10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2005

OR

¨ 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	75-2648842
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4501 NORTH FAIRFAX DRIVE ARLINGTON, VIRGINIA	22203
(Address of principal executive offices)	(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  ¨

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

The number of shares of the registrant’s common stock outstanding at May 2, 2005 was 87,452,654.

INDEX

		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets—March 31, 2005 (Unaudited) and December 31, 2004	2
	Consolidated Statements of Operations—Three months ended March 31, 2005 and 2004 (Unaudited)	3
	Consolidated Statements of Cash Flows—Three months ended March 31, 2005 and 2004 (Unaudited)	4
	Notes to Consolidated Financial Statements (Unaudited)	5
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32
ITEM 4.	CONTROLS AND PROCEDURES	33
PART II. OTHER INFORMATION
ITEM 6.	EXHIBITS	34
SIGNATURES

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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, 2005			December 31, 2004
	(Unaudited)
ASSETS
Property and equipment	$	2,637,362		$	2,581,720
Accumulated depreciation		(530,049	)		(506,632	)
		2,107,313			2,075,088
Investments in and advances to unconsolidated affiliates		70,451			84,796
Prepaid expenses and other assets		34,313			34,533
Insurance claim receivable		60,896			76,056
Accounts receivable, net of allowance for doubtful accounts of $358 and $691		40,506			32,979
Restricted cash		62,946			58,413
Cash and cash equivalents		53,870			60,540
	$	2,430,295		$	2,422,405
LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-term debt	$	1,600,177		$	1,573,276
Accounts payable and accrued expenses		69,897			75,527
Accrued interest		35,812			41,165
Due to Interstate Hotels & Resorts		18,045			21,799
Other liabilities		20,252			11,553
Total liabilities		1,744,183			1,723,320
Minority interests		13,706			14,053
Stockholders’ equity:
Common stock, par value $0.01 per share
Authorized—100,000 shares
Issued—89,877 and 89,739 shares		898			897
Additional paid-in capital		1,466,982			1,465,658
Accumulated deficit		(751,837	)		(738,393	)
Common stock held in treasury—2,438 and 2,372 shares		(43,637	)		(43,130	)
Total stockholders’ equity		672,406			685,032
	$	2,430,295		$	2,422,405

2

MERISTAR HOSPITALITY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(Dollars in thousands, except per share amounts)

	Three Months Ended March 31,
	2005			2004
Revenue:
Hotel operations:
Rooms	$	125,995		$	129,992
Food and beverage		51,858			49,110
Other hotel operations		11,384			15,340
Office rental, parking and other revenue		1,858			1,368
Total revenue		191,095			195,810
Hotel operating expenses:
Rooms		31,359			31,686
Food and beverage		37,509			36,907
Other hotel operating expenses		7,116			9,475
Office rental, parking and other expenses		824			585
Other operating expenses:
General and administrative, hotel		32,105			32,264
General and administrative, corporate		3,533			3,882
Property operating costs		29,682			29,735
Depreciation and amortization		24,888			25,517
Property taxes, insurance and other		10,989			16,334
Loss on asset impairments		—			184
Operating expenses		178,005			186,569
Equity in income/loss of and interest earned from unconsolidated affiliates		1,634			1,600
Hurricane business interruption income		2,281			—
Operating income		17,005			10,841
Minority interest		347			946
Interest expense, net		(30,714	)		(34,502	)
Loss on early extinguishments of debt		(60	)		(5,923	)
Loss before income taxes and discontinued operations		(13,422	)		(28,638	)
Income tax (expense) benefit		(22	)		524
Loss from continuing operations		(13,444	)		(28,114	)
Discontinued operations:
Loss from discontinued operations before income tax		—			(12,220	)
Income tax benefit		—			89
Loss from discontinued operations		—			(12,131	)
Net loss	$	(13,444	)	$	(40,245	)
Basic loss per share:
Loss from continuing operations	$	(0.15	)	$	(0.41	)
Loss from discontinued operations		—			(0.18	)
Net loss per basic share	$	(0.15	)	$	(0.59	)
Diluted loss per share:
Loss from continuing operations	$	(0.15	)	$	(0.41	)
Loss from discontinued operations		—			(0.17	)
Net loss per diluted share	$	(0.15	)	$	(0.58	)

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MERISTAR HOSPITALITY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(Dollars in thousands)

	Three Months Ended March 31,
	2005			2004
Operating activities:
Net loss	$	(13,444	)	$	(40,245	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		24,859			27,160
Loss on asset impairments		—			5,011
Loss on sale of assets, before tax effect		—			6,946
Loss on early extinguishments of debt		60			5,923
Minority interests		(347	)		(946	)
Equity in loss of unconsolidated affiliate		1,370			—
Amortization of unearned stock-based compensation		277			587
Deferred income taxes		—			(487	)
Changes in operating assets and liabilities:
Accounts receivable		7,633			(2,767	)
Prepaid expenses and other assets		(112	)		4,920
Receivables from unconsolidated affiliates		13,004			(1,600	)
Due from/to Interstate Hotels & Resorts		(3,754	)		(5,461	)
Accounts payable, accrued expenses, accrued interest and other liabilities		(8,012	)		(1,677	)
Net cash provided by (used in) operating activities		21,534			(2,636	)
Investing activities:
Capital expenditures for property and equipment		(55,642	)		(23,737	)
Proceeds from sales of assets		—			74,075
Increase in restricted cash		(4,533	)		(2,133	)
Costs associated with disposition program and other, net		—			(3,304	)
Net cash (used in) provided by investing activities		(60,175	)		44,901
Financing activities:
Prepayments on long-term debt		(1,531	)		(75,497	)
Scheduled payments on long-term debt		(2,731	)		(2,307	)
Proceeds from mortgage loan, net of financing costs		36,714			—
Distributions to minority investors		—			(141	)
Repurchase of common stock		(507	)		—
Other		26			(77	)
Net cash provided by (used in) financing activities		31,971			(78,022	)
Effect of exchange rate changes on cash and cash equivalents		—			(150	)
Net decrease in cash and cash equivalents		(6,670	)		(35,907	)
Cash and cash equivalents, beginning of period		60,540			230,884
Cash and cash equivalents, end of period	$	53,870		$	194,977
Supplemental Cash Flow Information
Cash paid for interest and income taxes:
Interest, net of capitalized interest	$	36,393		$	43,755
Income tax payments, net of (refunds)	$	22		$	(911	)
Non-cash investing and financing activities:
Senior subordinated debt redeemed in exchange for common stock	$	—		$	38,000
Redemption of OP units	$	—		$	20
Change of fair value of interest rate swap	$	6,750		$	—

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MERISTAR HOSPITALITY CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

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. Our portfolio is diversified geographically as well as by franchise and brand affiliations. As of March 31, 2005, we owned 73 hotels with 20,319 rooms, all of which were leased by our taxable subsidiaries. 71 of these hotels were managed by Interstate Hotels & Resorts (“Interstate”), one hotel was managed by The Ritz-Carlton Hotel Company, LLC (“Ritz-Carlton”), a subsidiary of Marriott International, Inc., and one hotel was managed by another subsidiary (“Marriott”) of Marriott International, Inc. (collectively with Interstate and Ritz-Carlton, the “Managers”).

The Managers operate the 73 hotels we owned as of March 31, 2005 pursuant to management agreements with our taxable subsidiaries. Under these management agreements, each taxable subsidiary pays a management fee for each property to the Manager of its hotels. The taxable subsidiaries in turn make rental payments to our subsidiary operating partnership under the participating leases.

Under the Interstate 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 have initial terms expiring on January 1, 2011 with three renewal periods of five years each at the option of Interstate, subject to some exceptions. Additionally, our franchise fees generally range from 2.0% to 7.4% of hotel room revenues.

Under the Ritz-Carlton and Marriott management agreements, the base management fee is 3.0% and 2.5% of total hotel revenue, respectively, through 2005 and 3.0% under both thereafter, plus incentive payments based on meeting performance thresholds that could total up to an additional 2.0% of total revenue and 20% of available cash flow (as defined in the relevant management agreement), respectively. The agreements have initial terms expiring in 2015 and 2024, respectively, with four and three renewal periods of 10 and five years each, respectively, at the option of Ritz-Carlton and Marriott. The Ritz-Carlton and Marriott management agreements include certain limited performance guarantees by the relevant manager which are designed primarily to provide downside performance protection and run through 2005 and up to 2008, respectively. Management, based upon budgets and operating trends, expects payments under these guarantees for 2005 and in the future to be minimal.

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 United States 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, 2004.

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.

Basis of Presentation and Principles of Consolidation. The accompanying consolidated financial statements include the accounts of the Company, its subsidiaries and its controlled affiliates. We consolidate entities (in the absence of other factors when determining control) when we own over 50% of the voting shares of another

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company or, in the case of partnership investments, when we own a majority of the general partnership interest. Additionally, if we determine that we are an owner in a variable interest entity within the meaning of the Financial Accounting Standards Board, or FASB, revision to Interpretation No. 46, “Consolidation of Variable Interest Entities” and that our variable interest will absorb a majority of the entity’s expected losses if they occur, receive a majority of the entity’s expected residual returns if they occur, or both, then we will consolidate the entity. All material intercompany transactions and balances have been eliminated in consolidation. One of our properties reports results over 13 four week periods each year. We include 12 weeks of results in each of quarters one through three and 16 weeks of results in quarter four.

Use of Estimates. Preparing financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from these estimates.

Property and Equipment. We record our property and equipment at cost, or at fair value at the time of contribution for contributed property. We use the straight-line method for depreciation. We depreciate the majority of our buildings and improvements over an estimated useful life of 20 to 40 years, or the remaining terms of a ground lease, if shorter. We depreciate furniture, fixtures and equipment over lives ranging from five to seven years, and computers over three to five years. During the three months ended March 31, 2005 and 2004, we recognized depreciation expense of $23.4 million and $24.5 million, respectively. For the three months ended March 31, 2005 and 2004, we capitalized interest of $2.7 million and $0.7 million, respectively.

Held for Sale Properties. Held-for-sale classification requires that the sale be probable and that the transfer of the asset is expected to be completed within one year, among other criteria. Assessing the probability of the sale requires significant judgment due to the uncertainty surrounding completing the transaction, and as a result, we have developed the following policy to aid in the assessment of probability. 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. If material to our total portfolio, we segregate the assets and liabilities relating to our held for sale properties on our consolidated balance sheet.

Cash Equivalents and Restricted Cash. 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. Restricted cash represents amounts held in escrow in accordance with the requirements of certain of our credit facilities.

Impairment or Disposal of Long-Lived Assets. We record as discontinued operations the current and prior period operating results of any asset that has been classified as held for sale or has been disposed of and where we have no continuing involvement. Any gains or losses on final disposition are also included in discontinued operations.

Whenever events or changes in circumstances indicate that the carrying value of a long-lived asset may be impaired, an analysis is performed to determine the recoverability of the asset’s carrying value. When we conclude that we expect to sell or otherwise dispose of an asset significantly before the end of its previously

6

estimated useful life, we perform an impairment analysis on that asset (as is the case for assets we are considering for disposition). 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 recognize a liability for a cost associated with an exit or disposal activity only when the liability is incurred, and measure that liability initially at fair value. Hotels of which we dispose may be managed under agreements that require payments 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. At that time, the recognition of the termination obligation will be included in the calculation of the final gain or loss on sale. To date, we have not incurred any management agreement termination obligations other than in connection with sales of hotels.

Stock-Based Compensation. We apply the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, 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 grant options with an exercise price equal to the price of our common stock on grant date. Compensation costs related to stock options are included in general and administrative expenses on the accompanying consolidated statement of operations. 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 plans, we recognize compensation expense over the vesting period based on the fair market value of the award at the date of grant for fixed plan awards, while variable plan awards are re-measured based upon the intrinsic value of the award at each balance sheet date.

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,
	2005			2004
Net loss, as reported	$	(13,444	)	$	(40,245	)
Add: Stock-based employee compensation expense included in reported net loss, net of related tax effect		605			587
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effect		(611	)		(651	)
Net loss, pro forma	$	(13,450	)	$	(40,309	)
Loss per share, as reported:
Basic	$	(0.15	)	$	(0.59	)
Diluted	$	(0.15	)	$	(0.58	)
Weighted average fair value of options granted		N/A	*	$	0.34
Loss per share, pro forma:
Basic	$	(0.15	)	$	(0.59	)
Diluted	$	(0.15	)	$	(0.58	)

* No options were granted during the three months ended March 31, 2005.

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

Derivative Instruments and Hedging Activities. Our interest rate risk management objective is to manage 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.

Acquisition of Hotels. Our hotel acquisitions consist almost exclusively of land, building, furniture, fixtures and equipment. We allocate the purchase price among these asset classes and any acquired intangible assets based upon their respective fair values as required by SFAS No. 141, “Business Combinations.”

Investments in Unconsolidated Affiliates. We have non-controlling interests in entities which we account for under the cost method or equity method of accounting. Our investment in MeriStar Investment Partners, L.P. (“MIP”) is a limited partner interest with no participation rights in the management, affairs or operations of the entity, and is accounted for using the cost method. We recognize our preferred return on this investment quarterly as it becomes due to us; this investment is reflected in a separate line item on our Consolidated Balance Sheets. Our investment in Radisson Lexington Avenue Hotel is accounted for using the equity method, since we are presumed to exert significant influence on this entity due to our ownership percentage of 49.99%. Accordingly, we recognize 49.99% of the profit and loss of the investee. This investment is also reflected in a separate line item on our Consolidated Balance Sheets. Our investments in unconsolidated affiliates are periodically reviewed for other than temporary declines in market value. An impairment is recorded as a reduction to the carrying value of the investment for any declines which are determined to be other than temporary.

Accounting for the Impact of the Hurricane Damage to Florida Properties. In August and September 2004, hurricanes caused substantial damage to a number of our hotels located in Florida. The hurricane damage and local evacuation orders also caused significant business interruption at many of our Florida properties, including the complete closure of certain hotels. As a result, seven of our hotels were closed for an extended period of time, and five others were affected in varying degrees.

We have comprehensive insurance coverage for both property damage and business interruption. Some properties are requiring substantial repair and reconstruction and have remained closed while such repairs are completed. Our recovery effort is extensive and includes replacing portions of buildings, landscaping and furniture, as well as upgrading to comply with changes in building and electrical codes. As of March 31, 2005, the net book value of the property damage is estimated to be at least $65.5 million; however, we are still assessing the impact of the hurricanes on our properties, and final net book value write-offs could vary from this estimate. Changes to this estimate will be recorded in the periods in which they are determined. We have recorded a corresponding insurance claim receivable for this $65.5 million net book value amount because we believe that it is probable that the insurance recovery, net of deductibles, will exceed the net book value of the damaged portion of these assets. The recovery is based on replacement cost, and we have submitted claims substantially in excess of $65.5 million.

While we expect the insurance proceeds will be sufficient to cover most of the replacement cost of the restoration of these hotels, certain deductibles (primarily windstorm) and limitations will apply. Moreover, while we are receiving and expect to continue to receive interim insurance payments, no determination has been made as to the total amount or timing of those insurance payments, and those insurance payments may not be sufficient to cover the costs of all the restoration of the hotels. To the extent that insurance proceeds, which are calculated on a replacement cost basis, ultimately exceed the net book value of the damaged property, a gain will be recorded in the period when all contingencies related to the insurance claim have been resolved and the relevant payments have been received.

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As of March 31, 2005, seven of our Florida properties remained substantially closed due to hurricane damage. As of May 2, 2005, six of these properties remained substantially closed. Additionally, as of March 31, 2005, two properties that suffered varying amounts of hurricane damage had certain rooms and conference facilities out of service. Where possible and in order to mitigate loss of revenues, some permanent repairs to damaged properties have been deferred during the Florida “high season”, which generally lasts from late December through early April, in order to have facilities available to meet demand. These damaged facilities will be removed from service for permanent repairs at a later date. We have hired consultants to assess our business interruption claims and are currently negotiating with our insurance carriers regarding the amount of loss for these income losses sustained. To the extent that we are entitled to a recovery under the insurance policies, we will recognize a receivable when it can be demonstrated that it is probable that such insurance recovery will be realized, and such receivable will then be reflected as a component of operating income. Any gain resulting from business interruption insurance for lost income will not be recognized until all contingencies related to the insurance recoveries are resolved and collection of the relevant payments is probable. These income recognition criteria will likely often result in business interruption insurance recoveries being recorded in a period subsequent to the period that we experience lost income from the affected properties, resulting in fluctuations in our net income that may reduce the comparability of reported quarterly results for some periods into the future.

Under these income recognition criteria, as of March 31, 2005, we have recorded a business interruption recovery gain of $2.3 million due to receiving recognition of a minimal level of business interruption profit that the insurance companies are willing to recognize without any contingencies at this time for certain of our hurricane-affected properties. Our business interruption claims substantially exceed the amount of this minimal recognition to date. We ultimately expect to recognize additional business interruption insurance profit as we proceed further through the claims process.

Through March 31, 2005, we have incurred recoverable costs related to both property damage and business interruption recoveries totaling $56.4 million. In addition, we recorded a receivable of $65.5 million related to the write-off of the net book value of the damaged portion of our assets. We collected $63.3 million in insurance advances through March 31, 2005, of which $61.0 million reduced our receivable balance, and $2.3 million represented income on our business interruption recoveries. We have collected an additional $7.2 million in advances from April 1 through May 2, 2005. The cost recoveries are recorded on the expense line item to which they relate; therefore there is no net impact to any line item or our results.

The following is a summary of hurricane-related activity recorded (in millions):

Hurricane Receivable

	March 31, 2005
Fixed assets net book value write down	$	65.5
Recoverable costs incurred		56.4
Business interruption income		2.3
Payments received		(63.3	)
	$	60.9

New Accounting Pronouncements. In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment,” which requires companies to recognize compensation cost relating to share-based payment transactions, and measure that cost based on the fair value of the equity or liability instruments issued. We are required to comply with the provisions of this statement beginning with the first quarter of 2006. We do not expect the adoption of this revised standard to have a material effect on our accounting treatment for share-based payments, as we adopted the transition provisions of SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” on January 1, 2003 and elected to recognize compensation expense for options granted subsequent to December 31, 2002 under the fair-value-based method.

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The FASB issued Statement No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions” in December 2004. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. We are required to comply with the provisions of this statement for the third quarter of 2005. We have not entered into or modified any transactions within the scope of this standard, nor do we have any existing transactions that fall within the scope of SFAS No. 153.

Reclassifications. Certain prior period information has been reclassified to conform to the current period presentation. These reclassifications have no impact on consolidated net loss.

3. Comprehensive Loss

Comprehensive loss equaled net loss for the three months ended March 31, 2005, as we no longer have foreign operations. Comprehensive loss was $40.5 million for the three months ended March 31, 2004, which consisted of net loss ($40.2 million) and foreign currency translation adjustments.

4. Acquisitions

On May 10, 2004 and June 25, 2004, we acquired the 366-room Ritz-Carlton, Pentagon City in Arlington, Virginia and the 485-room Marriott Irvine in Orange County, California, respectively, for a total purchase price of $185.5 million, plus net acquisition costs and adjustments of $0.9 million.

The acquisitions were accounted for under the purchase method of accounting, and the assets and liabilities and results of operations of the hotels have been consolidated in our financial statements since the date of purchase. On an unaudited pro forma basis, revenues, net income and basic and diluted loss per share for the three months ended March 31, 2005 and 2004 would have been reported as follows if the acquisitions had occurred at the beginning of each of the respective periods (in thousands, except per share amounts):

	Three Months Ended March 31,
	2005			2004
Total revenue	$	191,095		$	207,221
Net loss		(13,444	)		(39,422	)
Net loss per share:
Basic and Diluted	$	(0.15	)	$	(0.57	)

5. Property and Equipment

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

	March 31, 2005		December 31, 2004
Land	$	244,088	$	244,088
Buildings and improvements		1,940,443		1,926,813
Furniture, fixtures and equipment		307,070		295,562
Construction-in-progress		145,761		115,257
	$	2,637,362	$	2,581,720

For the three months ended March 31, 2005 and 2004, we capitalized interest of $2.7 million and $0.7 million, respectively.

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We incurred no impairment losses during the first quarter of 2005. During the first quarter of 2004, we recognized impairment losses of $5.0 million, of which $4.8 million is recorded in discontinued operations as of March 31, 2005 (see Note 11).

The impairment charges recorded during the first quarter of 2004 were triggered by an expectation that a property would be sold significantly before the end of its estimated useful life. The impairment charges were based on our estimates of the fair value of the properties we were actively marketing based on available market data. These estimates required us to make assumptions about the sales prices that we expected to realize for each property as well as the timing of a potential sale. In making these estimates, we considered the operating results of the assets, the market for comparable properties, and quotes from brokers, among other information. In nearly all cases, our estimates reflected the results of an extensive marketing effort and negotiations with prospective buyers. Actual results could differ materially from these estimates.

6. Investments in Unconsolidated Affiliates

Investment in Radisson Lexington Avenue Hotel. On October 1, 2004, we acquired a 49.99% interest in the 705-room Radisson Lexington Avenue Hotel in Midtown Manhattan. We made a total investment of $50 million, which includes a $40 million mezzanine loan that matures on October 1, 2014 and yields $5.8 million of cumulative annual interest, and a $10 million equity interest in the hotel. The mezzanine loan is secured by a pledge of the equity interests held by the borrower in an indirect parent of the owner of the hotel, and has a 10-year term. The loan is subordinate to $150 million in senior notes, but has priority over all equity interests.

Our equity investment is accounted for under the equity method of accounting, in accordance with our accounting policies as described in Note 2 to the Consolidated Financial Statements. The interest income from the loan, as well as the income related to the 49.99% share in profits and losses, is recorded in a separate line item “equity in income/loss of and interest earned from unconsolidated affiliates” within operating activities as the operations of this investment are integral to our operations. As of March 31, 2005, we recognized interest income of $1.4 million on the mezzanine loan, which is recognized as earned. Our outstanding loan balance of $40.4 million includes $0.4 million unamortized origination costs associated with the loan. Our initial equity investment balance of $10.1 million includes $0.1 million of external costs incurred. During the three months ended March 31, 2005, we recognized $1.3 million of equity in losses on our equity investment.

Investment in MIP. In 1999, we, through MeriStar Hospitality Operating Partnership, L.P. (“MHOP”), our principal operating subsidiary, 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 limited partnership interest, in which we earned (through December 9, 2004) a 16% cumulative preferred return with outstanding balances compounded quarterly. In accordance with MIP’s December 2004 amended and restated partnership agreement, the return on our investment and on our remaining unpaid accrued preferred return was reduced to a 12% annual cumulative return rate, and subordinate only to the MIP debt; and $12.5 million of our $40 million investment was upgraded to receive preference in liquidation over all other investments.

During the fourth quarter of 2003, we recognized a $25.0 million impairment loss on this investment since, at that time, the decline in the underlying value of our investment was deemed other than temporary. As of March 31, 2005, the book value of the original investment is $15.0 million.

In February 2005, MIP completed a $175 million commercial mortgage-backed securities financing, secured by its portfolio of eight hotels. Upon the completion of the financing in February 2005, we received a distribution of $15.5 million, which was applied to reduce our outstanding accrued preferred returns receivable to approximately $4 million.

As of March 31, 2005, our total MIP carrying value was $20.7 million, consisting of the $15.0 million adjusted investment balance and $5.7 million of accrued preferred returns receivable.

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We recognize our preferred return quarterly as it becomes due to us. The income, net of related expense, if any, is recorded in the “Equity in income/loss of and interest earned from unconsolidated affiliates” line within operating activities as the operations of this investment are integral to our operations. For the three months ended March 31, 2005 and 2004, we recognized a preferred return of $1.6 million and $1.6 million, respectively, from this investment. As of March 31, 2005 and December 31, 2004, cumulative preferred returns of $5.7 million and $19.7 million, respectively, were due from MIP. 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. We evaluate the collectibility of our preferred return based on our preference to distributions and the underlying value of the hotel properties.

7. Long-Term Debt

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

	March 31, 2005			December 31, 2004
Senior unsecured notes due 2011—9.125%	$	355,665		$	355,665
Senior unsecured notes due 2008—9.0%		270,500			270,500
Senior unsecured notes due 2009—10.5%		224,187			224,187
Secured facility, due 2009		301,388			302,979
Secured facility, due 2013		98,880			99,293
Convertible subordinated notes		170,000			170,000
Senior subordinated notes		32,740			34,225
Mortgage and other debt		161,972			125,051
Unamortized issue discount		(3,731	)		(3,950	)
	$	1,611,601		$	1,577,950
Fair value adjustment for interest rate swap		(11,424	)		(4,674	)
	$	1,600,177		$	1,573,276

Aggregate future maturities as of March 31, 2005 were as follows (in thousands):

2005 (nine months)	$	8,414
2006		12,031
2007		45,523
2008		284,741
2009		503,526
Thereafter		757,366
	$	1,611,601
Fair value adjustment for interest rate swap		(11,424	)
	$	1,600,177

Senior subordinated notes. During the three months ended March 31, 2005, we repurchased, using available cash, $1.49 million of our senior subordinated notes (plus $0.06 million of accrued interest). We recorded a loss on early extinguishment of debt of $0.06 million and wrote off deferred financing costs of $0.01 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.

Mortgage and other debt. On January 26, 2005, we entered into a $37.7 million mortgage loan on our Hilton Crystal City hotel that bears interest at a fixed rate of 5.84%. The mortgage requires interest only payments for the first three years and then monthly payments of interest and principal over the remaining portion of the ten

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year term of the loan, with the majority of the principal balance paid at the end of the ten year term. Our net proceeds of $34.7 million are net of a $3 million escrow reserve for future capital expenditures. We incurred financing costs of $0.8 million related to this mortgage.

Derivatives. As of March 31, 2005 and December 31, 2004, the fair value of our interest rate swap was approximately an $11.4 million liability and $4.7 million liability, respectively. This amount is recorded on our consolidated balance sheet in the other liabilities line item with a corresponding debit recorded to long-term debt. During the three months ended March 31, 2005, we earned net cash payments of $0.9 million under the swap, which were recorded as a reduction in interest expense. In conjunction with the interest rate swap, we have posted collateral of $18.9 million and $12.0 million as of March 31, 2005 and December 31, 2004, respectively, which is recorded as restricted cash. The required collateral amount fluctuates based on the changes in the swap rate and the amount of time left to maturity. During the three months ended March 31, 2005, our posted collateral ranged from $10.9 million to $18.9 million. However, due to the terms of the swap agreement, our posted collateral must be a minimum amount calculated per the agreement, which was $6.3 million as of March 31, 2005. We will receive all remaining collateral upon maturity of the swap.

8. Stockholders’ Equity and Minority Interests

Common Stock Transactions. During the three months ended March 31, 2005, we awarded 133,937 shares of common stock to employees, with a value of $1.0 million, related to our annual incentive plan for 2004. Of these shares, 63,935 were repurchased as treasury stock to satisfy the minimum statutory tax withholding requirements, and 70,002 shares were issued. During the three months ended March 31, 2005, we issued 3,430 shares of common stock with a value of $0.03 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 Profits-Only OP Units (POPs).

No Common OP Units were converted into common stock during the three months ended March 31, 2005. Common OP Unit holders converted 3,686 of their OP Units, with a value of $0.02 million into common stock during the three months ended March 31, 2004. A POPs unit holder converted 15,000 POPs for cash during the three months ended March 31, 2004.

Treasury Stock. As of March 31, 2005 and December 31, 2004, we carried 2.4 million shares in treasury stock. We record and carry treasury stock at cost, and generally acquire treasury stock to cover the Company’s minimum tax withholdings related to stock issued for compensation.

Dividends. We did not declare or pay any dividends in 2005 or 2004.

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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,
	2005			2004
Basic Loss Per Share:
Loss from continuing operations	$	(13,444	)	$	(28,114	)
Dividends paid on unvested restricted stock		—			—
Loss available to common stockholders	$	(13,444	)	$	(28,114	)
Weighted average number of basic shares of common stock outstanding		87,392			68,640
Basic loss per share from continuing operations	$	(0.15	)	$	(0.41	)
Diluted Loss Per Share:
Loss available to common stockholders from continuing operations	$	(13,444	)	$	(28,114	)
Minority interest		—			(1,083	)
Adjusted net loss	$	(13,444	)	$	(29,197	)
Weighted average number of basic shares of common stock outstanding		87,392			68,640
Common stock equivalents:
Operating partnership units		—			2,427
Total weighted average number of diluted shares of common stock outstanding		87,392			71,067
Diluted loss per share from continuing operations	$	(0.15	)	$	(0.41	)

For the three months ended March 31, 2005 and 2004, 19,100,534 shares and 18,129,255 shares, respectively, consisting of shares issuable upon conversion, exchange or exercise of stock options, certain operating partnership units, 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

In the course of document review with respect to the MIP restructuring, we discovered a potential technical REIT qualification issue relating to a wholly-owned subsidiary of MIP, of which we are deemed to own a de minimis proportionate share. In order to eliminate any uncertainty regarding this issue, we are currently negotiating a closing agreement with the Internal Revenue Service to resolve all REIT qualification matters with respect to this potential issue. As a result of our negotiations with the Internal Revenue Service, we do not anticipate incurring a material tax liability and we expect to remain qualified as a REIT for all prior years. We also remain qualified to operate as a REIT for calendar year 2005.

As part of our asset renovation program, we have entered into contractual obligations with vendors to acquire capital assets and perform renovations totaling approximately $46.1 million to be expended over the next 12 months. Additionally, we have entered into contractual obligations related to capital expenditures as a result of hurricanes in the amount of $25.8 million to be expended over the next 12 months, most of which we expect to reimbursed by our insurance carriers.

11. Dispositions

No hotels were disposed of in the three months ended March 31, 2005. We disposed of 11 hotels in the three months ended March 31, 2004. As of March 31, 2005 and December 31, 2004, none of our hotels met our criteria

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for held-for-sale classification. Operating results for the sold hotels, and where applicable, the gain or loss on final disposition, are included in discontinued operations.

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

	Three Months Ended March 31,
	2005		2004
Revenue	$	—	$	22,369
Loss on asset impairments	$	—	$	(4,827	)
Pretax loss from operations		—		(447	)
Loss on disposal		—		(6,946	)
	$	—	$	(12,220	)

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

12. Consolidating Financial Statements

We and certain subsidiaries of 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 subordinated notes. We own a one percent general partner interest in MHOP, and MeriStar LP, Inc., our wholly-owned subsidiary, owns approximately a 96 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, 2005 and December 31, 2004, consolidating statements of operations for the three months ended March 31, 2005 and 2004, and consolidating statements of cash flows for the three months ended March 31, 2005 and 2004.

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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. Forward-looking statements, which are based on various 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. We cannot guarantee that we actually will achieve these plans, intentions or expectations. All statements regarding our expected financial position, business and financing plans are forward-looking statements.

Except for historical information, matters discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are subject to 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.

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

• economic conditions generally and the real estate market specifically;

• 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;

• competition;

• cash flow generally, including the availability of capital generally, cash available for capital expenditures, and our ability to refinance debt;

• 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, including new laws and regulations and particularly changes to laws governing the taxation of real estate investment trusts;

• weather conditions generally and natural disasters;

• rising interest rates; 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 in the United States. Our portfolio is diversified geographically as well as by franchise and

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brand affiliations. As of March 31, 2005, we owned 73 hotels with 20,319 rooms. Our hotels are located in major metropolitan areas, rapidly growing secondary markets or resort locations in the United States. All of our hotels are leased by our taxable subsidiaries. 71 of these hotels were managed by Interstate Hotels & Resorts (“Interstate”), one hotel was managed by The Ritz-Carlton Hotel Company, LLC (“Ritz-Carlton”), a subsidiary of Marriott International, Inc., and one hotel was managed by another subsidiary (“Marriott”) of Marriott International, Inc. (collectively with Interstate and Ritz-Carlton, the “Managers”).

The Managers operate the 73 hotels we owned as of March 31, 2005 pursuant to management agreements with our taxable subsidiaries. Under these management agreements, each taxable subsidiary pays a management fee for each property to the Manager of its hotels. The taxable subsidiaries in turn make rental payments to our subsidiary operating partnership under the participating leases.

Under the Interstate 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 have initial terms expiring on January 1, 2011 with three renewal periods of five years each at the option of Interstate, subject to some exceptions. Additionally, our franchise fees generally range from 2.0% to 7.4% of hotel room revenues.

Under the Ritz-Carlton and Marriott management agreements, the base management fee is 3.0% and 2.5% of total hotel revenue, respectively, through 2005 and 3.0% under both thereafter, plus incentive payments based on meeting performance thresholds that could total up to an additional 2.0% of total revenue and 20% of available cash flow (as defined in the relevant management agreement), respectively. The agreements have initial terms expiring in 2015 and 2024, respectively, with four and three renewal periods of 10 and five years each, respectively, at the option of Ritz-Carlton and Marriott. The Ritz-Carlton and Marriott management agreements include certain limited performance guarantees by the relevant manager which are designed primarily to provide downside performance protection and run through 2005 and up to 2008, respectively. Management, based upon budgets and operating trends, expects payments under these guarantees in the future to be minimal.

Since the July 2002 merger that formed Interstate, we and Interstate have separated 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. During July 2004, we concluded negotiations with Interstate to terminate the intercompany agreement. In exchange for terminating the intercompany agreement, we received, among other things:

• the right to terminate up to 600 rooms per year upon the payment of a termination fee equal to 1.5 times the fees earned during the preceding 12 months, with the ability to carry over up to 600 rooms for termination in the succeeding year;

• the right to terminate the management contract of a hotel, where Interstate invests in a competing hotel, with no termination fee; and

• an extension of the termination fee payment period for terminations related to hotel sales, from 30 months to 48 months.

The termination of the intercompany agreement eliminates the last element of our original “paper clip” relationship with Interstate.

Separately, we reached an agreement with Interstate regarding the calculation of termination fees payable upon a sale. Although termination fees for the properties that have been disposed of or were expected to be disposed of under our previously announced disposition program (which includes one of the 73 properties we owned as of March 31, 2005) will be unchanged, we received a $2.5 million credit, which is applicable to fees payable with respect to future dispositions. Of the $2.5 million credit, $2.4 million has been applied to terminations that occurred during 2004.

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In January 2005, we notified Interstate that 11 hotels with 3,655 rooms had apparently failed to meet the performance test involving two year operating results versus budgets for those years. We and Interstate are currently in discussions relating to the apparent shortfall, the reasons for such shortfall, and any remedies that are available to us.

Results Overview

General

We believe that we are in the midst of the early stages of a lodging industry economic recovery; however, the recovery is not uniform throughout the country. Certain of our markets are performing well, while others have not yet recovered. Our strategy currently includes the following key initiatives: focus on growth of earnings and cash flow from our existing portfolio using an aggressive asset management program; upgrade our portfolio through extensive renovations; recycle capital into higher yielding hotel investments; improve our capital structure to support internal growth, position the Company for external opportunities and increase our fixed charges coverage; increase shareholder value; and maintain liquidity.

We are in the process of upgrading the product quality and growth potential of our hotels through our aggressive capital expenditure program and selective brand conversions. We have continued to reshape our portfolio through three strategic, high-quality acquisitions, including one investment completed in October 2004, and dispositions of a number of lower yielding properties. We may continue to reposition our portfolio and recycle capital through investing in current or new assets, funded by dispositions of assets, where we see an opportunity to increase our return on investment and financial results.

We have developed a targeted renovation program that is designed to reduce the time and cost required to renovate hotels, allowing us to improve the quality of our hotels faster to take advantage of the rebound in the economy and better manage the disruptions associated with renovations. We accelerated our renovation program for certain key assets, which created some short-term disruption but also positioned these properties to participate more quickly in the lodging industry recovery. We invested approximately $134 million in capital expenditures during 2004. During the three months ended March 31, 2005, we invested approximately $39 million in non hurricane-related capital expenditures and expect to invest an additional $61 million in non hurricane-related capital expenditures during the remainder of 2005 to enhance the quality of our portfolio to meet or exceed the standards of our primary brands—Hilton, Marriott, and Starwood—as well as to improve the competitiveness of these assets in their markets and enable them to more fully participate in the economic recovery. While hotel results are negatively impacted during renovations due to out of service rooms and limitations on the ability to sell other hotel services, we expect to have positioned these renovated properties well to be able to benefit from the economic recovery. During the three months ended March 31, 2005, we invested approximately $17 million in hurricane-related capital expenditures. The total amount of hurricane-related capital expenditures has not yet been fully determined, however we anticipate it to be well in excess of $100 million, most of which we expect to be reimbursed by our insurance carriers.

The August – September 2004 Hurricanes

In August and September 2004, hurricanes caused substantial damage to a number of our hotels located in Florida. The hurricane damage and local evacuation orders also caused significant business interruption at many of our Florida properties, including the complete closure of certain hotels. As a result, seven of our hotels were closed for an extended period of time, and five others were affected in varying degrees.

We have comprehensive insurance coverage for both property damage and business interruption. Some properties are requiring substantial repair and reconstruction and have remained closed while such repairs are completed. Our recovery effort is extensive and includes replacing portions of buildings, landscaping and furniture, as well as upgrading to comply with changes in building and electrical codes. As of March 31, 2005,

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the net book value of the property damage is estimated to be at least $65.5 million; however, we are still assessing the impact of the hurricanes on our properties, and final net book value write-offs could vary from this estimate. Changes to this estimate will be recorded in the periods in which they are determined. We have recorded a corresponding insurance claim receivable for this $65.5 million net book value amount because we believe that it is probable that the insurance recovery, net of deductibles, will exceed the net book value of the damaged portion of these assets. The recovery is based on replacement cost, and we have submitted claims substantially in excess of $65.5 million.

While we expect the insurance proceeds will be sufficient to cover most of the replacement cost of the restoration of these hotels, certain deductibles (primarily windstorm) and limitations will apply. Moreover, while we are receiving and expect to continue to receive interim insurance payments, no determination has been made as to the total amount or timing of those insurance payments, and those insurance payments may not be sufficient to cover the costs of all the restoration of the hotels. To the extent that insurance proceeds, which are calculated on a replacement cost basis, ultimately exceed the net book value of the damaged property, a gain will be recorded in the period when all contingencies related to the insurance claim have been resolved.

As of March 31, 2005, seven of our Florida properties remained substantially closed due to hurricane damage. As of May 2, 2005, six of these properties remained substantially closed. Additionally, as of March 31, 2005, two properties that suffered varying amounts of hurricane damage had certain rooms and conference facilities out of service. Where possible and in order to mitigate loss of revenues, some permanent repairs to damaged properties were deferred during the Florida “high season”, which generally lasts from late December through early April, in order to have facilities available to meet demand. These damaged facilities will be removed from service for permanent repairs at a later date. We have hired consultants to assess our business interruption claims and are currently negotiating with our insurance carriers regarding the amount of loss for income losses sustained. To the extent that we are entitled to a recovery under the insurance policies, we will recognize a receivable when it can be demonstrated that it is probable that such insurance recovery will be realized, and such receivable will then be reflected as a component of operating income. Any gain resulting from business interruption insurance for lost income will not be recognized until all contingencies related to the insurance recoveries are resolved and collection of the relevant payments is probable. These income recognition criteria will result in business interruption insurance recoveries being recorded in a period subsequent to the period that we experience lost income from the affected properties, resulting in fluctuations in our net income that may reduce the comparability of reported quarterly results for some periods into the future. Additionally, current year expenses will reflect reduced operating expenses and recoverable expenses recorded as recoveries, resulting in lower current year expenses as compared to prior year.

Under these income recognition criteria, as of March 31, 2005, we have recorded a business interruption recovery gain of $2.3 million due to receiving recognition of a minimal level of business interruption profit that the insurance companies are willing to recognize without any contingencies at this time for certain of our hurricane-affected properties. Our business interruption claims substantially exceed the amount of this minimal recognition to date. We ultimately expect to recognize additional business interruption insurance profit as we proceed further through the claims process.

Through March 31, 2005, we have incurred recoverable costs related to both property damage and business interruption recoveries totaling $56.4 million. In addition, we recorded a receivable of $65.5 million related to the write-off of the net book value of the damaged portion of our assets. We collected $63.3 million in insurance advances through March 31, 2005, of which $61.0 million reduced our receivable balance, and $2.3 million represented income on our business interruption recoveries. We have collected an additional $7.2 million in advances from April 1 through May 2, 2005. The cost recoveries are recorded on the expense line item to which they relate; therefore there is no net impact to any line item or our results.

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The following is a summary of hurricane-related activity recorded (in millions):

Hurricane Receivable

	March 31, 2005
Fixed assets net book value write down	$	65.5
Recoverable costs incurred		56.4
Business interruption income		2.3
Payments received		(63.3	)
	$	60.9

During the first quarter of 2004, the seven hotels that were completely or substantially closed realized $28.9 million in revenues. These hotels recognized $4.0 million of revenues during the first quarter of 2005.

Overall Results

Revenues from continuing operations were $191.1 million for the three months ended March 31, 2005, compared to $195.8 million for the three months ended March 31, 2004. The revenue decrease is primarily due to a disruption of all revenues at properties impacted by hurricanes in August and September 2004, partially offset by an increase of $3.59 in RevPAR at our comparable hotels (see “Results of Operations” for definition of comparable hotels), higher food and beverage revenues attributable to increased menu pricing in 2005 and revenues from our two hotels acquired during the second quarter of 2004. Hotel and other operating expenses were 4.6% lower compared to the same period in 2004, mainly due to the limited operations of certain of the hurricane-impacted properties. We incurred a $0.1 million loss on extinguishment of debt for the quarter ended March 31, 2005, compared to a $5.9 million loss for the quarter ended March 31, 2004. Additionally, our 2004 results include a $12.1 million loss realized at properties we no longer own.

Property taxes, insurance and other reflects no rental payments under the best efforts lease programs at two properties in the first quarter of 2005 due to the closure of hurricane-impacted properties.

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2004 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 income (but not in revenues) is our cumulative preferred return on our partnership interest in MIP, the interest income on our mezzanine loan to the Radisson Lexington Avenue Hotel and our equity in the income/loss on our Radisson Lexington Avenue Hotel investment. Operating costs include direct costs to run our hotels, management fees to Interstate and others 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.

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Accordingly, we have reclassified all prior periods presented to comply with this requirement. See Footnote 11, “Dispositions,” included in Item 1 of this Quarterly Report on Form 10-Q for further information regarding the amounts reclassified.

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

	Three Months Ended March 31, 2005			Three Months Ended March 31, 2004			Percent Change
Summary of Operations:
Total revenue from continuing operations	$	191,095		$	195,810		(2.4	)%
Hotel operating expenses		76,808			78,653		(2.3	)
Other operating expenses		101,197			107,732		(6.1	)
Loss on asset impairments		—			184		(100.0	)
Total operating expenses		178,005			186,569		(4.6	)
Equity in income/loss of and interest earned from unconsolidated affiliates		1,634			1,600		2.1
Hurricane business interruption income		2,281			—		>100.0
Operating income		17,005			10,841		56.9
Loss on extinguishments of debt		(60	)		(5,923	)	(99.0	)
Minority interest		347			946		(63.3	)
Interest expense, net		(30,714	)		(34,502	)	(11.0	)
Income tax (expense) benefit		(22	)		524		>(100.0	)
Loss from continuing operations		(13,444	)		(28,114	)	(52.2	)
Loss from discontinued operations, net of tax(a)		—			(12,131	)	100.0
Net loss	$	(13,444	)	$	(40,245	)	(66.6	)%

(a) Includes loss on asset impairments of $4.8 million and loss on disposal of $6.9 million for the three months ended March 31, 2004. Income tax benefit was $0.1 million for the three months ended March 31, 2004.

Operating Data for our 73 hotels (20,319 rooms):

	Three Months Ended March 31, 2005			Three Months Ended March 31, 2004			Percent Change
Average Daily Rate	$	112.50		$	109.59		2.7	%
Occupancy		61.3	%		67.6	%	(9.3	)
Revenue Per Available Room (RevPAR)	$	69.01		$	74.06		(6.8	)

Three months ended March 31, 2005 compared with the three months ended March 31, 2004

Continuing Operations Results

Our 73 properties in continuing operations include two properties acquired in 2004, two properties of which we intend to dispose, and seven properties in Florida that were significantly impacted by hurricanes that occurred in August and September 2004 and that remained closed or substantially closed in the first quarter of 2005. Operating results have been impacted by these events. For more information regarding the impact of these hurricanes, see “—Results Overview”. Because of these events, our total results are not comparable between years. In order to provide a useful comparison, where appropriate, this section includes discussion and analysis of

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our results as a whole and discussion and analysis of results of the 62 comparable hotels that were in normal operations for the current period and the prior year period. The seven Florida hotels that remained substantially closed in the first quarter of 2005, the two hotels of which we intend to dispose under our repositioning program, and the two hotels acquired in 2004, are excluded from the comparable hotels.

Total revenue. Because of the events noted above, our total revenue is not comparable between years. Total revenue decreased by $4.7 million or 2.4% in 2005 compared to the first quarter of 2004. This decrease in revenue is primarily due to a disruption of all revenues at properties impacted by the hurricanes of 2004, partially offset by an increase in ADR and higher food and beverage revenues attributable to a strategy of increasing room rates and reducing our exposure to contract business paying lower rates, increased menu pricing in 2005 and revenues from our two hotels acquired during the second quarter of 2004. Overall ADR increased 2.7% for the quarter ended March 31, 2005 when compared with the same period in 2004, primarily due to a focus on increasing business related to higher rate transient and corporate business, and away from lower paying groups, as well as overall increasing daily rates in general, and due to the acquisition of two higher rate properties in the second quarter of 2004, and the result of the industry benefiting from an increase in travel due to a general strengthening of the economy; this favorable impact on rooms revenue was offset by revenue losses from our hurricane-impacted hotels, which generally realize high RevPAR during the first quarter. The decrease in occupancy of 9.3% over the same period was due to rooms out of service as a result of the Florida hurricanes, the impact of having fewer available rooms due to hotel room renovations, as well as a focus on increasing daily rates, which resulted in lower group, contract, and internet sales. Approximately 75% of the 9.3% decrease in occupancy was specifically due to the rooms out of service as a result of the Florida hurricanes.

The following table presents operating data for our 62 comparable hotels:

Operating Data for our comparable hotels (17,684 rooms):

	Three Months Ended March 31, 2005			Three Months Ended March 31, 2004			Percent Change
ADR	$	108.69		$	100.57		8.1	%
Occupancy % *		67.8	%		69.7	%	(2.7	)
RevPAR *	$	73.64		$	70.05		5.1

* Occupancy and RevPAR have been adjusted for rooms out of service due to renovations.

For the 62 comparable hotels, total revenue increased by $5.2 million or 3.2% from $162.4 million in the first quarter of 2004 to $167.6 million in the first quarter of 2005. The increase in room revenue was primarily due to an increase in ADR of $8.12 or 8.1% and RevPAR of $3.59 or 5.1%, which resulted from a strategy of increasing room rates and reducing our exposure to contract business paying lower rates, and the general strengthening of the economy and lodging industry. Occupancy decreased 2.7% mainly due to the impact of having fewer available rooms due to hotel room renovations, as well as a focus on increasing business related to higher rate transient and corporate business, and away from lower paying groups, as well as overall increasing daily rates in general. Revenue growth was negatively impacted due to the short term effects of brand conversions and rooms out of service during renovations and as a result of the Florida hurricanes at our comparable hotels.

Hotel operating expenses. Because of the events noted above, our total hotel operating expenses are not comparable between years. Hotel operating expenses decreased by $1.8 million or 2.3% in the three months ended March 31, 2005 as compared to the same period in 2004. The decrease was primarily attributable to the limited operations of certain of the hurricane-impacted properties, including the substantial closure of several properties. Food and beverage expense decreased by 2.8% of food and beverage revenue mainly due to menu pricing adjustments that have outpaced the increasing cost of labor and benefits. Rooms expense increased by 0.5% of rooms revenue mainly due to rising labor and benefits costs.

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For the 62 comparable hotels, hotel operating expenses remained relatively flat from the first quarter of 2004 to the first quarter of 2005, even though revenues increased, primarily due to a decrease in occupancy and occupancy-driven expenses, as we focused on increasing ADR.

Other operating expenses. Other operating expenses include general and administrative expenses, property operating costs, depreciation and amortization, non-income taxes, and insurance. Individual variations in these expenses were as follows:

• Property taxes, insurance expense and other expense: In the first quarter of 2005, expenses for hurricane-impacted properties decreased from the same period in 2004, primarily due to a $2.3 million reduction in rental payments under the best efforts leases program. Also, the hurricane-impacted properties’ expenses were reduced in 2005 to the extent that these costs were recoverable; these same properties had normal operating expenses in the first quarter of 2004. Additionally, property taxes decreased by $2.7 million from the same period in 2004, which included adjustments of $2.5 million of tax reserves. Insurance expense also decreased by $0.5 million, primarily due to a reduction in property insurance premiums, which was partially offset by additional insurance costs associated with the two hotels acquired in the second quarter of 2004.

• Write-off of deferred financing fees: The current year’s repurchase of $1.5 million of senior unsecured notes resulted in a $0.01 million write-off of deferred financing fees. The same period in 2004 reflects the repurchase of approximately $71.5 million of senior unsecured notes, and the issuance of common stock in exchange for $38.0 million of senior subordinated notes, which resulted in a write-off of deferred financing fees of approximately $1.3 million. These expenses are included in depreciation and amortization expense.

Losses on asset impairments. Due to the progress of our asset disposition program during 2004, losses from asset impairments were recorded during the first quarter of 2004. The portfolio remaining in the 2005 first quarter has experienced no further impairments or adjustments to holding periods.

Equity in income/loss of and interest earned from unconsolidated affiliates. Equity in income/loss of and interest earned from unconsolidated affiliates consists of income earned from two investments in which we own non-controlling interests and do not consolidate in our financial statements. We recognize a proportionate share of the profit and loss earned by the Radisson Lexington Avenue Hotel, an equity method investment acquired in 2004, as well as interest income on the $40 million loan made to this entity. For the three months ended March 31, 2005, we recognized interest income of $1.4 million, offset by a $1.3 million equity share of net losses. In addition, we currently recognize a preferred return of 12% from our investment in MIP, accounted for using the cost method, resulting in current and cumulative preferred return income of $1.6 million in the first quarter of 2005. Our first quarter 2004 income of $1.6 million represents only the current portion of our 16% preferred return; no cumulative portion of the return was recognized.

Hurricane business interruption income. In the three months ended March 31, 2005, we recognized $2.3 million of business interruption income, based on insurance company acknowledgement of this minimum level of profit that six of our properties would have earned from the hurricane dates through March 31, 2005. For additional information regarding hurricane business interruption income, see “Results Overview—The August – September 2004 Hurricanes.”

Interest expense, net. Net interest expense declined 11.0% or $3.8 million in the three months ended March 31, 2005 compared to the same period in 2004, primarily as a result of 2004 repurchases of approximately $99.6 million of senior unsecured notes and the issuance of common stock in 2004 in exchange for $49.2 million of senior subordinated notes. The interest savings from these repurchases were somewhat offset by the placement of lower interest rate mortgages, and increases in LIBOR.

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Loss from discontinued operations

During the three months ended March 31, 2005, there were no discontinued operations, sales of assets, or assets classified as held for sale. Loss from discontinued operations for the same period in 2004 totaled $12.1 million, including impairment charges of $4.8 million, a loss on disposition of assets of $6.9 million, and an income tax benefit of $0.1 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, which we have also adopted.

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, has recommended that FFO include the effect of asset impairment charges, which is the 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 provides beneficial information to investors.

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,
	2005			2004
Net loss	$	(13,444	)	$	(40,245	)
Depreciation and amortization of real estate assets		23,494			24,503
Loss on disposal of assets		—			6,946
Unconsolidated affiliate adjustments		1,254			—
Minority interest to common OP unit holders		(634	)		(997	)
FFO		10,670			(9,793	)(A)
FFO per share	$	0.12			($0.14	)
Weighted average number of shares of common stock outstanding for FFO		87,495			68,640

(A) Funds from operations included the effect of asset impairment charges, loss on early extinguishments of debt, write off of deferred financing fees, and related minority interest amounts recognized during the three months ended March 31, 2004, totaling $(11.8) million or $(0.17) per diluted share. The weighted average number of shares of common stock outstanding at March 31, 2004 on a fully diluted basis was 68.7 million.

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The following reconciles our outstanding shares used to calculate net loss per share to our outstanding shares used to calculate FFO per diluted share (amounts in thousands):

	Three Months Ended March 31,
	2005	2004
Reconciliation from Basic Shares:
Weighted average number of basic shares of common stock outstanding for basic net loss per share calculation	87,392	68,640
Additional common stock equivalents for FFO:
Operating partnership units	—	—
Stock options	103	—
Weighted average number of shares of common stock outstanding for diluted FFO	87,495	68,640
Reconciliation from Diluted Shares:
Weighted average number of diluted shares of common stock outstanding for diluted net loss per share calculation	87,392	71,067
Additional common stock equivalents for FFO:
Operating partnership units	—	(2,427	)
Stock options	103	—
Weighted average number of shares of common stock outstanding for diluted FFO	87,495	68,640

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, investments in hotels (including capital projects and acquisitions), and escrow requirements. Our debt strategy includes considering opportunities to repay debt and to reduce our overall cost of borrowing, such as through repaying more expensive debt with the proceeds from low interest rate mortgages and asset sales and the use of interest rate swaps. We believe we currently have sufficient cash on hand, 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. We did not pay a dividend on our common stock during 2004, nor do we expect to pay one in 2005. 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 significantly 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, insurance coverage and timing of hurricane-related expenditures and related insurance receipts, 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, 2004;

• 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, 2004; and

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

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We generally intend to hold unrestricted 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 $50 million secured revolving bank line in December 2003, maturing in December 2006, which is fully available and increases our flexibility in managing our liquidity.

In 1999, we, through MeriStar Hospitality Operating Partnership, L.P. (“MHOP”), our principal operating subsidiary, 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 limited partnership interest, in which we earned (through December 9, 2004) a 16% cumulative preferred return with outstanding balances compounded quarterly. In accordance with MIP’s December 2004 amended and restated partnership agreement, the return on our investment and on our remaining unpaid accrued preferred return was reduced to a 12% annual cumulative return rate, and subordinate only to the MIP debt; and $12.5 million of our $40 million investment was upgraded to receive preference in liquidation over all other investments.

During the fourth quarter of 2003, we recognized a $25.0 million impairment loss on this investment since, at that time, the decline in the underlying value of our investment was deemed other than temporary. As of March 31, 2005, the book value of the original investment is $15.0 million.

In February 2005, MIP completed a $175 million commercial mortgage-backed securities financing, secured by its portfolio of eight hotels. Upon the completion of the financing in February 2005, we received a distribution of $15.5 million, which was applied to reduce our outstanding accrued preferred returns receivable to approximately $4 million.

As of March 31, 2005, our total MIP carrying value was $20.7 million, consisting of the $15.0 million adjusted investment balance and $5.7 million of accrued preferred returns receivable.

We invested approximately $134 million in capital expenditures during 2004. During the three months ended March 31, 2005, we invested approximately $39 million in non hurricane-related capital expenditures and expect to invest an additional $61 million in non hurricane-related capital expenditures during the remainder of 2005. During the three months ended March 31, 2005, we invested approximately $17 million in hurricane-related capital expenditures. The total amount of hurricane-related capital expenditures has not yet been fully determined, however we anticipate it to be well in excess of $100 million, most of which we expect to be reimbursed by our insurance carriers.

As part of our strategy to manage our leverage, we have retired debt with higher interest rates and acquired debt with lower interest rates. During the three months ended March 31, 2005, we repurchased, using available cash, $1.49 million of our senior subordinated notes (plus $0.06 million of accrued interest). Following these repurchases, we had $32.7 million of outstanding senior subordinated notes due 2007. In 2004, we retired $49.2 million of our senior subordinated notes and purchased $99.6 million of our senior unsecured notes. These transactions have allowed us to reduce our cost of borrowing and improve our credit statistics. We will continue to review opportunities to reduce our debt and cost of borrowing through debt repurchases.

On January 26, 2005, we entered into a $37.7 million mortgage loan on our Hilton Crystal City hotel that bears interest at a fixed rate of 5.84%. The mortgage requires interest only payments for the first three years and then monthly payments of interest and principal over the remaining portion of the ten year term of the loan, with the majority of the principal balance paid at the end of the ten year term. Our net proceeds of $34.7 million are net of a $3 million escrow reserve for future capital expenditures. We incurred financing costs of $0.8 million related to this mortgage.

We may look to use additional mortgage capacity permitted under our bond indentures to raise low interest rate, long-term secured debt with the proceeds used to repay more expensive debt and to fund capital investments in new or existing properties.

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We may from time to time receive offers from potential acquirers of our hotel assets. We consider and evaluate any such opportunities that have the potential to improve our financial condition or results of operations through further repositioning our portfolio and recycling of capital. Proceeds from asset dispositions would most likely be reinvested into high yielding projects in our existing portfolio or used to fund debt repurchases or acquire assets with higher returns.

In August and September 2004, a number of our hotels located in Florida incurred substantial damage and business interruption. While we have comprehensive insurance coverage for both property damage and business interruption, we are experiencing a decline in revenues due to the full or partial closure of certain hotels, and accounting rules do not permit us to recognize any income from business interruption insurance or gains on replacement of damaged property until all contingencies associated with the related insurance payments have been resolved. Additionally, we may experience a timing delay between cash outflows and cash inflows, as we may incur costs to rebuild the damaged properties, and temporary negative cash flows associated with affected properties, that may not be reimbursed by the insurance carriers for several periods. Additionally, we are liable for any policy deductibles. While this timing difference may have some impact on our short term liquidity, we believe that we will be able to meet all of our short term cash needs through a variety of means, including reducing capital expenditures, borrowings under our credit facility and the placement of mortgages, if necessary. For more information regarding the impact of these hurricanes, see “—Results Overview.”

As of March 31, 2005, we had $62.9 million of cash held in escrow, which was required by certain debt agreements and the interest rate swap agreement. Our cash balance held in escrow may increase or decrease based upon the performance of our encumbered hotels, our ability to obtain timely capital reimbursements, and the fair value of our interest rate swap. Of the $62.9 million, approximately $27.4 million was available to fund capital expenditures as of March 31, 2005.

Sources and Uses of Cash

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

	2005			2004			2005 vs 2004
Operating activities	$	21,534		$	(2,636	)	$	24,170
Investing activities		(60,175	)		44,901			(105,076	)
Financing activities		31,971			(78,022	)		109,993
Cash and cash equivalents, end of period—unrestricted		53,870			194,977			(141,107	)

Cash flow from operations increased in the first quarter of 2005, primarily due to the impact of margin improvements due to the refocusing of our portfolio assets, as well as the generation of new revenues from our hotels acquired in 2004, and as a result of the lodging industry economic recovery.

We used a net $60.2 million of cash for investing activities during the three months ended March 31, 2005, consisting of:

• $55.6 million in capital expenditures (including $2.7 million of capitalized interest); and

• $4.5 million increase in cash restricted, mainly related to our interest rate swap.

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

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

• $23.7 million in capital expenditures (including $0.7 million of capitalized interest);

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

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

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We generated a net $32.0 million of cash from financing activities during the three months ended March 31, 2005 due mainly to:

• the incurrence of a $36.7 million mortgage loan, net of financing costs; partially offset by

• $2.7 million in scheduled debt repayments; and

• the repurchase of $1.5 million of senior unsecured debt.

We used a net $78.0 million of cash for financing activities during the three months ended March 31, 2004 due mainly to $77.8 million in repayments and repurchases of debt.

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 permits the payment of dividends in order to maintain REIT qualification when 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. 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.

In the course of document review with respect to the MIP restructuring, we discovered a potential technical REIT qualification issue relating to a wholly-owned subsidiary of MIP, of which we are deemed to own a de minimis proportionate share. In order to eliminate any uncertainty regarding this issue, we are currently negotiating a closing agreement with the Internal Revenue Service to resolve all REIT qualification matters with respect to this potential issue. As a result of our negotiations with the Internal Revenue Service, we do not anticipate incurring a material tax liability and we expect to remain qualified as a REIT for all prior years. We also remain qualified to operate as a REIT for calendar year 2005.

Long-Term Debt

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

	March 31, 2005			December 31, 2004
Senior unsecured notes due 2011—9.125%	$	355,665		$	355,665
Senior unsecured notes due 2008—9.0%		270,500			270,500
Senior unsecured notes due 2009—10.5%		224,187			224,187
Secured facility, due 2009		301,388			302,979
Secured facility, due 2013		98,880			99,293
Convertible subordinated notes		170,000			170,000
Senior subordinated notes		32,740			34,225
Mortgage and other debt		161,972			125,051
Unamortized issue discount		(3,731	)		(3,950	)
	$	1,611,601		$	1,577,950
Fair value adjustment for interest rate swap		(11,424	)		(4,674	)
	$	1,600,177		$	1,573,276

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Senior subordinated notes. During the three months ended March 31, 2005, we repurchased, using available cash, $1.49 million of our senior subordinated notes (plus $0.06 million of accrued interest). We recorded a loss on early extinguishment of debt of $0.06 million and wrote off deferred financing costs of $0.01 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.

Mortgage and other debt. On January 26, 2005, we entered into a $37.7 million mortgage loan on our Hilton Crystal City hotel that bears interest at a fixed rate of 5.84%. The mortgage requires interest only payments for the first three years and then monthly payments of interest and principal over the remaining portion of the ten year term of the loan, with the majority of the principal balance paid at the end of the ten year term. Our net proceeds of $34.7 million are net of a $3 million escrow reserve for future capital expenditures. We incurred financing costs of $0.8 million related to this mortgage.

Derivatives. As of March 31, 2005 and December 31, 2004, the fair value of our interest rate swap was approximately an $11.4 million liability and $4.7 million liability, respectively. This amount is recorded on our consolidated balance sheet in the other liabilities line item with a corresponding debit recorded to long-term debt. During the three months ended March 31, 2005, we earned net cash payments of $0.9 million under the swap, which were recorded as a reduction in interest expense. In conjunction with the interest rate swap, we have posted collateral of $18.9 million and $12.0 million as of March 31, 2005 and December 31, 2004, respectively, which is recorded as restricted cash. The required collateral amount fluctuates based on the changes in the swap rate and the amount of time left to maturity. During the three months ended March 31, 2005, our posted collateral ranged from $10.9 million to $18.9 million. However, due to the terms of the swap agreement, our posted collateral must be a minimum amount calculated per the agreement, which was $6.3 million as of March 31, 2005. We will receive all remaining collateral upon maturity of the swap.

Asset Acquisitions

During 2004, we invested in three properties, each of them having exceptional quality and exhibiting superior growth potential, and being located in three of the top performing markets in the country. We believe these factors will enable these investments to produce superior returns for our shareholders. Our two consolidated hotels, and while not consolidated into our results, the hotel for which we record equity in income/loss, realized three months ended March 31, 2005 combined RevPAR of $129.39. RevPAR for our comparable hotels during the three months ended March 31, 2005 was $71.66. The higher RevPAR of the acquired hotels is indicative of their quality and overall earnings power.

On May 10, 2004 we acquired the four-star, four-diamond rated Ritz-Carlton, Pentagon City in Arlington, Virginia for a purchase price of $93 million. The 366-room luxury hotel is operated by The Ritz-Carlton Hotel Company, LLC under a long-term contract. The hotel features nearly 18,000 square feet of meeting space, which can accommodate meetings of up to 900 guests.

Additionally, on June 25, 2004, we acquired the 485-room Marriott Irvine in Orange County, California, for a purchase price of $92.5 million. The hotel is operated by a subsidiary of Marriott International, Inc. under a long-term contract. The hotel features 30,000 square feet of meeting space, including a 13,000 square foot ballroom, that can accommodate meetings of up to 1,500 guests.

On October 1, 2004, we acquired a 49.99% interest in the 705-room Radisson Lexington Avenue Hotel in Midtown Manhattan. We made a total investment of $50 million, which includes a $40 million mezzanine loan that matures on October 1, 2014 and yields $5.8 million of cumulative annual interest, and a $10 million equity interest in the hotel. The mezzanine loan is secured by a pledge of the equity interests held by the borrower in an indirect parent of the owner of the hotel, and has a 10-year term. The loan is subordinate to $150 million in senior notes, but has priority over all equity interests.

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We will continue to be highly selective with potential acquisitions, focusing primarily on larger properties located in major urban markets or high-end resort destinations with high barriers to new competition, premium brand affiliations, significant meeting space and superior growth potential. The terms of our senior note indentures may limit our ability to obtain financing to acquire assets beyond certain limited exceptions (including up to $300 million of mortgage indebtedness, of which $194.7 million was available at March 31, 2005, and $50 million of general indebtedness) as we are below the required fixed charge coverage ratio of 2 to 1, at which level we would be permitted to generally incur debt without restriction.

Asset Dispositions

We have substantially completed our previously announced portfolio repositioning disposition program that repositioned our portfolio into one generally consisting of larger assets with significant meeting space operated under major brands in urban or high-end resort locations. Between January 1, 2003 and March 31, 2005, we disposed of 36 hotels with 8,109 rooms for total gross proceeds of $283.6 million in cash and $11.1 million in reduction of debt. Of these 36 hotels, 15 hotels were disposed of in 2003 and 21 hotels were disposed of in 2004. The reshaping of our portfolio has contributed to an increase in RevPAR, which, for our entire portfolio of properties (both quarters exclude seven properties affected by hurricanes in 2004 and closed during the first quarter of 2005), increased to $72.83 from $64.07 for the three months ended March 31, 2005 and 2004, respectively.

In addition, we may from time to time receive offers on other assets that we might consider selling. We would consider any opportunities that have the potential to improve our financial condition or results of operations through further repositioning our portfolio and recycling of capital. Proceeds from asset dispositions would be reinvested into our portfolio through renovation activities and new investments, or used to fund debt repurchases.

Capital Expenditures

We have developed a targeted renovation program that is designed to reduce the time and cost required to renovate hotels, allowing us to improve the quality of our hotels faster to take advantage of the rebound in the economy and better manage the disruptions associated with renovations. We accelerated our renovation program for certain key assets, which created some short-term disruption but also positioned these properties to participate more quickly in the lodging industry recovery. We make ongoing capital expenditures in order to keep our hotels competitive in their markets and to comply with franchise obligations, as described further in “Operating Risks” (the potential adverse impact of our failure to meet the requirements contained in our franchise and licensing agreements) included in Item 1—Risk Factors of our Annual Report on Form 10-K as of December 31, 2004. Additionally, certain of our hotels’ management contracts and franchise agreements contain reserve requirements for property improvements. 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 assets to provide capital for renovation work. We invested approximately $134 million in capital expenditures during 2004. During the three months ended March 31, 2005, we invested approximately $39 million in non hurricane-related capital expenditures and expect to invest an additional $61 million in non hurricane-related capital expenditures during the remainder of 2005. The emphasis is on completing these projects on budget with minimal disruptions to operations. We 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 economic recovery. During the three months ended March 31, 2005, we invested approximately $17 million in hurricane-related capital expenditures. The total amount of hurricane-related capital expenditures has not yet been fully determined, however we anticipate it to be well in excess of $100 million, most of which we expect to be reimbursed by our insurance carriers.

Other Financial Information

Hurricane Related Insurance Recoveries

We have comprehensive insurance coverage for both property damage and business interruption. Some properties are requiring substantial repair and reconstruction and have remained closed while such repairs are

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completed. Our recovery effort is extensive and includes replacing portions of buildings, landscaping and furniture, as well as upgrading to comply with changes in building and electrical codes. As of March 31, 2005, the net book value of the property damage is estimated to be at least $65.5 million; however, we are still assessing the impact of the hurricanes on our properties, and final net book value write-offs could vary from this estimate. Changes to this estimate will be recorded in the periods in which they are determined. We have recorded a corresponding insurance claim receivable for this $65.5 million net book value amount because we believe that it is probable that the insurance recovery, net of deductibles, will exceed the net book value of the damaged portion of these assets. The recovery is based on replacement cost, and we have submitted claims substantially in excess of $65.5 million.

While we expect the insurance proceeds will be sufficient to cover most of the replacement cost of the restoration of these hotels, certain deductibles (primarily windstorm) and limitations will apply. Moreover, while we are receiving and expect to continue to receive interim insurance payments, no determination has been made as to the total amount or timing of those insurance payments, and those insurance payments may not be sufficient to cover the costs of all the restoration of the hotels. To the extent that insurance proceeds, which are on a replacement cost basis, ultimately exceed the net book value of the damaged property, a gain will be recorded in the period when all contingencies related to the insurance claim have been resolved and the relevant payments have been received.

As a result of the damage caused by the hurricanes, our properties experienced varying periods of business interruption and impacts on operations, including closure of certain hotels. Where possible and in order to mitigate loss of revenues, some permanent repairs to damaged properties were deferred during the Florida “high season”, which generally lasts from late December through early April, in order to have facilities available to meet demand. These damaged facilities will be removed from service for permanent repairs at a later date. We have hired consultants to assess our business interruption claims and are currently negotiating with our insurance carriers regarding the amount of loss for income losses sustained. To the extent that we are entitled to a recovery under the insurance policies, we will recognize a receivable when it can be demonstrated that it is probable that such insurance recovery will be realized, and such receivable will then be reflected as a component of operating income. Any gain resulting from business interruption insurance for lost income will not be recognized until all contingencies related to the insurance recoveries are resolved and collection of the relevant payments is probable. These income recognition criteria will result in business interruption insurance recoveries being recorded in a period subsequent to the period that we experience lost income from the affected properties, resulting in fluctuations in our net income that may reduce the comparability of reported quarterly results for some periods into the future.

New Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment,” which requires companies to recognize compensation cost relating to share-based payment transactions, and measure that cost based on the fair value of the equity or liability instruments issued. We are required to comply with the provisions of this statement beginning with the first quarter of 2006. We do not expect the adoption of this revised standard to have a material effect on our accounting treatment for share-based payments, as we adopted the transition provisions of SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” on January 1, 2003 and elected to recognize compensation expense for options granted subsequent to December 31, 2002 under the fair-value-based method.

The FASB issued Statement No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions” in December 2004. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. We are required to comply with the provisions of this statement for the third quarter of 2005. We have not entered into or modified any transactions within the scope of this standard, nor do we have any existing transactions that fall within the scope of SFAS No. 153.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our interest rate risk management objective is to manage 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. To achieve our objectives, we may borrow at a combination of fixed and variable rates, and may enter into derivative financial instruments such as interest rate swaps, caps and treasury locks in order to mitigate our interest rate risk on a related financial instrument. We only enter into derivative or interest rate transactions for hedging purposes, and not for trading purposes. We do not engage in speculative transactions.

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. Under the swap, we receive fixed-rate payments of 8.01% and pay floating rate payments based on a one month LIBOR plus 444 basis points on an initial $307 million notional amount.

We have designated the interest rate swap as a fair value hedge for financial reporting purposes and the amounts paid or received under the swap agreement will be recognized over the life of the agreement as an adjustment to interest expense. Changes in the fair value of the swap and the secured facilities are reflected in the balance sheet as offsetting changes and have no income statement effect. The fair value of the interest rate swap at March 31, 2005 was a liability of approximately $11.4 million, which is included in the other liabilities line item on our consolidated balance sheet.

In conjunction with the interest rate swap, we have posted collateral of $18.9 million and $12.0 million as of March 31, 2005 and December 31, 2004, respectively, which is recorded as restricted cash. The required collateral amount fluctuates based on the changes in the swap rate and the amount of time left to maturity. During the three months ended March 31, 2005, our posted collateral ranged from $10.9 million to $18.9 million. However, due to the terms of the swap agreement, our posted collateral must be a minimum amount calculated per the agreement, which was $6.3 million as of March 31, 2005. We will receive all remaining collateral upon maturity of the swap.

The table below provides information about our derivative financial instrument that is sensitive to changes in interest rates. The table presents contractual payments to be exchanged under the contract and weighted average interest rates by expected (contractual) maturity dates for our interest rate swap. Weighted average interest rates and notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average interest rates are based on implied forward rates in the yield curve as of March 31, 2005. The interest rate swap that we have entered into is strictly to hedge interest rate risk and not for trading purposes.

Expected Payment Date

($ in millions)

	2005			2006			2007			2008			2009			Total			Fair Value as of 3/31/05
Interest Rate Derivative
Interest Rate Swap
Fixed to Variable	$	0.5		$	(2.6	)	$	(3.4	)	$	(3.8	)	$	(2.6	)	$	(11.9	)	$	(11.4	)
Average pay rate		7.62	%		8.74	%		9.06	%		9.22	%		9.32	%
Average receive rate		8.01	%		8.01	%		8.01	%		8.01	%		8.01	%

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. A change in one month LIBOR of 50 basis points would result in an increase or decrease in current annual interest expense of approximately $1.5 million.

As of March 31, 2005, approximately 19% of our outstanding debt bears fixed rates of interest that have been effectively swapped from a fixed rate to a floating rate, with the remaining 81% of debt bearing fixed rates of interest.

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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, 2005, 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 during the three months ended March 31, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 6. 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).
13	Financial Statements of MeriStar Hospitality Operating Partnership, L.P. as of and for the three months ended March 31, 2005. *
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

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/    DONALD D. OLINGER
	Donald D. Olinger
	Executive Vice President and Chief Financial Officer MeriStar Hospitality Corporation

Dated: May 9, 2005

EX-13

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, 2005 (Unaudited)			December 31, 2004
ASSETS
Property and equipment	$	2,637,362		$	2,581,720
Accumulated depreciation		(530,049	)		(506,632	)
		2,107,313			2,075,088
Investments in and advances to unconsolidated affiliates		70,451			84,796
Prepaid expenses and other assets		34,045			34,230
Insurance claim receivable		60,896			76,056
Accounts receivable, net of allowance for doubtful accounts of $358 and $691		40,506			32,979
Restricted cash		62,946			58,413
Cash and cash equivalents		53,863			60,533
	$	2,430,020		$	2,422,095
LIABILITIES AND PARTNERS’ CAPITAL
Long-term debt	$	1,397,649		$	1,369,299
Notes payable to MeriStar Hospitality Corporation		202,528			203,977
Accounts payable and accrued expenses		66,144			71,781
Accrued interest		35,812			41,165
Due to Interstate Hotels & Resorts		18,045			21,799
Other liabilities		20,246			11,553
Total liabilities		1,740,424			1,719,574
Minority interests		2,422			2,418
Redeemable OP units at redemption value, 2,298 and 2,298 outstanding		16,085			19,187
Partners’ capital – Common OP units, 87,439 and 87,367 issued and outstanding		671,089			680,916
	$	2,430,020		$	2,422,095

The accompanying notes are an integral part of these consolidated financial statements.

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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(Dollars in thousands, except per unit amounts)

	Three Months Ended March 31,
	2005			2004
Revenue:
Hotel operations:
Rooms	$	125,995		$	129,992
Food and beverage		51,858			49,110
Other hotel operations		11,384			15,340
Office rental, parking and other revenue		1,858			1,368
Total revenue		191,095			195,810
Hotel operating expenses:
Rooms		31,359			31,686
Food and beverage		37,509			36,907
Other hotel operating expenses		7,116			9,475
Office rental, parking and other expenses		824			585
Other operating expenses:
General and administrative, hotel		32,105			32,264
General and administrative, corporate		3,533			3,882
Property operating costs		29,682			29,735
Depreciation and amortization		24,853			25,059
Property taxes, insurance and other		10,989			16,334
Loss on asset impairments		—			184
Operating expenses		177,970			186,111
Equity in income/loss of and interest earned from unconsolidated affiliates		1,634			1,600
Hurricane business interruption income		2,281			—
Operating income		17,040			11,299
Minority interest (expense) income		(5	)		4
Interest expense, net		(30,714	)		(34,502	)
Loss on early extinguishments of debt		(60	)		(5,923	)
Loss before income taxes and discontinued operations		(13,739	)		(29,122	)
Income tax (expense) benefit		(10	)		390
Loss from continuing operations		(13,749	)		(28,732	)
Discontinued operations:
Loss from discontinued operations before income tax		—			(12,220	)
Income tax benefit		—			65
Loss from discontinued operations		—			(12,155	)
Net loss	$	(13,749	)	$	(40,887	)
Preferred distributions		—			(141	)
Net loss applicable to common unitholders	$	(13,749	)	$	(41,028	)
Net loss applicable to general partner unitholders	$	(13,397	)	$	(39,250	)
Net loss applicable to limited partner unitholders	$	(352	)	$	(1,778	)
Basic and diluted loss per unit:
Loss from continuing operations	$	(0.15	)	$	(0.40	)
Loss from discontinued operations		—			(0.17	)
Net loss per basic and diluted unit	$	(0.15	)	$	(0.57	)

The accompanying notes are an integral part of these consolidated financial statements.

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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(Dollars in thousands)

	Three Months Ended March 31,
	2005			2004
Operating activities:
Net loss	$	(13,749	)	$	(40,887	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		24,824			26,702
Loss on asset impairments		—			5,011
Loss on sale of assets, before tax effect		—			6,946
Loss on early extinguishments of debt		60			5,923
Minority interests		5			(4	)
Equity in loss of unconsolidated affiliate		1,370			—
Amortization of unearned stock-based compensation		277			587
Deferred income taxes		—			(358	)
Changes in operating assets and liabilities:
Accounts receivable		7,633			(2,767	)
Prepaid expenses and other assets		(112	)		4,920
Receivables from unconsolidated affiliates		13,004			(1,600	)
Due from/to Interstate Hotels & Resorts		(3,754	)		(5,461	)
Accounts payable, accrued expenses, accrued interest and other liabilities		(8,024	)		(1,648	)
Net cash provided by (used in) operating activities		21,534			(2,636	)
Investing activities:
Capital expenditures for property and equipment		(55,642	)		(23,737	)
Proceeds from sales of assets		—			74,075
Increase in restricted cash		(4,533	)		(2,133	)
Costs associated with disposition program and other, net		—			(3,304	)
Net cash (used in) provided by investing activities		(60,175	)		44,901
Financing activities:
Prepayments on long-term debt		(1,531	)		(75,497	)
Scheduled payments on long-term debt		(2,731	)		(2,307	)
Proceeds from mortgage loan, net of financing costs		36,714			—
Distributions to minority investors		—			(141	)
Repurchase of limited partnership units		(507	)		—
Other		26			(77	)
Net cash provided by (used in) financing activities		31,971			(78,022	)
Effect of exchange rate changes on cash and cash equivalents		—			(150	)
Net decrease in cash and cash equivalents		(6,670	)		(35,907	)
Cash and cash equivalents, beginning of period		60,533			230,876
Cash and cash equivalents, end of period	$	53,863		$	194,969
Supplemental Cash Flow Information
Cash paid for interest and income taxes:
Interest, net of capitalized interest	$	36,393		$	43,755
Income tax payments, net of (refunds)	$	10		$	(969	)
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
Change of fair value of interest rate swap	$	6,750		$	—

The accompanying notes are an integral part of these consolidated financial statements.

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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

1. Organization

MeriStar Hospitality Operating Partnership, L.P. is the subsidiary operating partnership of MeriStar Hospitality Corporation Commission file number 1-11903, (“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. Our portfolio is diversified geographically as well as by franchise and brand affiliations. As of March 31, 2005, we owned 73 hotels with 20,319 rooms, all of which were leased by our taxable subsidiaries. 71 of these hotels were managed by Interstate Hotels & Resorts (“Interstate”), one hotel was managed by The Ritz-Carlton Hotel Company, LLC (“Ritz-Carlton”), a subsidiary of Marriott International, Inc., and one hotel was managed by another subsidiary (“Marriott”) of Marriott International, Inc. (collectively with Interstate and Ritz-Carlton, the “Managers”).

The Managers operate the 73 hotels we owned as of March 31, 2005 pursuant to management agreements with our taxable subsidiaries. Under these management agreements, each taxable subsidiary pays a management fee for each property to the Manager of its hotels. The taxable subsidiaries in turn make rental payments to our subsidiary operating partnership under the participating leases.

Under the Interstate 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 have initial terms expiring on January 1, 2011 with three renewal periods of five years each at the option of Interstate, subject to some exceptions. Additionally, our franchise fees generally range from 2.0% to 7.4% of hotel room revenues.

Under the Ritz-Carlton and Marriott management agreements, the base management fee is 3.0% and 2.5% of total hotel revenue, respectively, through 2005 and 3.0% under both thereafter, plus incentive payments based on meeting performance thresholds that could total up to an additional 2.0% of total revenue and 20% of available cash flow (as defined in the relevant management agreement), respectively. The agreements have initial terms expiring in 2015 and 2024, respectively, with four and three renewal periods of 10 and five years each, respectively, at the option of Ritz-Carlton and Marriott. The Ritz-Carlton and Marriott management agreements include certain limited performance guarantees by the relevant manager which are designed primarily to provide downside performance protection and run through 2005 and up to 2008, respectively. Management, based upon budgets and operating trends, expects payments under these guarantees for 2005 and in the future to be minimal.

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 United States 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, 2004.

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.

Basis of Presentation and Principles of Consolidation. The accompanying consolidated financial statements include the accounts of the Company, its subsidiaries and its controlled affiliates. We consolidate entities (in the absence of other factors when determining control) when we own over 50% of the voting shares of another company or, in the case of partnership investments, when we own a majority of the general partnership interest. Additionally, if we determine that we are an owner in a variable interest entity within the

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meaning of the Financial Accounting Standards Board, or FASB, revision to Interpretation No. 46, “Consolidation of Variable Interest Entities” and that our variable interest will absorb a majority of the entity’s expected losses if they occur, receive a majority of the entity’s expected residual returns if they occur, or both, then we will consolidate the entity. All material intercompany transactions and balances have been eliminated in consolidation. One of our properties reports results over 13 four week periods each year. We include 12 weeks of results in each of quarters one through three and 16 weeks of results in quarter four.

Use of Estimates. Preparing financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from these estimates.

Property and Equipment. We record our property and equipment at cost, or at fair value at the time of contribution for contributed property. We use the straight-line method for depreciation. We depreciate the majority of our buildings and improvements over an estimated useful life of 20 to 40 years, or the remaining terms of a ground lease, if shorter. We depreciate furniture, fixtures and equipment over lives ranging from five to seven years, and computers over three to five years. During the three months ended March 31, 2005 and 2004, we recognized depreciation expense of $23.4 million and $24.5 million, respectively. For the three months ended March 31, 2005 and 2004, we capitalized interest of $2.7 million and $0.7 million, respectively.

Held for Sale Properties. Held-for-sale classification requires that the sale be probable and that the transfer of the asset is expected to be completed within one year, among other criteria. Assessing the probability of the sale requires significant judgment due to the uncertainty surrounding completing the transaction, and as a result, we have developed the following policy to aid in the assessment of probability. 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. If material to our total portfolio, we segregate the assets and liabilities relating to our held for sale properties on our consolidated balance sheet.

Cash Equivalents and Restricted Cash. 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. Restricted cash represents amounts held in escrow in accordance with the requirements of certain of our credit facilities.

Impairment or Disposal of Long-Lived Assets. We record as discontinued operations the current and prior period operating results of any asset that has been classified as held for sale or has been disposed of and where we have no continuing involvement. Any gains or losses on final disposition are also included in discontinued operations.

Whenever events or changes in circumstances indicate that the carrying value of a long-lived asset may be impaired, an analysis is performed to determine the recoverability of the asset’s carrying value. When we conclude that we expect to sell or otherwise dispose of an asset significantly before the end of its previously estimated useful life, we perform an impairment analysis on that asset (as is the case for assets we are considering for disposition). 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 recognize a liability for a cost associated with an exit or disposal activity only when the liability is incurred, and measure that liability initially at

5

fair value. Hotels of which we dispose may be managed under agreements that require payments 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. At that time, the recognition of the termination obligation will be included in the calculation of the final gain or loss on sale. To date, we have not incurred any management agreement termination obligations other than in connection with sales of hotels.

Stock-Based Compensation. We apply the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, 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 grant options with an exercise price equal to the price of our common stock on grant date. Compensation costs related to stock options are included in general and administrative expenses on the accompanying consolidated statement of operations. We apply the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” in accounting for our stock options issued by MeriStar Hospitality 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 plans, we recognize compensation expense over the vesting period based on the fair market value of the award at the date of grant for fixed plan awards, while variable plan awards are re-measured based upon the intrinsic value of the award at each balance sheet date.

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 unit amounts would have been adjusted to the pro forma amounts indicated as follows (in thousands, except per unit amounts):

	Three Months Ended March 31,
	2005			2004
Net loss, as reported	$	(13,749	)	$	(40,887	)
Add: Stock-based employee compensation expense included in reported net loss, net of related tax effect		605			587
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effect		(611	)		(651	)
Net loss, pro forma	$	(13,755	)	$	(40,951	)
Loss per unit:
Basic and Diluted	$	(0.15	)	$	(0.57	)
Weighted average fair value of options granted		N/A	*	$	0.34
Loss per unit, pro forma:
Basic and Diluted	$	(0.15	)	$	(0.57	)

* No options were granted during the three months ended March 31, 2005.

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

Derivative Instruments and Hedging Activities. Our interest rate risk management objective is to manage 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.

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Acquisition of Hotels. Our hotel acquisitions consist almost exclusively of land, building, furniture, fixtures and equipment. We allocate the purchase price among these asset classes and any acquired intangible assets based upon their respective fair values as required by SFAS No. 141, “Business Combinations.”

Investments in Unconsolidated Affiliates. We have non-controlling interests in entities which we account for under the cost method or equity method of accounting. Our investment in MeriStar Investment Partners, L.P. (“MIP”) is a limited partner interest with no participation rights in the management, affairs or operations of the entity, and is accounted for using the cost method. We recognize our preferred return on this investment quarterly as it becomes due to us; this investment is reflected in a separate line item on our Consolidated Balance Sheets. Our investment in Radisson Lexington Avenue Hotel is accounted for using the equity method, since we are presumed to exert significant influence on this entity due to our ownership percentage of 49.99%. Accordingly, we recognize 49.99% of the profit and loss of the investee. This investment is also reflected in a separate line item on our Consolidated Balance Sheets. Our investments in unconsolidated affiliates are periodically reviewed for other than temporary declines in market value. An impairment is recorded as a reduction to the carrying value of the investment for any declines which are determined to be other than temporary.

Accounting for the Impact of the Hurricane Damage to Florida Properties. In August and September 2004, hurricanes caused substantial damage to a number of our hotels located in Florida. The hurricane damage and local evacuation orders also caused significant business interruption at many of our Florida properties, including the complete closure of certain hotels. As a result, seven of our hotels were closed for an extended period of time, and five others were affected in varying degrees.

We have comprehensive insurance coverage for both property damage and business interruption. Some properties are requiring substantial repair and reconstruction and have remained closed while such repairs are completed. Our recovery effort is extensive and includes replacing portions of buildings, landscaping and furniture, as well as upgrading to comply with changes in building and electrical codes. As of March 31, 2005, the net book value of the property damage is estimated to be at least $65.5 million; however, we are still assessing the impact of the hurricanes on our properties, and final net book value write-offs could vary from this estimate. Changes to this estimate will be recorded in the periods in which they are determined. We have recorded a corresponding insurance claim receivable for this $65.5 million net book value amount because we believe that it is probable that the insurance recovery, net of deductibles, will exceed the net book value of the damaged portion of these assets. The recovery is based on replacement cost, and we have submitted claims substantially in excess of $65.5 million.

While we expect the insurance proceeds will be sufficient to cover most of the replacement cost of the restoration of these hotels, certain deductibles (primarily windstorm) and limitations will apply. Moreover, while we are receiving and expect to continue to receive interim insurance payments, no determination has been made as to the total amount or timing of those insurance payments, and those insurance payments may not be sufficient to cover the costs of all the restoration of the hotels. To the extent that insurance proceeds, which are calculated on a replacement cost basis, ultimately exceed the net book value of the damaged property, a gain will be recorded in the period when all contingencies related to the insurance claim have been resolved and the relevant payments have been received.

As of March 31, 2005, seven of our Florida properties remained substantially closed due to hurricane damage. As of May 2, 2005, six of these properties remained substantially closed. Additionally, as of March 31, 2005, two properties that suffered varying amounts of hurricane damage had certain rooms and conference facilities out of service. Where possible and in order to mitigate loss of revenues, some permanent repairs to damaged properties have been deferred during the Florida “high season”, which generally lasts from late December through early April, in order to have facilities available to meet demand. These damaged facilities will be removed from service for permanent repairs at a later date. We have hired consultants to assess our business interruption claims and are currently negotiating with our insurance carriers regarding the amount of loss for these income losses sustained. To the extent that we are entitled to a recovery under the insurance policies, we will recognize a receivable when it can be demonstrated that it is probable that such insurance recovery will be realized, and such receivable will then be reflected as a component of operating income. Any gain resulting from business interruption insurance for lost income will not be recognized until all contingencies related to the insurance recoveries are resolved and collection of the relevant payments is probable. These income recognition criteria will likely often result in business interruption insurance recoveries being recorded in a period subsequent to the period that we experience lost income from the affected properties, resulting in fluctuations in our net income that may reduce the comparability of reported quarterly results for some periods into the future.

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Under these income recognition criteria, as of March 31, 2005, we have recorded a business interruption recovery gain of $2.3 million due to receiving recognition of a minimal level of business interruption profit that the insurance companies are willing to recognize without any contingencies at this time for certain of our hurricane-affected properties. Our business interruption claims substantially exceed the amount of this minimal recognition to date. We ultimately expect to recognize additional business interruption insurance profit as we proceed further through the claims process.

Through March 31, 2005, we have incurred recoverable costs related to both property damage and business interruption recoveries totaling $56.4 million. In addition, we recorded a receivable of $65.5 million related to the write-off of the net book value of the damaged portion of our assets. We collected $63.3 million in insurance advances through March 31, 2005, of which $61.0 million reduced our receivable balance, and $2.3 million represented income on our business interruption recoveries. We have collected an additional $7.2 million in advances from April 1 through May 2, 2005. The cost recoveries are recorded on the expense line item to which they relate; therefore there is no net impact to any line item or our results.

The following is a summary of hurricane-related activity recorded (in millions):

Hurricane Receivable

March 31, 2005

Fixed assets net book value write down	$	65.5
Recoverable costs incurred		56.4
Business interruption income		2.3
Payments received		(63.3	)
	$	60.9

New Accounting Pronouncements. In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment,” which requires companies to recognize compensation cost relating to share-based payment transactions, and measure that cost based on the fair value of the equity or liability instruments issued. We are required to comply with the provisions of this statement beginning with the first quarter of 2006. We do not expect the adoption of this revised standard to have a material effect on our accounting treatment for share-based payments, as we adopted the transition provisions of SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” on January 1, 2003 and elected to recognize compensation expense for options granted subsequent to December 31, 2002 under the fair-value-based method.

The FASB issued Statement No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions” in December 2004. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. We are required to comply with the provisions of this statement for the third quarter of 2005. We have not entered into or modified any transactions within the scope of this standard, nor do we have any existing transactions that fall within the scope of SFAS No. 153.

Reclassifications. Certain prior period information has been reclassified to conform to the current period presentation. These reclassifications have no impact on consolidated net loss.

3. Comprehensive Loss

Comprehensive loss equaled net loss for the three months ended March 31, 2005, as we no longer have foreign operations. Comprehensive loss was $41.2 million for the three months ended March 31, 2004, which consisted of net loss ($40.9 million) and foreign currency translation adjustments.

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4. Acquisitions

On May 10, 2004 and June 25, 2004, we acquired the 366-room Ritz-Carlton, Pentagon City in Arlington, Virginia and the 485-room Marriott Irvine in Orange County, California, respectively, for a total purchase price of $185.5 million, plus net acquisition costs and adjustments of $0.9 million.

The acquisitions were accounted for under the purchase method of accounting, and the assets and liabilities and results of operations of the hotels have been consolidated in our financial statements since the date of purchase. On an unaudited pro forma basis, revenues, net income and basic and diluted loss per unit for the three months ended March 31, 2005 and 2004 would have been reported as follows if the acquisitions had occurred at the beginning of each of the respective periods (in thousands, except per unit amounts):

	Three Months Ended March 31,
	2005			2004
Total revenue	$	191,095		$	207,221
Net loss		(13,749	)		(40,064	)
Net loss per unit:
Basic and Diluted	$	(0.15	)	$	(0.56	)

5. Property and Equipment

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

	March 31, 2005		December 31, 2004
Land	$	244,088	$	244,088
Buildings and improvements		1,940,443		1,926,813
Furniture, fixtures and equipment		307,070		295,562
Construction-in-progress		145,761		115,257
	$	2,637,362	$	2,581,720

For the three months ended March 31, 2005 and 2004, we capitalized interest of $2.7 million and $0.7 million, respectively.

We incurred no impairment losses during the first quarter of 2005. During the first quarter of 2004, we recognized impairment losses of $5.0 million, of which $4.8 million is recorded in discontinued operations as of March 31, 2005 (see Note 11).

The impairment charges recorded during the first quarter of 2004 were triggered by an expectation that a property would be sold significantly before the end of its estimated useful life. The impairment charges were based on our estimates of the fair value of the properties we were actively marketing based on available market data. These estimates required us to make assumptions about the sales prices that we expected to realize for each property as well as the timing of a potential sale. In making these estimates, we considered the operating results of the assets, the market for comparable properties, and quotes from brokers, among other information. In nearly all cases, our estimates reflected the results of an extensive marketing effort and negotiations with prospective buyers. Actual results could differ materially from these estimates.

6. Investments in Unconsolidated Affiliates

Investment in Radisson Lexington Avenue Hotel. On October 1, 2004, we acquired a 49.99% interest in the 705-room Radisson Lexington Avenue Hotel in Midtown Manhattan. We made a total investment of $50 million, which includes a $40 million mezzanine loan that matures on October 1, 2014 and yields $5.8 million of cumulative annual interest, and a $10 million equity interest in the hotel. The mezzanine loan is secured by a pledge of the equity interests held by the borrower in an indirect parent of the owner of the hotel, and has a 10-year term. The loan is subordinate to $150 million in senior notes, but has priority over all equity interests.

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Our equity investment is accounted for under the equity method of accounting, in accordance with our accounting policies as described in Note 2 to the Consolidated Financial Statements. The interest income from the loan, as well as the income related to the 49.99% share in profits and losses, is recorded in a separate line item “equity in income/loss of and interest earned from unconsolidated affiliates” within operating activities as the operations of this investment are integral to our operations. As of March 31, 2005, we recognized interest income of $1.4 million on the mezzanine loan, which is recognized as earned. Our outstanding loan balance of $40.4 million includes $0.4 million unamortized origination costs associated with the loan. Our initial equity investment balance of $10.1 million includes $0.1 million of external costs incurred. During the three months ended March 31, 2005, we recognized $1.3 million of equity in losses on our equity investment.

Investment in MIP. 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 limited partnership interest, in which we earned (through December 9, 2004) a 16% cumulative preferred return with outstanding balances compounded quarterly. In accordance with MIP’s December 2004 amended and restated partnership agreement, the return on our investment and on our remaining unpaid accrued preferred return was reduced to a 12% annual cumulative return rate, and subordinate only to the MIP debt; and $12.5 million of our $40 million investment was upgraded to receive preference in liquidation over all other investments.

During the fourth quarter of 2003, we recognized a $25.0 million impairment loss on this investment since, at that time, the decline in the underlying value of our investment was deemed other than temporary. As of March 31, 2005, the book value of the original investment is $15.0 million.

In February 2005, MIP completed a $175 million commercial mortgage-backed securities financing, secured by its portfolio of eight hotels. Upon the completion of the financing in February 2005, we received a distribution of $15.5 million, which was applied to reduce our outstanding accrued preferred returns receivable to approximately $4 million.

As of March 31, 2005, our total MIP carrying value was $20.7 million, consisting of the $15.0 million adjusted investment balance and $5.7 million of accrued preferred returns receivable.

We recognize our preferred return quarterly as it becomes due to us. The income, net of related expense, if any, is recorded in the “Equity in income/loss of and interest earned from unconsolidated affiliates” line within operating activities as the operations of this investment are integral to our operations. For the three months ended March 31, 2005 and 2004, we recognized a preferred return of $1.6 million and $1.6 million, respectively, from this investment. As of March 31, 2005 and December 31, 2004, cumulative preferred returns of $5.7 million and $19.7 million, respectively, were due from MIP. 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. We evaluate the collectibility of our preferred return based on our preference to distributions and the underlying value of the hotel properties.

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7. Long-Term Debt and Notes Payable to MeriStar Hospitality

Long-term debt and notes payable to MeriStar Hospitality consisted of the following (in thousands):

	March 31, 2005			December 31, 2004
Senior unsecured notes due 2011 – 9.125%	$	355,665		$	355,665
Senior unsecured notes due 2008 – 9.0%		270,500			270,500
Senior unsecured notes due 2009 – 10.5%		224,187			224,187
Secured facility, due 2009		301,388			302,979
Secured facility, due 2013		98,880			99,293
Mortgage and other debt		161,972			125,051
Unamortized issue discount		(3,519	)		(3,702	)
	$	1,409,073		$	1,373,973
Fair value adjustment for interest rate swap		(11,424	)		(4,674	)
Long-term debt	$	1,397,649		$	1,369,299
Notes payable to MeriStar Hospitality	$	202,740		$	204,225
Unamortized issue discount		(212	)		(248	)
Notes payable to MeriStar Hospitality	$	202,528		$	203,977
Total long-term debt and notes payable to MeriStar Hospitality	$	1,600,177		$	1,573,276

Aggregate future maturities as of March 31, 2005 were as follows (in thousands):

2005 (nine months)	$	8,414
2006		12,031
2007		45,523
2008		284,741
2009		503,526
Thereafter		757,366
	$	1,611,601
Fair value adjustment for interest rate swap		(11,424	)
	$	1,600,177

Notes payable to MeriStar Hospitality. During the three months ended March 31, 2005, we repurchased, using available cash, $1.49 million of our notes payable to MeriStar Hospitality (plus $0.06 million of accrued interest). We recorded a loss on early extinguishment of debt of $0.06 related to this activity.

Mortgage and other debt. On January 26, 2005, we entered into a $37.7 million mortgage loan on our Hilton Crystal City hotel that bears interest at a fixed rate of 5.84%. The mortgage requires interest only payments for the first three years and then monthly payments of interest and principal over the remaining portion of the ten year term of the loan, with the majority of the principal balance paid at the end of the ten year term. Our net proceeds of $34.7 million are net of a $3 million escrow reserve for future capital expenditures. We incurred financing costs of $0.8 million related to this mortgage.

Derivatives. As of March 31, 2005 and December 31, 2004, the fair value of our interest rate swap was approximately an $11.4 million liability and $4.7 million liability, respectively. This amount is recorded on our consolidated balance sheet in the other liabilities line item with a corresponding debit recorded to long-term debt. During the three months ended March 31, 2005, we earned net cash payments of $0.9 million under the swap, which were recorded as a reduction in interest expense. In conjunction with the interest rate swap, we have posted collateral of $18.9 million and $12.0 million as of March 31, 2005 and December 31, 2004, respectively, which is recorded as restricted cash. The required collateral amount fluctuates based on the changes in the swap rate and the amount of time left to maturity. During the three months ended March 31, 2005, our posted collateral ranged from $10.9 million to $18.9 million. However, due to the terms of the swap agreement, our posted collateral must be a minimum amount calculated per the agreement, which was $6.3 million as of March 31, 2005. We will receive all remaining collateral upon maturity of the swap.

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8. Partners’ Capital

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 Profits-Only OP Units, or POPs.

During the three months ended March 31, 2005, MeriStar Hospitality awarded 133,937 shares of common stock to employees, with a value of $1.0 million, related to our annual incentive plan for 2004. Of these shares, 63,935 were repurchased as treasury stock to satisfy the minimum statutory tax withholding requirements, and 70,002 shares were issued. In conjunction with this award, we issued 70,002 OP Units to MeriStar Hospitality. During the three months ended March 31, 2005, we issued 3,430 OP Units to MeriStar Hospitality in conjunction with their issuance shares of common stock with a value of $0.03 million, related to shares issued under the employee stock purchase plan.

No Common OP Units were converted into common stock during the three months ended March 31, 2005. Common OP Unit holders converted 3,686 of their OP Units, with a value of $0.02 million into common stock during the three months ended March 31, 2004. A POPs unit holder converted 15,000 POPs for cash during the three months ended March 31, 2004.

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,
	2005			2004
Basic and Diluted Loss Per Unit:
Loss from continuing operations	$	(13,749	)	$	(28,732	)
Preferred distributions		—			(141	)
Loss available to common unitholders	$	(13,749	)	$	(28,873	)
Weighted average number of OP units outstanding		89,690			71,750
Basic and diluted loss per unit from continuing operations	$	(0.15	)	$	(0.40	)

10. Commitments and Contingencies

In the course of document review with respect to the MIP restructuring, MeriStar Hospitality discovered a potential technical REIT qualification issue relating to a wholly-owned subsidiary of MIP, of which we are deemed to own a de minimis proportionate share. In order to eliminate any uncertainty regarding this issue, MeriStar Hospitality is currently negotiating a closing agreement with the Internal Revenue Service to resolve all REIT qualification matters with respect to this potential issue. As a partnership for federal income tax purposes, we are not directly affected by the outcome of the discussions by MeriStar Hospitality with the Internal Revenue Service.

As part of our asset renovation program, we have entered into contractual obligations with vendors to acquire capital assets and perform renovations totaling approximately $46.1 million to be expended over the next 12 months. Additionally, we have entered into contractual obligations related to capital expenditures as a result of hurricanes in the amount of $25.8 million to be expended over the next 12 months, most of which we expect to reimbursed by our insurance carriers.

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11. Dispositions

No hotels were disposed of in the three months ended March 31, 2005. We disposed of 11 hotels in the three months ended March 31, 2004. As of March 31, 2005 and December 31, 2004, none of our hotels met our criteria for held-for-sale classification. Operating results for the sold hotels, and where applicable, the gain or loss on final disposition, are included in discontinued operations.

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

	Three Months Ended March 31,
	2005		2004
Revenue	$	—	$	22,369
Loss on asset impairments	$	—	$	(4,827	)
Pretax loss from operations		—		(447	)
Loss on disposal		—		(6,946	)
	$	—	$	(12,220	)

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

12. Consolidating Financial Statements

Certain of our subsidiaries and MeriStar Hospitality are guarantors of senior unsecured notes. Certain of our subsidiaries are guarantors of MeriStar Hospitality’s unsecured 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 the guarantor subsidiaries. This exhibit presents our consolidating balance sheets as of March 31, 2005 and December 31, 2004, consolidating statements of operations for the three months ended March 31, 2005 and 2004, and consolidating statements of cash flows for the three months ended March 31, 2005 and 2004.

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EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. 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 the report based on such evaluation; and

d. 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 reasonably likely to materially 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 the registrant’s board of directors (or persons performing the equivalent functions):

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 9, 2005	/s/    PAUL W. WHETSELL
	Paul W. Whetsell
	Chief Executive Officer MeriStar Hospitality Corporation

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Donald D. Olinger, certify that:

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

2. Based on my knowledge, this 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. 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 the report based on such evaluation; and

d. 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 reasonably likely to materially 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 the registrant’s board of directors (or persons performing the equivalent functions):

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 9, 2005	/s/    DONALD D. OLINGER
	Donald D. Olinger
	Chief Financial Officer MeriStar Hospitality Corporation

EX-32.1

Exhibit 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report on Form 10-Q of MeriStar Hospitality Corporation (the “Registrant”) for the quarterly period ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, in the capacity as indicated below and 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, as amended, and

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

Date: May 9, 2005	/s/    PAUL W. WHETSELL
	Paul W. Whetsell Chief Executive Officer MeriStar Hospitality Corporation

EX-32.2

Exhibit 32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the annual report on Form 10-Q of MeriStar Hospitality Corporation (the “Registrant”) for the quarterly period ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, in the capacity as indicated below and 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, as amended, and

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

Date: May 9, 2005	/s/    DONALD D. OLINGER
	Donald D. Olinger Chief Financial Officer MeriStar Hospitality Corporation

EX-99.1

Exhibit 99.1

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

March 31, 2005

(Dollars in thousands)

	MeriStar Hospitality OP, L.P.			Non-Guarantor Subsidiaries		MeriStar Lexington Mortgage, LLC		MeriStar Lexington Partners, LLC	MeriStar Sub 7C, LLC	MeriStar Sub 8G, LLC	AGH UPREIT LLC	MeriStar Sub 6H, L.P.		MeriStar Sub 8F, L.P.		MeriStar Sub 8B, LLC		MeriStar Sub 1C, LLC		MeriStar Sub 8E, LLC
Assets
Property and equipment	$	23,772		1,504,837		—		—	—	—	—	10,886		13,805		94,250		27,639		16,074
Accumulated depreciation		(15,296	)	(299,876	)	—		—	—	—	—	(940	)	(3,343	)	(15,365	)	(7,672	)	(3,754	)
		8,476		1,204,961		—		—	—	—	—	9,946		10,462		78,885		19,967		12,320
Investments in affiliates		2,406,629		7,992		41,590		8,146	32	72	2,989	—		—		—		—		—
Prepaid expenses and other assets		30,965		(4,685	)	(10	)	96	—	—	—	(14	)	(94	)	(116	)	(228	)	(30	)
Insurance claim receivable		60,896		—		—		—	—	—	—	—		—		—		—		—
Accounts receivable, net		13,004		774		—		—	—	—	—	—		—		63		—		—
Due to/from subsidiaries		(1,130,785	)	537,290		1,670		655	—	9	73	8,122		7,107		27,702		(4,041	)	7,796
Note receivable from subsidiaries		259,065		—		—		—	—	—	—	—		—		—		—		—
Restricted cash		57,926		1,478		—		—	—	—	—	—		—		—		—		—
Cash and cash equivalents		24,971		—		—		—	—	—	—	—		—		—		—		—
	$	1,731,147		1,747,810		43,250		8,897	32	81	3,062	18,054		17,475		106,534		15,698		20,086
Liabilities and Partners’ Capital
Long-term debt	$	835,410		469,231		—		—	—	—	—	—		—		—		—		—
Notes payable to MeriStar Hospitality Corporation		202,528		—		—		—	—	—	—	—		—		—		—		—
Accounts payable and accrued expenses		12,035		3,762		—		—	—	—	—	22		5		5		104		(32	)
Accrued interest		33,399		2,146		—		—	—	—	—	—		—		—		—		—
Due to Interstate Hotels & Resorts		11,808		—		—		—	—	—	—	—		—		—		—		—
Other liabilities		12,130		—		—		—	—	—	—	—		—		—		—		—
		1,107,310		475,139		—		—	—	—	—	22		5		5		104		(32	)
Minority interests		2,422		—		—		—	—	—	—	—		—		—		—		—
Redeemable OP units at redemption value		16,085		—		—		—	—	—	—	—		—		—		—		—
Partners’ capital - Common OP units		605,330		1,272,671		43,250		8,897	32	81	3,062	18,032		17,470		106,529		15,594		20,118
	$	1,731,147		1,747,810		43,250		8,897	32	81	3,062	18,054		17,475		106,534		15,698		20,086

1

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

March 31, 2005

(Dollars in thousands)

	MeriStar Sub 7F, LLC		MeriStar Sub 5L, LLC		MeriStar Sub 3C, LLC		MeriStar Sub 5R, LLC		MeriStar Sub 8A, LLC	MeriStar Sub 6D, LLC		MeriStar Sub 6E, LLC		MeriStar Sub 4E, L.P.		MeriStar Sub 1B, LLC		MeriStar Sub 5F, L.P.		MeriStar Sub 6G, LLC		MeriStar Sub 8C, LLC
Assets
Property and equipment	9,753		11,990		17,612		—		—	18,427		51,799		—		21,021		23,124		24,394		—
Accumulated depreciation	(547	)	(763	)	(4,538	)	—		—	(3,483	)	(11,940	)	(1	)	(4,684	)	(745	)	(5,905	)	—
	9,206		11,227		13,074		—		—	14,944		39,859		(1	)	16,337		22,379		18,489		—
Investments in affiliates	—		—		—		43		—	—		—		—		—		—		—		—
Prepaid expenses and other assets	(14	)	(89	)	(4	)	—		—	(24	)	694		—		(95	)	(205	)	(40	)	—
Insurance claim receivable	—		—		—		—		—	—		—		—		—		—		—		—
Accounts receivable, net	—		—		—		—		—	112		3		—		96		—		—		—
Due to/from subsidiaries	3,659		5,125		7,299		(43	)	—	9,801		56,137		7,074		15,475		8,860		9,288		11,439
Note receivable from subsidiaries	—		—		—		—		—	—		—		—		—		—		—		—
Restricted cash	—		—		—		—		—	—		3,000		—		—		—		—		—
Cash and cash equivalents	—		—		—		—		—	—		—		—		—		—		—		—
	12,851		16,263		20,369		—		—	24,833		99,693		7,073		31,813		31,034		27,737		11,439
Liabilities and Partners’ Capital
Long-term debt	—		—		—		—		—	—		37,650		—		28		—		—		—
Notes payable to MeriStar Hospitality Corporation	—		—		—		—		—	—		—		—		—		—		—		—
Accounts payable and accrued expenses	184		23		310		—		—	(60	)	121		—		30		61		5		—
Accrued interest	—		—		—		—		—	—		—		—		—		—		—		—
Due to Interstate Hotels & Resorts	—		—		—		—		—	—		—		—		—		—		—		—
Other liabilities	—		—		—		—		—	—		—		—		—		—		—		—
	184		23		310		—		—	(60	)	37,771		—		58		61		5		—
Minority interests	—		—		—		—		—	—		—		—		—		—		—		—
Redeemable OP units at redemption value	—		—		—		—		—	—		—		—		—		—		—		—
Partners’ capital - Common OP units	12,667		16,240		20,059		—		—	24,893		61,922		7,073		31,755		30,973		27,732		11,439
	12,851		16,263		20,369		—		—	24,833		99,693		7,073		31,813		31,034		27,737		11,439

2

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

March 31, 2005

(Dollars in thousands)

	MeriStar Sub 4C, L.P.	MeriStar Sub 4H, L.P.	MeriStar Sub 7E, LLC		MeriStar Sub 3D, LLC		MeriStar Sub 1A, LLC		MeriStar Sub 7A Joint Venture		MeriStar Sub 2B, LLC	MeriStar Sub 3A, LLC	MeriStar Sub 4A, LP	MeriStar Sub 4D, LLC	MeriStar Sub 2A, LLC	MeriStar Sub 6L, LLC
Assets
Property and equipment	—	1	20,248		23,435		5,522		—		—	—	—	—	—	—
Accumulated depreciation	—	—	(4,139	)	(7,902	)	(75	)	—		—	—	—	—	—	—
	—	1	16,109		15,533		5,447		—		—	—	—	—	—	—
Investments in affiliates	—	—	—		—		—		—		—	—	—	—	—	—
Prepaid expenses and other assets	—	—	(25	)	(50	)	(119	)	—		—	—	—	—	—	—
Insurance claim receivable	—	—	—		—		—		—		—	—	—	—	—	—
Accounts receivable, net	—	—	—		—		—		(44	)	—	—	—	—	—	178
Due to/from subsidiaries	—	3,413	6,193		9,381		8,842		9,944		—	4,976	—	—	—	20,297
Note receivable from subsidiaries	—	—	—		—		—		—		—	—	—	—	—	—
Restricted cash	—	—	—		—		—		—		—	—	—	—	—	—
Cash and cash equivalents	—	—	—		—		—		—		—	—	—	—	—	—
	—	3,414	22,277		24,864		14,170		9,900		—	4,976	—	—	—	20,475
Liabilities and Partners’ Capital
Long-term debt	—	—	—		—		—		—		—	—	—	—	—	—
Notes payable to MeriStar Hospitality Corporation	—	—	—		—		—		—		—	—	—	—	—	—
Accounts payable and accrued expenses	—	—	78		30		23		—		—	—	—	—	—	—
Accrued interest	—	—	—		—		—		—		—	—	—	—	—	—
Due to Interstate Hotels & Resorts	—	—	—		—		—		—		—	—	—	—	—	—
Other liabilities	—	—	—		—		—		—		—	—	—	—	—	—
	—	—	78		30		23		—		—	—	—	—	—	—
Minority interests	—	—	—		—		—		—		—	—	—	—	—	—
Redeemable OP units at redemption value	—	—	—		—		—		—		—	—	—	—	—	—
Partners’ capital - Common OP units	—	3,414	22,199		24,834		14,147		9,900		—	4,976	—	—	—	20,475
	—	3,414	22,277		24,864		14,170		9,900		—	4,976	—	—	—	20,475

3

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

March 31, 2005

(Dollars in thousands)

	MDV Limited Partnership		MeriStar Sub 5C, LLC	MeriStar Sub 6J, LLC		MeriStar Sub 1D, LLC		MeriStar Sub 7B, L.P.	MeriStar Sub 7D, LLC		MeriStar Sub 7G, LLC	MeriStar Sub 6B, LLC		MeriStar Sub 4I, L.P.	MeriStar Sub 5D, LLC		MeriStar Sub 5H, LLC	MeriStar Sub 7H, LLC
Assets
Property and equipment	3,981		—	20,113		70,361		—	55,296		—	11,976		—	42,495		—	—
Accumulated depreciation	(889	)	—	(4,455	)	(14,906	)	—	(11,595	)	—	(2,748	)	—	(9,875	)	—	—
	3,092		—	15,658		55,455		—	43,701		—	9,228		—	32,620		—	—
Investments in affiliates	—		—	—		—		—	—		—	—		—	51,368		—	—
Prepaid expenses and other assets	(29	)	—	(13	)	(629	)	—	10		—	(16	)	—	(91	)	—	—
Insurance claim receivable	—		—	—		—		—	—		—	—		—	—		—	—
Accounts receivable, net	—		—	—		—		—	1,469		—	22		—	—		—	—
Due to/from subsidiaries	2,926		—	10,356		23,476		—	26,878		2,370	3,144		—	(6,150	)	—	—
Note receivable from subsidiaries	—		—	—		—		—	—		—	—		—	—		—	—
Restricted cash	—		—	—		—		—	—		—	—		—	—		—	—
Cash and cash equivalents	—		—	—		—		—	—		—	—		—	—		—	—
	5,989		—	26,001		78,302		—	72,058		2,370	12,378		—	77,747		—	—
Liabilities and Partners’ Capital
Long-term debt	—		—	—		—		—	—		—	—		—	24,000		—	—
Notes payable to MeriStar Hospitality Corporation	—		—	—		—		—	—		—	—		—	—		—	—
Accounts payable and accrued expenses	40		—	21		246		—	1,881		—	(67	)	—	234		—	—
Accrued interest	—		—	—		—		—	—		—	—		—	—		—	—
Due to Interstate Hotels & Resorts	—		—	—		—		—	(200	)	—	—		—	—		—	—
Other liabilities	—		—	—		—		—	—		—	—		—	—		—	—
	40		—	21		246		—	1,681		—	(67	)	—	24,234		—	—
Minority interests	—		—	—		—		—	—		—	—		—	—		—	—
Redeemable OP units at redemption value	—		—	—		—		—	—		—	—		—	—		—	—
Partners’ capital - Common OP units	5,949		—	25,980		78,056		—	70,377		2,370	12,445		—	53,513		—	—
	5,989		—	26,001		78,302		—	72,058		2,370	12,378		—	77,747		—	—

4

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

March 31, 2005

(Dollars in thousands)

	AGH PSS I, Inc.	MeriStar Sub 2D, LLC	MeriStar Sub 4F, L.P.		MeriStar Sub 5K, LLC	MeriStar Sub 5M, LLC		MeriStar Sub 1E, LLC	MeriStar Sub 5O, LLC		MeriStar Sub 4B, L.P.	MeriStar Sub 2C, LLC		MeriStar Sub 4G, L.P.		MeriStar Sub 3B, LLC	MeriStar Sub 5G, L.P.
Assets
Property and equipment	—	—	35,940		—	19,714		—	7,842		—	—		—		—	171,319
Accumulated depreciation	—	—	(7,206	)	—	(1,674	)	—	(878	)	—	—		(1	)	—	(37,273	)
	—	—	28,734		—	18,040		—	6,964		—	—		(1	)	—	134,046
Investments in affiliates	—	—	—		—	—		—	—		—	—		—		—	—
Prepaid expenses and other assets	—	—	(16	)	—	(135	)	—	(45	)	—	—		—		—	(490	)
Insurance claim receivable	—	—	—		—	—		—	—		—	—		—		—	—
Accounts receivable, net	—	—	—		—	—		—	—		—	—		—		—	—
Due to/from subsidiaries	—	—	3,677		21,531	10,450		—	3,969		—	(2,360	)	16,930		—	46,755
Note receivable from subsidiaries	—	—	—		—	—		—	—		—	—		—		—	—
Restricted cash	—	—	—		—	—		—	—		—	—		—		—	—
Cash and cash equivalents	—	—	—		—	—		—	—		—	—		—		—	—
	—	—	32,395		21,531	28,355		—	10,888		—	(2,360	)	16,929		—	180,311
Liabilities and Partners’ Capital
Long-term debt	—	—	—		—	—		—	—		—	—		—		—	—
Notes payable to MeriStar Hospitality Corporation	—	—	—		—	—		—	—		—	—		—		—	—
Accounts payable and accrued expenses	—	—	84		—	51		—	19		—	—		—		—	289
Accrued interest	—	—	—		—	—		—	—		—	—		—		—	—
Due to Interstate Hotels & Resorts	—	—	—		—	—		—	—		—	—		—		—	—
Other liabilities	—	—	—		—	—		—	—		—	—		—		—	—
	—	—	84		—	51		—	19		—	—		—		—	289
Minority interests	—	—	—		—	—		—	—		—	—		—		—	—
Redeemable OP units at redemption value	—	—	—		—	—		—	—		—	—		—		—	—
Partners’ capital - Common OP units	—	—	32,311		21,531	28,304		—	10,869		—	(2,360	)	16,929		—	180,022
	—	—	32,395		21,531	28,355		—	10,888		—	(2,360	)	16,929		—	180,311

5

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

March 31, 2005

(Dollars in thousands)

	MeriStar Sub 5N, LLC		MeriStar Sub 5P, LLC		MeriStar Sub 5J, LLC		MeriStar Sub 5Q, LLC		MeriStar Sub 5A, LLC		MeriStar Sub 8D, LLC	MeriStar Sub 4J, LLC		Meristar Pentagon City, LLC		MeriStar Sub 6K, LLC	MeriStar Sub 5E, LLC	MeriStar Sub 6I, LLC
Assets
Property and equipment	3,898		39		83,616		15,131		37,544		—	42,637		93,559		—	—	—
Accumulated depreciation	(467	)	(29	)	(15,730	)	(2,435	)	(12,037	)	—	(8,717	)	(4,782	)	—	—	—
	3,431		10		67,886		12,696		25,507		—	33,920		88,777		—	—	—
Investments in affiliates	—		—		—		—		4,627		—	—		—		—	—	—
Prepaid expenses and other assets	(52	)	(11	)	(891	)	(156	)	(90	)	—	(58	)	423		—	—	—
Insurance claim receivable	—		—		—		—		—		—	—		—		—	—	—
Accounts receivable, net	—		38		2		—		—		—	(14	)	(908	)	—	—	—
Due to/from subsidiaries	4,695		3,809		47,765		7,519		8,514		—	5,962		60,732		—	—	—
Note receivable from subsidiaries	—		—		—		—		—		—	—		—		—	—	—
Restricted cash	—		—		—		—		—		—	—		—		—	—	—
Cash and cash equivalents	—		—		—		—		—		—	—		—		—	—	—
	8,074		3,846		114,762		20,059		38,558		—	39,810		149,024		—	—	—
Liabilities and Partners’ Capital
Long-term debt	—		—		—		—		23,609		—	—		55,330		—	—	—
Notes payable to MeriStar Hospitality Corporation	—		—		—		—		—		—	—		—		—	—	—
Accounts payable and accrued expenses	22		—		362		12		283		—	97		545		—	—	—
Accrued interest	—		—		—		—		—		—	—		267		—	—	—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—	—		—		—	—	—
Other liabilities	—		—		—		—		—		—	—		—		—	—	—
	22		—		362		12		23,892		—	97		56,142		—	—	—
Minority interests	—		—		—		—		—		—	—		—		—	—	—
Redeemable OP units at redemption value	—		—		—		—		—		—	—		—		—	—	—
Partners’ capital - Common OP units	8,052		3,846		114,400		20,047		14,666		—	39,713		92,882		—	—	—
	8,074		3,846		114,762		20,059		38,558		—	39,810		149,024		—	—	—

6

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

March 31, 2005

(Dollars in thousands)

	MeriStar Sub 5I, LLC	CapStar Cherry Hill Company, LLC	Meristar Acquisition Company, LLC	MeriStar Sub 6A, LLC	MeriStar Sub 6F, LLC	MeriStar Hotel Lessee, Inc.	Guarantor Eliminations	Guarantor Subsidiaries Total	Consolidation Eliminations	Total Consolidated
Assets
Property and equipment	—	—	—	—	—	3,312	—	1,108,753	—	$2,637,362
Accumulated depreciation	—	—	—	—	—	(3,384)	—	(214,877)	—	(530,049)
	—	—	—	—	—	(72)	—	893,876	—	2,107,313
Investments in affiliates	—	—	—	—	—	43,219	(41,590)	110,496	(2,454,666)	70,451
Prepaid expenses and other assets	—	—	—	—	—	10,411	10	7,765	—	34,045
Insurance claim receivable	—	—	—	—	—	—	—	—	—	60,896
Accounts receivable, net	—	—	—	—	—	38,395	—	39,412	(12,684)	40,506
Due to/from subsidiaries	—	—	—	—	—	45,964	(1,670)	593,495	—	—
Note receivable from subsidiaries	—	—	—	—	—	—	—	—	(259,065)	—
Restricted cash	—	—	—	—	—	542	—	3,542	—	62,946
Cash and cash equivalents	—	—	—	—	—	28,892	—	28,892	—	53,863
	—	—	—	—	—	167,351	(43,250)	1,677,478	(2,726,415)	$2,430,020
Liabilities and Partners' Capital
Long-term debt	—	—	—	—	—	211,456	—	352,073	(259,065)	$1,397,649
Notes payable to MeriStar Hospitality Corporation	—	—	—	—	—	—	—	—	—	202,528
Accounts payable and accrued expenses	—	—	—	—	—	45,319	—	50,347	—	66,144
Accrued interest	—	—	—	—	—	12,684	—	12,951	(12,684)	35,812
Due to Interstate Hotels & Resorts	—	—	—	—	—	6,437	—	6,237	—	18,045
Other liabilities	—	—	—	—	—	8,116	—	8,116	—	20,246
	—	—	—	—	—	284,012	—	429,724	(271,749)	1,740,424
Minority interests	—	—	—	—	—	—	—	—	—	2,422
Redeemable OP units at redemption value	—	—	—	—	—	—	—	—	—	16,085
Partners' capital—Common OP units	—	—	—	—	—	(116,661)	(43,250)	1,247,754	(2,454,666)	671,089
	—	—	—	—	—	167,351	(43,250)	1,677,478	(2,726,415)	$2,430,020

7

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

December 31, 2004

(Dollars in thousands)

	MeriStar Hospitality OP, L.P.			Non-Guarantor Subsidiaries		MeriStar Lexington Mortgage, LLC	MeriStar Lexington Partners, LLC	MeriStar Sub 7C, LLC	MeriStar Sub 8G, LLC	AGH UPREIT LLC	MeriStar Sub 6H, L.P.		MeriStar Sub 8F, L.P.		MeriStar Sub 8B, LLC		MeriStar Sub 1C, LLC		MeriStar Sub 8E, LLC		MeriStar Sub 7F, LLC
Assets
Property and equipment	$	22,301		1,476,952		—	—	—	—	—	10,885		13,687		88,943		27,485		16,028		10,034
Accumulated depreciation		(14,642	)	(286,652	)	—	—	—	—	—	(783	)	(3,179	)	(14,741	)	(7,319	)	(3,618	)	(413	)
		7,659		1,190,300		—	—	—	—	—	10,102		10,508		74,202		20,166		12,410		9,621
Investments in affiliates		2,492,499		7,992		40,661	9,487	32	72	2,989	—		—		—		—		—		—
Prepaid expenses and other assets		31,287		(3,841	)	—	—	—	—	—	(11	)	(81	)	(101	)	(190	)	(26	)	(12	)
Insurance claim receivable		76,056		—		—	—	—	—	—	—		—		—		—		—		—
Accounts receivable, net		9,596		1,054		—	—	—	—	—	—		—		—		—		—		—
Due to/from subsidiaries		(1,106,110	)	522,427		1,181	750	—	9	73	7,830		6,748		31,376		(4,175	)	7,517		3,135
Note receivable from subsidiaries		221,704		—		—	—	—	—	—	—		—		—		—		—		—
Restricted cash		55,754		1,346		—	—	—	—	—	—		—		—		—		—		—
Cash and cash equivalents		41,224		—		—	—	—	—	—	—		—		—		—		—		—
	$	1,829,669		1,719,278		41,842	10,237	32	81	3,062	17,921		17,175		105,477		15,801		19,901		12,744
Liabilities and Partners’ Capital
Long-term debt	$	841,976		471,781		—	—	—	—	—	—		—		—		—		—		—
Notes payable to MeriStar Hospitality Corporation		203,977		—		—	—	—	—	—	—		—		—		—		—		—
Accounts payable and accrued expenses		14,777		5,128		—	—	—	—	—	—		6		—		59		—		153
Accrued interest		38,683		2,214		—	—	—	—	—	—		—		—		—		—		—
Due to Interstate Hotels & Resorts		11,347		—		—	—	—	—	—	—		—		—		—		—		—
Other liabilities		5,382		—		—	—	—	—	—	—		—		—		—		—		—
		1,116,142		479,123		—	—	—	—	—	—		6		—		59		—		153
Minority interests		2,418		—		—	—	—	—	—	—		—		—		—		—		—
Redeemable OP units at redemption value		19,187		—		—	—	—	—	—	—		—		—		—		—		—
Partners’ capital - Common OP units		691,922		1,240,155		41,842	10,237	32	81	3,062	17,921		17,169		105,477		15,742		19,901		12,591
	$	1,829,669		1,719,278		41,842	10,237	32	81	3,062	17,921		17,175		105,477		15,801		19,901		12,744

8

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

December 31, 2004

(Dollars in thousands)

	MeriStar Sub 5L, LLC		MeriStar Sub 3C, LLC		MeriStar Sub 5R, LLC		MeriStar Sub 8A, LLC	MeriStar Sub 6D, LLC		MeriStar Sub 6E, LLC		MeriStar Sub 4E, L.P.		MeriStar Sub 1B, LLC		MeriStar Sub 5F, L.P.		MeriStar Sub 6G, LLC		MeriStar Sub 8C, LLC	MeriStar Sub 4C, L.P.	MeriStar Sub 4H, L.P.
Assets
Property and equipment	11,800		17,581		—		—	18,367		49,971		—		20,404		18,560		24,167		—	—	1
Accumulated depreciation	(723	)	(4,384	)	—		—	(3,377	)	(11,560	)	(1	)	(4,557	)	(591	)	(5,738	)	—	—	—
	11,077		13,197		—		—	14,990		38,411		(1	)	15,847		17,969		18,429		—	—	1
Investments in affiliates	—		—		43		—	—		—		—		—		—		—		—	—	—
Prepaid expenses and other assets	(77	)	2		—		—	(21	)	(93	)	—		(83	)	(178	)	(35	)	—	—	—
Insurance claim receivable	—		—		—		—	—		—		—		—		—		—		—	—	—
Accounts receivable, net	—		—		—		—	124		—		64		96		—		—		—	—	—
Due to/from subsidiaries	5,022		6,581		(43	)	—	9,328		22,758		7,015		15,571		12,510		8,688		11,439	—	3,413
Note receivable from subsidiaries	—		—		—		—	—		—		—		—		—		—		—	—	—
Restricted cash	—		—		—		—	—		—		—		—		—		—		—	—	—
Cash and cash equivalents	—		—		—		—	—		—		—		—		—		—		—	—	—
	16,022		19,780		—		—	24,421		61,076		7,078		31,431		30,301		27,082		11,439	—	3,414
Liabilities and Partners’ Capital
Long-term debt	—		—		—		—	—		—		—		33		—		—		—	—	—
Notes payable to MeriStar Hospitality Corporation	—		—		—		—	—		—		—		—		—		—		—	—	—
Accounts payable and accrued expenses	1		211		—		—	(21	)	(20	)	5		(7	)	(4	)	61		—	—	—
Accrued interest	—		—		—		—	—		—		—		—		—		—		—	—	—
Due to Interstate Hotels & Resorts	—		—		—		—	—		—		—		—		—		—		—	—	—
Other liabilities	—		—		—		—	—		—		—		—		—		—		—	—	—
	1		211		—		—	(21	)	(20	)	5		26		(4	)	61		—	—	—
Minority interests	—		—		—		—	—		—		—		—		—		—		—	—	—
Redeemable OP units at redemption value	—		—		—		—	—		—		—		—		—		—		—	—	—
Partners’ capital - Common OP units	16,021		19,569		—		—	24,442		61,096		7,073		31,405		30,305		27,021		11,439	—	3,414
	16,022		19,780		—		—	24,421		61,076		7,078		31,431		30,301		27,082		11,439	—	3,414

9

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

December 31, 2004

(Dollars in thousands)

	MeriStar Sub 7E, LLC		MeriStar Sub 3D, LLC		MeriStar Sub 1A, LLC		MeriStar Sub 7A Joint Venture		MeriStar Sub 2B, LLC	MeriStar Sub 3A, LLC	MeriStar Sub 4A, LP	MeriStar Sub 4D, LLC	MeriStar Sub 2A, LLC	MeriStar Sub 6L, LLC	MDV Limited Partnership		MeriStar Sub 5C, LLC	MeriStar Sub 6J, LLC
Assets
Property and equipment	20,118		22,986		5,500		—		—	—	—	—	—	—	3,955		—	19,976
Accumulated depreciation	(3,974	)	(7,740	)	(2	)	—		—	—	—	—	—	—	(840	)	—	(4,320	)
	16,144		15,246		5,498		—		—	—	—	—	—	—	3,115		—	15,656
Investments in affiliates	—		—		—		—		—	—	—	—	—	—	—		—	—
Prepaid expenses and other assets	(22	)	(43	)	(96	)	—		—	—	—	—	—	—	(24	)	—	(6	)
Insurance claim receivable	—		—		—		—		—	—	—	—	—	—	—		—	—
Accounts receivable, net	—		—		—		(44	)	—	—	—	—	—	178	—		—	—
Due to/from subsidiaries	6,024		9,411		8,518		9,944		—	4,976	7,612	—	—	20,297	2,879		—	9,835
Note receivable from subsidiaries	—		—		—		—		—	—	—	—	—	—	—		—	—
Restricted cash	—		—		—		—		—	—	—	—	—	—	—		—	—
Cash and cash equivalents	—		—		—		—		—	—	—	—	—	—	—		—	—
	22,146		24,614		13,920		9,900		—	4,976	7,612	—	—	20,475	5,970		—	25,485
Liabilities and Partners’ Capital
Long-term debt	—		—		—		—		—	—	—	—	—	—	—		—	—
Notes payable to MeriStar Hospitality Corporation	—		—		—		—		—	—	—	—	—	—	—		—	—
Accounts payable and accrued expenses	88		—		2		—		—	—	—	—	—	—	75		—	59
Accrued interest	—		—		—		—		—	—	—	—	—	—	—		—	—
Due to Interstate Hotels & Resorts	—		—		—		—		—	—	—	—	—	—	—		—	—
Other liabilities	—		—		—		—		—	—	—	—	—	—	—		—	—
	88		—		2		—		—	—	—	—	—	—	75		—	59
Minority interests	—		—		—		—		—	—	—	—	—	—	—		—	—
Redeemable OP units at redemption value	—		—		—		—		—	—	—	—	—	—	—		—	—
Partners’ capital - Common OP units	22,058		24,614		13,918		9,900		—	4,976	7,612	—	—	20,475	5,895		—	25,426
	22,146		24,614		13,920		9,900		—	4,976	7,612	—	—	20,475	5,970		—	25,485

10

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

December 31, 2004

(Dollars in thousands)

	MeriStar Sub 1D, LLC		MeriStar Sub 7B, L.P.		MeriStar Sub 7D, LLC		MeriStar Sub 7G, LLC	MeriStar Sub 6B, LLC		MeriStar Sub 4I, L.P.	MeriStar Sub 5D, LLC		MeriStar Sub 5H, LLC	MeriStar Sub 7H, LLC	AGH PSS I, Inc.	MeriStar Sub 2D, LLC	MeriStar Sub 4F, L.P.		MeriStar Sub 5K, LLC
Assets
Property and equipment	69,500		—		55,081		—	11,877		—	42,467		—	—	—	—	35,341		—
Accumulated depreciation	(14,321	)	—		(11,258	)	—	(2,636	)	—	(9,533	)	—	—	—	—	(6,923	)	—
	55,179		—		43,823		—	9,241		—	32,934		—	—	—	—	28,418		—
Investments in affiliates	—		—		—		—	—		—	51,368		—	—	—	—	—		—
Prepaid expenses and other assets	(550	)	—		46		—	(14	)	—	(77	)	—	—	—	—	(10	)	—
Insurance claim receivable	—		—		—		—	—		—	—		—	—	—	—	—		—
Accounts receivable, net	—		—		1,169		—	—		—	—		—	—	—	—	—		—
Due to/from subsidiaries	22,849		(262	)	26,640		2,370	2,976		—	(6,151	)	—	—	—	—	4,108		21,531
Note receivable from subsidiaries	—		—		—		—	—		—	—		—	—	—	—	—		—
Restricted cash	—		—		—		—	—		—	—		—	—	—	—	—		—
Cash and cash equivalents	—		—		—		—	—		—	—		—	—	—	—	—		—
	77,478		(262	)	71,678		2,370	12,203		—	78,074		—	—	—	—	32,516		21,531
Liabilities and Partners’ Capital
Long-term debt	—		—		—		—	—		—	24,000		—	—	—	—	—		—
Notes payable to MeriStar Hospitality Corporation	—		—		—		—	—		—	—		—	—	—	—	—		—
Accounts payable and accrued expenses	—		—		2,381		—	(125	)	—	165		—	—	—	—	334		—
Accrued interest	—		—		—		—	—		—	—		—	—	—	—	—		—
Due to Interstate Hotels & Resorts	—		—		(200	)	—	—		—	—		—	—	—	—	—		—
Other liabilities	—		—		—		—	—		—	—		—	—	—	—	—		—
	—		—		2,181		—	(125	)	—	24,165		—	—	—	—	334		—
Minority interests	—		—		—		—	—		—	—		—	—	—	—	—		—
Redeemable OP units at redemption value	—		—		—		—	—		—	—		—	—	—	—	—		—
Partners’ capital - Common OP units	77,478		(262	)	69,497		2,370	12,328		—	53,909		—	—	—	—	32,182		21,531
	77,478		(262	)	71,678		2,370	12,203		—	78,074		—	—	—	—	32,516		21,531

11

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

December 31, 2004

(Dollars in thousands)

	MeriStar Sub 5M, LLC		MeriStar Sub 1E, LLC	MeriStar Sub 5O, LLC		MeriStar Sub 4B, L.P.	MeriStar Sub 2C, LLC		MeriStar Sub 4G, L.P.		MeriStar Sub 3B, LLC	MeriStar Sub 5G, L.P.		MeriStar Sub 5N, LLC		MeriStar Sub 5P, LLC
Assets
Property and equipment	18,969		—	7,263		—	—		—		—	168,827		3,580		39
Accumulated depreciation	(1,607	)	—	(844	)	—	—		(1	)	—	(35,721	)	(448	)	(28	)
	17,362		—	6,419		—	—		(1	)	—	133,106		3,132		11
Investments in affiliates	—		—	—		—	—		—		—	—		—		—
Prepaid expenses and other assets	(118	)	—	(39	)	—	—		—		—	(394	)	(45	)	(10	)
Insurance claim receivable	—		—	—		—	—		—		—	—		—		—
Accounts receivable, net	—		—	—		—	—		—		—	—		—		38
Due to/from subsidiaries	10,741		—	4,524		1,728	(2,360	)	16,930		—	45,208		4,988		3,724
Note receivable from subsidiaries	—		—	—		—	—		—		—	—		—		—
Restricted cash	—		—	—		—	—		—		—	—		—		—
Cash and cash equivalents	—		—	—		—	—		—		—	—		—		—
	27,985		—	10,904		1,728	(2,360	)	16,929		—	177,920		8,075		3,763
Liabilities and Partners’ Capital
Long-term debt	—		—	—		—	—		—		—	—		—		—
Notes payable to MeriStar Hospitality Corporation	—		—	—		—	—		—		—	—		—		—
Accounts payable and accrued expenses	—		—	—		—	—		—		—	—		4		—
Accrued interest	—		—	—		—	—		—		—	—		—		—
Due to Interstate Hotels & Resorts	—		—	—		—	—		—		—	—		—		—
Other liabilities	—		—	—		—	—		—		—	—		—		—
	—		—	—		—	—		—		—	—		4		—
Minority interests	—		—	—		—	—		—		—	—		—		—
Redeemable OP units at redemption value	—		—	—		—	—		—		—	—		—		—
Partners’ capital - Common OP units	27,985		—	10,904		1,728	(2,360	)	16,929		—	177,920		8,071		3,763
	27,985		—	10,904		1,728	(2,360	)	16,929		—	177,920		8,075		3,763

12

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

December 31, 2004

(Dollars in thousands)

	MeriStar Sub 5J, LLC		MeriStar Sub 5Q, LLC		MeriStar Sub 5A, LLC		MeriStar Sub 8D, LLC	MeriStar Sub 4J, LLC		Meristar Pentagon City, LLC		MeriStar Sub 6K, LLC	MeriStar Sub 5E, LLC	MeriStar Sub 6I, LLC	MeriStar Sub 5I, LLC	CapStar Cherry Hill Company, LLC	Meristar Acquisition Company, LLC	MeriStar Sub 6A, LLC
Assets
Property and equipment	79,579		13,980		37,074		—	41,862		93,264		—	—	—	—	—	—	—
Accumulated depreciation	(14,819	)	(2,312	)	(11,767	)	—	(8,398	)	(3,478	)	—	—	—	—	—	—	—
	64,760		11,668		25,307		—	33,464		89,786		—	—	—	—	—	—	—
Investments in affiliates	—		—		4,627		—	—		—		—	—	—	—	—	—	—
Prepaid expenses and other assets	(769	)	(137	)	(78	)	—	(51	)	466		—	—	—	—	—	—	—
Insurance claim receivable	—		—		—		—	—		—		—	—	—	—	—	—	—
Accounts receivable, net	—		—		—		359	(14	)	(361	)	—	—	—	—	—	—	—
Due to/from subsidiaries	51,127		8,187		8,010		16,379	6,370		58,867		—	—	—	—	—	—	—
Note receivable from subsidiaries	—		—		—		—	—		—		—	—	—	—	—	—	—
Restricted cash	—		—		—		—	—		—		—	—	—	—	—	—	—
Cash and cash equivalents	—		—		—		—	—		—		—	—	—	—	—	—	—
	115,118		19,718		37,866		16,738	39,769		148,758		—	—	—	—	—	—	—
Liabilities and Partners’ Capital
Long-term debt	—		—		23,609		—	—		55,509		—	—	—	—	—	—	—
Notes payable to MeriStar Hospitality Corporation	—		—		—		—	—		—		—	—	—	—	—	—	—
Accounts payable and accrued expenses	126		(18	)	114		—	152		273		—	—	—	—	—	—	—
Accrued interest	—		—		—		—	—		268		—	—	—	—	—	—	—
Due to Interstate Hotels & Resorts	—		—		—		—	—		—		—	—	—	—	—	—	—
Other liabilities	—		—		—		—	—		—		—	—	—	—	—	—	—
	126		(18	)	23,723		—	152		56,050		—	—	—	—	—	—	—
Minority interests	—		—		—		—	—		—		—	—	—	—	—	—	—
Redeemable OP units at redemption value	—		—		—		—	—		—		—	—	—	—	—	—	—
Partners’ capital - Common OP units	114,992		19,736		14,143		16,738	39,617		92,708		—	—	—	—	—	—	—
	115,118		19,718		37,866		16,738	39,769		148,758		—	—	—	—	—	—	—

13

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Balance Sheet

December 31, 2004

(Dollars in thousands)

	MeriStar Sub 6F, LLC	MeriStar Hotel Lessee, Inc.		Guarantor Eliminations		Guarantor Subsidiaries Total		Consolidation Eliminations		Total Consolidated
Assets
Property and equipment	—	3,316		—		1,082,467		—		$	2,581,720
Accumulated depreciation	—	(3,384	)	—		(205,338	)	—			(506,632	)
	—	(68	)	—		877,129		—			2,075,088
Investments in affiliates	—	42,290		(40,661	)	110,908		(2,526,603	)		84,796
Prepaid expenses and other assets	—	9,661		—		6,784		—			34,230
Insurance claim receivable	—	—		—		—		—			76,056
Accounts receivable, net	—	30,134		—		31,743		(9,414	)		32,979
Due to/from subsidiaries	—	40,158		(1,181	)	583,683		—			—
Note receivable from subsidiaries	—	—		—		—		(221,704	)		—
Restricted cash	—	1,313		—		1,313		—			58,413
Cash and cash equivalents	—	19,309		—		19,309		—			60,533
	—	142,797		(41,842	)	1,630,869		(2,757,721	)	$	2,422,095
Liabilities and Partners’ Capital
Long-term debt	—	174,095		—		277,246		(221,704	)	$	1,369,299
Notes payable to MeriStar Hospitality Corporation	—	—		—		—		—			203,977
Accounts payable and accrued expenses	—	47,802		—		51,876		—			71,781
Accrued interest	—	9,414		—		9,682		(9,414	)		41,165
Due to Interstate Hotels & Resorts	—	10,652		—		10,452		—			21,799
Other liabilities	—	6,171		—		6,171		—			11,553
	—	248,134		—		355,427		(231,118	)		1,719,574
Minority interests	—	—		—		—		—			2,418
Redeemable OP units at redemption value	—	—		—		—		—			19,187
Partners’ capital - Common OP units	—	(105,337	)	(41,842	)	1,275,442		(2,526,603	)		680,916
	—	142,797		(41,842	)	1,630,869		(2,757,721	)	$	2,422,095

14

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Hospitality OP, L.P.			Non-Guarantor Subsidiaries		MeriStar Lexington Mortgage, LLC	MeriStar Lexington Partners, LLC		MeriStar Sub 7C, LLC	MeriStar Sub 8G, LLC	AGH UPREIT LLC	MeriStar Sub 6H, L.P.	MeriStar Sub 8F, L.P.	MeriStar Sub 8B, LLC
Revenue:
Hotel operations:
Rooms	$	—		—		—	—		—	—	—	—	—	—
Food and beverage		—		—		—	—		—	—	—	—	—	—
Other hotel operations		—		—		—	—		—	—	—	—	—	—
Office rental, parking and other revenue		1,434		129		—	—		—	—	—	—	—	—
Participating lease revenue		—		35,598		1,408	(1,341	)	—	—	—	293	624	1,934
Total revenue		1,434		35,727		1,408	(1,341	)	—	—	—	293	624	1,934
Hotel operating expenses:
Rooms		—		—		—	—		—	—	—	—	—	—
Food and beverage		—		—		—	—		—	—	—	—	—	—
Other hotel operating expenses		—		—		—	—		—	—	—	—	—	—
Office rental, parking and other expenses		—		346		—	—		—	—	—	—	—	—
Other operating expenses:		—		—		—	—		—	—	—	—	—	—
General and administrative, hotel		—		—		—	—		—	—	—	—	—	—
General and administrative, corporate		3,500		—		—	—		—	—	—	—	—	—
Property operating costs		—		—		—	—		—	—	—	—	—	—
Depreciation and amortization		2,012		13,257		—	—		—	—	—	157	165	623
Property taxes, insurance and other		1,387		4,761		—	—		—	—	—	25	158	259
Loss on asset impairments		—		—		—	—		—	—	—	—	—	—
Operating expenses		6,899		18,364		—	—		—	—	—	182	323	882
Equity in income/loss of and interest earned from unconsolidated affiliates		1,634		—		—	—		—	—	—	—	—	—
Hurricane business interruption income		—		—		—	—		—	—	—	—	—	—
Operating income (loss)		(3,831	)	17,363		1,408	(1,341	)	—	—	—	111	301	1,052
Minority interest income (expense)		(5	)	—		—	—		—	—	—	—	—	—
Interest expense, net		(17,675	)	(7,669	)	—	—		—	—	—	—	—	—
Loss on early extinguishments of debt		(60	)	—		—	—		—	—	—	—	—	—
Equity in income from consolidated entities		7,822		—		—	—		—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations		(13,749	)	9,694		1,408	(1,341	)	—	—	—	111	301	1,052
Income tax expense		—		—		—	—		—	—	—	—	—	—
(Loss) income from continuing operations		(13,749	)	9,694		1,408	(1,341	)	—	—	—	111	301	1,052
Discontinued operations:
(Loss) income from discontinued operations before income taxes		—		—		—	—		—	—	—	—	—	—
Income tax expense		—		—		—	—		—	—	—	—	—	—
(Loss) income from discontinued operations		—		—		—	—		—	—	—	—	—	—
Net income (loss)	$	(13,749	)	9,694		1,408	(1,341	)	—	—	—	111	301	1,052

15

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar 1C, LLC		MeriStar Sub 8E, LLC	MeriStar Sub 7F, LLC	MeriStar Sub 5L, LLC	MeriStar Sub 3C, LLC	MeriStar Sub 5R, LLC	MeriStar Sub 8A, LLC	MeriStar Sub 6D, LLC	MeriStar Sub 6E, LLC		MeriStar Sub 4E, L.P.
Revenue:
Hotel operations:
Rooms	—		—	—	—	—	—	—	—	—		—
Food and beverage	—		—	—	—	—	—	—	—	—		—
Other hotel operations	—		—	—	—	—	—	—	—	—		—
Office rental, parking and other revenue	—		11	—	—	1	—	—	17	3		—
Participating lease revenue	414		385	242	293	748	—	—	618	1,561		—
Total revenue	414		396	242	293	749	—	—	635	1,564		—
Hotel operating expenses:
Rooms	—		—	—	—	—	—	—	—	—		—
Food and beverage	—		—	—	—	—	—	—	—	—		—
Other hotel operating expenses	—		—	—	—	—	—	—	—	—		—
Office rental, parking and other expenses	3		—	—	—	—	—	—	—	—		—
Other operating expenses:	—		—	—	—	—	—	—	—	—		—
General and administrative, hotel	—		—	—	—	—	—	—	—	—		—
General and administrative, corporate	—		—	—	—	—	—	—	—	—		—
Property operating costs	—		—	—	—	—	—	—	—	—		—
Depreciation and amortization	353		136	134	40	156	—	—	106	380		—
Property taxes, insurance and other	207		44	32	34	102	—	—	79	138		—
Loss on asset impairments	—		—	—	—	—	—	—	—	—		—
Operating expenses	563		180	166	74	258	—	—	185	518		—
Equity in income/loss of and interest earned from unconsolidated affiliates	—		—	—	—	—	—	—	—	—		—
Hurricane business interruption income	—		—	—	—	—	—	—	—	—		—
Operating income (loss)	(149	)	216	76	219	491	—	—	450	1,046		—
Minority interest income (expense)	—		—	—	—	—	—	—	—	—		—
Interest expense, net	—		—	—	—	—	—	—	—	(220	)	—
Loss on early extinguishments of debt	—		—	—	—	—	—	—	—	—		—
Equity in income from consolidated entities	—		—	—	—	—	—	—	—	—		—
(Loss) income before income taxes and discontinued operations	(149	)	216	76	219	491	—	—	450	826		—
Income tax expense	—		—	—	—	—	—	—	—	—		—
(Loss) income from continuing operations	(149	)	216	76	219	491	—	—	450	826		—
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—		—	—	—	—	—	—	—	—		—
Income tax expense	—		—	—	—	—	—	—	—	—		—
(Loss) income from discontinued operations	—		—	—	—	—	—	—	—	—		—
Net income (loss)	(149	)	216	76	219	491	—	—	450	826		—

16

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 1B, LLC		MeriStar Sub 5F, L.P.	MeriStar Sub 6G, LLC	MeriStar Sub 8C, LLC	MeriStar Sub 4C, L.P.	MeriStar Sub 4H, L.P.	MeriStar Sub 7E, LLC	MeriStar Sub 3D, LLC	MeriStar Sub 1A, LLC	MeriStar Sub 7A Joint Venture	MeriStar Sub 2B, LLC
Revenue:
Hotel operations:
Rooms	—		—	—	—	—	—	—	—	—	—	—
Food and beverage	—		—	—	—	—	—	—	—	—	—	—
Other hotel operations	—		—	—	—	—	—	—	—	—	—	—
Office rental, parking and other revenue	—		—	—	—	—	—	—	—	—	—	—
Participating lease revenue	520		910	979	—	—	—	358	444	439	—	—
Total revenue	520		910	979	—	—	—	358	444	439	—	—
Hotel operating expenses:
Rooms	—		—	—	—	—	—	—	—	—	—	—
Food and beverage	—		—	—	—	—	—	—	—	—	—	—
Other hotel operating expenses	—		—	—	—	—	—	—	—	—	—	—
Office rental, parking and other expenses	(3	)	—	—	—	—	—	—	5	36	—	—
Other operating expenses:	—		—	—	—	—	—	—	—	—	—	—
General and administrative, hotel	—		—	—	—	—	—	—	—	—	—	—
General and administrative, corporate	—		—	—	—	—	—	—	—	—	—	—
Property operating costs	—		—	—	—	—	—	—	—	—	—	—
Depreciation and amortization	126		154	167	—	—	—	165	162	73	—	—
Property taxes, insurance and other	44		89	101	—	—	—	52	57	100	—	—
Loss on asset impairments	—		—	—	—	—	—	—	—	—	—	—
Operating expenses	167		243	268	—	—	—	217	224	209	—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—		—	—	—	—	—	—	—	—	—	—
Hurricane business interruption income	—		—	—	—	—	—	—	—	—	—	—
Operating income (loss)	353		667	711	—	—	—	141	220	230	—	—
Minority interest income (expense)	—		—	—	—	—	—	—	—	—	—	—
Interest expense, net	(2	)	—	—	—	—	—	—	—	—	—	—
Loss on early extinguishments of debt	—		—	—	—	—	—	—	—	—	—	—
Equity in income from consolidated entities	—		—	—	—	—	—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	351		667	711	—	—	—	141	220	230	—	—
Income tax expense	—		—	—	—	—	—	—	—	—	—	—
(Loss) income from continuing operations	351		667	711	—	—	—	141	220	230	—	—
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—		—	—	—	—	—	—	—	—	—	—
Income tax expense	—		—	—	—	—	—	—	—	—	—	—
(Loss) income from discontinued operations	—		—	—	—	—	—	—	—	—	—	—
Net income (loss)	351		667	711	—	—	—	141	220	230	—	—

17

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 3A, LLC	MeriStar Sub 4A, LP	MeriStar Sub 4D, LLC	MeriStar Sub 2A, LLC	MeriStar Sub 6L, LLC	MDV Limited Partnership	MeriStar Sub 5C, LLC	MeriStar Sub 6J, LLC	MeriStar Sub 1D, LLC	MeriStar Sub 7B, L.P.
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—	—	—	—
Food and beverage	—	—	—	—	—	—	—	—	—	—
Other hotel operations	—	—	—	—	—	—	—	—	—	—
Office rental, parking and other revenue	—	—	—	—	—	—	—	—	4	—
Participating lease revenue	—	—	—	—	—	134	—	768	1,581	—
Total revenue	—	—	—	—	—	134	—	768	1,585	—
Hotel operating expenses:
Rooms	—	—	—	—	—	—	—	—	—	—
Food and beverage	—	—	—	—	—	—	—	—	—	—
Other hotel operating expenses	—	—	—	—	—	—	—	—	—	—
Office rental, parking and other expenses	—	—	—	—	—	—	—	—	60	—
Other operating expenses:	—	—	—	—	—	—	—	—	—	—
General and administrative, hotel	—	—	—	—	—	—	—	—	—	—
General and administrative, corporate	—	—	—	—	—	—	—	—	—	—
Property operating costs	—	—	—	—	—	—	—	—	—	—
Depreciation and amortization	—	—	—	—	—	49	—	139	584	—
Property taxes, insurance and other	—	—	—	—	—	31	—	76	363	—
Loss on asset impairments	—	—	—	—	—	—	—	—	—	—
Operating expenses	—	—	—	—	—	80	—	215	1,007	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—	—	—
Hurricane business interruption income	—	—	—	—	—	—	—	—	—	—
Operating income (loss)	—	—	—	—	—	54	—	553	578	—
Minority interest income (expense)	—	—	—	—	—	—	—	—	—	—
Interest expense, net	—	—	—	—	—	—	—	—	—	—
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—	—	—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	—	—	—	—	—	54	—	553	578	—
Income tax expense	—	—	—	—	—	—	—	—	—	—
(Loss) income from continuing operations	—	—	—	—	—	54	—	553	578	—
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—	—	—	—	—	—	—	—	—	—
Income tax expense	—	—	—	—	—	—	—	—	—	—
(Loss) income from discontinued operations	—	—	—	—	—	—	—	—	—	—
Net income (loss)	—	—	—	—	—	54	—	553	578	—

18

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 7D, LLC	MeriStar Sub 7G, LLC	MeriStar Sub 6B, LLC	MeriStar Sub 4I, L.P.	MeriStar Sub 5D, LLC		MeriStar Sub 5H, LLC	MeriStar Sub 7H, LLC	AGH PSS I, Inc.	MeriStar Sub 2D, LLC	MeriStar Sub 4F, L.P.
Revenue:
Hotel operations:
Rooms	—	—	—	—	—		—	—	—	—	—
Food and beverage	—	—	—	—	—		—	—	—	—	—
Other hotel operations	—	—	—	—	—		—	—	—	—	—
Office rental, parking and other revenue	—	—	—	—	—		—	—	—	—	3
Participating lease revenue	2,176	—	267	—	442		—	—	—	—	511
Total revenue	2,176	—	267	—	442		—	—	—	—	514
Hotel operating expenses:
Rooms	—	—	—	—	—		—	—	—	—	—
Food and beverage	—	—	—	—	—		—	—	—	—	—
Other hotel operating expenses	—	—	—	—	—		—	—	—	—	—
Office rental, parking and other expenses	353	—	—	—	2		—	—	—	—	(1	)
Other operating expenses:	—	—	—	—	—		—	—	—	—	—
General and administrative, hotel	—	—	—	—	—		—	—	—	—	—
General and administrative, corporate	—	—	—	—	—		—	—	—	—	—
Property operating costs	—	—	—	—	—		—	—	—	—	—
Depreciation and amortization	358	—	113	—	343		—	—	—	—	283
Property taxes, insurance and other	585	—	37	—	86		—	—	—	—	101
Loss on asset impairments	—	—	—	—	—		—	—	—	—	—
Operating expenses	1,296	—	150	—	431		—	—	—	—	383
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—		—	—	—	—	—
Hurricane business interruption income	—	—	—	—	—		—	—	—	—	—
Operating income (loss)	880	—	117	—	11		—	—	—	—	131
Minority interest income (expense)	—	—	—	—	—		—	—	—	—	—
Interest expense, net	—	—	—	—	(408	)	—	—	—	—	—
Loss on early extinguishments of debt	—	—	—	—	—		—	—	—	—	—
Equity in income from consolidated entities	—	—	—	—	—		—	—	—	—	—
(Loss) income before income taxes and discontinued operations	880	—	117	—	(397	)	—	—	—	—	131
Income tax expense	—	—	—	—	—		—	—	—	—	—
(Loss) income from continuing operations	880	—	117	—	(397	)	—	—	—	—	131
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—	—	—	—	—		—	—	—	—	—
Income tax expense	—	—	—	—	—		—	—	—	—	—
(Loss) income from discontinued operations	—	—	—	—	—		—	—	—	—	—
Net income (loss)	880	—	117	—	(397	)	—	—	—	—	131

19

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 5K, LLC	MeriStar Sub 5M, LLC	MeriStar Sub 1E, LLC	MeriStar Sub 5O, LLC		MeriStar Sub 4B, L.P.	MeriStar Sub 2C, LLC	MeriStar Sub 4G, L.P.	MeriStar Sub 3B, LLC	MeriStar Sub 5G, L.P.	MeriStar Sub 5N, LLC
Revenue:
Hotel operations:
Rooms	—	—	—	—		—	—	—	—	—	—
Food and beverage	—	—	—	—		—	—	—	—	—	—
Other hotel operations	—	—	—	—		—	—	—	—	—	—
Office rental, parking and other revenue	—	—	—	—		—	—	—	—	9	—
Participating lease revenue	—	386	—	—		—	—	—	—	3,989	—
Total revenue	—	386	—	—		—	—	—	—	3,998	—
Hotel operating expenses:
Rooms	—	—	—	—		—	—	—	—	—	—
Food and beverage	—	—	—	—		—	—	—	—	—	—
Other hotel operating expenses	—	—	—	—		—	—	—	—	—	—
Office rental, parking and other expenses	—	—	—	—		—	—	—	—	8	—
Other operating expenses:	—	—	—	—		—	—	—	—	—	—
General and administrative, hotel	—	—	—	—		—	—	—	—	—	—
General and administrative, corporate	—	—	—	—		—	—	—	—	—	—
Property operating costs	—	—	—	—		—	—	—	—	—	—
Depreciation and amortization	—	67	—	35		—	—	—	—	1,551	19
Property taxes, insurance and other	—	—	—	—		—	—	—	—	336	—
Loss on asset impairments	—	—	—	—		—	—	—	—	—	—
Operating expenses	—	67	—	35		—	—	—	—	1,895	19
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—		—	—	—	—	—	—
Hurricane business interruption income	—	—	—	—		—	—	—	—	—	—
Operating income (loss)	—	319	—	(35	)	—	—	—	—	2,103	(19	)
Minority interest income (expense)	—	—	—	—		—	—	—	—	—	—
Interest expense, net	—	—	—	—		—	—	—	—	—	—
Loss on early extinguishments of debt	—	—	—	—		—	—	—	—	—	—
Equity in income from consolidated entities	—	—	—	—		—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	—	319	—	(35	)	—	—	—	—	2,103	(19	)
Income tax expense	—	—	—	—		—	—	—	—	—	—
(Loss) income from continuing operations	—	319	—	(35	)	—	—	—	—	2,103	(19	)
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—	—	—	—		—	—	—	—	—	—
Income tax expense	—	—	—	—		—	—	—	—	—	—
(Loss) income from discontinued operations	—	—	—	—		—	—	—	—	—	—
Net income (loss)	—	319	—	(35	)	—	—	—	—	2,103	(19	)

20

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 5P, LLC	MeriStar Sub 5J, LLC		MeriStar Sub 5Q, LLC	MeriStar Sub 5A, LLC		MeriStar Sub 8D, LLC	MeriStar Sub 4J, LLC	Meristar Pentagon City, LLC		MeriStar Sub 6K, LLC	MeriStar Sub 5E, LLC	MeriStar Sub 6I, LLC
Revenue:
Hotel operations:
Rooms	—	—		—	—		—	—	—		—	—	—
Food and beverage	—	—		—	—		—	—	—		—	—	—
Other hotel operations	—	—		—	—		—	—	—		—	—	—
Office rental, parking and other revenue	—	227		—	18		—	2	—		—	—	—
Participating lease revenue	85	—		434	1,696		—	630	2,878		—	—	—
Total revenue	85	227		434	1,714		—	632	2,878		—	—	—
Hotel operating expenses:
Rooms	—	—		—	—		—	—	—		—	—	—
Food and beverage	—	—		—	—		—	—	—		—	—	—
Other hotel operating expenses	—	—		—	—		—	—	—		—	—	—
Office rental, parking and other expenses	—	1		—	1		—	122	—		—	—	—
Other operating expenses:	—	—		—	—		—	—	—		—	—	—
General and administrative, hotel	—	—		—	—		—	—	—		—	—	—
General and administrative, corporate	—	—		—	—		—	—	—		—	—	—
Property operating costs	—	—		—	—		—	—	—		—	—	—
Depreciation and amortization	1	911		123	270		—	318	1,323		—	—	—
Property taxes, insurance and other	1	(93	)	—	211		—	96	578		—	—	—
Loss on asset impairments	—	—		—	—		—	—	—		—	—	—
Operating expenses	2	819		123	482		—	536	1,901		—	—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—		—	—		—	—	—		—	—	—
Hurricane business interruption income	—	—		—	—		—	—	—		—	—	—
Operating income (loss)	83	(592	)	311	1,232		—	96	977		—	—	—
Minority interest income (expense)	—	—		—	—		—	—	—		—	—	—
Interest expense, net	—	—		—	(708	)	—	—	(803	)	—	—	—
Loss on early extinguishments of debt	—	—		—	—		—	—	—		—	—	—
Equity in income from consolidated entities	—	—		—	—		—	—	—		—	—	—
(Loss) income before income taxes and discontinued operations	83	(592	)	311	524		—	96	174		—	—	—
Income tax expense	—	—		—	—		—	—	—		—	—	—
(Loss) income from continuing operations	83	(592	)	311	524		—	96	174		—	—	—
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—	—		—	—		—	—	—		—	—	—
Income tax expense	—	—		—	—		—	—	—		—	—	—
(Loss) income from discontinued operations	—	—		—	—		—	—	—		—	—	—
Net income (loss)	83	(592	)	311	524		—	96	174		—	—	—

21

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 5I, LLC	CapStar Cherry Hill Company, LLC	Meristar Acquisition Company, LLC	MeriStar Sub 6A, LLC	MeriStar Sub 6F, LLC	MeriStar Hotel Lessee, Inc.		Guarantor Eliminations		Guarantor Subsidiaries Total		Consolidation Eliminations		Total Consolidated
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	125,995		—		125,995		—		$	125,995
Food and beverage	—	—	—	—	—	51,858		—		51,858		—			51,858
Other hotel operations	—	—	—	—	—	11,384		—		11,384		—			11,384
Office rental, parking and other revenue	—	—	—	—	—	—		—		295		—			1,858
Participating lease revenue	—	—	—	—	—	1,408		(1,408	)	26,806		(62,404	)		—
Total revenue	—	—	—	—	—	190,645		(1,408	)	216,338		(62,404	)		191,095
Hotel operating expenses:
Rooms	—	—	—	—	—	31,359		—		31,359		—			31,359
Food and beverage	—	—	—	—	—	37,509		—		37,509		—			37,509
Other hotel operating expenses	—	—	—	—	—	7,116		—		7,116		—			7,116
Office rental, parking and other expenses	—	—	—	—	—	(109	)	—		478		—			824
Other operating expenses:	—	—	—	—	—	—		—		—		—			—
General and administrative, hotel	—	—	—	—	—	32,105		—		32,105		—			32,105
General and administrative, corporate	—	—	—	—	—	33		—		33		—			3,533
Property operating costs	—	—	—	—	—	29,682		—		29,682		—			29,682
Depreciation and amortization	—	—	—	—	—	—		—		9,584		—			24,853
Property taxes, insurance and other	—	—	—	—	—	63,316		—		67,245		(62,404	)		10,989
Loss on asset impairments	—	—	—	—	—	—		—		—		—			—
Operating expenses	—	—	—	—	—	201,011		—		215,111		(62,404	)		177,970
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—		—		—		—			1,634
Hurricane business interruption income	—	—	—	—	—	2,281		—		2,281		—			2,281
Operating income (loss)	—	—	—	—	—	(8,085	)	(1,408	)	3,508		—			17,040
Minority interest income (expense)	—	—	—	—	—	—		—		—		—			(5	)
Interest expense, net	—	—	—	—	—	(3,229	)	—		(5,370	)	—			(30,714	)
Loss on early extinguishments of debt	—	—	—	—	—	—		—		—		—			(60	)
Equity in income from consolidated entities	—	—	—	—	—	—		—		—		(7,822	)		—
(Loss) income before income taxes and discontinued operations	—	—	—	—	—	(11,314	)	(1,408	)	(1,862	)	(7,822	)		(13,739	)
Income tax expense	—	—	—	—	—	(10	)	—		(10	)	—			(10	)
(Loss) income from continuing operations	—	—	—	—	—	(11,324	)	(1,408	)	(1,872	)	(7,822	)		(13,749	)
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—	—	—	—	—	—		—		—		—			—
Income tax expense	—	—	—	—	—	—		—		—		—			—
(Loss) income from discontinued operations	—	—	—	—	—	—		—		—		—			—
Net income (loss)	—	—	—	—	—	(11,324	)	(1,408	)	(1,872	)	(7,822	)	$	(13,749	)

22

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Hospitality OP, L.P.			Non- Guarantor Subsidiaries		MeriStar Sub 7C, LLC	MeriStar Sub 8G, LLC	AGH UPREIT LLC	MeriStar Sub 6H, L.P.	MeriStar Sub 8F, L.P.	MeriStar Sub 8B, LLC	MeriStar Sub 1C, LLC		MeriStar Sub 8E, LLC	MeriStar Sub 7F, LLC	MeriStar Sub 5L, LLC
Revenue:
Hotel operations:
Rooms	$	—		—		—	—	—	—	—	—	—		—	—	—
Food and beverage		—		—		—	—	—	—	—	—	—		—	—	—
Other hotel operations		—		—		—	—	—	—	—	—	—		—	—	—
Office rental, parking and other revenue		4		634		—	—	—	—	—	—	—		9	—	—
Participating lease revenue		—		33,982		—	—	—	302	601	1,864	422		371	245	377
Total revenue		4		34,616		—	—	—	302	601	1,864	422		380	245	377
Hotel operating expenses:
Rooms		—		—		—	—	—	—	—	—	—		—	—	—
Food and beverage		—		—		—	—	—	—	—	—	—		—	—	—
Other hotel operating expenses		—		—		—	—	—	—	—	—	—		—	—	—
Office rental, parking and other expenses		—		290		—	—	—	—	—	—	—		—	—	—
Other operating expenses:
General and administrative, hotel		—		—		—	—	—	—	—	—	—		—	—	—
General and administrative, corporate		3,831		—		—	—	—	—	—	—	—		—	—	—
Property operating costs		—		—		—	—	—	—	—	—	—		—	—	—
Depreciation and amortization		2,521		12,529		—	—	—	157	164	595	356		149	97	38
Property taxes, insurance and other		—		5,735		—	—	—	24	123	306	210		62	29	40
Loss on asset impairments		—		—		—	—	—	—	—	—	—		—	—	—
Write-off of deferred financing fees		856		—		—	—	—	—	—	—	—		—	—	—
Operating expenses		7,208		18,554		—	—	—	181	287	901	566		211	126	78
Equity in income/loss of and interest earned from unconsolidated affiliates		1,600		—		—	—	—	—	—	—	—		—	—	—
Operating income (loss)		(5,604	)	16,062		—	—	—	121	314	963	(144	)	169	119	299
Minority interest income (expense)		4		—		—	—	—	—	—	—	—		—	—	—
Interest expense, net		(23,430	)	(8,415	)	—	—	—	—	—	—	—		—	—	—
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	)	7,647		—	—	—	121	314	963	(144	)	169	119	299
Income tax benefit		390		—		—	—	—	—	—	—	—		—	—	—
(Loss) income from continuing operations		(41,429	)	7,647		—	—	—	121	314	963	(144	)	169	119	299
Discontinued operations:
(Loss) income from discontinued operations before income taxes		477		(56	)	—	—	—	—	—	—	—		—	—	—
Income tax benefit		65		—		—	—	—	—	—	—	—		—	—	—
(Loss) income from discontinued operations		542		(56	)	—	—	—	—	—	—	—		—	—	—
Net income (loss)	$	(40,887	)	7,591		—	—	—	121	314	963	(144	)	169	119	299

23

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 3C, LLC	MeriStar Sub 5R, LLC	MeriStar SUB 8A, LLC	MeriStar Sub 6D, LLC	MeriStar Sub 6E, LLC	MeriStar Sub 4E, L.P.	MeriStar Sub 1B, LLC	MeriStar Sub 5F, L.P.	MeriStar Sub 6G, LLC	MeriStar Sub 8C, LLC		MeriStar Sub 4C, L.P.	MeriStar Sub 4H, L.P.
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—	—	—	—		—	—
Food and beverage	—	—	—	—	—	—	—	—	—	—		—	—
Other hotel operations	—	—	—	—	—	—	—	—	—	—		—	—
Office rental, parking and other revenue	1	—	—	49	—	—	—	—	—	—		—	—
Participating lease revenue	583	—	—	432	1,413	—	604	692	829	—		—	—
Total revenue	584	—	—	481	1,413	—	604	692	829	—		—	—
Hotel operating expenses:
Rooms	—	—	—	—	—	—	—	—	—	—		—	—
Food and beverage	—	—	—	—	—	—	—	—	—	—		—	—
Other hotel operating expenses	—	—	—	—	—	—	—	—	—	—		—	—
Office rental, parking and other expenses	—	—	—	—	—	—	—	—	—	—		—	—
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—	—	—	—	—		—	—
General and administrative, corporate	—	—	—	—	—	—	—	—	—	—		—	—
Property operating costs	—	—	—	—	—	—	—	—	—	—		—	—
Depreciation and amortization	178	—	—	137	410	—	128	196	209	—		—	—
Property taxes, insurance and other	109	—	—	78	153	—	47	98	105	—		—	—
Loss on asset impairments	—	—	—	—	—	—	—	—	—	—		—	—
Write-off of deferred financing fees	—	—	—	—	—	—	—	—	—	—		—	—
Operating expenses	287	—	—	215	563	—	175	294	314	—		—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—	—	—		—	—
Operating income (loss)	297	—	—	266	850	—	429	398	515	—		—	—
Minority interest income (expense)	—	—	—	—	—	—	—	—	—	—		—	—
Interest expense, net	—	—	—	—	—	—	—	—	—	—		—	—
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—	—	—		—	—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—	—	—		—	—
(Loss) income before income taxes and discontinued operations	297	—	—	266	850	—	429	398	515	—		—	—
Income tax benefit	—	—	—	—	—	—	—	—	—	—		—	—
(Loss) income from continuing operations	297	—	—	266	850	—	429	398	515	—		—	—
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—	—	—	—	—	165	—	—	—	(203	)	—	(403	)
Income tax benefit	—	—	—	—	—	—	—	—	—	—		—	—
(Loss) income from discontinued operations	—	—	—	—	—	165	—	—	—	(203	)	—	(403	)
Net income (loss)	297	—	—	266	850	165	429	398	515	(203	)	—	(403	)

24

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 7E, LLC	MeriStar Sub 3D, LLC	MeriStar Sub 1A, LLC		MeriStar Sub 7A Joint Venture		MeriStar Sub 2B, LLC	MeriStar Sub 3A, LLC	MeriStar Sub 4A, LP	MeriStar Sub 4D, LLC	MeriStar Sub 2A, LLC	MeriStar Sub 6L, LLC	MDV Limited Partnership	MeriStar Sub 5C, LLC
Revenue:
Hotel operations:
Rooms	—	—	—		—		—	—	—	—	—	—	—	—
Food and beverage	—	—	—		—		—	—	—	—	—	—	—	—
Other hotel operations	—	—	—		—		—	—	—	—	—	—	—	—
Office rental, parking and other revenue	1	—	—		—		—	—	—	—	—	—	—	—
Participating lease revenue	345	376	422		—		—	—	—	—	—	—	130	—
Total revenue	346	376	422		—		—	—	—	—	—	—	130	—
Hotel operating expenses:
Rooms	—	—	—		—		—	—	—	—	—	—	—	—
Food and beverage	—	—	—		—		—	—	—	—	—	—	—	—
Other hotel operating expenses	—	—	—		—		—	—	—	—	—	—	—	—
Office rental, parking and other expenses	—	—	—		—		—	—	—	—	—	—	—	—
Other operating expenses:
General and administrative, hotel	—	—	34		—		—	—	—	—	—	—	—	—
General and administrative, corporate	—	—	—		—		—	—	—	—	—	—	—	—
Property operating costs	—	—	—		—		—	—	—	—	—	—	—	—
Depreciation and amortization	152	192	113		—		—	—	—	—	—	—	23	—
Property taxes, insurance and other	52	65	108		—		—	—	—	—	—	—	29	—
Loss on asset impairments	—	—	184		—		—	—	—	—	—	—	—	—
Write-off of deferred financing fees	—	—	—		—		—	—	—	—	—	—	—	—
Operating expenses	204	257	439		—		—	—	—	—	—	—	52	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—		—		—	—	—	—	—	—	—	—
Operating income (loss)	142	119	(17	)	—		—	—	—	—	—	—	78	—
Minority interest income (expense)	—	—	—		—		—	—	—	—	—	—	—	—
Interest expense, net	—	—	—		—		—	—	—	—	—	—	—	—
Loss on early extinguishments of debt	—	—	—		—		—	—	—	—	—	—	—	—
Equity in income from consolidated entities	—	—	—		—		—	—	—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	142	119	(17	)	—		—	—	—	—	—	—	78	—
Income tax benefit	—	—	—		—		—	—	—	—	—	—	—	—
(Loss) income from continuing operations	142	119	(17	)	—		—	—	—	—	—	—	78	—
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—	—	—		(664	)	—	89	96	—	—	1,852	—	—
Income tax benefit	—	—	—		—		—	—	—	—	—	—	—	—
(Loss) income from discontinued operations	—	—	—		(664	)	—	89	96	—	—	1,852	—	—
Net income (loss)	142	119	(17	)	(664	)	—	89	96	—	—	1,852	78	—

25

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 6J, LLC	MeriStar Sub 1D, LLC	MeriStar Sub 7B, L.P.		MeriStar Sub 7D, LLC	MeriStar Sub 7G, LLC	MeriStar Sub 6B, LLC	MeriStar Sub 4I, L.P.	MeriStar Sub 5D, LLC		MeriStar Sub 5H, LLC	MeriStar Sub 7H, LLC	AGH PSS I, Inc.	MeriStar Sub 2D, LLC
Revenue:
Hotel operations:
Rooms	—	—	—		—	—	—	—	—		—	—	—	—
Food and beverage	—	—	—		—	—	—	—	—		—	—	—	—
Other hotel operations	—	—	—		—	—	—	—	—		—	—	—	—
Office rental, parking and other revenue	—	85	—		436	—	—	—	—		—	—	—	—
Participating lease revenue	496	1,389	—		1,461	—	237	—	459		—	—	—	—
Total revenue	496	1,474	—		1,897	—	237	—	459		—	—	—	—
Hotel operating expenses:
Rooms	—	—	—		—	—	—	—	—		—	—	—	—
Food and beverage	—	—	—		—	—	—	—	—		—	—	—	—
Other hotel operating expenses	—	—	—		—	—	—	—	—		—	—	—	—
Office rental, parking and other expenses	—	28	—		199	—	—	—	—		—	—	—	—
Other operating expenses:
General and administrative, hotel	—	—	—		—	—	—	—	—		—	—	—	—
General and administrative, corporate	—	—	—		—	—	—	—	—		—	—	—	—
Property operating costs	—	—	—		—	—	—	—	—		—	—	—	—
Depreciation and amortization	141	569	—		431	—	112	—	369		—	—	—	—
Property taxes, insurance and other	75	418	—		658	—	58	—	53		—	—	—	—
Loss on asset impairments	—	—	—		—	—	—	—	—		—	—	—	—
Write-off of deferred financing fees	—	—	—		—	—	—	—	—		—	—	—	—
Operating expenses	216	1,015	—		1,288	—	170	—	422		—	—	—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—		—	—	—	—	—		—	—	—	—
Operating income (loss)	280	459	—		609	—	67	—	37		—	—	—	—
Minority interest income (expense)	—	—	—		—	—	—	—	—		—	—	—	—
Interest expense, net	—	—	—		—	—	—	—	(307	)	—	—	—	—
Loss on early extinguishments of debt	—	—	—		—	—	—	—	—		—	—	—	—
Equity in income from consolidated entities	—	—	—		—	—	—	—	—		—	—	—	—
(Loss) income before income taxes and discontinued operations	280	459	—		609	—	67	—	(270	)	—	—	—	—
Income tax benefit	—	—	—		—	—	—	—	—		—	—	—	—
(Loss) income from continuing operations	280	459	—		609	—	67	—	(270	)	—	—	—	—
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—	—	(284	)	—	47	—	—	—		—	—	—	—
Income tax benefit	—	—	—		—	—	—	—	—		—	—	—	—
(Loss) income from discontinued operations	—	—	(284	)	—	47	—	—	—		—	—	—	—
Net income (loss)	280	459	(284	)	609	47	67	—	(270	)	—	—	—	—

26

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 4F, L.P.	MeriStar Sub 5K, LLC	MeriStar Sub 5M, LLC	MeriStar Sub 1E, LLC	MeriStar Sub 5O, LLC	MeriStar Sub 4B, L.P.		MeriStar Sub 2C, LLC		MeriStar Sub 4G, L.P.	MeriStar Sub 3B, LLC	MeriStar Sub 5G, L.P.
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—		—		—	—	—
Food and beverage	—	—	—	—	—	—		—		—	—	—
Other hotel operations	—	—	—	—	—	—		—		—	—	—
Office rental, parking and other revenue	4	—	—	—	—	—		—		—	—	7
Participating lease revenue	492	—	569	—	261	—		—		—	—	3,062
Total revenue	496	—	569	—	261	—		—		—	—	3,069
Hotel operating expenses:
Rooms	—	—	—	—	—	—		—		—	—	—
Food and beverage	—	—	—	—	—	—		—		—	—	—
Other hotel operating expenses	—	—	—	—	—	—		—		—	—	—
Office rental, parking and other expenses	—	—	—	—	—	—		—		—	—	—
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—		—		—	—	—
General and administrative, corporate	—	—	—	—	—	—		—		—	—	—
Property operating costs	—	—	—	—	—	—		—		—	—	—
Depreciation and amortization	277	—	118	—	57	—		—		—	—	1,572
Property taxes, insurance and other	89	—	71	—	27	—		—		—	—	426
Loss on asset impairments	—	—	—	—	—	—		—		—	—	—
Write-off of deferred financing fees	—	—	—	—	—	—		—		—	—	—
Operating expenses	366	—	189	—	84	—		—		—	—	1,998
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—		—		—	—	—
Operating income (loss)	130	—	380	—	177	—		—		—	—	1,071
Minority interest income (expense)	—	—	—	—	—	—		—		—	—	—
Interest expense, net	—	—	—	—	—	—		—		—	—	—
Loss on early extinguishments of debt	—	—	—	—	—	—		—		—	—	—
Equity in income from consolidated entities	—	—	—	—	—	—		—		—	—	—
(Loss) income before income taxes and discontinued operations	130	—	380	—	177	—		—		—	—	1,071
Income tax benefit	—	—	—	—	—	—		—		—	—	—
(Loss) income from continuing operations	130	—	380	—	177	—		—		—	—	1,071
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—	264	—	—	—	(216	)	(978	)	85	—	—
Income tax benefit	—	—	—	—	—	—		—		—	—	—
(Loss) income from discontinued operations	—	264	—	—	—	(216	)	(978	)	85	—	—
Net income (loss)	130	264	380	—	177	(216	)	(978	)	85	—	1,071

27

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 5N, LLC	MeriStar Sub 5P, LLC	MeriStar Sub 5J, LLC	MeriStar Sub 5Q, LLC	MeriStar Sub 5A, LLC		MeriStar Sub 8D, LLC		MeriStar Sub 4J, LLC	MeriStar Sub 6K, LLC	MeriStar Sub 5E, LLC	MeriStar Sub 6I, LLC
Revenue:
Hotel operations:
Rooms	—	—	—	—	—		—		—	—	—	—
Food and beverage	—	—	—	—	—		—		—	—	—	—
Other hotel operations	—	—	—	—	—		—		—	—	—	—
Office rental, parking and other revenue	—	—	—	—	36		—		32	—	—	—
Participating lease revenue	308	167	2,675	571	1,631		—		654	—	—	—
Total revenue	308	167	2,675	571	1,667		—		686	—	—	—
Hotel operating expenses:
Rooms	—	—	—	—	—		—		—	—	—	—
Food and beverage	—	—	—	—	—		—		—	—	—	—
Other hotel operating expenses	—	—	—	—	—		—		—	—	—	—
Office rental, parking and other expenses	—	—	—	—	—		—		68	—	—	—
Other operating expenses:
General and administrative, hotel	—	—	—	—	—		—		—	—	—	—
General and administrative, corporate	—	—	—	—	—		—		—	—	—	—
Property operating costs	—	—	—	—	—		—		—	—	—	—
Depreciation and amortization	34	1	1,415	140	269		—		315	—	—	—
Property taxes, insurance and other	28	2	375	57	189		—		91	—	—	—
Loss on asset impairments	—	—	—	—	—		—		—	—	—	—
Write-off of deferred financing fees	—	—	—	—	—		—		—	—	—	—
Operating expenses	62	3	1,790	197	458		—		474	—	—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—		—		—	—	—	—
Operating income (loss)	246	164	885	374	1,209		—		212	—	—	—
Minority interest income (expense)	—	—	—	—	—		—		—	—	—	—
Interest expense, net	—	—	—	—	(708	)	—		—	—	—	—
Loss on early extinguishments of debt	—	—	—	—	—		—		—	—	—	—
Equity in income from consolidated entities	—	—	—	—	—		—		—	—	—	—
(Loss) income before income taxes and discontinued operations	246	164	885	374	501		—		212	—	—	—
Income tax benefit	—	—	—	—	—		—		—	—	—	—
(Loss) income from continuing operations	246	164	885	374	501		—		212	—	—	—
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—	—	—	—	—		(857	)	—	—	—	—
Income tax benefit	—	—	—	—	—		—		—	—	—	—
(Loss) income from discontinued operations	—	—	—	—	—		(857	)	—	—	—	—
Net income (loss)	246	164	885	374	501		(857	)	212	—	—	—

28

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Operations

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 5I, LLC	CapStar Cherry Hill Company, LLC	Meristar Acquisition Company, LLC	MeriStar Sub 6A, LLC	MeriStar Sub 6F, LLC	MeriStar Hotel Lessee, Inc.		Guarantor Subsidiaries Total		Eliminations		Total Consolidated
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	129,992		129,992		—		$	129,992
Food and beverage	—	—	—	—	—	49,110		49,110		—			49,110
Other hotel operations	—	—	—	—	—	15,340		15,340		—			15,340
Office rental, parking and other revenue	—	—	—	—	—	70		730		—			1,368
Participating lease revenue	—	—	—	—	—	—		24,440		(58,422	)		—
Total revenue	—	—	—	—	—	194,512		219,612		(58,422	)		195,810
Hotel operating expenses:
Rooms	—	—	—	—	—	31,686		31,686		—			31,686
Food and beverage	—	—	—	—	—	36,907		36,907		—			36,907
Other hotel operating expenses	—	—	—	—	—	9,475		9,475		—			9,475
Office rental, parking and other expenses	—	—	—	—	—	—		295		—			585
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	32,230		32,264		—			32,264
General and administrative, corporate	—	—	—	—	—	51		51		—			3,882
Property operating costs	—	—	—	—	—	29,735		29,735		—			29,735
Depreciation and amortization	—	—	—	—	—	39		9,153		—			24,203
Property taxes, insurance and other	—	—	—	—	—	64,766		69,021		(58,422	)		16,334
Loss on asset impairments	—	—	—	—	—	—		184		—			184
Write-off of deferred financing fees	—	—	—	—	—	—		—		—			856
Operating expenses	—	—	—	—	—	204,889		218,771		(58,422	)		186,111
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—		—		—			1,600
Operating income (loss)	—	—	—	—	—	(10,377	)	841		—			11,299
Minority interest income (expense)	—	—	—	—	—	—		—		—			4
Interest expense, net	—	—	—	—	—	(1,642	)	(2,657	)	—			(34,502	)
Loss on early extinguishments of debt	—	—	—	—	—	—		—		—			(5,923	)
Equity in income from consolidated entities	—	—	—	—	—	—		—		6,866			—
(Loss) income before income taxes and discontinued operations	—	—	—	—	—	(12,019	)	(1,816	)	6,866			(29,122	)
Income tax benefit	—	—	—	—	—	—		—		—			390
(Loss) income from continuing operations	—	—	—	—	—	(12,019	)	(1,816	)	6,866			(28,732	)
Discontinued operations:
(Loss) income from discontinued operations before income taxes	—	—	—	—	—	(11,634	)	(12,641	)	—			(12,220	)
Income tax benefit	—	—	—	—	—	—		—		—			65
(Loss) income from discontinued operations	—	—	—	—	—	(11,634	)	(12,641	)	—			(12,155	)
Net income (loss)	—	—	—	—	—	(23,653	)	(14,457	)	6,866		$	(40,887	)

29

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Hospitality OP, L.P.			Non- Guarantor Subsidiaries		MeriStar Lexington Mortgage, LLC		MeriStar Lexington Partners, LLC		MeriStar Sub 7C, LLC	MeriStar Sub 8G, LLC	AGH UPREIT LLC	MeriStar Sub 6H, L.P.		MeriStar Sub 8F, L.P.		MeriStar Sub 8B, LLC
Operating activities:
Net income (loss)	$	(13,749	)	9,694		1,408		(1,341	)	—	—	—	111		301		1,052
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		2,012		13,257		—		(29	)	—	—	—	157		165		623
Loss on early extinguishments of debt		60		—		—		—		—	—	—	—		—		—
Minority interests		5		—		—		—		—	—	—	—		—		—
Equity in loss (income) of unconsolidated affiliates		(7,822	)	—		—		1,370		—	—	—	—		—		—
Amortization of unearned stock-based compensation		277		—		—		—		—	—	—	—		—		—
Changes in operating assets and liabilities:
Accounts receivable		11,752		280		—		—		—	—	—	—		—		(63	)
Prepaid expenses and other assets		25		844		10		(96	)	—	—	—	3		13		15
Receivables from unconsolidated affiliates		13,933		—		1,229		(2,158	)	—	—	—	—		—		—
Due from/to Interstate Hotels & Resorts		461		—		—		—		—	—	—	—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities		(7,005	)	(1,434	)	—		—		—	—	—	22		(1	)	5
Due from/to subsidiaries		202,954		5,866		(1,624	)	913		—	—	—	(292	)	(360	)	3,675
Net cash provided by (used in) operating activities		202,903		28,507		1,023		(1,341	)	—	—	—	1		118		5,307
Investing activities:
Capital expenditures for property and equipment		(1,472	)	(27,830	)	(929	)	1,341		—	—	—	(1	)	(118	)	(5,307	)
Proceeds from sales of assets		—		—		—		—		—	—	—	—		—		—
(Increase) decrease in restricted cash		(2,172	)	(132	)	—		—		—	—	—	—		—		—
Net cash (used in) provided by investing activities		(3,644	)	(27,962	)	(929	)	1,341		—	—	—	(1	)	(118	)	(5,307	)
Financing activities:
Prepayments on long-term debt		(1,531	)	—		—		—		—	—	—	—		—		—
Scheduled payments on long-term debt		(2,003	)	(545	)	—		—		—	—	—	—		—		—
Proceeds from incurrence of mortgage loan, net of financing costs		(41	)	—		(94	)	—		—	—	—	—		—		—
Loans to/from subsidiaries		(211,456	)	—		—		—		—	—	—	—		—		—
Repurchase of limited partnership units		(507	)	—		—		—		—	—	—	—		—		—
Other		26		—		—		—		—	—	—	—		—		—
Net cash provided by (used in) financing activities		(215,512	)	(545	)	(94	)	—		—	—	—	—		—		—
Net (decrease) increase in cash and cash equivalents		(16,253	)	—		—		—		—	—	—	—		—		—
Cash and cash equivalents, beginning of period		41,224		—		—		—		—	—	—	—		—		—
Cash and cash equivalents, end of period	$	24,971		—		—		—		—	—	—	—		—		—

30

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 1C, LLC		MeriStar Sub 8E, LLC		MeriStar Sub 7F, LLC		MeriStar Sub 5L, LLC		MeriStar Sub 3C, LLC		MeriStar Sub 5R, LLC	MeriStar Sub 8A, LLC	MeriStar Sub 6D, LLC		MeriStar Sub 6E, LLC		MeriStar Sub 4E, L.P.
Operating activities:
Net income (loss)	(149	)	216		76		219		491		—	—	450		826		—
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	353		136		134		40		156		—	—	106		380		—
Loss on early extinguishments of debt	—		—		—		—		—		—	—	—		—		—
Minority interests	—		—		—		—		—		—	—	—		—		—
Equity in loss (income) of unconsolidated affiliates	—		—		—		—		—		—	—	—		—		—
Amortization of unearned stock-based compensation	—		—		—		—		—		—	—	—		—		—
Changes in operating assets and liabilities:
Accounts receivable	—		—		—		—		—		—	—	12		(3	)	64
Prepaid expenses and other assets	38		4		2		12		6		—	—	3		(787	)	—
Receivables from unconsolidated affiliates	—		—		—		—		—		—	—	—		—		—
Due from/to Interstate Hotels & Resorts	—		—		—		—		—		—	—	—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	45		(32	)	31		22		99		—	—	(39	)	141		(5	)
Due from/to subsidiaries	(133	)	(278	)	(525	)	(104	)	(722	)	—	—	(472	)	(32,578	)	(59	)
Net cash provided by (used in) operating activities	154		46		(282	)	189		30		—	—	60		(32,021	)	—
Investing activities:
Capital expenditures for property and equipment	(154	)	(46	)	282		(189	)	(30	)	—	—	(60	)	(1,828	)	—
Proceeds from sales of assets	—		—		—		—		—		—	—	—		—		—
(Increase) decrease in restricted cash	—		—		—		—		—		—	—	—		(3,000	)	—
Net cash (used in) provided by investing activities	(154	)	(46	)	282		(189	)	(30	)	—	—	(60	)	(4,828	)	—
Financing activities:
Prepayments on long-term debt	—		—		—		—		—		—	—	—		—		—
Scheduled payments on long-term debt	—		—		—		—		—		—	—	—		—		—
Proceeds from incurrence of mortgage loan, net of financing costs	—		—		—		—		—		—	—	—		36,849		—
Loans to/from subsidiaries	—		—		—		—		—		—	—	—		—		—
Repurchase of limited partnership units	—		—		—		—		—		—	—	—		—		—
Other	—		—		—		—		—		—	—	—		—		—
Net cash provided by (used in) financing activities	—		—		—		—		—		—	—	—		36,849		—
Net (decrease) increase in cash and cash equivalents	—		—		—		—		—		—	—	—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—	—	—		—		—
Cash and cash equivalents, end of period	—		—		—		—		—		—	—	—		—		—

31

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 1B, LLC		MeriStar Sub 5F, L.P.		MeriStar Sub 6G, LLC		MeriStar Sub 8C, LLC	MeriStar Sub 4C, L.P.	MeriStar Sub 4H, L.P.	MeriStar Sub 7E, LLC		MeriStar Sub 3D, LLC		MeriStar Sub 1A, LLC		MeriStar Sub 7A Joint Venture
Operating activities:
Net income (loss)	351		667		711		—	—	—	141		220		230		—
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	126		154		167		—	—	—	165		162		73		—
Loss on early extinguishments of debt	—		—		—		—	—	—	—		—		—		—
Minority interests	—		—		—		—	—	—	—		—		—		—
Equity in loss (income) of unconsolidated affiliates	—		—		—		—	—	—	—		—		—		—
Amortization of unearned stock-based compensation	—		—		—		—	—	—	—		—		—		—
Changes in operating assets and liabilities:
Accounts receivable	—		—		—		—	—	—	—		—		—		—
Prepaid expenses and other assets	12		27		5		—	—	—	3		7		23		—
Receivables from unconsolidated affiliates	—		—		—		—	—	—	—		—		—		—
Due from/to Interstate Hotels & Resorts	—		—		—		—	—	—	—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	37		65		(56	)	—	—	—	(10	)	30		21		—
Due from/to subsidiaries	97		3,651		(600	)	—	—	—	(169	)	31		(325	)	—
Net cash provided by (used in) operating activities	623		4,564		227		—	—	—	130		450		22		—
Investing activities:
Capital expenditures for property and equipment	(618	)	(4,564	)	(227	)	—	—	—	(130	)	(450	)	(22	)	—
Proceeds from sales of assets	—		—		—		—	—	—	—		—		—		—
(Increase) decrease in restricted cash	—		—		—		—	—	—	—		—		—		—
Net cash (used in) provided by investing activities	(618	)	(4,564	)	(227	)	—	—	—	(130	)	(450	)	(22	)	—
Financing activities:
Prepayments on long-term debt	—		—		—		—	—	—	—		—		—		—
Scheduled payments on long-term debt	(5	)	—		—		—	—	—	—		—		—		—
Proceeds from incurrence of mortgage loan, net of financing costs	—		—		—		—	—	—	—		—		—		—
Loans to/from subsidiaries	—		—		—		—	—	—	—		—		—		—
Repurchase of limited partnership units	—		—		—		—	—	—	—		—		—		—
Other	—		—		—		—	—	—	—		—		—		—
Net cash provided by (used in) financing activities	(5	)	—		—		—	—	—	—		—		—		—
Net (decrease) increase in cash and cash equivalents	—		—		—		—	—	—	—		—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—	—	—	—		—		—		—
Cash and cash equivalents, end of period	—		—		—		—	—	—	—		—		—		—

32

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 2B, LLC	MeriStar Sub 3A, LLC	MeriStar Sub 4A, LP	MeriStar Sub 4D, LLC	MeriStar Sub 2A, LLC	MeriStar Sub 6L, LLC	MDV Limited Partnership		MeriStar Sub 5C, LLC	MeriStar Sub 6J, LLC		MeriStar Sub 1D, LLC
Operating activities:
Net income (loss)	—	—	—	—	—	—	54		—	553		578
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	—	—	—	—	—	—	49		—	139		584
Loss on early extinguishments of debt	—	—	—	—	—	—	—		—	—		—
Minority interests	—	—	—	—	—	—	—		—	—		—
Equity in loss (income) of unconsolidated affiliates	—	—	—	—	—	—	—		—	—		—
Amortization of unearned stock-based compensation	—	—	—	—	—	—	—		—	—		—
Changes in operating assets and liabilities:
Accounts receivable	—	—	—	—	—	—	—		—	—		—
Prepaid expenses and other assets	—	—	—	—	—	—	5		—	7		79
Receivables from unconsolidated affiliates	—	—	—	—	—	—	—		—	—		—
Due from/to Interstate Hotels & Resorts	—	—	—	—	—	—	—		—	—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	—	—	—	—	—	—	(35	)	—	(38	)	246
Due from/to subsidiaries	—	—	—	—	—	—	(47	)	—	(524	)	(574	)
Net cash provided by (used in) operating activities	—	—	—	—	—	—	26		—	137		913
Investing activities:
Capital expenditures for property and equipment	—	—	—	—	—	—	(26	)	—	(137	)	(913	)
Proceeds from sales of assets	—	—	—	—	—	—	—		—	—		—
(Increase) decrease in restricted cash	—	—	—	—	—	—	—		—	—		—
Net cash (used in) provided by investing activities	—	—	—	—	—	—	(26	)	—	(137	)	(913	)
Financing activities:
Prepayments on long-term debt	—	—	—	—	—	—	—		—	—		—
Scheduled payments on long-term debt	—	—	—	—	—	—	—		—	—		—
Proceeds from incurrence of mortgage loan, net of financing costs	—	—	—	—	—	—	—		—	—		—
Loans to/from subsidiaries	—	—	—	—	—	—	—		—	—		—
Repurchase of limited partnership units	—	—	—	—	—	—	—		—	—		—
Other	—	—	—	—	—	—	—		—	—		—
Net cash provided by (used in) financing activities	—	—	—	—	—	—	—		—	—		—
Net (decrease) increase in cash and cash equivalents	—	—	—	—	—	—	—		—	—		—
Cash and cash equivalents, beginning of period	—	—	—	—	—	—	—		—	—		—
Cash and cash equivalents, end of period	—	—	—	—	—	—	—		—	—		—

33

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 7B, L.P.	MeriStar Sub 7D, LLC		MeriStar Sub 7G, LLC	MeriStar Sub 6B, LLC		MeriStar Sub 4I, L.P.	MeriStar Sub 5D, LLC		MeriStar Sub 5H, LLC	MeriStar Sub 7H, LLC	AGH PSS I, Inc.	MeriStar Sub 2D, LLC
Operating activities:
Net income (loss)	—	880		—	117		—	(397	)	—	—	—	—
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	—	358		—	113		—	343		—	—	—	—
Loss on early extinguishments of debt	—	—		—	—		—	—		—	—	—	—
Minority interests	—	—		—	—		—	—		—	—	—	—
Equity in loss (income) of unconsolidated affiliates	—	—		—	—		—	—		—	—	—	—
Amortization of unearned stock-based compensation	—	—		—	—		—	—		—	—	—	—
Changes in operating assets and liabilities:
Accounts receivable	—	(300	)	—	(22	)	—	—		—	—	—	—
Prepaid expenses and other assets	—	36		—	2		—	14		—	—	—	—
Receivables from unconsolidated affiliates	—	—		—	—		—	—		—	—	—	—
Due from/to Interstate Hotels & Resorts	—	—		—	—		—	—		—	—	—	—
Accounts payable, accrued expenses, accrued interest and other liabilities	—	(500	)	—	58		—	69		—	—	—	—
Due from/to subsidiaries	—	(259	)	—	(169	)	—	(1	)	—	—	—	—
Net cash provided by (used in) operating activities	—	215		—	99		—	28		—	—	—	—
Investing activities:
Capital expenditures for property and equipment	—	(215	)	—	(99	)	—	(28	)	—	—	—	—
Proceeds from sales of assets	—	—		—	—		—	—		—	—	—	—
(Increase) decrease in restricted cash	—	—		—	—		—	—		—	—	—	—
Net cash (used in) provided by investing activities	—	(215	)	—	(99	)	—	(28	)	—	—	—	—
Financing activities:
Prepayments on long-term debt	—	—		—	—		—	—		—	—	—	—
Scheduled payments on long-term debt	—	—		—	—		—	—		—	—	—	—
Proceeds from incurrence of mortgage loan, net of financing costs	—	—		—	—		—	—		—	—	—	—
Loans to/from subsidiaries	—	—		—	—		—	—		—	—	—	—
Repurchase of limited partnership units	—	—		—	—		—	—		—	—	—	—
Other	—	—		—	—		—	—		—	—	—	—
Net cash provided by (used in) financing activities	—	—		—	—		—	—		—	—	—	—
Net (decrease) increase in cash and cash equivalents	—	—		—	—		—	—		—	—	—	—
Cash and cash equivalents, beginning of period	—	—		—	—		—	—		—	—	—	—
Cash and cash equivalents, end of period	—	—		—	—		—	—		—	—	—	—

34

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 4F, L.P.		MeriStar Sub 5K, LLC	MeriStar Sub 5M, LLC		MeriStar Sub 1E, LLC	MeriStar Sub 5O, LLC		MeriStar Sub 4B, L.P.	MeriStar Sub 2C, LLC	MeriStar Sub 4G, L.P.	MeriStar Sub 3B, LLC	MeriStar Sub 5G, L.P.
Operating activities:
Net income (loss)	131		—	319		—	(35	)	—	—	—	—	2,103
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	283		—	67		—	35		—	—	—	—	1,551
Loss on early extinguishments of debt	—		—	—		—	—		—	—	—	—	—
Minority interests	—		—	—		—	—		—	—	—	—	—
Equity in loss (income) of unconsolidated affiliates	—		—	—		—	—		—	—	—	—	—
Amortization of unearned stock-based compensation	—		—	—		—	—		—	—	—	—	—
Changes in operating assets and liabilities:
Accounts receivable	—		—	—		—	—		—	—	—	—	—
Prepaid expenses and other assets	6		—	17		—	6		—	—	—	—	96
Receivables from unconsolidated affiliates	—		—	—		—	—		—	—	—	—	—
Due from/to Interstate Hotels & Resorts	—		—	—		—	—		—	—	—	—	—
Accounts payable, accrued expenses, accrued interest and other liabilities	(250	)	—	51		—	19		—	—	—	—	289
Due from/to subsidiaries	429		—	291		—	554		—	—	—	—	(1,548	)
Net cash provided by (used in) operating activities	599		—	745		—	579		—	—	—	—	2,491
Investing activities:
Capital expenditures for property and equipment	(599	)	—	(745	)	—	(579	)	—	—	—	—	(2,491	)
Proceeds from sales of assets	—		—	—		—	—		—	—	—	—	—
(Increase) decrease in restricted cash	—		—	—		—	—		—	—	—	—	—
Net cash (used in) provided by investing activities	(599	)	—	(745	)	—	(579	)	—	—	—	—	(2,491	)
Financing activities:
Prepayments on long-term debt	—		—	—		—	—		—	—	—	—	—
Scheduled payments on long-term debt	—		—	—		—	—		—	—	—	—	—
Proceeds from incurrence of mortgage loan, net of financing costs	—		—	—		—	—		—	—	—	—	—
Loans to/from subsidiaries	—		—	—		—	—		—	—	—	—	—
Repurchase of limited partnership units	—		—	—		—	—		—	—	—	—	—
Other	—		—	—		—	—		—	—	—	—	—
Net cash provided by (used in) financing activities	—		—	—		—	—		—	—	—	—	—
Net (decrease) increase in cash and cash equivalents	—		—	—		—	—		—	—	—	—	—
Cash and cash equivalents, beginning of period	—		—	—		—	—		—	—	—	—	—
Cash and cash equivalents, end of period	—		—	—		—	—		—	—	—	—	—

35

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 5N, LLC		MeriStar Sub 5P, LLC		MeriStar Sub 5J, LLC		MeriStar Sub 5Q, LLC		MeriStar Sub 5A, LLC		MeriStar Sub 8D, LLC		MeriStar Sub 4J, LLC		MeriStar Pentagon City, LLC		MeriStar Sub 6K, LLC	MeriStar Sub 5E, LLC
Operating activities:
Net income (loss)	(19	)	83		(592	)	311		524		—		96		174		—	—
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	19		1		911		123		270		—		318		1,323		—	—
Loss on early extinguishments of debt	—		—		—		—		—		—		—		—		—	—
Minority interests	—		—		—		—		—		—		—		—		—	—
Equity in loss (income) of unconsolidated affiliates	—		—		—		—		—		—		—		—		—	—
Amortization of unearned stock-based compensation	—		—		—		—		—		—		—		—		—	—
Changes in operating assets and liabilities:
Accounts receivable	—		—		(2	)	—		—		359		—		547		—	—
Prepaid expenses and other assets	7		1		122		19		12		—		7		43		—	—
Receivables from unconsolidated affiliates	—		—		—		—		—		—		—		—		—	—
Due from/to Interstate Hotels & Resorts	—		—		—		—		—		—		—		—		—	—
Accounts payable, accrued expenses, accrued interest and other liabilities	18		—		236		30		169		—		(55	)	271		—	—
Due from/to subsidiaries	293		(85	)	3,362		668		(505	)	(359	)	409		(1,885	)	—	—
Net cash provided by (used in) operating activities	318		—		4,037		1,151		470		—		775		473		—	—
Investing activities:
Capital expenditures for property and equipment	(318	)	—		(4,037	)	(1,151	)	(470	)	—		(775	)	(295	)	—	—
Proceeds from sales of assets	—		—		—		—		—		—		—		—		—	—
(Increase) decrease in restricted cash	—		—		—		—		—		—		—		—		—	—
Net cash (used in) provided by investing activities	(318	)	—		(4,037	)	(1,151	)	(470	)	—		(775	)	(295	)	—	—
Financing activities:
Prepayments on long-term debt	—		—		—		—		—		—		—		—		—	—
Scheduled payments on long-term debt	—		—		—		—		—		—		—		(178	)	—	—
Proceeds from incurrence of mortgage loan, net of financing costs	—		—		—		—		—		—		—		—		—	—
Loans to/from subsidiaries	—		—		—		—		—		—		—		—		—	—
Repurchase of limited partnership units	—		—		—		—		—		—		—		—		—	—
Other	—		—		—		—		—		—		—		—		—	—
Net cash provided by (used in) financing activities	—		—		—		—		—		—		—		(178	)	—	—
Net (decrease) increase in cash and cash equivalents	—		—		—		—		—		—		—		—		—	—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—		—		—		—	—
Cash and cash equivalents, end of period	—		—		—		—		—		—		—		—		—	—

36

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2005

(Dollars in thousands)

	MeriStar Sub 6I, LLC	MeriStar Sub 5I, LLC	CapStar Cherry Hill Company, LLC	MeriStar Acquisition Company, LLC	MeriStar Sub 6A, LLC	MeriStar Sub 6F, LLC	MeriStar Hotel Lessee, Inc.		Guarantor Eliminations		Guarantor Subsidiaries Total		Consolidation Eliminations		Total Consolidated
Operating activities:
Net income (loss)	—	—	—	—	—	—	(11,324	)	(1,408	)	(1,872	)	(7,822	)	$	(13,749	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	—	—	—	—	—	—	—		—		9,555		—			24,824
Loss on early extinguishments of debt	—	—	—	—	—	—	—		—		—		—			60
Minority interests	—	—	—	—	—	—	—		—		—		—			5
Equity in loss (income) of unconsolidated affiliates	—	—	—	—	—	—	—		—		1,370		7,822			1,370
Amortization of unearned stock-based compensation	—	—	—	—	—	—	—		—		—		—			277
Changes in operating assets and liabilities:
Accounts receivable	—	—	—	—	—	—	(8,261	)	—		(7,669	)	3,270			7,633
Prepaid expenses and other assets	—	—	—	—	—	—	(750	)	(10	)	(981	)	—			(112	)
Receivables from unconsolidated affiliates	—	—	—	—	—	—	1,229		(1,229	)	(929	)	—			13,004
Due from/to Interstate Hotels & Resorts	—	—	—	—	—	—	(4,215	)	—		(4,215	)	—			(3,754	)
Accounts payable, accrued expenses, accrued interest and other liabilities	—	—	—	—	—	—	2,732		—		3,685		(3,270	)		(8,024	)
Due from/to subsidiaries	—	—	—	—	—	—	(180,714	)	1,718		(208,820	)	—			—
Net cash provided by (used in) operating activities	—	—	—	—	—	—	(201,303	)	(929	)	(209,876	)	—			21,534
Investing activities:
Capital expenditures for property and equipment	—	—	—	—	—	—	(1,341	)	929		(26,340	)	—			(55,642	)
Proceeds from sales of assets	—	—	—	—	—	—	—		—		—		—			—
(Increase) decrease in restricted cash	—	—	—	—	—	—	771		—		(2,229	)	—			(4,533	)
Net cash (used in) provided by investing activities	—	—	—	—	—	—	(570	)	929		(28,569	)	—			(60,175	)
Financing activities:
Prepayments on long-term debt	—	—	—	—	—	—	—		—		—		—			(1,531	)
Scheduled payments on long-term debt	—	—	—	—	—	—	—		—		(183	)	—			(2,731	)
Proceeds from incurrence of mortgage loan, net of financing costs	—	—	—	—	—	—	—		—		36,755		—			36,714
Loans to/from subsidiaries	—	—	—	—	—	—	211,456		—		211,456		—			—
Repurchase of limited partnership units	—	—	—	—	—	—	—		—		—		—			(507	)
Other	—	—	—	—	—	—	—		—		—		—			26
Net cash provided by (used in) financing activities	—	—	—	—	—	—	211,456		—		248,028		—			31,971
Net (decrease) increase in cash and cash equivalents	—	—	—	—	—	—	9,583		—		9,583		—			(6,670	)
Cash and cash equivalents, beginning of period	—	—	—	—	—	—	19,309		—		19,309		—			60,533
Cash and cash equivalents, end of period	—	—	—	—	—	—	28,892		—		28,892		—		$	53,863

37

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Hospitality OP, L.P.			Non- Guarantor Subsidiaries		MeriStar Sub 7C, LLC	MeriStar Sub 8G, LLC	AGH UPREIT LLC	MeriStar Sub 6H, L.P.		MeriStar Sub 8F, L.P.		MeriStar Sub 8B, LLC		MeriStar Sub 1C, LLC		MeriStar Sub 8E, LLC
Operating activities:
Net income (loss)	$	(40,887	)	7,591		—	—	—	121		314		963		(144	)	169
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		3,377		13,358		—	—	—	157		164		595		356		149
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	)	—		—	—	—	—		—		—		—		—
Equity in loss of unconsolidated affiliates		6,866		—		—	—	—	—		—		—		—		—
Amortization of unearned stock-based compensation		587		—		—	—	—	—		—		—		—		—
Deferred income taxes		(358	)	—		—	—	—	—		—		—		—		—
Changes in operating assets and liabilities:
Accounts receivable		26		151		—	—	—	—		—		—		—		—
Prepaid expenses and other assets		1,187		1,972		—	—	—	4		16		19		19		5
Receivables from unconsolidated affiliates		(1,600	)	—		—	—	—	—		—		—		—		—
Due from/to Interstate Hotels & Resorts		5,866		—		—	—	—	—		—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities		(8,972	)	(3,129	)	—	—	—	(139	)	(66	)	59		37		(11	)
Due from/to subsidiaries		86,165		(36,539	)	—	—	—	(143	)	(428	)	954		(111	)	(256	)
Net cash provided by (used in) operating activities		58,108		(14,104	)	—	—	—	—		—		2,590		157		56
Investing activities:
Capital expenditures for property and equipment		(3,321	)	(9,189	)	—	—	—	—		—		(2,590	)	(157	)	(56	)
Proceeds from sales of assets		—		26,475		—	—	—	—		—		—		—		—
(Increase) decrease in restricted cash		(1,127	)	282		—	—	—	—		—		—		—		—
Costs associated with disposition program and other, net		84		(1,157	)	—	—	—	—		—		—		—		—
Net cash (used in) provided by investing activities		(4,364	)	16,411		—	—	—	—		—		(2,590	)	(157	)	(56	)
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 and cash equivalents		(150	)	—		—	—	—	—		—		—		—		—
Net decrease in cash and cash equivalents		(49,614	)	—		—	—	—	—		—		—		—		—
Cash and cash equivalents, beginning of period		218,646		—		—	—	—	—		—		—		—		—
Cash and cash equivalents, end of period	$	169,032		—		—	—	—	—		—		—		—		—

38

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 7F, LLC		MeriStar Sub 5L, LLC		MeriStar Sub 3C, LLC		MeriStar Sub 5R, LLC	MeriStar Sub 8A, LLC	MeriStar Sub 6D, LLC		MeriStar Sub 6E, LLC		MeriStar Sub 4E, L.P.		MeriStar Sub 1B, LLC		MeriStar Sub 5F, L.P.
Operating activities:
Net income (loss)	119		299		297		—	—	266		850		165		429		398
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	97		38		178		—	—	137		410		76		128		196
Loss on asset impairments	—		—		—		—	—	—		—		—		—		—
Loss on sale of assets, before tax effect	—		—		—		—	—	—		—		—		—		—
Loss on early extinguishments of debt	—		—		—		—	—	—		—		—		—		—
Minority interests	—		—		—		—	—	—		—		—		—		—
Equity in loss of unconsolidated affiliates	—		—		—		—	—	—		—		—		—		—
Amortization of unearned stock-based compensation	—		—		—		—	—	—		—		—		—		—
Deferred income taxes	—		—		—		—	—	—		—		—		—		—
Changes in operating assets and liabilities:
Accounts receivable	—		—		—		—	—	(7	)	—		—		—		—
Prepaid expenses and other assets	3		17		5		—	—	4		16		10		16		36
Receivables from unconsolidated affiliates	—		—		—		—	—	—		—		—		—		—
Due from/to Interstate Hotels & Resorts	—		—		—		—	—	—		—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	(24	)	38		175		—	—	(38	)	328		(255	)	(15	)	(39	)
Due from/to subsidiaries	(186	)	(357	)	(648	)	—	—	(312	)	(1,026	)	13		(311	)	(442	)
Net cash provided by (used in) operating activities	9		35		7		—	—	50		578		9		247		149
Investing activities:
Capital expenditures for property and equipment	(9	)	(35	)	(7	)	—	—	(50	)	(578	)	(9	)	(247	)	(149	)
Proceeds from sales of assets	—		—		—		—	—	—		—		—		—		—
(Increase) decrease in restricted cash	—		—		—		—	—	—		—		—		—		—
Costs associated with disposition program and other, net	—		—		—		—	—	—		—		—		—		—
Net cash (used in) provided by investing activities	(9	)	(35	)	(7	)	—	—	(50	)	(578	)	(9	)	(247	)	(149	)
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 and cash equivalents	—		—		—		—	—	—		—		—		—		—
Net decrease in cash and cash equivalents	—		—		—		—	—	—		—		—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—	—	—		—		—		—		—
Cash and cash equivalents, end of period	—		—		—		—	—	—		—		—		—		—

39

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 6G, LLC		MeriStar Sub 8C, LLC		MeriStar Sub 4C, L.P.	MeriStar Sub 4H, L.P.		MeriStar Sub 7E, LLC		MeriStar Sub 3D, LLC		MeriStar Sub 1A, LLC		MeriStar Sub 7A Joint Venture		MeriStar Sub 2B, LLC		MeriStar Sub 3A, LLC
Operating activities:
Net income (loss)	515		(203	)	—	(403	)	142		119		(17	)	(664	)	—		89
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	209		—		—	43		152		192		113		61		—		51
Loss on asset impairments	—		—		—	—		—		—		184		809		—		—
Loss on sale of assets, before tax effect	—		253		—	365		—		—		—		—		—		(20	)
Loss on early extinguishments of debt	—		—		—	—		—		—		—		—		—		—
Minority interests	—		—		—	—		—		—		—		—		—		—
Equity in loss of unconsolidated affiliates	—		—		—	—		—		—		—		—		—		—
Amortization of unearned stock-based compensation	—		—		—	—		—		—		—		—		—		—
Deferred income taxes	—		—		—	—		—		—		—		—		—		—
Changes in operating assets and liabilities:
Accounts receivable	—		—		—	—		—		—		—		—		2,345		—
Prepaid expenses and other assets	6		117		—	(8	)	4		8		26		7		—		1
Receivables from unconsolidated affiliates	—		—		—	—		—		—		—		—		—		—
Due from/to Interstate Hotels & Resorts	—		—		—	—		—		—		—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	97		306		—	(178	)	(13	)	3		59		(20	)	—		(161	)
Due from/to subsidiaries	(742	)	(5,787	)	—	(4,192	)	158		(298	)	(361	)	(185	)	(2,345	)	(2,936	)
Net cash provided by (used in) operating activities	85		(5,314	)	—	(4,373	)	443		24		4		8		—		(2,976	)
Investing activities:
Capital expenditures for property and equipment	(85	)	569		—	(86	)	(443	)	(24	)	(4	)	(8	)	—		(83	)
Proceeds from sales of assets	—		5,000		—	4,650		—		—		—		—		—		3,300
(Increase) decrease in restricted cash	—		—		—	—		—		—		—		—		—		—
Costs associated with disposition program and other, net	—		(255	)	—	(191	)	—		—		—		—		—		(241	)
Net cash (used in) provided by investing activities	(85	)	5,314		—	4,373		(443	)	(24	)	(4	)	(8	)	—		2,976
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 and cash equivalents	—		—		—	—		—		—		—		—		—		—
Net decrease in cash and cash equivalents	—		—		—	—		—		—		—		—		—		—
Cash and cash equivalents, beginning of period	—		—		—	—		—		—		—		—		—		—
Cash and cash equivalents, end of period	—		—		—	—		—		—		—		—		—		—

40

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 4A, LP		MeriStar Sub 4D, LLC		MeriStar Sub 2A, LLC		MeriStar Sub 6L, LLC		MDV Limited Partnership		MeriStar Sub 5C, LLC		MeriStar Sub 6J, LLC		MeriStar Sub 1D, LLC		MeriStar Sub 7B, L.P.		MeriStar Sub 7D, LLC
Operating activities:
Net income (loss)	96		—		—		1,852		78		—		280		459		(284	)	609
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	—		—		—		—		23		—		141		569		98		431
Loss on asset impairments	—		—		—		—		—		—		—		—		—		—
Loss on sale of assets, before tax effect	46		—		—		(1,827	)	—		—		—		—		425		—
Loss on early extinguishments of debt	—		—		—		—		—		—		—		—		—		—
Minority interests	—		—		—		—		—		—		—		—		—		—
Equity in loss of unconsolidated affiliates	—		—		—		—		—		—		—		—		—		—
Amortization of unearned stock-based compensation	—		—		—		—		—		—		—		—		—		—
Deferred income taxes	—		—		—		—		—		—		—		—		—		—
Changes in operating assets and liabilities:
Accounts receivable	—		—		2,002		(178	)	—		2		—		—		—		(234	)
Prepaid expenses and other assets	(9	)	3		—		14		4		(4	)	4		105		7		17
Receivables from unconsolidated affiliates	—		—		—		—		—		—		—		—		—		—
Due from/to Interstate Hotels & Resorts	—		—		—		—		—		—		—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	(342	)	—		—		(25	)	4		—		228		335		(540	)	(166	)
Due from/to subsidiaries	(2,918	)	(3	)	(2,002	)	(13,823	)	(82	)	2		(560	)	(1,155	)	328		(326	)
Net cash provided by (used in) operating activities	(3,127	)	—		—		(13,987	)	27		—		93		313		34		331
Investing activities:
Capital expenditures for property and equipment	(194	)	—		—		(319	)	(27	)	—		(93	)	(313	)	(34	)	(331	)
Proceeds from sales of assets	3,575		—		—		14,775		—		—		—		—		—		—
(Increase) decrease in restricted cash	—		—		—		—		—		—		—		—		—		—
Costs associated with disposition program and other, net	(254	)	—		—		(469	)	—		—		—		—		—		—
Net cash (used in) provided by investing activities	3,127		—		—		13,987		(27	)	—		(93	)	(313	)	(34	)	(331	)
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 and cash equivalents	—		—		—		—		—		—		—		—		—		—
Net decrease in cash and cash equivalents	—		—		—		—		—		—		—		—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—		—		—		—		—
Cash and cash equivalents, end of period	—		—		—		—		—		—		—		—		—		—

41

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 7G, LLC		MeriStar Sub 6B, LLC		MeriStar Sub 4I, L.P.		MeriStar Sub 5D, LLC		MeriStar Sub 5H, LLC		MeriStar Sub 7H, LLC		AGH PSS I, Inc.		MeriStar Sub 2D, LLC		MeriStar Sub 4F, L.P.		MeriStar Sub 5K, LLC
Operating activities:
Net income (loss)	47		67		—		(270	)	—		—		—		—		130		264
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	49		112		—		369		—		—		—		—		277		324
Loss on asset impairments	—		—		—		—		—		—		—		—		—		—
Loss on sale of assets, before tax effect	—		—		—		—		—		—		—		—		—		—
Loss on early extinguishments of debt	—		—		—		—		—		—		—		—		—		—
Minority interests	—		—		—		—		—		—		—		—		—		—
Equity in loss of unconsolidated affiliates	—		—		—		—		—		—		—		—		—		—
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	5		2		—		18		1		—		1		—		7		37
Receivables from unconsolidated affiliates	—		—		—		—		—		—		—		—		—		—
Due from/to Interstate Hotels & Resorts	—		—		—		—		—		—		—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	147		63		61		327		—		—		—		—		(295	)	44
Due from/to subsidiaries	(241	)	(81	)	(61	)	(346	)	(1	)	(43	)	(1	)	(1,166	)	241		(632	)
Net cash provided by (used in) operating activities	7		163		—		98		—		—		—		—		360		37
Investing activities:
Capital expenditures for property and equipment	(7	)	(163	)	—		(98	)	—		—		—		—		(360	)	(37	)
Proceeds from sales of assets	—		—		—		—		—		—		—		—		—		—
(Increase) decrease in restricted cash	—		—		—		—		—		—		—		—		—		—
Costs associated with disposition program and other, net	—		—		—		—		—		—		—		—		—		—
Net cash (used in) provided by investing activities	(7	)	(163	)	—		(98	)	—		—		—		—		(360	)	(37	)
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 and cash equivalents	—		—		—		—		—		—		—		—		—		—
Net decrease in cash and cash equivalents	—		—		—		—		—		—		—		—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—		—		—		—		—
Cash and cash equivalents, end of period	—		—		—		—		—		—		—		—		—		—

42

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 5M, LLC		MeriStar Sub 1E, LLC		MeriStar Sub 5O, LLC		MeriStar Sub 4B, L.P.		MeriStar Sub 2C, LLC		MeriStar Sub 4G, L.P.		MeriStar Sub 3B, LLC		MeriStar Sub 5G, L.P.		MeriStar Sub 5N, LLC		MeriStar Sub 5P, LLC
Operating activities:
Net income (loss)	380		—		177		(216	)	(978	)	85		—		1,071		246		164
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	118		—		57		—		—		112		—		1,572		34		1
Loss on asset impairments	—		—		—		—		903		245		—		—		—		—
Loss on sale of assets, before tax effect	—		—		—		215		—		—		—		—		—		—
Loss on early extinguishments of debt	—		—		—		—		—		—		—		—		—		—
Minority interests	—		—		—		—		—		—		—		—		—		—
Equity in loss of unconsolidated affiliates	—		—		—		—		—		—		—		—		—		—
Amortization of unearned stock-based compensation	—		—		—		—		—		—		—		—		—		—
Deferred income taxes	—		—		—		—		—		—		—		—		—		—
Changes in operating assets and liabilities:
Accounts receivable	—		198		—		—		(7	)	—		—		—		—		—
Prepaid expenses and other assets	21		(1	)	8		(4	)	17		47		—		131		9		2
Receivables from unconsolidated affiliates	—		—		—		—		—		—		—		—		—		—
Due from/to Interstate Hotels & Resorts	—		—		—		—		—		—		—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	49		(14	)	27		(411	)	(119	)	(405	)	22		(761	)	28		—
Due from/to subsidiaries	(548	)	(183	)	(264	)	(6,187	)	251		(83	)	(22	)	567		(300	)	(167	)
Net cash provided by (used in) operating activities	20		—		5		(6,603	)	67		1		—		2,580		17		—
Investing activities:
Capital expenditures for property and equipment	(20	)	—		(5	)	(415	)	(67	)	(1	)	—		(2,580	)	(17	)	—
Proceeds from sales of assets	—		—		—		7,500		—		—		—		—		—		—
(Increase) decrease in restricted cash	—		—		—		—		—		—		—		—		—		—
Costs associated with disposition program and other, net	—		—		—		(482	)	—		—		—		—		—		—
Net cash (used in) provided by investing activities	(20	)	—		(5	)	6,603		(67	)	(1	)	—		(2,580	)	(17	)	—
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 and cash equivalents	—		—		—		—		—		—		—		—		—		—
Net decrease in cash and cash equivalents	—		—		—		—		—		—		—		—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—		—		—		—		—
Cash and cash equivalents, end of period	—		—		—		—		—		—		—		—		—		—

43

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2004

(Dollars in thousands)

	MeriStar Sub 5J, LLC		MeriStar Sub 5Q, LLC		MeriStar Sub 5A, LLC		MeriStar Sub 8D, LLC		MeriStar Sub 4J, LLC		MeriStar Sub 6K, LLC	MeriStar Sub 5E, LLC	MeriStar Sub 6I, LLC	MeriStar Sub 5I, LLC	CapStar Cherry Hill Company, LLC
Operating activities:
Net income (loss)	885		374		501		(857	)	212		—	—	—	—	—
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1,415		140		269		—		315		—	—	—	—	—
Loss on asset impairments	—		—		—		—		—		—	—	—	—	—
Loss on sale of assets, before tax effect	—		—		—		899		—		—	—	—	—	—
Loss on early extinguishments of debt	—		—		—		—		—		—	—	—	—	—
Minority interests	—		—		—		—		—		—	—	—	—	—
Equity in loss of unconsolidated affiliates	—		—		—		—		—		—	—	—	—	—
Amortization of unearned stock-based compensation	—		—		—		—		—		—	—	—	—	—
Deferred income taxes	—		—		—		—		—		—	—	—	—	—
Changes in operating assets and liabilities:
Accounts receivable	—		—		—		(359	)	—		—	—	—	—	—
Prepaid expenses and other assets	169		26		15		14		9		—	—	—	—	—
Receivables from unconsolidated affiliates	—		—		—		—		—		—	—	—	—	—
Due from/to Interstate Hotels & Resorts	—		—		—		—		—		—	—	—	—	—
Accounts payable, accrued expenses, accrued interest and other liabilities	154		28		370		183		12		—	—	—	—	—
Due from/to subsidiaries	(1,505	)	(510	)	(940	)	(7,983	)	(202	)	—	—	—	—	—
Net cash provided by (used in) operating activities	1,118		58		215		(8,103	)	346		—	—	—	—	—
Investing activities:
Capital expenditures for property and equipment	(1,118	)	(58	)	(215	)	(358	)	(346	)	—	—	—	—	—
Proceeds from sales of assets	—		—		—		8,800		—		—	—	—	—	—
(Increase) decrease in restricted cash	—		—		—		—		—		—	—	—	—	—
Costs associated with disposition program and other, net	—		—		—		(339	)	—		—	—	—	—	—
Net cash (used in) provided by investing activities	(1,118	)	(58	)	(215	)	8,103		(346	)	—	—	—	—	—
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 and cash equivalents	—		—		—		—		—		—	—	—	—	—
Net decrease in cash and cash equivalents	—		—		—		—		—		—	—	—	—	—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—	—	—	—	—
Cash and cash equivalents, end of period	—		—		—		—		—		—	—	—	—	—

44

MeriStar Hospitality Operating Partnership, L.P.

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2004

(Dollars in thousands)

	Meristar Acquisition Company, LLC	MeriStar Sub 6A, LLC	MeriStar Sub 6F, LLC	MeriStar Hotel Lessee, Inc.		Guarantor Subsidiaries Total		Eliminations		Total Consolidated
Operating activities:
Net income (loss)	—	—	—	(23,653	)	(14,457	)	6,866		$	(40,887	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	—	—	—	39		9,967		—			26,702
Loss on asset impairments	—	—	—	—		2,141		—			5,011
Loss on sale of assets, before tax effect	—	—	—	7,036		7,392		—			6,946
Loss on early extinguishments of debt	—	—	—	—		—		—			5,923
Minority interests	—	—	—	—		—		—			(4	)
Equity in loss of unconsolidated affiliates	—	—	—	—		—		(6,866	)		—
Amortization of unearned stock-based compensation	—	—	—	—		—		—			587
Deferred income taxes	—	—	—	—		—		—			(358	)
Changes in operating assets and liabilities:
Accounts receivable	—	—	—	(7,915	)	(2,944	)	—			(2,767	)
Prepaid expenses and other assets	—	—	—	755		1,761		—			4,920
Receivables from unconsolidated affiliates	—	—	—	—		—		—			(1,600	)
Due from/to Interstate Hotels & Resorts	—	—	—	(11,327	)	(11,327	)	—			(5,461	)
Accounts payable, accrued expenses, accrued interest and other liabilities	—	—	—	11,306		10,453		—			(1,648	)
Due from/to subsidiaries	—	—	—	11,261		(49,626	)	—			—
Net cash provided by (used in) operating activities	—	—	—	(12,498	)	(46,640	)	—			(2,636	)
Investing activities:
Capital expenditures for property and equipment	—	—	—	—		(11,227	)	—			(23,737	)
Proceeds from sales of assets	—	—	—	—		47,600		—			74,075
(Increase) decrease in restricted cash	—	—	—	(1,288	)	(1,288	)	—			(2,133	)
Costs associated with disposition program and other, net	—	—	—	—		(2,231	)	—			(3,304	)
Net cash (used in) provided by investing activities	—	—	—	(1,288	)	32,854		—			44,901
Financing activities:
Prepayments on long-term debt	—	—	—	—		—		—			(75,497	)
Scheduled payments on long-term debt	—	—	—	—		—		—			(2,307	)
Loans to/from subsidiaries	—	—	—	27,493		27,493		—			—
Distributions to minority investors	—	—	—	—		—		—			(141	)
Other	—	—	—	—		—		—			(77	)
Net cash provided by (used in) financing activities	—	—	—	27,493		27,493		—			(78,022	)
Effect of exchange rate changes on cash and cash equivalents	—	—	—	—		—		—			(150	)
Net decrease in cash and cash equivalents	—	—	—	13,707		13,707		—			(35,907	)
Cash and cash equivalents, beginning of period	—	—	—	12,230		12,230		—			230,876
Cash and cash equivalents, end of period	—	—	—	25,937		25,937		—		$	194,969

45