e10vq

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M9HevU6Vdlz6ZXWWoviV0g/M0i+ZH+fu8hZgoajF8mhdKM8BQ0dJ3d7StnXuxKeX qEUGp7edCK44hCSQxVj53w== 0000950133-04-001901.txt : 20040510 0000950133-04-001901.hdr.sgml : 20040510 20040510163322 ACCESSION NUMBER: 0000950133-04-001901 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERISTAR HOSPITALITY CORP CENTRAL INDEX KEY: 0001012967 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 752648842 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11903 FILM NUMBER: 04793544 BUSINESS ADDRESS: STREET 1: 4501 N. FAIRFAX DRIVE CITY: ARLINGTON STATE: VA ZIP: 22203 BUSINESS PHONE: 7038127200 MAIL ADDRESS: STREET 1: 4501 N. FAIRFAX DRIVE CITY: ARLINGTON STATE: VA ZIP: 22203 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GENERAL HOSPITALITY CORP DATE OF NAME CHANGE: 19960428 10-Q 1 w97027e10vq.htm FORM 10-Q e10vq

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-11903

MeriStar Hospitality Corporation

(Exact name of registrant as specified in its charter)


Maryland (State or other jurisdiction of incorporation or organization)		75-2648842 (I.R.S. Employer Identification No.)

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

(703) 812-7200

(Registrant’s telephone number, including area code)

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

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

The number of shares of the registrant’s common stock outstanding at April 30, 2004 was 86,942,710.

INDEX


		Page

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets — March 31, 2004 and December 31, 2003		2
	Consolidated Statements of Operations — Three months ended March 31, 2004 and 2003		3
	Consolidated Statements of Cash Flows — Three months ended March 31, 2004 and 2003		4
	Notes to Unaudited Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		27
Item 4.	Controls and Procedures		28
PART II. OTHER INFORMATION
Item 6.	Exhibits and Reports on Form 8-K		29
Signatures			30

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MERISTAR HOSPITALITY CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars and shares in thousands, except per share amounts)


			March 31,
			2004			December 31,
			(Unaudited)			2003

ASSETS
Property and equipment			$	2,437,395		$	2,481,752
Accumulated depreciation				(465,360	)		(446,032	)

				1,972,035			2,035,720
Assets held for sale				39,274			51,169
Investment in affiliate				15,000			15,000
Prepaid expenses and other assets				41,007			47,934
Accounts receivable, net of allowance for doubtful accounts of $2,751 and $2,040				69,076			64,709
Restricted cash				44,656			42,523
Cash and cash equivalents — unrestricted				194,977			230,884

			$	2,376,025		$	2,487,939

LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-term debt			$	1,527,278		$	1,638,028
Accounts payable and accrued expenses				91,835			83,458
Accrued interest				37,449			46,813
Due to Interstate Hotels & Resorts				17,133			16,411
Other liabilities				12,213			11,831

Total liabilities				1,685,908			1,796,541

Minority interests				36,477			37,785
Stockholders’ equity:
	Common stock, par value $0.01 per share
		Authorized — 100,000 shares
		Issued — 75,446 and 69,135 shares		754			691
	Additional paid-in capital			1,379,430			1,338,959
	Accumulated deficit			(682,339	)		(642,094	)
	Accumulated other comprehensive loss			(1,239	)		(977	)
	Common stock held in treasury — 2,345 shares			(42,966	)		(42,966	)

Total stockholders’ equity				653,640			653,613

			$	2,376,025		$	2,487,939

See accompanying notes to the unaudited consolidated financial statements.

MERISTAR HOSPITALITY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(Dollars in thousands, except per share amounts)



				Three Months
				Ended March 31,

				2004			2003

Revenue:
	Hotel operations:
		Rooms		$	135,666		$	131,567
		Food and beverage			51,879			52,176
		Other hotel operations			17,043			16,647
	Office rental, parking and other revenue				2,970			3,263

Total revenue					207,558			203,653

Hotel operating expenses:
		Rooms			33,224			31,209
		Food and beverage			38,881			37,566
		Other hotel operating expenses			10,363			9,505
Office rental, parking and other expenses					585			630
Other operating expenses:
		General and administrative			38,021			34,681
		Property operating costs			31,488			29,505
		Depreciation and amortization			26,218			24,169
		Property taxes, insurance and other			17,061			17,193
		Loss on asset impairments			1,238			—

Operating expenses					197,079			184,458

Operating income					10,479			19,195
Minority interest					946			3,677
Interest expense, net					(34,380	)		(34,718	)
Loss on early extinguishments of debt					(5,923	)		—

Loss before income taxes and discontinued operations					(28,878	)		(11,846	)
Income tax benefit					433			175

Loss from continuing operations					(28,445	)		(11,671	)

Discontinued operations:
	Loss from discontinued operations before income tax benefit				(11,980	)		(58,096	)
	Income tax benefit				180			21

Loss from discontinued operations					(11,800	)		(58,075	)

Net loss				$	(40,245	)	$	(69,746	)

Basic and diluted loss per share:
	Loss from continuing operations			$	(0.42	)	$	(0.26	)
	Loss from discontinued operations				(0.17	)		(1.27	)

			Net loss per basic and diluted share	$	(0.59	)	$	(1.53	)

See accompanying notes to the unaudited consolidated financial statements.

MERISTAR HOSPITALITY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(Dollars in thousands)



				Three Months
				Ended March 31,

				2004			2003

Operating activities:
	Net loss			$	(40,245	)	$	(69,746	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization			27,160			28,994
		Loss on asset impairments			5,011			56,677
		Loss on sale of assets, before tax effect			6,946			—
		Loss on early extinguishments of debt			5,923			—
		Minority interests			(946	)		(3,677	)
		Amortization of unearned stock-based compensation			587			976
		Change in value of interest rate swaps			—			(2,055	)
		Deferred income taxes			(487	)		(931	)
		Changes in operating assets and liabilities:
			Accounts receivable		(4,367	)		(12,937	)
			Prepaid expenses and other assets		4,920			1,416
			Due from/to Interstate Hotels & Resorts		(5,461	)		93
			Accounts payable, accrued expenses, accrued interest and other liabilities		(1,677	)		(9,039	)

Net cash used in operating activities					(2,636	)		(10,229	)

Investing activities:
	Capital expenditures for property and equipment				(23,737	)		(8,622	)
	Proceeds from sales of assets				74,075			12,650
	Payments from Interstate Hotels & Resorts				—			42,052
	Increase in restricted cash				(2,133	)		(1,656	)
	Costs associated with disposition program and other, net				(3,304	)		(299	)

Net cash provided by investing activities					44,901			44,125

Financing activities:
	Prepayments on long-term debt				(75,497	)		—
	Scheduled payments on long-term debt				(2,307	)		(1,889	)
	Distributions to minority investors				(141	)		(141	)
	Other				(77	)		—

Net cash used in financing activities					(78,022	)		(2,030	)

Effect of exchange rate changes on cash and cash equivalents					(150	)		(274	)

Net (decrease) increase in cash and cash equivalents					(35,907	)		31,592
Cash and cash equivalents, beginning of period					230,884			33,896

Cash and cash equivalents, end of period				$	194,977		$	65,488

Supplemental Cash Flow Information
Cash paid for interest and income taxes:
	Interest, net of capitalized interest			$	43,755		$	46,989
	Income taxes			$	275		$	207
Non-cash investing and financing activities:
	Senior subordinated debt redeemed in exchange for common stock			$	38,000		$	—
	Redemption of OP units			$	20		$	18,109

See accompanying notes to the unaudited consolidated financial statements.

MERISTAR HOSPITALITY CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2004

1. Organization

MeriStar Hospitality Corporation is a real estate investment trust, or REIT. We own a portfolio of primarily upper upscale, full-service hotels and resorts in the United States and one in Canada. Our portfolio is diversified geographically as well as by franchise and brand affiliations. As of March 31, 2004, we owned 81 hotels with 22,236 rooms, all of which were leased by our taxable subsidiaries and managed by Interstate Hotels & Resorts, Inc. (“Interstate Hotels”). Of our 81 hotels at March 31, 2004, eight were included in our non-core disposition program. Two of these assets with 371 rooms were sold during the second quarter of 2004.

Our taxable subsidiaries are parties to management agreements with a subsidiary of Interstate Hotels to manage all of our hotels. Under these management agreements, the taxable subsidiaries pay a management fee for each property to a subsidiary of Interstate Hotels. The taxable subsidiaries in turn make rental payments to our subsidiary operating partnership under the participating leases. Under the management agreements, the base management fee is 2.5% of total hotel revenue, plus incentive payments based on meeting performance thresholds that could total up to an additional 1.5% of total hotel revenue. The agreements generally have initial terms of 10 years with three renewal periods of five years each at the option of Interstate Hotels, subject to some exceptions.

2. Summary of Significant Accounting Policies

Interim Financial Statements. We have prepared these unaudited interim financial statements according to the rules and regulations of the Securities and Exchange Commission. We have omitted certain information and footnote disclosures that are normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States. These interim financial statements should be read in conjunction with the financial statements, accompanying notes and other information included in our Annual Report on Form 10-K for the year ended December 31, 2003.

In our opinion, the accompanying unaudited consolidated interim financial statements reflect all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the financial condition and results of operations and cash flows for the periods presented. The results of operations for the interim periods are not necessarily indicative of the results for the entire year.

Principles of Consolidation. Our consolidated financial statements include the accounts of all wholly-owned and majority-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Held for Sale Properties. We classify the properties we are actively marketing as held for sale once all of the following conditions are met:

• Our board has approved the sale,

• We have a fully executed agreement with a qualified buyer which provides for no significant outstanding or continuing obligations with the property after sale, and

• We have a significant non-refundable deposit.

We carry properties held for sale at the lower of their carrying values or estimated fair values less costs to sell. We cease depreciation at the time the asset is classified as held for sale.

Cash and Cash Equivalents. We classify investments with original maturities of three months or less as cash equivalents. Our cash equivalents include investments in debt securities, including commercial paper, overnight repurchase agreements and money market funds.

which require the current and prior period operating results of any asset that has been classified as held for sale or has been disposed of on or after January 1, 2002 and where we have no continuing involvement to be recorded as discontinued operations. Any gains or losses on final disposition are also included in discontinued operations.

The provisions of SFAS No. 144 also require that whenever events or changes in circumstances indicate that the carrying value of a long-lived asset may be impaired that an analysis be performed to determine the recoverability of the asset’s carrying value. We make estimates of the undiscounted cash flows from the expected future operations or potential sale of the asset. If the analysis indicates that the carrying value is not recoverable from these estimates of cash flows, we write down the asset to estimated fair value and recognize an impairment loss. Any impairment losses we recognize on assets held for use are recorded as operating expenses. We record any impairment losses on assets held for sale as a component of discontinued operations.

Accounting for Costs Associated with Exit or Disposal Activities. We apply the provisions of SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which require that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. Our strategy includes the disposition of certain hotel assets, all of which are managed under agreements that typically require payments to Interstate Hotels as a result of termination. Any such liability will be recognized at the time the asset disposition is complete and a termination notice is provided to Interstate Hotels. At that time, the recognition of the termination obligation will be included in the calculation of the final gain or loss on sale. For further discussion of potential termination obligations, see “Asset Dispositions” included in Item 2 of this Quarterly Report on Form 10-Q.

Stock-Based Compensation. We adopted the recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, on January 1, 2003 for new stock options issued under our compensation programs. As permitted by SFAS No. 148, we elected to apply the provisions prospectively, which includes recognizing compensation expense for only those stock options issued in 2003 and after. We apply the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” in accounting for our stock options issued under our compensation programs prior to January 1, 2003. As we granted these stock options at fair market value, no compensation cost has been recognized. For our other equity-based compensation awards, we recognize compensation expense over the vesting period based on the fair market value of the award at the date of grant.

Had compensation cost been determined based on fair value at the grant date for awards granted prior to our adoption of the fair value method, our net loss and per share amounts would have been adjusted to the pro forma amounts indicated as follows (in thousands, except per share amounts):



		Three Months Ended
		March 31,

		2004			2003

Net loss, as reported		$	(40,245	)	$	(69,746	)
	Add: Stock-based employee compensation expense included in reported net loss, net of related tax effect		587			929
	Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effect		(651	)		(1,081	)

Net loss, pro forma		$	(40,309	)	$	(69,898	)

Loss per share:
	Basic and diluted, as reported	$	(0.59	)	$	(1.53	)
	Basic and diluted, pro forma	$	(0.59	)	$	(1.53	)

These pro forma compensation costs may not be representative of the actual effects on reported net loss and loss per share in future periods.

Derivative Instruments and Hedging Activities. Our interest rate risk management objective is to limit the effect of interest rate changes on earnings and cash flows. We look to manage interest rates through the use of a combination of fixed and variable rate debt. We only enter into derivative or interest rate transactions for hedging purposes. We recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income based on the derivative’s effectiveness and whether the derivative has been designated as a cash flow or fair value hedge.

3. Comprehensive Loss

Comprehensive loss was $40.5 million and $68.7 million for the three months ended March 31, 2004 and 2003, respectively. Comprehensive loss consisted of net loss ($40.2 million and $69.7 million for the three months ended March 31, 2004 and 2003, respectively) and foreign currency translation adjustments.

4. Property and Equipment

Property and equipment consisted of the following (in thousands):


	March 31,		December 31,
	2004		2003

Land	$	233,272	$	238,772
Buildings and improvements		1,873,018		1,930,155
Furniture, fixtures and equipment		280,150		284,602
Construction-in-progress		50,955		28,223

	$	2,437,395	$	2,481,752

For the three months ended March 31, 2004 and 2003, we capitalized interest of $0.75 million and $0.78 million, respectively.

During the first quarter of 2004, we recognized an additional impairment loss of $5.0 million, of which $3.8 million is recorded in discontinued operations (see Note 11). As of March 31, 2004, we had eight hotels remaining in our disposition program, five of which are classified as held for sale (see Note 5).

The impairment charges are based on our estimates of the fair value of the properties we are actively marketing. These estimates require us to make assumptions about the sales prices that we expect to realize for each property as well as the timing of a potential sale. In making these estimates, we consider the operating results of the assets, the market for comparable properties, and quotes from brokers, among other information. In nearly all cases, our estimates have reflected the results of an extensive marketing effort and negotiations with prospective buyers. Actual results could differ materially from these estimates.

5. Assets Held for Sale

At December 31, 2003, seven assets were classified as held for sale. Six of these assets were sold during the first quarter of 2004. At March 31, 2004, five of the eight properties remaining in our non-core disposition program met our criteria for classification as held for sale. The three other assets included in our asset

disposition program did not meet the probability criteria as prescribed by SFAS No. 144 to classify them as held for sale. Assets held for sale consisted of the following (in thousands):


	March 31,			December 31,
	2004			2003

Land	$	3,138		$	5,061
Buildings and improvements		34,822			43,391
Furniture, fixtures and equipment		1,364			2,759
Construction-in-progress		253			1,114

		39,577			52,325
Accumulated depreciation		(303	)		(1,156	)

	$	39,274		$	51,169

6. Investment in Affiliate

In 1999, we invested $40 million in MeriStar Investment Partners, L.P. (“MIP”), a joint venture established to acquire upscale, full-service hotels. Our cost-basis investment is in the form of a partnership interest, in which we earn a 16% cumulative preferred return with outstanding balances compounded quarterly. While the return on this investment is preferred and cumulative, the underlying investment ranks equally with the investments of the other investors in MIP. We recognize the return quarterly as it becomes due to us. For the three months ended March 31, 2004 and 2003, we recognized a preferred return of $1.6 million and $2.0 million, respectively, from this investment. As of March 31, 2004 and December 31, 2003, cumulative preferred returns of $22.0 million and $19.6 million, respectively, were due from MIP. We have reserved a portion of this balance and have included the net $19.8 million and $18.2 million in accounts receivable on the accompanying consolidated balance sheets as of March 31, 2004 and December 31, 2003, respectively. We expect that any cumulative unpaid preferred returns will be paid in the future from excess cash flow above our current return and from potential partnership hotel disposition proceeds in excess of debt allocated to individual assets. Given the current economic environment, we do not expect MIP’s operations to provide adequate cash flow in the near term for significant payment of our current returns or repayments of our cumulative unpaid preferred returns, however we expect to receive payments from MIP during 2004 resulting from planned dispositions of certain assets combined with cash flow improvements on other assets. We evaluate the collectibility of our preferred return based on our preference to distributions and the underlying value of the hotel properties.

While we believe that our current and cumulative returns continue to be fully collectible, the current value of our underlying investment declined due to the decline in MIP’s cash flow, particularly driven by results in four of its hotel markets. While we believe that the cash flow, and thus the value of our investment in MIP, will be recoverable over time, we expect that any such recovery will take a number of years to achieve. The accounting rules for cost basis investments require that declines in value that are other than temporary be recognized currently. Since the decline in the value of our underlying investment in MIP was other than temporary, we recognized a $25.0 million impairment loss on this investment during the fourth quarter of 2003.

7. Long-Term Debt

Long-term debt consisted of the following (in thousands):


	March 31,			December 31,
	2004			2003

Senior unsecured notes due 2011 — 9.125%	$	364,665		$	400,000
Senior unsecured notes due 2008 — 9.0%		282,000			300,000
Senior unsecured notes due 2009 — 10.5%		231,787			250,000
Secured facility, due 2009		307,566			309,035
Secured facility, due 2013		100,397			100,765
Convertible subordinated notes		173,705			173,705
Senior subordinated notes		45,438			83,438
Mortgage debt		26,546			27,011
Unamortized issue discount		(4,826	)		(5,926	)

	$	1,527,278		$	1,638,028

Aggregate future maturities as of March 31, 2004 were as follows (in thousands):


2004 (nine months)	$	10,862
2005		10,269
2006		11,125
2007		57,093
2008		292,315
Thereafter		1,145,614

	$	1,527,278

As of March 31, 2004, all of our debt bore fixed rates of interest. Our overall weighted average interest rate was 8.9%. Based on market prices at March 31, 2004, the fair value of our long-term debt was $1.63 billion. On April 2, 2004, we entered into an interest rate swap on our secured facility due 2009, effectively converting the interest the facility bears from a fixed rate to a floating rate. The new floating rate is LIBOR plus 444 basis points. Our overall weighted average interest rate is currently 8.5% after giving effect to the interest rate swap.

Credit facility. On December 23, 2003, we entered into a new three-year $50 million senior credit facility, secured by six of our hotels, and terminated our previous credit facility. The facility carries an annual interest rate of the London Interbank Offered Rate, or LIBOR, plus 450 basis points. As of March 31, 2004, we had no outstanding borrowings under this facility.

The facility contains financial and other restrictive covenants. Our ability to borrow under this facility is subject to financial covenants, including leverage, fixed charge coverage and interest coverage ratios and minimum net worth requirements. Our compliance with these covenants in future periods will depend substantially upon the financial results of our hotels. The agreement governing our new senior credit facility limits our ability to effect mergers, asset sales and change of control events and limits the payments of dividends other than those required for us to maintain our status as a REIT and our ability to incur additional secured and total indebtedness.

statements of operations. As of May 5, 2004, we had purchased an additional $7.6 million of our 10.5% notes due 2009, $1.5 million of our 9% notes due 2008, and $4.5 million of our 9.125% notes due 2011.

These notes are unsecured obligations of certain subsidiaries of ours, and we guarantee payment of principal and interest on the notes. These notes contain various restrictive covenants, limiting our ability to initiate or transact certain business activities if specific financial thresholds are not achieved. One of those thresholds is having a 2 to 1 fixed charge coverage ratio (as defined in the indentures, fixed charges only include interest on debt obligations and preferred equity) in order to enter into certain types of transactions. As of March 31, 2004, our fixed charge coverage ratio was significantly below 2 to 1, and therefore we were not permitted generally to enter into certain transactions, including the repurchase of our stock, the issuance of any preferred stock, the payment of dividends, the incurrence of any additional debt, or the repayment of outstanding debt before it comes due, except as noted below.

There are certain exceptions with respect to the incurrence of additional debt and early repayment of debt features in the indentures. We have the ability to incur up to $250 million of secured financing within restricted subsidiaries, subject to meeting other maintenance tests under the indentures. We also have a general carve-out to incur $50 million of unspecified borrowings within a restricted subsidiary. Additionally, we are permitted to repay subordinated debt prior to its maturity from the proceeds of an equal or junior financing with a longer term than the debt refinanced, an equity offering, or a financing within an unrestricted subsidiary.

Secured facilities. On September 26, 2003, as permitted by the indentures governing our senior unsecured notes and senior subordinated notes, we completed a $101 million commercial mortgage-backed securities financing, secured by a portfolio of four hotels. The loan carries a fixed annual interest rate of 6.88% and matures in 2013. The proceeds will be used to repay debt carrying higher interest rates, or to fund capital expenditures or acquisitions to the extent that higher interest rate debt cannot be acquired at attractive prices.

We completed a $330 million non-recourse financing secured by a portfolio of 19 hotels in 1999. The loan bears a fixed annual interest rate of 8.01% and matures in 2009. The secured facility contains standard provisions that require the servicer to maintain in escrow cash balances for certain items such as property taxes and insurance. In addition, the facility contains a provision that requires our mortgage servicer to retain in escrow the excess cash from the encumbered hotels after payment of debt service (“Excess Cash”), if net hotel operating income (“NOI”) for the trailing twelve months declines below $57 million. This provision was triggered in October 2002 and will be effective until the hotels generate the minimum cash flow required for two consecutive quarters, at which time the cash being held in escrow will be released to us. Approximately $32.4 million and $27.2 million of cash was held in escrow under this provision as of March 31, 2004 and December 31, 2003, respectively. In July 2003, we signed an amendment to the loan agreement that permits the release of cash placed in escrow for all capital expenditures incurred on the 19 encumbered properties on or after April 1, 2003. Although the servicer will continue to retain in escrow any excess cash from the encumbered hotels, they will release cash for all capital expenditures we have incurred from April 1, 2003 through the date of the amendment and future capital expenditures we incur on the 19 properties. Escrowed funds totaling approximately $23.6 million were available to fund capital expenditures under this provision as of March 31, 2004.

Convertible subordinated notes. On July 1, 2003, we completed an offering of $170 million aggregate principal amount of 9.5% convertible subordinated notes due 2010. These notes are convertible into our common stock at any time prior to or at maturity, April 1, 2010, at a conversion price of $10.18 per share (equal to a conversion rate of 98.2318 shares per $1,000 principal amount of notes).

The proceeds from the new issuance were used to repurchase $150.6 million of our $154.3 million 4.75% convertible notes due 2004, at varying prices, resulting in an aggregate discount of approximately $1.4 million. These convertible notes are convertible into our common stock at a rate of 23.2558 shares per $1,000 in principal amount, which equals approximately $43.00 per share.

Senior subordinated notes. The senior subordinated notes are unsecured obligations due in 2007 and provide for semi-annual payments of interest each February 15 and August 15 at an annual rate of 8.75%. The related indenture contains various restrictive covenants, which are similar to those in our senior unsecured notes.

During the three months ended March 31, 2004, we acquired $38.0 million of our senior subordinated notes through the issuance of 6,304,146 shares of common stock. We recorded a loss on early extinguishment of debt of $1.3 million and wrote off deferred financing costs of $0.4 million related to this activity. The write off of deferred financing costs is included in depreciation and amortization expense on the accompanying consolidated statements of operations. In April 2004, we exchanged an additional $11.2 million aggregate principal amount of our senior subordinated notes for 1,834,582 shares of our common stock.

Derivatives. During the three months ended March 31, 2003, we recognized $2.1 million of income related to the decrease in fair value of the liability recorded for the interest rate swaps in place in that time period. For the three months ended March 31, 2003, we made cash payments on those swaps of $2.1 million. The change in fair value and the swap payments are netted together on our statement of operations. These swaps expired during the fourth quarter of 2003.

8. Stockholders’ Equity and Minority Interests

Common Stock Transactions. During the three months ended March 31, 2004, we issued 6,304,146 shares of common stock in exchange for $38.0 million of our senior subordinated notes (see Note 7).

During the three months ended March 31, 2004, we issued 3,339 shares of common stock with a value of $0.02 million, related to shares issued under our employee stock purchase plan.

OP Units. Substantially all of our assets are held indirectly by and operated through MeriStar Hospitality Operating Partnership, L.P., our subsidiary operating partnership (Commission file number 333-63768). Our operating partnership’s partnership agreement provides for five classes of partnership interests: Common OP Units, Class B OP Units, Class C OP Units, Class D OP Units and POPs.

Common OP Unit holders converted 3,686 and 787,177 of their OP Units, with a value of $0.02 million and $18.1 million, respectively, into common stock during the three months ended March 31, 2004 and 2003, respectively. A POPs unit holder converted 15,000 POPs for cash during the three months ended March 31, 2004.

On April 9, 2004, in accordance with the terms of the certificate of designation for the outstanding Class D OP Units of our operating partnership we redeemed all outstanding Class D OP Units plus accrued and unpaid preferential distributions on those units, for an aggregate consideration of approximately $8.8 million. The Class D OP Units had become redeemable at the option of the holder on April 1, 2004.

On April 23, 2004, we announced an agreement with an underwriter to issue and sell 12.0 million shares of common stock at a price to the public of $6.25 per share pursuant to our effective shelf registration statement filed under the Securities Act of 1933. In addition, the underwriter was granted an over-allotment option to purchase up to an additional 1.8 million shares which expires on May 23, 2004. The offering closed on April 28, 2004 with net proceeds of $72.5 million. If the over-allotment were to be exercised in full by the underwriter an additional $10.9 million would be realized.

9. Loss Per Share

The following table presents the computation of basic and diluted loss per share (in thousands, except per share amounts):



		Three Months Ended
		March 31,

		2004			2003

Basic and Diluted Loss Per Share:
	Loss from continuing operations	$	(28,445	)	$	(11,671	)
	Weighted average number of basic and diluted shares of common stock outstanding		68,640			45,548

	Basic and diluted loss per share from continuing operations	$	(0.42	)	$	(0.26	)

For the quarter ended March 31, 2004 and 2003, 20,916,868 and 10,572,450 shares, respectively, consisting of shares issuable upon conversion, exchange or exercise of stock options, operating partnership units of MeriStar Hospitality Operating Partnership, L.P., and shares from our outstanding convertible notes, were excluded from the calculation of diluted loss per share as their inclusion would be anti-dilutive.

10. Commitments and Contingencies

Litigation. In the course of our normal business activities, various lawsuits, claims and proceedings have been or may be instituted or asserted against us. Based on currently available facts, we believe that the disposition of matters that are pending or asserted will not have a material adverse effect on our financial position, results of operations or liquidity.

Minimum Lease Payments. We lease the land at certain of our hotels and office space of our corporate headquarters under long-term arrangements from third parties. Certain leases contain contingent rent features based on gross revenues at the respective property. Future minimum lease payments required under these operating leases as of March 31, 2004 were as follows (in thousands):


2004 (nine months)	$	1,338
2005		1,746
2006		1,649
2007		1,672
2008		1,672
Thereafter		52,296

	$	60,373

Our obligations under other operating lease commitments, primarily for equipment, are not significant.

We lease certain office, retail and parking space to outside parties under non-cancelable operating leases with initial or remaining terms in excess of one year. Future minimum rental receipts under these leases as of March 31, 2004 were as follows (in thousands):


2004 ( nine months)	$	3,207
2005		2,838
2006		1,943
2007		1,677
2008		992
Thereafter		1,909

	$	12,566

We may be obligated to pay Interstate Hotels termination fees of up to a maximum of approximately $11.1 million with respect to the 28 properties we have sold since January 1, 2003. In addition, as we dispose of the six remaining assets in our disposition program, we may incur termination obligations due to Interstate Hotels of up to a maximum of approximately $4.3 million, assuming the disposition of all six of the properties in 2004 and assuming buyers of our hotel properties elect to have the properties managed by parties other than Interstate Hotels or do not assume the obligation as part of the disposition transaction. Any obligation due under the termination provisions of the contract is payable over a period of 30 months after termination. Termination fees payable to Interstate Hotels may be reduced by amounts paid under replacement management contracts. Negotiations with Interstate Hotels are ongoing with respect to our hotel management agreements, including the method of calculation for the incentive fee and termination fees.

11. Acquisitions and Dispositions

As part of our asset acquisition strategy, in April 2004, we announced that we had signed a definitive agreement to acquire the four-star, four-diamond rated Ritz-Carlton, Pentagon City in Arlington, Virginia for $93 million. The 366-room luxury hotel will be operated by The Ritz-Carlton Hotel Company. The transaction is expected to close during the second quarter of 2004, subject to customary closing conditions.

Since January 1, 2003 and as of March 31, 2004, we have sold 26 hotels with 5,345 rooms for total gross proceeds of $202.2 million. Of these 26 hotels, 15 hotels were sold in 2003, and 11 hotels were sold in the first quarter of 2004. As of March 31, 2004, we had eight hotels remaining in our non-core disposition program. Five of these hotels met our criteria for held-for-sale classification as of March 31, 2004 (see Note 5). Operating results for the sold hotels, and where applicable, the gain or loss on final disposition, and the five classified as held-for-sale are included in discontinued operations. Two of the eight hotels in our disposition program have been sold in the second quarter of 2004 for approximately $18 million.

Summary financial information included in discontinued operations for these hotels were as follows (in thousands):



	Three Months
	Ended March 31,

	2004			2003

Revenue	$	12,222		$	39,513
Loss on asset impairments		(3,773	)		(56,677	)
Pretax loss from operations		(1,261	)		(1,419	)
Loss on disposal		(6,946	)		—

Loss on disposal resulted primarily from the recognition of termination fees payable to Interstate Hotels with respect to these hotels’ management contracts.

12. Consolidating Financial Statements

We and certain subsidiaries of MeriStar Hospitality Operating Partnership, L.P. (“MHOP”), our subsidiary operating partnership, are guarantors of senior unsecured notes issued by MHOP. MHOP and certain of its subsidiaries are guarantors of our unsecured senior subordinated notes. We own a one percent general partner interest in MHOP, and MeriStar LP, Inc., our wholly-owned subsidiary, owns approximately a 93 percent limited partner interest in MHOP. All guarantees are full and unconditional, and joint and several. Exhibit 99.1 to this Quarterly Report on Form 10-Q presents supplementary consolidating financial statements for MHOP, including each of the guarantor subsidiaries. This exhibit presents MHOP’s consolidating balance sheets as of March 31, 2004 and December 31, 2003, consolidating statements of operations for the three months ended March 31, 2004 and 2003, and consolidating statements of cash flows for the three months ended March 31, 2004 and 2003.


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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and as such may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identified by our use of words such as “intend,” “plan,” “may,” “should,” “will,” “project,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “opportunity,” and similar expressions, whether in the negative or affirmative. All statements regarding our expected financial position, business and financing plans are forward-looking statements.

Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

• the continuing uncertainty of the national economy;

• economic conditions generally and the real estate market specifically;

• the effects of threats of terrorism and increased security precautions on travel patterns and demand for hotels;

• the threatened or actual outbreak of hostilities and international political instability;

• governmental actions;

• legislative/regulatory changes, including changes to laws governing the taxation of real estate investment trusts;

• the level of proceeds from asset sales;

• cash available for capital expenditures;

• the availability of capital;

• our ability to refinance debt;

• rising interest rates;

• rising insurance premiums;

• competition;

• supply and demand for hotel rooms in our current and proposed market areas;

• other factors that may influence the travel industry, including health, safety and economic factors; and

• changes in generally accepted accounting principles, policies and guidelines applicable to real estate investment trusts.

These risks and uncertainties should be considered in evaluating any forward-looking statements contained in this report or incorporated by reference herein. All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section. We undertake no obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report.

BUSINESS SUMMARY

We are a real estate investment trust, or REIT, and own a portfolio of primarily upper upscale, full-service hotels and resorts. Our portfolio is diversified geographically as well as by franchise and brand affiliations. As of March 31, 2004, we owned 81 hotels with 22,236 rooms. Two of these assets with 371 total rooms were disposed of during the second quarter of 2004. Our hotels are located in major metropolitan areas, rapidly growing secondary markets or resort locations in the United States and one in Canada. All of our hotels are leased by our taxable subsidiaries and all are currently managed by Interstate Hotels & Resorts (“Interstate Hotels”), which was created on July 31, 2002 through the merger of MeriStar Hotels & Resorts, Inc. and Interstate Hotels Corporation.

Our taxable subsidiaries are parties to management agreements with a subsidiary of Interstate Hotels to manage all of our hotels. Under these management agreements, the taxable subsidiaries pay a management fee for each property to a subsidiary of Interstate Hotels. The taxable subsidiaries in turn make rental payments to our operating partnership under the participating leases. Under the management agreements, the base management fee is 2.5% of total hotel revenue, plus incentive payments based on meeting performance thresholds that could total up to an additional 1.5% of total hotel revenue. The agreements generally have initial terms of 10 years with three renewal periods of five years each at the option of Interstate Hotels, subject to some exceptions.

Since the July 2002 merger that formed Interstate Hotels, we and Interstate Hotels have been separating the senior management teams of the two companies in order to allow each senior management team to devote more attention to its respective company’s matters. In December 2003, our Board of Directors and that of Interstate Hotels each formed a special committee of independent directors to explore further changes to the relationship between our company and Interstate Hotels, including possible changes to the terms, or complete elimination, of the intercompany agreement. Discussions also include possible changes to the provisions of the various management agreements relating to our hotels, including the method of calculation for the incentive fee and termination fees.

RESULTS OVERVIEW

At the beginning of 2003, we set out a strategy to position our company to best take advantage of an expected economic and industry recovery. Our strategy includes the following key initiatives: reshape the portfolio through asset sales and strategic acquisitions; enhance liquidity; reduce our leverage and extend our debt maturities; begin an aggressive renovation program of our core product offering; and focus on asset performance through aggressive asset management.

We have made significant progress in reshaping our portfolio with our asset disposition program, completing the sale of 26 non-core assets through March 31, 2004, with two additional hotels sold through early May. We have generated $220 million in gross cash proceeds from the disposition of those 28 assets, which has significantly enhanced our liquidity. We ended the quarter with approximately $240 million in cash and cash equivalents, $195 million of which was unrestricted. We have no material maturities until 2007. We expect to retire the remaining $34.2 million face amount of our 8.75% senior subordinated notes due 2007 by the end of the third quarter of 2004.

We have begun an aggressive renovation program for our core assets. We expect to invest approximately $225 million in capital expenditures during 2004 and 2005 to enhance the quality of our core product to meet or exceed the standards of our primary brands — Hilton, Marriott, and Starwood — to improve the competitiveness of these assets in their markets and enable them to more fully participate in any economic recovery. We expect the program to dramatically reduce the time required to renovate hotels, allowing us to improve the quality of our hotels faster to take advantage of the rebound in the economy.

Since the beginning of 2004, we have completed four of 10 planned brand conversions. Although the conversions impacted our results in the first quarter, we expect the conversions to generate positive results at these hotels going forward.

Revenues from continuing operations increased to $207.6 million for the three months ended March 31, 2004 compared to $203.7 million for the same period in 2003. Net income for the three months ended March 31, 2004 includes operating expenses that are 6.8% higher compared to the same period in 2003, mainly due to the impact of aggressive cost-cutting initiatives that were implemented last year prior to the war in Iraq, and a restoration of 2003 cost reductions, particularly in areas having the most impact on guest satisfaction such as concierge, lounge, restaurant and lounge hours and front desk and bell stand staffing. Our first quarter 2004 rooms expense also includes a significant amount of one-time marketing, training and other expense associated with the conversions of a number of our hotels to other brands. In addition, we realized a $5.9 million loss on early extinguishment of debt during the three months ended March 31, 2004.

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2003 as filed with the Securities and Exchange Commission, and with the unaudited consolidated financial statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS

Our revenues are derived from the operations of our hospitality properties, including room, food and beverage revenues, as well as from our leases of office, retail and parking rentals. Included in our operating results is our 16% cumulative preferred return on our partnership interest in MeriStar Investment Partners, L.P. (“MIP”). Operating costs include direct costs to run our hotels, management fees to Interstate Hotels for the management of our properties, depreciation of our properties, impairment charges, property tax and insurance, as well as sales, marketing and general and administrative costs. Our expenses also include interest on our debt, amortization of related debt-issuance costs and minority interest allocations, which represent the allocation of income and losses to outside investors for properties that are not wholly owned.

The provisions of Statement of Financial Accounting Standards (SFAS) No. 144 require that current and prior period operating results of any asset that has been classified as held for sale or has been disposed of on or after January 1, 2002, including any gain or loss recognized on the sale, be recorded as discontinued operations. Accordingly, we have reclassified all prior periods presented to conform to this requirement. See Note 11, “Acquisitions and Dispositions,” included in Item 1 of this Quarterly Report on Form 10-Q for further information regarding the amounts reclassified.

Summary data for the quarter ended March 31 were as follows (dollars in thousands, except operating data statistics):



	Three Months
	Ended March 31,
							Percent
Summary of Operations:	2004			2003			Change

Total revenue	$	207,558		$	203,653			1.9	%

Hotel operating expenses		82,468			78,280			5.4
Other operating expenses		113,373			106,178			6.8
Loss on asset impairments		1,238			—			N/A

Total operating expenses		197,079			184,458			6.8

Operating income		10,479			19,195			(45.4	)
Minority interest		946			3,677			(74.0	)
Loss on early extinguishment of debt		(5,923	)		—			N/A
Income tax benefit		433			175			150.3
Interest expense, net		(34,380	)		(34,718	)		0.1

Loss from continuing operations		(28,445	)		(11,671	)		143.7
Loss from discontinued operations^(a)		(11,800	)		(58,075	)		(79.7	)

Net loss	$	(40,245	)	$	(69,746	)		(42.3	)%

^(a)
Includes loss on asset impairments of $3.8 million and $56.7 million for the three months ended March 31, 2004 and 2003, respectively. Also includes loss on disposal of $6.9 million for the three months ended March 31, 2004.

Operating Statistics of Core 73 Properties

Eight of the 81 hotels we owned as of March 31, 2004 were planned for disposition; the remaining 73 properties represent our core properties. The following table provides operating statistics for the 73 hotels we have identified as core properties.



	Three Months
	Ended March 31,
					Percent
	2004		2003		Change

Average Daily Rate (ADR)	$	109.27	$	107.97		1.20	%
Occupancy		67.4%		66.5%		1.35	%
Revenue Per Available Room (RevPAR)	$	73.70	$	71.76		2.70	%

As of March 31, 2004, five of the eight assets remaining in our disposition program were classified as held for sale. Their results of operations were included in discontinued operations. The following discussion addresses results for the 76 properties included in continuing operations. For these 76 properties, ADR increased over one percent to $107.79 for the three months ended March 31, 2004. Occupancy increased from 66% to 66.5%, and RevPAR increased to $71.67 from $70.24 for these 76 hotels.

Three months ended March 31, 2004 compared with the three months ended March 31, 2003

Total revenue. Total revenue increased in the first quarter of 2004 compared to the same period of 2003, primarily due to a $4.1 million increase in room revenue that was primarily attributable to an increase in average daily rate. The average daily rate increased 1.28% for the three months ended March 31, 2004 when compared with the same period in 2003 as the industry began to benefit from an increase in travel due to a general strengthening of the economy. Additionally, the prior year was impacted by the build-up and start of the war in Iraq.

Hotel operating expenses. Hotel operating expenses increased $4.2 million or 5.4% in the first quarter of 2004 compared to same period of 2003. The increase was attributable to a 6.5% increase in rooms expense mainly due to the restoration of services with an emphasis on improving guest satisfaction, as well as an increase in occupancy. Also, prior year results reflect aggressive cost reductions in anticipation of the war in Iraq. Food and beverage expense also increased 3.5% as rapidly increasing food costs and labor expenses outpaced adjustments in menu pricing.

Other operating expenses. Other operating expenses increased 6.8% and include general and administrative expenses, property operating costs, depreciation and amortization, and property taxes, insurance and other. Variations in these expenses were as follows:

General and administrative expenses increased by approximately $3.3 million or 9.6% during the first quarter of 2004 as compared to the first quarter in 2003 due to an increase in sales and marketing expense at the hotel level associated with new initiatives implemented in the first quarter of 2004, as well as an increase in corporate headquarters resources. Property operating costs, which consist of repairs and maintenance, energy, franchise and management costs, increased $2.0 million to $31.5 million during the three months ended March 31, 2004 as compared to the same period in 2003 mainly due to an increase in repairs and maintenance (as a result of a strategy to improve operating capabilities and longer term quality of our assets), and higher energy costs (due to colder weather in January and February 2004). The energy costs increase was partially mitigated by a strategic program implemented in late 2003 which is designed to help us manage the increasingly volatile energy costs at our hotels.

Depreciation and amortization expense increased $2.0 million in the first quarter of 2004 to $26.2 million from $24.2 million in the first quarter of 2003. The increase is primarily due to the write-off of deferred financing fees related to early repayments of our debt securities.

Loss on asset impairments. We recognized losses on asset impairments totaling $5.0 million and $56.7 million related to our asset disposition program during the three months ended March 31, 2004 and

2003, respectively. Of these total asset impairment losses, $3.8 million and $56.7 million for the three months ended 2004 and 2003, respectively, are included in discontinued operations. The impairment losses recorded during the three months ended March 31, 2004 primarily represent a decrease in estimated proceeds from the sale of our remaining assets planned for disposition. Impairments were significant during the three months ended March 31, 2003 due to our decision during that quarter to expand our asset disposition program, thereby resulting in a change in our expected holding period for these assets.

Loss on early extinguishment of debt. During the first three months of 2004, we recorded a loss on early extinguishment of debt of $4.6 million related to our repurchase of $71.5 million of our senior unsecured notes, and $1.3 million related to our redemption of $38.0 million of our senior subordinated notes.

Loss from discontinued operations. During the first quarter of 2004, we completed the sale of 11 hotels in separate transactions for an aggregate of $74.1 million in cash, resulting in loss on disposal of $6.9 million. Loss on disposal resulted primarily from the recognition of termination fees payable to Interstate Hotels with respect to these hotels’ management contracts. As of March 31, 2004, we had five hotels classified as held for sale. Discontinued operations for the three months ended March 31, 2004 included impairment charges totaling $3.8 million related to the assets held for sale. Discontinued operations for the three months ended March 31, 2003 included impairment charges totaling $56.7 million.

FUNDS FROM OPERATIONS (FFO)

Substantially all of our non-current assets consist of real estate, and in accordance with accounting principles generally accepted in the United States, or GAAP, those assets are subject to straight-line depreciation, which reflects the assumption that the value of real estate assets, other than land, will decline ratably over time. That assumption is often not true with respect to the actual market values of real estate assets (and, in particular, hotels), which fluctuate based on economic, market and other conditions. As a result, management and many industry investors believe the presentation of GAAP operating measures for real estate companies to be more informative and useful when other measures, adjusted for depreciation and amortization, are also presented.

In an effort to address these concerns, the National Association of Real Estate Investment Trusts, or NAREIT, adopted a definition of Funds From Operations, or FFO. NAREIT defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate, real estate-related depreciation and amortization, and after comparable adjustments for our portion of these items related to unconsolidated partnerships and joint ventures. Extraordinary items and cumulative effect of changes in accounting principle as defined by GAAP are also excluded from the calculation of FFO. As defined by NAREIT, FFO also does not include reductions from asset impairment charges. The Securities and Exchange Commission, however, recommends that FFO include the effect of asset impairment charges, which presentation we have adopted for all historical presentations of FFO. We believe FFO is an indicative measure of our operating performance due to the significance of our hotel real estate assets, and that it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. We also use FFO in our annual budget process.

FFO should not be considered as an alternative to any other performance measures prescribed by GAAP. Although FFO is considered a standard benchmark utilized by the investment community, our FFO may not be comparable to a similarly titled measure reported by other companies.

FFO

We use FFO as a measure of our performance. The following reconciles our GAAP net loss to FFO on a diluted basis (amounts in thousands, except per share amounts):



		Three Months Ended
		March 31

		2004			2003

	Net loss	$	(40,245	)	$	(69,746	)
	Depreciation and amortization of real estate assets		24,502			27,613
	Loss on disposal of assets		6,946			—
	Minority interest to common OP unit holders		(996	)		(1,412	)

FFO		$	(9,793	) ^(A)	$	(43,545	) ^(B)

FFO per share		$	(0.14	) ^(A)	$	(0.96	) ^(B)

Weighted average number of shares of common stock outstanding for loss per share and FFO			68,640			45,548

^(A)
Funds from operations included the effect of asset impairment charges, loss on early extinguishment of debt and related write off of deferred financing fees and related minority amounts recognized during first quarter of 2004, totaling $(12.1) million, or $(0.17) per diluted share. Weighted average number of shares of common stock and common OP units outstanding at March 31, 2004 on a fully diluted basis were 71.8 million.

^(B)
Funds from operations included the effect of asset impairment charges and related minority amounts recognized during the first quarter of 2003, totaling $(54.3) million or $(1.18) per diluted share. Weighted average number of shares of common stock and common OP units outstanding at March 31, 2003 on a fully diluted basis were 49.0 million.

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

Our principal sources of liquidity are cash generated from operations, funds from borrowings, funds from the sales of assets and existing cash on hand. Our principal uses of cash include the funding of working capital obligations, debt service, debt repurchases, and investments in hotels (including capital projects and acquisitions). We do not expect to pay a dividend on our common stock in 2004. We believe we have sufficient cash flow currently, and we expect to have adequate cash flow during the next twelve months in order to fund our operations, capital commitments and debt service obligations. Our current and future liquidity is, however, greatly dependent upon our operating results, which are driven largely by overall economic conditions, and since September 11, 2001 have been heavily affected by geopolitical concerns and other factors affecting business and leisure travel. If general economic conditions are significantly worse than we expect for an extended period, this will likely have a negative effect on our projections of available cash flow and liquidity.

Factors that may influence our liquidity include:

• Factors that affect our results of operations, including general economic conditions, demand for business and leisure travel, public concerns about travel safety related primarily to terrorism and related concerns, capital investments required to maintain our property’s competitive position and other operating risks described under the caption, “Risk Factors — Operating Risks” in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2003;

• Factors that affect our access to bank financing and the capital markets, including operational risks, high leverage, covenant compliance, interest rate fluctuations, and other risks described under the caption “Risk Factors — Financing Risks” in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2003; and

• Other factors described previously under the caption, “Cautionary Statement Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.

We generally intend to hold cash balances of $40 million to $50 million in our operating accounts as a hedge against economic and geopolitical uncertainties, as well as to provide for our recurring cash requirements. We established a new $50 million secured revolving bank line in December 2003, maturing in December 2006, which is fully available and will increase our flexibility in managing our liquidity.

As part of our strategy to reduce our leverage, during fiscal 2004, we have retired $49.2 million of our senior subordinated notes by issuing 8,138,727 shares of common stock through May 5, 2004. In addition, as of May 5, 2004, we have purchased from available cash $85.1 million of our senior unsecured notes, including $25.8 million of the 10.5% notes, $19.5 million of the 9% notes and $39.8 million of the 9.125% notes. Following these exchanges and the repurchases, we had as of May 5, 2004, approximately $34.2 million of outstanding senior subordinated notes due 2007 and $864.9 million of outstanding senior unsecured notes. We expect to retire the remaining senior subordinated notes due 2007 by the end of the third quarter of 2004.

On April 23, 2004, we announced an agreement with an underwriter to issue and sell 12.0 million shares of common stock at a price to the public of $6.25 per share pursuant to our effective shelf registration statement filed under the Securities Act of 1933. In addition, the underwriter was granted an over-allotment option to purchase up to an additional 1.8 million shares, which expires on May 23, 2004. The offering closed on April 28, 2004 with net proceeds of approximately $72.5 million. If the over-allotment were to be exercised in full by the underwriter an additional $10.9 million would be realized.

In April 2004, we signed a definitive agreement to acquire the four-star, four-diamond rated Ritz-Carlton, Pentagon City in Arlington, Virginia for $93 million. The 366-room luxury hotel will be operated by The Ritz-Carlton Hotel Company. The transaction is expected to close during the second quarter, subject to customary closing conditions. The hotel features nearly 18,000 square feet of meeting space, which can accommodate meetings of up to 900 guests. We expect to partially fund this acquisition through the assumption of a mortgage to take advantage of the current low interest rate environment.

Sources and Uses of Cash

The following table shows our consolidated cash flows, generated by (used in) our various activities, for the quarter ended March 31 (in thousands):


	2004			2003			2004 vs 2003

Operating activities	$	(2,636	)	$	(10,229	)	$	7,593
Investing activities		44,901			44,125			776
Financing activities		(78,022	)		(2,030	)		(75,992	)
Cash and cash equivalents, end of period — unrestricted		194,977			65,488			129,489

Our operating results and the amount of cash generated by our hotel operations were adversely affected beginning in late 2001 by a general downturn in the economy compounded by the events of September 11, 2001 and have continued to be negatively affected by the reduction in travel resulting from economic conditions, geopolitical events, war, the continued threat of domestic terrorism, and other factors affecting business and leisure travel. Cash paid for interest decreased $3.2 million for the three months ended March 31, 2004 as compared to the three months ended March 31, 2003 mainly due our to repurchases of debt, resulting in a $125.2 million lower total debt balance at March 31, 2004 as compared to March 31, 2003.

Our investing activities provided a net $44.9 million of cash during the quarter ended March 31, 2004, resulting primarily from:

• $74.1 million in proceeds from the sale of 11 non-core hotel assets; partially offset by

• $23.7 million in capital expenditures (including $0.75 million of capitalized interest);

• $3.3 million in costs associated with our asset disposition program; and

• $2.1 million increase in cash restricted for mortgage escrows.

Our investing activities provided a net $44.1 million of cash during the quarter ended March 31, 2003, resulting primarily from:

• $42.1 million from Interstate Hotels for the payment of a note receivable; and

• $12.7 million of proceeds from the sale of one hotel, partially offset by

• $8.6 million of hotel capital expenditures (including $0.78 million of capitalized interest).

We used a net $78.0 million of cash from financing activities during the quarter ended March 31, 2004 due mainly to repayments and repurchases of debt. We used $2.0 million of cash in financing activities during the quarter ended March 31, 2003 due mainly to the repayment of our long-term debt obligations.

We must distribute to stockholders at least 90% of our REIT taxable income, excluding net capital gains, to preserve the favorable tax treatment accorded to REITs under the Internal Revenue Code. Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet the Internal Revenue Code requirements. In that event, we would seek to borrow additional funds or sell additional non-core assets for cash, or both, to the extent necessary to obtain cash sufficient to make the distributions required to retain our qualification as a REIT. Any future distributions will be at the discretion of our board of directors and will be determined by factors including our operating results, restrictions imposed by our borrowing agreements, capital expenditure requirements, the economic outlook, the distribution requirements for REITs under the Internal Revenue Code and such other factors as our board of directors deems relevant. Our senior unsecured notes indenture and our senior credit facility permit the payment of dividends in order to maintain REIT qualification even if we fall below a 2 to 1 fixed charge coverage ratio. However, our senior subordinated notes indenture is more restrictive in that it permits the payment of dividends only if we exceed the 2 to 1 fixed charge coverage ratio. As of March 31, 2004, our fixed charge coverage ratio was significantly below 2 to 1. The timing and amount of any future distributions is dependent upon these factors, and we cannot provide assurance that any such distributions will be made in the future. We do not expect to pay a dividend on our common stock in 2004.

Long-Term Debt

Long-term debt consisted of the following (in thousands):


	March 31,			December 31,
	2004			2003

Senior unsecured notes due 2011 — 9.125%	$	364,665		$	400,000
Senior unsecured notes due 2008 — 9.0%		282,000			300,000
Senior unsecured notes due 2009 — 10.5%		231,787			250,000
Secured facility, due 2009		307,566			309,035
Secured facility, due 2013		100,397			100,765
Convertible subordinated notes		173,705			173,705
Senior subordinated notes		45,438			83,438
Mortgage debt		26,546			27,011
Unamortized issue discount		(4,826	)		(5,926	)

	$	1,527,278		$	1,638,028

LIBOR plus 444 basis points. Our overall weighted average interest rate is currently 8.5% after giving effect to the interest rate swap.

Senior unsecured notes. During the three months ended March 31, 2004, we repurchased from available cash approximately $71.5 million of our senior unsecured notes, including approximately $18.0 million of the 9.0% notes due 2008, approximately $35.3 million of the 9.125% notes due 2011 and approximately $18.2 million of the 10.5% notes due 2009. We recorded a loss on early extinguishment of debt of $4.6 million and wrote off deferred financing costs of $0.8 million related to these repurchases. The write-off of deferred financing costs is included in depreciation and amortization expense on the accompanying consolidated statements of operations. As of May 5, 2004, we had purchased an additional $7.6 million of our 10.5% notes due 2009, $1.5 million of our 9% notes due 2008, and $4.5 million of our 9.125% notes due 2011, and recorded an additional loss on early extinguishment of debt of approximately $1.0 million.

Secured facilities. On September 26, 2003, as permitted by the indentures to our senior unsecured notes and senior subordinated notes, we completed a $101 million commercial mortgage-backed securities financing, secured by a portfolio of four hotels. The loan carries a fixed annual interest rate of 6.88% and matures in 2013. The proceeds will be used to repay debt carrying higher interest rates, or to fund capital expenditures or acquisitions to the extent that higher interest rate debt cannot be acquired at attractive prices.

triggered in October 2002 and will be effective until the hotels generate the minimum cash flow required for two consecutive quarters, at which time the cash being held in escrow will be released to us. Approximately $32.4 million and $27.2 million of cash was held in escrow under this provision as of March 31, 2004 and December 31, 2003, respectively. In July 2003, we signed an amendment to the loan agreement that permits the release of cash placed in escrow for all capital expenditures incurred on the 19 encumbered properties on or after April 1, 2003. Although the servicer will continue to retain in escrow any excess cash from the encumbered hotels, they will release cash for all capital expenditures we have incurred from April 1, 2003 through the date of the amendment and future capital expenditures we incur on the 19 properties. Escrowed funds totaling approximately $23.6 million were available to fund capital expenditures under this provision as of March 31, 2004.

Convertible subordinated notes. On July 1, 2003, we completed an offering of $170 million aggregate principal amount of 9.5% convertible subordinated notes due 2010. These notes are convertible into our common stock at any time prior to or at maturity, April 1, 2010 at a conversion price of $10.18 per share (equal to a conversion rate of 98.2318 shares per $1,000 principal amount of notes).

Senior subordinated notes. The notes are unsecured obligations due in 2007, and provide for semi-annual payments of interest each February 15 and August 15 at an annual rate of 8.75%. The related indenture contains various restrictive covenants, which are similar to those in our senior unsecured notes.

The senior subordinated notes, plus accrued and unpaid interest at the redemption date, are subject to redemption at our option. Under the indenture governing these notes, the redemption price for redemptions occurring through August 15, 2004 will be 101.458% of the principal amount, and for redemptions occurring after August 15, 2004, the redemption price will be 100.000% of the principal amount.

Asset Acquisitions

One of our key strategies includes the acquisition of high quality, upscale full-service hotels strategically located in major urban markets or destination resorts. Our acquisitions may involve management contracts with hotel brand owners where our long-term investment focus makes us a preferred owner. We intend to acquire assets with strong existing cash flow and use moderate or no leverage in the near term to finance these potential acquisitions, thereby enabling us to improve our overall leverage and interest coverage levels. In pursuing this strategy, we may be somewhat limited by the terms of our senior note indentures, which limit our ability to obtain financing beyond certain limited exceptions (including up to $250 million of mortgage indebtedness, $50 million of general indebtedness and borrowings to the extent capacity exists within unrestricted subsidiaries) to acquire assets (as we are below the required fixed charge coverage ratio of 2 to 1). In order to incur additional indebtedness beyond that permitted by those limited exceptions, we would have to comply with the 2 to 1 fixed charge coverage ratio test on a pro forma basis after incurring the indebtedness and applying its proceeds. As of March 31, 2004, our fixed charge coverage ratio was significantly below 2 to 1.

As part of our asset acquisition strategy, in April 2004, we signed a definitive agreement to acquire the four-star, four-diamond rated Ritz-Carlton, Pentagon City in Arlington, VA for $93 million. The 366-room luxury hotel will be operated by The Ritz-Carlton Hotel Company. The transaction is expected to close during the

second quarter, subject to customary closing conditions. The hotel features nearly 18,000 square feet of meeting space, which can accommodate meetings of up to 900 guests. We expect to partially fund this acquisition through the assumption of a mortgage to take advantage of the current low interest rate environment.

We have an active pipeline of acquisition opportunities, but we will continue to be highly selective, focusing primarily on larger properties located in major urban markets or high-end resort destinations with strong brand affiliations and significant meeting space.

Asset Dispositions

During 2003, we began executing one of our key short-term strategies, which is to dispose of selected non-core assets in order to begin repositioning our portfolio into one generally consisting of larger assets with significant meeting space in urban or high-end resort locations. Many of these non-core assets were acquired as part of portfolios of assets.

We have sold 26 hotels in our disposition program, 11 of which were sold during the first quarter of 2004 for $74.1 million. Two additional assets have been sold in the second quarter of 2004 for $18 million. We have six assets remaining in our non-core disposition program with expected gross proceeds totalling $45 million to $50 million.

As a result of a continuing review of assets in our disposition program, we recorded an impairment charge in the first quarter of $1.2 million with respect to assets not classified as held for sale and $3.8 million with respect to assets held for sale. The impairment charge is based on our estimates of the fair value of the disposition properties. These estimates require us to make assumptions about the disposition prices that we expect to realize for each property as well as the timing of a potential disposition. In making these estimates, we consider the operating results of the assets, the market for comparable properties, and quotes from brokers, among other information. In nearly all cases, our estimates have reflected the results of an extensive marketing effort and negotiations with prospective buyers. Actual results could differ materially from these estimates.

We will continue to analyze certain hotels as to whether we should recycle into higher yielding investments. Any dispositions of additional assets may result in further impairment charges in future periods, if and when such transactions might be undertaken.

We may be obligated to pay Interstate Hotels termination fees of up to a maximum of approximately $11.1 million with respect to the 28 properties that we have sold since January 1, 2003. In addition, as we dispose of the six remaining assets in our disposition program, we may incur termination obligations due to Interstate Hotels of up to a maximum of approximately $4.3 million, assuming the disposition of all six of the properties in 2004 and assuming buyers of our hotel properties elect to have the properties managed by parties other than Interstate Hotels or do not assume the obligation as part of the disposition transaction. Any such obligation would affect the calculation of the final gain or loss on the disposition of a particular asset, since in accordance with current accounting guidance, the obligation is not recognized until such time as the asset disposition is complete and a termination notice is provided to Interstate Hotels. At that time, the recognition of any termination obligation will be included in discontinued operations. Any obligation due under the termination provisions of the contract is payable over a period of 30 months after termination. Termination fees payable to Interstate Hotels may be reduced by amounts paid under replacement management contracts. Negotiations with Interstate Hotels are ongoing with respect to our hotel management agreements, including the method of calculation for the incentive fee and termination fees.

Capital Expenditures

We make ongoing capital expenditures in order to keep our hotels competitive in their markets and to comply with franchise obligations. We fund our capital expenditures primarily from cash generated from operations and existing cash on hand, and intend to use a portion of the proceeds from the sales of non-core assets to provide capital for renovation work. We invested $23.7 million for ongoing capital expenditures during the quarter ended March 31, 2004. We have initiated an aggressive renovation program for our core assets and anticipate investing a total of $125 million on capital expenditures in 2004. The emphasis will be on completing these projects on budget with minimal disruptions to operations. We will focus on complete room

and facility renovations, eliminating to the degree possible, piecemeal work where the typical consumer might not ascribe value to the improvements. We believe we are timing this work appropriately to take full advantage of the anticipated industry recovery. The properties we are now marketing for sale typically have higher per room capital expenditure requirements than our core assets. Sales of these properties will allow us to focus our capital spending dollars in the future on our core portfolio. We expect to continually review our portfolio with a goal of recycling capital out of lower yielding investments into higher yielding opportunities.

OTHER FINANCIAL INFORMATION

Critical Accounting Policies

Our consolidated financial statements include the accounts of all wholly-owned and majority-owned subsidiaries. Preparing financial statements in conformity with accounting principles generally accepted in the United States requires us 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. On an ongoing basis, we evaluate our estimates and judgments, including those related to the impairment of long-lived assets and the recording of certain accrued liabilities. Some of our estimates are material to the financial statements. These estimates are therefore particularly sensitive as future events could cause the actual results to be significantly different from our estimates.

Our critical accounting policies include the accounting for the impairment or disposal of long-lived assets and the classification of properties as held for sale. Our hotel properties generally fall into two categories, held for use and held for sale. Our held for use properties may include those that we are actively marketing. Until such time as our criteria for held for sale are met, as described below in further detail, we maintain classification as an operational asset. At the time we determine an asset to meet the criteria noted below, we reclassify the asset and its operations to discontinued operations. All of our properties are subject to an impairment analysis whenever events or changes in circumstances indicate that the carrying value may be impaired.

Accounting for the impairment or disposal of long-lived assets

We apply the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which require the current and prior period operating results of any asset that has been classified as held for sale or had been disposed of on or after January 1, 2002 and where we have no continuing involvement, including any gain or loss recognized, to be recorded as discontinued operations.

Classification of properties as held for sale

We classify the properties we are actively marketing as held for sale once all of these conditions are met:

We carry properties held for sale at the lower of their carrying values or estimated fair values less costs to sell. We cease depreciation at the time the asset is classified as held for sale.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

We have future long-term debt and ground lease obligations related to our consolidated entities and properties. As of March 31, 2004, we were not involved in any other off-balance sheet arrangements.

Our taxable subsidiaries are parties to management agreements with a subsidiary of Interstate Hotels to manage all of our hotels. Under these management agreements, the taxable subsidiaries pay a management fee for each property to a subsidiary of Interstate Hotels. The taxable subsidiaries in turn make rental payments to our operating partnership under the participating leases. Under the management agreements, the base management fee is 2.5% of total hotel revenue, plus incentive payments based on meeting performance thresholds that could total up to an additional 1.5% of total hotel revenue. The agreements generally have initial terms of 10 years with three renewal periods of five years each at the option of Interstate Hotels, subject to some exceptions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

In early April 2004, we entered into an interest rate swap on our secured facility due 2009, effectively converting the interest the facility bears from a fixed rate to a floating rate. The new floating rate is LIBOR plus 444 basis points.

As a result of our interest rate swap, we are exposed to market risks related to changes in interest rates. In the future, we intend to manage our interest rate exposure using a mix of fixed and floating interest rate debt. An increase of 0.5% in interest rates would result in an increase in annual interest expense of approximately $1.5 million.

Approximately 20% of our outstanding debt is now variable rate with the remaining 80% of debt at fixed rates of interest.

Foreign Currency Risk

Our only foreign currency exchange rate exposure at March 31, 2004 was the Canadian dollar. Foreign currency risk associated with this exposure was not significant, as we have one hotel remaining in Canada. This Canadian hotel is included in our disposition program, and is classified as held for sale.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and regulations, and that the information is accumulated and communicated to our management, including our chief executive officer and chief financial and chief accounting officer, as appropriate, to allow timely decisions regarding required disclosures based closely on the definition of “disclosure controls and procedures” in Rule 13a-1(c) of the Securities Exchange Act of 1934. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, we have investments in certain unconsolidated entities. As we do not control or manage these entities, our disclosure controls and procedures with respect to these entities are substantially more limited than those we maintain with respect to our consolidated subsidiaries.

As of March 31, 2004, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer, our chief financial officer, and our chief accounting officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, we concluded that our disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting in the first quarter of 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a.) Exhibits


Exhibit
No.			Description of Document

	3	.1	Second Articles of Amendment and Restatement of Incorporation of the Registrant (incorporated by reference to Exhibit 3.4 to our Registration Statement on Form S-11 (No. 333-4568), and filed with the Commission on July 24, 1996).
	3	.1.1	Articles of Amendment of Second Articles of Amendment and Restatement of Incorporation dated August 11, 2000 (incorporated by reference to Exhibit 3.1.1 to our annual report on Form 10-K for the year ended December 31, 2001, and filed with the Commission on March 6, 2002).
	3	.1.2	Articles of Amendment of Second Articles of Amendment and Restatement of Incorporation dated June 30, 2001 (incorporated by reference to Exhibit 3.1.2 to our annual report on Form 10-K for the year ended December 31, 2001, and filed with the Commission on March 6, 2002).
	3	.2	Amended and Restated By-laws of the Registrant (incorporated by reference to Exhibit 3.2 to our Registration Statement No. 333-66229, and filed with the Commission on October 28, 1998).
	3	.2.1	Amended and Restated By-laws of the Registrant dated and effective April 22, 2003 (incorporated by reference to Exhibit 3.2.1 to our quarterly report on Form 10-Q for the quarter ended March 31, 2003, and filed with the Commission on May 14, 2003).
	10	.4.2	Second Amendment to the MeriStar Hospitality Corporation Incentive Plan.*
	13		Financial Statements of MeriStar Hospitality Operating Partnership, L.P. as of and for the three months ended March 31, 2004.*
	31	.1	Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer.*
	31	.2	Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer.*
	32	.1	Sarbanes-Oxley Act Section 906 Certification of Chief Executive Officer.*
	32	.2	Sarbanes-Oxley Act Section 906 Certification of Chief Financial Officer.*
	99	.1	Consolidating Financial Information of MeriStar Hospitality Operating Partnership, L.P.*

* Filed herewith

(b.) Reports on Form 8-K

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MERISTAR HOSPITALITY CORPORATION

By: /s/ PAUL W. WHETSELL

Paul W. Whetsell

Chief Executive Officer

Dated: May 10, 2004

30 EX-10.4.2 2 w97027exv10w4w2.htm EXHIBIT 10.4.2 exv10w4w2

Exhibit 10.4.2

SECOND AMENDMENT TO THE
MERISTAR HOSPITALITY CORPORATION
INCENTIVE PLAN

Pursuant to the approval by the Board of Directors of MeriStar Hospitality Corporation (the “Company”) and the Company’s shareholders at the Company’s 2002 Annual Meeting, the MeriStar Hospitality Corporation Incentive Plan (the “Plan”) is amended, effective June 9, 2003, by deleting the language contained in Section 7.1 in its entirety and by replacing such language with the following text:

Award. In accordance with the provisions of Article IV, the Committee will designate each individual to whom a Stock Award is to be made and will specify the number of shares of Common Stock covered by such awards; provided, however, that no individual may receive Stock Awards with respect to more than 250,000 shares of Common Stock in any calendar year.

IN WITNESS WHEREOF, MeriStar Hospitality Corporation has caused this amendment to the Plan to be duly executed in its corporate name this 9th day of June, 2003.

MERISTAR HOSPITALITY CORPORATION

/s/ Jerome J. Kraisinger

Jerome J. Kraisinger
Executive Vice President, General Counsel, and Secretary

EX-13 3 w97027exv13.htm EXHIBIT 13 exv13

Exhibit 13

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(Dollars and units in thousands)


	March 31,
	2004			December 31,
	(Unaudited)			2003

ASSETS
Property and equipment	$	2,437,395		$	2,481,752
Accumulated depreciation		(465,360	)		(446,032	)

		1,972,035			2,035,720
Assets held for sale		39,274			51,169
Investment in affiliate		15,000			15,000
Prepaid expenses and other assets		40,565			47,033
Accounts receivable, net of allowance for doubtful accounts of $2,751 and $2,040		69,076			64,709
Restricted cash		44,656			42,523
Cash and cash equivalents – unrestricted		194,969			230,876

	$	2,375,575		$	2,487,030


LIABILITIES AND PARTNERS’ CAPITAL
Long-term debt	$	1,308,534		$	1,381,555
Notes payable to MeriStar Hospitality Corporation		218,744			256,473
Accounts payable and accrued expenses		88,439			80,014
Accrued interest		37,449			46,813
Due to Interstate Hotels & Resorts		17,133			16,411
Other liabilities		11,556			11,045

Total liabilities		1,681,855			1,792,311

Minority interests		2,492			2,496
Redeemable OP units at redemption value, 3,491 and 3,510 outstanding		36,770			35,926
Partners’ capital – Common OP Units, 73,101 and 66,790 issued and outstanding		654,458			656,297

	$	2,375,575		$	2,487,030

See accompanying notes to the unaudited consolidated financial statements.

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(Dollars in thousands, except per unit amounts)



				Three Months
				Ended March 31,

				2004			2003

Revenue:
	Hotel operations:
		Rooms		$	135,666		$	131,567
		Food and beverage			51,879			52,176
		Other hotel operations			17,043			16,647
	Office rental, parking and other revenue				2,970			3,263

Total revenue					207,558			203,653

Hotel operating expenses:
		Rooms			33,224			31,209
		Food and beverage			38,881			37,566
		Other hotel operating expenses			10,363			9,505
Office rental, parking and other expenses					585			630
Other operating expenses:
		General and administrative			38,021			34,681
		Property operating costs			31,488			29,505
		Depreciation and amortization			25,760			23,881
		Property taxes, insurance and other			17,061			17,193
		Loss on asset impairments			1,238			—

Operating expenses					196,621			184,170

Operating income					10,937			19,483
Minority interest					4			(11	)
Interest expense, net					(34,380	)		(34,718	)
Loss on early extinguishments of debt					(5,923	)		—

Loss before income taxes and discontinued operations					(29,362	)		(15,246	)
Income tax benefit					323			128

Loss from continuing operations					(29,039	)		(15,118	)

Discontinued operations:
	Loss from discontinued operations before income tax benefit				(11,980	)		(58,096	)
	Income tax benefit				132			16

Loss from discontinued operations					(11,848	)		(58,080	)

Net loss				$	(40,887	)	$	(73,198	)

	Preferred distributions			$	(141	)	$	(141	)

	Net loss applicable to common unitholders			$	(41,028	)	$	(73,339	)

	Net loss applicable to general partner unitholders			$	(39,250	)	$	(68,125	)

	Net loss applicable to limited partner unitholders			$	(1,778	)	$	(5,214	)


Basic and Diluted Loss per unit:
		Loss from continuing operations		$	(0.41	)	$	(0.31	)
		Loss from discontinued operations			(0.16	)		(1.19	)

			Net loss	$	(0.57	)	$	(1.50	)

See accompanying notes to the unaudited consolidated financial statements.

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Dollars in thousands)



				Three Months
				Ended March 31,

				2004			2003

Operating activities:
	Net loss			$	(40,887	)	$	(73,198	)
	Adjustments to reconcile net loss to net cash used in by operating activities:
		Depreciation and amortization			26,702			28,706
		Loss on asset impairments			5,011			56,677
		Loss on sale of assets, before tax effect			6,946			—
		Loss on early extinguishments of debt			5,923			—
		Minority interests			(4	)		11
		Amortization of unearned stock-based compensation			587			976
		Change in value of interest rate swaps			—			(2,055	)
		Deferred income taxes			(358	)		(682	)
		Changes in operating assets and liabilities:
			Accounts receivable		(4,367	)		(12,937	)
			Prepaid expenses and other assets		4,920			1,416
			Due from/to Interstate Hotels & Resorts		(5,461	)		93
			Accounts payable, accrued expenses, accrued interest and other liabilities		(1,648	)		(9,236	)

Net cash used in operating activities					(2,636	)		(10,229	)

Investing activities:
	Capital expenditures for property and equipment				(23,737	)		(8,622	)
	Proceeds from sales of assets				74,075			12,650
	Payments from Interstate Hotels & Resorts				—			42,052
	Increase in restricted cash				(2,133	)		(1,656	)
	Costs associated with disposition program and other, net				(3,304	)		(299	)

Net cash provided by investing activities					44,901			44,125

Financing activities:
	Prepayment on long-term debt				(75,497	)		—
	Scheduled payments on long-term debt				(2,307	)		(1,889	)
	Distributions to minority investors				(141	)		(141	)
	Other				(77	)		—

Net cash used in financing activities					(78,022	)		(2,030	)

Effect of exchange rate changes on cash and cash equivalents					(150	)		(274	)

Net (decrease) increase in cash and cash equivalents					(35,907	)		31,592
Cash and cash equivalents, beginning of period					230,876			33,889

Cash and cash equivalents, end of period				$	194,969		$	65,481

Supplemental Cash Flow Information
Cash paid for interest and income taxes:
	Interest, net of capitalized interest			$	43,755		$	46,989
	Income taxes			$	275		$	207
Non-cash investing and financing activities:
	Notes payable to MeriStar Hospitality redeemed in exchange for Common OP Units			$	38,000		$	—
	Redemption of OP units			$	20		$	18,109

See accompanying notes to the unaudited consolidated financial statements.

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004

1. Organization

MeriStar Hospitality Operating Partnership, L.P. is the subsidiary operating partnership of MeriStar Hospitality Corporation (“MeriStar Hospitality”), which is a real estate investment trust, or REIT. We own a portfolio of primarily upper upscale, full-service hotels and resorts in the United States and one in Canada. Our portfolio is diversified geographically as well as by franchise and brand affiliations. As of March 31, 2004, we owned 81 hotels with 22,236 rooms, all of which were leased by our taxable subsidiaries and managed by Interstate Hotels & Resorts, Inc. (“Interstate Hotels”). Of our 81 hotels at March 31, 2004, eight were included in our non-core disposition program. Two of these assets with 371 total rooms were sold during the second quarter of 2004.

2. Summary of Significant Accounting Policies

Held for Sale Properties. We classify the properties we are actively marketing as held for sale once all of the following conditions are met:

We carry properties held for sale at the lower of their carrying values or estimated fair values less costs to sell. We cease depreciation at the time the asset is classified as held for sale.

Impairment or Disposal of Long-Lived Assets. We apply the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which require the current and prior period operating results of any asset that has been classified as held for sale or has been disposed of on or after January 1, 2002 and where we have no continuing involvement to be recorded as discontinued operations. Any gains or losses on final disposition are also included in discontinued operations.

Stock-Based Compensation. We adopted the recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, on January 1, 2003 for new stock options issued under our compensation programs sponsored by MeriStar Hospitality. As permitted by SFAS No. 148, we elected to apply the provisions prospectively, which includes recognizing compensation expense for only those stock options issued in 2003 and after. We apply the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” in accounting for our stock options issued under our compensation programs prior to January 1, 2003. As MeriStar Hospitality granted these stock options at fair market value, no compensation cost has been recognized. For our other equity-based compensation awards, we recognize compensation expense over the vesting period based on the fair market value of the award at the date of grant.



		Three Months
		Ended March 31,

		2004			2003

Net loss, as reported		$	(40,887	)	$	(73,198	)
	Add: Stock-based employee compensation expense included in reported net loss, net of related tax effect		587			929
	Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effect		(651	)		(1,081	)

Net loss, pro forma		$	(40,951	)	$	(73,350	)

Loss per share:
	Basic and diluted, as reported	$	(0.57	)	$	(1.50	)
	Basic and diluted, pro forma	$	(0.57	)	$	(1.50	)

These pro forma compensation costs may not be representative of the actual effects on reported net loss and loss per share in future periods.

3. Comprehensive Loss

Comprehensive loss was $41.2 million and $72.1 million for the three months ended March 31, 2004 and 2003, respectively. Comprehensive loss consisted of net loss ($40.9 million and $73.2 million for the three months ended March 31, 2004 and 2003, respectively) and foreign currency translation adjustments.

4. Property and Equipment

Property and equipment consisted of the following (in thousands):


	March 31,		December 31,
	2004		2003

Land	$	233,272	$	238,772
Buildings and improvements		1,873,018		1,930,155
Furniture, fixtures and equipment		280,150		284,602
Construction-in-progress		50,955		28,223

	$	2,437,395	$	2,481,752

For the three months ended March 31, 2004 and 2003, we capitalized interest of $0.75 million and $0.78 million, respectively.

5. Assets Held for Sale

disposition program did not meet the probability criteria as prescribed by SFAS No. 144 to classify them as held for sale. Assets held for sale consisted of the following (in thousands):


	March 31,			December 31,
	2004			2003

Land	$	3,138		$	5,061
Buildings and improvements		34,822			43,391
Furniture, fixtures and equipment		1,364			2,759
Construction-in-progress		253			1,114

		39,577			52,325
Accumulated depreciation		(303	)		(1,156	)

	$	39,274		$	51,169

6. Investment in Affiliate

7. Long-Term Debt

Long-term debt consisted of the following (in thousands):


		March 31,			December 31,
		2004			2003

Senior unsecured notes due 2011 — 9.125%		$	364,665		$	400,000
Senior unsecured notes due 2008 — 9.0%			282,000			300,000
Senior unsecured notes due 2009 — 10.5%			231,787			250,000
Secured facility, due 2009			307,566			309,035
Secured facility, due 2013			100,397			100,765
Mortgage debt			26,546			27,011
Unamortized issue discount			(4,427	)		(5,256	)

	Long-term debt	$	1,308,534		$	1,381,555

Notes payable to MeriStar Hospitality		$	219,143		$	257,143
Unamortized issue discount			(399	)		(670	)

	Notes payable to MeriStar Hospitality	$	218,744		$	256,473

Total long-term debt and notes payable to MeriStar Hospitality		$	1,527,278		$	1,638,028

Aggregate future maturities as of March 31, 2004 were as follows (in thousands):


2004 (nine months)	$	10,862
2005		10,269
2006		11,125
2007		57,093
2008		292,315
Thereafter		1,145,614

	$	1,527,278

The facility contains financial and other restrictive covenants. Our ability to borrow under this facility is subject to financial covenants, including leverage, fixed charge coverage and interest coverage ratios and minimum net worth requirements. Our compliance with these covenants in future periods will depend substantially upon the financial results of our hotels. The agreement governing our new senior credit facility limits our ability to effect mergers, asset sales and change of control events and limits the payments of dividends other than those required for MeriStar Hospitality to maintain its status as a REIT and our ability to incur additional secured and total indebtedness.

These notes are unsecured obligations of certain subsidiaries of ours, and Meristar Hospitality guarantees payment of principal and interest on the notes. These notes contain various restrictive covenants, limiting our ability to initiate or transact certain business activities if specific financial thresholds are not achieved. One of those thresholds is having a 2 to 1 fixed charge coverage ratio (as defined in the indentures, fixed charges only include interest on debt obligations and preferred equity) in order to enter into certain types of transactions. As of March 31, 2004, our fixed charge coverage ratio was significantly below 2 to 1, and therefore we were not permitted generally to enter into certain transactions, including the repurchases of our common OP units, the issuance of preferred equity, the payment of certain distributions, the incurrence of any additional debt, or the repayment of outstanding debt before it comes due, except as noted below.

Notes payable to MeriStar Hospitality. On July 1, 2003, MeriStar Hospitality completed an offering of $170 million aggregate principal amount of 9.5% convertible subordinated notes due 2010. In conjunction with this transaction, we borrowed $170 million from MeriStar Hospitality under terms matching those of the 9.5% convertible subordinated notes.

The proceeds from the new borrowing were used to repurchase $150.6 million of our $154.3 million 4.75% notes payable to MeriStar Hospitality due 2004, at varying prices, resulting in an aggregate discount of approximately $1.4 million. The remaining proceeds from the issuance were also used to repurchase a portion of our 8.75% notes payable to MeriStar Hospitality due 2007.

The 8.75% notes payable to MeriStar Hospitality due 2007 are unsecured obligations, and provide for semi-annual payments of interest each February 15 and August 15. The related indenture contains various restrictive covenants, which are similar to those in our senior unsecured notes.

During the three months ended March 31, 2004, we acquired $38.0 million of our 8.75% notes payable due to MeriStar Hospitality through the issuance of 6,304,146 common OP units. We recorded a loss on early extinguishment of debt of $1.3 million. In April 2004, we exchanged an additional $11.2 million aggregate principal amount of our 8.75% notes payable due to MeriStar Hospitality for 1,834,582 common OP units.

8. Partnership Units and Minority Interests

OP Units. Our operating partnership agreement provides for five classes of partnership interests: Common OP Units, Class B OP Units, Class C OP Units, Class D OP Units and POPs.

During the three months ended March 31, 2004, we issued 6,304,146 Common OP Units in exchange for the redemption of $38.0 million of our 8.75% notes payable to MeriStar Hospitality due 2007 (see Note 7).

On April 23, 2004, MeriStar Hospitality announced an agreement with an underwriter to issue and sell 12.0 million shares of common stock at a price to the public of $6.25 per share pursuant to its effective shelf registration statement filed under the Securities Act of 1933. In addition, the underwriter was granted an over-allotment option to purchase up to an additional 1.8 million shares which expires on May 23, 2004. The offering closed on April 28, 2004 with net proceeds of $72.5 million. In connection with this transaction, MeriStar L.P. Inc., a wholly-owned subsidiary of MeriStar Hospitality, contributed the net proceeds to us in exchange for the same number of common OP Units. If the over-allotment were to be exercised in full by the underwriter an additional $10.9 million would be realized.

9. Loss Per Unit

The following table presents the computation of basic and diluted loss per unit (in thousands, except per unit amounts):



		Three Months
		Ended March 31,

		2004			2003

Basic and Diluted Loss Per Unit:
	Loss from continuing operations	$	(29,039	)	$	(15,118	)
	Preferred distribution		(141	)		(141	)

	Loss from continuing operations available to common unitholders	$	(29,180	)	$	(15,259	)
	Weighted average number of OP Units outstanding		71,750			49,033

	Basic and diluted loss per unit from continuing operations	$	(0.41	)	$	(0.31	)

10. Commitments and Contingencies


2004 (nine months)	$	1,338
2005		1,746
2006		1,649
2007		1,672
2008		1,672
Thereafter		52,296

	$	60,373

Our obligations under other operating lease commitments, primarily for equipment, are not significant.


2004 (nine months)	$	3,207
2005		2,838
2006		1,943
2007		1,677
2008		992
Thereafter		1,909

	$	12,566

of the six remaining assets in our disposition program, we may incur termination obligations due to Interstate Hotels of up to a maximum of approximately $4.3 million, assuming the disposition of all six of the properties in 2004 and assuming buyers of our hotel properties elect to have the properties managed by parties other than Interstate Hotels or do not assume the obligation as part of the disposition transaction. Any obligation due under the termination provisions of the contract is payable over a period of 30 months after termination. Termination fees payable to Interstate Hotels may be reduced by amounts paid under replacement management contracts. Negotiations with Interstate Hotels are ongoing with respect to our hotel management agreements, including the method of calculation for the incentive fee and termination fees.

11. Acquisitions and Dispositions

Summary financial information included in discontinued operations for these hotels were as follows (in thousands):



	Three Months
	Ended March 31,

	2004			2003

Revenue	$	12,222		$	39,513
Loss on asset impairments		(3,773	)		(56,677	)
Pretax loss from operations		(1,261	)		(1,419	)
Loss on disposal		(6,946	)		—

Loss on disposal resulted primarily from the recognition of termination fees payable to Interstate Hotels with respect to these hotels’ management contracts.

12. Consolidating Financial Statements

Certain of our subsidiaries and MeriStar Hospitality are guarantors of our senior unsecured notes. Certain of our subsidiaries are guarantors of MeriStar Hospitality’s senior subordinated notes. All guarantees are full and unconditional, and joint and several. Exhibit 99.1 to this Quarterly Report on Form 10-Q presents our supplementary consolidating financial statements, including each of our guarantor subsidiaries. This exhibit presents our consolidating balance sheets as of March 31, 2004 and December 31, 2003, consolidating statements of operations for the three months ended March 31, 2004 and 2003, and consolidating statements of cash flows for the three months ended March 31, 2004 and 2003.

14 EX-31.1 4 w97027exv31w1.htm EXHIBIT 31.1 exv31w1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Paul W. Whetsell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MeriStar Hospitality Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2004

/s/ PAUL W. WHETSELL

Paul W. Whetsell

Chief Executive Officer

MeriStar Hospitality Corporation

EX-31.2 5 w97027exv31w2.htm EXHIBIT 31.2 exv31w2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Donald D. Olinger, certify that:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to affect, the registrant’s internal control over financial reporting; and

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2004

/s/ DONALD D. OLINGER

Donald D. Olinger

Executive Vice President and

Chief Financial Officer

MeriStar Hospitality Corporation

EX-32.1 6 w97027exv32w1.htm EXHIBIT 32.1 exv32w1

Exhibit 32.1

SARBANES-OXLEY ACT SECTION 906 CERTIFICATION

In connection with this quarterly report on Form 10-Q of MeriStar Hospitality Corporation (the “Issuer”) for the three months ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul W. Whetsell, Chief Executive Officer of the Issuer, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m or 78o(d)); and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Date: May 10, 2004

/s/ PAUL W. WHETSELL

Paul W. Whetsell

Chief Executive Officer

MeriStar Hospitality Corporation

EX-32.2 7 w97027exv32w2.htm EXHIBIT 32.2 exv32w2

Exhibit 32.2

SARBANES-OXLEY ACT SECTION 906 CERTIFICATIONS

In connection with this quarterly report on Form 10-Q of MeriStar Hospitality Corporation (the “Issuer”) for the three months ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Donald D. Olinger, Chief Financial Officer of the Issuer, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

Date: May 10, 2004

/s/ DONALD D. OLINGER

Donald D. Olinger

Executive Vice President and

Chief Financial Officer

MeriStar Hospitality Corporation

EX-99.1 8 w97027exv99w1.txt EXHIBIT 99.1 . . . EXHIBIT 99.1 MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR NON- MERISTAR HOSPITALITY GUARANTOR SUB 7C, AGH UPREIT, OP, L.P. SUBSIDIARIES LLC LLC ----------- ------------ ----------- ----------- ASSETS Property and equipment 24,325 1,366,908 -- -- Accumulated depreciation (14,395) (258,216) -- -- ---------- ---------- ---------- ---------- 9,930 1,108,692 -- -- Assets held for sale -- 24,446 -- -- Investments in affiliate 2,437,934 8,200 32 2,989 Note receivable from subsidiaries 172,840 -- -- -- Due to/from subsidiaries (932,546) 445,438 -- 74 Prepaid expenses and other assets 29,982 (3,519) -- -- Accounts receivable, net of allowance for doubtful accounts 19,794 806 -- -- Restricted cash 41,059 2,193 -- -- Cash and cash equivalents -- unrestricted 169,032 -- -- -- ---------- ---------- ---------- ---------- 1,948,025 1,586,256 32 3,063 ========== ========== ========== ========== LIABILITIES AND PARTNERS' CAPITAL Long-term debt 871,279 434,476 -- -- Notes payable to MeriStar Hospitality Corporation 218,744 -- -- -- Accounts payable and accrued expenses 16,060 4,489 -- -- Accrued interest 32,410 2,604 -- -- Due to Interstate Hotels & Resorts 12,857 -- -- -- Other liabilities 1,085 -- -- -- ---------- ---------- ---------- ---------- Total liabilities 1,152,435 441,569 -- -- ---------- ---------- ---------- ---------- Minority interests 2,492 -- -- -- Redeemable OP units at redemption value 36,770 -- -- -- Partners' capital 756,328 1,144,687 32 3,063 ---------- ---------- ---------- ---------- 1,948,025 1,586,256 32 3,063 ========== ========== ========== ==========

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 5N, SUB 8A, SUB 8F, SUB 8G, SUB 6H, LLC LLC L.P. LLC L.P. ----------- ----------- ------------ ----------- ------------ ASSETS Property and equipment 4,163 -- 11,502 -- 10,862 Accumulated depreciation (713) -- (2,685) -- (313) ----------- ----------- ------------ ----------- ------------ 3,450 -- 8,817 -- 10,549 Assets held for sale -- -- -- -- -- Investments in affiliate -- -- -- 72 -- Note receivable from subsidiaries -- -- -- -- -- Due to/from subsidiaries 4,541 -- 7,441 9 6,955 Prepaid expenses and other assets (26) -- (44) -- (2) Accounts receivable, net of allowance for doubtful accounts -- -- -- -- -- Restricted cash -- -- 115 -- -- Cash and cash equivalents -- unrestricted -- -- -- -- -- ----------- ----------- ------------ ----------- ------------ 7,965 -- 16,329 81 17,502 =========== =========== ============ =========== ============ LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- -- Accounts payable and accrued expenses 17 -- 1 -- 22 Accrued interest -- -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- -- Other liabilities -- -- -- -- -- ----------- ----------- ------------ ----------- ------------ Total liabilities 17 -- 1 -- 22 ----------- ----------- ------------ ----------- ------------ Minority interests -- -- -- -- -- Redeemable OP units at redemption value -- -- -- -- -- Partners' capital 7,948 -- 16,328 81 17,480 ----------- ----------- ------------ ----------- ------------ 7,965 -- 16,329 81 17,502 =========== =========== ============ =========== ============
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR SUB 8B, SUB 1C, SUB 8E, SUB 7F, LLC L.P. LLC LLC ----------- ------------ ------------ ----------- ASSETS Property and equipment 85,805 26,798 15,549 7,303 Accumulated depreciation (12,861) (6,256) (3,173) (193) ----------- ------------ ------------ ----------- 72,944 20,542 12,376 7,110 Assets held for sale -- -- -- -- Investments in affiliate -- -- -- -- Note receivable from subsidiaries -- -- -- -- Due to/from subsidiaries 29,974 (3,775) 6,943 5,302 Prepaid expenses and other assets (50) (107) (15) (4) Accounts receivable, net of allowance for doubtful accounts -- -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ----------- ------------ ------------ ----------- 102,868 16,660 19,304 12,408 =========== ============ ============ =========== LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 2,561 125 (43) 184 Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ----------- ------------ ------------ ----------- Total liabilities 2,561 125 (43) 184 ----------- ------------ ------------ ----------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital 100,307 16,535 19,347 12,224 ----------- ------------ ------------ ----------- 102,868 16,660 19,304 12,408 =========== ============ ============ ===========

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 5L, SUB 3C, SUB 5R, SUB 6D, SUB 6E, LLC LLC LLC LLC LLC ----------- ----------- ----------- ----------- ----------- ASSETS 11,876 17,504 -- 17,499 45,734 Property and equipment (684) (3,872) -- (3,030) (10,373) Accumulated depreciation ----------- ----------- ----------- ----------- ----------- 11,192 13,632 -- 14,469 35,361 -- -- -- -- -- Assets held for sale -- -- 43 -- -- Investments in affiliate -- -- -- -- -- Note receivable from subsidiaries 4,595 5,694 (43) 8,756 22,955 Due to/from subsidiaries (41) 21 -- (11) (49) Prepaid expenses and other assets -- -- -- 110 -- Accounts receivable, net of allowance for doubtful accounts -- -- -- -- -- Restricted cash -- -- -- -- -- Cash and cash equivalents -- unrestricted ----------- ----------- ----------- ----------- ----------- 15,746 19,347 -- 23,324 58,267 =========== =========== =========== =========== =========== LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- -- Accounts payable and accrued expenses 23 315 -- -- 119 Accrued interest -- -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- -- Other liabilities -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total liabilities 23 315 -- -- 119 ----------- ----------- ----------- ----------- ----------- Minority interests -- -- -- -- -- Redeemable OP units at redemption value -- -- -- -- -- Partners' capital 15,723 19,032 -- 23,324 58,148 ----------- ----------- ----------- ----------- ----------- 15,746 19,347 -- 23,324 58,267 =========== =========== =========== =========== ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR SUB 4E, SUB 1B, SUB 5F, SUB 6G, L.P. LLC L.P. LLC ----------- ----------- ------------ ----------- ASSETS Property and equipment 5,056 18,903 17,559 22,663 Accumulated depreciation (151) (4,192) (394) (5,223) ----------- ----------- ------------ ----------- 4,905 14,711 17,165 17,440 Assets held for sale -- -- -- -- Investments in affiliate -- -- -- -- Note receivable from subsidiaries -- -- -- -- Due to/from subsidiaries 3,513 15,685 12,871 7,726 Prepaid expenses and other assets (27) (48) (99) (18) Accounts receivable, net of allowance for doubtful accounts -- 96 -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ----------- ----------- ------------ ----------- 8,391 30,444 29,937 25,148 =========== =========== ============ =========== LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- 33 -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 95 24 58 28 Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ----------- ----------- ------------ ----------- Total liabilities 95 57 58 28 ----------- ----------- ------------ ----------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital 8,296 30,387 29,879 25,120 ----------- ----------- ------------ ----------- 8,391 30,444 29,937 25,148 =========== =========== ============ ===========

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 8C, SUB 4C, SUB 4H, SUB 7E, SUB 3D, LLC L.P. L.P. LLC LLC ----------- ------------ ------------ ----------- ----------- ASSETS -- -- -- 19,013 22,706 Property and equipment -- -- -- (3,475) (7,229) Accumulated depreciation ----------- ------------ ------------ ----------- ----------- -- -- -- 15,538 15,477 -- -- -- -- -- Assets held for sale -- -- -- -- -- Investments in affiliate -- -- -- -- -- Note receivable from subsidiaries 11,297 -- 3,414 6,206 8,747 Due to/from subsidiaries -- -- -- (12) (24) Prepaid expenses and other assets -- -- -- -- -- Accounts receivable, net of allowance for doubtful accounts -- -- -- -- -- Restricted cash -- -- -- -- -- Cash and cash equivalents -- unrestricted ----------- ------------ ------------ ----------- ----------- 11,297 -- 3,414 21,732 24,200 =========== ============ ============ =========== =========== LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- -- Accounts payable and accrued expenses -- -- -- 61 34 Accrued interest -- -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- -- Other liabilities -- -- -- -- -- ----------- ------------ ------------ ----------- ----------- Total liabilities -- -- -- 61 34 ----------- ------------ ------------ ----------- ----------- Minority interests -- -- -- -- -- Redeemable OP units at redemption value -- -- -- -- -- Partners' capital 11,297 -- 3,414 21,671 24,166 ----------- ------------ ------------ ----------- ----------- 11,297 -- 3,414 21,732 24,200 =========== ============ ============ =========== ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR SUB MERISTAR MERISTAR SUB 1A, 7A JOINT SUB 2B, SUB 3A, LLC VENTURE LLC LLC ---------- ------------- ----------- ------------ ASSETS Property and equipment 8,293 4,898 -- -- Accumulated depreciation -- -- -- -- ---------- ------------ ----------- ------------ 8,293 4,898 -- -- Assets held for sale -- -- -- -- Investments in affiliate -- -- -- -- Note receivable from subsidiaries -- -- -- -- Due to/from subsidiaries 7,690 5,206 (3,579) 4,976 Prepaid expenses and other assets (82) (6) -- -- Accounts receivable, net of allowance for doubtful accounts -- -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ---------- ------------ ----------- ------------ 15,901 10,098 (3,579) 4,976 ========== ============ =========== ============ LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 42 130 (8) -- Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ---------- ------------ ----------- ------------ Total liabilities 42 130 (8) -- ---------- ------------ ----------- ------------ Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital 15,859 9,968 (3,571) 4,976 ---------- ------------ ----------- ------------ 15,901 10,098 (3,579) 4,976 ========== ============ =========== ============

MERISTAR MERISTAR MERISTAR MERISTAR MDV SUB 4A, SUB 4D, SUB 2A, SUB 6L, LIMITED LLC LLC LLC LLC PARTNERSHIP -------- ------------ ------------ ------------ ----------- ASSETS Property and equipment -- -- -- -- 3,877 Accumulated depreciation -- -- -- -- (709) -------- ------------ ------------ ------------ ----------- -- -- -- -- 3,168 Assets held for sale -- -- -- -- -- Investments in affiliate -- -- -- -- -- Note receivable from subsidiaries -- -- -- -- -- Due to/from subsidiaries 7,611 -- (8,096) 20,297 2,619 Prepaid expenses and other assets -- -- -- -- (9) Accounts receivable, net of allowance for doubtful accounts -- -- -- 178 -- Restricted cash -- -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- -- -------- ------------ ------------ ------------ ----------- 7,611 -- (8,096) 20,475 5,778 ======== ============ ============ ============ =========== LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- -- Accounts payable and accrued expenses -- -- (7) -- 100 Accrued interest -- -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- -- Other liabilities -- -- -- -- -- -------- ------------ ------------ ------------ ----------- Total liabilities -- -- (7) -- 100 -------- ------------ ------------ ------------ ----------- Minority interests -- -- -- -- -- Redeemable OP units at redemption value -- -- -- -- -- Partners' capital 7,611 -- (8,089) 20,475 5,678 -------- ------------ ------------ ------------ ----------- 7,611 -- (8,096) 20,475 5,778 ======== ============ ============ ============ ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR SUB 5C, SUB 6J, SUB 1D, SUB 7B, LLC LLC L.P. L.P. ------------ ----------- ------------ ------------ ASSETS Property and equipment -- 19,623 69,021 -- Accumulated depreciation -- (3,914) (12,604) -- ------------ ----------- ------------ ------------ -- 15,709 56,417 -- Assets held for sale -- -- -- 4,586 Investments in affiliate -- -- -- -- Note receivable from subsidiaries -- -- -- -- Due to/from subsidiaries 5,087 8,195 20,621 (3,799) Prepaid expenses and other assets 4 16 (314) (5) Accounts receivable, net of allowance for doubtful accounts (2) -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------------ ----------- ------------ ------------ 5,089 23,920 76,724 782 ============ =========== ============ ============ LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses -- 12 244 540 Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------------ ----------- ------------ ------------ Total liabilities -- 12 244 540 ------------ ----------- ------------ ------------ Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital 5,089 23,908 76,480 242 ------------ ----------- ------------ ------------ 5,089 23,920 76,724 782 ============ =========== ============ ============

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 7D, SUB 7G, SUB 6B, SUB 4I, SUB 5D, LLC LLC LLC L.P. LLC ------------ ------------ ------------ ------------ ------------ ASSETS Property and equipment 52,748 -- 10,965 -- 42,204 Accumulated depreciation (10,180) -- (2,299) -- (8,471) ------------ ------------ ------------ ------------ ------------ 42,568 -- 8,666 -- 33,733 Assets held for sale -- 1,859 -- -- -- Investments in affiliate -- -- -- -- 51,368 Note receivable from subsidiaries -- -- -- -- -- Due to/from subsidiaries 25,750 599 3,204 1,660 (6,285) Prepaid expenses and other assets 154 (5) (8) -- (34) Accounts receivable, net of allowance for doubtful accounts 1,560 -- -- -- -- Restricted cash -- -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ 70,032 2,453 11,862 1,660 78,782 ============ ============ ============ ============ ============ LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- 24,000 Notes payable to MeriStar Hospitality Corporation -- -- -- -- -- Accounts payable and accrued expenses 4,004 140 (44) -- 339 Accrued interest -- -- -- -- -- Due to Interstate Hotels & Resorts (200) -- -- -- -- Other liabilities -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Total liabilities 3,804 140 (44) -- 24,339 ------------ ------------ ------------ ------------ ------------ Minority interests -- -- -- -- -- Redeemable OP units at redemption value -- -- -- -- -- Partners' capital 66,228 2,313 11,906 1,660 54,443 ------------ ------------ ------------ ------------ ------------ 70,032 2,453 11,862 1,660 78,782 ============ ============ ============ ============ ============
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR SUB 5H, SUB 7H, SUB 2D, LLC LLC AGH PSS I, INC. LLC ------------ ------------ --------------- ------------ ASSETS Property and equipment -- -- -- -- Accumulated depreciation -- -- -- -- ------------ ------------ --------------- ------------ -- -- -- -- Assets held for sale -- -- -- -- Investments in affiliate -- -- -- -- Note receivable from subsidiaries -- -- -- -- Due to/from subsidiaries 36,574 9,589 25,570 (4,723) Prepaid expenses and other assets -- -- -- -- Accounts receivable, net of allowance for doubtful accounts 46 -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------------ ------------ --------------- ------------ 36,620 9,589 25,570 (4,723) ============ ============ =============== ============ LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses (2) -- -- (1) Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------------ ------------ --------------- ------------ Total liabilities (2) -- -- (1) ------------ ------------ --------------- ------------ Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital 36,622 9,589 25,570 (4,722) ------------ ------------ --------------- ------------ 36,620 9,589 25,570 (4,723) ============ ============ =============== ============

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 4F, SUB 5K, SUB 5M, SUB 1E, SUB 5O, L.P. LLC LLC L.P. LLC ------------ ------------ ------------ ------------ ------------ ASSETS Property and equipment 32,975 28,423 22,076 -- 8,745 Accumulated depreciation (6,086) (5,530) (2,473) -- (1,201) ------------ ------------ ------------ ------------ ------------ 26,889 22,893 19,603 -- 7,544 Assets held for sale -- -- -- -- -- Investments in affiliate -- -- -- -- -- Note receivable from subsidiaries -- -- -- -- -- Due to/from subsidiaries 4,989 249 8,398 24,352 3,342 Prepaid expenses and other assets 6 (111) (69) -- (23) Accounts receivable, net of allowance for doubtful accounts -- -- -- -- -- Restricted cash -- -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ 31,884 23,031 27,932 24,352 10,863 ============ ============ ============ ============ ============ LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- -- Accounts payable and accrued expenses 75 3,072 49 -- 19 Accrued interest -- -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- -- Other liabilities -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Total liabilities 75 3,072 49 -- 19 ------------ ------------ ------------ ------------ ------------ Minority interests -- -- -- -- -- Redeemable OP units at redemption value -- -- -- -- -- Partners' capital 31,809 19,959 27,883 24,352 10,844 ------------ ------------ ------------ ------------ ------------ 31,884 23,031 27,932 24,352 10,863 ============ ============ ============ ============ ============
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR SUB 4B, SUB 2C, SUB 4G, SUB 3B, L.P. LLC L.P. LLC ------------ ------------ ------------ ----------- ASSETS Property and equipment -- -- 8,730 -- Accumulated depreciation -- -- -- -- ------------ ------------ ------------ ----------- -- -- 8,730 -- Assets held for sale -- 8,383 -- -- Investments in affiliate -- -- -- -- Note receivable from subsidiaries -- -- -- -- Due to/from subsidiaries 1,728 5,416 8,877 9,351 Prepaid expenses and other assets -- (258) (136) (3) Accounts receivable, net of allowance for doubtful accounts -- 6 -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------------ ------------ ------------ ----------- 1,728 13,547 17,471 9,348 ============ ============ ============ =========== LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- 19,458 -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses -- 138 83 22 Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------------ ------------ ------------ ----------- Total liabilities -- 19,596 83 22 ------------ ------------ ------------ ----------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital 1,728 (6,049) 17,388 9,326 ------------ ------------ ------------ ----------- 1,728 13,547 17,471 9,348 ============ ============ ============ ===========

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 5G, SUB 5P, SUB 5J, SUB 5Q, SUB 5A, L.P. LLC LLC LLC LLC ------------ ------------ ------------ ------------ ------------ ASSETS Property and equipment 166,853 39 111,524 16,794 35,922 Accumulated depreciation (32,075) (24) (18,231) (2,409) (10,955) ------------ ------------ ------------ ------------ ------------ 134,778 15 93,293 14,385 24,967 Assets held for sale -- -- -- -- -- Investments in affiliate -- -- -- -- 4,627 Note receivable from subsidiaries -- -- -- -- -- Due to/from subsidiaries 42,098 3,254 23,448 5,146 7,469 Prepaid expenses and other assets (110) (6) (538) (79) (44) Accounts receivable, net of allowance for doubtful accounts -- 38 -- -- -- Restricted cash -- -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ 176,766 3,301 116,203 19,452 37,019 ============ ============ ============ ============ ============ LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- 23,609 Notes payable to MeriStar Hospitality Corporation -- -- -- -- -- Accounts payable and accrued expenses 291 -- 285 (161) 175 Accrued interest -- -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- -- Other liabilities -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Total liabilities 291 -- 285 (161) 23,784 ------------ ------------ ------------ ------------ ------------ Minority interests -- -- -- -- -- Redeemable OP units at redemption value -- -- -- -- -- Partners' capital 176,475 3,301 115,918 19,613 13,235 ------------ ------------ ------------ ------------ ------------ 176,766 3,301 116,203 19,452 37,019 ============ ============ ============ ============ ============
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR SUB 8D, SUB 4J, HOTEL LESSEE, LLC LLC INC. ------------ ------------ -------------- ASSETS Property and equipment -- 38,809 3,148 Accumulated depreciation -- (7,441) (3,330) ------------ ------------ -------------- -- 31,368 (182) Assets held for sale -- -- -- Investments in affiliate -- -- -- Note receivable from subsidiaries -- -- -- Due to/from subsidiaries 16,379 7,644 (12,678) Prepaid expenses and other assets -- (28) 16,346 Accounts receivable, net of allowance for doubtful accounts 359 (12) 46,097 Restricted cash -- -- 1,289 Cash and cash equivalents -- unrestricted -- -- 25,937 ------------ ------------ -------------- 16,738 38,972 76,809 ============ ============ ============== LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- 108,519 Notes payable to MeriStar Hospitality Corporation -- -- -- Accounts payable and accrued expenses -- 93 54,636 Accrued interest -- -- 2,435 Due to Interstate Hotels & Resorts -- -- 4,476 Other liabilities -- -- 10,471 ------------ ------------ -------------- Total liabilities -- 93 180,537 ------------ ------------ -------------- Minority interests -- -- -- Redeemable OP units at redemption value -- -- -- Partners' capital 16,738 38,879 (103,728) ------------ ------------ -------------- 16,738 38,972 76,809 ============ ============ ==============

GUARANTOR SUBSIDIARIES TOTAL TOTAL ELIMINATIONS CONSOLIDATED ------------ ------------ ------------ ASSETS Property and equipment 1,046,162 -- 2,437,395 Accumulated depreciation (192,749) -- (465,360) ------------ ------------ ------------ 853,413 -- 1,972,035 Assets held for sale 14,828 -- 39,274 Investments in affiliate 59,131 (2,490,265) 15,000 Note receivable from subsidiaries -- (172,840) -- Due to/from subsidiaries 487,108 -- -- Prepaid expenses and other assets 14,102 -- 40,565 Accounts receivable, net of allowance for doubtful accounts 48,476 -- 69,076 Restricted cash 1,404 -- 44,656 Cash and cash equivalents -- unrestricted 25,937 -- 194,969 ------------ ------------ ------------ 1,504,399 (2,663,105) 2,375,575 ============ ============ ============ LIABILITIES AND PARTNERS' CAPITAL Long-term debt 175,619 (172,840) 1,308,534 Notes payable to MeriStar Hospitality Corporation -- -- 218,744 Accounts payable and accrued expenses 67,890 -- 88,439 Accrued interest 2,435 -- 37,449 Due to Interstate Hotels & Resorts 4,276 -- 17,133 Other liabilities 10,471 -- 11,556 ------------ ------------ ------------ Total liabilities 260,691 (172,840) 1,681,855 ------------ ------------ ------------ Minority interests -- -- 2,492 Redeemable OP units at redemption value -- -- 36,770 Partners' capital 1,243,708 (2,490,265) 654,458 ------------ ------------ ------------ 1,504,399 (2,663,105) 2,375,575 ============ ============ ============
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
MERISTAR NON- MERISTAR AGH HOSPITALITY GUARANTOR SUB 7C, UPREIT, OP, L.P. SUBSIDIARIES LLC LLC ----------- ------------ ------------ ----------- ASSETS Property and equipment 18,987 1,407,432 -- -- Accumulated depreciation (13,219) (246,091) -- -- ---------- ---------- ---------- ---------- 5,768 1,161,341 -- -- Assets held for sale -- 4,273 -- -- Investments in affiliate 2,208,641 8,200 32 2,989 Due from/to subsidiaries (838,258) 397,837 -- 133 Note receivable from subsidiaries 120,855 -- -- -- Prepaid expenses and other assets 34,658 (1,612) -- -- Accounts receivable, net of allowance for doubtful accounts 18,220 956 -- -- Restricted cash 39,932 2,476 -- -- Cash and cash equivalents -- unrestricted 218,646 -- -- -- ---------- ---------- ---------- ---------- 1,808,462 1,573,471 32 3,122 ========== ========== ========== ========== LIABILITIES AND PARTNERS' CAPITAL Long-term debt 917,232 436,778 -- -- Notes payable to MeriStar Hospitality Corporation 256,473 -- -- -- Accounts payable and accrued expenses 14,806 5,517 -- -- Accrued interest 43,396 2,639 -- -- Due to Interstate Hotels & Resorts 6,923 -- -- -- Other liabilities 1,750 (304) -- -- ---------- ---------- ---------- ---------- Total liabilities 1,240,580 444,630 -- -- ---------- ---------- ---------- ---------- Minority interests 2,496 -- -- -- Redeemable OP units at redemption value 35,926 -- -- -- Partners' capital -- Common OP Units 529,460 1,128,841 32 3,122 ---------- ---------- ---------- ---------- 1,808,462 1,573,471 32 3,122 ========== ========== ========== ==========

MERISTAR MERISTAR MERISTAR MERISTAR SUB 5N, SUB 8A, SUB 8F, SUB 8G, LLC LLC L.P. LLC -------- -------- -------- -------- ASSETS Property and equipment 4,146 -- 11,502 -- Accumulated depreciation (679) -- (2,521) -- ------- ------- ------- ------- 3,467 -- 8,981 -- Assets held for sale -- -- -- -- Investments in affiliate -- -- -- 72 Due from/to subsidiaries 4,243 -- 7,012 10 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets (18) -- (28) -- Accounts receivable, net of allowance for doubtful accounts -- -- -- -- Restricted cash -- -- 115 -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- 7,692 -- 16,080 82 ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses (11) -- 67 -- Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities (11) -- 67 -- ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 7,703 -- 16,013 82 ------- ------- ------- ------- 7,692 -- 16,080 82 ======= ======= ======= =======
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 6H, L.P. 8B, LLC 1C, L.P. 8E, LLC ------------ ------------ ------------ ------------ ASSETS Property and equipment 10,862 83,215 26,641 15,493 Accumulated depreciation (157) (12,270) (5,900) (3,024) -------- -------- -------- -------- 10,705 70,945 20,741 12,469 Assets held for sale -- -- -- -- Investments in affiliate -- -- -- -- Due from/to subsidiaries 6,814 30,981 (3,881) 6,688 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets 1 (26) (88) (10) Accounts receivable, net of allowance for doubtful accounts -- -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- -------- -------- -------- -------- 17,520 101,900 16,772 19,147 ======== ======== ======== ======== LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 161 2,502 88 (32) Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- -------- -------- -------- -------- Total liabilities 161 2,502 88 (32) -------- -------- -------- -------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 17,359 99,398 16,684 19,179 -------- -------- -------- -------- 17,520 101,900 16,772 19,147 ======== ======== ======== ========

MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 7F, LLC 5L, LLC 3C, LLC 5R, LLC ------------ ----------- ------------- ------------ ASSETS Property and equipment 7,293 11,841 17,498 -- Accumulated depreciation (97) (645) (3,696) -- ------- ------- ------- ------- 7,196 11,196 13,802 -- Assets held for sale -- -- -- -- Investments in affiliate -- -- -- 43 Due from/to subsidiaries 5,122 4,239 5,062 (43) Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets (1) (24) 28 -- Accounts receivable, net of allowance for doubtful accounts -- -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- 12,317 15,411 18,892 -- ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 208 (15) 140 -- Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities 208 (15) 140 -- ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 12,109 15,426 18,752 -- ------- ------- ------- ------- 12,317 15,411 18,892 -- ======= ======= ======= =======
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR SUB MERISTAR SUB 6D, SUB 6E, 4E, SUB 1B, LLC LLC L.P. LLC -------- -------- ------------ --------- ASSETS Property and equipment 17,449 45,155 5,047 18,656 Accumulated depreciation (2,893) (9,963) (76) (4,064) ------- ------- ------- ------- 14,556 35,192 4,971 14,592 Assets held for sale -- -- -- -- Investments in affiliate -- -- -- -- Due from/to subsidiaries 8,445 21,931 3,545 15,375 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets (7) (33) (17) (32) Accounts receivable, net of allowance for doubtful accounts 103 -- -- 96 Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- 23,097 57,090 8,499 30,031 ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- 33 Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 38 (208) 351 39 Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities 38 (208) 351 72 ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 23,059 57,298 8,148 29,959 ------- ------- ------- ------- 23,097 57,090 8,499 30,031 ======= ======= ======= =======

MERISTAR MERISTAR MERISTAR MERISTAR SUB 5F, SUB 6G, SUB 8C, SUB 4C, L.P. LLC LLC L.P. -------- -------- -------- --------- ASSETS Property and equipment 17,410 22,578 -- -- Accumulated depreciation (198) (5,014) -- -- ------- ------- ------- ------- 17,212 17,564 -- -- Assets held for sale -- -- 5,530 -- Investments in affiliate -- -- -- -- Due from/to subsidiaries 12,431 6,988 5,557 -- Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets (63) (12) 117 -- Accounts receivable, net of allowance for doubtful accounts -- -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- 29,580 24,540 11,204 -- ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 97 (69) (306) -- Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities 97 (69) (306) -- ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 29,483 24,609 11,510 -- ------- ------- ------- ------- 29,580 24,540 11,204 -- ======= ======= ======= =======
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR SUB 4H, SUB 7E, SUB 3D, SUB 1A, L.P. LLC LLC LLC -------- -------- --------- --------- ASSETS Property and equipment 4,929 18,569 22,682 11,514 Accumulated depreciation (130) (3,323) (7,036) (2,928) ------- ------- ------- ------- 4,799 15,246 15,646 8,586 Assets held for sale -- -- -- -- Investments in affiliate -- -- -- -- Due from/to subsidiaries (791) 6,367 8,459 7,330 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets (8) (8) (16) (56) Accounts receivable, net of allowance for doubtful accounts -- -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- 4,000 21,605 24,089 15,860 ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 178 74 30 (17) Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities 178 74 30 (17) ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 3,822 21,531 24,059 15,877 ------- ------- ------- ------- 4,000 21,605 24,089 15,860 ======= ======= ======= =======

MERISTAR SUB MERISTAR MERISTAR MERISTAR 7A JOINT SUB 2B, SUB 3A, SUB 4A, VENTURE LLC LLC LLC ------------ -------- -------- --------- ASSETS Property and equipment 5,881 -- 3,197 -- Accumulated depreciation (121) -- (51) -- ------- ------- ------- ------- 5,760 -- 3,146 -- Assets held for sale -- -- -- 3,301 Investments in affiliate -- -- -- -- Due from/to subsidiaries 5,021 (7,036) 1,904 4,573 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets 1 -- 1 (9) Accounts receivable, net of allowance for doubtful accounts -- 2,345 -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- 10,782 (4,691) 5,051 7,865 ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 150 (8) 161 342 Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities 150 (8) 161 342 ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 10,632 (4,683) 4,890 7,523 ------- ------- ------- ------- 10,782 (4,691) 5,051 7,865 ======= ======= ======= =======
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MDV SUB 4D, SUB 2A, SUB 6L, LIMITED LLC LLC LLC PARTNERSHIP -------- -------- -------- ----------- ASSETS Property and equipment -- -- -- 3,850 Accumulated depreciation -- -- -- (686) ------- ------- ------- ------- -- -- -- 3,164 Assets held for sale -- -- 12,395 -- Investments in affiliate -- -- -- -- Due from/to subsidiaries 2,930 (9,934) 6,238 2,538 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets 3 -- 15 (4) Accounts receivable, net of allowance for doubtful accounts -- 2,002 -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- 2,933 (7,932) 18,648 5,698 ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses -- (8) 25 96 Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities -- (8) 25 96 ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 2,933 (7,924) 18,623 5,602 ------- ------- ------- ------- 2,933 (7,932) 18,648 5,698 ======= ======= ======= =======

MERISTAR MERISTAR MERISTAR MERISTAR SUB 5C, SUB 6J, SUB 1D, SUB 7B, LLC LLC L.P. L.P. -------- -------- -------- --------- ASSETS Property and equipment -- 19,530 68,709 4,806 Accumulated depreciation -- (3,776) (12,036) (156) ------- ------- ------- ------- -- 15,754 56,673 4,650 Assets held for sale -- -- -- -- Investments in affiliate -- -- -- -- Due from/to subsidiaries 5,088 7,636 19,511 (3,011) Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets -- 23 (209) 1 Accounts receivable, net of allowance for doubtful accounts -- -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- 5,088 23,413 75,975 1,640 ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses -- (216) (91) 1,080 Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities -- (216) (91) 1,080 ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 5,088 23,629 76,066 560 ------- ------- ------- ------- 5,088 23,413 75,975 1,640 ======= ======= ======= =======
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR SUB 7D, SUB 7G, SUB 6B, SUB 4I, LLC LLC LLC L.P. --------- --------- -------- -------- ASSETS Property and equipment 52,417 1,901 10,802 -- Accumulated depreciation (9,771) -- (2,188) -- ------- ------- ------- ------- 42,646 1,901 8,614 -- Assets held for sale -- -- -- -- Investments in affiliate -- -- -- -- Due from/to subsidiaries 25,422 365 3,137 1,609 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets 192 -- (5) -- Accounts receivable, net of allowance for doubtful accounts 1,326 -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- 69,586 2,266 11,746 1,609 ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 4,169 (6) (107) (61) Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts (200) -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities 3,969 (6) (107) (61) ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 65,617 2,272 11,853 1,670 ------- ------- ------- ------- 69,586 2,266 11,746 1,609 ======= ======= ======= =======

MERISTAR MERISTAR MERISTAR AGH SUB 5D, SUB 5H, SUB 7H, PSS I, LLC LLC LLC INC. --------- --------- --------- ------- ASSETS Property and equipment 42,105 -- -- -- Accumulated depreciation (8,102) -- -- -- ------- ------- ------- ------- 34,003 -- -- -- Assets held for sale -- -- -- -- Investments in affiliate 51,368 -- -- -- Due from/to subsidiaries (6,600) 36,579 9,567 25,579 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets (17) 1 -- 1 Accounts receivable, net of allowance for doubtful accounts -- 46 43 -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- 78,754 36,626 9,610 25,580 ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt 24,000 -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 12 (2) -- -- Accrued interest -- -- -- -- -- -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities 24,012 (2) -- -- ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 54,742 36,628 9,610 25,580 ------- ------- ------- ------- 78,754 36,626 9,610 25,580 ======= ======= ======= =======
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR SUB 2D, SUB 4F, SUB 5K, SUB 5M, LLC L.P. LLC LLC -------- -------- -------- -------- ASSETS Property and equipment -- 32,615 28,386 22,056 Accumulated depreciation -- (5,809) (5,206) (2,355) ------- ------- ------- ------- -- 26,806 23,180 19,701 Assets held for sale -- -- -- -- Investments in affiliate -- -- -- -- Due from/to subsidiaries (6,223) 5,237 (365) 7,852 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets -- 13 (74) (48) Accounts receivable, net of allowance for doubtful accounts 1,166 -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- (5,057) 32,056 22,741 27,505 ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses (1) 370 3,028 -- Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities (1) 370 3,028 -- ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units (5,056) 31,686 19,713 27,505 ------- ------- ------- ------- (5,057) 32,056 22,741 27,505 ======= ======= ======= =======

MERISTAR MERISTAR MERISTAR MERISTAR SUB 1E, SUB 5O, SUB 4B, SUB 2C, L.P. LLC L.P. LLC -------- -------- -------- -------- ASSETS Property and equipment -- 8,741 -- -- Accumulated depreciation -- (1,144) -- -- ------- ------- ------- ------- -- 7,597 -- -- Assets held for sale -- -- 7,158 9,415 Investments in affiliate -- -- -- -- Due from/to subsidiaries 24,172 3,077 (4,789) 5,673 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets (1) (15) (4) (240) Accounts receivable, net of allowance for doubtful accounts 198 -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- ------- ------- ------- ------- 24,369 10,659 2,365 14,848 ======= ======= ======= ======= LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- 19,731 Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 14 (8) 410 257 Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- ------- ------- ------- ------- Total liabilities 14 (8) 410 19,988 ------- ------- ------- ------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 24,355 10,667 1,955 (5,140) ------- ------- ------- ------- 24,369 10,659 2,365 14,848 ======= ======= ======= =======
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR SUB 4G, SUB 3B, SUB 5G, SUB 5P, L.P. LLC L.P. LLC -------- -------- --------- --------- ASSETS Property and equipment 9,086 -- 164,273 39 Accumulated depreciation -- -- (30,502) (23) ------- -------- -------- -------- 9,086 -- 133,771 16 Assets held for sale -- -- -- -- Investments in affiliate -- -- -- -- Due from/to subsidiaries 8,806 9,336 42,679 3,088 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets (89) (3) (255) (4) Accounts receivable, net of allowance for doubtful accounts -- -- -- 38 Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- -------- -------- -------- -------- 17,803 9,333 176,195 3,138 ======== ======== ======== ======== LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- -- -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 488 -- 775 -- Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- -------- -------- -------- -------- Total liabilities 488 -- 775 -- -------- -------- -------- -------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 17,315 9,333 175,420 3,138 -------- -------- -------- -------- 17,803 9,333 176,195 3,138 ======== ======== ======== ========

MERISTAR MERISTAR MERISTAR MERISTAR SUB 5J, SUB 5Q, SUB 5A, SUB 8D, LLC LLC LLC LLC -------- -------- -------- -------- ASSETS Property and equipment 110,406 16,737 35,707 -- Accumulated depreciation (16,816) (2,269) (10,686) -- -------- -------- -------- -------- 93,590 14,468 25,021 -- Assets held for sale -- -- -- 9,097 Investments in affiliate -- -- 4,627 -- Due from/to subsidiaries 21,963 4,637 6,562 8,303 Note receivable from subsidiaries -- -- -- -- Prepaid expenses and other assets (370) (53) (29) 14 Accounts receivable, net of allowance for doubtful accounts -- -- -- -- Restricted cash -- -- -- -- Cash and cash equivalents -- unrestricted -- -- -- -- -------- -------- -------- -------- 115,183 19,052 36,181 17,414 ======== ======== ======== ======== LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- -- 23,609 -- Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 131 (189) (195) (183) Accrued interest -- -- -- -- Due to Interstate Hotels & Resorts -- -- -- -- Other liabilities -- -- -- -- -------- -------- -------- -------- Total liabilities 131 (189) 23,414 (183) -------- -------- -------- -------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 115,052 19,241 12,767 17,597 -------- -------- -------- -------- 115,183 19,052 36,181 17,414 ======== ======== ======== ========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 2003 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR GUARANTOR SUB 4J, HOTEL LESSEE, SUBSIDIARIES LLC INC. TOTAL ELIMINATIONS ----------- -------------- ------------- ------------ ASSETS Property and equipment 38,463 3,146 1,055,333 -- Accumulated depreciation (7,127) (3,284) (186,722) -- ---------- ---------- ---------- ---------- 31,336 (138) 868,611 -- Assets held for sale -- -- 46,896 -- Investments in affiliate -- 1,629 60,760 (2,262,601) Due from/to subsidiaries 7,469 (189) 440,421 -- Note receivable from subsidiaries -- -- -- (120,855) Prepaid expenses and other assets (19) 15,471 13,987 -- Accounts receivable, net of allowance for doubtful accounts (13) 38,183 45,533 -- Restricted cash -- -- 115 -- Cash and cash equivalents -- unrestricted -- 12,230 12,230 -- ---------- ---------- ---------- ---------- 38,773 67,186 1,488,553 (2,383,456) ========== ========== ========== ========== LIABILITIES AND PARTNERS' CAPITAL Long-term debt -- 81,027 148,400 (120,855) Notes payable to MeriStar Hospitality Corporation -- -- -- -- Accounts payable and accrued expenses 81 45,862 59,691 -- Accrued interest -- 778 778 -- Due to Interstate Hotels & Resorts -- 9,688 9,488 -- Other liabilities -- 9,599 9,599 -- ---------- ---------- ---------- ---------- 81 146,954 227,956 (120,855) ---------- ---------- ---------- ---------- Minority interests -- -- -- -- Redeemable OP units at redemption value -- -- -- -- Partners' capital -- Common OP Units 38,692 (79,768) 1,260,597 (2,262,601) ---------- ---------- ---------- ---------- 38,773 67,186 1,488,553 (2,383,456) ========== ========== ========== ==========

TOTAL CONSOLIDATED ------------ ASSETS Property and equipment 2,481,752 Accumulated depreciation (446,032) ----------- 2,035,720 Assets held for sale 51,169 Investments in affiliate 15,000 Due from/to subsidiaries -- Note receivable from subsidiaries -- Prepaid expenses and other assets 47,033 Accounts receivable, net of allowance for doubtful accounts 64,709 Restricted cash 42,523 Cash and cash equivalents -- unrestricted 230,876 ----------- 2,487,030 =========== LIABILITIES AND PARTNERS' CAPITAL Long-term debt 1,381,555 Notes payable to MeriStar Hospitality Corporation 256,473 Accounts payable and accrued expenses 80,014 Accrued interest 46,813 Due to Interstate Hotels & Resorts 16,411 Other liabilities 11,045 ----------- 1,792,311 ----------- Minority interests 2,496 Redeemable OP units at redemption value 35,926 Partners' capital -- Common OP Units 656,297 ----------- 2,487,030 ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR NON- MERISTAR AGH MERISTAR HOSPITALITY GUARANTOR SUB 7C, UPREIT, SUB 5N, OP, L.P. SUBSIDIARIES LLC LLC LLC ---------- ------------ ---------- ---------- ------------ Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental parking and other revenue 1,604 634 -- -- -- Participating lease revenue -- 33,982 -- -- 308 ---------- ---------- ---------- ---------- ---------- Total revenue 1,604 34,616 -- -- 308 ---------- ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- 290 -- -- -- Other operating expenses: General and administrative 3,831 -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization 3,377 12,657 -- -- 34 Property taxes, insurance and other -- 5,338 -- -- 28 Loss on asset impairments -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total operating expenses 7,208 18,285 -- -- 62 ---------- ---------- ---------- ---------- ---------- Operating (loss) income (5,604) 16,331 -- -- 246 ---------- ---------- ---------- ---------- ---------- Minority interest 4 -- -- -- -- Interest expense, net (23,430) (8,293) -- -- -- Loss on early extinguishments of debt (5,923) -- -- -- -- Equity in income from consolidated entities (6,866) -- -- -- -- ---------- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations (41,819) 8,038 -- -- 246 Income tax benefit 323 -- -- -- -- ---------- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations (41,496) 8,038 -- -- 246 Discontinued operations: Income (loss) from discontinued operations before income tax benefit 477 (447) -- -- -- Income tax benefit 132 -- -- -- -- ---------- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations 609 (447) -- -- -- ---------- ---------- ---------- ---------- ---------- Net (loss) income (40,887) 7,591 -- -- 246 ========== ========== ========== ========== ==========

MERISTAR MERISTAR MERISTAR MERISTAR SUB 8A, SUB 8F, SUB 8G, SUB 6H, LLC L.P. LLC L.P. ---------- ---------- ---------- ---------- Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental parking and other revenue -- -- -- -- Participating lease revenue -- 601 -- 302 ---------- ---------- ---------- ---------- Total revenue -- 601 -- 302 ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization -- 164 -- 157 Property taxes, insurance and other -- 123 -- 24 Loss on asset impairments -- -- -- -- ---------- ---------- ---------- ---------- Total operating expenses -- 287 -- 181 ---------- ---------- ---------- ---------- Operating (loss) income -- 314 -- 121 ---------- ---------- ---------- ---------- Minority interest -- -- -- -- Interest expense, net -- -- -- -- Loss on early extinguishments of debt -- -- -- -- Equity in income from consolidated entities -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations -- 314 -- 121 Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations -- 314 -- 121 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations -- -- -- -- ---------- ---------- ---------- ---------- Net (loss) income -- 314 -- 121 ========== ========== ========== ==========

MERISTAR MERISTAR MERISTAR MERISTAR SUB 8B, SUB 1C, SUB 8E, SUB 7F, LLC L.P. LLC LLC ---------- ---------- ---------- ---------- Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental parking and other revenue -- -- 9 -- Participating lease revenue 1,864 422 371 245 ---------- ---------- ---------- ---------- Total revenue 1,864 422 380 245 ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- - Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization 595 356 149 97 Property taxes, insurance and other 306 210 62 29 Loss on asset impairments -- -- -- -- ---------- ---------- ---------- ---------- Total operating expenses 901 566 211 126 ---------- ---------- ---------- ---------- Operating (loss) income 963 (144) 169 119 ---------- ---------- ---------- ---------- Minority interest -- -- -- -- Interest expense, net -- -- -- -- Loss on early extinguishments of debt -- -- -- -- Equity in income from consolidated entities -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations 963 (144) 169 119 Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations 963 (144) 169 119 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations -- -- -- -- ---------- ---------- ---------- ---------- Net (loss) income 963 (144) 169 119 ========== ========== ========== ==========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 5L, SUB 3C, SUB 5R, SUB 6D, SUB 6E, LLC LLC LLC LLC LLC ----------- ----------- ----------- ----------- ----------- Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental parking and other revenue -- 1 -- 49 -- Participating lease revenue 377 583 -- 432 1,413 ----------- ----------- ----------- ----------- ----------- Total revenue 377 584 -- 481 1,413 ----------- ----------- ----------- ----------- ----------- Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- -- -- -- -- Other operating expenses: General and administrative -- -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization 38 178 -- 137 410 Property taxes, insurance and other 40 109 -- 78 153 Loss on asset impairments -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total operating expenses 78 287 -- 215 563 ----------- ----------- ----------- ----------- ----------- Operating (loss) income 299 297 -- 266 850 ----------- ----------- ----------- ----------- ----------- Minority interest -- -- -- -- -- Interest expense, net -- -- -- -- -- Loss on early extinguishments of debt -- -- -- -- -- Equity in income from consolidated entities -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- (Loss) income before income taxes and discontinued operations 299 297 -- 266 850 Income tax benefit -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- (Loss) income before discontinued operations 299 297 -- 266 850 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- -- Income tax benefit -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Income (loss) on discontinued operations -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Net (loss) income 299 297 -- 266 850 ========== ========== ========== ========== ==========

MERISTAR MERISTAR MERISTAR MERISTAR SUB 4E, SUB 1B, SUB 5F, SUB 6G, L.P. LLC L.P. LLC ----------- ----------- ----------- ----------- Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental parking and other revenue 1 -- -- -- Participating lease revenue 360 604 692 829 ----------- ----------- ----------- ----------- Total revenue 361 604 692 829 ----------- ----------- ----------- ----------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization 76 128 196 209 Property taxes, insurance and other 120 47 98 105 Loss on asset impairments -- -- -- -- ----------- ----------- ----------- ----------- Total operating expenses 196 175 294 314 ----------- ----------- ----------- ----------- Operating (loss) income 165 429 398 515 ----------- ----------- ----------- ----------- Minority interest -- -- -- -- Interest expense, net -- -- -- -- Loss on early extinguishments of debt -- -- -- -- Equity in income from consolidated entities -- -- -- -- ----------- ----------- ----------- ----------- (Loss) income before income taxes and discontinued operations 165 429 398 515 Income tax benefit -- -- -- -- ----------- ----------- ----------- ----------- (Loss) income before discontinued operations 165 429 398 515 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- Income tax benefit -- -- -- -- ----------- ----------- ----------- ----------- Income (loss) on discontinued operations -- -- -- -- ----------- ----------- ----------- ----------- Net (loss) income 165 429 398 515 ========== ========== ========== ==========

MERISTAR MERISTAR MERISTAR MERISTAR SUB 8C, SUB 4C, SUB 4H, SUB 7E, LLC L.P. L.P. LLC ----------- ----------- ----------- ----------- Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental parking and other revenue -- -- -- 1 Participating lease revenue -- -- -- 345 ----------- ----------- ----------- ----------- Total revenue -- -- -- 346 ----------- ----------- ----------- ----------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization -- -- -- 152 Property taxes, insurance and other -- -- -- 52 Loss on asset impairments -- -- -- -- ----------- ----------- ----------- ----------- Total operating expenses -- -- -- 204 ----------- ----------- ----------- ----------- Operating (loss) income -- -- -- 142 ----------- ----------- ----------- ----------- Minority interest -- -- -- -- Interest expense, net -- -- -- -- Loss on early extinguishments of debt -- -- -- -- Equity in income from consolidated entities -- -- -- -- ----------- ----------- ----------- ----------- (Loss) income before income taxes and discontinued operations -- -- -- 142 Income tax benefit -- -- -- -- ----------- ----------- ----------- ----------- (Loss) income before discontinued operations -- -- -- 142 Discontinued operations: Income (loss) from discontinued operations before income tax benefit (203) -- (403) -- Income tax benefit -- -- -- -- ----------- ----------- ----------- ----------- Income (loss) on discontinued operations (203) -- (403) -- ----------- ----------- ----------- ----------- Net (loss) income (203) -- (403) 142 =========== ========== ========== ==========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR SUB 7A MERISTAR MERISTAR SUB 3D, SUB 1A, JOINT SUB 2B, SUB 3A, LLC LLC VENTURE LLC LLC ---------- ---------- ---------- ---------- ---------- Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental parking and other revenue -- -- -- -- -- Participating lease revenue 376 422 270 -- -- ---------- ---------- ---------- ---------- ---------- Total revenue 376 422 270 -- -- ---------- ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- -- -- -- -- Other operating expenses: General and administrative -- 34 -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization 192 113 61 -- -- Property taxes, insurance and other 65 108 64 -- -- Loss on asset impairments -- 184 809 -- -- ---------- ---------- ---------- ---------- ---------- Total operating expenses 257 439 934 -- -- ---------- ---------- ---------- ---------- ---------- Operating (loss) income 119 (17) (664) -- -- ---------- ---------- ---------- ---------- ---------- Minority interest -- -- -- -- -- Interest expense, net -- -- -- -- -- Loss on early extinguishments of debt -- -- -- -- -- Equity in income from consolidated entities -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations 119 (17) (664) -- -- Income tax benefit -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations 119 (17) (664) -- -- Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- 89 Income tax benefit -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations -- -- -- -- 89 Net (loss) income 119 (17) (664) -- 89 ========== ========== ========== ========== ==========

MERISTAR MERISTAR MERISTAR MERISTAR SUB 4A, SUB 4D, SUB 2A, SUB 6L, LLC LLC LLC LLC ---------- ---------- ---------- ---------- Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental parking and other revenue -- -- -- -- Participating lease revenue -- -- -- -- ---------- ---------- ---------- ---------- Total revenue -- -- -- -- ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization -- -- -- -- Property taxes, insurance and other -- -- -- -- Loss on asset impairments -- -- -- -- ---------- ---------- ---------- ---------- Total operating expenses -- -- -- -- ---------- ---------- ---------- ---------- Operating (loss) income -- -- -- -- ---------- ---------- ---------- ---------- Minority interest -- -- -- -- Interest expense, net -- -- -- -- Loss on early extinguishments of debt -- -- -- -- Equity in income from consolidated entities -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations -- -- -- -- Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations -- -- -- -- Discontinued operations: Income (loss) from discontinued operations before income tax benefit 96 -- -- 1,852 Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations 96 -- -- 1,852 ---------- ---------- ---------- ---------- Net (loss) income 96 -- -- 1,852 ========== ========== ========== ==========

MDV MERISTAR MERISTAR MERISTAR LIMITED SUB 5C, SUB 6J, SUB 1D, PARTNERSHIP LLC LLC L.P. ----------- ---------- ---------- ---------- Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental parking and other revenue -- -- -- 85 Participating lease revenue 130 -- 496 1,389 ---------- ---------- ---------- ---------- Total revenue 130 -- 496 1,474 ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- 28 Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization 23 -- 141 569 Property taxes, insurance and other 29 -- 75 418 Loss on asset impairments -- -- -- -- ---------- ---------- ---------- ---------- Total operating expenses 52 -- 216 1,015 ---------- ---------- ---------- ---------- Operating (loss) income 78 -- 280 459 ---------- ---------- ---------- ---------- Minority interest -- -- -- -- Interest expense, net -- -- -- -- Loss on early extinguishments of debt -- -- -- -- Equity in income from consolidated entities -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations 78 -- 280 459 Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations 78 -- 280 459 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations -- -- -- -- ---------- ---------- ---------- ---------- Net (loss) income 78 -- 280 459 ========== ========== ========== ==========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 7B, SUB 7D, SUB 7G, SUB 6B, SUB 4I, L.P. LLC LLC LLC L.P. ---------- ---------- ---------- ---------- ---------- Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental parking and other revenue -- 436 -- -- -- Participating lease revenue -- 1,461 -- 237 -- ---------- ---------- ---------- ---------- ---------- Total revenue -- 1,897 -- 237 -- ---------- ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- 199 -- -- -- Other operating expenses: General and administrative -- -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization -- 431 -- 112 -- Property taxes, insurance and other -- 658 -- 58 -- Loss on asset impairments -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total operating expenses -- 1,288 -- 170 -- ---------- ---------- ---------- ---------- ---------- Operating (loss) income -- 609 -- 67 -- ---------- ---------- ---------- ---------- ---------- Minority interest -- -- -- -- -- Interest expense, net -- -- -- -- -- Loss on early extinguishments of debt -- -- -- -- -- Equity in income from consolidated entities -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations -- 609 -- 67 -- Income tax benefit -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations -- 609 -- 67 -- Discontinued operations: Income (loss) from discontinued operations before income tax benefit (284) -- 47 -- -- Income tax benefit -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations (284) -- 47 -- -- ---------- ---------- ---------- ---------- ---------- Net (loss) income (284) 609 47 67 -- ========== ========== ========== ========== ==========

MERISTAR MERISTAR MERISTAR AGH PSS SUB 5D, SUB 5H, SUB 7H, I, LLC LLC LLC INC. ---------- ---------- ---------- ---------- Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental parking and other revenue -- -- -- -- Participating lease revenue 459 -- -- -- ---------- ---------- ---------- ---------- Total revenue 459 -- -- -- ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization 369 -- -- -- Property taxes, insurance and other 53 -- -- -- Loss on asset impairments -- -- -- -- ---------- ---------- ---------- ---------- Total operating expenses 422 -- -- -- ---------- ---------- ---------- ---------- Operating (loss) income 37 -- -- -- ---------- ---------- ---------- ---------- Minority interest -- -- -- -- Interest expense, net (307) -- -- -- Loss on early extinguishments of debt -- -- -- -- Equity in income from consolidated entities -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations (270) -- -- -- Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations (270) -- -- -- Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations -- -- -- -- ---------- ---------- ---------- ---------- Net (loss) income (270) -- -- -- ========== ========== ========== ==========

MERISTAR MERISTAR MERISTAR MERISTAR SUB 2D, SUB 4F, SUB 5K, SUB 5M, LLC L.P. LLC LLC ---------- ---------- ---------- ---------- Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental parking and other revenue -- 4 -- -- Participating lease revenue -- 492 686 569 ---------- ---------- ---------- ---------- Total revenue -- 496 686 569 ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization -- 277 324 118 Property taxes, insurance and other -- 89 98 71 Loss on asset impairments -- -- -- -- ---------- ---------- ---------- ---------- Total operating expenses -- 366 422 189 ---------- ---------- ---------- ---------- Operating (loss) income -- 130 264 380 ---------- ---------- ---------- ---------- Minority interest -- -- -- -- Interest expense, net -- -- -- -- Loss on early extinguishments of debt -- -- -- -- Equity in income from consolidated entities -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations -- 130 264 380 Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations -- 130 264 380 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations -- -- -- -- ---------- ---------- ---------- ---------- Net (loss) income -- 130 264 380 ========== ========== ========== ==========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 1E, SUB 5O, SUB 4B, SUB 2C, SUB 4G, L.P. LLC L.P. LLC L.P. ---------- ---------- ---------- ---------- ---------- Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental parking and other revenue -- -- -- -- -- Participating lease revenue -- 261 -- -- 577 ---------- ---------- ---------- ---------- ---------- Total revenue -- 261 -- -- 577 ---------- ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- -- -- -- -- Other operating expenses: General and administrative -- -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization -- 57 -- -- 112 Property taxes, insurance and other -- 27 -- -- 135 Loss on asset impairments -- -- -- -- 245 ---------- ---------- ---------- ---------- ---------- Total operating expenses -- 84 -- -- 492 ---------- ---------- ---------- ---------- ---------- Operating (loss) income -- 177 -- -- 85 ---------- ---------- ---------- ---------- ---------- Minority interest -- -- -- -- -- Interest expense, net -- -- -- -- -- Loss on early extinguishments of debt -- -- -- -- -- Equity in income from consolidated entities -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations -- 177 -- -- 85 Income tax benefit -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations -- 177 -- -- 85 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- (216) (978) -- Income tax benefit -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations -- -- (216) (978) -- ---------- ---------- ---------- ---------- ---------- Net (loss) income -- 177 (216) (978) 85 ========== ========== ========== ========== ==========

MERISTAR MERISTAR MERISTAR MERISTAR SUB 3B, SUB 5G, SUB 5P, SUB 5J, LLC L.P. LLC LLC ---------- ---------- ---------- ---------- Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental parking and other revenue -- 7 -- -- Participating lease revenue -- 3,062 167 2,675 ---------- ---------- ---------- ---------- Total revenue -- 3,069 167 2,675 ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization -- 1,572 1 1,415 Property taxes, insurance and other -- 426 2 375 Loss on asset impairments -- -- -- -- ---------- ---------- ---------- ---------- Total operating expenses -- 1,998 3 1,790 ---------- ---------- ---------- ---------- Operating (loss) income -- 1,071 164 885 ---------- ---------- ---------- ---------- Minority interest -- -- -- -- Interest expense, net -- -- -- -- Loss on early extinguishments of debt -- -- -- -- Equity in income from consolidated entities -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations -- 1,071 164 885 Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations -- 1,071 164 885 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations -- -- -- -- ---------- ---------- ---------- ---------- Net (loss) income -- 1,071 164 885 ========== ========== ========== ==========

MERISTAR MERISTAR MERISTAR MERISTAR SUB 5Q, SUB 5A, SUB 8D, SUB 4J, LLC LLC LLC LLC ---------- ---------- ---------- ---------- Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental parking and other revenue -- 36 -- 32 Participating lease revenue 571 1,631 -- 654 ---------- ---------- ---------- ---------- Total revenue 571 1,667 -- 686 ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- 68 Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization 140 269 -- 315 Property taxes, insurance and other 57 189 -- 91 Loss on asset impairments -- -- -- -- ---------- ---------- ---------- ---------- Total operating expenses 197 458 -- 474 ---------- ---------- ---------- ---------- Operating (loss) income 374 1,209 -- 212 ---------- ---------- ---------- ---------- Minority interest -- -- -- -- Interest expense, net -- (708) -- -- Loss on early extinguishments of debt -- -- -- -- Equity in income from consolidated entities -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations 374 501 -- 212 Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- (Loss) income before discontinued operations 374 501 -- 212 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- (857) -- Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- Income (loss) on discontinued operations -- -- (857) -- ---------- ---------- ---------- ---------- Net (loss) income 374 501 (857) 212 ========== ========== ========== ==========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR GUARANTOR HOTEL SUBSIDIARIES TOTAL LESSEE, INC. TOTAL ELIMINATIONS CONSOLIDATED ------------ ------------ ------------ ------------ Revenue: Hotel operations: Rooms 135,666 135,666 -- 135,666 Food and beverage 51,879 51,879 -- 51,879 Other hotel operations 17,043 17,043 -- 17,043 Office rental parking and other revenue 71 732 -- 2,970 Participating lease revenue -- 26,333 (60,315) -- ---------- ---------- ---------- ---------- Total revenue 204,659 231,653 (60,315) 207,558 ---------- ---------- ---------- ---------- Hotel operating expenses: Rooms 33,224 33,224 -- 33,224 Food and beverage 38,881 38,881 -- 38,881 Other operating departments 10,363 10,363 -- 10,363 Office rental, parking and other expenses -- 295 -- 585 Other operating expenses: General and administrative 34,156 34,190 -- 38,021 Property operating costs 31,488 31,488 -- 31,488 Depreciation and amortization 39 9,726 -- 25,760 Property taxes, insurance and other 67,366 72,038 (60,315) 17,061 Loss on asset impairments -- 1,238 -- 1,238 ---------- ---------- ---------- ---------- Total operating expenses 215,517 231,443 (60,315) 196,621 ---------- ---------- ---------- ---------- Operating (loss) income (10,858) 210 -- 10,937 ---------- ---------- ---------- ---------- Minority interest -- -- -- 4 Interest expense, net (1,642) (2,657) -- (34,380) Loss on early extinguishments of debt -- -- -- (5,923) Equity in income from consolidated entities -- -- 6,866 -- ---------- ---------- ---------- ---------- (Loss) income before income taxes and discontinued operations (12,500) (2,447) 6,866 (29,362) Income tax benefit -- -- -- 323 ---------- ---------- ---------- ---------- (Loss) income before discontinued operations (12,500) (2,447) 6,866 (29,039) Discontinued operations: Income (loss) from discontinued operations before income tax benefit (11,153) (12,010) -- (11,980) Income tax benefit -- -- -- 132 ---------- ---------- ---------- ---------- Income (loss) on discontinued operations (11,153) (12,010) -- (11,848) ---------- ---------- ---------- ---------- Net (loss) income (23,653) (14,457) 6,866 (40,887) ========== ========== ========== ==========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR NON- HOSPITALITY OP, GUARANTOR MERISTAR SUB AGH UPREIT, MERISTAR SUB L.P. SUBSIDIARIES 7C, LLC LLC 5N, LLC --------------- ------------ ------------ ----------- ------------ Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental, parking and other revenue 2,053 664 -- -- -- Participating lease revenue -- 28,689 -- -- 281 --------------- ------------ ------------ ----------- ------------ Total revenue 2,053 29,353 -- -- 281 --------------- ------------ ------------ ----------- ------------ Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- 289 -- -- -- Other operating expenses: General and administrative 2,919 -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization 2,214 11,044 -- -- 34 Property taxes, insurance and other 642 5,400 -- -- 27 Loss on asset impairments -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Operating expenses 5,775 16,733 -- -- 61 --------------- ------------ ------------ ----------- ------------ Operating (loss) income (3,722) 12,620 -- -- 220 Minority interest (11) -- -- -- -- Interest expense, net (26,405) (6,836) -- -- -- Equity in income from consolidated entities (44,064) -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before income taxes and discontinued operations (74,202) 5,784 -- -- 220 Income tax benefit 128 -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before discontinued operations (74,074) 5,784 -- -- 220 Discontinued operations: Income (loss) from discontinued operations before income tax benefit 860 (2,632) -- -- -- Income tax benefit 16 -- -- -- -- --------------- ------------ ------------ ----------- ------------ Income (loss) on discontinued operations 876 (2,632) -- -- -- --------------- ------------ ------------ ----------- ------------ Net (loss) income (73,198) 3,152 -- -- 220 =============== ============ ============ =========== ============

MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 8A, LLC 8F, L.P. 8G, LLC 6H, L.P. --------------- ------------ ------------ ------------ Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental, parking and other revenue -- -- -- -- Participating lease revenue -- 586 -- 256 --------------- ------------ ------------ ----------- Total revenue -- 586 -- 256 --------------- ------------ ------------ ----------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization -- 115 -- 108 Property taxes, insurance and other -- 146 -- 24 Loss on asset impairments -- -- -- -- --------------- ------------ ------------ ----------- Operating expenses -- 261 -- 132 --------------- ------------ ------------ ----------- Operating (loss) income -- 325 -- 124 Minority interest -- -- -- -- Interest expense, net -- -- -- -- Equity in income from consolidated entities -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before income taxes and discontinued operations -- 325 -- 124 Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before discontinued operations -- 325 -- 124 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- Income (loss) on discontinued operations -- -- -- -- --------------- ------------ ------------ ----------- Net (loss) income -- 325 -- 124 =============== ============ ============ ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 8B, LLC 1C, L.P. 8E, LLC 7F, LLC 5L, LLC --------------- ------------ ------------ ----------- ------------ Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental, parking and other revenue -- -- 5 -- -- Participating lease revenue 1,818 526 362 226 319 --------------- ------------ ------------ ----------- ------------ Total revenue 1,818 526 367 226 319 --------------- ------------ ------------ ----------- ------------ Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- -- -- -- -- Other operating expenses: General and administrative -- -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization 610 254 146 115 34 Property taxes, insurance and other 346 242 54 40 24 Loss on asset impairments -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Operating expenses 956 496 200 155 58 --------------- ------------ ------------ ----------- ------------ Operating (loss) income 862 30 167 71 261 Minority interest -- -- -- -- -- Interest expense, net -- -- -- -- (2) Equity in income from consolidated entities -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before income taxes and discontinued operations 862 30 167 71 259 Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before discontinued operations 862 30 167 71 259 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- -- Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Income (loss) on discontinued operations -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Net (loss) income 862 30 167 71 259 =============== ============ ============ =========== ============

MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 3C, LLC 5R, LLC 6D, LLC 6E, LLC --------------- ------------ ------------ ------------ Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental, parking and other revenue -- -- 4 -- Participating lease revenue 594 -- 432 1,308 --------------- ------------ ------------ ----------- Total revenue 594 -- 436 1,308 --------------- ------------ ------------ ----------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization 179 -- 137 414 Property taxes, insurance and other 98 -- 79 161 Loss on asset impairments -- -- -- -- --------------- ------------ ------------ ----------- Operating expenses 277 -- 216 575 --------------- ------------ ------------ ----------- Operating (loss) income 317 -- 220 733 Minority interest -- -- -- -- Interest expense, net -- -- -- -- Equity in income from consolidated entities -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before income taxes and discontinued operations 317 -- 220 733 Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before discontinued operations 317 -- 220 733 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- Income (loss) on discontinued operations -- -- -- -- --------------- ------------ ------------ ----------- Net (loss) income 317 -- 220 733 =============== ============ ============ ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 4E, L.P. 1B, LLC 5F, LLC 6G, LLC 8C, LLC --------------- ------------ ------------ ----------- ------------ Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental, parking and other revenue 1 -- -- -- -- Participating lease revenue 351 590 726 516 -- --------------- ------------ ------------ ----------- ------------ Total revenue 352 590 726 516 -- --------------- ------------ ------------ ----------- ------------ Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- -- -- -- -- Other operating expenses: General and administrative -- -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization 211 143 267 215 -- Property taxes, insurance and other 111 46 99 88 -- Loss on asset impairments -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Operating expenses 322 189 366 303 -- --------------- ------------ ------------ ----------- ------------ Operating (loss) income 30 401 360 213 -- Minority interest -- -- -- -- -- Interest expense, net -- (10) -- -- -- Equity in income from consolidated entities -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before income taxes and discontinued operations 30 391 360 213 -- Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before discontinued operations 30 391 360 213 -- Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- (3,999) Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Income (loss) on discontinued operations -- -- -- -- (3,999) --------------- ------------ ------------ ----------- ------------ Net (loss) income 30 391 360 213 (3,999) =============== ============ ============= =========== ============

MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 4C, L.P. 4H, L.P. 7E, LLC 3D, LLC --------------- ------------ ------------ ------------ Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental, parking and other revenue -- -- -- -- Participating lease revenue -- -- 336 374 --------------- ------------ ------------ ----------- Total revenue -- -- 336 374 --------------- ------------ ------------ ----------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization -- -- 155 197 Property taxes, insurance and other -- -- 49 59 Loss on asset impairments -- -- -- -- --------------- ------------ ------------ ----------- Operating expenses -- -- 204 256 --------------- ------------ ------------ ----------- Operating (loss) income -- -- 132 118 Minority interest -- -- -- -- Interest expense, net -- -- -- -- Equity in income from consolidated entities -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before income taxes and discontinued operations -- -- 132 118 Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before discontinued operations -- -- 132 118 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- (114) -- -- Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- Income (loss) on discontinued operations -- (114) -- -- --------------- ------------ ------------ ----------- Net (loss) income -- (114) 132 118 =============== ============ ============ ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR SUB MERISTAR SUB MERISTAR SUB 7A JOINT MERISTAR SUB MERISTAR SUB 1A, LLC 5E, LLC VENTURE 6K, LLC 2B, LLC --------------- ------------ ------------ ----------- ------------ Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental, parking and other revenue -- -- -- -- -- Participating lease revenue 449 1,242 271 952 -- --------------- ------------ ------------ ----------- ------------ Total revenue 449 1,242 271 952 -- --------------- ------------ ------------ ----------- ------------ Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- -- -- -- -- Other operating expenses: General and administrative -- -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization 113 484 107 186 -- Property taxes, insurance and other 105 101 63 95 -- Loss on asset impairments -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Operating expenses 218 585 170 281 -- --------------- ------------ ------------ ----------- ------------ Operating (loss) income 231 657 101 671 -- Minority interest -- -- -- -- -- Interest expense, net -- -- -- -- -- Equity in income from consolidated entities -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before income taxes and discontinued operations 231 657 101 671 -- Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before discontinued operations 231 657 101 671 -- Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- (3,835) Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Income (loss) on discontinued operations -- -- -- -- (3,835) --------------- ------------ ------------ ----------- ------------ Net (loss) income 231 657 101 671 (3,835) =============== ============ ============ =========== ============

MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 3A, LLC 4A, LLC 4D, LLC 2A, LLC --------------- ------------ ------------ ------------ Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental, parking and other revenue -- -- -- -- Participating lease revenue -- -- -- -- --------------- ------------ ------------ ----------- Total revenue -- -- -- -- --------------- ------------ ------------ ----------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization -- -- -- -- Property taxes, insurance and other -- -- -- -- Loss on asset impairments -- -- -- -- --------------- ------------ ------------ ----------- Operating expenses -- -- -- -- --------------- ------------ ------------ ----------- Operating (loss) income -- -- -- -- Minority interest -- -- -- -- Interest expense, net -- -- -- -- Equity in income from consolidated entities -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before income taxes and discontinued operations -- -- -- -- Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before discontinued operations -- -- -- -- Discontinued operations: Income (loss) from discontinued operations before income tax benefit 44 191 (969) (2,177) Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- Income (loss) on discontinued operations 44 191 (969) (2,177) --------------- ------------ ------------ ----------- Net (loss) income 44 191 (969) (2,177) =============== ============ ============ ============
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR SUB MDV LIMITED MERISTAR SUB MERISTAR SUB MERISTAR SUB 6L, LLC PARTNERSHIP 5C, LLC 6J, LLC 1D, L.P. --------------- ------------ ------------ ----------- ------------ Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental, parking and other revenue -- -- -- -- 79 Participating lease revenue -- 126 -- 462 1,188 --------------- ------------ ------------ ----------- ------------ Total revenue -- 126 -- 462 1,267 --------------- ------------ ------------ ----------- ------------ Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- -- -- -- 42 Other operating expenses: General and administrative -- -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization -- 35 -- 158 578 Property taxes, insurance and other -- 34 -- 65 387 Loss on asset impairments -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Operating expenses -- 69 -- 223 1,007 --------------- ------------ ------------ ----------- ------------ Operating (loss) income -- 57 -- 239 260 Minority interest -- -- -- -- -- Interest expense, net -- -- -- 1 -- Equity in income from consolidated entities -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before income taxes and discontinued operations -- 57 -- 240 260 Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before discontinued operations -- 57 -- 240 260 Discontinued operations: Income (loss) from discontinued operations before income tax benefit 78 -- (5,878) -- -- Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Income (loss) on discontinued operations 78 -- (5,878) -- -- --------------- ------------ ------------ ----------- ------------ Net (loss) income 78 57 (5,878) 240 260 =============== ============ ============ =========== ============

MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 7B, L.P. 7D, LLC 7G, LLC 6B, LLC --------------- ------------ ------------- ------------- Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental, parking and other revenue -- 358 -- -- Participating lease revenue -- 1,425 -- 225 --------------- ------------ ------------ ----------- Total revenue -- 1,783 -- 225 --------------- ------------ ------------ ----------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- 201 -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization -- 421 -- 116 Property taxes, insurance and other -- 561 -- 50 Loss on asset impairments -- -- -- -- --------------- ------------ ------------ ----------- Operating expenses -- 1,183 -- 166 --------------- ------------ ------------ ----------- Operating (loss) income -- 600 -- 59 Minority interest -- -- -- -- Interest expense, net -- -- -- -- Equity in income from consolidated entities -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before income taxes and discontinued operation -- 600 -- 59 Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before discontinued operations -- 600 -- 59 Discontinued operations: Income (loss) from discontinued operations before income tax benefit (7,856) -- (6,630) -- Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- Income (loss) on discontinued operations (7,856) -- (6,630) -- --------------- ------------ ------------ ----------- Net (loss) income (7,856) 600 (6,630) 59 =============== ============ ============ ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB AGH PSS I, 4I, L.P. 5D, LLC 5H, LLC 7H, LLC INC. --------------- ------------ ------------ ------------ ------------ Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental, parking and other revenue -- -- -- -- -- Participating lease revenue -- 475 -- -- -- --------------- ------------ ------------ ----------- ------------ Total revenue -- 475 -- -- -- --------------- ------------ ------------ ----------- ------------ Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- -- -- -- -- Other operating expenses: General and administrative -- -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization -- 365 -- -- -- Property taxes, insurance and other -- 58 -- -- -- Loss on asset impairments -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Operating expenses -- 423 -- -- -- --------------- ------------ ------------ ----------- ------------ Operating (loss) income -- 52 -- -- -- Minority interest -- -- -- -- -- Interest expense, net -- (328) -- -- -- Equity in income from consolidated entities -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before income taxes and discontinued operations -- (276) -- -- -- Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before discontinued operations -- (276) -- -- -- Discontinued operations: Income (loss) from discontinued operations before income tax benefit (111) -- 562 146 450 Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Income (loss) on discontinued operations (111) -- 562 146 450 --------------- ------------ ------------ ----------- ------------ Net (loss) income (111) (276) 562 146 450 =============== ============ ============ =========== ============

MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 2D, LLC 4F, L.P. 5K, LLC 5M, LLC --------------- ------------ ------------ ------------ Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental, parking and other revenue -- 3 -- -- Participating lease revenue -- 526 627 547 --------------- ------------ ------------ ----------- Total revenue -- 529 627 547 --------------- ------------ ------------ ----------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization -- 279 322 118 Property taxes, insurance and other -- 86 94 66 Loss on asset impairments -- -- -- -- --------------- ------------ ------------ ----------- Operating expenses -- 365 416 184 --------------- ------------ ------------ ----------- Operating (loss) income -- 164 211 363 Minority interest -- -- -- -- Interest expense, net -- -- -- -- Equity in income from consolidated entities -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before income taxes and discontinued operations -- 164 211 363 Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before discontinued operations -- 164 211 363 Discontinued operations: Income (loss) from discontinued operations before income tax benefit (7,826) -- -- -- Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- Income (loss) on discontinued operations (7,826) -- -- -- --------------- ------------ ------------ ----------- Net (loss) income (7,826) 164 211 363 =============== ============ ============ ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 1E, L.P. 5O, LLC 6M COMPANY 4B, L.P. 6C, LLC -------------- ------------ ----------- ------------ ------------ Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental, parking and other revenue -- -- -- -- 4 Participating lease revenue -- 240 917 -- 649 --------------- ------------ ------------ ----------- ------------ Total revenue -- 240 917 -- 653 --------------- ------------ ------------ ----------- ------------ Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- -- -- -- -- Other operating expenses: General and administrative -- -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization -- 57 308 -- 194 Property taxes, insurance and other -- 26 83 -- 56 Loss on asset impairments -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Operating expenses -- 83 391 -- 250 --------------- ------------ ------------ ----------- ------------ Operating (loss) income -- 157 526 -- 403 Minority interest -- -- -- -- -- Interest expense, net -- -- -- -- -- Equity in income from consolidated entities -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before income taxes and discontinued operations -- 157 526 -- 403 Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before discontinued operations -- 157 526 -- 403 Discontinued operations: Income (loss) from discontinued operations before income tax benefit 238 -- -- (156) -- Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Income (loss) on discontinued operations 238 -- -- (156) -- --------------- ------------ ------------ ----------- ------------ Net (loss) income 238 157 526 (156) 403 =============== ============ ============ =========== ============

MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 2C, LLC 4G, L.P. 3B, LLC 5G, L.P. --------------- ------------ ------------ ------------ Revenue: Hotel operations: Rooms -- -- -- -- Food and beverage -- -- -- -- Other hotel operations -- -- -- -- Office rental, parking and other revenue -- -- -- 9 Participating lease revenue -- 528 -- 3,056 --------------- ------------ ------------ ----------- Total revenue -- 528 -- 3,065 --------------- ------------ ------------ ----------- Hotel operating expenses: Rooms -- -- -- -- Food and beverage -- -- -- -- Other operating departments -- -- -- -- Office rental, parking and other expenses -- -- -- -- Other operating expenses: General and administrative -- -- -- -- Property operating costs -- -- -- -- Depreciation and amortization -- 225 -- 1,572 Property taxes, insurance and other -- 154 -- 481 Loss on asset impairments -- -- -- -- --------------- ------------ ------------ ----------- Operating expenses -- 379 -- 2,053 --------------- ------------ ------------ ----------- Operating (loss) income -- 149 -- 1,012 Minority interest -- -- -- -- Interest expense, net -- -- -- -- Equity in income from consolidated entities -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before income taxes and discontinued operations -- 149 -- 1,012 Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before discontinued operations -- 149 -- 1,012 Discontinued operations: Income (loss) from discontinued operations before income tax benefit (13,660) -- (491) -- Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- Income (loss) on discontinued operations (13,660) -- (491) -- --------------- ------------ ------------ ----------- Net (loss) income (13,660) 149 (491) 1,012 =============== ============ ============ ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB MERISTAR SUB 5P, LLC 5J, LLC 5Q, LLC 5A, LLC 8D, LLC --------------- ------------ ------------ ------------ ------------ Revenue: Hotel operations: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other hotel operations -- -- -- -- -- Office rental, parking and other revenue -- -- -- 29 -- Participating lease revenue 181 2,693 613 1,593 -- --------------- ------------ ------------ ----------- ------------ Total revenue 181 2,693 613 1,622 -- --------------- ------------ ------------ ----------- ------------ Hotel operating expenses: Rooms -- -- -- -- -- Food and beverage -- -- -- -- -- Other operating departments -- -- -- -- -- Office rental, parking and other expenses -- -- -- -- -- Other operating expenses: General and administrative -- -- -- -- -- Property operating costs -- -- -- -- -- Depreciation and amortization 1 871 140 386 -- Property taxes, insurance and other 3 370 54 177 -- Loss on asset impairments -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Operating expenses 4 1,241 194 563 -- --------------- ------------ ------------ ----------- ------------ Operating (loss) income 177 1,452 419 1,059 -- Minority interest -- -- -- -- -- Interest expense, net -- (3) -- (708) -- Equity in income from consolidated entities -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before income taxes and discontinued operations 177 1,449 419 351 -- Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ (Loss) income before discontinued operations 177 1,449 419 351 -- Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- -- -- -- 172 Income tax benefit -- -- -- -- -- --------------- ------------ ------------ ----------- ------------ Income (loss) on discontinued operations -- -- -- -- 172 --------------- ------------ ------------ ----------- ------------ Net (loss) income 177 1,449 419 351 172 =============== ============ ============ =========== =============

MERISTAR GUARANTOR MERISTAR SUB HOTEL LESSEE, SUBSIDIARIES 4J, LLC INC. TOTAL ELIMINATIONS -------------- ------------- ------------ ------------ Revenue: Hotel operations: Rooms -- 131,567 131,567 -- Food and beverage -- 52,176 52,176 -- Other hotel operations -- 16,647 16,647 -- Office rental, parking and other revenue 54 -- 546 -- Participating lease revenue 725 -- 29,311 (58,000) --------------- ------------ ------------ ----------- Total revenue 779 200,390 230,247 (58,000) --------------- ------------ ------------ ----------- Hotel operating expenses: Rooms -- 31,209 31,209 -- Food and beverage -- 37,566 37,566 -- Other operating departments -- 9,505 9,505 -- Office rental, parking and other expenses 98 -- 341 -- Other operating expenses: General and administrative -- 31,762 31,762 -- Property operating costs -- 29,505 29,505 -- Depreciation and amortization 326 (73) 10,623 -- Property taxes, insurance and other 81 64,208 69,151 (58,000) Loss on asset impairments -- -- -- -- --------------- ------------ ------------ ----------- Operating expenses 505 203,682 219,662 (58,000) --------------- ------------ ------------ ----------- Operating (loss) income 274 (3,292) 10,585 -- Minority interest -- -- -- -- Interest expense, net -- (427) (1,477) -- Equity in income from consolidated entities -- -- -- 44,064 --------------- ------------ ------------ ----------- (Loss) income before income taxes and discontinued operations 274 (3,719) 9,108 44,064 Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- (Loss) income before discontinued operations 274 (3,719) 9,108 44,064 Discontinued operations: Income (loss) from discontinued operations before income tax benefit -- (4,503) (56,324) -- Income tax benefit -- -- -- -- --------------- ------------ ------------ ----------- Income (loss) on discontinued operations -- (4,503) (56,324) -- --------------- ------------ ------------ ----------- Net (loss) income 274 (8,222) (47,216) 44,064 =============== ============ ============ ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
TOTAL CONSOLIDATED --------------- Revenue: Hotel operations: Rooms 131,567 Food and beverage 52,176 Other hotel operations 16,647 Office rental, parking and other revenue 3,263 Participating lease revenue -- --------------- Total revenue 203,653 --------------- Hotel operating expenses: Rooms 31,209 Food and beverage 37,566 Other operating departments 9,505 Office rental, parking and other expenses 630 Other operating expenses: General and administrative 34,681 Property operating costs 29,505 Depreciation and amortization 23,881 Property taxes, insurance and other 17,193 Loss on asset impairments -- --------------- Operating expenses 184,170 --------------- Operating (loss) income 19,483 Minority interest (11) Interest expense, net (34,718) Equity in income from consolidated entities -- --------------- (Loss) income before income taxes and discontinued operations (15,246) Income tax benefit 128 --------------- (Loss) income before discontinued operations (15,118) Discontinued operations: Income (loss) from discontinued operations before income tax benefit (58,096) Income tax benefit 16 --------------- Income (loss) on discontinued operations (58,080) --------------- Net (loss) income (73,198) ===============
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTH ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR NON- MERISTAR AGH MERISTAR HOSPITALITY GUARANTOR SUB 7C, UPREIT, SUB 5N, OP, L.P. SUBSIDIARIES LLC LLC LLC ----------- ------------ -------- ------- -------- Cash flows from operating activities: Net (loss) income (40,887) 7,591 -- -- 246 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 3,377 13,358 -- -- 34 Equity in earnings 6,866 -- -- -- -- Loss on asset impairments -- 2,870 -- -- -- Loss on sale of assets, before tax effect (68) (378) -- -- -- Loss on early extinguishments of debt 5,923 -- -- -- -- Minority interests (4) -- -- -- -- Amortization of unearned stock based compensation 587 -- -- -- -- Deferred income taxes (358) -- -- -- -- Changes in operating assets and liabilities: Accounts receivable (1,574) 151 -- -- -- Prepaid expenses and other assets 1,187 1,972 -- -- 9 Due from/to Interstate Hotels & Resorts 5,866 -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities (8,972) (3,129) -- -- 28 Due from subsidiaries 86,165 (36,539) -- -- (300) ----------- ------------ -------- ------- -------- Net cash provided by (used in) operating activities 58,108 (14,104) -- -- 17 ----------- ------------ -------- ------- -------- Cash flows from investing activities: Capital expenditures for property and equipment (3,321) (9,189) -- -- (17) Proceeds from sales of assets -- 26,475 -- -- -- Change in restricted cash (1,127) 282 -- -- -- Costs associated with disposition program and other, net 84 (1,157) -- -- -- ----------- ------------ -------- ------- -------- Net cash provided by (used in) investing activities (4,364) 16,411 -- -- (17) ----------- ------------ -------- ------- -------- Cash flows from financing activities: Prepayments on long-term debt (75,497) -- -- -- -- Scheduled payments on long-term debt -- (2,307) -- -- -- Loans to/from subsidiaries (27,493) -- -- -- -- Distributions to minority investors (141) -- -- -- -- Other (77) -- -- -- -- ----------- ------------ -------- ------- -------- Net cash provided by (used in) financing activities (103,208) (2,307) -- -- -- ----------- ------------ -------- ------- -------- Effect of exchange rate changes on cash (150) -- -- -- -- ----------- ------------ -------- ------- -------- NET CHANGE IN CASH (49,614) -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 218,646 -- -- -- -- ----------- ------------ -------- ------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD 169,032 -- -- -- -- =========== ============ ======== ======= ========

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 8A, SUB 8F, SUB 8G, SUB 6H, SUB 8B, SUB 1C, LLC L.P. LLC L.P. LLC L.P. -------- -------- -------- -------- -------- -------- Cash flows from operating activities: Net (loss) income -- 314 -- 121 963 (144) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization -- 164 -- 157 595 356 Equity in earnings -- -- -- -- -- -- Loss on asset impairments -- -- -- -- -- -- Loss on sale of assets, before tax effect -- -- -- -- -- -- Loss on early extinguishments of debt -- -- -- -- -- -- Minority interests -- -- -- -- -- -- Amortization of unearned stock based compensation -- -- -- -- -- -- Deferred income taxes -- -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- -- -- Prepaid expenses and other assets -- 16 -- 4 19 19 Due from/to Interstate Hotels & Resorts -- -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities -- (66) -- (139) 59 37 Due from subsidiaries -- (428) -- (143) 954 (111) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities -- -- -- -- 2,590 157 -------- -------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment -- -- -- -- (2,590) (157) Proceeds from sales of assets -- -- -- -- -- -- Change in restricted cash -- -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities -- -- -- -- (2,590) (157) -------- -------- -------- -------- -------- -------- Cash flows from financing activities: Prepayments on long-term debt -- -- -- -- -- -- Scheduled payments on long-term debt -- -- -- -- -- -- Loans to/from subsidiaries -- -- -- -- -- -- Distributions to minority investors -- -- -- -- -- -- Other -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- NET CHANGE IN CASH -- -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- -- ======== ======== ======== ======== ======== ========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTH ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 8E, SUB 7F, SUB 5L, SUB 3C, SUB 5R, SUB 6D, LLC LLC LLC LLC LLC LLC -------- -------- -------- -------- -------- -------- Cash flows from operating activities: Net (loss) income 169 119 299 297 -- 266 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 149 97 38 178 -- 137 Equity in earnings -- -- -- -- -- -- Loss on asset impairments -- -- -- -- -- -- Loss on sale of assets, before tax effect -- -- -- -- -- -- Loss on early extinguishments of debt -- -- -- -- -- -- Minority interests -- -- -- -- -- -- Amortization of unearned stock based compensation -- -- -- -- -- -- Deferred income taxes -- -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- -- (7) Prepaid expenses and other assets 5 3 17 5 -- 4 Due from/to Interstate Hotels & Resorts -- -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities (11) (24) 38 175 -- (38) Due from subsidiaries (256) (186) (357) (648) -- (312) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities 56 9 35 7 -- 50 -------- -------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment (56) (9) (35) (7) -- (50) Proceeds from sales of assets -- -- -- -- -- -- Change in restricted cash -- -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities (56) (9) (35) (7) -- (50) -------- -------- -------- -------- -------- -------- Cash flows from financing activities: Prepayments on long-term debt -- -- -- -- -- -- Scheduled payments on long-term debt -- -- -- -- -- -- Loans to/from subsidiaries -- -- -- -- -- -- Distributions to minority investors -- -- -- -- -- -- Other -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- NET CHANGE IN CASH -- -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- -- ======== ======== ======== ======== ======== ========

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 6E, SUB 4E, SUB 1B, SUB 5F, SUB 6G, LLC L.P. LLC L.P. LLC -------- -------- -------- --------- --------- Cash flows from operating activities: Net (loss) income 850 165 429 398 515 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 410 76 128 196 209 Equity in earnings -- -- -- -- -- Loss on asset impairments -- -- -- -- -- Loss on sale of assets, before tax effect -- -- -- -- -- Loss on early extinguishments of debt -- -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock based compensation -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- -- Prepaid expenses and other assets 16 10 16 36 6 Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities 328 (255) (15) (39) 97 Due from subsidiaries (1,026) 13 (311) (442) (742) -------- -------- -------- --------- --------- Net cash provided by (used in) operating activities 578 9 247 149 85 -------- -------- -------- --------- --------- Cash flows from investing activities: Capital expenditures for property and equipment (578) (9) (247) (149) (85) Proceeds from sales of assets -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -------- -------- -------- --------- --------- Net cash provided by (used in) investing activities (578) (9) (247) (149) (85) -------- -------- -------- --------- --------- Cash flows from financing activities: Prepayments on long-term debt -- -- -- -- -- Scheduled payments on long-term debt -- -- -- -- -- Loans to/from subsidiaries -- -- -- -- -- Distributions to minority investors -- -- -- -- -- Other -- -- -- -- -- -------- -------- -------- --------- --------- Net cash provided by (used in) financing activities -- -- -- -- -- -------- -------- -------- --------- --------- Effect of exchange rate changes on cash -- -- -- -- -- -------- -------- -------- --------- --------- NET CHANGE IN CASH -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- -------- -------- -------- --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======== ======== ======== ========= =========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTH ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 8C, SUB 4C, SUB 4H, SUB 7E, SUB 3D, SUB 1A, LLC L.P. L.P. LLC LLC LLC -------- -------- -------- -------- -------- -------- Cash flows from operating activities: Net (loss) income (203) -- (403) 142 119 (17) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization -- -- 43 152 192 113 Equity in earnings -- -- -- -- -- -- Loss on asset impairments -- -- -- -- -- 184 Loss on sale of assets, before tax effect 253 -- 365 -- -- -- Loss on early extinguishments of debt -- -- -- -- -- -- Minority interests -- -- -- -- -- -- Amortization of unearned stock based compensation -- -- -- -- -- -- Deferred income taxes -- -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- -- -- Prepaid expenses and other assets 117 -- (8) 4 8 26 Due from/to Interstate Hotels & Resorts -- -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities 306 -- (178) (13) 3 59 Due from subsidiaries (5,787) -- (4,192) 158 (298) (361) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities (5,314) -- (4,373) 443 24 4 -------- -------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment 569 -- (86) (443) (24) (4) Proceeds from sales of assets 5,000 -- 4,650 -- -- -- Change in restricted cash -- -- -- -- -- -- Costs associated with disposition program and other, net (255) -- (191) -- -- -- -------- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities 5,314 -- 4,373 (443) (24) (4) -------- -------- -------- -------- -------- -------- Cash flows from financing activities: Prepayments on long-term debt -- -- -- -- -- -- Scheduled payments on long-term debt -- -- -- -- -- -- Loans to/from subsidiaries -- -- -- -- -- -- Distributions to minority investors -- -- -- -- -- -- Other -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- NET CHANGE IN CASH -- -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- -- ======== ======== ======== ======== ======== ========

MERISTAR SUB MERISTAR MERISTAR MERISTAR MERISTAR 7A JOINT SUB 2B, SUB 3A, SUB 4A, SUB 4D, VENTURE LLC LLC LLC LLC ------------ ---------- -------- -------- -------- Cash flows from operating activities: Net (loss) income (664) -- 89 96 -- Adjustments to reconcile net (loss) income to net cas h provided by (used in) operating activities: Depreciation and amortization 61 -- 51 -- -- Equity in earnings -- -- -- -- -- Loss on asset impairments 809 -- -- -- -- Loss on sale of assets, before tax effect -- -- (20) 46 -- Loss on early extinguishments of debt -- -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock based compensation -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- 2,345 -- -- -- Prepaid expenses and other assets 7 -- 1 (9) 3 Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities (20) -- (161) (342) -- Due from subsidiaries (185) (2,345) (2,936) (2,918) (3) ------------ ---------- -------- -------- -------- Net cash provided by (used in) operating activities 8 -- (2,976) (3,127) -- ------------ ---------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment (8) -- (83) (194) -- Proceeds from sales of assets -- -- 3,300 3,575 -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- (241) (254) -- ------------ ---------- -------- -------- -------- Net cash provided by (used in) investing activities (8) -- 2,976 3,127 -- ------------ ---------- -------- -------- -------- Cash flows from financing activities: Prepayments on long-term debt -- -- -- -- -- Scheduled payments on long-term debt -- -- -- -- -- Loans to/from subsidiaries -- -- -- -- -- Distributions to minority investors -- -- -- -- -- Other -- -- -- -- -- Net cash provided by (used in) financing activities -- -- -- -- -- ------------ ---------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- ------------ ---------- -------- -------- -------- NET CHANGE IN CASH -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- ------------ ---------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ============ ========== ======== ======== ========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTH ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR SUB 2A, SUB 6L, MDV LIMITED SUB 5C, SUB 6J, LLC LLC PARTNERSHIP LLC LLC -------- -------- ----------- -------- -------- Cash flows from operating activities: Net (loss) income -- 1,852 78 -- 280 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization -- -- 23 -- 141 Equity in earnings -- -- -- -- -- Loss on asset impairments -- -- -- -- -- Loss on sale of assets, before tax effect -- (1,827) -- -- -- Loss on early extinguishments of debt -- -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock based compensation -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable 2,002 (178) -- 2 -- Prepaid expenses and other assets -- 14 4 (4) 4 Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities -- (25) 4 -- 228 Due from subsidiaries (2,002) (13,823) (82) 2 (560) -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities -- (13,987) 27 -- 93 -------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment -- (319) (27) -- (93) Proceeds from sales of assets -- 14,775 -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- (469) -- -- -- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities -- 13,987 (27) -- (93) -------- -------- -------- -------- -------- Cash flows from financing activities: Prepayments on long-term debt -- -- -- -- -- Scheduled payments on long-term debt -- -- -- -- -- Loans to/from subsidiaries -- -- -- -- -- Distributions to minority investors -- -- -- -- -- Other -- -- -- -- -- -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities -- -- -- -- -- -------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -------- -------- -------- -------- -------- Net change in cash -- -- -- -- -- Cash and cash equivalents, beginning of period -- -- -- -- -- -------- -------- -------- -------- -------- Cash and cash equivalents, end of period -- -- -- -- -- ======== ======== ======== ======== ========

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 1D, SUB 7B, SUB 7D, SUB 7G, SUB 6B, SUB 4I, L.P. L.P. LLC LLC LLC L.P. -------- -------- -------- -------- -------- -------- Cash flows from operating activities: Net (loss) income 459 (284) 609 47 67 -- Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 569 98 431 49 112 -- Equity in earnings -- -- -- -- -- -- Loss on asset impairments -- -- -- -- -- -- Loss on sale of assets, before tax effect -- 425 -- -- -- -- Loss on early extinguishments of debt -- -- -- -- -- -- Minority interests -- -- -- -- -- -- Amortization of unearned stock based compensation -- -- -- -- -- -- Deferred income taxes -- -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- (234) -- -- -- Prepaid expenses and other assets 105 7 17 5 2 -- Due from/to Interstate Hotels & Resorts -- -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities 335 (540) (166) 147 63 61 Due from subsidiaries (1,155) 328 (326) (241) (81) (61) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities 313 34 331 7 163 -- -------- -------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment (313) (34) (331) (7) (163) -- Proceeds from sales of assets -- -- -- -- -- -- Change in restricted cash -- -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities (313) (34) (331) (7) (163) -- -------- -------- -------- -------- -------- -------- Cash flows from financing activities: Prepayments on long-term debt -- -- -- -- -- -- Scheduled payments on long-term debt -- -- -- -- -- -- Loans to/from subsidiaries -- -- -- -- -- -- Distributions to minority investors -- -- -- -- -- -- Other -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Net change in cash -- -- -- -- -- -- Cash and cash equivalents, beginning of period -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Cash and cash equivalents, end of period -- -- -- -- -- -- ======== ======== ======== ======== ======== ========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTH ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 5D, SUB 5H, SUB 7H, AGH PSS SUB 2D, LLC LLC LLC I INC. LLC -------- -------- -------- -------- -------- Cash flows from operating activities: Net (loss) income (270) -- -- -- -- Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 369 -- -- -- -- Equity in earnings -- -- -- -- -- Loss on asset impairments -- -- -- -- -- Loss on sale of assets, before tax effect -- -- -- -- -- Loss on early extinguishments of debt -- -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock based compensation -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- 43 -- 1,166 Prepaid expenses and other assets 18 1 -- 1 -- Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities 327 -- -- -- -- Due from subsidiaries (346) (1) (43) (1) (1,166) -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities 98 -- -- -- -- -------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment (98) -- -- -- -- Proceeds from sales of assets -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities (98) -- -- -- -- -------- -------- -------- -------- -------- Cash flows from financing activities: Prepayments on long-term debt -- -- -- -- -- Scheduled payments on long-term debt -- -- -- -- -- Loans to/from subsidiaries -- -- -- -- -- Distributions to minority investors -- -- -- -- -- Other -- -- -- -- -- -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities -- -- -- -- -- -------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -------- -------- -------- -------- -------- Net change in cash -- -- -- -- -- Cash and cash equivalents, beginning of period -- -- -- -- -- -------- -------- -------- -------- -------- Cash and cash equivalents, end of period -- -- -- -- -- ======== ======== ======== ======== ========

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 4F, SUB 5K, SUB 5M, SUB 1E, SUB 5O, SUB 4B L.P. LLC LLC L.P. LLC L.P. -------- -------- -------- -------- -------- -------- Cash flows from operating activities: Net (loss) income 130 264 380 -- 177 (216) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 277 324 118 -- 57 -- Equity in earnings -- -- -- -- -- -- Loss on asset impairments -- -- -- -- -- -- Loss on sale of assets, before tax effect -- -- -- -- -- 215 Loss on early extinguishments of debt -- -- -- -- -- -- Minority interests -- -- -- -- -- -- Amortization of unearned stock based compensation -- -- -- -- -- -- Deferred income taxes -- -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- 198 -- -- Prepaid expenses and other assets 7 37 21 (1) 8 (4) Due from/to Interstate Hotels & Resorts -- -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities (295) 44 49 (14) 27 (411) Due from subsidiaries 241 (632) (548) (183) (264) (6,187) -------- -------- -------- -------- -------- ------ Net cash provided by (used in) operating activities 360 37 20 -- 5 (6,603) -------- -------- -------- -------- -------- ------- Cash flows from investing activities: Capital expenditures for property and equipment (360) (37) (20) -- (5) (415) Proceeds from sales of assets -- -- -- -- -- 7,500 Change in restricted cash -- -- -- -- -- - Costs associated with disposition program and other, net -- -- -- -- -- (482) -------- -------- -------- -------- -------- ------- Net cash provided by (used in) investing activities (360) (37) (20) -- (5) 6,603 -------- -------- -------- -------- -------- ------- Cash flows from financing activities: Prepayments on long-term debt -- -- -- -- -- -- Scheduled payments on long-term debt -- -- -- -- -- -- Loans to/from subsidiaries -- -- -- -- -- -- Distributions to minority investors -- -- -- -- -- -- Other -- -- -- -- -- -- -------- -------- -------- -------- -------- ------- Net cash provided by (used in) financing activities -- -- -- -- -- -- -------- -------- -------- -------- -------- ------- Effect of exchange rate changes on cash -- -- -- -- -- -- -------- -------- -------- -------- --------- ------- Net change in cash -- -- -- -- -- -- Cash and cash equivalents, beginning of period -- -- -- -- -- -- -------- -------- -------- -------- -------- ------- Cash and cash equivalents, end of period -- -- -- -- -- -- ======== ======== ======== ======== ======== =======
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTH ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 2C, SUB 4G, SUB 3B, SUB 5G, SUB 5P, LLC L.P. LLC L.P. LLC -------- -------- -------- -------- -------- Cash flows from operating activities: Net (loss) income (978) 85 -- 1,071 164 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization -- 112 -- 1,572 1 Equity in earnings -- -- -- -- -- Loss on asset impairments 903 245 -- -- -- Loss on sale of assets, before tax effect -- -- -- -- -- Loss on early extinguishments of debt -- -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock based compensation -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable (7) -- -- -- -- Prepaid expenses and other assets 17 47 -- 131 2 Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities (119) (405) 22 (761) -- Due from subsidiaries 251 (83) (22) 567 (167) -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities 67 1 -- 2,580 -- -------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment (67) (1) -- (2,580) -- Proceeds from sales of assets -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities (67) (1) -- (2,580) -- -------- -------- -------- -------- -------- Cash flows from financing activities: Prepayments on long-term debt -- -- -- -- -- Scheduled payments on long-term debt -- -- -- -- -- Loans to/from subsidiaries -- -- -- -- -- Distributions to minority investors -- -- -- -- -- Other -- -- -- -- -- -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities -- -- -- -- - -------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -------- -------- -------- -------- -------- NET CHANGE IN CASH -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======== ======== ======== ======== ========

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 5J, SUB 5Q, SUB 5A, SUB 8D, SUB 4J HOTEL LLC LLC LLC LLC LLC LESSEE, INC -------- -------- -------- -------- -------- ----------- Cash flows from operating activities: Net (loss) income 885 374 501 (857) 212 (23,653) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 1,415 140 269 -- 315 39 Equity in earnings -- -- -- -- -- -- Loss on asset impairments -- -- -- -- -- -- Loss on sale of assets, before tax effect -- -- -- 899 -- 7,036 Loss on early extinguishments of debt -- -- -- -- -- -- Minority interests -- -- -- -- -- -- Amortization of unearned stock based compensation -- -- -- -- -- -- Deferred income taxes -- -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- (359) -- (7,915) Prepaid expenses and other assets 169 26 15 14 9 755 Due from/to Interstate Hotels & Resorts -- -- -- -- -- (11,327) Accounts payable, accrued expenses, accrued interest and other liabilities 154 28 370 183 12 11,306 Due from subsidiaries (1,505) (510) (940) (7,983) (202) 11,261 -------- -------- -------- -------- -------- ----------- Net cash provided by (used in) operating activities 1,118 58 215 (8,103) 346 (12,498) -------- -------- -------- -------- -------- ----------- Cash flows from investing activities: Capital expenditures for property and equipment (1,118) (58) (215) (358) (346) -- Proceeds from sales of assets -- -- -- 8,800 -- -- Change in restricted cash -- -- -- -- -- (1,288) Costs associated with disposition program and other, net -- -- -- (339) -- -- -------- -------- -------- -------- -------- ----------- Net cash provided by (used in) investing activities (1,118) (58) (215) 8,103 (346) (1,288) -------- -------- -------- -------- -------- ----------- Cash flows from financing activities: Prepayments on long-term debt -- -- -- -- -- -- Scheduled payments on long-term debt -- -- -- -- -- -- Loans to/from subsidiaries -- -- -- -- -- 27,493 Distributions to minority investors -- -- -- -- -- -- Other -- -- -- -- -- -- -------- -------- -------- -------- -------- ----------- Net cash provided by (used in) financing activities -- -- -- -- -- 27,493 -------- -------- -------- -------- -------- ----------- Effect of exchange rate changes on cash -- -- -- -- -- -- -------- -------- -------- -------- -------- ----------- NET CHANGE IN CASH -- -- -- -- -- 13,707 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- 12,231 -------- -------- -------- -------- -------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- 25,938 ======== ======== ======== ======== ======== ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTH ENDED MARCH 31, 2004 (DOLLARS IN THOUSANDS)
GUARANTOR SUBSIDIARIES TOTAL TOTAL ELIMINATIONS CONSOLIDATED ------------ ------------ ------------ Cash flows from operating activities: Net (loss) income (14,457) 6,866 (40,887) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 9,967 -- 26,702 Equity in earnings -- (6,866) -- Loss on asset impairments 2,141 -- 5,011 Loss on sale of assets, before tax effect 7,392 -- 6,946 Loss on early extinguishments of debt -- -- 5,923 Minority interests -- -- (4) Amortization of unearned stock based compensation -- -- 587 Deferred income taxes -- -- (358) Changes in operating assets and liabilities: Accounts receivable (2,944) -- (4,367) Prepaid expenses and other assets 1,761 -- 4,920 Due from/to Interstate Hotels & Resorts (11,327) -- (5,461) Accounts payable, accrued expenses, accrued interest and other liabilities 10,453 -- (1,648) Due from subsidiaries (49,626) -- -- ------------ ------------ ------------ Net cash provided by (used in) operating activities (46,640) -- (2,636) ------------ ------------ ------------ Cash flows from investing activities: Capital expenditures for property and equipment (11,227) -- (23,737) Proceeds from sales of assets 47,600 -- 74,075 Change in restricted cash (1,288) -- (2,133) Costs associated with disposition program and other, net (2,231) -- (3,304) ------------ ------------ ------------ Net cash provided by (used in) investing activities 32,854 -- 44,901 ------------ ------------ ------------ Cash flows from financing activities: Prepayments on long-term debt -- -- (75,497) Scheduled payments on long-term debt -- -- (2,307) Loans to/from subsidiaries 27,493 -- -- Distributions to minority investors -- -- (141) Other -- -- (77) ------------ ------------ ------------ Net cash provided by (used in) financing activities 27,493 -- (78,022) ------------ ------------ ------------ Effect of exchange rate changes on cash -- -- (150) ------------ ------------ ------------ NET CHANGE IN CASH 13,707 -- (35,907) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,231 -- 230,876 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD 25,938 -- 194,969 ============ ============ ============
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR NON- MERISTAR AGH MERISTAR HOSPITALITY GUARANTOR SUB 7C, UPREIT, SUB 5N, OP, L.P. SUBSIDIARIES LLC LLC LLC ----------- ------------ -------- ------- -------- Operating activities: Net (loss) income (73,198) 3,152 -- -- 220 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 2,214 12,792 -- -- 34 Equity in earnings 44,064 -- -- -- -- Loss on asset impairments -- 3,975 -- -- -- Minority interests 11 -- -- -- -- Amortization of unearned stock-based compensation 976 -- -- -- -- Change in value of interest rate swaps (2,055) -- -- -- -- Deferred income taxes (682) -- -- -- -- Changes in operating assets and liabilities: Accounts receivable (1,047) 72 -- -- -- Prepaid expenses and other assets 4,804 (1,091) -- -- (9) Due from/to Interstate Hotels & Resorts 137 -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities (6,389) (5,694) -- -- (2) Due from subsidiaries 30,077 (19,439) -- -- (234) ----------- ------------ -------- ------- -------- Net cash provided by (used in) operating activities (1,088) (6,233) -- -- 9 ----------- ------------ -------- ------- -------- Cash flows from investing activities: Capital expenditures for property and equipment (260) (4,372) -- -- (9) Proceeds from sales of assets -- 12,650 -- -- -- Payments from Interstate Hotels & Resorts 42,052 -- -- -- -- Change in restricted cash (1,788) 132 -- -- -- Costs associated with disposition program and other, net -- (299) -- -- -- ----------- ------------ -------- ------- -------- Net cash provided by (used in) investing activities 40,004 8,111 -- -- (9) ----------- ------------ -------- ------- -------- Cash flows from financing activities: Scheduled payments on long-term debt (12,249) (1,878) -- -- -- Distributions to minority investors (141) -- -- -- -- ----------- ------------ -------- ------- -------- Net cash used in financing activities (12,390) (1,878) -- -- -- ----------- ------------ -------- ------- -------- Effect of exchange rate changes on cash (274) -- -- -- -- ----------- ------------ -------- ------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS 26,252 -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 21,372 -- -- -- -- ----------- ------------ -------- ------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD 47,624 -- -- -- -- =========== ============ ======== ======= =======

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 8A, SUB 8F, SUB 8G, SUB 6H, SUB 8B, LLC LLC LLC L.P. LLC -------- -------- -------- -------- -------- Operating activities: Net (loss) income -- 325 -- 124 862 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization -- 115 -- 108 610 Equity in earnings -- -- -- -- -- Loss on asset impairments -- -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- -- Prepaid expenses and other assets -- (18) -- (4) (3) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities -- (121) -- 11 (25) Due from subsidiaries -- (293) -- (238) (841) -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities -- 8 -- 1 603 -------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment -- (8) -- (1) (603) Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities -- (8) -- (1) (603) -------- -------- -------- -------- -------- Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- -- Distributions to minority investors -- -- -- -- -- -------- -------- -------- -------- -------- Net cash used in financing activities -- -- -- -- -- -------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -------- -------- -------- -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======== ======== ======== ======== ========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 1C, SUB 8E, SUB 7F, SUB 5L, SUB 3C, L.P. LLC LLC LLC LLC --------- -------- -------- -------- -------- Operating activities: Net (loss) income 30 167 71 259 317 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 254 146 115 34 179 Equity in earnings -- -- -- -- -- Loss on asset impairments -- -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable (4) -- -- 48 -- Prepaid expenses and other assets (72) (6) (4) (24) (5) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities (24) (63) 29 (22) 82 Due from subsidiaries (153) (179) (182) (278) (566) --------- -------- -------- -------- -------- Net cash provided by (used in) operating activities 31 65 29 17 7 --------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment (31) (65) (29) (17) (7) Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- --------- -------- -------- -------- -------- Net cash provided by (used in) investing activities (31) (65) (29) (17) (7) --------- -------- -------- -------- -------- Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- -- Distributions to minority investors -- -- -- -- -- --------- -------- -------- -------- -------- Net cash used in financing activities -- -- -- -- -- --------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- --------- -------- -------- -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- --------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ========= ======== ======== ======== ========

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 5R, SUB 6D, SUB 6E, SUB 4E, SUB 1B, LLC LLC LLC L.P. LLC -------- -------- -------- -------- -------- Operating activities: Net (loss) income -- 220 733 30 391 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization -- 137 414 211 143 Equity in earnings -- -- -- -- -- Loss on asset impairments -- -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- (7) -- -- -- Prepaid expenses and other assets -- (4) (18) (14) (20) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities -- (82) (44) (358) 17 Due from subsidiaries -- (264) (985) 220 (506) -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities -- -- 100 89 25 -------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment -- -- (100) (89) (14) Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities -- -- (100) (89) (14) -------- -------- -------- -------- -------- Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- (11) Distributions to minority investors -- -- -- -- -- -------- -------- -------- -------- -------- Net cash used in financing activities -- -- -- -- (11) -------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -------- -------- -------- -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======== ======== ======== ======== ========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 5F, SUB 6G, SUB 8C, SUB 4C SUB 4H, L.P. LLC LLC L.P. L.P. -------- -------- -------- -------- -------- Operating activities: Net (loss) income 360 213 (3,999) -- (114) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 267 215 200 -- 132 Equity in earnings -- -- -- -- -- Loss on asset impairments -- -- 4,127 -- -- Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- 14 Prepaid expenses and other assets (38) (7) (13) -- (17) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest an other liabilities (15) (71) (298) -- (95) Due from subsidiaries (548) (342) (9) -- 114 -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities 26 8 8 -- 34 -------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment (26) (8) (8) -- (34) Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities (26) (8) (8) -- (34) -------- -------- -------- -------- -------- Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- -- Distributions to minority investors -- -- -- -- -- -------- -------- -------- -------- -------- Net cash used in financing activities -- -- -- -- -- -------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -------- -------- -------- -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======== ======== ======== ======== ========

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 7E, SUB 3D, SUB 1A, SUB 5E, SUB 7A LLC LLC LLC LLC JOINT VENTURE -------- -------- -------- -------- ------------- Operating activities: Net (loss) income 132 118 231 657 101 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 155 197 113 484 107 Equity in earnings -- -- -- -- -- Loss on asset impairments -- -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- -- Prepaid expenses and other assets (5) (9) (33) (11) (8) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest an other liabilities (30) 5 (51) 67 (64) Due from subsidiaries (243) (302) (250) (1,177) (115) -------- -------- -------- -------- ------------- Net cash provided by (used in) operating activities 9 9 10 20 21 -------- -------- -------- -------- ------------- Cash flows from investing activities: Capital expenditures for property and equipment (9) (9) (10) (20) (21) Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -------- -------- -------- -------- ------------- Net cash provided by (used in) investing activities (9) (9) (10) (20) (21) -------- -------- -------- -------- ------------- Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- -- Distributions to minority investors -- -- -- -- -- -------- -------- -------- -------- ------------- Net cash used in financing activities -- -- -- -- -- -------- -------- -------- -------- ------------- Effect of exchange rate changes on cash -- -- -- -- -- -------- -------- -------- -------- ------------- NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- -------- -------- -------- -------- ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======== ======== ======== ======== =============
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 6K, SUB 2B, SUB 3A, SUB 4A, SUB 4D, LLC LLC LLC LLC LLC -------- -------- -------- -------- -------- Operating activities: Net (loss) income 671 (3,835) 44 191 (969) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 186 113 66 -- 55 Equity in earnings -- -- -- -- -- Loss on asset impairments -- 3,680 -- -- 1,004 Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- 1 -- -- -- Prepaid expenses and other assets (2) (12) (5) (7) (4) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest an other liabilities (60) -- (23) (175) 19 Due from subsidiaries (789) 54 (80) 57 (69) -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities 6 1 2 66 36 -------- -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment (6) (1) (2) (66) (36) Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities (6) (1) (2) (66) (36) -------- -------- -------- -------- -------- Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- -- Distributions to minority investors -- -- -- -- -- -------- -------- -------- -------- -------- Net cash used in financing activities -- -- -- -- -- -------- -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -------- -------- -------- -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- -------- -------- -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======== ======== ======== ======== ========

MERISTAR MERISTAR MDV MERISTAR MERISTAR SUB 2A, SUB 6L, LIMITED SUB 5C, SUB 6J, LLC LLC PARTNERSHIP LLC LLC -------- -------- ----------- -------- -------- Operating activities: Net (loss) income (2,177) 78 57 (5,878) 240 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 84 222 35 153 158 Equity in earnings -- -- -- -- -- Loss on asset impairments 1,981 -- -- 5,840 -- Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- -- Prepaid expenses and other assets (10) (7) (7) (32) (5) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest an other liabilities 20 33 (48) (69) (25) Due from subsidiaries 403 (289) (34) 38 (356) -------- -------- ----------- -------- -------- Net cash provided by (used in) operating activities 301 37 3 52 12 -------- -------- ----------- -------- -------- Cash flows from investing activities: Capital expenditures for property and equipment (301) (37) (3) (52) (12) Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- -------- -------- ----------- -------- -------- Net cash provided by (used in) investing activities (301) (37) (3) (52) (12) -------- -------- ----------- -------- -------- Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- -- Distributions to minority investors -- -- -- -- -- -------- -------- ----------- -------- -------- Net cash used in financing activities -- -- -- -- -- -------- -------- ----------- -------- -------- Effect of exchange rate changes on cash -- -- -- -- -- -------- -------- ----------- -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- -------- -------- ----------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======== ======== =========== ======== ========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 1D, SUB 7B, SUB 7D, SUB 7G, SUB 6B, L.P. L.P. LLC LLC LLC -------- -------- -------- -------- ------- Operating activities: Net (loss) income 260 (7,856) 600 (6,630) 59 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 578 181 421 178 116 Equity in earnings -- -- -- -- -- Loss on asset impairments -- 7,894 -- 6,549 -- Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- 243 -- -- Prepaid expenses and other assets (111) (7) (18) (6) (1) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities -- (211) (695) (70) 43 Due from subsidiaries (677) 35 (549) 11 (205) ------- ------- ------- ------- ------ Net cash provided by (used in) operating activities 50 36 2 32 12 ------- ------- ------- ------- ------ Cash flows from investing activities: Capital expenditures for property and equipment (50) (36) (2) (32) (12) Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- ------- ------- ------- ------- ------ Net cash provided by (used in) investing activities (50) (36) (2) (32) (12) ------- ------- ------- ------- ------ Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- -- Distributions to minority investors -- -- -- -- -- ------- ------- ------- ------- ------ Net cash used in financing activities -- -- -- -- -- ------- ------- ------- ------- ------ Effect of exchange rate changes on cash -- -- -- -- -- ------- ------- ------- ------- ------ NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- ------- ------- ------- ------- ------ CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======= ======= ======= ======= ======

MERISTAR MERISTAR MERISTAR MERISTAR AGH SUB 4I, SUB 5D, SUB 5H, SUB 7H, PSS I L.P. LLC LLC LLC INC. -------- -------- -------- -------- ------- Operating activities: Net (loss) income (111) (276) 562 146 450 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 73 365 505 51 -- Equity in earnings -- -- -- -- -- Loss on asset impairments -- -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- -- Prepaid expenses and other assets (8) (20) (98) (5) (45) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities (179) (15) (76) (145) (1) Due from subsidiaries 243 (41) (823) (42) (388) ------- ------- ------- ------- ------ Net cash provided by (used in) operating activities 18 13 70 5 16 ------- ------- ------- ------- ------ Cash flows from investing activities: Capital expenditures for property and equipment (18) (13) (70) (5) (16) Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- ------- ------- ------- ------- ------ Net cash provided by (used in) investing activities (18) (13) (70) (5) (16) ------- ------- ------- ------- ------ Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- -- Distributions to minority investors -- -- -- -- -- ------- ------- ------- ------- ------ Net cash used in financing activities -- -- -- -- -- ------- ------- ------- ------- ------ Effect of exchange rate changes on cash -- -- -- -- -- ------- ------- ------- ------- ------ NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- ------- ------- ------- ------- ------ CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======= ======= ======= ======= ======
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 2D, SUB 4F, SUB 5K, SUB 5M, SUB 1E, LLC L.P. LLC LLC L.P. -------- -------- -------- -------- ------- Operating activities: Net (loss) income (7,826) 164 211 363 238 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 127 279 322 118 79 Equity in earnings -- -- -- -- -- Loss on asset impairments 7,650 -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- -- Prepaid expenses and other assets (12) (8) (40) (20) (12) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities (74) (267) (25) (4) 6 Due from subsidiaries 135 66 (428) (449) (302) ------- ------- ------- ------- ------ Net cash provided by (used in) operating activities -- 234 40 8 9 ------- ------- ------- ------- ------ Cash flows from investing activities: Capital expenditures for property and equipment -- (234) (40) (8) (9) Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- ------- ------- ------- ------- ------ Net cash provided by (used in) investing activities -- (234) (40) (8) (9) ------- ------- ------- ------- ------ Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- -- Distributions to minority investors -- -- -- -- -- ------- ------- ------- ------- ------ Net cash used in financing activities -- -- -- -- -- ------- ------- ------- ------- ------ Effect of exchange rate changes on cash -- -- -- -- -- ------- ------- ------- ------- ------ NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- ------- ------- ------- ------- ------ CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======= ======= ======= ======= ======

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 5O, SUB 6M SUB 4B, SUB 6C, SUB 2C, LLC COMPANY L.P. LLC LLC -------- -------- -------- -------- ------- Operating activities: Net (loss) income 157 526 (156) 403 (13,660) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 57 308 136 194 278 Equity in earnings -- -- -- -- -- Loss on asset impairments -- -- -- -- 13,282 Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- -- Prepaid expenses and other assets (8) (8) (9) (7) (31) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities 2 58 (204) (7) 52 Due from subsidiaries (205) (880) 296 (543) 79 ------- ------- ------- ------- ------- Net cash provided by (used in) operating activities 3 4 63 40 -- ------- ------- ------- ------- ------- Cash flows from investing activities: Capital expenditures for property and equipment (3) (4) (63) (40) -- Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- ------- ------- ------- ------- ------- Net cash provided by (used in) investing activities (3) (4) (63) (40) -- ------- ------- ------- ------- ------- Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- -- Distributions to minority investors -- -- -- -- -- ------- ------- ------- ------- ------- Net cash used in financing activities -- -- -- -- -- ------- ------- ------- ------- ------- Effect of exchange rate changes on cash -- -- -- -- -- ------- ------- ------- ------- ------- NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- ------- ------- ------- ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======= ======= ======= ======= =======
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 4G, SUB 3B, SUB 5G, SUB 5P, SUB 5J, L.P. LLC L.P. LLC LLC -------- -------- -------- -------- ------- Operating activities: Net (loss) income 149 (491) 1,012 177 1,449 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 225 130 1,572 1 871 Equity in earnings -- -- -- -- -- Loss on asset impairments -- 695 -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- -- -- Prepaid expenses and other assets (50) (7) (140) (6) (147) Due from/to Interstate Hotels & Resorts -- -- -- -- -- Accounts payable, accrued expenses, accrued interest and other liabilities (386) 56 47 -- (168) Due from subsidiaries 69 (348) (2,333) (172) (791) ------- ------- ------- ------- ------- Net cash provided by (used in) operating activities 7 35 158 -- 1,214 ------- ------- ------- ------- ------- Cash flows from investing activities: Capital expenditures for property and equipment (7) (35) (158) -- (1,214) Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- ------- ------- ------- ------- ------- Net cash provided by (used in) investing activities (7) (35) (158) -- (1,214) ------- ------- ------- ------- ------- Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- -- Distributions to minority investors -- -- -- -- -- ------- ------- ------- ------- ------- Net cash used in financing activities -- -- -- -- -- ------- ------- ------- ------- ------- Effect of exchange rate changes on cash -- -- -- -- -- ------- ------- ------- ------- ------- NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- -- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- -- ------- ------- ------- ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- -- ======= ======= ======= ======= =======

MERISTAR MERISTAR MERISTAR MERISTAR MERISTAR SUB 5Q, SUB 5A, SUB 8D, SUB 4J, HOTEL LLC LLC LLC LLC LESSEE, INC. -------- -------- -------- -------- ----------- Operating activities: Net (loss) income 419 351 172 274 (8,222) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 140 386 314 326 (73) Equity in earnings -- -- -- -- -- Loss on asset impairments -- -- -- -- -- Minority interests -- -- -- -- -- Amortization of unearned stock-based compensation -- -- -- -- -- Change in value of interest rate swaps -- -- -- -- -- Deferred income taxes -- -- -- -- -- Changes in operating assets and liabilities: Accounts receivable -- -- -- (8) (12,249) Prepaid expenses and other assets (28) (16) (8) (11) (977) Due from/to Interstate Hotels & Resorts -- -- -- -- (44) Accounts payable, accrued expenses, accrued interest and other liabilities (29) 36 (16) (110) 6,711 Due from subsidiaries (413) (697) (332) (459) 7,941 ------- ------- ------- ------- ----------- Net cash provided by (used in) operating activities 89 60 130 12 (6,913) ------- ------- ------- ------- ----------- Cash flows from investing activities: Capital expenditures for property and equipment (89) (60) (130) (12) 4 Proceeds from sales of assets -- -- -- -- -- Payments from Interstate Hotels & Resorts -- -- -- -- -- Change in restricted cash -- -- -- -- -- Costs associated with disposition program and other, net -- -- -- -- -- ------- ------- ------- ------- ----------- Net cash provided by (used in) investing activities (89) (60) (130) (12) 4 ------- ------- ------- ------- ----------- Cash flows from financing activities: Scheduled payments on long-term debt -- -- -- -- 12,249 Distributions to minority investors -- -- -- -- -- ------- ------- ------- ------- ----------- Net cash used in financing activities -- -- -- -- 12,249 ------- ------- ------- ------- ----------- Effect of exchange rate changes on cash -- -- -- -- -- ------- ------- ------- ------- ----------- NET CHANGE IN CASH AND CASH EQUIVALENTS -- -- -- -- 5,340 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- -- -- 12,517 ------- ------- ------- ------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD -- -- -- -- 17,857 ======= ======= ======= ======= ===========
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2003 UNAUDITED (DOLLARS IN THOUSANDS)
GUARANTOR SUBSIDIARIES TOTAL ELIMINATIONS TOTAL CONSOLIDATED -------------- --------------- ------------------ Operating activities: Net (loss) income (47,216) 44,064 (73,198) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 13,700 -- 28,706 Equity in earnings -- (44,064) -- Loss on asset impairments 52,702 -- 56,677 Minority interests -- -- 11 Amortization of unearned stock-based compensation -- -- 976 Change in value of interest rate swaps -- -- (2,055) Deferred income taxes -- -- (682) Changes in operating assets and liabilities: Accounts receivable (11,962) -- (12,937) Prepaid expenses and other assets (2,297) -- 1,416 Due from/to Interstate Hotels & Resorts (44) -- 93 Accounts payable, accrued expenses, accrued interest and other liabilities 2,847 -- (9,236) Due from subsidiaries (10,638) -- -- ------------- -------------- ----------------- Net cash provided by (used in) operating activities (2,908) -- (10,229) ------------- -------------- ----------------- Cash flows from investing activities: Capital expenditures for property and equipment (3,990) -- (8,622) Proceeds from sales of assets -- -- 12,650 Payments from Interstate Hotels & Resorts -- -- 42,052 Change in restricted cash -- -- (1,656) Costs associated with disposition program and other, net -- -- (299) ------------- -------------- ----------------- Net cash provided by (used in) investing activities (3,990) -- 44,125 ------------- -------------- ----------------- Cash flows from financing activities: Scheduled payments on long-term debt 12,238 -- (1,889) Distributions to minority investors -- -- (141) ------------- -------------- ----------------- Net cash used in financing activities 12,238 -- (2,030) ------------- -------------- ----------------- Effect of exchange rate changes on cash -- -- (274) ------------- -------------- ----------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 5,340 -- 31,592 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,517 -- 33,889 ------------- -------------- ----------------- CASH AND CASH EQUIVALENTS, END OF PERIOD 17,857 -- 65,481 ============= ============== =================
-----END PRIVACY-ENHANCED MESSAGE-----


	•	Our board has approved the sale,

	•	We have a fully executed agreement with a qualified buyer which provides for no significant outstanding or continuing obligations with the property after sale, and

	•	We have a significant non-refundable deposit.


	•	the continuing uncertainty of the national economy;

	•	economic conditions generally and the real estate market specifically;

	•	the effects of threats of terrorism and increased security precautions on travel patterns and demand for hotels;

	•	the threatened or actual outbreak of hostilities and international political instability;

	•	governmental actions;

	•	legislative/regulatory changes, including changes to laws governing the taxation of real estate investment trusts;

	•	the level of proceeds from asset sales;

	•	cash available for capital expenditures;

	•	the availability of capital;

	•	our ability to refinance debt;

	•	rising interest rates;

	•	rising insurance premiums;

	•	competition;

	•	supply and demand for hotel rooms in our current and proposed market areas;

	•	other factors that may influence the travel industry, including health, safety and economic factors; and

	•	changes in generally accepted accounting principles, policies and guidelines applicable to real estate investment trusts.


^(a)	Includes loss on asset impairments of $3.8 million and $56.7 million for the three months ended March 31, 2004 and 2003, respectively. Also includes loss on disposal of $6.9 million for the three months ended March 31, 2004.


^(A)	Funds from operations included the effect of asset impairment charges, loss on early extinguishment of debt and related write off of deferred financing fees and related minority amounts recognized during first quarter of 2004, totaling $(12.1) million, or $(0.17) per diluted share. Weighted average number of shares of common stock and common OP units outstanding at March 31, 2004 on a fully diluted basis were 71.8 million.

^(B)	Funds from operations included the effect of asset impairment charges and related minority amounts recognized during the first quarter of 2003, totaling $(54.3) million or $(1.18) per diluted share. Weighted average number of shares of common stock and common OP units outstanding at March 31, 2003 on a fully diluted basis were 49.0 million.


	•	Factors that affect our results of operations, including general economic conditions, demand for business and leisure travel, public concerns about travel safety related primarily to terrorism and related concerns, capital investments required to maintain our property’s competitive position and other operating risks described under the caption, “Risk Factors — Operating Risks” in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2003;

	•	Factors that affect our access to bank financing and the capital markets, including operational risks, high leverage, covenant compliance, interest rate fluctuations, and other risks described under the caption “Risk Factors — Financing Risks” in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2003; and

	•	Other factors described previously under the caption, “Cautionary Statement Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.


	•	$74.1 million in proceeds from the sale of 11 non-core hotel assets; partially offset by

	•	$23.7 million in capital expenditures (including $0.75 million of capitalized interest);

	•	$3.3 million in costs associated with our asset disposition program; and

	•	$2.1 million increase in cash restricted for mortgage escrows.


	•	$42.1 million from Interstate Hotels for the payment of a note receivable; and

	•	$12.7 million of proceeds from the sale of one hotel, partially offset by

	•	$8.6 million of hotel capital expenditures (including $0.78 million of capitalized interest).


	1.	I have reviewed this quarterly report on Form 10-Q of MeriStar Hospitality Corporation;

	2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


	b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


	c.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to affect, the registrant’s internal control over financial reporting; and


	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	/s/ PAUL W. WHETSELL
	Paul W. Whetsell
	Chief Executive Officer
	MeriStar Hospitality Corporation


	/s/ DONALD D. OLINGER
	Donald D. Olinger
	Executive Vice President and
	Chief Financial Officer
	MeriStar Hospitality Corporation


	1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m or 78o(d)); and

	2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.