operations


                               (in millions)


                   Fiscal Year Ended December 31, 2001)





                                   Guarantor   Non-Guarantor
                          Parent  Subsidiaries Subsidiaries  Eliminations Consolidated
                          ------  ------------ ------------- ------------ ------------
                                                           
REVENUES................  $ 212      $ 355        $ 4,216      $(1,029)      $3,754
Depreciation and
 amortization...........    (80)      (128)          (170)         --          (378)
Hotel operating
 expenses...............    --         --          (2,507)         --        (2,507)
Property-level
 expenses...............    (42)       (68)          (172)         --          (282)
Rental expenses.........    --         --          (1,029)       1,029          --
Minority interest.......     (4)       --             (12)         --           (16)
Corporate expenses......     (5)       (10)           (17)         --           (32)
Interest expense........   (212)      (118)          (215)          52         (493)
Interest income.........     54         22             12          (52)          36
Net gains (losses) on
 property transactions..     13        (11)             4          --             6
Equity in earnings
 (losses) of
 affiliates.............    136         92             (4)        (221)           3
Other expenses..........     (9)        (8)            (7)         --           (24)
                          -----      -----        -------      -------       ------
Income from continuing
 operations before
 taxes..................     63        126             99         (221)          67
Benefit (provision) for
 income taxes...........      1         (2)            (1)          (6)          (8)
                          -----      -----        -------      -------       ------
INCOME BEFORE
 EXTRAORDINARY ITEM.....     64        124             98         (227)          59
Extraordinary item--gain
 on extinguishment of
 debt (net of income
 taxes).................     (1)        (1)           --           --            (2)
                          -----      -----        -------      -------       ------
NET INCOME..............  $  63      $ 123        $    98      $  (227)      $   57
                          =====      =====        =======      =======       ======

                      Fiscal Year Ended December 31, 2000


                                   Guarantor   Non-Guarantor
                          Parent  Subsidiaries Subsidiaries  Eliminations Consolidated
                          ------  ------------ ------------- ------------ ------------
                                                           
REVENUES................  $ 260      $ 414        $   733      $             $1,407
Depreciation and
 amortization...........    (69)      (106)          (156)         --          (331)
Property-level
 expenses...............    (50)       (70)          (156)         --          (276)
Minority interest.......     (7)       --             (20)         --           (27)
Corporate expenses......     (7)       (13)           (22)         --           (42)
Interest expense........   (183)      (109)          (196)          22         (466)
Interest income.........     38          7             17          (22)          40
Net gains on property
 transactions...........      1          1              4          --             6
Equity in earnings
 (losses) of
 affiliates.............    144        211            (11)        (319)          25
Other expenses..........    (17)      (209)            (5)         --          (231)
                          -----      -----        -------      -------       ------
Income from continuing
 operations before
 taxes..................    110        126            188         (319)         105
Benefit (provision) for
 income taxes...........     93          2              3          --            98
                          -----      -----        -------      -------       ------
INCOME BEFORE
 EXTRAORDINARY ITEM.....    203        128            191         (319)         203
Extraordinary item--gain
 on extinguishment of
 debt (net of income
 taxes).................      4        --             --           --             4
                          -----      -----        -------      -------       ------
NET INCOME..............  $ 207      $ 128        $   191      $  (319)      $  207
                          =====      =====        =======      =======       ======



                                      F-38



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                    Fiscal Year Ended December 31, 1999





                                   Guarantor   Non-Guarantor
                          Parent  Subsidiaries Subsidiaries  Eliminations Consolidated
                          ------  ------------ ------------- ------------ ------------
                                                           
REVENUES................  $ 236      $ 387         $ 680        $ --         $1,303
Depreciation and
 amortization...........    (60)       (94)         (139)         --           (293)
Property-level
 expenses...............    (55)       (63)         (150)         --           (268)
Minority interest.......     (5)       --            (16)         --            (21)
Corporate expenses......     (5)       (11)          (18)         --            (34)
Interest expense........   (196)      (121)         (190)          38          (469)
Interest income.........     44         20            13          (38)           39
Net gains on property
 transactions...........     12         12             4          --             28
Equity in earnings
 (losses) of
 affiliates.............    331        200            (2)        (523)            6
Other expenses..........    (35)       (10)           (6)         --            (51)
                          -----      -----         -----        -----        ------
Income from continuing
 operations before
 taxes..................    267        320           176         (523)          240
Benefit for income
 taxes..................      8          5             3          --             16
                          -----      -----         -----        -----        ------
INCOME BEFORE
 EXTRAORDINARY ITEM.....    275        325           179         (523)          256
Extraordinary item--gain
 on extinguishment of
 debt (net of income
 taxes).................     10        --             19          --             29
                          -----      -----         -----        -----        ------
NET INCOME..............  $ 285      $ 325         $ 198        $(523)       $  285
                          =====      =====         =====        =====        ======



                                      F-39



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)




   Supplemental Condensed Combined Consolidating Statement of Cash Flows


                               (in millions)


                    Fiscal Year Ended December 31, 2001





                                         Guarantor   Non-Guarantor
                                Parent  Subsidiaries Subsidiaries  Consolidated
                                ------  ------------ ------------- ------------
                                                       
OPERATING ACTIVITIES
Cash from (used in)
 operations...................  $ 156      $ (90)        $ 215        $ 281
                                -----      -----         -----        -----
INVESTING ACTIVITIES
Proceeds from sales of assets
 .............................     45        --             15           60
Capital expenditures..........    (58)      (109)         (119)        (286)
Acquisitions..................    (63)       --            --           (63)
Other.........................     10        --            --            10
                                -----      -----         -----        -----
Cash used in investing
 activities...................    (66)      (109)         (104)        (279)
                                -----      -----         -----        -----
FINANCING ACTIVITIES
Repayment of debt.............   (584)       (45)         (129)        (758)
Issuance of debt..............    866         94             8          968
Issuance of OP Units..........      3        --            --             3
Issuance of preferred limited
 partner units................    143        --            --           143
Distributions on common and
 preferred limited partner
 units........................   (326)       --            --          (326)
Transfer to/from Parent.......   (234)       155            79          --
Other.........................     20          2           (15)           7
                                -----      -----         -----        -----
Cash (used in) from financing
 activities...................   (112)       206           (57)          37
                                -----      -----         -----        -----
INCREASE IN CASH AND CASH
 EQUIVALENTS..................    (22)         7            54           39
CASH AND CASH EQUIVALENTS,
 beginning of year............    244         45            24          313
                                -----      -----         -----        -----
CASH AND CASH EQUIVALENTS, end
 of year......................  $ 222      $  52         $  78        $ 352
                                =====      =====         =====        =====



                                      F-40



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                    Fiscal Year Ended December 31, 2000





                                         Guarantor   Non-Guarantor
                                Parent  Subsidiaries Subsidiaries  Consolidated
                                ------  ------------ ------------- ------------
                                                       
OPERATING ACTIVITIES
Cash from operations..........  $ 116      $ 117         $ 301        $ 534
                                -----      -----         -----        -----
INVESTING ACTIVITIES
Capital expenditures..........    (82)      (149)         (148)        (379)
Acquisitions..................    --         (40)          --           (40)
Other.........................    (29)       --            --           (29)
                                -----      -----         -----        -----
Cash used in investing
 activities...................   (111)      (189)         (148)        (448)
                                -----      -----         -----        -----
FINANCING ACTIVITIES
Repayment of debt.............   (192)       (12)         (113)        (317)
Issuance of debt..............    451        --             89          540
Issuance of OP Units..........      4        --            --             4
Issuance of preferred limited
 partner units................    --         --            --           --
Distributions on common and
 preferred limited partner
 units........................   (260)       --            --          (260)
Redemption or repurchase of OP
 Units for cash...............    (47)       --            --           (47)
Repurchase of Convertible
 Preferred Securities.........    (15)       --            --           (15)
Cost of extinguishment of
 debt.........................    --         --            --           --
Transfer to/from Parent.......    104         88          (192)         --
Other.........................     (3)        (2)           50           45
                                -----      -----         -----        -----
Cash from (used in) financing
 activities...................     42         74          (166)         (50)
INCREASE (DECREASE) IN CASH
 AND CASH EQUIVALENTS.........     47          2           (13)          36
CASH AND CASH EQUIVALENTS,
 beginning of year............    197         43            37          277
                                -----      -----         -----        -----
CASH AND CASH EQUIVALENTS, end
 of year......................  $ 244      $  45         $  24        $ 313
                                =====      =====         =====        =====



                                      F-41



                   HOST MARRIOTT, L.P. AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                    Fiscal Year Ended December 31, 1999





                                         Guarantor   Non-Guarantor
                                Parent  Subsidiaries Subsidiaries  Consolidated
                                ------  ------------ ------------- ------------
                                                       
OPERATING ACTIVITIES
Cash from operations..........  $  46      $ 111        $   203      $   360
                                -----      -----        -------      -------
INVESTING ACTIVITIES
Proceeds from sales of
 assets.......................      3        192            --           195
Capital expenditures..........    (68)      (168)          (125)        (361)
Acquisitions..................     (3)        (5)           (21)         (29)
Other.........................     19        --             --            19
                                -----      -----        -------      -------
Cash (used in) from investing
 activities...................    (49)        19           (146)        (176)
                                -----      -----        -------      -------
FINANCING ACTIVITIES
Repayment of debt.............   (229)      (186)        (1,016)      (1,431)
Issuance of debt..............    290         23          1,032        1,345
Issuance of OP Units..........      5        --             --             5
Issuance of preferred limited
 partner units................    196        --             --           196
Distributions on common and
 preferred limited partner
 units........................   (260)       --             --          (260)
Redemption or repurchase of OP
 Units for cash...............    (54)       --             --           (54)
Repurchase of Convertible
 Preferred Securities.........    (36)       --             --           (36)
Cost of extinguishment of
 debt.........................     (2)       --             --            (2)
Transfer to/from Parent.......     40         60           (100)         --
Other.........................    (79)       (25)            (2)        (106)
                                -----      -----        -------      -------
Cash used in financing
 activities...................   (129)      (128)           (86)        (343)
                                -----      -----        -------      -------
(DECREASE) INCREASE IN CASH
 AND CASH EQUIVALENTS.........   (132)         2            (29)        (159)
CASH AND CASH EQUIVALENTS,
 beginning of year............    329         41             66          436
                                -----      -----        -------      -------
CASH AND CASH EQUIVALENTS, end
 of year......................  $ 197      $  43        $    37      $   277
                                =====      =====        =======      =======



                                      F-42



                    CCHP I CORPORATION AND SUBSIDIARIES


                     CONSOLIDATED FINANCIAL STATEMENTS


                  December 29, 2000 and December 31, 1999


            With Independent Public Accountants' Report Thereon




                                      F-43



                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To CCHP I Corporation:


   We have audited the accompanying consolidated balance sheets of CCHP I
Corporation and its subsidiaries (a Delaware corporation) as of December 29,
2000 and December 31, 1999, and the related consolidated statements of
operations, shareholder's equity and cash flows for the fiscal years ended
December 29, 2000 and December 31, 1999. These consolidated financial
statements are the responsibility of CCHP I Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.


   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.


   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CCHP I
Corporation and its subsidiaries as of December 29, 2000 and December 31, 1999
and the results of their operations and their cash flows for the fiscal years
then ended in conformity with accounting principles generally accepted in the
United States.


                                          Arthur Andersen LLP


Vienna, Virginia


February 23, 2001


                                      F-44



                    CCHP I CORPORATION AND SUBSIDIARIES


                        CONSOLIDATED BALANCE SHEETS


               As of December 29, 2000 and December 31, 1999


                     (in thousands, except share data)





                                                                 2000    1999
                                                                ------- -------
                                                                  
                            ASSETS
Current assets
  Cash and cash equivalents.................................... $ 4,849 $ 9,467
  Due from hotel managers......................................   5,862   3,890
  Due from Crestline...........................................     682     --
  Other current assets.........................................      62     --
                                                                ------- -------
                                                                 11,455  13,357
Hotel working capital..........................................  26,011  26,011
                                                                ------- -------
                                                                $37,466 $39,368
                                                                ======= =======
             LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
  Lease payable to Host Marriott............................... $ 5,252 $ 5,792
  Due to hotel managers........................................   4,138   3,334
  Other current liabilities....................................     500     --
                                                                ------- -------
                                                                  9,890   9,126
Hotel working capital notes payable to Host Marriott...........  26,011  26,011
Deferred income taxes..........................................   1,565   1,027
                                                                ------- -------
  Total liabilities............................................  37,466  36,164
                                                                ------- -------
Shareholder's equity
  Common stock (100 shares issued at $1.00 par value)..........     --      --
  Retained earnings............................................     --    3,204
                                                                ------- -------
    Total shareholder's equity.................................     --    3,204
                                                                ------- -------
                                                                $37,466 $39,368
                                                                ======= =======



              See Notes to Consolidated Financial Statements.


                                      F-45



                    CCHP I CORPORATION AND SUBSIDIARIES


                   CONSOLIDATED STATEMENTS OF OPERATIONS


        Fiscal Years Ended December 29, 2000 and December 31, 1999


                              (in thousands)





                                                              2000      1999
                                                            --------  --------
                                                                
REVENUES
  Rooms.................................................... $624,314  $585,381
  Food and beverage........................................  289,577   277,684
  Other....................................................   63,848    65,069
                                                            --------  --------
    Total revenues.........................................  977,739   928,134
                                                            --------  --------
OPERATING COSTS AND EXPENSES
Property-level operating costs and expenses
  Rooms....................................................  148,482   141,898
  Food and beverage........................................  218,802   211,964
  Other....................................................  254,248   241,996
Other operating costs and expenses
  Lease expense to Host Marriott...........................  296,664   276,058
  Management fees..........................................   47,172    40,659
                                                            --------  --------
    Total operating costs and expenses.....................  965,368   912,575
                                                            --------  --------
OPERATING PROFIT BEFORE CORPORATE EXPENSES AND INTEREST....   12,371    15,559
Corporate expenses.........................................   (1,224)   (1,367)
Interest expense...........................................   (1,332)   (1,585)
Interest income............................................      334       --
                                                            --------  --------
INCOME BEFORE INCOME TAXES.................................   10,149    12,607
Provision for income taxes.................................   (4,289)   (5,169)
                                                            --------  --------
NET INCOME................................................. $  5,860  $  7,438
                                                            ========  ========



              See Notes to Consolidated Financial Statements.


                                      F-46



                    CCHP I CORPORATION AND SUBSIDIARIES


              CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY


        Fiscal Years Ended December 29, 2000 and December 31, 1999


                              (in thousands)





                                                       Common Retained
                                                       Stock  Earnings   Total
                                                       ------ --------  -------
                                                               
Balance, January 1, 1999..............................  $--   $   --    $   --
  Dividend to Crestline...............................   --    (4,234)   (4,234)
  Net income..........................................   --     7,438     7,438
                                                        ----  -------   -------
Balance, December 31, 1999............................   --     3,204     3,204
  Dividend to Crestline...............................   --    (9,064)   (9,064)
  Net income..........................................   --     5,860     5,860
                                                        ----  -------   -------
Balance, December 29, 2000............................  $--   $   --    $   --
                                                        ====  =======   =======



              See Notes to Consolidated Financial Statements.


                                      F-47



                    CCHP I CORPORATION AND SUBSIDIARIES


                   CONSOLIDATED STATEMENTS OF CASH FLOWS


        Fiscal Years Ended December 29, 2000 and December 31, 1999


                              (in thousands)





                                                                2000     1999
                                                               -------  -------
                                                                  
OPERATING ACTIVITIES..........................................
Net income.................................................... $ 5,860  $ 7,438
Change in amounts due from hotel managers.....................  (1,972)    (678)
Change in lease payable to Host Marriott......................    (540)   5,792
Changes in amounts due to hotel managers......................     804    1,149
Changes in other operating accounts...........................     294      --
                                                               -------  -------
  Cash from operations........................................   4,446   13,701
                                                               -------  -------
FINANCING ACTIVITIES..........................................
Dividend to Crestline.........................................  (9,064)  (4,234)
                                                               -------  -------
Increase (decrease) in cash and cash equivalents..............  (4,618)   9,467
Cash and cash equivalents, beginning of year..................   9,467      --
                                                               -------  -------
Cash and cash equivalents, end of year........................ $ 4,849  $ 9,467
                                                               =======  =======



              See Notes to Consolidated Financial Statements.


                                      F-48



                    CCHP I CORPORATION AND SUBSIDIARIES


                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1. Summary of Significant Accounting Policies


 Organization


   CCHP I Corporation (the "Company") was incorporated in the state of Delaware
on November 23, 1998 as a wholly owned subsidiary of Crestline Capital
Corporation ("Crestline"). On December 29, 1998, Crestline became a publicly
traded company when Host Marriott Corporation ("Host Marriott") completed its
plan of reorganizing its business operations by spinning-off Crestline to the
shareholders of Host Marriott as part of a series of transactions pursuant to
which Host Marriott converted into a real estate investment trust ("REIT").


   On December 31, 1998, wholly owned subsidiaries of the Company (the "Tenant
Subsidiaries") entered into lease agreements with Host Marriott to lease 35 of
Host Marriott's full-service hotels with the existing management agreements of
the leased hotels assigned to the Tenant Subsidiaries. As of December 29, 2000,
the Company leased 34 full-service hotels from Host Marriott.


   The Company operates as a unit of Crestline, utilizing Crestline's
employees, insurance and administrative services since the Company does not
have any employees. Certain direct expenses are paid by Crestline and charged
directly or allocated to the Company. Certain general and administrative costs
of Crestline are allocated to the Company, using a variety of methods,
principally including Crestline's specific identification of individual costs
and otherwise through allocations based upon estimated levels of effort devoted
by general and administrative departments to the Company or relative measures
of the size of the Company based on revenues. In the opinion of management, the
methods for allocating general and administrative expenses and other direct
costs are reasonable.


 Principles of Consolidation


   The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany transactions and balances
between the Company and its subsidiaries have been eliminated.


 Fiscal Year


   The Company's fiscal year ends on the Friday nearest December 31.


 Cash and Cash Equivalents


   The Company considers all highly liquid investments with a maturity of three
months or less at date of purchase as cash equivalents.


 Revenues


   The Company records the gross property-level revenues generated by the
hotels as revenues.


 Use of Estimates in the Preparation of Financial Statements


   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

                                      F-49



                    CCHP I CORPORATION AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 2. Leases


   Future minimum annual rental commitments for all non-cancelable leases as of
December 29, 2000 are as follows (in thousands):



                                                              
      2001............................................................ $182,432
      2002............................................................  175,108
      2003............................................................  174,099
      2004............................................................  159,082
      2005............................................................  159,082
      Thereafter......................................................   24,014
                                                                       --------
        Total minimum lease payments.................................. $873,817
                                                                       ========

      


   Lease expense for the fiscal years 2000 and 1999 consisted of the following
(in thousands):





                                                                 2000     1999
                                                               -------- --------
                                                                  
      Base rent............................................... $177,405 $167,996
      Percentage rent.........................................  119,259  108,062
                                                               -------- --------
                                                               $296,664 $276,058
                                                               ======== ========



 Hotel Leases


   The Tenant Subsidiaries entered into leases with Host Marriott effective
January 1, 1999 for 35 full-service hotels. See Note 6 for a discussion of the
sale of all but one of the full-service hotel leases in 2001.


   Each hotel lease had an initial term generally ranging from three to seven
years. The Tenant Subsidiaries were required to pay the greater of (i) a
minimum rent specified in each hotel lease or (ii) a percentage rent based upon
a specified percentage of aggregate revenues from the hotel, including room
revenues, food and beverage revenues, and other income, in excess of specified
thresholds. The amount of minimum rent is increased each year based upon 50% of
the increase in CPI during the previous twelve months. Percentage rent
thresholds are increased each year based on a blend of the increases in CPI and
the Employment Cost Index during the previous twelve months. The hotel leases
generally provided for a rent adjustment in the event of damage, destruction,
partial taking or certain capital expenditures.


   The Tenant Subsidiaries were responsible for paying all of the expenses of
operating the hotels, including all personnel costs, utility costs, and general
repair and maintenance of the hotels. In addition, the Tenant Subsidiaries were
responsible for all fees payable to the hotel manager, including base and
incentive management fees, chain services payments and franchise or system
fees. Host Marriott was responsible for real estate and personal property
taxes, property casualty insurance, equipment rent, ground lease rent,
maintaining a reserve fund for FF&E replacements and capital expenditures.


   For those hotels where Marriott International is the manager, it had a
noneconomic membership interest with certain limited voting rights in the
Tenant Subsidiaries.


 FF&E Leases


   Prior to entering into the hotel leases, if the average tax basis of a
hotel's FF&E and other personal property exceeded 15% of the aggregate average
tax basis of the hotel's real and personal property (the


                                      F-50



                    CCHP I CORPORATION AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


"Excess FF&E"), the Tenant Subsidiaries and affiliates of Host Marriott entered
into lease agreements (the "FF&E Leases") for the Excess FF&E. The terms of the
FF&E Leases generally ranged from two to three years and rent under the FF&E
Leases was a fixed amount.


 Guaranty and Pooling Agreement


   In connection with entering into the hotel leases, the Company, Crestline
and Host Marriott, entered into a pool guarantee and a pooling and security
agreement by which the Company provided a full guarantee and Crestline provided
a limited guarantee of all of the hotel lease obligations.


   The cumulative limit of Crestline's guarantee obligation was the greater of
ten percent of the aggregate rent payable for the immediately preceding fiscal
year under all of the Company's hotel leases or ten percent of the aggregate
rent payable under all of the Company's hotel leases for 1999. In the event
that Crestline's obligation under the pooling and guarantee agreement was
reduced to zero, the Company could terminate the agreement and Host Marriott
could terminate the Company's hotel leases without penalty.


   All of the Company's leases were cross-defaulted and the Company's
obligations under the guaranty were secured by all the funds received from its
Tenant Subsidiaries.


Note 3. Working Capital Notes


   Upon the commencement of the hotel leases, the Company purchased the working
capital of the leased hotels from Host Marriott for $26,832,000 with the
purchase price evidenced by notes that bear interest at 5.12%. Interest on each
note is due simultaneously with the rent payment of each hotel lease. The
principal amount of each note is due upon the termination of each hotel lease.
See Note 6 for a discussion of the repayment of all but one of the hotel
working notes in 2001. As of December 29, 2000, the outstanding balance of the
working capital notes was $26,011,000.


   Debt maturities at December 29, 2000 are as follows (in thousands):



                                                                
      2001.............................................................. $ 1,340
      2002..............................................................     --
      2003..............................................................   3,005
      2004..............................................................     --
      2005..............................................................  21,666
                                                                         -------
                                                                         $26,011
                                                                         =======

      


   Cash paid for interest expense in 2000 and 1999 totaled $1,351,000 and
$1,463,000, respectively.


Note 4. Management Agreements


   All of the Company's hotels are operated by hotel management companies under
long-term hotel management agreements between Host Marriott and hotel
management companies. The existing management agreements were assigned to the
Tenant Subsidiaries upon the execution of the hotel leases for the term of each
corresponding hotel lease. See Note 6 for a discussion of the transfer of all
of the management contracts to Host Marriott in 2001.


                                      F-51



                   CCHP I CORPORATION AND SUBSIDIARIES


         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The Tenant Subsidiaries were obligated to perform all of the obligations of
Host Marriott under the hotel management agreements including payment of fees
due under the management agreements other than certain obligations including
payment of property taxes, property casualty insurance and ground rent,
maintaining a reserve fund for FF&E replacements and capital expenditures for
which Host Marriott retained responsibility.


   Marriott International manages 30 of the 34 hotels under long-term
management agreements. The remaining four hotels are managed by other hotel
management companies. The management agreements generally provide for payment
of base management fees equal to one to four percent of revenues and incentive
management fees generally equal to 20% to 50% of Operating Profit (as defined
in the management agreements) over a priority return (as defined) to the
Tenant Subsidiaries, with total incentive management fees not to exceed 20% of
cumulative Operating Profit, or 20% of current year Operating Profit.


Note 5. Income Taxes


   The Company is included in the consolidated Federal income tax return of
Crestline and its affiliates (the "Group"). Tax expense is allocated to the
Company as a member of the Group based upon the relative contribution to the
Group's consolidated taxable income/loss and changes in temporary differences.
This allocation method results in Federal, state and Canadian tax expense
allocated for the period presented that is substantially equal to the expense
that would have been recognized if the Company had filed separate tax returns.


   The provision for income taxes for the fiscal years 2000 and 1999 consists
of the following (in thousands):





                                                                    2000   1999
                                                                   ------ ------
                                                                    
      Current..................................................... $3,945 $4,142
      Deferred....................................................    344  1,027
                                                                   ------ ------
                                                                   $4,289 $5,169
                                                                   ====== ======



   The significant difference between the Company's effective income tax rate
and the Federal state tax rate is attributable to the state and Canadian tax
rates.


   As of December 29, 2000 and December 31, 1999, the Company had no deferred
tax assets. The tax effect of the temporary difference that gives rise to the
Company's deferred tax liability is generally attributable to the hotel
working capital.


Note 6. Subsequent Event


   On December 17, 1999, the Work Incentives Improvement Act was passed which
contained certain tax provisions related to REITs commonly known as the REIT
Modernization Act ("RMA"). Under the RMA, beginning on January 1, 2001, REITs
could lease hotels to a "taxable subsidiary" if the hotel is operated and
managed on behalf of such subsidiary by an independent third party. This law
enabled Host Marriott, beginning January 2001, to lease its hotels to a
taxable subsidiary. Under the terms of the Company's full-service hotel
leases, Host Marriott, at its sole discretion, could purchase the full-service
hotel leases for a price equal to the fair market value of the Company's
leasehold interest in the leases based upon an agreed upon formula in the
leases.


   On November 13, 2000, Crestline, the Company and the Tenant Subsidiaries
entered into an agreement with a subsidiary of Host Marriott for the purchase
and sale of Tenant Subsidiaries' leasehold interests in the full-service
hotels. The purchase and sale transaction would generally transfer ownership
of the Tenant


                                     F-52



                    CCHP I CORPORATION AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Subsidiaries owned by the Company to a subsidiary of Host Marriott for a total
consideration of $32.6 million in cash. On January 10, 2001, upon the receipt
of all required consents, the purchase and sale transaction was completed for
$28.2 million, which reflects the deferral of the sale of one of the leases for
$4.4 million. The Company recognized a pre-tax gain on the transaction of
approximately $28 million in the first quarter of 2001, net of transaction
costs. The effective date of the transaction was January 1, 2001.


   In connection with the sale of the Tenant Subsidiaries, the hotel working
capital notes for all but one of the full-service hotels were repaid.
Accordingly, the Company's remaining hotel working capital notes payable to
Host Marriott after the sale of the Tenant Subsidiaries on January 10, 2001
totaled $2,003,000.


                                      F-53



                   CCHP II CORPORATION AND SUBSIDIARIES


                     CONSOLIDATED FINANCIAL STATEMENTS


                  December 29, 2000 and December 31, 1999


            With Independent Public Accountants' Report Thereon




                                      F-54



                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To CCHP II Corporation:


   We have audited the accompanying consolidated balance sheets of CCHP II
Corporation and its subsidiaries (a Delaware corporation) as of December 29,
2000 and December 31, 1999, and the related consolidated statements of
operations, shareholder's equity and cash flows for the fiscal years ended
December 29, 2000 and December 31, 1999. These consolidated financial
statements are the responsibility of CCHP II Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.


   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.


   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CCHP II
Corporation and its subsidiaries as of December 29, 2000 and December 31, 1999
and the results of their operations and their cash flows for the fiscal years
then ended in conformity with accounting principles generally accepted in the
United States.


                                          Arthur Andersen LLP


Vienna, Virginia


February 23, 2001


                                      F-55





                   CCHP II CORPORATION AND SUBSIDIARIES


                        CONSOLIDATED BALANCE SHEETS


               As of December 29, 2000 and December 31, 1999


                     (in thousands, except share data)





                                                                 2000    1999
                                                                ------- -------
                                                                  
                            ASSETS
Current assets
  Cash and cash equivalents.................................... $ 4,867 $ 8,856
  Due from hotel managers......................................  13,029  10,280
  Due from Crestline...........................................     105     --
  Other current assets.........................................   1,023     --
                                                                ------- -------
                                                                 19,024  19,136
Hotel working capital..........................................  18,090  18,090
                                                                ------- -------
                                                                $37,114 $37,226
                                                                ======= =======
             LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
  Lease payable to Host Marriott............................... $15,565 $16,197
  Due to hotel managers........................................   2,085     958
  Due to Crestline.............................................     --      288
                                                                ------- -------
                                                                 17,650  17,443
Hotel working capital notes payable to Host Marriott...........  18,090  18,090
Deferred income taxes..........................................   1,374     996
                                                                ------- -------
  Total liabilities............................................  37,114  36,529
                                                                ------- -------
Shareholder's equity
  Common stock (100 shares issued at $100 par value)...........     --      --
  Retained earnings............................................     --      697
                                                                ------- -------
    Total shareholder's equity.................................     --      697
                                                                ------- -------
                                                                $37,114 $37,226
                                                                ======= =======



              See Notes to Consolidated Financial Statements.



                                      F-56



                   CCHP II CORPORATION AND SUBSIDIARIES


                   CONSOLIDATED STATEMENTS OF OPERATIONS


        Fiscal Years Ended December 29, 2000 and December 31, 1999


                              (in thousands)





                                                          2000        1999
                                                       ----------  ----------
                                                             
REVENUES
  Rooms............................................... $  689,406  $  646,624
  Food and beverage...................................    335,607     306,320
  Other...............................................     66,971      64,876
                                                       ----------  ----------
    Total revenues....................................  1,091,984   1,017,820
                                                       ----------  ----------
OPERATING COSTS AND EXPENSES
Property-level operating costs and expenses
  Rooms...............................................    167,839     158,279
  Food and beverage...................................    249,087     230,001
  Other...............................................    244,590     231,668
Other operating costs and expenses
  Lease expense to Host Marriott......................    337,643     312,112
  Management fees.....................................     75,268      66,672
                                                       ----------  ----------
    Total operating costs and expenses................  1,074,427     998,732
                                                       ----------  ----------
OPERATING PROFIT BEFORE CORPORATE EXPENSES AND
 INTEREST.............................................     17,557      19,088
Corporate expenses....................................     (1,372)     (1,499)
Interest expense......................................       (926)       (928)
Interest income.......................................        536         --
                                                       ----------  ----------
INCOME BEFORE INCOME TAXES............................     15,795      16,661
Provision for income taxes............................     (6,529)     (6,831)
                                                       ----------  ----------
NET INCOME............................................ $    9,266  $    9,830
                                                       ==========  ==========



              See Notes to Consolidated Financial Statements.


                                      F-57



                   CCHP II CORPORATION AND SUBSIDIARIES


              CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY


        Fiscal Years Ended December 29, 2000 and December 31, 1999


                              (in thousands)





                                                       Common Retained
                                                       Stock  Earnings   Total
                                                       ------ --------  -------
                                                               
Balance, January 1, 1999..............................  $--   $   --    $   --
  Dividend to Crestline...............................   --    (9,133)   (9,133)
  Net income..........................................   --     9,830     9,830
                                                        ----  -------   -------
Balance, December 31, 1999............................   --       697       697
  Dividend to Crestline...............................   --    (9,963)   (9,963)
  Net income..........................................   --     9,266     9,266
                                                        ----  -------   -------
Balance, December 29, 2000............................  $--   $   --    $   --
                                                        ====  =======   =======



              See Notes to Consolidated Financial Statements.


                                      F-58



                   CCHP II CORPORATION AND SUBSIDIARIES


                   CONSOLIDATED STATEMENTS OF CASH FLOWS


        Fiscal Years Ended December 29, 2000 and December 31, 1999


                              (in thousands)





                                                                2000     1999
                                                               -------  -------
                                                                  
OPERATING ACTIVITIES
Net income.................................................... $ 9,266  $ 9,830
Change in amounts due from hotel managers.....................  (2,749)  (9,322)
Change in lease payable to Host Marriott......................    (632)  16,197
Change in amounts due to hotel managers.......................   1,127      --
Changes in other operating accounts...........................  (1,038)   1,284
                                                               -------  -------
  Cash from operations........................................   5,974   17,989
                                                               -------  -------
FINANCING ACTIVITIES
Dividend to Crestline.........................................  (9,963)  (9,133)
                                                               -------  -------
Increase (decrease) in cash and cash equivalents..............  (3,989)   8,856
Cash and cash equivalents, beginning of year..................   8,856      --
                                                               -------  -------
Cash and cash equivalents, end of year........................ $ 4,867  $ 8,856
                                                               =======  =======



              See Notes to Consolidated Financial Statements.


                                      F-59



                   CCHP II CORPORATION AND SUBSIDIARIES


                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1. Summary of Significant Accounting Policies


 Organization


   CCHP II Corporation (the "Company") was incorporated in the state of
Delaware on November 23, 1998 as a wholly owned subsidiary of Crestline Capital
Corporation ("Crestline"). On December 29, 1998, Crestline became a publicly
traded company when Host Marriott Corporation ("Host Marriott") completed its
plan of reorganizing its business operations by spinning-off Crestline to the
shareholders of Host Marriott as part of a series of transactions pursuant to
which Host Marriott converted into a real estate investment trust ("REIT").


   On December 31, 1998, wholly owned subsidiaries of the Company (the "Tenant
Subsidiaries") entered into lease agreements with Host Marriott to lease 28 of
Host Marriott's full-service hotels with the existing management agreements of
the leased hotels assigned to the Tenant Subsidiaries. As of December 29, 2000,
the Company leased 28 full-service hotels from Host Marriott.


   The Company operates as a unit of Crestline, utilizing Crestline's
employees, insurance and administrative services since the Company does not
have any employees. Certain direct expenses are paid by Crestline and charged
directly or allocated to the Company. Certain general and administrative costs
of Crestline are allocated to the Company, using a variety of methods,
principally including Crestline's specific identification of individual costs
and otherwise through allocations based upon estimated levels of effort devoted
by general and administrative departments to the Company or relative measures
of the size of the Company based on revenues. In the opinion of management, the
methods for allocating general and administrative expenses and other direct
costs are reasonable.


 Principles of Consolidation


   The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany transactions and balances
between the Company and its subsidiaries have been eliminated.


 Fiscal Year


   The Company's fiscal year ends on the Friday nearest December 31.


 Cash and Cash Equivalents


   The Company considers all highly liquid investments with a maturity of three
months or less at date of purchase as cash equivalents.


 Revenues


   The Company records the gross property-level revenues generated by the
hotels as revenues.


 Use of Estimates in the Preparation of Financial Statements


   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

                                      F-60



                   CCHP II CORPORATION AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 2. Leases


   Future minimum annual rental commitments for all non-cancelable leases as of
December 29, 2000 are as follows (in thousands):



                                                               
   2001............................................................. $  174,747
   2002.............................................................    174,747
   2003.............................................................    174,747
   2004.............................................................    174,747
   2005.............................................................    174,747
   Thereafter.......................................................    174,746
                                                                     ----------
   Total minimum lease payments..................................... $1,048,481
                                                                     ==========

   


   Lease expense for the fiscal years 2000 and 1999 consisted of the following
(in thousands):





                                                                 2000     1999
                                                               -------- --------
                                                                  
   Base rent.................................................. $173,247 $167,755
   Percentage rent............................................  164,396  144,357
                                                               -------- --------
                                                               $337,643 $312,112
                                                               ======== ========



 Hotel Leases


   The Tenant Subsidiaries entered into leases with Host Marriott effective
January 1, 1999 for 28 full-service hotels. See Note 6 for a discussion of the
sale of all of the full-service hotel leases in 2001.


   Each hotel lease had an initial term of eight years. The Tenant Subsidiaries
were required to pay the greater of (i) a minimum rent specified in each hotel
lease or (ii) a percentage rent based upon a specified percentage of aggregate
revenues from the hotel, including room revenues, food and beverage revenues,
and other income, in excess of specified thresholds. The amount of minimum rent
is increased each year based upon 50% of the increase in CPI during the
previous twelve months. Percentage rent thresholds are increased each year
based on a blend of the increases in CPI and the Employment Cost Index during
the previous twelve months. The hotel leases generally provide for a rent
adjustment in the event of damage, destruction, partial taking or certain
capital expenditures.


   The Tenant Subsidiaries were responsible for paying all of the expenses of
operating the hotels, including all personnel costs, utility costs, and general
repair and maintenance of the hotels. In addition, the Tenant Subsidiaries were
responsible for all fees payable to the hotel manager, including base and
incentive management fees, chain services payments and franchise or system
fees. Host Marriott was responsible for real estate and personal property
taxes, property casualty insurance, equipment rent, ground lease rent,
maintaining a reserve fund for FF&E replacements and capital expenditures.


   For those hotels where Marriott International is the manager, it had a
noneconomic membership interest with certain limited voting rights in the
Tenant Subsidiaries.


 FF&E Leases


   Prior to entering into the hotel leases, if the average tax basis of a
hotel's FF&E and other personal property exceeded 15% of the aggregate average
tax basis of the hotel's real and personal property (the "Excess FF&E"), the
Tenant Subsidiaries and affiliates of Host Marriott entered into lease
agreements (the "FF&E Leases") for the Excess FF&E. The terms of the FF&E
Leases generally ranged from two to three years and rent under the FF&E Leases
was a fixed amount.


                                      F-61



                   CCHP II CORPORATION AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Guaranty and Pooling Agreement


   In connection with entering into the hotel leases, the Company, Crestline
and Host Marriott, entered into a pool guarantee and a pooling and security
agreement by which the Company provided a full guarantee and Crestline provided
a limited guarantee of all of the hotel lease obligations.


   The cumulative limit of Crestline's guarantee obligation was the greater of
ten percent of the aggregate rent payable for the immediately preceding fiscal
year under all of the Company's hotel leases or ten percent of the aggregate
rent payable under all of the Company's hotel leases for 1999. In the event
that Crestline's obligation under the pooling and guarantee agreement was
reduced to zero, the Company could terminate the agreement and Host Marriott
could terminate the Company's hotel leases without penalty.


   All of the Company's leases were cross-defaulted and the Company's
obligations under the guaranty were secured by all the funds received from its
Tenant Subsidiaries.


Note 3. Working Capital Notes


   Upon the commencement of the hotel leases, the Company purchased the working
capital of the leased hotels from Host Marriott for $18,090,000 with the
purchase price evidenced by notes that bear interest at 5.12%. Interest on each
note is due simultaneously with the rent payment of each hotel lease. The
principal amount of each note is due upon the termination of each hotel lease.
See Note 6 for a discussion of the repayment of all of the hotel working
capital notes in 2001. As of December 29, 2000, the outstanding balance of the
working capital notes was $18,090,000, which mature in 2006. Cash paid for
interest expense in 2000 and 1999 totaled $926,000 and $856,000, respectively.


Note 4. Management Agreements


   All of the Company's hotels are operated by hotel management companies under
long-term hotel management agreements between Host Marriott and hotel
management companies. The existing management agreements were assigned to the
Tenant Subsidiaries upon the execution of the hotel leases for the term of each
corresponding hotel lease. See Note 6 for a discussion of the transfer of all
of the management agreements to Host Marriott in 2001.


   The Tenant Subsidiaries were obligated to perform all of the obligations of
Host Marriott under the hotel management agreements including payment of fees
due under the management agreements other than certain obligations including
payment of property taxes, property casualty insurance and ground rent,
maintaining a reserve fund for FF&E replacements and capital expenditures for
which Host Marriott retained responsibility.


   Marriott International manages 23 of the 28 hotels under long-term
management agreements. The Company's remaining five hotels are managed by other
hotel management companies. The management agreements generally provide for
payment of base management fees equal to one to four percent of revenues and
incentive management fees generally equal to 20% to 50% of Operating Profit (as
defined in the management agreements) over a priority return (as defined) to
the Tenant Subsidiaries, with total incentive management fees not to exceed 20%
of cumulative Operating Profit, or 20% of current year Operating Profit.


Note 5. Income Taxes


   The Company is included in the consolidated Federal income tax return of
Crestline and its affiliates (the "Group"). Tax expense is allocated to the
Company as a member of the Group based upon the relative contribution to the
Group's consolidated taxable income/loss and changes in temporary differences.
This

                                      F-62



                   CCHP II CORPORATION AND SUBSIDIARIES


         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


allocation method results in Federal, state and Canadian tax expense allocated
for the period presented that is substantially equal to the expense that would
have been recognized if the Company had filed separate tax returns.


   The provision for income taxes for the fiscal years 2000 and 1999 consists
of the following (in thousands):





                                                                    2000   1999
                                                                   ------ ------
                                                                    
      Current..................................................... $5,904 $5,835
      Deferred....................................................    625    996
                                                                   ------ ------
                                                                   $6,529 $6,831
                                                                   ====== ======



   The significant difference between the Company's effective income tax rate
and the Federal statutory tax rate is attributable to the state and Canadian
tax rates.


   As of December 29, 2000 and December 31, 1999, the Company had no deferred
tax assets. The tax effect of the temporary differences that gives rise to the
Company's federal deferred tax liability is generally attributable to the
hotel working capital.


Note 6. Subsequent Event


   On December 17, 1999, the Work Incentives Improvement Act was passed which
contained certain tax provisions related to REITs commonly known as the REIT
Modernization Act ("RMA"). Under the RMA, beginning on January 1, 2001, REITs
could lease hotels to a "taxable subsidiary" if the hotel is operated and
managed on behalf of such subsidiary by an independent third party. This law
enabled Host Marriott, beginning January 2001, to lease its hotels to a
taxable subsidiary. Under the terms of the Company's full-service hotel
leases, Host Marriott, at its sole discretion, could purchase the full-service
hotel leases for a price equal to the fair market value of the Company's
leasehold interest in the leases based upon an agreed upon formula in the
leases.


   On November 13, 2000, Crestline, the Company and the Tenant Subsidiaries
entered into an agreement with a subsidiary of Host Marriott for the purchase
and sale of the Tenant Subsidiaries' leasehold interests in the full-service
hotels. The purchase and sale transaction would generally transfer ownership
of the Tenant Subsidiaries owned by the Company to a subsidiary of Host
Marriott for a total consideration of $66.8 million in cash. On January 10,
2001, upon receipt of all required consents, the purchase and sale transaction
was completed for $66.8 million. The Company will recognize a pre-tax gain on
the transaction of approximately $66.6 million in the first quarter of 2001,
net of transaction costs. The effective date of the transaction was January 1,
2001.


   In connection with the sale of the Tenant Subsidiaries, all of the hotel
working capital notes were repaid on January 10, 2001.


                                     F-63



                   CCHP III CORPORATION AND SUBSIDIARIES


                     CONSOLIDATED FINANCIAL STATEMENTS


                  December 29, 2000 and December 31, 1999


            With Independent Public Accountants' Report Thereon


                                      F-64



                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To CCHP III Corporation:


   We have audited the accompanying consolidated balance sheets of CCHP III
Corporation and its subsidiaries (a Delaware corporation) as of December 29,
2000 and December 31, 1999, and the related consolidated statements of
operations, shareholder's equity and cash flows for the fiscal years ended
December 29, 2000 and December 31, 1999. These consolidated financial
statements are the responsibility of CCHP III Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.


   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.


   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CCHP III
Corporation and its subsidiaries as of December 29, 2000 and December 31, 1999
and the results of their operations and their cash flows for the fiscal years
then ended in conformity with accounting principles generally accepted in the
United States.


                                          Arthur Andersen LLP


Vienna, Virginia


February 23, 2001


                                      F-65



                   CCHP III CORPORATION AND SUBSIDIARIES


                        CONSOLIDATED BALANCE SHEETS


               AS OF DECEMBER 29, 2000 AND DECEMBER 31, 1999


                     (in thousands, except share data)





                                                                 2000    1999
                                                                ------- -------
                                                                  
                            ASSETS
Current assets
  Cash and cash equivalents.................................... $ 3,069 $ 6,638
  Due from hotel managers......................................  11,062   8,214
  Restricted cash..............................................   3,836   4,519
  Due from Crestline...........................................     157     --
  Other current assets.........................................      79     --
                                                                ------- -------
                                                                 18,203  19,371
Hotel working capital..........................................  21,697  21,697
                                                                ------- -------
                                                                $39,900 $41,068
                                                                ======= =======
             LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
  Lease payable to Host Marriott............................... $13,733 $13,706
  Due to hotel managers........................................   3,514   3,379
  Other current liabilities....................................     750     760
                                                                ------- -------
                                                                 17,997  17,845
Hotel working capital notes payable to Host Marriott...........  21,697  21,697
Deferred income taxes..........................................     206     342
                                                                ------- -------
  Total liabilities............................................  39,900  39,884
                                                                ------- -------
Shareholder's equity
  Common stock (100 shares issued at $1.00 par value)..........     --      --
  Retained earnings............................................     --    1,184
                                                                ------- -------
    Total shareholder's equity.................................     --    1,184
                                                                ------- -------
                                                                $39,900 $41,068
                                                                ======= =======



              See Notes to Consolidated Financial Statements.


                                      F-66



                   CCHP III CORPORATION AND SUBSIDIARIES


                   CONSOLIDATED STATEMENTS OF OPERATIONS


        Fiscal Years Ended December 29, 2000 and December 31, 1999


                              (in thousands)





                                                              2000      1999
                                                            --------  --------
                                                                
REVENUES
  Rooms.................................................... $598,264  $570,611
  Food and beverage........................................  283,921   274,233
  Other....................................................   85,909    80,149
                                                            --------  --------
    Total revenues.........................................  968,094   924,993
                                                            --------  --------
OPERATING COSTS AND EXPENSES
Property-level operating costs and expenses
  Rooms....................................................  141,157   137,338
  Food and beverage........................................  209,791   202,181
  Other....................................................  242,786   236,721
Other operating costs and expenses
  Lease expense to Host Marriott...........................  313,611   295,563
  Management fees..........................................   45,975    41,893
                                                            --------  --------
    Total operating costs and expenses.....................  953,320   913,696
                                                            --------  --------
OPERATING PROFIT BEFORE CORPORATE EXPENSES AND INTEREST....   14,774    11,297
Corporate expenses.........................................   (1,230)   (1,357)
Interest expense...........................................   (1,111)   (1,129)
Interest income............................................      745       --
                                                            --------  --------
INCOME BEFORE INCOME TAXES.................................   13,178     8,811
Provision for income taxes.................................   (5,472)   (3,612)
                                                            --------  --------
NET INCOME................................................. $  7,706  $  5,199
                                                            ========  ========



              See Notes to Consolidated Financial Statements.


                                      F-67



                   CCHP III CORPORATION AND SUBSIDIARIES


              CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY


        Fiscal Years Ended December 29, 2000 and December 31, 1999


                              (in thousands)





                                                       Common Retained
                                                       Stock  Earnings   Total
                                                       ------ --------  -------
                                                               
Balance, January 1, 1999..............................  $--   $   --    $   --
  Dividend to Crestline...............................   --    (4,015)   (4,015)
  Net income..........................................   --     5,199     5,199
                                                        ----  -------   -------
Balance, December 31, 1999............................   --     1,184     1,184
  Dividend to Crestline...............................   --    (8,890)   (8,890)
  Net income..........................................   --     7,706     7,706
                                                        ----  -------   -------
Balance, December 29, 2000............................  $--   $   --    $   --
                                                        ====  =======   =======



              See Notes to Consolidated Financial Statements.



                                      F-68



                   CCHP III CORPORATION AND SUBSIDIARIES


                   CONSOLIDATED STATEMENTS OF CASH FLOWS


        Fiscal Years Ended December 29, 2000 and December 31, 1999


                              (in thousands)





                                                                2000     1999
                                                               -------  -------
                                                                  
OPERATING ACTIVITIES
Net income.................................................... $ 7,706  $ 5,199
Change in amounts due from hotel managers.....................  (2,848)  (4,084)
Change in lease payable to Host Marriott......................      27   13,706
Change in amounts due to hotel managers.......................     135      --
Changes in other operating accounts...........................     301   (4,168)
                                                               -------  -------
  Cash from operations........................................   5,321   10,653
                                                               -------  -------
FINANCING ACTIVITIES
Dividend to Crestline.........................................  (8,890)  (4,015)
                                                               -------  -------
Increase (decrease) in cash and cash equivalents..............  (3,569)   6,638
Cash and cash equivalents, beginning of year..................   6,638      --
                                                               -------  -------
Cash and cash equivalents, end of year........................ $ 3,069  $ 6,638
                                                               =======  =======



              See Notes to Consolidated Financial Statements.


                                      F-69





                   CCHP III CORPORATION AND SUBSIDIARIES


                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1. Summary of Significant Accounting Policies


 Organization


   CCHP III Corporation (the "Company") was incorporated in the state of
Delaware on November 23, 1998 as a wholly owned subsidiary of Crestline Capital
Corporation ("Crestline"). On December 29, 1998, Crestline became a publicly
traded company when Host Marriott Corporation ("Host Marriott") completed its
plan of reorganizing its business operations by spinning-off Crestline to the
shareholders of Host Marriott as part of a series of transactions pursuant to
which Host Marriott converted into a real estate investment trust ("REIT").


   On December 31, 1998, wholly owned subsidiaries of the Company (the "Tenant
Subsidiaries") entered into lease agreements with Host Marriott to lease 31 of
Host Marriott's full-service hotels with the existing management agreements of
the leased hotels assigned to the Tenant Subsidiaries. As of December 29, 2000,
the Company leased 29 full-service hotels from Host Marriott.


   The Company operates as a unit of Crestline, utilizing Crestline's
employees, insurance and administrative services since the Company does not
have any employees. Certain direct expenses are paid by Crestline and charged
directly or allocated to the Company. Certain general and administrative costs
of Crestline are allocated to the Company, using a variety of methods,
principally including Crestline's specific identification of individual costs
and otherwise through allocations based upon estimated levels of effort devoted
by general and administrative departments to the Company or relative measures
of the size of the Company based on revenues. In the opinion of management, the
methods for allocating general and administrative expenses and other direct
costs are reasonable.


 Principles of Consolidation


   The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany transactions and balances
between the Company and its subsidiaries have been eliminated.


 Fiscal Year


   The Company's fiscal year ends on the Friday nearest December 31.


 Cash and Cash Equivalents


   The Company considers all highly liquid investments with a maturity of three
months or less at date of purchase as cash equivalents.


 Restricted Cash


   In connection with the lender requirements of one of the leased hotels, the
Company is required to maintain a separate account with the lender on behalf of
the Company for the operating profit and incentive management fees of the
hotel. Following an annual audit, amounts will be distributed to the hotel's
manager and to the Company in accordance with the loan agreement.


 Revenues


   The Company records the gross property-level revenues generated by the
hotels as revenues.


                                      F-70



                   CCHP III CORPORATION AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Use of Estimates in the Preparation of Financial Statements


   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.


Note 2. Leases


   Future minimum annual rental commitments for all non-cancelable leases as of
December 29, 2000 are as follows (in thousands):



                                                            
      2001.......................................................... $  170,318
      2002..........................................................    170,318
      2003..........................................................    170,318
      2004..........................................................    170,318
      2005..........................................................    170,318
      Thereafter....................................................    340,635
                                                                     ----------
      Total minimum lease payments.................................. $1,192,225
                                                                     ==========

      


   Lease expense for fiscal years 2000 and 1999 consisted of the following (in
thousands):





                                                                 2000     1999
                                                               -------- --------
                                                                  
      Base rent............................................... $170,318 $168,910
      Percentage rent.........................................  143,293  126,653
                                                               -------- --------
                                                               $313,611 $295,563
                                                               ======== ========



 Hotel Leases


   The Tenant Subsidiaries entered into leases with Host Marriott effective
January 1, 1999 for 31 full-service hotels. See Note 6 for a discussion of the
sale of all of the full-service hotel leases in 2001.


   Each hotel lease had an initial term of nine years. The Tenant Subsidiaries
were required to pay the greater of (i) a minimum rent specified in each hotel
lease or (ii) a percentage rent based upon a specified percentage of aggregate
revenues from the hotel, including room revenues, food and beverage revenues,
and other income, in excess of specified thresholds. The amount of minimum rent
is increased each year based upon 50% of the increase in CPI during the
previous twelve months. Percentage rent thresholds are increased each year
based on a blend of the increases in CPI and the Employment Cost Index during
the previous twelve months. The hotel leases generally provide for a rent
adjustment in the event of damage, destruction, partial taking or certain
capital expenditures.


   The Tenant Subsidiaries were responsible for paying all of the expenses of
operating the hotels, including all personnel costs, utility costs, and general
repair and maintenance of the hotels. In addition, the Tenant Subsidiaries were
responsible for all fees payable to the hotel manager, including base and
incentive management fees, chain services payments and franchise or system
fees. Host Marriott was responsible for real estate and personal property
taxes, property casualty insurance, equipment rent, ground lease rent,
maintaining a reserve fund for FF&E replacements and capital expenditures.


                                      F-71



                   CCHP III CORPORATION AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)




   For those hotels where Marriott International is the manager, it had a
noneconomic membership interest with certain limited voting rights in the
Tenant Subsidiaries.


 FF&E Leases


   Prior to entering into the hotel leases, if the average tax basis of a
hotel's FF&E and other personal property exceeded 15% of the aggregate average
tax basis of the hotel's real and personal property (the "Excess FF&E"), the
Tenant Subsidiaries and affiliates of Host Marriott entered into lease
agreements (the "FF&E Leases") for the Excess FF&E. The terms of the FF&E
Leases generally ranged from two to three years and rent under the FF&E Leases
was a fixed amount.


 Guaranty and Pooling Agreement


   In connection with entering into the hotel leases, the Company, Crestline
and Host Marriott, entered into a pool guarantee and a pooling and security
agreement by which the Company provided a full guarantee and Crestline provided
a limited guarantee of all of the hotel lease obligations.


   The cumulative limit of Crestline's guarantee obligation was the greater of
ten percent of the aggregate rent payable for the immediately preceding fiscal
year under all of the Company's hotel leases or ten percent of the aggregate
rent payable under all of the Company's hotel leases for 1999. In the event
that Crestline's obligation under the pooling and guarantee agreement was
reduced to zero, the Company could terminate the agreement and Host Marriott
could terminate the Company's hotel leases without penalty.


   All of the Company's leases were cross-defaulted and the Company's
obligations under the guaranty were secured by all the funds received from its
Tenant Subsidiaries.


Note 3. Working Capital Notes


   Upon the commencement of the hotel leases, the Company purchased the working
capital of the leased hotels from Host Marriott for $22,046,000 with the
purchase price evidenced by notes that bear interest at 5.12%. Interest on each
note is due simultaneously with the rent payment of each hotel lease. The
principal amount of each note is due upon the termination of each hotel lease.
See Note 6 for a discussion of the repayment of all of the hotel working
capital notes in 2001. As of December 29, 2000, the outstanding balance of the
working capital notes was $21,697,000, which mature in 2007. Cash paid for
interest expense in fiscal years 2000 and 1999 totaled $1,112,000 and
$1,042,000, respectively.


Note 4. Management Agreements


   All of the Company's hotels are operated by hotel management companies under
long-term hotel management agreements between Host Marriott and hotel
management companies. The existing management agreements were assigned to the
Tenant Subsidiaries upon the execution of the hotel leases for the term of each
corresponding hotel lease. See Note 6 for a discussion of the transfer of all
of the management agreements to Host Marriott in 2001.


   The Tenant Subsidiaries were obligated to perform all of the obligations of
Host Marriott under the hotel management agreements including payment of fees
due under the management agreements other than certain obligations including
payment of property taxes, property casualty insurance and ground rent,
maintaining a reserve fund for FF&E replacements and capital expenditures for
which Host Marriott retained responsibility.


                                      F-72



                  CCHP III CORPORATION AND SUBSIDIARIES


         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Marriott International manages 21 of the 29 hotels under long-term
management agreements. The Company's remaining eight hotels are managed by
other hotel management companies. The management agreements generally provide
for payment of base management fees equal to one to four percent of revenues
and incentive management fees generally equal to 20% to 50% of Operating
Profit (as defined in the management agreements) over a priority return (as
defined) to the Tenant Subsidiaries, with total incentive management fees not
to exceed 20% of cumulative Operating Profit, or 20% of current year Operating
Profit.


Note 5. Income Taxes


   The Company is included in the consolidated Federal income tax return of
Crestline and its affiliates (the "Group"). Tax expense is allocated to the
Company as a member of the Group based upon the relative contribution to the
Group's consolidated taxable income/loss and changes in temporary differences.
This allocation method results in Federal and net state tax expense allocated
for the period presented that is substantially equal to the expense that would
have been recognized if the Company had filed separate tax returns.


   The provision for income taxes for the fiscal years 2000 and 1999 consists
of the following (in thousands):





                                                                    2000   1999
                                                                   ------ ------
                                                                    
      Current..................................................... $5,382 $3,270
      Deferred....................................................     90    342
                                                                   ------ ------
                                                                   $5,472 $3,612
                                                                   ====== ======



   As of December 29, 2000 and December 31, 1999, the Company had no deferred
tax assets. The tax effect of the temporary differences that gives rise to the
Company's deferred tax liability is generally attributable to the hotel
working capital.


Note 6. Subsequent Event


   On December 17, 1999, the Work Incentives Improvement Act was passed which
contained certain tax provisions related to REITs commonly known as the REIT
Modernization Act ("RMA"). Under the RMA, beginning on January 1, 2001, REITs
could lease hotels to a "taxable subsidiary" if the hotel is operated and
managed on behalf of such subsidiary by an independent third party. This law
enabled Host Marriott, beginning January 2001, to lease its hotels to a
taxable subsidiary. Under the terms of the Company's full-service hotel
leases, Host Marriott, at its sole discretion, could purchase the full-service
hotel leases for a price equal to the fair market value of the Company's
leasehold interest in the leases based upon an agreed upon formula in the
leases.


   On November 13, 2000, Crestline, the Company and the Tenant Subsidiaries
entered into an agreement with a subsidiary of Host Marriott for the purchase
and sale of the Tenant Subsidiaries' leasehold interests in the full-service
hotels. The purchase and sale transaction would generally transfer ownership
of the Tenant Subsidiaries owned by the Company to a subsidiary of Host
Marriott for a total consideration of $55.1 million in cash. On January 10,
2001, upon receipt of all required consents, the purchase and sale transaction
was completed for $55.1 million. The Company recognized a pre-tax gain on the
transaction of approximately $55 million in the first quarter of 2001, net of
transaction costs. The effective date of the transaction was January 1, 2001.


   In connection with the sale of the Tenant Subsidiaries, all of the hotel
working capital notes were repaid on January 10, 2001.


                                     F-73



                   CCHP IV CORPORATION AND SUBSIDIARIES


                     CONSOLIDATED FINANCIAL STATEMENTS


                  December 29, 2000 and December 31, 1999


            With Independent Public Accountants' Report Thereon


                                      F-74





                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To CCHP IV Corporation:


   We have audited the accompanying consolidated balance sheets of CCHP IV
Corporation and its subsidiaries (a Delaware corporation) as of December 29,
2000 and December 31, 1999, and the related consolidated statements of
operations, shareholder's equity and cash flows for the fiscal years ended
December 29, 2000 and December 31, 1999. These consolidated financial
statements are the responsibility of CCHP IV Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.


   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.


   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CCHP IV
Corporation and its subsidiaries as of December 29, 2000 and December 31, 1999
and the results of their operations and their cash flows for the fiscal years
then ended in conformity with accounting principles generally accepted in the
United States.


                                          Arthur Andersen LLP


Vienna, Virginia


February 23, 2001


                                      F-75





                   CCHP IV CORPORATION AND SUBSIDIARIES


                        CONSOLIDATED BALANCE SHEETS


               As of December 29, 2000 and December 31, 1999


                     (in thousands, except share data)





                                                                 2000    1999
                                                                ------- -------
                                                                  
                            ASSETS
Current assets
  Cash and cash equivalents.................................... $ 1,699 $ 3,487
  Due from hotel managers......................................  24,984  14,571
  Due from Crestline...........................................     --    3,487
  Other current assets.........................................     544     --
                                                                ------- -------
                                                                 27,227  21,545
Hotel working capital..........................................  16,522  16,522
                                                                ------- -------
                                                                $43,749 $38,067
                                                                ======= =======
             LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
  Lease payable to Host Marriott............................... $21,561 $20,348
  Due to hotel managers........................................   2,246     446
  Other current liabilities ...................................     602      10
                                                                ------- -------
                                                                 24,409  20,804
Hotel working capital notes payable to Host Marriott...........  16,522  16,522
Deferred income taxes..........................................     666     741
                                                                ------- -------
    Total liabilities..........................................  41,597  38,067
                                                                ------- -------
Shareholder's equity
  Common stock (100 shares issued at $100 par value)...........     --      --
  Retained earnings............................................   2,152     --
                                                                ------- -------
    Total shareholder's equity.................................   2,152     --
                                                                ------- -------
                                                                $43,749 $38,067
                                                                ======= =======



              See Notes to Consolidated Financial Statements.


                                      F-76



                   CCHP IV CORPORATION AND SUBSIDIARIES


                   CONSOLIDATED STATEMENTS OF OPERATIONS


        Fiscal Years Ended December 29, 2000 and December 31, 1999


                              (in thousands)





                                 2000       1999
                              ----------  --------
                                    
REVENUES
  Rooms.....................  $  630,427  $578,321
  Food and beverage.........     358,604   333,120
  Other.....................      88,221    77,368
                              ----------  --------
    Total revenues..........   1,077,252   988,809
                              ----------  --------
OPERATING COSTS AND EXPENSES
Property-level operating
 costs and expenses
  Rooms.....................     140,593   129,051
  Food and beverage.........     251,938   234,310
  Other.....................     250,690   231,547
Other operating costs and
 expenses
  Lease expense to Host
   Marriott.................     349,958   316,654
  Management fees...........      75,832    66,514
                              ----------  --------
    Total operating costs
     and expenses...........   1,069,011   978,076
                              ----------  --------
OPERATING PROFIT BEFORE
 CORPORATE EXPENSES AND
 INTEREST...................       8,241    10,733
Corporate expenses..........      (1,369)   (1,449)
Interest expense............        (846)     (846)
Interest income.............         538        16
                              ----------  --------
INCOME BEFORE INCOME TAXES..       6,564     8,454
Provision for income taxes..      (2,751)   (3,466)
                              ----------  --------
NET INCOME..................  $    3,813  $  4,988
                              ==========  ========



              See Notes to Consolidated Financial Statements.


                                      F-77



                   CCHP IV CORPORATION AND SUBSIDIARIES


              CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY


        Fiscal Years Ended December 29, 2000 and December 31, 1999


                              (in thousands)





                                                       Common Retained
                                                       Stock  Earnings   Total
                                                       ------ --------  -------
                                                               
Balance, January 1, 1999..............................  $--   $   --    $   --
  Dividend to Crestline...............................   --    (4,988)   (4,988)
  Net income..........................................   --     4,988     4,988
                                                        ----  -------   -------
Balance, December 31, 1999............................   --       --        --
  Dividend to Crestline...............................   --    (1,661)    (1661)
  Net income..........................................   --     3,813     3,813
                                                        ----  -------   -------
Balance, December 29, 2000............................  $--   $ 2,152   $ 2,152
                                                        ====  =======   =======



              See Notes to Consolidated Financial Statements.


                                      F-78



                   CCHP IV CORPORATION AND SUBSIDIARIES


                   CONSOLIDATED STATEMENTS OF CASH FLOWS


 Fiscal Years Ended December 29, 2000 and December 31, 1999 (in thousands)





                                                               2000      1999
                                                             --------  --------
                                                                 
OPERATING ACTIVITIES
Net income.................................................. $  3,813  $  4,988
Change in amounts due from hotel managers...................  (10,413)  (14,124)
Change in lease payable to Host Marriott....................    1,213    20,348
Change in amounts due to hotel managers.....................    1,800       --
Changes in other operating accounts.........................    3,460       750
                                                             --------  --------
  Cash provided by (used in) operations.....................     (127)   11,962
                                                             --------  --------
FINANCING ACTIVITIES
Amounts advanced to Crestline...............................      --     (3,487)
Dividend to Crestline.......................................   (1,661)   (4,988)
                                                             --------  --------
  Cash used in financing activities.........................   (1,661)   (8,475)
                                                             --------  --------
Increase (decrease) in cash and cash equivalents............   (1,788)    3,487
Cash and cash equivalents, beginning of year................    3,487       --
                                                             --------  --------
Cash and cash equivalents, end of year...................... $  1,699  $  3,487
                                                             ========  ========



              See Notes to Consolidated Financial Statements.



                                      F-79





                   CCHP IV CORPORATION AND SUBSIDIARIES


                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1. Summary of Significant Accounting Policies


 Organization


   CCHP IV Corporation (the "Company") was incorporated in the state of
Delaware on November 23, 1998 as a wholly owned subsidiary of Crestline Capital
Corporation ("Crestline"). On December 29, 1998, Crestline became a publicly
traded company when Host Marriott Corporation ("Host Marriott") completed its
plan of reorganizing its business operations by spinning-off Crestline to the
shareholders of Host Marriott as part of a series of transactions pursuant to
which Host Marriott converted into a real estate investment trust ("REIT").


   On December 31, 1998, wholly owned subsidiaries of the Company (the "Tenant
Subsidiaries") entered into lease agreements with Host Marriott to lease 27 of
Host Marriott's full-service hotels with the existing management agreements of
the leased hotels assigned to the Tenant Subsidiaries. As of December 29, 2000,
the Company leased 27 full-service hotels from Host Marriott.


   The Company operates as a unit of Crestline, utilizing Crestline's
employees, insurance and administrative services since the Company does not
have any employees. Certain direct expenses are paid by Crestline and charged
directly or allocated to the Company. Certain general and administrative costs
of Crestline are allocated to the Company, using a variety of methods,
principally including Crestline's specific identification of individual costs
and otherwise through allocations based upon estimated levels of effort devoted
by general and administrative departments to the Company or relative measures
of the size of the Company based on revenues. In the opinion of management, the
methods for allocating general and administrative expenses and other direct
costs are reasonable.


 Principles of Consolidation


   The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany transactions and balances
between the Company and its subsidiaries have been eliminated.


 Fiscal Year


   The Company's fiscal year ends on the Friday nearest December 31.


 Cash and Cash Equivalents


   The Company considers all highly liquid investments with a maturity of three
months or less at date of purchase as cash equivalents.


 Revenues


   The Company records the gross property-level revenues generated by the
hotels as revenues.


 Use of Estimates in the Preparation of Financial Statements


   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

                                      F-80



                   CCHP IV CORPORATION AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 2. Leases


   Future minimum annual rental commitments for all non-cancelable leases as of
December 29, 2000 are as follows (in thousands):



                                                            
      2001.......................................................... $  188,116
      2002..........................................................    188,116
      2003..........................................................    188,116
      2004..........................................................    188,116
      2005..........................................................    188,116
      Thereafter....................................................    564,347
                                                                     ----------
        Total minimum lease payments................................ $1,504,927
                                                                     ==========

      


   Lease expense for the fiscal years 2000 and 1999 consisted of the following
(in thousands):





                                                                 2000     1999
                                                               -------- --------
                                                                  
      Base rent............................................... $188,116 $183,048
      Percentage rent.........................................  161,842  133,606
                                                               -------- --------
                                                               $349,958 $316,654
                                                               ======== ========



 Hotel Leases


   The Tenant Subsidiaries entered into leases with Host Marriott effective
January 1, 1999 for 27 full-service hotels. See Note 6 for a discussion of the
sale of all of the full-service hotel leases in 2001.


   Each hotel lease had an initial term of ten years. The Tenant Subsidiaries
were required to pay the greater of (i) a minimum rent specified in each hotel
lease or (ii) a percentage rent based upon a specified percentage of aggregate
revenues from the hotel, including room revenues, food and beverage revenues,
and other income, in excess of specified thresholds. The amount of minimum rent
is increased each year based upon 50% of the increase in CPI during the
previous twelve months. Percentage rent thresholds are increased each year
based on a blend of the increases in CPI and the Employment Cost Index during
the previous twelve months. The hotel leases generally provide for a rent
adjustment in the event of damage, destruction, partial taking or certain
capital expenditures.


   The Tenant Subsidiaries were responsible for paying all of the expenses of
operating the hotels, including all personnel costs, utility costs, and general
repair and maintenance of the hotels. In addition, the Tenant Subsidiaries were
responsible for all fees payable to the hotel manager, including base and
incentive management fees, chain services payments and franchise or system
fees. Host Marriott was responsible for real estate and personal property
taxes, property casualty insurance, equipment rent, ground lease rent,
maintaining a reserve fund for FF&E replacements and capital expenditures.


   For those hotels where Marriott International is the manager, it had a
noneconomic membership interest with certain limited voting rights in the
Tenant Subsidiaries.


                                      F-81



                   CCHP IV CORPORATION AND SUBSIDIARIES


          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 FF&E Leases


   Prior to entering into the hotel leases, if the average tax basis of a
hotel's FF&E and other personal property exceeded 15% of the aggregate average
tax basis of the hotel's real and personal property (the "Excess FF&E"), the
Tenant Subsidiaries and affiliates of Host Marriott entered into lease
agreements (the "FF&E Leases") for the Excess FF&E. The terms of the FF&E
Leases generally ranged from two to three years and rent under the FF&E Leases
was a fixed amount.


 Guaranty and Pooling Agreement


   In connection with entering into the hotel leases, the Company, Crestline
and Host Marriott, entered into a pool guarantee and a pooling and security
agreement by which the Company provided a full guarantee and Crestline provided
a limited guarantee of all of the hotel lease obligations.


   The cumulative limit of Crestline's guarantee obligation was the greater of
ten percent of the aggregate rent payable for the immediately preceding fiscal
year under all of the Company's hotel leases or ten percent of the aggregate
rent payable under all of the Company's hotel leases for 1999. In the event
that Crestline's obligation under the pooling and guarantee agreement was
reduced to zero, the Company could terminate the agreement and Host Marriott
could terminate the Company's hotel leases without penalty.


   All of the Company's leases were cross-defaulted and the Company's
obligations under the guaranty were secured by all the funds received from its
Tenant Subsidiaries.


Note 3. Working Capital Notes


   Upon the commencement of the hotel leases, the Company purchased the working
capital of the leased hotels from Host Marriott for $16,522,000 with the
purchase price evidenced by notes that bear interest at 5.12%. Interest on each
note is due simultaneously with the rent payment of each hotel lease. The
principal amount of each note is due upon the termination of each hotel lease.
See Note 6 for a discussion of the repayment of all of the hotel working
capital notes in 2001. As of December 29, 2000, the outstanding balance of the
working capital notes was $16,522,000, which mature in 2008. Cash paid for
interest expense in 2000 and 1999 totaled $846,000 and $781,000, respectively.


Note 4. Management Agreements


   All of the Company's hotels are operated by hotel management companies under
long-term hotel management agreements between Host Marriott and hotel
management companies. The existing management agreements were assigned to the
Tenant Subsidiaries upon the execution of the hotel leases for the term of each
corresponding hotel lease. See Note 6 for a discussion of the transfer of all
of the management agreements to Host Marriott in 2001.


   The Tenant Subsidiaries were obligated to perform all of the obligations of
Host Marriott under the hotel management agreements including payment of fees
due under the management agreements other than certain obligations including
payment of property taxes, property casualty insurance and ground rent,
maintaining a reserve fund for FF&E replacements and capital expenditures for
which Host Marriott retained responsibility.


   Marriott International manages 23 of the 27 hotels under long-term
management agreements. The Company's remaining four hotels are managed by other
hotel management companies. The management

                                      F-82



                   CCHP IV CORPORATION AND SUBSIDIARIES


         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


agreements generally provide for payment of base management fees equal to one
to four percent of revenues and incentive management fees generally equal to
20% to 50% of Operating Profit (as defined in the management agreements) over
a priority return (as defined) to the Tenant Subsidiaries, with total
incentive management fees not to exceed 20% of cumulative Operating Profit, or
20% of current year Operating Profit.


Note 5. Income Taxes


   The Company is included in the consolidated Federal income tax return of
Crestline and its affiliates (the "Group"). Tax expense is allocated to the
Company as a member of the Group based upon the relative contribution to the
Group's consolidated taxable income/loss and changes in temporary differences.
This allocation method results in Federal and net state tax expense allocated
for the period presented that is substantially equal to the expense that would
have been recognized if the Company had filed separate tax returns.


   The provision for income taxes for fiscal years 2000 and 1999 consists of
the following (in thousands):





                                                                    2000   1999
                                                                   ------ ------
                                                                    
      Current..................................................... $2,452 $2,725
      Deferred....................................................    299    741
                                                                   ------ ------
                                                                   $2,751 $3,466
                                                                   ====== ======



   As of December 29, 2000 and December 31, 1999, the Company had no deferred
tax assets. The tax effect of the temporary differences that gives rise to the
Company's deferred tax liability is generally attributable to the hotel
working capital.


Note 6. Subsequent Event


   On December 17, 1999, the Work Incentives Improvement Act was passed which
contained certain tax provisions related to REITs commonly known as the REIT
Modernization Act ("RMA"). Under the RMA, beginning on January 1, 2001, REITs
could lease hotels to a "taxable subsidiary" if the hotel is operated and
managed on behalf of such subsidiary by an independent third party. This law
enabled Host Marriott, beginning January 2001, to lease its hotels to a
taxable subsidiary. Under the terms of the Company's full-service hotel
leases, Host Marriott, at its sole discretion, could purchase the full-service
hotel leases for a price equal to the fair market value of the Company's
leasehold interest in the leases based upon an agreed upon formula in the
leases.


   On November 13, 2000, Crestline, the Company and the Tenant Subsidiaries
entered into an agreement with a subsidiary of Host Marriott for the purchase
and sale of the Tenant Subsidiaries' leasehold interests in the full-service
hotels. The purchase and sale transaction would generally transfer ownership
of the Lessee Entities owned by the Company to a subsidiary of Host Marriott
for a total consideration of $46.1 million in cash. On January 10, 2001, upon
receipt of all required consents, the purchase and sale transaction was
completed for $46.1 million. The Company recognized a pre-tax gain on the
transaction of approximately $46 million in the first quarter of 2001, net of
the transaction costs. The effective date of the transaction was January 1,
2001.


   In connection with the sale of the Tenant Subsidiaries, all of the hotel
working capital notes were repaid on January 10, 2001.


                                     F-83



                            HOST MARRIOTT, L.P.


                   CONDENSED CONSOLIDATED BALANCE SHEETS


                               (in millions)





                                                         March 22,  December 31,
                                                           2002         2001
                                                        ----------- ------------
                                                        (unaudited)
                                                              
                        ASSETS
Property and equipment, net...........................    $6,939       $6,999
Notes and other receivables (including amounts due
 from affiliates of $6 million and $6 million,
 respectively)........................................        54           54
Due from Manager......................................       150          141
Investments in affiliates.............................       137          142
Other assets..........................................       558          532
Restricted cash.......................................       115          114
Cash and cash equivalents.............................       341          352
                                                          ------       ------
                                                          $8,294       $8,334
                                                          ======       ======

         LIABILITIES AND SHAREHOLDERS' EQUITY
Debt
 Senior notes.........................................    $3,231       $3,235
 Mortgage debt........................................     2,228        2,261
 Convertible debt obligation to Host Marriott.........       492          492
 Other................................................       106          106
                                                          ------       ------
                                                           6,057        6,094
Accounts payable and accrued expenses.................       124          121
Other liabilities.....................................       301          320
                                                          ------       ------
  Total liabilities...................................     6,482        6,535
                                                          ------       ------
Minority interest.....................................       111          108

Limited partnership interests of third parties at
 redemption value (representing 21.5 million units and
 21.6 million units at March 22, 2002 and December 31,
 2001, respectively)..................................       257          194

Partners' Capital
 General partner......................................         1            1
 Cumulative redeemable preferred limited partner......       339          339
 Limited partner......................................     1,107        1,162
 Accumulated other comprehensive (loss) income........        (3)          (5)
                                                          ------       ------
  Total partners' capital.............................     1,444        1,497
                                                          ------       ------
                                                          $8,294       $8,334
                                                          ======       ======



              See Notes to Condensed Consolidated Statements


                                      F-84



                            HOST MARRIOTT, L.P.


              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


           Twelve Weeks Ended March 22, 2002 and March 23, 2001


                         (unaudited, in millions)





                                                                  2002   2001
                                                                  -----  ----
                                                                   
REVENUES
 Hotel sales
  Rooms.......................................................... $ 465  $522
  Food and beverage..............................................   244   253
  Other..........................................................    55    64
                                                                  -----  ----
    Total hotel sales............................................   764   839
 Rental income...................................................    26    34
                                                                  -----  ----
    Total revenues...............................................   790   873
                                                                  -----  ----
OPERATING COSTS AND EXPENSES
 Rooms...........................................................   111   121
 Food and beverage...............................................   175   191
 Hotel departmental costs and deductions.........................   196   208
 Management fees.................................................    36    52
 Taxes, insurance and other property-level expenses..............    62    65
 Depreciation and amortization...................................    84    77
 Corporate expenses..............................................    13     8
 Other expenses..................................................     4     2
                                                                  -----  ----
OPERATING PROFIT.................................................   109   149
 Minority interest expense.......................................    (5)   (7)
 Interest income.................................................     3     8
 Interest expense................................................  (112) (110)
 Net gains on property transactions..............................     1     1
 Equity in earnings (loss) of affiliates.........................    (4)    2
                                                                  -----  ----
INCOME (LOSS) BEFORE INCOME TAXES................................    (8)   43
Provision for income taxes.......................................    (4)   (3)
                                                                  -----  ----
INCOME (LOSS) FROM CONTINUING OPERATIONS.........................   (12)   40

DISCONTINUED OPERATIONS
Gain on disposal.................................................     7    --
                                                                  -----  ----
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS.........................    (5)   40
Extraordinary gain on debt extinguishment........................     6    --
                                                                  -----  ----
NET INCOME....................................................... $   1  $ 40
                                                                  =====  ====
Less: Distributions on preferred limited partner units to Host
 Marriott........................................................    (9)   (5)
                                                                  -----  ----
NET INCOME (LOSS) AVAILABLE TO COMMON UNITHOLDERS................ $  (8) $ 35
                                                                  =====  ====
BASIC EARNINGS (LOSS) PER COMMON UNIT:
 Continuing operations........................................... $(.08) $.12
 Discontinued operations.........................................   .03    --
 Extraordinary gain..............................................   .02    --
                                                                  -----  ----
BASIC EARNINGS (LOSS) PER COMMON UNIT............................ $(.03) $.12
                                                                  =====  ====
DILUTED EARNINGS (LOSS) PER COMMON UNIT:
 Continuing operations........................................... $(.08) $.12
 Discontinued operations.........................................   .03    --
 Extraordinary gain..............................................   .02    --
                                                                  -----  ----
DILUTED EARNINGS PER COMMON UNIT................................. $(.03) $.12
                                                                  =====  ====



              See Notes to Condensed Consolidated Statements


                                      F-85



                            HOST MARRIOTT, L.P.


              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW


           Twelve Weeks Ended March 22, 2002 and March 23, 2001


                         (unaudited, in millions)





                                                                   2002  2001
                                                                   ----  -----
                                                                   
OPERATING ACTIVITIES
Income (loss) from continuing operations.......................... $(12) $  40
Adjustments to reconcile to cash from operations:
 Depreciation and amortization....................................   84     77
 Income taxes.....................................................   (4)   (19)
 Deferred contingent rental income................................    1      7
 Net gains on property transactions...............................   (1)    (1)
 Equity in earnings of affiliates.................................    4     (2)
 Purchase of Crestline leases.....................................   --   (204)
 Changes in other operating accounts..............................  (18)   (44)
 Other............................................................    5     (2)
                                                                   ----  -----
  Cash from (used in) operations..................................   59   (148)
                                                                   ----  -----
INVESTING ACTIVITIES
Capital expenditures:
 Capital expenditures for renewals and replacements...............  (42)   (56)
 New investment capital expenditures..............................   (5)   (20)
 Other investments................................................   (1)    (5)
Note receivable collections, net..................................   --      3
                                                                   ----  -----
  Cash used in investing activities...............................  (48)   (78)
                                                                   ----  -----
FINANCING ACTIVITIES
Issuances of debt, net............................................   (1)   118
Scheduled principal repayments....................................   (8)    (9)
Issuances of common units.........................................   --      1
Distributions.....................................................   (9)   (79)
Other.............................................................   (4)    (6)
                                                                   ----  -----
  Cash from (used in) financing activities........................  (22)    25
                                                                   ----  -----
DECREASE IN CASH AND CASH EQUIVALENTS............................. $(11) $(201)
                                                                   ====  =====



              See Notes to Condensed Consolidated Statements


                                      F-86



                            HOST MARRIOTT, L.P.


              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


           Twelve Weeks Ended March 22, 2002 and March 23, 2001


                         (unaudited, in millions)


Supplemental schedule of noncash investing and financing activities:


   During the first quarter of 2002 and 2001, outside OP Units valued at $11.6
million and $173.1 million, respectively, were converted to shares of Host
Marriott common stock of 1.2 million and 13.0 million, respectively.


   In addition, of the converted OP Units valued at $11.6 million, $10.5
million was a result of the acquisition of minority interest in the San Diego
Marina Marriott hotel, which transaction resulted in an increase to property
and equipment of $10.5 million to reflect the fair value of this acquired
interest.


   In January of 2002, the Company transferred the St. Louis Marriott Pavilion
to the mortgage lender. The Company recorded the difference between the debt
extinguished and the fair value of the assets surrendered of $6 million, net of
tax expense of $3.6 million, as an extraordinary item. The Company also
recorded the reversal of deferred incentive management fees and the operations
of the hotel prior to sale, net of tax, as a gain in disposal in discontinued
operations.


              See Notes to Condensed Consolidated Statements


                                      F-87



                            HOST MARRIOTT, L.P.


           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                (Unaudited)


1.  Organization


  Host Marriott, L.P. (the "Operating Partnership" or the "Company" or "Host
  LP") is a Delaware limited partnership whose sole general partner is Host
  Marriott Corporation ("Host REIT" or "Host Marriott"). Host REIT, a
  Maryland corporation, operating through an umbrella partnership structure,
  is a self-managed and self-administered real estate investment trust
  ("REIT") with its operations conducted through the Operating Partnership
  and its subsidiaries. As of March 22, 2002, Host REIT owned approximately
  92% of the Operating Partnership.


2.  Summary of Significant Accounting Policies


  The accompanying unaudited condensed consolidated financial statements of
  the Company and its subsidiaries have been prepared without audit. Certain
  information and footnote disclosures normally included in financial
  statements presented in accordance with accounting principles generally
  accepted in the United States have been condensed or omitted. The Company
  believes the disclosures made are adequate to make the information
  presented not misleading. However, the unaudited condensed consolidated
  financial statements should be read in conjunction with the consolidated
  financial statements and notes thereto included in the Company's annual
  report on Form 10-K for the fiscal year ended December 31, 2001.


  In the opinion of the Company, the accompanying unaudited condensed
  consolidated financial statements reflect all adjustments necessary to
  present fairly the financial position of the Company as of March 22, 2002
  and the results of its operations and cash flows for the twelve weeks ended
  March 22, 2002 and March 23, 2001. Interim results are not necessarily
  indicative of fiscal year performance because of the impact of seasonal and
  short-term variations.


  Certain reclassifications were made to the prior year financial statements
  to conform to the current presentation.


  The Company consolidates entities in which it owns a controlling financial
  interest (when it owns over 50% of the voting shares of another company or,
  in the case of partnership investments, when the Company owns the general
  partnership interest). In all cases, the Company considers the impact on
  the Company's financial control or the ability of minority shareholders or
  other partners to participate or block management decisions. All material
  intercompany transactions and balances have been eliminated.


  Revenue from operations of the Company's hotels not leased to third parties
  is recognized when the services are provided. For the Company's leased
  properties, rental income is recorded when due and is the greater of base
  rent or percentage rent, as defined. Percentage rent received pursuant to
  the leases but not recognized until all contingencies have been met is
  included on the balance sheet as deferred rent. Contingent rental revenue
  of $1 million and $7 million, respectively, for the twelve weeks ended
  March 22, 2002 and March 23, 2001, have been deferred. Contingent rent in
  the first quarter of 2001 related to four of our full-service properties
  and our HPT leases. In the first quarter of 2002, as a result of the
  Company, in 2001, repurchasing the lessee entities with respect to the
  aforementioned four full-service properties, contingent rent relates only
  to our HPT leases.


3.  Earnings Per Unit


  Basic earnings per unit is computed by dividing net income available to
  common unitholders by the weighted average number of common units
  outstanding. Diluted earnings per unit is computed by dividing


                                      F-88



                            HOST MARRIOTT, L.P.


     NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                                (Unaudited)


  net income available to common unitholders as adjusted for potentially
  dilutive securities, by the weighted average number of common units
  outstanding plus other potentially dilutive securities. Dilutive securities
  may include units distributions to Host REIT for Host REIT common shares
  granted under comprehensive stock plans and the Convertible Preferred
  Securities. Dilutive securities may also include those common and preferred
  Operating Partnership Units ("OP Units") issuable or outstanding that are
  held by minority partners which are assumed to be converted. No effect is
  shown for securities if they are anti-dilutive.





                                                     Twelve weeks ended
                            ---------------------------------------------------------------------
                                      March 22, 2002                     March 23, 2001
                            ---------------------------------- ----------------------------------
                              Income        Units     Per Unit   Income        Units     Per Unit
                            (Numerator) (Denominator)  Amount  (Numerator) (Denominator)  Amount
                            ----------- ------------- -------- ----------- ------------- --------
                                                                       
   Net income.............      $ 1         285.0      $  --       $40         284.8      $ .14
   Distributions on
    preferred limited
    partner Units.........       (9)           --       (.03)       (5)           --       (.02)
                                ---         -----      -----       ---         -----      -----
   Basic income (loss)
    available to
    unitholders per unit..       (8)        285.0       (.03)       35         284.8        .12
    Assuming distribution
     of units to Host
     Marriott Corporation
     for Host Marriott
     Corporation common
     shares granted under
     the comprehensive
     stock plan, less
     shares assumed
     purchased at average
     market price ........       --            --         --        --           4.3         --
    Assuming conversion of
     minority OP Units
     Outstanding..........       --            --         --        --            --         --
                                ---         -----      -----       ---         -----      -----
   Diluted earnings (loss)
    per unit..............      $(8)        285.0      $(.03)      $35         289.1      $ .12
                                ===         =====      =====       ===         =====      =====



4.  Equity Transactions


  During February 2002, Host REIT filed a shelf registration statement for
  1.1 million common shares to be issued to a minority partner in the San
  Diego Marina Marriott hotel for the acquisition of certain interests in the
  San Diego partnership. On March 15, 2002, this minority partner sold the
  1.1 million common shares to an underwriter for resale on the open market.
  Concurrent with the issuance of the common shares by Host REIT, the
  Operating Partnership issued to Host REIT an equivalent number of OP Units.
  This transaction did not materially impact Host REIT's ownership percentage
  in the Operating Partnership but did result in an increase to property and
  equipment of $10.5 million to reflect the fair value of the interest
  acquired.


5.  Derivative Instruments


  On December 20, 2001, we entered into a 5-year interest rate swap
  agreement, which is effective January 15, 2002 and matures January 2007.
  Under the swap, we receive fixed-rate payments of 9.5% and pay floating-
  rate payments based on one-month LIBOR plus 450 basis points, on a $450
  million notional amount. The fair value of the interest rate swap agreement
  was zero at inception. Under SFAS No. 133, "Accounting for Derivative
  Instruments and Hedging Activities," we have designated the interest rate
  swap as a fair value hedge and the amounts paid or received under the swap
  agreement will be recognized over the life of the agreement as an
  adjustment to interest expense.


                                      F-89



                            HOST MARRIOTT, L.P.


     NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                                (Unaudited)


  On January 4, 2002, in a separate agreement with a different counter party,
  we purchased for approximately $3.5 million a 5-year interest rate cap with
  the same notional amount which caps the floating interest rate at 14%.
  Under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
  Activities," the cap represents a derivative that will be marked to market
  and the gains and losses from changes in the market value of the cap will
  be recorded in other income or expense in the current period. For the first
  quarter of 2002, the Company recorded other expense of $1.1 million due to
  a decline in the market value of the interest rate cap.


6.  Development Projects


  During January 2002, the 295-room Ritz-Carlton, Naples Golf Resort, which
  is approximately 2 miles from our existing Ritz-Carlton, Naples hotel, was
  placed in service at an approximate development cost of $75 million. The
  golf resort has 15,000 square-feet of meeting space, four food and beverage
  outlets, and full access to 36 holes of a Greg Norman-designed golf course
  surrounding the hotel.


7.  Dispositions


  During January 2002, the Company transferred the St. Louis Marriott
  Pavilion to the mortgage lender in a non-cash transaction. In accordance
  with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
  Assets," the Company recorded the reversal of deferred incentive management
  fees and the operations of the hotel prior to sale of $7 million, net of
  taxes of $4.6 million, as a gain on disposal in discontinued operations. In
  addition, the Company also recorded the difference between the debt
  extinguished and the fair value of the assets surrendered of $6 million,
  net of taxes of $3.6 million, as an extraordinary item.


8.  Distributions Payable


  On March 19, 2002, the Company announced that the Board of Directors of
  Host Marriott declared a quarterly cash distribution of $0.625 per Class A,
  B, and C preferred limited partner unit. The first quarter distribution was
  paid on April 15, 2002 to unitholders of record on March 28, 2002.


9.  Geographic Information


  During the first quarter of 2001, the Company's foreign operations
  consisted of four hotel properties located in Canada. Effective in the
  second quarter of 2001, as a result of the purchase of Rockledge Hotel
  Properties, Inc., foreign operations of the Company, consisted of four
  hotel properties located in Canada and two properties located in Mexico.
  There were no intercompany sales between the properties and the Company.
  The following table presents revenues for each of the geographical areas in
  which the Company owns hotels.





                                                        Twelve Weeks Ended
                                                   -----------------------------
                                                   March 22, 2002 March 23, 2001
                                                   -------------- --------------
                                                            
   United States..................................      $787           $858
   International..................................         3             15
                                                        ----           ----
     Total........................................      $790           $873
                                                        ====           ====




                                      F-90



                            HOST MARRIOTT, L.P.


     NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                                (Unaudited)


10.  Comprehensive Income


  The Company's other comprehensive income consists of unrealized gains and
  losses on foreign currency translation adjustments and the right to receive
  cash from Host Marriott Services Corporation subsequent to the exercise of
  the options held by certain former and current employees of Marriott
  International, pursuant to the distribution agreement between the Company
  and Host Marriott Services Corporation. For the twelve weeks ended March
  22, 2002 and March 23, 2001, comprehensive income totaled $3 million and
  $37 million, respectively.


11.  Supplemental Guarantor and Non-Guarantor Subsidiary Information


  All subsidiaries of the Company guarantee the Senior Notes except those
  owning 42 of the Company's full service hotels and HMH HPT RIBM LLC and HMH
  HPT CBM LLC, the lessees of the Residence Inn and Courtyard properties,
  respectively. The separate financial statements of each guaranteeing
  subsidiary (each, a "Guarantor Subsidiary") are not presented because the
  Company's management has concluded that such financial statements are not
  material to investors. The guarantee of each Guarantor Subsidiary is full
  and unconditional and joint and several and each Guarantor Subsidiary is a
  wholly owned subsidiary of the Company.


  The following condensed combined consolidating information sets forth the
  financial position as of March 22, 2002 and December 31, 2001 and results
  of operations and cash flows for the twelve weeks ended March 22, 2002 and
  March 23, 2001 of the parent, Guarantor Subsidiaries and the Non-Guarantor
  Subsidiaries.


                                      F-91



                            HOST MARRIOTT, L.P.


     NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                                (Unaudited)




       Supplemental Condensed Combined Consolidating Balance Sheets


                               (in millions)


                              March 22, 2002





                                                   Non-
                                   Guarantor    Guarantor
                          Parent  Subsidiaries Subsidiaries Eliminations Consolidated
                          ------  ------------ ------------ ------------ ------------
                                                          
Property and equipment,
 net....................  $1,099     $2,105       $3,735      $    --       $6,939
Notes and other
 receivables............     707         96          156         (905)          54
Due from Manager........      (5)         6          149           --          150
Rent receivable.........       7         19           46          (61)          11
Investments in
 affiliate..............   2,633      2,020           --       (4,516)         137
Other assets............     170        219          269         (111)         547
Restricted cash.........      21          2           92           --          115
Cash and cash
 equivalents............     186         58           97           --          341
                          ------     ------       ------      -------       ------
  Total assets..........  $4,818     $4,525       $4,544      $(5,593)      $8,294
                          ======     ======       ======      =======       ======
Debt....................  $2,542     $1,267       $2,524      $  (768)      $5,565
Convertible debt
 obligation to Host
 Marriott...............     492         --           --           --          492
Other liabilities.......     152        233          419         (379)         425
                          ------     ------       ------      -------       ------
  Total liabilities.....   3,186      1,500        2,943       (1,147)       6,482
Minority interests......       1         --          110           --          111
Limited partner interest
 of third parties at
 redemption value.......     257         --           --           --          257
Owner's capital.........   1,374      3,025        1,491       (4,446)       1,444
                          ------     ------       ------      -------       ------
  Total liabilities and
   owner's capital......  $4,818     $4,525       $4,544      $(5,593)      $8,294
                          ======     ======       ======      =======       ======

                               December 31, 2001


                                                   Non-
                                   Guarantor    Guarantor
                          Parent  Subsidiaries Subsidiaries Eliminations Consolidated
                          ------  ------------ ------------ ------------ ------------
                                                          
Property and equipment,
 net....................  $1,111     $2,135       $3,753      $    --       $6,999
Investments in
 affiliate..............   2,651      2,004           --       (4,513)         142
Notes and other
 receivables............     704         96          156         (902)          54
Rent receivable.........       2         17           25          (44)          --
Due from manager........      (5)         9          137           --          141
Other assets............     118        210          256          (52)         532
Restricted cash.........      22          3           89           --          114
Cash, cash equivalents
 and marketable
 securities.............     222         52           78           --          352
                          ------     ------       ------      -------       ------
  Total assets..........  $4,825     $4,526       $4,494      $(5,511)      $8,334
                          ======     ======       ======      =======       ======
Debt....................  $2,545     $1,293       $2,532      $  (768)      $5,602
Convertible debt
 obligation to Host
 Marriott...............     492         --           --           --          492
Other liabilities.......      96        216          359         (230)         441
                          ------     ------       ------      -------       ------
  Total liabilities.....   3,133      1,509        2,891         (998)       6,535
Minority interests......       1         --          107           --          108
Limited partner interest
 of third parties at
 redemption value.......     194         --           --           --          194
Partners' capital.......   1,497      3,017        1,496       (4,513)       1,497
                          ------     ------       ------      -------       ------
  Total liabilities and
   partners' capital....  $4,825     $4,526       $4,494      $(5,511)      $8,334
                          ======     ======       ======      =======       ======




                                      F-92



                            HOST MARRIOTT, L.P.


     NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                                (Unaudited)


         Supplemental Condensed Combined Statements of Operations


                               (in millions)


                     Twelve Weeks Ended March 22, 2002





                                                  Non-
                                  Guarantor    Guarantor
                          Parent Subsidiaries Subsidiaries Eliminations Consolidated
                          ------ ------------ ------------ ------------ ------------
                                                         
REVENUES................   $ 32      $ 44        $ 866        $(152)       $ 790
Depreciation............    (15)      (29)         (40)          --          (84)
Hotel operating
 expenses...............     --        --         (518)          --         (518)
Property-level
 expenses...............    (12)      (14)         (36)          --          (62)
Rental expense..........     --        --         (222)         222           --
Minority interest.......     (1)       --           (4)          --           (5)
Interest expense........    (48)      (28)         (48)          12         (112)
Interest income.........     11         3            1          (12)           3
Corporate expenses......     (2)       (4)          (7)          --          (13)
Net gains on property
 transactions...........     --        --            1           --            1
Equity in earnings
 (losses) of
 affiliates.............    (31)       (6)          --           33           (4)
Other expenses..........     (2)       --           (2)          --           (4)
                           ----      ----        -----        -----        -----
INCOME (LOSS) BEFORE
 INCOME TAXES...........    (68)      (34)          (9)         103           (8)
(Provision for) benefit
 from income taxes......     (1)        2           (5)          --           (4)
                           ----      ----        -----        -----        -----
INCOME (LOSS) FROM
 CONTINUING OPERATIONS..    (69)      (32)         (14)         103          (12)
DISCONTINUED OPERATIONS
Gain on disposal........     --         7           --           --            7
                           ----      ----        -----        -----        -----
INCOME (LOSS) BEFORE
 EXTRAORDINARY ITEMS....    (69)      (25)         (14)         103           (5)
Extraordinary gain......     --         6           --           --            6
                           ----      ----        -----        -----        -----
NET INCOME (LOSS).......   $(69)     $(19)       $ (14)       $ 103        $   1
                           ====      ====        =====        =====        =====

                       Twelve Weeks Ended March 23, 2001


                                                  Non-
                                  Guarantor    Guarantor
                          Parent Subsidiaries Subsidiaries Eliminations Consolidated
                          ------ ------------ ------------ ------------ ------------
                                                         
REVENUES................   $ 27      $ 44        $ 942        $(145)       $ 868
Depreciation............    (15)      (25)         (37)          --          (77)
Hotel operating
 expenses...............     (2)       --         (573)          --         (575)
Property-level
 expenses...............     (6)      (15)         (36)          --          (57)
Rental expense..........     --        --         (257)         257           --
Minority interest.......     (2)       --           (5)          --           (7)
Interest expense........    (47)      (24)         (46)           6         (111)
Interest income.........     10         1            3           (6)           8
Corporate expenses......     (1)       (3)          (4)          --           (8)
Net gains on property
 transactions...........     --        --            1           --            1
Equity in earnings
 (losses) of
 affiliates.............    (35)       (9)          --           47            3
Other expenses..........     --        --           (2)          --           (2)
                           ----      ----        -----        -----        -----
INCOME (LOSS) BEFORE
 INCOME TAXES...........    (71)      (31)         (14)         159           43
(Provision for) benefit
 from income taxes......     (2)       --           (1)          --           (3)
                           ----      ----        -----        -----        -----
INCOME (LOSS) BEFORE
 EXTRAORDINARY ITEMS....    (73)      (31)         (15)         159           40
Extraordinary gain......      1        --           (1)          --           --
                           ----      ----        -----        -----        -----
NET INCOME (LOSS).......   $(72)     $(31)       $ (16)       $ 159        $  40
                           ====      ====        =====        =====        =====




                                      F-93



                            HOST MARRIOTT, L.P.


     NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                                (Unaudited)










         Supplemental Condensed Combined Statements of Operations


                               (in millions)


                     Twelve Weeks Ended March 22, 2002





                                                          Non-
                                          Guarantor    Guarantor
                                 Parent  Subsidiaries Subsidiaries Consolidated
                                 ------  ------------ ------------ ------------
                                                       
OPERATING ACTIVITIES
Cash from operations...........  $ (10)     $  13         $ 56        $  59
                                 -----      -----         ----        -----
INVESTING ACTIVITIES
Capital expenditures...........     (8)       (15)         (25)         (48)
                                 -----      -----         ----        -----
Cash used in investing
 activities....................     (8)       (15)         (25)         (48)
                                 -----      -----         ----        -----
FINANCING ACTIVITIES
Issuances of debt..............     (1)       --           --            (1)
Repayment of debt..............    --          (1)          (7)          (8)
Distributions..................     (9)       --           --            (9)
Other..........................     (5)         8          --            (4)
Transfers to/from Parent.......     (3)         8           (5)         --
                                 -----      -----         ----        -----
Cash (used in) provided by
 financing activities..........    (18)         8          (12)         (22)
                                 -----      -----         ----        -----
INCREASE (DECEASE) IN CASH AND
 CASH EQUIVALENTS..............  $ (36)     $   6         $ 19        $ (11)
                                 =====      =====         ====        =====

                       Twelve Weeks Ended March 23, 2001


                                                          Non-
                                          Guarantor    Guarantor
                                 Parent  Subsidiaries Subsidiaries Consolidated
                                 ------  ------------ ------------ ------------
                                                       
OPERATING ACTIVITIES
Cash from operations...........  $ (57)     $(160)        $ 69        $(148)
                                 -----      -----         ----        -----
INVESTING ACTIVITIES
Capital expenditures and other
 investments...................    (15)       (32)         (34)         (81)
Other..........................      3         --           --           --
                                 -----      -----         ----        -----
Cash used in investing
 activities....................    (12)       (32)         (34)         (81)
                                 -----      -----         ----        -----
FINANCING ACTIVITIES
Issuances of debt..............    114         --            4          118
Repayment od debt..............     --         (1)          (8)          (9)
Issuances of OP Units..........      1         --           --            1
Distributions..................    (79)        --           --          (79)
Other expenses.................     (4)        (3)           1           (6)
Transferes to/from Parent......   (182)       195          (13)          --
                                 -----      -----         ----        -----
Cash (used in) provided by
 financing activities..........   (150)      (191)         (16)          25
                                 -----      -----         ----        -----
INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS..............  $(219)     $  (1)        $ 19        $(201)
                                 =====      =====         ====        =====



                                      F-94



                            HOST MARRIOTT, L.P.


     NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                                (Unaudited)


12. Subsequent Events


   On April 8, 2002, the Operating Partnership issued approximately 6.9 million
OP Units to acquire an additional interest in the San Diego Marina Marriott
hotel. As a result of this acquisition, the Operating Partnership now owns 90%
of the hotel and Host REIT's ownership percentage of the Operating Partnership
is now at 90%. This transaction will result in a property and equipment
increase of $56.1 million, reflecting the fair value of the partnership
interest acquired. Combine with the partnership interest acquired during
February, the total increase to property and equipment is $66.6 million.


                                      F-95


- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

   We have not authorized any dealer, salesperson or other person to give any
information or represent anything to you other than the information contained
in this prospectus. You must not rely on unauthorized information or
representations not contained in this prospectus.

                                ---------------

                               TABLE OF CONTENTS




                                                                          Page
                                                                          ----
                                                                       
Summary..................................................................   1
Risk Factors.............................................................  10
Forward-Looking Statements...............................................  23
Use of Proceeds..........................................................  24
Capitalization...........................................................  24
Pro Forma Financial Information of Host Marriott, L.P....................  25
Selected Financial Data..................................................  31
Management's Discussion and Analysis of Results of Operations and
 Financial Condition ....................................................  34
Quantitative and Qualitative Disclosures About Market Risk...............  50
Management...............................................................  73
Certain Relationships and Related Transactions...........................  83
The Exchange Offer.......................................................  89
Description of Series I Senior Notes.....................................  96
Description of Certain Indebtedness...................................... 139
Material Federal Tax Consequences of the Exchange........................ 142
Plan of Distribution..................................................... 147
Legal Matters............................................................ 148
Experts.................................................................. 148
Where You Can Find More Information...................................... 148
Index to Financial Statements............................................ F-1



- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

                      -----------------------------------

                                  PROSPECTUS

                      -----------------------------------

                              Host Marriott, L.P.

                               Offer to Exchange
                                     up to
                                 $450,000,000
                                      of
                       9 1/2% Series I Senior Notes due
                             2007, which have been
                             registered under the
                                Securities Act

                                   for up to
                                 $450,000,000
                                of outstanding
                         9 1/2% Series H Senior Notes
                                   Due 2007

                               May 17, 2002


- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------


                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

   Host Marriott Corporation's Articles of Amendment and Restatement of
Articles of Incorporation (the "Articles of Incorporation") authorize it, to
the maximum extent permitted by Maryland law, to obligate itself to indemnify
and to pay or reimburse reasonable expenses in advance of final disposition of
a proceeding to: (i) any present of former director of officer or (ii) any
individual who, while a director of Host Marriott and at the request of Host
Marriott, serves or has served another corporation, real estate investment
trust, partnership, joint venture, trust, employee benefit plan or any other
enterprise from and against any claim or liability to which such person may
become subject or which such person may incur by reason of his or her status as
a present or former director of Host Marriott Corporation. Host Marriott
Corporation's Bylaws obligate it, to the maximum extent permitted by Maryland
law, to indemnify and to pay or reimburse reasonable expenses in advance of
final disposition of a proceeding to (a) any present or former director or
officer who is made a party to the proceeding by reason of his service in that
capacity or (b) any individual who, while a director of Host Marriott
Corporation and at the request of Host Marriott Corporation, serves or has
served another corporation, real state investment trust, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director,
trustee, officer or partner of such corporation, real estate investment trust
partnership, joint venture, trust, employee benefit plan or other enterprise
and who is made a party to the proceeding by reason of his service in that
capacity, against any claim or liability to which he may become subject by
reason of such status. Host Marriott's Articles of Incorporation and Bylaws
also permit Host Marriott to indemnify and advance expenses to any person who
served as a predecessor of Host Marriott in any of the capacities described
above any to any employee or agent of Host Marriott or a predecessor of Host
Marriott. Host Marriott's Bylaws require Host Marriott to indemnify a director
or officer who has been successful, on the merits or otherwise, in the defense
of any proceeding to which he is made a party by reason of his service in that
capacity.

   The Maryland General Corporation Law, as amended (the "MGCL"), permits a
Maryland corporation to indemnify and advance expenses to its directors,
officers, employees and agents, and permits a corporation to indemnify its
present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason
of their service in those or other capacities unless it is established that (a)
the act or omission of the director or officer was material to the matter
giving rise to the proceeding and (i) was committed in bad faith or (ii) was
the result of active and deliberate dishonesty, (b) the director of officer
actually received an improper personal benefit in money, property, or services
or (c) in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. However,
under the MGCL, a Maryland corporation may not indemnify a director or officer
in a suit by or in the right of the corporation if such director or officer has
been adjudged to be liable to the corporation. In accordance with the MGCL,
Host Marriott's Bylaws require it, as a condition to advancing expenses, to
obtain (1) a written affirmation by the director or officer of his good faith
belief that he has met the standard of conduct necessary for indemnification by
Host Marriott as authorized by Host Marriott's Bylaws and (2) a written
statement by or on his behalf to repay the amount paid of reimbursed by Host
Marriott shall ultimately be determined that the standard of conduct was not
met.

   Host Marriott intends to enter into indemnification agreements with each of
its directors and officers. The indemnification agreements will require, among
other things, that Host Marriott indemnify its directors and officers to the
fullest extent permitted by law and advance to its directors and officers all
related expenses, subject to reimbursement if it is subsequently determined
that indemnification is not permitted.

   The Amended and Restated Agreement of Limited Partnership of Host Marriott,
L.P. (the "Partnership Agreement") also provides for indemnification of Host
Marriott and its officers and directors to the same extent that indemnification
is provided to officers and directors of Host Marriott in its Articles of
Incorporation,

                                      II-1


and limit liability of Host Marriott and its officers and directors to the
Operating Partnership and its respective partners to the same extent that the
liability of the officers and directors of Host Marriott to Host Marriott and
its stockholders is limited under Host Marriott's Articles of Incorporation.

   Insofar as indemnification for liabilities arising under the Securities Act
of 1933, may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, Host Marriott has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.

Item 21. Exhibits and Financial Statement Schedules

   (A) Exhibits




 Exhibit No. Description
 ----------- -----------
          
   2.1       Agreement and Plan by and among Host Marriott Corporation, HMC
             Merger Corporation and Host Marriott L.P. (incorporated by
             reference to Host Marriott Corporation Registration Statement No.
             333-64793).

   3.1       Second Amended and Restated Agreement of Limited Partnership of
             Host Marriott, L.P. (incorporated by reference to Exhibit 3.1 of
             Host Marriott Corporation Registration Statement No. 333-55807).

   3.2       Eleventh Amendment to Second Amended and Restated Agreement of
             Limited Partnership of Host Marriott, L.P., dated as of August 3,
             1999, establishing an additional class of units entitled the Class
             A Preferred Units (incorporated by reference to Exhibit 3.2 of
             Host Marriott, L.P.'s Annual Report on Form 10-K for the year
             ended December 31, 2001).

   3.3       Sixteenth Amendment to Second Amended and Restated Agreement of
             Limited Partnership of Host Marriott, L.P., dated as of November
             29, 1999, establishing an additional class of units entitled the
             Class B Preferred Units (incorporated by reference to Exhibit 3.3
             of Host Marriott, L.P.'s Annual Report on Form 10-K for the year
             ended December 31, 2001).

   3.4       Twenty-fifth Amendment to Second Amended and Restated Agreement of
             Limited Partnership of Host Marriott, L.P., dated as of March 27,
             2001, establishing an additional class of units entitled the Class
             C Preferred Units (incorporated by reference to Exhibit 3.4 of
             Host Marriott, L.P.'s Annual Report on Form 10-K for the year
             ended December 31, 2001).

   3.5       Thirtieth Amendment to Second Amended and Restated Agreement of
             Limited Partnership of Host Marriott, L.P (incorporated by
             reference to Exhibit 3.5 of Host Marriott, L.P.'s Annual Report on
             Form 10-K for the year ended December 31, 2001).

   4.1       Indenture by and among HMH Properties, Inc., as Issuer, and the
             Subsidiary Guarantors named therein, and Marine Midland Bank, as
             Trustee (incorporated by reference to Host Marriott Corporation
             Current Report on Form 8-K dated August 6, 1998).

   4.2+      Ninth Supplemental Indenture, dated December 14, 2001, between
             Host Marriott, L.P., the Subsidiary Guarantors named therein and
             HSBC Bank USA (formerly Marine Midland Bank), as Trustee.

   5.1*      Opinion of Latham & Watkins regarding the legality of the
             securities being registered.

   8.1+      Opinion of Latham & Watkins regarding certain tax matters.

  10.1       Indenture between Host Marriott L.P., as Issuer, and Marine
             Midland Bank, as Indenture Trustee, and Form of 6.56% Callable
             Note due December 15, 2005 (incorporated by reference to
             Exhibit 4.1 of Host Marriott Corporation Registration Statement
             No. 333-55807).




                                      II-2





 Exhibit No. Description
 ----------- -----------
          
  10.2       Host Marriott L.P. Executive Deferred Compensation Plan effective
             as of December 29, 1998 (formerly the Marriott Corporation
             Executive Deferred Compensation Plan) (incorporated by reference
             to Exhibit 10.7 of Host Marriott Corporation's Form 10-K for the
             year ended December 31, 1998).

  10.3       Host Marriott Corporation and Host Marriott, L.P. Comprehensive
             Stock and Cash Incentive Plan, as amended and restated December
             29, 1998 (incorporated by reference to Exhibit No. 10.8 of Host
             Marriott Corporation's Form 10-K for the year ended December 31,
             2000.)

  10.4       Distribution Agreement dated as of September 15, 1993 between
             Marriott Corporation and Marriott International, Inc.
             (incorporated by reference from Host Marriott Corporation Current
             Report on Form 8-K dated October 23, 1993).

  10.5       Amendment No. 1 to the Distribution Agreement dated December 29,
             1995 by and among Host Marriott Corporation, Host Marriott
             Services Corporation and Marriott International, Inc.
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated January 1996).

  10.6       Amendment No. 2 to the Distribution Agreement dated June 21, 1997
             by and among Host Marriott Corporation, Host Marriott Services
             Corporation and Marriott International, Inc. (incorporated by
             reference to Host Marriott Corporation Registration Statement No.
             333-64793).

  10.7       Amendment No. 3 to the Distribution Agreement dated March 3, 1998
             by and among Host Marriott Corporation, Host Marriott Services
             Corporation, Marriott International, Inc. and Sodexho Marriott
             Services, Inc. (incorporated by reference to Host Marriott
             Corporation Registration Statement No. 333-64793).

  10.8       Amendment No. 4 to the Distribution Agreement by and among Host
             Marriott Corporation and Marriott International Inc. (incorporated
             by reference to Host Marriott Corporation Registration Statement
             No. 333-64793).

  10.9       Amendment No. 5 to the Distribution Agreement dated December 18,
             1998 by and among Host Marriott Corporation, Host Marriott
             Services Corporation and Marriott International Inc. (incorporated
             by reference to Exhibit 10.14 of Host Marriott Corporation's Form
             10-K for the year ended December 31, 1998).

  10.10      Distribution Agreement dated December 22, 1995 by and between Host
             Marriott Corporation and Host Marriott Services Corporation
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated January 16, 1996).

  10.11      Amendment to Distribution Agreement dated December 22, 1995 by and
             between Host Marriott Corporation and Host Marriott Services
             Corporation (incorporated by reference to Exhibit 10.16 of Host
             Marriott Corporation's Form 10-K for the year ended December 31,
             1998).

  10.12      Tax Sharing Agreement dated as of October 5, 1993 by and between
             Marriott Corporation and Marriott International, Inc.
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated October 23, 1993).

  10.13      License Agreement dated as of December 29, 1998 by and among Host
             Marriott Corporation, Host Marriott, L.P., Marriott International,
             Inc. and Marriott Worldwide Corporation (incorporated by reference
             to Exhibit 10.18 of Host Marriott Corporation's Form 10-K for the
             year ended December 31, 1998).

  10.14      Tax Administration Agreement dated as of October 8, 1993 by and
             between Marriott Corporation and Marriott International, Inc.
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated October 23, 1993).



                                      II-3





 Exhibit No. Description
 ----------- -----------
          
  10.15      Restated Noncompetition Agreement by and among Host Marriott
             Corporation, Marriott International, Inc. and Sodexho Marriott
             Services, Inc. (incorporated by reference to Host Marriott
             Corporation Registration Statement No. 333-64793).

  10.16      First Amendment to Restated Noncompetition Agreement by and among
             Host Marriott Corporation, Marriott International, Inc. and
             Sodexho Marriott Services, Inc. (incorporated by reference to Host
             Marriott Corporation Registration Statement No. 333-64793).

  10.17      Employee Benefits and Other Employment Matters Allocation
             Agreement dated as of December 29, 1995 by and between Host
             Marriott Corporation and Host Marriott Services Corporation
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated January 16, 1996).

  10.18      Tax Sharing Agreement dated as of December 29, 1995 by and between
             Host Marriott Corporation and Host Marriott Services Corporation
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated January 16, 1996).

  10.19      Host Marriott, L.P. Retirement and Savings Plan and Trust
             (incorporated by reference to Exhibit 10.26 of Host Marriott
             Corporation 1998 Annual Report on Form 10-K for the year ended
             December 31, 1998).

  10.20      Contribution Agreement dated as of April 16, 1998 among Host
             Marriott Corporation, Host Marriott, L.P. and the contributors
             named therein, together with Exhibit B (incorporated by reference
             to Exhibit 10.18 of Host Marriott Corporation Registration
             Statement No. 333-55807).

  10.21      Amendment No. 1 to Contribution Agreement dated May 8, 1998 among
             Marriott Corporation, Host Marriott, L.P. and the contributors
             named therein (incorporated by reference to Exhibit 10.19 of Host
             Marriott Corporation Registration Statement No. 333-55807).

  10.22      Amendment No. 2 to Contribution Agreement dated May 18, 1998 among
             Host Marriott Corporation, Host Marriott, L.P. and the
             contributors named therein (incorporated by reference to Exhibit
             10.20 of Host Marriott Corporation Registration Statement No. 333-
             55807).

  10.23#     Form of Management Agreement for Full Services Hotels
             (incorporated by reference to Host Marriott Corporation
             Registration Statement No. 333-51707).

  10.24      Employee Benefits and Other Employment Matters Allocation
             Agreement between Host Marriott Corporation, Host Marriott, L.P.
             and Crestline Capital Corporation (incorporated by reference to
             Host Marriott Corporation Registration Statement No. 333-64793).

  10.25      Amendment to the Employee Benefits and Other Employment Matters
             Allocation Agreement effective as of December 29, 1998 by and
             between Host Marriott Corporation, Marriott International, Sodexho
             Marriott Services, Inc., Crestline Capital Corporation and Host
             Marriott, L.P. (incorporated by reference to Exhibit 10.34 of Host
             Marriott Corporation's Form 10-K for the year ended December 31,
             1998).

  10.26      Amended and Restated Communities Noncompetition Agreement
             (incorporated by reference to Host Marriott Corporation
             Registration Statement No. 333-64793).

  10.27      Registration Rights Agreement, dated as of October 14, 2001, by
             and among Host Marriott, L.P., the Guarantors named therein and
             the Purchasers named therein (incorporated by reference to Exhibit
             10.43 of Host Marriott, L.P.'s Registration Statement on Form S-4
             No. 333-73550).

  10.28      Amended and Restated Credit Agreement, dated as of May 31, 2000,
             among Host Marriott Corporation, Host Marriott, L.P., Various
             Banks and Bankers Trust Company, as Administrative Agent
             (incorporated by reference to Exhibit 10.40 of Host Marriott's
             Registration Statement No. 333-51944).



                                      II-4





 Exhibit No. Description
 ----------- -----------
          
  10.29      First Amendment to the Amended and Restated Credit Agreement,
             dated as of October 23, 2000, among Host Marriott Corporation,
             Host Marriott, L.P., Various Banks and Bankers Trust Company, As
             Administrative Agent (incorporated by reference to Exhibit 10.41
             of Host Marriott's Registration Statement No. 333-51944.)

  10.30      Second Amendment and Waiver of Amended and Restated Credit
             Agreement, dated as of March 2, 2001, among Host Marriott
             Corporation, Host Marriott, L.P., Various Banks and Bankers, and
             Bankers Trust Company, as administrative Agent (incorporated by
             reference to Exhibit 10.42 of Host Marriott's Form 10.42 of Host
             Marriott's Form 10-Q for the quarter ended September 7, 2001.)

  10.31      Third Amendment and Modification to Amended and Restated Credit
             Agreement, dated as of November 15, 2001, among Host Marriott
             Corporation, Host Marriott, L.P., Various Banks, and Bankers Trust
             Company, as Administrative Agent, dated as of November 19, 2001
             (incorporated by reference to Exhibit 10.41 of Host Marriott
             Corporation's Current Report on Form 8-K dated December 5, 2001).

  10.32      Amended and Restated Pledge and Security Agreement, dated as of
             May 31, 2000, among the Pledgors and Banker's Trust Company, as
             Pledgee (incorporated by reference to Exhibit No. 10.44 of Host
             Marriott, L.P.'s Form 10-Q for the quarter ended September 7,
             2001).

  10.33      First Amendment to Amended and Restated Pledge and Security
             Agreement, dated as of March 1, 2001, among the Pledgors and
             Bankers Trust Company, as Pledgee (incorporated by reference to
             Exhibit No. 10.41 of Host Marriott, L.P.'s Form 10-Q for the
             quarter ended September 7, 2001.)

  10.34      Amended and Restated Subsidiaries Guaranty, dated as of March 1,
             2001 (incorporated by reference to Exhibit 10.43 of Host Marriott,
             L.P.'s Form 10-Q for the quarter ended September 7, 2001).

  10.35      Acquisition and Exchange Agreement dated November 13, 2000 by Host
             Marriott, L.P. and Crestline Capital Corporation (incorporated by
             reference to Exhibit 99.2 of Host Marriott, L.P.'s Form 8-K/A
             filed December 14, 2000).

  10.36      Host Marriott Corporation's Non-Employee Director's Deferred Stock
             Compensation Plan (incorporated by reference to Exhibit 10.7 of
             Host Marriott Corporation's Form 10-K dated March 26, 1999).

  10.43+     Registration Rights Agreement, dated as of December 14, 2001, by
             and among Host Marriott, L.P., the Guarantors named therein and
             the Purchasers named therein.

  10.45+     ISDA Master Agreement, dated as of December 19, 2001, between
             Societe Generale, New York Branch, and Host Marriott, L.P.

  10.46+     ISDA Master Agreement, dated as of January 4, 2002, between Wells
             Fargo Bank, N.A. and Host Marriott, L.P.

  12.1*      Computation of Ratios of Earnings to Fixed Charges and Preferred
             Unit Charges.

  21.1       List of Subsidiaries of Host Marriott, L.P. (incorporated by
             reference to Exhibit 21 of Host Marriott, L.P.'s Form 10-K for the
             year ended December 31, 2001).

  23.1*      Consent of Latham & Watkins (included as part of Exhibit 5).

  23.2       Consent of Latham & Watkins (included as part of Exhibit 8).

  23.3*      Consent of Arthur Andersen LLP.

  24.1       Power of Attorney (included on signature page).

  25.1+      Statement of Eligibility and Qualification on Form T-1 of HSBC
             Bank USA, as trustee for the 9 1/2% Series I Senior Notes due 2007
             of the Registrant.

  99.1+      Form of Letter of Transmittal and related documents to be used in
             conjunction with the exchange offer.

  99.2+      Form of Notice of Guaranteed Delivery to be used in conjunction
             with the exchange offer.


- --------

#  Agreement filed is illustrative of numerous other agreements to which the
   Company is a party.


*  Filed herewith.


+  Previously filed.


                                      II-5


   (B) Financial Statement Schedule

                                                                          
Report of Independent Public Accountants.................................... S-1

Schedule III--Real Estate and Accumulated Depreciation...................... S-2



Item 22. Undertakings

   A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expense incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted against the registrant by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

   B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's Annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's Annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

   C. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.

   D. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

   E. (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145, the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.

   (2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933, as amended,
and is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

   F. The undersigned registrant hereby undertakes:

   (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

     (i) To include any prospectus required by section 10(a)(3) of the
  Securities Act of 1933;

                                      II-6


     (ii) To reflect in the prospectus any facts or events arising after the
  effective date of the registration statement (or the most recent post-
  effective amendment thereof) which, individually or in the aggregate,
  represent a fundamental change in the information in the registration
  statement. To reflect in the prospectus any facts or events arising after
  the effective date of the registration statement (or the most recent post-
  effective amendment thereof) which, individually or in the aggregate,
  represent a fundamental change in the information set forth in the
  registration statement. Notwithstanding the foregoing, any increase or
  decrease in volume of securities offered (if the total dollar value of
  securities offered would not exceed that which was registered) and any
  deviation from the low or high end of the estimated maximum offering range
  may be reflected in the form of prospectus filed with the Commission
  pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
  price represent no more than a 20% change in the maximum aggregate offering
  price set forth in the "Calculation of Registration Fee" table in the
  effective registration statement;

     (iii) To include any material information with respect to the plan of
  distribution not previously disclosed in the registration statement or any
  material change to such information in the registration statement;

   Provided, however, That paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3 or Form S-8 or Form
F-3, and the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.

   (2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

   (3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.

                                      II-7


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland on this 15th day of May, 2002.


                                          HOST MARRIOTT, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                          By:  /s/ Robert E. Parsons, Jr.

                                             ----------------------------------
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                               POWER OF ATTORNEY

   We, the undersigned directors and officers of Host Marriott Corporation, do
hereby constitute and appoint Elizabeth A. Abdoo and Robert E. Parsons, Jr.,
and each of them, our true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, to do any and all acts and things in
our names and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us in the capacities indicated below, which
said attorney and agent may deem necessary or advisable to enable said
corporation to comply with the Securities Act of 1933 and any rules,
regulations and agreements of the Securities and Exchange Commission, in
connection with this registration statement, or any registration statement for
this offering that is to be effective upon filing pursuant to Rule 462(b) under
the Securities Act of 1933, including specifically, but without limitation, any
and all amendments (including post-effective amendments) hereto; and we hereby
ratify and confirm all that said attorney and agent shall do or cause to be
done by virtue thereof.

   Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-4 has been signed below by the following
persons in their capacities on the dates indicated.




              Signature                          Title                   Date
              ---------                          -----                   ----

                                                            
                  *                    President, Chief Executive    May 15, 2002
______________________________________  Officer and Director
       Christopher J. Nassetta          (Principal Executive
                                        Officer)

      /s/ Robert E. Parsons, Jr.       Executive Vice President      May 15, 2002
______________________________________  and Chief Financial
        Robert E. Parsons, Jr.          Officer (Principal
                                        Financial Officer)

                  *                    Senior Vice President and     May 15, 2002
______________________________________  Corporate Controller
          Donald D. Olinger             (Principal Accounting
                                        Officer)

                  *                    Chairman of the Board of      May 15, 2002
______________________________________  Directors
         Richard E. Marriott




                                      II-8



                                                            
                  *                    Director                      May 15, 2002
______________________________________
           Robert M. Baylis

                  *                    Director                      May 15, 2002
______________________________________
          Terence C. Golden

                  *                    Director                      May 15, 2002
______________________________________
          J.W. Marriott, Jr.

                  *                    Director                      May 15, 2002
______________________________________
       Ann McLaughlin Korologos

                  *                    Director                      May 15, 2002
______________________________________
          John G. Schreiber

                  *                    Director                      May 15, 2002
______________________________________
        Harry L. Vincent, Jr.




  * /s/ Robert E. Parsons, Jr.

_________________________________

       Attorney-in-fact


                                      II-9


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMH Rivers, L.P

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-10


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMH Marina LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-11


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC SBM Two LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-12


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Retirement Properties, L.P.

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-13


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMH Pentagon LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-14


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Airport Hotels LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                    II-15th


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Chesapeake Financial Services LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-16


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Capital Resources LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-17


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          PRM LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-18


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Host Park Ridge LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-19


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Philadelphia Airport Hotel LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-20


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Hartford LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-21


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMH Norfolk LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-22


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMH Norfolk, L.P.

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-23


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Partnership Holdings LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-24


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Suites LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-25


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Suites Limited Partnership

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-26


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Wellsford-Park Ridge Host HMC
                                           Limited Partnership


                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-27


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          City Center Interstate Partnership
                                           LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-28


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Farrell's Ice Cream Parlor
                                           Restaurants LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-29


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Burlingame LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-30


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC California Leasing LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-31


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Capital LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-32


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Grand LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-33


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Mexpark LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-34


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Polanco LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-35


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC NGL LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-36


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC OLS I L.P.

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-37


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC RTZ Loan I LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-38


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC RTZ II LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-39


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Seattle LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-40


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Swiss Holdings LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-41


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Waterford LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-42


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMH Restaurants LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-43


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMH Rivers LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-44


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMH WTC LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-45


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMP Capital Ventures LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-46


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Host La Jolla LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-47


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          City Center Hotel Limited
                                           Partnership

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-48


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          MFR of Illinois LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-49


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          MFR of Vermont LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-50


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          MFR of Wisconsin LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-51


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          PM Financial LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-52


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          PM Financial LP

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-53


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Chicago LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-54


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC HPP LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-55


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Desert LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-56


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Hanover LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-57


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Diversified LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-58


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Properties I LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-59


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Potomac LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-60


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC East Side II LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-61


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Manhattan Beach LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-62


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Chesapeake Hotel Limited Partnership

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-63


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMH General Partner Holdings LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer


                                     II-64


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC IHP Holdings LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer


                                     II-65


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC OP BN LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-66


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          S.D. Hotels LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-67


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Gateway LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-68


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Pacific Gateway LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-69


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Market Street LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-70


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          New Market Street LP

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-71


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Times Square LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-72


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Times Square GP LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-73


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Atlanta LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-74


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Ivy Street LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-75


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Properties II LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-76


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Santa Clara HMC LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-77


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC BCR Holdings LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-78


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Palm Desert LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-79


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Georgia LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-80


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC SFO LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-81


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Market Street Host LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-82


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Property Leasing LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-83


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Host Restaurants LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/  Robert E. Parsons, Jr.
                                          By:__________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer


                                     II-84


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Durbin LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By:_________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer


                                     II-85


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC HT LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By:_________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer


                                     II-86


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC JWDC GP LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-87


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC JWDC LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-88


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC OLS I LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-89


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC OLS II L.P.

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-90


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Park Ridge LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-91


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Host of Houston 1979

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-92


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Host of Houston, Ltd.

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-93


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Host of Boston, Ltd.

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-94


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          YBG Associates LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-95


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMT Lessee Parent LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-96


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC PLP LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-97


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMP Financial Services LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-98


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Hotel Development LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-99


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          MDSM Finance LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-100


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC/Interstate Ontario, L.P.

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-101


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC/Interstate Manhattan Beach, L.P.

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-102


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Host/Interstate Partnership, L.P.

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-103


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC/Interstate Waterford, L.P.


                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-104


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Ameliatel

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-105


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Amelia I LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-106


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          HMC Amelia II LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-107


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Rockledge Hotel LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-108


                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bethesda, State of Maryland, on this 15th day of May, 2002.


                                          Fernwood Hotel LLC

                                          By: Host Marriott, L.P.

                                          By: Host Marriott Corporation, as
                                              General Partner of Host
                                              Marriott, L.P.

                                                /s/ Robert E. Parsons, Jr.
                                          By: _________________________________
                                             Name: Robert E. Parsons, Jr.
                                             Title: Executive Vice President
                                                  and Chief Financial Officer

                                     II-109


                                                                    SCHEDULE III
                                                                     Page 1 of 3

                      HOST MARRIOTT, L.P. AND SUBSIDIARIES

                    REAL ESTATE AND ACCUMULATED DEPRECIATION

                               December 31, 2001
                                 (in millions)



                                                              Gross Amount at
                            Initial Costs                    December 31, 2001
                          ------------------             -------------------------
                                             Subsequent                                            Date of
                                Buildings &     Costs          Buildings &         Accumulated  Completion of   Date
   Description      Debt  Land  Improvements Capitalized Land  Improvements Total  Depreciation Construction  Acquired
   -----------     ------ ----- ------------ ----------- ----- ------------ ------ ------------ ------------- --------
                                                                                
Full-service
hotels:
 New York
 Marriott Marquis
 Hotel, New York,
 NY..............  $  255 $ --     $  552      $   58    $ --     $  610    $  610   $  (201)         1986        n/a
 Other full-
 service
 properties, each
 less than 5% of
 total...........   2,006   721     5,325       1,067      696     6,417     7,113    (1,064)      various    various
                   ------ -----    ------      ------    -----    ------    ------   -------
 Total full-
 service.........   2,261   721     5,877       1,125      696     7,027     7,723    (1,265)
 Other
 properties, each
 less than 5% of
 total...........     --     40        27         (55)       0        12        12       (16)      various        n/a
                   ------ -----    ------      ------    -----    ------    ------   -------
 Total...........  $2,261 $ 761    $5,904      $1,070    $ 696    $7,039    $7,735   $(1,281)
                   ====== =====    ======      ======    =====    ======    ======   =======

                   Depreciation
   Description         Life
   -----------     ------------
                
Full-service
hotels:
 New York
 Marriott Marquis
 Hotel, New York,
 NY..............         40
 Other full-
 service
 properties, each
 less than 5% of
 total...........         40
 Total full-
 service.........
 Other
 properties, each
 less than 5% of
 total...........    various
 Total...........


                                      S-1


                                                                    SCHEDULE III
                                                                     Page 2 of 3

                      HOST MARRIOTT, L.P. AND SUBSIDIARIES

                    REAL ESTATE AND ACCUMULATED DEPRECIATION

                               December 31, 2001
                                 (in millions)

Notes:

(A) The change in total cost of properties for the fiscal years ended December
    31, 2001, 2000 and 1999 is as follows:

                                                                   
   Balance at January 2, 1998..........................................  $7,353
   Additions:
     Acquisitions......................................................      29
     Capital expenditures and transfers from construction-in-progress..     147
   Deductions:
     Dispositions and other............................................    (155)
                                                                         ------
   Balance at December 31, 1999........................................  $7,374
   Additions:
     Capital expenditures and transfers from construction-in-progress..     306
   Deductions:
     Dispositions and other............................................      (9)
                                                                         ------
   Balance at December 31, 2000........................................  $7,671
   Additions:
     Capital expenditures and transfers from construction-in-progress..     278
   Deductions:
     Dispositions and other............................................    (214)
                                                                         ------
   Balance at December 31, 2001........................................  $7,735
                                                                         ======

   

                                      S-2


                                                                    SCHEDULE III
                                                                     Page 3 of 3

                      HOST MARRIOTT, L.P. AND SUBSIDIARIES

                    REAL ESTATE AND ACCUMULATED DEPRECIATION

                               December 31, 2001
                                 (in millions)

Notes:

(B) The change in accumulated depreciation and amortization of real estate
    assets for the fiscal years ended December 31, 2001, 2000, 1999 and 1998 is
    as follows:

                                                                     
   Balance at December 31, 1998........................................... $575
   Depreciation and amortization..........................................  243
   Dispositions and other.................................................   35
                                                                           ----

   

                                                                   
   Balance at December 31, 1999.........................................    853
   Depreciation and amortization........................................    215
   Dispositions and other...............................................    (2)
                                                                         ------
   Balance at December 31, 2000.........................................  1,066
   Depreciation and amortization........................................    281
   Dispositions and other...............................................   (66)
                                                                         ------
   Balance at December 31, 2001......................................... $1,281
                                                                         ======

   

(C) The aggregate cost of properties for Federal income tax purposes is
    approximately $5,609 million at December 31, 2001.

(D) The total cost of properties excludes construction-in-progress properties.

                                      S-3



                               EXHIBIT INDEX





 Exhibit No. Description
 ----------- -----------
          
   2.1       Agreement and Plan by and among Host Marriott Corporation, HMC
             Merger Corporation and Host Marriott L.P. (incorporated by
             reference to Host Marriott Corporation Registration Statement No.
             333-64793).

   3.1       Second Amended and Restated Agreement of Limited Partnership of
             Host Marriott, L.P. (incorporated by reference to Exhibit 3.1 of
             Host Marriott Corporation Registration Statement No. 333-55807).

   3.2       Eleventh Amendment to Second Amended and Restated Agreement of
             Limited Partnership of Host Marriott, L.P., dated as of August 3,
             1999, establishing an additional class of units entitled the Class
             A Preferred Units (incorporated by reference to Exhibit 3.2 of
             Host Marriott, L.P.'s Annual Report on Form 10-K for the year
             ended December 31, 2001).

   3.3       Sixteenth Amendment to Second Amended and Restated Agreement of
             Limited Partnership of Host Marriott, L.P., dated as of November
             29, 1999, establishing an additional class of units entitled the
             Class B Preferred Units (incorporated by reference to Exhibit 3.3
             of Host Marriott, L.P.'s Annual Report on Form 10-K for the year
             ended December 31, 2001).

   3.4       Twenty-fifth Amendment to Second Amended and Restated Agreement of
             Limited Partnership of Host Marriott, L.P., dated as of March 27,
             2001, establishing an additional class of units entitled the Class
             C Preferred Units (incorporated by reference to Exhibit 3.4 of
             Host Marriott, L.P.'s Annual Report on Form 10-K for the year
             ended December 31, 2001).

   3.5       Thirtieth Amendment to Second Amended and Restated Agreement of
             Limited Partnership of Host Marriott, L.P (incorporated by
             reference to Exhibit 3.5 of Host Marriott, L.P.'s Annual Report on
             Form 10-K for the year ended December 31, 2001).

   4.1       Indenture by and among HMH Properties, Inc., as Issuer, and the
             Subsidiary Guarantors named therein, and Marine Midland Bank, as
             Trustee (incorporated by reference to Host Marriott Corporation
             Current Report on Form 8-K dated August 6, 1998).

   4.2+      Ninth Supplemental Indenture, dated December 14, 2001, between
             Host Marriott, L.P., the Subsidiary Guarantors named therein and
             HSBC Bank USA (formerly Marine Midland Bank), as Trustee.

   5.1*      Opinion of Latham & Watkins regarding the legality of the
             securities being registered.

   8.1+      Opinion of Latham & Watkins regarding certain tax matters.

  10.1       Indenture between Host Marriott L.P., as Issuer, and Marine
             Midland Bank, as Indenture Trustee, and Form of 6.56% Callable
             Note due December 15, 2005 (incorporated by reference to
             Exhibit 4.1 of Host Marriott Corporation Registration Statement
             No. 333-55807).

  10.2       Host Marriott L.P. Executive Deferred Compensation Plan effective
             as of December 29, 1998 (formerly the Marriott Corporation
             Executive Deferred Compensation Plan) (incorporated by reference
             to Exhibit 10.7 of Host Marriott Corporation's Form 10-K for the
             year ended December 31, 1998).

  10.3       Host Marriott Corporation and Host Marriott, L.P. Comprehensive
             Stock and Cash Incentive Plan, as amended and restated December
             29, 1998 (incorporated by reference to Exhibit No. 10.8 of Host
             Marriott Corporation's Form 10-K for the year ended December 31,
             2000.)

  10.4       Distribution Agreement dated as of September 15, 1993 between
             Marriott Corporation and Marriott International, Inc.
             (incorporated by reference from Host Marriott Corporation Current
             Report on Form 8-K dated October 23, 1993).









 Exhibit No. Description
 ----------- -----------
          
  10.5       Amendment No. 1 to the Distribution Agreement dated December 29,
             1995 by and among Host Marriott Corporation, Host Marriott
             Services Corporation and Marriott International, Inc.
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated January 1996).

  10.6       Amendment No. 2 to the Distribution Agreement dated June 21, 1997
             by and among Host Marriott Corporation, Host Marriott Services
             Corporation and Marriott International, Inc. (incorporated by
             reference to Host Marriott Corporation Registration Statement No.
             333-64793).

  10.7       Amendment No. 3 to the Distribution Agreement dated March 3, 1998
             by and among Host Marriott Corporation, Host Marriott Services
             Corporation, Marriott International, Inc. and Sodexho Marriott
             Services, Inc. (incorporated by reference to Host Marriott
             Corporation Registration Statement No. 333-64793).

  10.8       Amendment No. 4 to the Distribution Agreement by and among Host
             Marriott Corporation and Marriott International Inc. (incorporated
             by reference to Host Marriott Corporation Registration Statement
             No. 333-64793).

  10.9       Amendment No. 5 to the Distribution Agreement dated December 18,
             1998 by and among Host Marriott Corporation, Host Marriott
             Services Corporation and Marriott International Inc. (incorporated
             by reference to Exhibit 10.14 of Host Marriott Corporation's Form
             10-K for the year ended December 31, 1998).

  10.10      Distribution Agreement dated December 22, 1995 by and between Host
             Marriott Corporation and Host Marriott Services Corporation
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated January 16, 1996).

  10.11      Amendment to Distribution Agreement dated December 22, 1995 by and
             between Host Marriott Corporation and Host Marriott Services
             Corporation (incorporated by reference to Exhibit 10.16 of Host
             Marriott Corporation's Form 10-K for the year ended December 31,
             1998).

  10.12      Tax Sharing Agreement dated as of October 5, 1993 by and between
             Marriott Corporation and Marriott International, Inc.
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated October 23, 1993).

  10.13      License Agreement dated as of December 29, 1998 by and among Host
             Marriott Corporation, Host Marriott, L.P., Marriott International,
             Inc. and Marriott Worldwide Corporation (incorporated by reference
             to Exhibit 10.18 of Host Marriott Corporation's Form 10-K for the
             year ended December 31, 1998).

  10.14      Tax Administration Agreement dated as of October 8, 1993 by and
             between Marriott Corporation and Marriott International, Inc.
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated October 23, 1993).

  10.15      Restated Noncompetition Agreement by and among Host Marriott
             Corporation, Marriott International, Inc. and Sodexho Marriott
             Services, Inc. (incorporated by reference to Host Marriott
             Corporation Registration Statement No. 333-64793).

  10.16      First Amendment to Restated Noncompetition Agreement by and among
             Host Marriott Corporation, Marriott International, Inc. and
             Sodexho Marriott Services, Inc. (incorporated by reference to Host
             Marriott Corporation Registration Statement No. 333-64793).

  10.17      Employee Benefits and Other Employment Matters Allocation
             Agreement dated as of December 29, 1995 by and between Host
             Marriott Corporation and Host Marriott Services Corporation
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated January 16, 1996).

  10.18      Tax Sharing Agreement dated as of December 29, 1995 by and between
             Host Marriott Corporation and Host Marriott Services Corporation
             (incorporated by reference to Host Marriott Corporation Current
             Report on Form 8-K dated January 16, 1996).








 Exhibit No. Description
 ----------- -----------
          
  10.19      Host Marriott, L.P. Retirement and Savings Plan and Trust
             (incorporated by reference to Exhibit 10.26 of Host Marriott
             Corporation 1998 Annual Report on Form 10-K for the year ended
             December 31, 1998).

  10.20      Contribution Agreement dated as of April 16, 1998 among Host
             Marriott Corporation, Host Marriott, L.P. and the contributors
             named therein, together with Exhibit B (incorporated by reference
             to Exhibit 10.18 of Host Marriott Corporation Registration
             Statement No. 333-55807).

  10.21      Amendment No. 1 to Contribution Agreement dated May 8, 1998 among
             Marriott Corporation, Host Marriott, L.P. and the contributors
             named therein (incorporated by reference to Exhibit 10.19 of Host
             Marriott Corporation Registration Statement No. 333-55807).

  10.22      Amendment No. 2 to Contribution Agreement dated May 18, 1998 among
             Host Marriott Corporation, Host Marriott, L.P. and the
             contributors named therein (incorporated by reference to Exhibit
             10.20 of Host Marriott Corporation Registration Statement No. 333-
             55807).

  10.23#     Form of Management Agreement for Full Services Hotels
             (incorporated by reference to Host Marriott Corporation
             Registration Statement No. 333-51707).

  10.24      Employee Benefits and Other Employment Matters Allocation
             Agreement between Host Marriott Corporation, Host Marriott, L.P.
             and Crestline Capital Corporation (incorporated by reference to
             Host Marriott Corporation Registration Statement No. 333-64793).

  10.25      Amendment to the Employee Benefits and Other Employment Matters
             Allocation Agreement effective as of December 29, 1998 by and
             between Host Marriott Corporation, Marriott International, Sodexho
             Marriott Services, Inc., Crestline Capital Corporation and Host
             Marriott, L.P. (incorporated by reference to Exhibit 10.34 of Host
             Marriott Corporation's Form 10-K for the year ended December 31,
             1998).

  10.26      Amended and Restated Communities Noncompetition Agreement
             (incorporated by reference to Host Marriott Corporation
             Registration Statement No. 333-64793).

  10.27      Registration Rights Agreement, dated as of October 14, 2001, by
             and among Host Marriott, L.P., the Guarantors named therein and
             the Purchasers named therein (incorporated by reference to Exhibit
             10.43 of Host Marriott, L.P.'s Registration Statement on Form S-4
             No. 333-73550).

  10.28      Amended and Restated Credit Agreement, dated as of May 31, 2000,
             among Host Marriott Corporation, Host Marriott, L.P., Various
             Banks and Bankers Trust Company, as Administrative Agent
             (incorporated by reference to Exhibit 10.40 of Host Marriott's
             Registration Statement No. 333-51944).

  10.29      First Amendment to the Amended and Restated Credit Agreement,
             dated as of October 23, 2000, among Host Marriott Corporation,
             Host Marriott, L.P., Various Banks and Bankers Trust Company, As
             Administrative Agent (incorporated by reference to Exhibit 10.41
             of Host Marriott's Registration Statement No. 333-51944.)

  10.30      Second Amendment and Waiver of Amended and Restated Credit
             Agreement, dated as of March 2, 2001, among Host Marriott
             Corporation, Host Marriott, L.P., Various Banks and Bankers, and
             Bankers Trust Company, as administrative Agent (incorporated by
             reference to Exhibit 10.42 of Host Marriott's Form 10.42 of Host
             Marriott's Form 10-Q for the quarter ended September 7, 2001.)

  10.31      Third Amendment and Modification to Amended and Restated Credit
             Agreement, dated as of November 15, 2001, among Host Marriott
             Corporation, Host Marriott, L.P., Various Banks, and Bankers Trust
             Company, as Administrative Agent, dated as of November 19, 2001
             (incorporated by reference to Exhibit 10.41 of Host Marriott
             Corporation's Current Report on Form 8-K dated December 5, 2001).








 Exhibit No. Description
 ----------- -----------
          
 10.32       Amended and Restated Pledge and Security Agreement, dated as of
             May 31, 2000, among the Pledgors and Banker's Trust Company, as
             Pledgee (incorporated by reference to Exhibit No. 10.44 of Host
             Marriott, L.P.'s Form 10-Q for the quarter ended September 7,
             2001).

 10.33       First Amendment to Amended and Restated Pledge and Security
             Agreement, dated as of March 1, 2001, among the Pledgors and
             Bankers Trust Company, as Pledgee (incorporated by reference to
             Exhibit No. 10.41 of Host Marriott, L.P.'s Form 10-Q for the
             quarter ended September 7, 2001.)

 10.34       Amended and Restated Subsidiaries Guaranty, dated as of March 1,
             2001 (incorporated by reference to Exhibit 10.43 of Host Marriott,
             L.P.'s Form 10-Q for the quarter ended September 7, 2001).

 10.35       Acquisition and Exchange Agreement dated November 13, 2000 by Host
             Marriott, L.P. and Crestline Capital Corporation (incorporated by
             reference to Exhibit 99.2 of Host Marriott, L.P.'s Form 8-K/A
             filed December 14, 2000).

 10.36       Host Marriott Corporation's Non-Employee Director's Deferred Stock
             Compensation Plan (incorporated by reference to Exhibit 10.7 of
             Host Marriott Corporation's Form 10-K dated March 26, 1999).

 10.43+      Registration Rights Agreement, dated as of December 14, 2001, by
             and among Host Marriott, L.P., the Guarantors named therein and
             the Purchasers named therein.

 10.45+      ISDA Master Agreement, dated as of December 19, 2001, between
             Societe Generale, New York Branch, and Host Marriott, L.P.

 10.46+      ISDA Master Agreement, dated as of January 4, 2002, between Wells
             Fargo Bank, N.A. and Host Marriott, L.P.

 12.1*       Computation of Ratios of Earnings to Fixed Charges and Preferred
             Unit Charges.

 21.1        List of Subsidiaries of Host Marriott, L.P. (incorporated by
             reference to Exhibit 21 of Host Marriott, L.P.'s Form 10-K for the
             year ended December 31, 2001).

 23.1*       Consent of Latham & Watkins (included as part of Exhibit 5).

 23.2        Consent of Latham & Watkins (included as part of Exhibit 8).

 23.3*       Consent of Arthur Andersen LLP.

 24.1        Power of Attorney (included on signature page).

 25.1+       Statement of Eligibility and Qualification on Form T-1 of HSBC
             Bank USA, as trustee for the 9 1/2% Series I Senior Notes due 2007
             of the Registrant.

 99.1+       Form of Letter of Transmittal and related documents to be used in
             conjunction with the exchange offer.

 99.2+       Form of Notice of Guaranteed Delivery to be used in conjunction
             with the exchange offer.


- --------

#  Agreement filed is illustrative of numerous other agreements to which the
   Company is a party.


*  Filed herewith.


+  Previously filed.

EX-5.1

  BOSTON                   Latham & Watkins                        NEW YORK
 BRUSSELS                  ATTORNEYS AT LAW                   NORTHERN VIRGINIA
  CHICAGO                     www.lw.com                        ORANGE COUNTY
 FRANKFURT                                                          PARIS
  HAMBURG                   _______________                       SAN DIEGO
 HONG KONG                                                      SAN FRANCISCO
  LONDON                                                        SILICON VALLEY
LOS ANGELES                                                       SINGAPORE
  MOSCOW                                                            TOKYO
NEW JERSEY                                                     WASHINGTON, D.C.



                                                   May 15, 2002

Host Marriott, L.P.
10400 Fernwood Road
Bethesda, Maryland 20817

     Re:  9 1/2% Series I Senior Notes due 2007 of Host Marriott, L.P.
          ------------------------------------------------------------

Ladies and Gentlemen:

     In connection with the issuance of $450,000,000 aggregate principal amount
of 9 1/2% Series I Senior Notes due 2007 (the "Series I senior notes") by Host
Marriott, L.P., a Delaware limited partnership (the "Company"), and guarantees
thereof ("Guarantees" and together with the Series I senior notes, the
"Securities") by certain subsidiaries of the Company (the "Subsidiary
Guarantors") to be registered under the Securities Act of 1933, as amended, on a
registration statement on Form S-4 filed with the Securities and Exchange
Commission (the "Commission") on January 10, 2002 (the "Registration Statement")
relating to the offer by the Company to exchange its outstanding 9 1/2% Series H
Senior Notes due 2007 for Series I senior notes, you have requested our opinion
with respect to the matters set forth below.

     In our capacity as counsel of Host Marriott Corporation, the general
partner of the Company, in connection with such registration, we are familiar
with the proceedings taken and proposed to be taken by the Company and the
Subsidiary Guarantors in connection with the authorization, issuance and sale of
the Securities, and for the purposes of this opinion, have assumed such
proceedings will be timely completed in the manner presently proposed.  In
addition, we have made such legal and factual examinations and inquiries,
including an examination of originals or copies certified or otherwise
identified to our satisfaction of such documents, corporate records and
instruments, as we have deemed necessary or appropriate for purposes of this
opinion.

     In our examination, we have assumed the genuiness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as copies.

     We are opining herein as to the effect on the subject transaction only of
the Revised Uniform Limited Partnership Act of the State of Delaware and the
Limited Liability Company Act of the State of Delaware, we express no opinion
with respect to the


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         11400 Commerce Park Drive, Suite 200 - Reston, Virginia 20191
               TELEPHONE:  (703) 390-0900 - FAX:  (703) 390-0901


Host Marriott, L.P.
May 15, 2002
Page 2


applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or, in the case of Delaware, any other laws, or as to any matters
of municipal law or the laws of any local agencies within any state.

     Capitalized terms used herein without definition have the meanings ascribed
to them in the Registration Statements.

     Subject to the foregoing and other matters set forth herein, it is our
opinion that as of the date hereof:

     (1)  The Series I senior notes have been duly authorized by all necessary
          action of the Company, and when executed, authenticated and delivered
          by or on behalf of the Company against exchange therefor in accordance
          with the terms of the Indenture, will constitute legally valid and
          binding obligations of the Company, enforceable against the Company in
          accordance with their terms.

     (2)  Each of the Guarantees has been duly authorized by all necessary
          action of the respective Subsidiary Guarantor, and when the Series I
          senior notes are executed, authenticated and delivered by or on behalf
          of the Company in accordance with the terms of the Indenture, will
          constitute legally valid and binding obligation of the respective
          Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in
          accordance with its terms.

     The opinions rendered above relating to the enforceability of the
Securities are subject to the following exceptions, limitations and
qualifications: (i) the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws and, with respect to the Guarantees, fraudulent
conveyance, or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors; (ii) the effect of general
principles of equity, whether enforcement is considered in a proceeding in
equity of law, and the discretion of the court before which any proceeding
therefor may be brought; (iii) we express no opinion concerning the
enforceability of the waiver of rights or defenses contained in the Indenture.

     In rendering the opinions above in paragraph (2), to the extent any
Subsidiary Guarantor is organized under the laws of a jurisdiction other than
Delaware, we have assumed with your permission that each of them is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and that the Indenture has been duly authorized,
executed and delivered by such Subsidiary Guarantor in accordance with the laws
of such jurisdiction.

     To the extent that the obligations of the Company and/or the Subsidiary
Guarantors under the Indenture may be dependent upon such matters, we assume for
purposes of this opinion that the Trustee is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization; that
the Trustee is duly qualified to engage in the activities contemplated by the
Indenture; that the Indenture has been duly authorized, executed and delivered
by the Trustee and constitutes the legally valid, binding and enforceable
obligation of the Trustee enforceable against the Trustee in accordance with its
terms; that the Trustee is in compliance, generally and with respect to acting
as a trustee under the Indenture, with all applicable laws and regulations; and
that the Trustee has the requisite organizational and legal power and authority
to perform its obligations under the Indenture.


Host Marriott, L.P.
May 15, 2002
Page 3



     We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to us contained under the heading "Legal
Matters."

                                         Very truly yours,


                                         /s/  Latham & Watkins

EX-12.1

                                                                    Exhibit 12.1

      Computation of Ratio of Earnings to Fixed Charges and Preferred Unit
                                 Distributions:




                                    First
                                   Quarter            Fiscal Year
                                  ----------  ---------------------------------
                                  2002  2001  2001  2000  1999  1998  1997
                                  ----  ----  ----  ----  ----  ----  ----
                                     (in millions, except ratios)
                                                    
Income (loss) from operations
 before income taxes............. $ (8) $ 43  $ 67  $105  $240  $174  $ 83
 Add (deduct):
 Fixed charges...................  133   126   572   533   518   415   364
 Capitalized interest............   (1)   (2)   (8)   (8)   (7)   (4)   (1)
 Amortization of capitalized
  interest.......................    2     2     7     6     6     6     5
 Net (gains) losses related to
  certain 50% or less owned
  affiliate......................    5    (3)    6   (24)   (6)   (1)   (1)
 Minority interest in
  consolidated affiliates........    5     7    16    27    21    52    31
                                  ----  ----  ----  ----  ----  ----  ----
 Adjusted earnings...............  136   173   660  $639  $772  $642  $481
                                  ====  ====  ====  ====  ====  ====  ====
 Fixed charges:
 Interest on indebtedness and
  amortization of deferred
  financing costs................ $113  $110  $493  $466  $469  $335  $288
 Dividends on convertible
  preferred securities of
  subsidiary trust...............  --    --    --    --    --     37    37
 Distributions on preferred
  limited partner units..........    9     5    32    20     6   --    --
 Portion of rents representative
  of the interest factor.........   11    11    47    47    43    43    39
                                  ----  ----  ----  ----  ----  ----  ----
 Total fixed charges and
  preferred unit distributions...  133   126   572  $533  $518  $415  $364
                                  ====  ====  ====  ====  ====  ====  ====
 Ratio of earnings to fixed
  charges and preferred unit
  distributions.................. 1.02  1.37  1.15  1.20  1.49  1.54  1.32

EX-23.3

                                                                    Exhibit 23.3

                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

   As independent public accountants, we hereby consent to the use of our
reports, and to all references to our Firm included in or made a part of this
registration statement.

                                          Arthur Andersen LLP

Vienna, Virginia

May 10, 2002