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 June 30, 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  x    No  ¨

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

The number of shares of the registrant’s common stock outstanding at August 2, 2005 was 87,497,600.

INDEX

		Page
	PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets – June 30, 2005 (Unaudited) and December 31, 2004	2
	Consolidated Statements of Operations – Three and six months ended June 30, 2005 and 2004 (Unaudited)	3
	Consolidated Statements of Cash Flows – Six months ended June 30, 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	18
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	40
ITEM 4.	CONTROLS AND PROCEDURES	41
	PART II. OTHER INFORMATION
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	42
ITEM 6.	EXHIBITS	43
SIGNATURES		44

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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)

	June 30, 2005 (Unaudited)			December 31, 2004
ASSETS
Property and equipment	$	2,655,676		$	2,581,720
Accumulated depreciation		(545,023	)		(506,632	)
		2,110,653			2,075,088
Assets held for sale		5,063			—
Investments in and advances to unconsolidated affiliates		71,066			84,796
Prepaid expenses and other assets		32,918			34,533
Insurance claim receivable		34,458			76,056
Accounts receivable, net of allowance for doubtful accounts of $349 and $691		42,250			32,979
Restricted cash		69,317			58,413
Cash and cash equivalents		90,974			60,540
	$	2,456,699		$	2,422,405
LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-term debt	$	1,625,585		$	1,573,276
Accounts payable and accrued expenses		76,201			75,527
Accrued interest		39,949			41,165
Due to Interstate Hotels & Resorts		14,027			21,799
Other liabilities		13,578			11,553
Total liabilities		1,769,340			1,723,320
Minority interests		13,112			14,053
Stockholders’ equity:
Preferred stock, par value $0.01 per share
Authorized – 100,000 shares
Issued – none		—			—
Common stock, par value $0.01 per share
Authorized – 100,000 shares
Issued – 89,975 and 89,739 shares		900			897
Additional paid-in capital		1,468,162			1,465,658
Accumulated deficit		(750,903	)		(738,393	)
Common stock held in treasury – 2,479 and 2,372 shares		(43,912	)		(43,130	)
Total stockholders’ equity		674,247			685,032
	$	2,456,699		$	2,422,405

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

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MERISTAR HOSPITALITY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(Dollars in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Revenue:
Hotel operations:
Rooms	$	142,908		$	137,230		$	266,669		$	265,197
Food and beverage		61,006			57,028			112,187			105,572
Other hotel operations		11,815			15,694			23,039			30,945
Office rental, parking and other revenue		1,212			1,328			3,069			2,625
Total revenue		216,941			211,280			404,964			404,339
Hotel operating expenses:
Rooms		33,785			33,208			64,409			64,153
Food and beverage		40,903			39,877			77,752			76,141
Other hotel operating expenses		7,623			9,943			14,626			19,323
Office rental, parking and other expenses		612			670			1,436			1,255
Other operating expenses:
General and administrative, hotel		31,771			30,152			63,095			61,946
General and administrative, corporate		2,828			3,473			6,361			7,106
Property operating costs		31,294			30,048			60,452			59,300
Depreciation and amortization		23,837			24,356			48,256			49,464
Property taxes, insurance and other		12,098			15,232			22,882			31,345
Loss on asset impairments		—			310			—			310
Operating expenses		184,751			187,269			359,269			370,343
Equity in income/loss of and interest earned from unconsolidated affiliates		2,940			1,600			4,575			3,200
Hurricane business interruption insurance gain		2,009			—			4,290			—
Operating income		37,139			25,611			54,560			37,196
Minority interest (expense) income		(39	)		671			308			1,617
Interest expense, net		(30,698	)		(30,090	)		(61,411	)		(64,592	)
Loss on early extinguishments of debt		(947	)		(1,980	)		(1,007	)		(7,903	)
Income (loss) before income taxes and discontinued operations		5,455			(5,788	)		(7,550	)		(33,682	)
Income tax (expense) benefit		(812	)		(38	)		(834	)		455
Income (loss) from continuing operations		4,643			(5,826	)		(8,384	)		(33,227	)
Discontinued operations:
Loss from discontinued operations before income tax		(3,709	)		(5,784	)		(4,126	)		(18,747	)
Income tax benefit		—			55			—			175
Loss from discontinued operations		(3,709	)		(5,729	)		(4,126	)		(18,572	)
Net income (loss)	$	934		$	(11,555	)	$	(12,510	)	$	(51,799	)
Basic earnings (loss) per share:
Earnings (loss) from continuing operations	$	0.05		$	(0.07	)	$	(0.10	)	$	(0.44	)
Loss from discontinued operations		(0.04	)		(0.07	)		(0.04	)		(0.24	)
Earnings (loss) per basic share	$	0.01		$	(0.14	)	$	(0.14	)	$	(0.68	)
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations	$	0.05		$	(0.08	)	$	(0.10	)	$	(0.45	)
Loss from discontinued operations		(0.04	)		(0.06	)		(0.04	)		(0.23	)
Earnings (loss) per diluted share	$	0.01		$	(0.14	)	$	(0.14	)	$	(0.68	)

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

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MERISTAR HOSPITALITY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(Dollars in thousands)

	Six Months Ended June 30,
	2005			2004
Operating activities:
Net loss	$	(12,510	)	$	(51,799	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		49,000			52,585
Loss on asset impairments		2,836			7,441
Loss on sale of assets, before tax effect		1,037			11,530
Loss on early extinguishments of debt		1,007			7,903
Minority interests		(308	)		(1,617	)
Equity in loss of unconsolidated affiliate		1,164			—
Amortization of unearned stock-based compensation		542			1,090
Deferred income taxes		—			(890	)
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds		35,098			—
Accounts receivable, net		(9,271	)		689
Prepaid expenses and other assets		722			4,864
Receivables from unconsolidated affiliates		12,663			(4,916	)
Due to Interstate Hotels & Resorts		(8,398	)		(3,241	)
Accounts payable, accrued expenses, accrued interest and other liabilities		736			(5,949	)
Net cash provided by operating activities		74,318			17,690
Investing activities:
Acquisition of hotels, net of cash acquired of $3.5 million		—			(182,790	)
Capital expenditures for property and equipment		(109,322	)		(49,898	)
Proceeds from sales of assets		20,500			104,873
Insurance proceeds related to capital expenditures		6,500			—
Increase in restricted cash		(4,580	)		(29,955	)
Costs associated with disposition program and other, net		(596	)		(5,081	)
Net cash used in investing activities		(87,498	)		(162,851	)
Financing activities:
Prepayments on long-term debt		(23,846	)		(105,857	)
Scheduled payments on long-term debt		(5,477	)		(3,691	)
Proceeds from mortgage loans, net of financing costs		73,410			—
Proceeds from debt issuance, net of issuance costs		—			109,687
Distributions to minority investors		—			(141	)
Proceeds from common stock issuance, net of issuance costs		309			72,340
Purchase of subsidiary partnership interests		—			(8,690	)
Repurchase of common stock under employee stock plans		(782	)		(160	)
Other		—			(165	)
Net cash provided by financing activities		43,614			63,323
Effect of exchange rate changes on cash and cash equivalents		—			(227	)
Net increase (decrease) in cash and cash equivalents		30,434			(82,065	)
Cash and cash equivalents, beginning of period		60,540			230,884
Cash and cash equivalents, end of period	$	90,974		$	148,819
Supplemental Cash Flow Information
Cash paid for interest and income taxes:
Interest, net of capitalized interest	$	63,482		$	69,804
Income tax payments, net of (refunds)	$	436		$	(530	)
Non-cash investing and financing activities:
Senior subordinated debt redeemed in exchange for common stock	$	—		$	49,213
Change of fair value of interest rate swap	$	1,430		$	10,074
Issuance of stock bonus	$	1,022		$	—
Redemption of OP units	$	633		$	123

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

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MERISTAR HOSPITALITY CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2005

1. Organization

MeriStar Hospitality Corporation (the “Company”) 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 June 30, 2005, we owned 72 hotels with 20,115 rooms, all of which were leased by our taxable subsidiaries. Seventy 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 72 hotels we owned as of June 30, 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 7.6% 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 U.S. generally accepted accounting principles. 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 term of a ground lease (including consideration of renewal options), 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 June 30, 2005 and 2004, we recognized depreciation expense of $22.4 million and $23.6 million, respectively. During the six months ended June 30, 2005 and 2004, we recognized depreciation expense of $45.8 million and $48.0 million, respectively. For the three months ended June 30, 2005 and 2004, we capitalized interest of $3.1 million and $1.2 million, respectively. For the six months ended June 30, 2005 and 2004, we capitalized interest of $5.8 million and $2.0 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 Sheets.

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

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conclude that we are more likely than not 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 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 based compensation awards 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 Statements 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 income (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 June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net income (loss), as reported	$	934		$	(11,555	)	$	(12,510	)	$	(51,799	)
Add: Stock-based employee compensation expense included in reported net loss, net of related tax effect		613			395			1,374			975
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effect		(620	)		(442	)		(1,387	)		(1,077	)
Net income (loss), pro forma	$	927		$	(11,602	)	$	(12,523	)	$	(51,901	)
Earnings (loss) per share, as reported:
Basic and diluted	$	0.01		$	(0.14	)	$	(0.14	)	$	(0.68	)
Weighted average fair value of options granted		N/A	*	$	0.31			N/A	*	$	0.32
Earnings (loss) per share, pro forma:
Basic and diluted	$	0.01		$	(0.14	)	$	(0.14	)	$	(0.69	)

* No options were granted during the six months ended June 30, 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 the “investments in and advances to unconsolidated affiliates” line 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 entity in which our investment was made. This investment is also reflected in the “investments in and advances to unconsolidated affiliates” line 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, eight of our hotels were closed for an extended period of time, and four 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 June 30, 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.

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As of June 30, 2005 and August 2, 2005, three of our Florida properties remained substantially closed due to hurricane damage. Additionally, as of June 30, 2005 and August 2, 2005, one property that suffered varying amounts of hurricane damage had certain guest rooms, its restaurants, lounge, registration area 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 sustained income losses. 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. 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, during the three and six months ended June 30, 2005, we have recorded a business interruption recovery gain of $2.0 million and $4.3 million, respectively, 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 June 30, 2005, we have incurred recoverable costs related to both property damage and business interruption recoveries totaling $64.9 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 had collected $100.2 million in insurance advances through June 30, 2005. We have collected an additional $2.5 million in insurance proceeds from July 1 through August 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):

Insurance claim receivable

June 30, 2005

Fixed assets net book value write down	$	65.5
Recoverable costs incurred		64.9
Business interruption insurance gain		4.3
Payments received		(100.2	)
	$	34.5

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.

In June 2005, the FASB issued Statement No. 154, “Accounting Changes and Error Corrections a Replacement of APB Opinion No. 20 and FASB Statement No. 3”, which changes the requirements for the accounting for and reporting of a change in accounting principle, and applies to all voluntary changes in accounting principle. This Statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless the change is required by a new pronouncement and the pronouncement states specific transition provisions. This Statement carries forward without change the guidance contained in Opinion 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. We are required to adopt this Statement for accounting changes and corrections of errors made during and after the first quarter of 2006. We do not expect the adoption of this statement to have a material effect on our results of operations.

Emerging Issues Task Force (“EITF”) Issue 04-5, “Investor’s Accounting for an Investment in a Limited Partnership When the Investor Is the Sole General Partner and the Limited Partners Have Certain Rights” was ratified by the FASB in June 2005. At issue is what rights held by the limited partner(s) preclude consolidation in circumstances in which the sole general partner would consolidate the limited partnership. The assessment of limited partners’ rights and their impact on the presumption of control of the limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if there is a change to the terms or in the exercisability of the rights of the limited partners, the sole general partner increases or decreases its ownership of limited partnership interests, or there is an increase or decrease in the number of outstanding limited partnership interests. We are required to adopt the provisions of EITF Issue 04-5 for the first quarter of 2006, and for the third quarter of 2005 for new or modified arrangements. We do not expect the adoption of this EITF to have a material effect on our financial statements.

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

3. Comprehensive Income (loss)

Comprehensive loss equaled net income (loss) for the three and six months ended June 30, 2005, as we no longer have foreign operations. Comprehensive loss was $10.3 million and $50.8 million for the three and six months ended June 30, 2004, respectively, which consisted of net loss ($11.6 million and $51.8 million, respectively) 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.

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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 and six months ended June 30, 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 June 30, 2004			Six Months Ended June 30, 2004
Total revenue	$	227,046		$	431,516
Net loss		(10,213	)		(49,634	)
Net loss per share:
Basic	$	(0.12	)	$	(0.66	)
Diluted		(0.13	)		(0.66	)

5. Property and Equipment

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

	June 30, 2005		December 31, 2004
Land	$	241,528	$	244,088
Buildings and improvements		1,928,195		1,926,813
Furniture, fixtures and equipment		315,127		295,562
Construction-in-progress		170,826		115,257
	$	2,655,676	$	2,581,720

We incurred no impairment losses during the first quarter of 2005. During the second quarter of 2005, we recognized an impairment loss of $2.8 million which is recorded in discontinued operations (see Note 12). During the first and second quarters of 2004, we recognized impairment losses of $5.0 million and $2.4 million, respectively, of which $5.0 million and $2.1 million, respectively, are recorded in discontinued operations as of June 30, 2005 (see Note 12).

The impairment charges recorded during 2005 and 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. Assets Held for Sale

At December 31, 2004, none of our properties met the criteria as prescribed by SFAS No. 144 to classify them as held for sale. At June 30, 2005, one of our properties met our criteria for classification as held for sale. In July 2005, this property was sold. No other assets met the criteria as prescribed by SFAS No. 144 to classify them as held for sale.

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Assets held for sale as of June 30, 2005 consisted of the following (in thousands):

	June 30, 2005
Land	$	392
Buildings and improvements		4,332
Furniture, fixtures and equipment		264
Construction-in-progress		75
	$	5,063

7. 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 “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. During the three and six months ended June 30, 2005, we recognized interest income of $1.4 million and $2.9 million, respectively, on the mezzanine loan, which is recognized as earned. Our outstanding loan balance of $40.5 million includes $0.5 million of 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 and six months ended June 30, 2005, we recognized $0.2 million and ($1.2) million, respectively, of equity in income (losses) on our equity investment.

Investment in MIP. In 1999, we, through MeriStar Hospitality Operating Partnership, L.P. (“MHOP”), our principal operating subsidiary, invested $40.0 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 is subordinate only to the MIP debt; and $12.5 million of our $40.0 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. There have been no changes in circumstances in 2004 and 2005 that would require an additional impairment. After recognition of this impairment loss, 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 June 30, 2005, our total MIP carrying value was $22.1 million, consisting of the $15.0 million adjusted investment balance and $7.1 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 June 30, 2005 and 2004, we recognized a preferred return of $1.3 million and $1.6 million, respectively, from this investment. For the six months ended June 30, 2005 and 2004, we recognized a preferred return of $2.9 million and $3.2 million, respectively, from this investment. As of June 30, 2005 and December 31, 2004, cumulative preferred returns of $7.1 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.

8. Long-Term Debt

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

	June 30, 2005			December 31, 2004
Senior unsecured notes due 2011 – 9.125%	$	347,665		$	355,665
Senior unsecured notes due 2008 – 9.0%		265,500			270,500
Senior unsecured notes due 2009 – 10.5%		215,687			224,187
Secured facility, due 2009		299,765			302,979
Secured facility, due 2013		98,498			99,293
Convertible subordinated notes		170,000			170,000
Senior subordinated notes		32,740			34,225
Mortgage and other debt		205,234			125,051
Unamortized issue discount		(3,400	)		(3,950	)
	$	1,631,689		$	1,577,950
Fair value adjustment for interest rate swap		(6,104	)		(4,674	)
	$	1,625,585		$	1,573,276

Aggregate future maturities as of June 30, 2005 were as follows (in thousands):

2005 (six months)	$	5,671
2006		12,031
2007		45,544
2008		280,116
2009		495,949
Thereafter		792,378
	$	1,631,689
Fair value adjustment for interest rate swap		(6,104	)
	$	1,625,585

Credit facility. In August 2005, we completed a $100 million expansion of our $50 million credit facility to a total capacity of $150 million. The total $150 million facility will carry an annual interest rate of the London Interbank Offered Rate, or LIBOR, plus 350 basis points, which is 100 basis points less than the original annual interest rate of LIBOR plus 450 basis points. The additional $100 million will mature in August 2006 and consists of $25 million in additional revolver capacity and $75 million of term loan capacity. Asset disposition proceeds in excess of $30 million must be used to pay down any outstanding balance under the facility and permanently reduce the availability if repaying borrowings under the term loan. The original $50 million revolving facility matures in December 2006, as originally provided. There are currently no outstanding borrowings under the facility.

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

Senior unsecured notes. During the six months ended June 30, 2005, we repurchased, using available cash, $21.5 million of our senior unsecured notes, consisting of $5.0 million of the 9.0% notes due 2008, $8.0 million of the 9.125% notes due 2011, and $8.5 million of the 10.5% notes due 2009. We recorded a loss on early extinguishment of debt of $0.9 million and wrote off deferred financing costs of $0.2 million related to these repurchases which is included in depreciation and amortization expense on the accompanying Consolidated Statements of Operations. Between June 30, 2005 and August 2, 2005, using cash on hand, we repurchased an additional $1.0 million of our 9.0% notes due 2008, $5.0 million of our 9.125% notes due 2011, and $6.8 million of our 10.5% notes due 2009, and recorded an additional loss on early extinguishment of debt of $1.0 million and wrote off deferred financing costs of $0.1 million.

Senior subordinated notes. During the six months ended June 30, 2005, we repurchased, using available cash, $1.5 million of our 8.75% senior subordinated notes due 2007 (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.

In July 2005, we provided irrevocable notice that we would exercise our option to redeem all of our outstanding 8.75% senior subordinated notes due 2007 at a price equal to their outstanding principal amount plus interest to the date of redemption. The redemption date is scheduled to be August 15, 2005. As of June 30, 2005, there was $32.7 million principal amount of these notes outstanding. The redemption will total $34.2 million, consisting of $32.7 million of principal plus interest. We expect to record a loss on early extinguishment of debt of $0.2 million, and write off deferred financing costs of $0.2 million 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 monthly payments of interest only 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 due at the end of the ten year term. Our net proceeds of $34.7 million are net of a $3.0 million escrow reserve for future capital expenditures. We incurred financing costs of $0.8 million related to this mortgage.

On June 17, 2005, we entered into a $44.0 million mortgage loan on our Hilton Clearwater hotel that bears interest at a fixed rate of 5.68%. The mortgage requires monthly payments of interest only 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 due at the end of the ten year term. Our net proceeds of $40.7 million are net of a $3.3 million escrow reserve for future capital expenditures. We incurred financing costs of $1.1 million related to this mortgage.

Derivatives. As of June 30, 2005 and December 31, 2004, the fair value of our interest rate swap was approximately a $6.1 million liability and a $4.7 million liability, respectively. This amount is recorded on our Consolidated Balance Sheets in the other liabilities line with a corresponding debit recorded to long-term debt. During the three and six months ended June 30, 2005, we earned net cash payments of $0.3 million and $1.2 million, respectively, under the swap, which were recorded as a reduction in interest expense. During the three and six months ended June 30, 2004, we earned net cash payments of $1.7 million under the swap, which also were recorded as a reduction in interest expense. In conjunction with the interest rate swap, we have posted collateral of $12.3 million and $12.0 million as of June 30, 2005 and December 31, 2004, respectively, which is

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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 six months ended June 30, 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 June 30, 2005. We will receive all remaining collateral upon maturity of the swap.

9. Stockholders’ Equity and Minority Interests

Common Stock Transactions. During the six months ended June 30, 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 tax withholding requirements, and 70,002 shares were issued. During the six months ended June 30, 2005, we issued 6,302 shares of common stock with a value of $0.04 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).

Common OP Unit holders converted 39,385 and 25,141 of their OP Units, with a value of $0.6 million and $0.1 million, respectively, into common stock during the six months ended June 30, 2005 and 2004, respectively. A POPs unit holder converted 25,000 POPs for cash during the six months ended June 30, 2004.

Treasury Stock. As of June 30, 2005 and December 31, 2004, we carried 2.5 million shares and 2.4 million shares, respectively, 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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10. Earnings (Loss) Per Share

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2005		2004			2005			2004
Basic Earnings (Loss) Per Share:
Income (loss) available to common stockholders from continuing operations	$	4,643	$	(5,826	)	$	(8,384	)	$	(33,227	)
Weighted average number of basic shares of common stock outstanding		87,472		82,855			87,432			75,748
Basic earnings (loss) per share from continuing operations	$	0.05	$	(0.07	)	$	(0.10	)	$	(0.44	)
Diluted Earnings (Loss) Per Share:
Income (loss) available to common stockholders from continuing operations	$	4,643	$	(5,826	)	$	(8,384	)	$	(33,227	)
Minority interest		46		(651	)		(306	)		(1,735	)
Adjusted net income (loss)	$	4,689	$	(6,477	)	$	(8,690	)	$	(34,962	)
Weighted average number of basic shares of common stock outstanding		87,472		82,855			87,432			75,748
Common stock equivalents:
Operating partnership units		2,283		2,415			2,290			2,421
Stock options		91		—			—			—
Total weighted average number of diluted shares of common stock outstanding		89,846		85,270			89,722			78,169
Diluted earnings (loss) per share from continuing operations	$	0.05	$	(0.08	)	$	(0.10	)	$	(0.45	)

For the three months ended June 30, 2005 and 2004, 16,699,411 shares and 16,871,589 shares, respectively, consisting of shares issuable upon conversion, exchange or exercise of stock options and our outstanding convertible notes, were excluded from the calculation of diluted earnings (loss) per share as their inclusion would be anti-dilutive.

For the six months ended June 30, 2005 and 2004, 16,795,831 shares and 16,873,653 shares, respectively, consisting of shares issuable upon conversion, exchange or exercise of stock options and our outstanding convertible notes, were excluded from the calculation of diluted earnings (loss) per share as their inclusion would be anti-dilutive.

11. 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 have negotiated, subject to final approval, a closing agreement with the Internal Revenue Service that resolves 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, as of June 30, 2005, we have entered into contractual obligations with vendors to acquire capital assets and perform renovations totaling approximately $33 million to be

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expended over the next 12 months. Additionally, as of June 30, 2005, we have entered into contractual obligations related to capital expenditures as a result of hurricanes in the amount of $33 million to be expended over the next 12 months, most of which we expect to be reimbursed by our insurance carriers.

12. Dispositions

One hotel was disposed of in the six months ended June 30, 2005. We disposed of 15 hotels in the six months ended June 30, 2004. As of June 30, 2005, one of our hotels met our criteria for held-for-sale classification (see Note 6). None of our hotels met our criteria for held-for-sale classification as of December 31, 2004. Operating results for the hotels which either have been sold or are classified as held-for-sale, and where applicable, the gain or loss on final disposition, are included in discontinued operations.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Revenue	$	3,209		$	17,304		$	6,281		$	42,425
Loss on asset impairments	$	(2,836	)	$	(2,120	)	$	(2,836	)	$	(7,131	)
Pretax (loss) gain from operations		164			920			(253	)		(85	)
Loss on disposal		(1,037	)		(4,584	)		(1,037	)		(11,531	)
	$	(3,709	)	$	(5,784	)	$	(4,126	)	$	(18,747	)

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

13. 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 June 30, 2005 and December 31, 2004, consolidating statements of operations for the three and six months ended June 30, 2005 and 2004, and consolidating statements of cash flows for the six months ended June 30, 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 U.S. 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 June 30, 2005, we owned 72 hotels with 20,115 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. Seventy 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 72 hotels we owned as of June 30, 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 7.6% 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 eliminated 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 72 properties we owned as of June 30, 2005) will be unchanged, we received a $2.5 million credit, which is applicable to fees payable with respect to future dispositions. We have applied the entire $2.5 million credit to terminations that occurred during 2004 and 2005.

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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

While we believe that we are still in the early stages, we are seeing a general improvement in the economy and recovery of business. We are experiencing robust revenue growth primarily driven by an increase in room rates, which have improved margins and profitability, in part due to the impact of our renovation program on improving our product. Our strategy currently includes the following key initiatives to increase shareholder value: 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; 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. Additionally, 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 six months ended June 30, 2005, we invested approximately $66 million in non hurricane-related capital expenditures and expect to invest an additional $34 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 six months ended June 30, 2005, we invested approximately $43 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 $150 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, eight of our hotels were closed for an extended period of time, and four 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 June 30, 2005, the

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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 June 30, 2005 and August 2, 2005, three of our Florida properties remained substantially closed due to hurricane damage. Additionally, as of June 30, 2005 and August 2, 2005, one property that suffered varying amounts of hurricane damage had certain guest rooms, its restaurants, lounge, registration area 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 sustained income losses. 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. 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, during the three and six months ended June 30, 2005, we have recorded a business interruption recovery gain of $2.0 million and $4.3 million, respectively, 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 June 30, 2005, we have incurred recoverable costs related to both property damage and business interruption recoveries totaling $64.9 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 had collected $100.2 million in insurance advances through June 30, 2005. We have collected an additional $2.5 million in insurance proceeds from July 1 through August 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):

Insurance claim receivable

June 30, 2005

Fixed assets net book value write down	$	65.5
Recoverable costs incurred		64.9
Business interruption insurance gain		4.3
Payments received		(100.2	)
	$	34.5

During the three and six months ended June 30, 2004, the seven hotels that were substantially affected in the first and second quarters of 2005 (four of which reopened in the second quarter of 2005) realized revenues of $26.5 million and $55.4 million, respectively. These hotels recognized revenues of $4.4 million and $8.3 million, respectively, during the three and six months ended June 30, 2005.

Overall Results

Revenues from continuing operations were $405.0 million for the six months ended June 30, 2005, compared to $404.3 million for the six months ended June 30, 2004. This revenue increase is primarily due to improved RevPAR at our comparable hotels (see “Results of Operations” for a definition of comparable hotels), higher food and beverage revenues attributable to increased menu pricing in 2005 and revenues from our two hotels acquired in June 2004, partially offset by a disruption of all revenues at properties impacted by hurricanes in August and September 2004. Hotel and other operating expenses were 2.9% lower compared to the same periods in 2004, mainly due to the limited operations of certain hurricane-impacted properties. Property taxes, insurance and other expense reflects a reduction in rental payments under the best efforts rental programs at two properties in the first and second quarters of 2005 due to the closure of hurricane-impacted properties. We incurred a $1.0 million loss on extinguishment of debt for the six months ended June 30, 2005, compared to a $7.9 million loss for the six months ended June 30, 2004. Additionally, our 2005 and 2004 results include losses of $4.1 million and $18.6 million, respectively, realized at properties in discontinued operations.

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 12, “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 and six months ended June 30 were as follows (dollars in thousands, except operating data statistics):

	Three Months Ended June 30,								Six Months Ended June 30,
	2005			2004			Percent Change		2005			2004			Percent Change
Summary of Operations:
Total revenue from continuing operations	$	216,941		$	211,280		2.7	%	$	404,964		$	404,339		0.2	%
Hotel operating expenses		82,923			83,698		(0.9	)		158,223			160,872		(1.6	)
Other operating expenses		101,828			103,261		(1.4	)		201,046			209,161		(3.9	)
Loss on asset impairments		—			310		(100.0	)		—			310		(100.0	)
Total operating expenses		184,751			187,269		(1.3	)		359,269			370,343		(3.0	)
Equity in income/loss of and interest earned from unconsolidated affiliates		2,940			1,600		83.8			4,575			3,200		43.0
Hurricane business interruption insurance gain		2,009			—		>100.0			4,290			—		>100.0
Operating income		37,139			25,611		45.0			54,560			37,196		46.7
Minority interest		(39	)		671		>(100.0	)		308			1,617		(81.0	)
Interest expense, net		(30,698	)		(30,090	)	2.0			(61,411	)		(64,592	)	(4.9	)
Loss on early extinguishments of debt		(947	)		(1,980	)	(52.2	)		(1,007	)		(7,903	)	(87.3	)
Income tax (expense) benefit		(812	)		(38	)	>100.0			(834	)		455		>(100.0	)
Income (loss) from continuing operations		4,643			(5,826	)	>100.0			(8,384	)		(33,227	)	(74.8	)
Loss from discontinued operations, net of tax		(3,709	)(A)		(5,729	)(A)	(35.3	)		(4,126	)(B)		(18,572	)(B)	(77.8	)
Net income (loss)	$	934		$	(11,555	)	>100.0	%	$	(12,510	)	$	(51,799	)	(75.8	)%

^(A) Includes loss on asset impairments of $2.8 million and $2.1 million for the three months ended June 30, 2005 and 2004, respectively. Also includes loss on disposal of $1.0 million and $4.6 million for the three months ended June 30, 2005 and 2004, respectively. Income tax benefit was $0.1 million for the three months ended June 30, 2004.

^(B) Includes loss on asset impairments of $2.8 million and $7.1 million for the six months ended June 30, 2005 and 2004, respectively. Also includes loss on disposal of $1.0 million and $11.5 million for the six months ended June 30, 2005 and 2004, respectively. Income tax benefit was $0.2 million for the six months ended June 30, 2004.

Operating Data for our 71 hotels included in continuing operations (19,889 rooms):

	Three Months Ended June 30,								Six Months Ended June 30,
	2005			2004			Percent Change		2005			2004			Percent Change
Average Daily Rate (ADR)	$	116.58		$	109.81		6.2	%	$	114.72		$	109.84		4.4	%
Occupancy		67.8	%		71.8	%	(5.6	)		64.7	%		69.9	%	(7.4	)
Revenue Per Available Room (RevPAR)	$	79.09		$	78.89		0.3		$	74.20		$	76.75		(3.3	)

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Three months ended June 30, 2005 compared with the three months ended June 30, 2004

Continuing Operations Results

Our 71 properties included in continuing operations include two properties acquired in 2004, one property that we intend to sell, and seven properties in Florida that were significantly impacted by hurricanes that occurred in August and September 2004 and that remained substantially affected in the first and second quarters 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 our results as a whole and discussion and analysis of results of the 61 comparable hotels that were in normal operations for the current period and the prior year period. The seven Florida hotels that were substantially affected in the first and second quarters of 2005 (four of which reopened in the second quarter of 2005), the one hotel that we intend to sell under our repositioning strategy, and the two hotels acquired in 2004, are excluded from the comparable hotels.

Total revenue. Because of the events and changes to our portfolio noted above, our total revenue for the entire portfolio of our 71 hotels in continuing operations is not comparable between years. Total revenue increased by $5.7 million or 2.7% in 2005 compared to the second quarter of 2004. This increase in revenue is primarily due to an increase in ADR attributable to a strategy of increasing room rates and reducing our exposure to lower rated contract business, higher food and beverage revenues attributable to increased menu pricing in 2005, and the inclusion of a full period of revenues from our two hotels acquired in May and June 2004 ($12.8 million), partially offset by the lost revenue at our hurricane affected properties. Overall ADR increased 6.2% for the quarter ended June 30, 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, reducing trade with lower rated groups, overall increases in our daily rates in general, the inclusion of a full period of revenues from two higher rate properties acquired in May and June of 2004 and an increase in travel due to a general strengthening of the economy. This favorable impact on rooms revenue was partially offset by revenue losses from our hurricane-impacted hotels ($22.1 million), which generally realize comparatively higher RevPAR during the first two quarters. The decrease in occupancy of 5.6% over the same period for the entire portfolio of our 71 hotels in continuing operations was mainly due to rooms out of service as a result of the Florida hurricanes.

The following table presents operating data for our 61 comparable hotels:

Operating Data for our 61 comparable hotels (17,480 rooms):

	Three Months Ended June 30,
	2005			2004			Percent Change
ADR	$	112.48		$	102.60		9.6	%
Occupancy %		72.2	%		72.0	%	0.3
RevPAR	$	81.19		$	73.87		9.9

For the 61 comparable hotels, total revenue increased by $15.8 million or 9.0% from $176.0 million in the second quarter of 2004 to $191.8 million in the second quarter of 2005. The increase in room revenue was primarily due to an increase in ADR of $9.88 or 9.6% and RevPAR of $7.32 or 9.9%, which resulted from a strategy of increasing room rates and reducing our exposure to lower rated contract business, and the general strengthening of the economy and lodging industry. Occupancy was relatively flat from the second quarter of 2004 to the second quarter of 2005, as we focused on increasing ADR, rather than occupancy, through increasing business related to higher rate transient and corporate business, reducing trade with lower rated groups, as well as overall increases in our daily rates in general.

Hotel operating expenses. Because of the events noted above, our total hotel operating expenses are not comparable between years. Hotel operating expenses decreased by $0.8 million or 0.9% in the three months

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ended June 30, 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 certain properties. Food and beverage expense decreased by 2.9% of food and beverage revenue mainly due to menu pricing adjustments that have outpaced the increasing cost of materials, labor and benefits. Rooms expense decreased by 0.6% of rooms revenue mainly due to a decrease in occupancy and occupancy-driven expenses, as we focused on increasing ADR.

For the 61 comparable hotels, hotel operating expenses increased 5.4% from the second quarter of 2004, primarily related to increases in labor and related costs and new linen programs. As a percentage of revenue, hotel operating expenses decreased 1.3%. Rooms expense margins improved 0.6% points primarily due to the positive impacts of increasing our ADR which generates additional revenues with little additional cost. Food and beverage margins improved 1.9% points mainly due to menu pricing adjustments that have outpaced the increasing cost of materials, labor and benefits.

Other operating expenses. Other operating expenses, which include general and administrative expenses, property operating costs, depreciation and amortization, non-income taxes, and insurance, declined $1.4 million from the second quarter of 2004 to the second quarter of 2005, primarily due to a $3.1 million decrease in property tax, insurance and other. Property tax, insurance and other expense declined mainly due to a decrease in the second quarter of 2005 of expenses for hurricane-impacted properties, primarily due to a $2.1 million reduction in rental payments mainly under the best efforts rental programs at South Seas Resort and Sundial Beach Resort. 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 second quarter of 2004.

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 June 30, 2005, we recognized interest income of $1.4 million, and a $0.2 million equity share of net income of the investment. 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 $1.3 million in the second quarter of 2005. Our second 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 insurance gain. In the three months ended June 30, 2005, we recognized $2.0 million of business interruption gain, based on insurance company acknowledgement of this minimal level of profit that certain of our properties would have earned. For additional information regarding hurricane business interruption gain, see “Results Overview – The August – September 2004 Hurricanes.”

Loss on early extinguishments of debt. During the current quarter, we repurchased $21.5 million of senior unsecured notes, which resulted in a $0.9 million loss on early extinguishment of debt. In the same period in 2004, we repurchased approximately $28.1 million of senior unsecured notes, and issued common stock in exchange for $11.2 million of senior subordinated notes, which resulted in a loss on early extinguishment of debt of $2.0 million.

Loss from discontinued operations

Loss from discontinued operations during the three months ended June 30, 2005 totaled $3.7 million, including impairment charges of $2.8 million, and a loss on disposition of assets of $1.0 million. Loss from discontinued operations for the same period in 2004 totaled $5.7 million, including impairment charges of $2.1 million, and a loss on disposition of assets of $4.6 million.

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Six months ended June 30, 2005 compared with the six months ended June 30, 2004

Continuing Operations Results

Our results of operations for the six months ended June 30, 2005 for the 71 properties included in continuing operations have been affected by the same factors and events that affected our results of operations for the three months ended June 30, 2005, and 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 our results as a whole and discussion and analysis of results of the 61 comparable hotels that were in normal operations for the current period and the prior year period.

Total revenue. Because of the events and changes to our portfolio noted previously, our total revenue for the entire portfolio of our 71 hotels in continuing operations is not comparable between years. Total revenue increased by $0.6 million or 0.2% in 2005 compared to the first half of 2004. This increase in revenue is primarily due to an increase in ADR attributable to a strategy of increasing room rates and reducing our exposure to lower rated contract business, higher food and beverage revenues attributable to increased menu pricing in 2005, and the inclusion of a full period of revenues from our two hotels acquired in May and June of 2004 ($28.0 million), partially offset by the lost revenue at our hurricane affected properties. Overall ADR increased 4.4% for the six months ended June 30, 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, reducing trade with lower rated groups, overall increases in our daily rates in general, the inclusion of a full period of revenues from two higher rate properties acquired in May and June of 2004 and an increase in travel due to a general strengthening of the economy. This favorable impact on rooms revenue was partially offset by revenue losses from our hurricane-impacted hotels ($47.1 million), which generally realize comparatively higher RevPAR during the first two quarters. The decrease in occupancy of 7.4% over the same period for the entire portfolio of our 71 hotels in continuing operations 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 82% of the 7.4% 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 61 comparable hotels:

Operating Data for our 61 comparable hotels (17,480 rooms):

	Six Months Ended June 30,
	2005			2004			Percent Change
ADR	$	110.65		$	101.63		8.9	%
Occupancy %		69.1	%		70.0	%	(1.3	)
RevPAR	$	76.44		$	71.16		7.4

For the 61 comparable hotels, total revenue increased by $20.9 million or 6.2% from $336.8 million in the second quarter of 2004 to $357.7 million in the second quarter of 2005. The increase in room revenue was primarily due to an increase in ADR of $9.02 or 8.9% and RevPAR of $5.28 or 7.4%, which resulted from a strategy of increasing room rates and reducing our exposure to lower rated contract business, and the general strengthening of the economy and lodging industry. Occupancy decreased 1.3% mainly due to our focus on increasing business related to higher rate transient and corporate business, reducing trade with lower rated groups, as well as overall increases in our daily rates in general.

Hotel operating expenses. Because of the events noted above, our total hotel operating expenses are not comparable between years. Hotel operating expenses decreased by $2.6 million or 1.6% in the six months ended June 30, 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.

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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 materials, labor and benefits.

For the 61 comparable hotels, hotel operating expenses increased 3.1% from the second quarter of 2004, primarily related to increases in labor and related costs and new linen programs. As a percentage of revenue, hotel operating expenses decreased 1.2%. Rooms expense margins improved 0.5% points primarily due to the positive impacts of increasing our ADR which generates additional revenues with little additional cost. Food and beverage margins improved 2.2% points mainly due to menu pricing adjustments that have outpaced the increasing cost of materials, labor and benefits.

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:

• General and administrative expense, corporate: The decrease of $0.7 million in general and administrative costs in the six months ended June 30, 2005 was primarily attributable to a $1.1 million expense reduction related to prior years’ workers’ compensation claims and a $0.5 million expense reduction related to legal costs, partially offset by a $0.9 million expense related to incentive plan grants.

• Property taxes, insurance expense and other expense: In the six months ended June 30, 2005, expenses for hurricane-impacted properties decreased from the same period in 2004, primarily due to a $4.4 million reduction in rental payments mainly under the best efforts rental programs at South Seas Resort and Sundial Beach Resort. 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, current year expense was reduced by a $2.0 million tax adjustment due to a change in estimate and a $1.0 million reduction to property tax expense related to refunds.

• Write-off of deferred financing fees: The current year’s repurchase of $23.0 million of senior unsecured notes and senior subordinated notes resulted in a $0.2 million write-off of deferred financing fees. The same period in 2004 reflects the repurchase of approximately $99.6 million of senior unsecured notes, and the issuance of common stock in exchange for $49.2 million of senior subordinated notes, which resulted in a write-off of deferred financing fees of approximately $1.7 million. These expenses are included in depreciation and amortization expense.

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 six months ended June 30, 2005, we recognized interest income of $2.9 million, partially offset by a $1.2 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 $2.9 million in the first half of 2005. Our 2004 income of $3.2 million represents only the current portion of our 16% preferred return; no cumulative portion of the return was recognized.

Hurricane business interruption insurance gain. In the six months ended June 30, 2005, we recognized $4.3 million of business interruption gain, based on insurance company acknowledgement of this minimum level of profit that certain of our properties would have earned. For additional information regarding hurricane business interruption gain, see “Results Overview – The August – September 2004 Hurricanes.”

Loss on early extinguishments of debt. During the first six months of 2005, we repurchased $21.5 million of senior unsecured notes and $1.5 million of senior subordinated notes, which resulted in a $1.0 million loss on

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early extinguishment of debt. In the same period in 2004, we repurchased approximately $99.6 million of senior unsecured notes, and issued common stock in exchange for $49.2 million of senior subordinated notes, which resulted in a loss on early extinguishment of debt of approximately $7.9 million.

Interest expense, net. Net interest expense declined 4.9% or $3.2 million in the six months ended June 30, 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.

Loss from discontinued operations

Loss from discontinued operations during the six months ended June 30, 2005 totaled $4.1 million, including impairment charges of $2.8 million, and a loss on disposition of assets of $1.0 million. Loss from discontinued operations for the same period in 2004 totaled $18.6 million, including impairment charges of $7.1 million, and a loss on disposition of assets of $11.5 million.

Funds From Operations (FFO)

Substantially all of our non-current assets consist of real estate, and in accordance with U.S. generally accepted accounting principles, 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.

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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 June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net income (loss)	$	934		$	(11,555	)	$	(12,510	)	$	(51,799	)
Depreciation and amortization of real estate assets		22,503			23,617			45,997			48,120
Loss on disposal of assets		1,037			4,584			1,037			11,530
Unconsolidated affiliate adjustments		1,163			—			2,417			—
Minority interest to common OP unit holders		(628	)		(671	)		(1,215	)		(1,759	)
Interest on convertible debt		4,038			—			—			—
FFO	$	29,047	(A)	$	15,975	(B)	$	35,726	(C)	$	6,092	(D)
FFO per share	$	0.28	(A)	$	0.19	(B)	$	0.41	(C)	$	0.08	(D)
Weighted average number of shares of common stock outstanding for FFO		104,263	(E)		85,333			87,529			78,234

^(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 June 30, 2005 totaling $(3.9) million or $(0.04) per diluted share. The weighted average number of shares of common stock outstanding at June 30, 2005 on a fully diluted basis was 104.3 million.

^(B) Funds from operations included the effect of asset impairment charges, loss on early extinguishments of debt, and write off of deferred financing fees recognized during the three months ended June 30, 2004 totaling $(4.9) million or $(0.06) per diluted share. The weighted average number of shares of common stock outstanding at June 30, 2004 on a fully diluted basis was 85.3 million.

^(C) 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 six months ended June 30, 2005 totaling $(4.0) million or $(0.04) per diluted share. The weighted average number of shares of common stock outstanding at June 30, 2005 on a fully diluted basis was 87.5 million.

^(D) Funds from operations included the effect of asset impairment charges, loss on early extinguishments of debt, and write off of deferred financing fees recognized during the six months ended June 30, 2004 totaling $(17.1) million or $(0.22) per diluted share. The weighted average number of shares of common stock outstanding at June 30, 2004 on a fully diluted basis was 78.2 million.

^(E) The 104.2 million weighted average shares of common stock outstanding for diluted FFO for the three months ended June 30, 2005, includes 87.5 million weighted average shares that are issued and outstanding, and 16.7 million incremental shares that are not issued or outstanding, but that would be issued upon conversion of our convertible subordinated notes. These incremental shares are dilutive in calculating FFO per diluted share only for the three month period ending June 30, 2005. These $170.0 million notes are convertible into common stock at a ratio of $10.18 per share.

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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 June 30,			Six Months Ended June 30,
	2005		2004	2005		2004
Reconciliation from Basic Shares:
Weighted average number of basic shares of common stock outstanding for basic net loss per share calculation	87,472		82,855	87,432		75,748
Additional common stock equivalents for FFO:
Operating partnership units	—		2,415	—		2,421
Stock options	91		63	97		65
Convertible notes	16,700	(A)	—	—		—
Weighted average number of shares of common stock outstanding for diluted FFO	104,263	(A)	85,333	87,529		78,234
Reconciliation from Diluted Shares:
Weighted average number of diluted shares of common stock outstanding for diluted net loss per share calculation	89,846		85,270	89,722		78,169
Additional common stock equivalents for FFO:
Operating partnership units	(2,283	)	—	(2,290	)	—
Stock options	—		63	97		65
Convertible notes	16,700	(A)	—	—		—
Weighted average number of shares of common stock outstanding for diluted FFO	104,263	(A)	85,333	87,529		78,234

^(A) The 104,263 weighted average number of shares of common stock outstanding for diluted FFO includes 16,700 incremental shares that are not issued or outstanding, but that would be issued upon conversion of our convertible subordinated notes.

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 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. While economic conditions are generally improving, 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;

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• 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.

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. In August 2005, this revolving bank line was expanded by $100 million to a total capacity of $150 million; the additional $100 million will mature in August 2006 and consists of $25 million in additional revolver capacity and $75 million of term loan capacity. The entire $150 million is fully available and increases our flexibility in managing our liquidity, however, asset disposition proceeds in excess of $30 million must be used to pay down any outstanding balance under the facility and permanently reduce the availability if repaying borrowings under the term loan. We expect to borrow approximately $30 million on the revolving bank line in the near future to fund our debt repurchases, renovation program and hurricane-related expenditures, with repayment coming from future asset sales.

In 1999, we, through MeriStar Hospitality Operating Partnership, L.P. (“MHOP”), our principal operating subsidiary, invested $40.0 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 is subordinate only to the MIP debt; and $12.5 million of our $40.0 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. There have been no changes in circumstances in 2004 and 2005 that would require an additional impairment. After recognition of this impairment loss, 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 June 30, 2005, our total MIP carrying value was $22.1 million, consisting of the $15.0 million adjusted investment balance and $7.1 million of accrued preferred returns receivable.

We invested approximately $134 million in capital expenditures during 2004. During the six months ended June 30, 2005, we invested approximately $66 million in non hurricane-related capital expenditures and expect to invest an additional $34 million in non hurricane-related capital expenditures during the remainder of 2005. During the six months ended June 30, 2005, we invested approximately $43 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 $150 million, most of which we expect to be reimbursed by our insurance carriers.

As part of our strategy to manage our leverage, we may repurchase debt with available cash, or retire debt with higher interest rates and issue debt with lower interest rates, therefore reducing our overall interest expense, lowering cost of borrowing and improving financial ratios. This strategy provides us with more liquidity and flexibility in managing our business.

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We repurchased, using available cash, $1.5 million of our 8.75% senior subordinated notes due 2007 (plus $0.06 million of accrued interest) during the six months ended June 30, 2005. In addition, we repurchased, using available cash, $21.5 million of our senior unsecured notes, consisting of $5.0 million of the 9.0% notes due 2008, $8.0 million of the 9.125% notes due 2011, and $8.5 million of the 10.5% notes due 2009 during the six months ended June 30, 2005, and an additional $1.0 million of our 9.0% notes due 2008, $5.0 million of our 9.125% notes due 2011, and $6.8 million of our 10.5% notes due 2009 between June 30, 2005 and August 2, 2005. Following these repurchases, we had $32.7 million of outstanding senior subordinated notes due 2007 and $816.1 million of outstanding senior unsecured notes. 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.

In July 2005, we provided irrevocable notice that we would exercise our option to redeem all of our outstanding 8.75% senior subordinated notes due 2007 at a price equal to their outstanding principal amount plus interest to the date of redemption. The redemption date is scheduled to be August 15, 2005. As of June 30, 2005, there was $32.7 million principal amount of these notes outstanding. The redemption will total $34.2 million, consisting of $32.7 million of principal plus interest.

With our expanded asset disposition program (see discussion below) and the additional capacity of our senior credit facility, we will continue to monitor the market for debt buy-back opportunities and buy back debt when economically and financially advantageous. Toward that end, the remaining $209 million of our 10.5% senior unsecured debt becomes callable on December 15, 2005 at a price of 105.25% of its outstanding principal amount plus interest. We may strategically repurchase our senior unsecured notes through exercising the call provisions on the 10.5% senior unsecured notes or through open market purchases of any of the tranches depending upon pricing and availability in accordance with our expanded asset disposition program, with a focus on repurchasing the 10.5% senior unsecured notes. The actual amount acquired will be a function of pricing and availability as well as the results of our asset disposition program.

We have also announced our plan to refinance our existing $299 million secured loan facility due 2009. The new loan will allow for significant interest savings and increased flexibility compared to the current secured facility loan. The interest rate on the new facility is expected to be 309 basis points lower than the existing secured facility interest rate. Due to the current secured facility’s terms regarding the low net operating income of the secured properties, all cash from the properties securing the current loan is currently retained in an escrow account with a balance in excess of $30 million. We expect that the new secured facility will eliminate the escrow account and release the cash held in the escrow account reserve. We expect that the new secured facility will also eliminate the need for the existing interest rate swap agreement and its related cash collateral balance of approximately $16 million. We expect that the new secured facility will require the defeasance of the current secured facility, and under this defeasance we will incur a loss on early extinguishment of debt of approximately $47 million. We additionally expect to incur a charge for the termination of the existing interest rate swap agreement, based on the swap’s fair value on the date of termination. We expect that the total economics of this transaction, including the associated charges, will be positive on a net present value basis.

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 monthly payments of interest only 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 due at the end of the ten year term. Our net proceeds of $34.7 million are net of a $3.0 million escrow reserve for future capital expenditures. We incurred financing costs of $0.8 million related to this mortgage.

On June 17, 2005, we entered into a $44.0 million mortgage loan on our Hilton Clearwater hotel that bears interest at a fixed rate of 5.68%. The mortgage requires monthly payments of interest only 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 due at the end of the ten year term. Our net proceeds of $40.7 million

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are net of a $3.3 million escrow reserve for future capital expenditures. We incurred financing costs of $1.1 million related to this mortgage.

While we have substantially completed the disposition program of our non-strategic assets, due to the strong seller’s market and the high pricing that can be obtained, we may sell additional hotels that we would otherwise retain, particularly those with residential development potential, where we believe that we can reinvest the proceeds and obtain a higher return on our investment. We would consider and evaluate any such opportunities that have the potential to improve our financial condition or results of operations through further repositioning of our portfolio and recycling capital. Proceeds from asset dispositions would most likely be reinvested into high yielding projects in our existing portfolio through renovation activities and new investments, or be used to fund debt repurchases.

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 June 30, 2005, we had $69.3 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 $69.3 million, approximately $37.3 million was available to fund capital expenditures as of June 30, 2005.

Sources and Uses of Cash

The following table shows our consolidated cash flows, generated by (used in) our various activities, for the six months ended June 30 (in thousands):

	2005			2004			2005 vs 2004
Operating activities	$	74,318		$	17,690		$	56,628
Investing activities		(87,498	)		(162,851	)		75,353
Financing activities		43,614			63,323			(19,709	)
Cash and cash equivalents, end of period – unrestricted		90,974			148,819			(57,845	)

Cash flow from operations increased in the first two quarters 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. Additionally, we realized net cash inflow of $41.6 million related to our insurance claim receivable. We have estimated that $6.5 million of proceeds received were related to reimbursement of hurricane-related capital expenditures at our properties damaged by the hurricanes, and reflected such insurance proceeds within investing activities. The remaining $35.1 million change in our insurance claim receivable is related to operating expenditures, and is therefore reflected within operating activities.

We used a net $87.5 million of cash for investing activities during the first half of 2005, consisting of:

• $109.3 million in capital expenditures (including $5.8 million of capitalized interest); and

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• $4.6 million increase in cash restricted, mainly related to mortgage escrows; partially offset by

• $20.5 million of proceeds from the sale of one hotel asset; and

• $6.5 million of insurance proceeds related to capital expenditures.

We used a net $162.9 million of cash from investing activities during the first half of 2004, primarily due to:

• $182.8 million for acquisition of hotels, net of cash acquired;

• $49.9 million in capital expenditures (including $2.0 million of capitalized interest); and

• $30.0 million increase in cash restricted for mortgage escrows; partially offset by

• $104.9 million of proceeds from the sale of 15 hotel assets.

We generated a net $43.6 million of cash from financing activities during the first half of 2005 due mainly to:

• the incurrence of $73.4 million in mortgage loans, net of financing costs; partially offset by

• prepayments on long-term debt of $23.8 million; and

• scheduled payments on long-term debt of $5.5 million.

We generated a net $63.3 million of cash from financing activities during the first half of 2004 primarily due to:

• proceeds from debt issuance, net of issuance costs, of $109.7 million;

• net proceeds from common stock issuances of $72.3 million; partially offset by

• prepayments on long-term debt of $105.9 million;

• scheduled payments on long-term debt of $3.7 million; and

• the purchase of subsidiary partnership interests for $8.7 million.

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 have negotiated, subject to final approval, a closing agreement with the Internal Revenue Service that resolves 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.

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Long-Term Debt

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

	June 30, 2005			December 31, 2004
Senior unsecured notes due 2011 – 9.125%	$	347,665		$	355,665
Senior unsecured notes due 2008 – 9.0%		265,500			270,500
Senior unsecured notes due 2009 – 10.5%		215,687			224,187
Secured facility, due 2009		299,765			302,979
Secured facility, due 2013		98,498			99,293
Convertible subordinated notes		170,000			170,000
Senior subordinated notes		32,740			34,225
Mortgage and other debt		205,234			125,051
Unamortized issue discount		(3,400	)		(3,950	)
	$	1,631,689		$	1,577,950
Fair value adjustment for interest rate swap		(6,104	)		(4,674	)
	$	1,625,585		$	1,573,276

Credit facility. In August 2005, we completed a $100 million expansion of our $50 million credit facility to a total capacity of $150 million. The total $150 million facility will carry an annual interest rate of the London Interbank Offered Rate, or LIBOR, plus 350 basis points, which is 100 basis points less than the original annual interest rate of LIBOR plus 450 basis points. The additional $100 million will mature in August 2006 and consists of $25 million in additional revolver capacity and $75 million of term loan capacity. Asset disposition proceeds in excess of $30 million must be used to pay down any outstanding balance under the facility and permanently reduce the availability if repaying borrowings under the term loan. The original $50 million revolving facility matures in December 2006, as originally provided. There are currently no outstanding borrowings under the facility. However, we expect to borrow approximately $30 million on the credit facility in the near future to fund our debt repurchases, renovation program and hurricane-related expenditures, with repayment coming from future asset sales.

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

Senior unsecured notes. During the six months ended June 30, 2005, we repurchased, using available cash, $21.5 million of our senior unsecured notes, consisting of $5.0 million of the 9.0% notes due 2008, $8.0 million of the 9.125% notes due 2011, and $8.5 million of the 10.5% notes due 2009. We recorded a loss on early extinguishment of debt of $0.9 million and wrote off deferred financing costs of $0.2 million related to these repurchases which is included in depreciation and amortization expense on the accompanying Consolidated Statements of Operations. Between June 30, 2005 and August 2, 2005, using cash on hand, we repurchased an additional $1.0 million of our 9.0% notes due 2008, $5.0 million of our 9.125% notes due 2011, and $6.8 million of our 10.5% notes due 2009, and recorded an additional loss on early extinguishment of debt of $1.0 million and wrote off deferred financing costs of $0.1 million.

Senior subordinated notes. During the six months ended June 30, 2005, we repurchased, using available cash, $1.5 million of our 8.75% senior subordinated notes due 2007 (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.

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In July 2005, we provided irrevocable notice that we would exercise our option to redeem all of our outstanding 8.75% senior subordinated notes due 2007 at a price equal to their outstanding principal amount plus interest to the date of redemption. The redemption date is scheduled to be August 15, 2005. As of June 30, 2005, there was $32.7 million principal amount of these notes outstanding. The redemption will total $34.2 million, consisting of $32.7 million of principal plus interest. We expect to record a loss on early extinguishment of debt of $0.2 million, and write off deferred financing costs of $0.2 million 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 monthly payments of interest only 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 due at the end of the ten year term. Our net proceeds of $34.7 million are net of a $3.0 million escrow reserve for future capital expenditures. We incurred financing costs of $0.8 million related to this mortgage.

On June 17, 2005, we entered into a $44.0 million mortgage loan on our Hilton Clearwater hotel that bears interest at a fixed rate of 5.68%. The mortgage requires monthly payments of interest only 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 due at the end of the ten year term. Our net proceeds of $40.7 million are net of a $3.3 million escrow reserve for future capital expenditures. We incurred financing costs of $1.1 million related to this mortgage.

Derivatives. As of June 30, 2005 and December 31, 2004, the fair value of our interest rate swap was approximately a $6.1 million liability and a $4.7 million liability, respectively. This amount is recorded on our Consolidated Balance Sheets in the other liabilities line with a corresponding debit recorded to long-term debt. During the three and six months ended June 30, 2005, we earned net cash payments of $0.3 million and $1.2 million, respectively, under the swap, which were recorded as a reduction in interest expense. During the three and six months ended June 30, 2004, we earned net cash payments of $1.7 million under the swap, which also were recorded as a reduction in interest expense. In conjunction with the interest rate swap, we have posted collateral of $12.3 million and $12.0 million as of June 30, 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 six months ended June 30, 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 June 30, 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 and six months ended June 30, 2005 combined RevPAR of $167.49 and $148.52, respectively. RevPAR for our comparable hotels during the three and six months ended June 30, 2005 was $81.19 and $76.44, respectively. 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.

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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.

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 beyond certain limited exceptions (including up to $300 million of mortgage indebtedness, of which $113.2 million was available at June 30, 2005, and $50 million of general indebtedness) to acquire assets 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 June 30, 2005, we disposed of 37 hotels with 8,313 rooms for total gross proceeds of $304.1 million in cash and $11.1 million in reduction of debt. Of these 37 hotels, 15 hotels were disposed of in 2003, 21 hotels were disposed of in 2004 and one hotel was disposed of in 2005. The reshaping of our portfolio over the past two years has contributed to an increase in RevPAR, which, for our entire portfolio of properties (all periods exclude seven properties affected by hurricanes in 2004), increased to $77.88 from $61.51 for the six months ended June 30, 2005 and 2003, respectively.

Furthermore, due to the strong seller’s market and the high pricing that can be obtained, we may sell additional hotels that we would otherwise retain, particularly those with residential development potential, where we believe that we can reinvest the proceeds and obtain a higher return on our investment. We would consider and evaluate any such opportunities that have the potential to improve our financial condition or results of operations through further repositioning of our portfolio and recycling capital. Proceeds from asset dispositions would most likely be reinvested into high yielding projects in our existing portfolio through renovation activities and new investments, or be 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 six months ended June 30, 2005, we invested approximately $66 million in non hurricane-related capital expenditures and expect to invest an additional $34 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

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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 six months ended June 30, 2005, we invested approximately $43 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 $150 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 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 June 30, 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.

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 sustained income losses. 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. 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

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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.

In June 2005, the FASB issued Statement No. 154, “Accounting Changes and Error Corrections a Replacement of APB Opinion No. 20 and FASB Statement No. 3”, which changes the requirements for the accounting for and reporting of a change in accounting principle, and applies to all voluntary changes in accounting principle. This Statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless the change is required by a new pronouncement and the pronouncement states specific transition provisions. This Statement carries forward without change the guidance contained in Opinion 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. We are required to adopt this Statement for accounting changes and corrections of errors made during and after the first quarter of 2006. We do not expect the adoption of this statement to have a material effect on our results of operations.

Emerging Issues Task Force (“EITF”) Issue 04-5, “Investor’s Accounting for an Investment in a Limited Partnership When the Investor Is the Sole General Partner and the Limited Partners Have Certain Rights” was ratified by the FASB in June 2005. At issue is what rights held by the limited partner(s) preclude consolidation in circumstances in which the sole general partner would consolidate the limited partnership. The assessment of limited partners’ rights and their impact on the presumption of control of the limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if there is a change to the terms or in the exercisability of the rights of the limited partners, the sole general partner increases or decreases its ownership of limited partnership interests, or there is an increase or decrease in the number of outstanding limited partnership interests. We are required to adopt the provisions of EITF Issue 04-5 for the first quarter of 2006, and for the third quarter of 2005 for new or modified arrangements. We do not expect the adoption of this EITF to have a material effect on our financial statements.

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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 June 30, 2005 was a liability of approximately $6.1 million, which is included in the other liabilities line on our Consolidated Balance Sheets.

In conjunction with the interest rate swap, we have posted collateral of $12.3 million and $12.0 million as of June 30, 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 six months ended June 30, 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 June 30, 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 June 30, 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 6/30/05
Interest Rate Derivative
Interest Rate Swap
Fixed to Variable	$	0.9		$	(1.0	)	$	(1.5	)	$	(1.7	)	$	(1.1	)	$	(4.4	)	$	(6.1	)
Average pay rate		7.51	%		8.24	%		8.40	%		8.49	%		8.51	%
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 June 30, 2005, approximately 18% 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 82% 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 June 30, 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 June 30, 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our Annual Meeting of Stockholders was held on May 26, 2005. At that meeting, the following matters were submitted to a vote of our stockholders:

Proposal No. 1

To elect three members of the Board of Directors to serve three-year terms expiring on the date of the Annual Meeting in 2008 and until their successors are duly elected and qualify.

Bruce G. Wiles	For	72,225,577
	Withheld	10,267,020
James F. Dannhauser	For	72,215,107
	Withheld	10,277,490
Paul J. Klaassen	For	72,214,630
	Withheld	10,277,967

The following directors continue to hold their positions as directors: J. Taylor Crandall, William S. Janes, H. Cabot Lodge III, D. Ellen Shuman, Paul W. Whetsell, and James R. Worms.

Proposal No. 2

To consider and vote on a proposal to amend the Company’s Non-Employee Directors’ Incentive Plan to replace the annual grants of 5,000 stock options with annual grants of Common Stock having a value of $20,000 in the aggregate, and to increase the share limitation, the details of which have been summarized in the proxy and are provided in the accompanying exhibit to this Form 10-Q.

For	50,199,997
Against	23,924,848
Abstain	8,367,752

Proposal No. 3

To consider the ratification of the appointment of KPMG LLP as independent auditors for the Company for the fiscal year ending December 31, 2005.

For	82,052,973
Against	385,593
Abstain	54,031

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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).
3.2.2	Third Amended and Restated By-laws of the Registrant dated and effective December 14, 2004. **
10.5.2	Non-Employee Directors’ Incentive Plan, as amended on May 26, 2005. **
10.21*	Executive Employment Agreement, effective January 1, 2005, between MeriStar Hospitality Corporation, MeriStar Hospitality Operating Partnership, L.P. and Paul W. Whetsell. **
13	Financial Statements of MeriStar Hospitality Operating Partnership, L.P. as of and for the three and six months ended June 30, 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. **

* Indicates a management contract or compensatory plan or arrangement required to be filed pursuant to Item 14(c) of Form 10-Q.

** 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: August 5, 2005

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EX-3.2.2

Exhibit 3.2.2

MERISTAR HOSPITALITY CORPORATION

THIRD AMENDED AND RESTATED BYLAWS

ARTICLE I

OFFICES

Section 1. PRINCIPAL OFFICE. The principal office of the Corporation in the State of Maryland shall be located at such place or places as the Board of Directors may designate.

Section 2. ADDITIONAL OFFICES. The Corporation may have additional offices, including a principal executive office, at such places as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. PLACE. All meetings of stockholders shall be held at the principal executive office of the Corporation or at such other place as shall be set by the Board of Directors and stated in the notice of the meeting.

Section 2. ANNUAL MEETING. An annual meeting of the stockholders for the election of directors and the transaction of any business within the powers of the Corporation shall be held on a date and at the time set by the Board of Directors during the month of May in each year.

Section 3. SPECIAL MEETINGS.

(a) General. The chairman of the board, president, chief executive officer or Board of Directors may call a special meeting of the stockholders. Subject to subsection (b) of this Section 3, a special meeting of stockholders shall also be called by the secretary of the Corporation upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.

(b) Stockholder Requested Special Meetings. (1) Any stockholder of record seeking to have stockholders request a special meeting shall, by sending written notice to the secretary (the “Record Date Request Notice”) by registered mail, return receipt requested, request the Board of Directors to fix a record date to determine the stockholders entitled to request a special meeting (the “Request Record Date”). The Record Date Request Notice shall set forth the purpose of the meeting and the matters proposed to be acted on at it, shall be signed by one or more stockholders of record as of the date of signature (or their agents duly authorized in writing), shall bear the date of signature of each such stockholder (or such agent) and shall set forth all information relating to each such stockholder that must be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date.

The Request Record Date shall not precede and shall not be more than ten days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors. If the Board of Directors, within ten days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth day after the first date on which the Record Date Request Notice is received by the secretary.

(2) In order for any stockholder to request a special meeting, one or more written requests for a special meeting signed by stockholders of record (or their agents duly authorized in writing) as of the Request Record Date entitled to cast not less than a majority (the “Special Meeting Percentage”) of all of the votes entitled to be cast at such meeting (the “Special Meeting Request”) shall be delivered to the secretary. In addition, the Special Meeting Request shall set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to those lawful matters set forth in the Record Date Request Notice received by the secretary), shall bear the date of signature of each such stockholder (or such agent) signing the Special Meeting Request, shall set forth the name and address, as they appear in the Corporation’s books, of each stockholder signing such request (or on whose behalf the Special Meeting Request is signed), the class, series and number of all shares of stock of the Corporation which are owned by each such stockholder, and the nominee holder for, and number of, shares owned by such stockholder beneficially but not of record, shall be sent to the secretary by registered mail, return receipt requested, and shall be received by the secretary within 60 days after the Request Record Date. Any requesting stockholder may revoke his, her or its request for a special meeting at any time by written revocation delivered to the secretary.

(3) The secretary shall inform the requesting stockholders of the reasonably estimated cost of preparing and mailing the notice of meeting (including the Corporation’s proxy materials). The secretary shall not be required to call a special meeting upon stockholder request and such meeting shall not be held unless, in addition to the documents required by paragraph (2) of this Section 3(b), the secretary receives payment of such reasonably estimated cost prior to the mailing of any notice of the meeting.

(4) Except as provided in the next sentence, any special meeting shall be held at such place, date and time as may be designated by the chairman of the board, chief executive officer, president or Board of Directors, whoever has called the meeting. In the case of any special meeting called by the secretary upon the request of stockholders (a “Stockholder Requested Meeting”), such meeting shall be held at such place, date and time as may be designated by the Board of Directors; provided, however, that the date of any Stockholder Requested Meeting shall be not more than 90 days after the record date for such meeting (the “Meeting Record Date”); and provided further that if the Board of Directors fails to designate, within ten days after the date that a valid Special Meeting Request is actually received by the secretary (the “Delivery Date”), a date and time for a Stockholder Requested Meeting, then such meeting shall be held at 2:00 p.m. local time on the 90^th day after the Meeting Record Date or, if such 90^th day is not a Business Day (as defined below), on the first preceding Business Day; and provided further that in the event that the Board of Directors fails to designate a place for a Stockholder Requested Meeting within ten days after the Delivery Date, then such meeting shall be held at the principal executive office of the Corporation. In fixing a date for any special meeting, the chairman of the board, chief executive officer, president or Board of Directors may consider such factors as he, she or it deems relevant within the good faith exercise of business judgment, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for the meeting and any plan of the Board of Directors to call an annual meeting or a special meeting. In the case of any Stockholder Requested Meeting, if the Board of Directors fails to fix a Meeting Record Date that is a date within 30 days after the Delivery Date, then the close of business on the 30^th day after the Delivery Date shall be the

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Meeting Record Date. The Board of Directors may revoke the notice for any Stockholder Requested Meeting in the event that the requesting stockholders fail to comply with the provisions of paragraph (3) of this Section 3(b).

(5) If written revocations of requests for the special meeting have been delivered to the secretary and the result is that stockholders of record (or their agents duly authorized in writing), as of the Request Record Date, entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting to the secretary, the secretary shall: (i) if the notice of meeting has not already been mailed, refrain from mailing the notice of the meeting and send to all requesting stockholders who have not revoked such requests written notice of any revocation of a request for the special meeting, or (ii) if the notice of meeting has been mailed and if the secretary first sends to all requesting stockholders who have not revoked requests for a special meeting written notice of any revocation of a request for the special meeting and written notice of the secretary’s intention to revoke the notice of the meeting, revoke the notice of the meeting at any time before ten days before the commencement of the meeting. Any request for a special meeting received after a revocation by the secretary of a notice of a meeting shall be considered a request for a new special meeting.

(6) The chairman of the board, chief executive officer, president or Board of Directors may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the secretary. For the purpose of permitting the inspectors to perform such review, no such purported request shall be deemed to have been delivered to the secretary until the earlier of (i) five Business Days after receipt by the secretary of such purported request and (ii) such date as the independent inspectors certify to the Corporation that the valid requests received by the secretary represent at least a majority of the issued and outstanding shares of stock that would be entitled to vote at such meeting. Nothing contained in this paragraph (6) shall in any way be construed to suggest or imply that the Corporation or any stockholder shall not be entitled to contest the validity of any request, whether during or after such five Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

(7) For purposes of these Bylaws, “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of Maryland are authorized or obligated by law or executive order to close.

Section 4. NOTICE. Not less than ten nor more than 90 days before each meeting of stockholders, the secretary shall give to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting written or printed notice stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, either by mail, by presenting it to such stockholder personally, by leaving it at the stockholder’s residence or usual place of business or by any other means permitted by Maryland law. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at the stockholder’s address as it appears on the records of the Corporation, with postage thereon prepaid.

Subject to Section 11(a) of this Article II, any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice.

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Section 5. ORGANIZATION AND CONDUCT. Every meeting of stockholders shall be conducted by an individual appointed by the Board of Directors to be chairman of the meeting or, in the absence of such appointment, by the chairman of the board or, in the case of a vacancy in the office or absence of the chairman of the board, by one of the following officers present at the meeting: the vice chairman of the board, if there be one, the president, the vice presidents in their order of rank and seniority, or, in the absence of such officers, a chairman chosen by the stockholders by a vote of a majority of the votes cast by stockholders present in person or by proxy. The secretary, or, in the secretary’s absence, an assistant secretary, or in the absence of both the secretary and assistant secretaries, an individual appointed by the Board of Directors or, in the absence of such appointment, an individual appointed by the chairman of the meeting shall act as secretary. In the event that the secretary presides at a meeting of the stockholders, an assistant secretary, or in the absence of assistant secretaries, an individual appointed by the Board of Directors or the chairman of the meeting, shall record the minutes of the meeting. The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the chairman of the meeting. The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of such chairman, are appropriate for the proper conduct of the meeting, including, without limitation, (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record of the Corporation, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments by participants; (e) determining when the polls should be opened and closed; (f) maintaining order and security at the meeting; (g) removing any stockholder or any other individual who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; and (h) concluding the meeting, or recessing or adjourning the meeting to a later date and time and at a place announced at the meeting. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 6. QUORUM. At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting on any matter shall constitute a quorum; but this section shall not affect any requirement under any statute or the charter of the Corporation for the vote necessary for the adoption of any measure. If, however, such quorum shall not be present at any meeting of the stockholders, the chairman of the meeting shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. The stockholders present either in person or by proxy, at a meeting which has been duly called and convened, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Section 7. VOTING. A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the charter of the Corporation. Unless otherwise provided by statute or by the charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Voting on any question or in any election may be viva voce unless the chairman of the meeting shall order that voting be by ballot.

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Section 8. PROXIES. A stockholder may cast the votes entitled to be cast by the shares of stock owned of record by the stockholder in person or by proxy executed by the stockholder or by the stockholder’s duly authorized agent in any manner permitted by law. Such proxy or evidence of authorization of such proxy shall be filed with the secretary of the Corporation before or at the meeting. No proxy shall be valid more than eleven months after its date, unless otherwise provided in the proxy.

Section 9. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the Corporation registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, a general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any director or other fiduciary may vote stock registered in his or her name as such fiduciary, either in person or by proxy.

Shares of stock of the Corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the stockholder of record of the specified stock in place of the stockholder who makes the certification.

Section 10. INSPECTORS. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more individual inspectors or one or more entities that designate individuals as inspectors to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the individual presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the chairman of the meeting. The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders.

Each such report shall be in writing and signed by him or her or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

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Section 11. ADVANCE NOTICE OF STOCKHOLDER NOMINEES FOR DIRECTOR AND OTHER STOCKHOLDER PROPOSALS.

(a) Annual Meetings of Stockholders. (1) Nominations of individuals for election to the Board of Directors and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record both at the time of giving of notice by the stockholder as provided for in this Section 11(a) and at the time of the annual meeting, who is entitled to vote at the meeting and who has complied with this section 11(a).

(2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this Section 11, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation and such other business must otherwise be a proper matter for action by the stockholders. To be timely, a stockholder’s notice shall set forth all information required under this Section 11 and shall be delivered to the secretary at the principal executive office of the Corporation not earlier than the 120^th day nor later than 5:00 p.m., Eastern Time, on the 90^th day prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting; provided, however, that in the event that the date of the mailing of the notice for the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the 120^th day prior to the date of mailing of the notice for such annual meeting and not later than 5:00 p.m. Eastern Time on the later of the 90^th day prior to the first anniversary of the date of mailing of the notice for such annual meeting or the tenth day following the day on which public announcement of the date of mailing of the notice for such meeting is first made. The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth (i) as to each individual whom the stockholder proposes to nominate for election or reelection as a director (A) the name, age, business address and residence address of such individual, (B) the class, series and number of any shares of stock of the Corporation that are beneficially owned by such individual, (C) the date such shares were acquired and the investment intent of such acquisition and (D) all other information relating to such individual that is required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act and the rules thereunder (including such individual’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a description of such business, the reasons for proposing such business at the meeting and any material interest in such business of such stockholder and any Stockholder Associated Person (as defined below), individually or in the aggregate, including any anticipated benefit to the stockholder and the Stockholder Associated Person therefrom; (iii) as to the stockholder giving the notice and any Stockholder Associated Person, the class, series and number of all shares of stock of the Corporation which are owned by such stockholder and by such Stockholder Associated Person, if any, and the nominee holder for, and number of, shares owned beneficially but not of record by such stockholder and by any such Stockholder Associated Person; (iv) as to the stockholder giving the notice and any Stockholder Associated Person covered by clauses (ii) or (iii) of this paragraph (2) of this Section 11(a), the name and address of such stockholder, as they appear on the Corporation’s stock ledger and current name and address, if different, and of such Stockholder Associated Person; and (v) to the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the nominee for election or reelection as a director or the proposal of other business on the date of such stockholder’s notice.

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(3) Notwithstanding anything in this subsection (a) of this Section 11 to the contrary, in the event the Board of Directors increases or decreases the maximum or minimum number of directors in accordance with Article III, Section 2 of these Bylaws, and there is no public announcement of such action at least 100 days prior to the first anniversary of the date of mailing of the notice of the preceding year’s annual meeting, a stockholder’s notice required by this Section 11 (a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive office of the Corporation not later than 5:00 p.m. Eastern Time, on the tenth day following the day on which such public announcement is first made by the Corporation.

(4) For purposes of this Section 11, “Stockholder Associated Person” of any stockholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (ii) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder and (iii) any person controlling, controlled by or under common control with such Stockholder Associated Person.

(b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of individuals for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) provided that the Board of Directors has determined that directors shall be elected at such special meeting, by any stockholder of the Corporation who is a stockholder of record both at the time of giving of notice provided for in this Section 11 and at the time of the special meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 11. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more individuals to the Board of Directors, any such stockholder may nominate an individual or individuals (as the case may be) for election as a director as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (2) of this Section 11(a) shall be delivered to the secretary at the principal executive office of the Corporation not earlier than the 120^th day prior to such special meeting and not later than 5:00 p.m., Eastern Time on the later of the 90^th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. The public announcement of a postponement or adjournment of a special meeting shall not commence a new time period for the giving of a stockholder’s notice as described above.

(c) General. (1) Upon written request by the secretary or the Board of Directors or any committee thereof, any stockholder proposing a nominee for election as a director or any proposal for other business at a meeting of stockholders shall provide, within five Business Days of delivery of such request (or such other period as may be specified in such request), written verification, satisfactory, in the discretion of the Board of Directors or any committee thereof or any authorized officer of the Corporation, to demonstrate the accuracy of any information submitted by the stockholder pursuant to this Section 11. If a stockholder fails to provide such written verification within such period, the information as to which written verification was requested may be deemed not to have been provided in accordance with this Section 11.

(2) Only such individuals who are nominated in accordance with this Section 11 shall be eligible for election by stockholders as directors, and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with this Section 11. The chairman of the meeting shall have the power and duty to determine whether a nomination or any

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other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with this Section 11.

(3) For purposes of this Section 11, (a) the “date of mailing of the notice” shall mean the date of the proxy statement for the solicitation of proxies for election of directors and (b) “public announcement” shall mean disclosure (i) in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or comparable news service or (ii) in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to the Exchange Act.

(4) Notwithstanding the foregoing provisions of this Section 12, a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 12. Nothing in this Section 12 shall be deemed to affect any rights of stockholders to request inclusion of proposals in, nor any right of the Corporation to omit a proposal from, the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 12. CONTROL SHARE ACQUISITION ACT. Notwithstanding any other provision of the charter of the Corporation or these Bylaws, Title 3, Subtitle 7 of the Maryland General Corporation Law (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

ARTICLE III

DIRECTORS

Section 1. GENERAL POWERS. The business and affairs of the Corporation shall be managed under the direction of its Board of Directors.

Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Directors may establish, increase or decrease the number of directors, provided that the number thereof shall never be less than the minimum number required by the Maryland General Corporation Law, nor more than 15, and further provided that the tenure of office of a director shall not be affected by any decrease in the number of directors.

Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. In the event such meeting is not so held, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors. The Board of Directors may provide, by resolution, the time and place for the holding of regular meetings of the Board of Directors without other notice than such resolution.

Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the chairman of the board, the chief executive officer, the president or by a majority of the directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix any place as the place for holding any special meeting of the Board of

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Directors called by them. The Board of Directors may provide, by resolution, the time and place for the holding of special meetings of the Board of Directors without other notice than such resolution.

Section 5. NOTICE. Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, electronic mail, facsimile transmission, United States mail or courier to each director at his or her business or residence address. Notice by personal delivery, telephone, electronic mail or facsimile transmission shall be given at least 24 hours prior to the meeting. Notice by United States mail shall be given at least three days prior to the meeting. Notice by courier shall be given at least two days prior to the meeting. Telephone notice shall be deemed to be given when the director or his or her agent is personally given such notice in a telephone call to which the director or his or her agent is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Corporation by the director. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Notice by United States mail shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws.

Section 6. QUORUM. A majority of the directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that, if less than a majority of such directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to applicable law, the charter of the Corporation or these Bylaws, the vote of a majority of a particular group of directors is required for action, a quorum must also include a majority of such group.

The directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum.

Section 7. VOTING. (a) The action of the majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the charter or these Bylaws. If enough directors have withdrawn from a meeting to leave less than a quorum but the meeting is not adjourned, the action of the majority of the number of directors necessary to constitute a quorum at such meeting shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the charter or these Bylaws.

(b) Any action pertaining to any transaction in which the Corporation is purchasing, selling, leasing or mortgaging any real estate asset, making a joint venture investment or engaging in any other transaction in which an advisor, director or officer of the Corporation, any affiliated lessee or affiliated contract manager of any property of the Corporation or any affiliate of the foregoing, has any direct or indirect interest other than as a result of such person’s status as a director, officer or stockholder of the Corporation, shall be approved by the affirmative vote of a majority of the Independent Directors (as defined in the Corporation’s charter), even if the Independent Directors constitute less than a quorum.

Section 8. ORGANIZATION. At each meeting of the Board of Directors, the chairman of the board or, in the absence of the chairman, the vice chairman of the board, if any, shall act as chairman of the meeting. In the absence of both the chairman and vice chairman of the board, the chief executive

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officer or in the absence of the chief executive officer, the president or in the absence of the president, a director chosen by a majority of the directors present, shall act as chairman of the meeting. The secretary or in the absence of the secretary, an assistant secretary of the Corporation, or in the absence of the secretary and all assistant secretaries, an individual appointed by the chairman of the meeting, shall act as secretary of the meeting.

Section 9. TELEPHONE MEETINGS. Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 10. CONSENT BY DIRECTORS WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each director and is filed with the minutes of proceedings of the Board of Directors.

Section 11. VACANCIES. If for any reason any or all the directors cease to be directors, such event shall not terminate the Corporation or affect these Bylaws or the powers of the remaining directors hereunder (even if fewer than three directors remain). Except as may be provided by the Board of Directors in setting the terms of any class or series of preferred stock, any vacancy on the Board of Directors may be filled only by a majority of the remaining directors, even if the remaining directors do not constitute a quorum. Any director elected to fill a vacancy shall serve for the remainder of the full term of the class in which the vacancy occurred and until a successor is elected and qualifies.

Section 12. COMPENSATION. Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive compensation per year and/or per meeting and/or per visit to real property or other facilities owned or leased by the Corporation and for any service or activity they performed or engaged in as directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they performed or engaged in as directors; but nothing herein contained shall be construed to preclude any directors from serving the Corporation in any other capacity and receiving compensation therefor.

Section 13. LOSS OF DEPOSITS. No director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or stock have been deposited.

Section 14. SURETY BONDS. Unless required by law, no director shall be obligated to give any bond or surety or other security for the performance of any of his or her duties.

Section 15. RELIANCE. Each director, officer, employee and agent of the Corporation shall, in the performance of his or her duties with respect to the Corporation, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Corporation, upon an opinion of counsel or upon reports made to the Corporation by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by the Board of Directors or officers of the Corporation, regardless of whether such counsel or expert may also be a director.

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Section 16. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The directors shall have no responsibility to devote their full time to the affairs of the Corporation. Any director or officer, employee or agent of the Corporation, in his personal capacity or in a capacity as an affiliate, employee or agent of any other person, or otherwise, may have business interests and engage in business activities similar to, in addition to or in competition with those of or relating to the Corporation.

ARTICLE IV

COMMITTEES

Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may appoint from among its members an Executive Committee, an Audit Committee, a Compensation Committee, a Leasing Committee, a Nominating Committee and other committees, composed of one or more directors, to serve at the pleasure of the Board of Directors. The members of the Audit Committee and Compensation Committee shall at all times consist solely of Independent Directors.

Section 2. POWERS. The Board of Directors may delegate to committees appointed under Section 1 of this Article any of the powers of the Board of Directors, except as prohibited by law.

Section 3. MEETINGS. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two members of any committee (if there are at least two members of the Committee) may fix the time and place of its meeting unless the Board shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Each committee shall keep minutes of its proceedings.

Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 5. CONSENT BY COMMITTEES WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each member of the committee and is filed with the minutes of proceedings of such committee.

Section 6. VACANCIES. Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee.

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ARTICLE V

OFFICERS

Section 1. GENERAL PROVISIONS. The officers of the Corporation shall include a chief executive officer, a president, a secretary and a treasurer and may include a chairman of the board, a vice chairman of the board, one or more vice presidents, a chief operating officer, a chief financial officer, one or more assistant secretaries and one or more assistant treasurers. In addition, the Board of Directors may from time to time elect such other officers with such powers and duties as it shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the Board of Directors, except that the chief executive officer may from time to time appoint one or more vice presidents, assistant secretaries and assistant treasurers or other officers. Each officer shall hold office until his or her successor is elected and qualifies or until his or her death, resignation or removal in the manner hereinafter provided. Any two or more offices except president and vice president may be held by the same person. In its discretion, the Board of Directors may leave unfilled any office except that of president, treasurer and secretary. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent.

Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Corporation may be removed, with or without cause, by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, the chairman of the board, the president or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the notice of resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

Section 3. VACANCIES. A vacancy in any office may be filled by the Board of Directors for the balance of the term.

Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors shall designate a chief executive officer. In the absence of such designation, the chairman of the board shall be the chief executive officer of the Corporation. The chief executive officer shall have general responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of chief executive officer and such other duties as may be prescribed by the Board of Directors from time to time.

Section 5. CHIEF OPERATING OFFICER. The Board of Directors may designate a chief operating officer. The chief operating officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer.

Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer.

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Section 7. CHAIRMAN OF THE BOARD. The Board of Directors may designate a chairman of the board. The chairman of the board shall preside over the meetings of the Board of Directors and of the stockholders at which he shall be present. The chairman of the board shall perform such other duties as may be assigned to him or her by the Board of Directors.

Section 8. PRESIDENT. In the absence of a chief executive officer, the president shall in general supervise all of the business and affairs of the Corporation. In the absence of a designation of a chief operating officer by the Board of Directors, the president shall be the chief operating officer. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time.

Section 9. VICE PRESIDENTS. In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to such vice president by the president or by the Board of Directors. The Board of Directors may designate one or more vice presidents as executive vice president, senior vice president, or as vice president for particular areas of responsibility.

Section 10. SECRETARY. The secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the stock transfer books of the Corporation; and (f) in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or by the Board of Directors.

Section 11. TREASURER. The treasurer shall have the custody of the funds and securities of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. In the absence of a designation of a chief financial officer by the Board of Directors, the treasurer shall be the chief financial officer of the Corporation.

The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and Board of Directors, at the regular meetings of the Board of Directors or whenever it may so require, an account of all his or her transactions as treasurer and of the financial condition of the Corporation.

If required by the Board of Directors, the treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation.

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Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the president or the Board of Directors. The assistant treasurers shall, if required by the Board of Directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors.

Section 13. SALARIES. The salaries and other compensation of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he is also a director.

ARTICLE VI

CONTRACTS, LOANS, CHECKS AND DEPOSITS

Section 1. CONTRACTS. The Board of Directors, the Executive Committee or another committee of the Board of Directors within the scope of its delegated authority may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document shall be valid and binding upon the Corporation when duly authorized or ratified by action of the Board of Directors or the Executive Committee or such other committee and executed by an authorized person.

Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors.

Section 3. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may designate.

ARTICLE VII

STOCK

Section 1. CERTIFICATES. Except as otherwise provided in these Bylaws, this Section shall not be interpreted to limit the authority of the Board of Directors to issue some or all of the shares of any or all of the Corporation’s classes or series of stock without certificates. Each stockholder, upon written request to the secretary of the Corporation, shall be entitled to a certificate or certificates which shall represent and certify the number of shares of each class of stock held by him or her in the Corporation. Each certificate shall be signed by the chairman of the board, the president or a vice president and countersigned by the secretary or an assistant secretary or the treasurer or an assistant treasurer and may be sealed with the seal, if any, of the Corporation. The signatures may be either manual or facsimile. Certificates shall be consecutively numbered; and if the Corporation shall, from time to time, issue several classes of stock, each class may have its own number series. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Each certificate representing shares which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Corporation, shall have a statement of such restriction,

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limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. If the Corporation has authority to issue stock of more than one class, the certificate shall contain on the face or back a full statement or summary of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of each class of stock and, if the Corporation is authorized to issue any preferred or special class in series, the differences in the relative rights and preferences between the shares of each series to the extent they have been set and the authority of the Board of Directors to set the relative rights and preferences of subsequent series. In lieu of such statement or summary, the certificate may state that the Corporation will furnish a full statement of such information to any stockholder upon request and without charge. If any class of stock is restricted by the Corporation as to transferability, the certificate shall contain a full statement of the restriction or state that the Corporation will furnish information about the restrictions to the stockholder on request and without charge.

Section 2. TRANSFERS. Upon surrender to the Corporation or the transfer agent of the Corporation of a stock certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland.

Notwithstanding the foregoing, transfers of shares of any class of stock will be subject in all respects to the charter of the Corporation and all of the terms and conditions contained therein.

Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board of Directors may direct a new certificate to be issued in place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, an officer designated by the Board of Directors may, in his or her discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or the owner’s legal representative to advertise the same in such manner as he or she shall require and/or to give bond, with sufficient surety, to the Corporation to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate.

Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of stockholders, not less than ten days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not longer than 20 days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days before the date of such meeting.

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If no record date is fixed and the stock transfer books are not closed for the determination of stockholders, (a) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the day on which the notice of meeting is mailed or the 30^th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the Board of Directors, declaring the dividend or allotment of rights, is adopted.

When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein.

Section 5. STOCK LEDGER. The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate stock ledger containing the name and address of each stockholder and the number of shares of stock of each class held by such stockholder.

Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors may issue fractional stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit.

ARTICLE VIII

ACCOUNTING YEAR

The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.

ARTICLE IX

DISTRIBUTIONS

Section 1. AUTHORIZATION. Dividends and other distributions upon the stock of the Corporation may be authorized by the Board of Directors, subject to the provisions of law and the charter of the Corporation. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the charter.

Section 2. CONTINGENCIES. Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall

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determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve.

ARTICLE X

INVESTMENT POLICY

Subject to the provisions of the charter of the Corporation, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.

ARTICLE XI

SEAL

Section 1. SEAL. The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation, the year of its incorporation and the words “Incorporated Maryland.” The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.

Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.

ARTICLE XII

WAIVER OF NOTICE

Whenever any notice is required to be given pursuant to the charter of the Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE XIII

AMENDMENT OF BYLAWS

The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws.

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EX-10.5.2

Exhibit 10.5.2

MERISTAR HOSPITALITY CORPORATION

NON-EMPLOYEE DIRECTORS’ INCENTIVE PLAN

ARTICLE I

Definitions

1.1 Award Date means the first business day following the Company’s annual meeting of stockholders, beginning with the annual meeting of stockholders in 1999.

1.2 Board means the Board of Directors of the Company.

1.3 Committee means the Board or the committee appointed by the Board to administer the Plan.

1.4 Common Stock means the common stock of the Company.

1.5 Company means MeriStar Hospitality Corporation, a Maryland corporation.

1.6 Fair Market Value means, on any given date: if the Common Stock is not listed on an established stock exchange, Fair Market Value shall be the average of the final bid and asked quotations on the over-the-counter market in which the Common Stock is traded or, if applicable, the reported “closing” price of a share of Common Stock in the New York over-the-counter market as reported by the National Association of Securities Dealers, Inc. If the Common Stock is listed on one or more established stock exchanges, Fair Market Value shall be deemed to be the highest closing price of a share of Common Stock reported on any of such exchanges. In any case, if no sale of Common Stock is made on any stock exchange or over-the-counter market on that date, then Fair Market Value shall be determined as of the next preceding day on which there was a sale.

1.7 First Award Date means the date following the consummation of the merger contemplated by the Agreement and Plan of Merger among American General Hospitality Corporation and American General Hospitality Operating Partnership, L.P., and Capstar Hotel Company, Capstar Management Company, L.P. and Capstar Management Company II, L.P., dated as of March 15, 1998, upon which the Participant commences service as a member of the Board, whether by election or appointment.

1.8 Internal Revenue Code means the Internal Revenue Code of 1986, as amended.

1.9 Option means a stock option that entitles the holder to purchase shares of Common Stock from the Company on the terms set forth in Article IV of this Plan.

1.10 Participant means a member of the Board who, on the First Award Date or applicable Award Date, is not an employee or officer of the Company or any “subsidiary” or “parent” corporation of the Company within the meaning of Section 424 of the Internal Revenue Code.

1.11 Plan means the MeriStar Hospitality Corporation Non-Employee Directors’ Incentive Plan.

ARTICLE II

Purposes

The Plan is intended to (i) assist the Company in recruiting and retaining non-employee directors and (ii) promote a greater identity of interest between Participants and stockholders by enabling Participants to participate in the Company’s future success.

ARTICLE III

Administration

The Plan shall be administered by the Committee. The Committee shall have complete authority to interpret all provisions of the Plan; to adopt, amend, and rescind rules and regulations pertaining to the administration of the Plan and to make all other determinations necessary or advisable for the administration of the Plan. The express grant in the Plan of any specific power to the Committee shall not be construed as limiting any power or authority of the Committee. Any decision made, or action taken, by the Committee in connection with the administration of the Plan shall be final and conclusive. No member of the Committee shall be liable for any act done in good faith with respect to the Plan. All expenses of administering the Plan shall be borne by the Company.

ARTICLE IV

Options & Common Stock Grants

4.1 Grant of Options. Each Participant shall be granted an Option for 7,500 shares of Common Stock on the applicable First Award Date. Thereafter, each Participant shall receive an annual grant of Common Stock on each Award Date having a Fair Market Value of $20,000. All Options shall be evidenced by Agreements that shall be subject to the applicable provisions of this Plan and to such other provisions as the Committee may adopt which are not inconsistent with the provisions of this Plan.

4.2 Option Price. The price per share of Common Stock purchased on the exercise of an Option shall be the Fair Market Value on the date that the Option is granted.

4.3 Maximum Option Period. The maximum period during which an Option may be exercised shall be ten years from the date of grant.

4.4 Exercise of Options. All Options granted under the Plan shall vest in three annual installments beginning on the date of grant and on subsequent anniversaries thereof (each, a “Vesting Date”), provided the Participant continues to serve as a director of the Company on such Vesting Date.

4.5 Effect of Termination of Services or Death. If a Participant ceases to serve as a director of the Company for any reason, the Options that have been previously granted to that Participant and that are not vested as of that date shall be forfeited. Options that have vested as of the date of such cessation of services may be exercised by the Participant, in accordance with and subject to the terms of the Plan, after the date such Participant ceases to be a director of the Company. If a Participant dies, the Options that have been previously granted to that Participant and that are vested as of the date of death may be exercised by the administrator of the Participant’s estate, or by the person to whom such Options are transferred by will or the laws of descent and distribution. In no event, however, may any Option be exercised after the expiration date of such Option. Any Option or portion thereof that is not exercised during the applicable time period specified above shall be deemed terminated at the end of the applicable time period for purposes of Article VI hereof.

4.6 Effect of a Change in Control. All Options granted pursuant to this Plan shall immediately vest upon a Change in Control of the Company. For purposes of the Plan, a “Change in Control” shall mean (i) the commencement of a public tender offer for all or any portion of the Common Stock, (ii) a proposal to merge, consolidate or otherwise combine with another company is submitted to the stockholders of the Company for approval, or (iii) the Board approves any transaction or event that would constitute a change of control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of the Securities Exchange Act of 1934, as amended.

4.7 Payment of Option Price. Payment of the Option price shall be made in cash, cash equivalent acceptable to the Committee, Company Common Stock, or a combination thereof. In addition, a Participant may provide instructions to the Company that upon receipt of the Option price in cash from a broker or dealer acting at the direction of the Participant in payment for any shares of Common Stock pursuant to the exercise of an Option, the Company shall issue such shares of Common Stock directly to the designated broker or dealer. If shares of Common Stock are surrendered in payment of the Option price, the shares

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surrendered must have an aggregate Fair Market Value (determined as of the day preceding the exercise date) that, together with any cash or cash equivalent paid, is not less than the Option price for the number of shares of Common Stock for which this Option is being exercised.

4.8 Nontransferability. Each Option granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. During the lifetime of the Participant to whom an Option is granted, the Option may be exercised only by the Participant. No right or interest of a Participant in any Option shall be liable for, or subject to, any lien, obligation, or liability of such Participant.

4.9 Transferable Options. Section 4.8 hereof to the contrary notwithstanding, an Option may be transferred by a Participant to the Participant’s children, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners; provided, however, that the Participant may not receive any consideration for the transfer. The holder of an Option transferred pursuant to this section shall be bound by the same terms and conditions that governed the Option during the period that it was held by the Participant.

4.10 Stockholder Rights. No Participant shall have any rights as a stockholder with respect to shares of Common Stock subject to his or her Option until the date of exercise of such option.

ARTICLE V

Shares in Lieu of Fees

5.1 Each Participant shall have the right to elect to receive payment of any or all director fees in shares of Common Stock rather than cash. Unless a Participant elects otherwise, fees paid in shares of Common Stock will be paid at the same time as are fees paid in cash.

ARTICLE VI

Stock Subject to Plan

6.1 Shares Issued. Upon the exercise of an Option, the Company may deliver to the Participant (or the Participant’s broker if the Participant so directs), shares of Common Stock from its authorized but unissued Common Stock.

6.2 Aggregate Limit. The maximum aggregate number of shares of Common Stock that may be issued under this Plan is the total of (i) two percent (2%) of the number of shares of Common Stock that were outstanding as of the end of the immediately preceding calendar year (rounded downward if necessary to eliminate fractional shares); minus (ii) the number of shares subject to awards granted under the Plan through the last day of the immediately preceding calendar year; plus (iii) as of the last day of the immediately preceding calendar year, the number of shares with respect to which previously granted awards under the Plan have expired or have been forfeited. The maximum aggregate number of shares that may be issued under this Plan shall be subject to adjustment as provided in Article VII.

6.3 Reallocation of Shares. If an Option is terminated, in whole or in part, for any reason other than its exercise, the number of shares of Common Stock allocated to the Option or portion thereof may be reallocated to other Options to be granted under this Plan.

ARTICLE VII

Adjustment Upon Change in Common Stock

The provisions of this Plan and the terms of outstanding Options shall be adjusted as the Committee shall determine to be equitably required in the event that there is an increase or reduction in the number of shares of Common Stock, or any change (including, but not limited to, a change in value) in the shares of Common Stock or exchange of shares of Common Stock for a different number or kind of shares or other securities of the Company by reason of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, subdivision or consolidation of shares, extraordinary dividend, change in

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corporate structure or otherwise. Any determination made under this Article VII by the Committee shall be final and conclusive.

The issuance by the Company of shares of any class, or securities convertible into shares of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares of obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the provisions of this Plan or the terms of outstanding Options.

ARTICLE VIII

Compliance With Law and

Approval of Regulatory Bodies; Governing Law

No Common Stock shall be issued and no certificates for shares of Common Stock shall be delivered under the Plan except in compliance with all applicable federal and state laws and regulations, any listing agreement to which the Company is a party, and the rules of all domestic stock exchanges on which the Company’s Common Stock may be listed. The Company shall have the right to rely on an opinion of its counsel as to such compliance. Any certificate issued to evidence Common Stock issued upon the exercise of an Option granted under the Plan may bear such legends and statements as the Committee may deem advisable to assure compliance with federal and state laws and regulations. No Common Stock shall be issued and no certificate for shares of Common Stock shall be delivered upon the exercise of an Option granted under the Plan until the Company has obtained such consent or approval as the Committee may deem advisable from regulatory bodies having jurisdiction over such matters. Except as to matters of federal law, this Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State of Maryland without giving effect to conflicts of law principles.

ARTICLE IX

General Provisions

9.1 Unfunded Plan. The Plan, insofar as it provides for awards, shall be unfunded, and the Company shall not be required to segregate any assets that may at any time be represented by awards under the Plan. Any liability of the Company to any person with respect to any award to be made under the Plan shall be based solely upon any contractual obligations that may be created pursuant to the Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company.

9.2 Rules of Construction. Headings are given to the articles and sections of the Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or other provision of law shall be construed to refer to any amendment to or successor of such provision of law.

ARTICLE X

Amendment

The Board may amend from time to time or terminate the Plan at any time; provided, however, that no amendment may become effective until stockholder approval is obtained if the amendment (i) materially increases the aggregate number of shares of Common Stock that may be issued under this Plan or (ii) stockholder approval would be required for compliance with stock exchange rules. No amendment shall, without a Participant’s consent, adversely affect any rights of such Participant under any outstanding Option.

ARTICLE XI

Duration of Plan

No Option may be made under this Plan after December 31, 2008. Options made before that date shall remain valid in accordance with their terms.

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ARTICLE XII

Effective Date of Plan

The Plan was originally adopted by the Board on July 11, 1996 and approved by shareholders on July 15, 1996. The Plan was subsequently amended by the Board on April 3, 1998, which amendments were approved by the stockholders on July 28, 1998.

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EX-10.21

Exhibit 10.21

EXECUTIVE EMPLOYMENT AGREEMENT

EXECUTIVE EMPLOYMENT AGREEMENT, effective as of January 1, 2005, by and between MERISTAR HOSPITALITY CORPORATION, a Maryland corporation (the “Company”), MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the “Partnership”), and PAUL W. WHETSELL (the “Executive”), an individual residing at [address].

The Company and the Partnership desire to employ the Executive in the capacity of Chairman of the Board of Directors and Chief Executive Officer and the Executive desires to be so employed, on the terms and subject to the conditions set forth in this agreement (the “Agreement”);

Now, therefore, in consideration of the mutual covenants set forth herein and other good and valuable consideration the parties hereto hereby agree as follows:

1. Employment Term. The Company and the Partnership each hereby employ the Executive, and the Executive agrees to be employed by the Company and the Partnership, upon the terms and subject to the conditions set forth herein, for a term of three (3) years, commencing on January 1, 2005 (the “Commencement Date”), unless terminated earlier in accordance with Section 5 of this Agreement; provided that such term shall automatically be extended from time to time for additional periods of one calendar year from the date on which it would otherwise expire unless the Executive, on one hand, or the Company and the Partnership, on the other, gives notice to the other party or parties prior to such date that it elects to permit the term of this Agreement to expire without extension on such date. (The initial term of this Agreement as the same may be extended in accordance with the terms of this Agreement is hereinafter referred to as the “Term”).

2. Positions: Conduct.

(a) During the Term, the Executive will hold the titles and offices of, and serve in the positions of, Chairman of the Board of Directors and Chief Executive Officer of the Company and the Partnership. The Executive shall report to the Board of Directors of the Company (the “Board”), undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons situated in similar executive capacities, and perform such other specific duties and services (including service as an officer, director or equivalent position of any direct or indirect subsidiary without additional compensation) as the Board shall reasonably request consistent with the Executive’s positions.

(b) During the Term, the Executive agrees to devote his full business time and attention to the business and affairs of the Company and the

Partnership and to faithfully and diligently perform, to the best of his ability, all of his duties and responsibilities hereunder. The Company is aware that the Executive serves as the Chairman of the Board of Directors of Interstate Hotels & Resorts, Inc. (“Interstate”) in a non-executive capacity. Nothing in this Agreement shall preclude the Executive from devoting reasonable time and attention to (i) serving, with the approval of the Board, as a director, trustee or member of any committee of any organization, (ii) engaging in charitable and community activities and (iii) managing his personal investments and affairs; provided that such activities do not involve any material conflict of interest with the interests of the Company or, individually or collectively, interfere materially with the performance by the Executive of his duties and responsibilities under this Agreement. Notwithstanding the foregoing and except as expressly provided herein, during the Term, the Executive may not accept employment with any other individual or entity, or engage in any other venture which is directly or indirectly in conflict or competition with the business of the Company or the Partnership.

(c) The Executive’s office and place of rendering his services under this Agreement shall be in the principal executive offices of the Company which shall be in the Washington, D.C. metropolitan area. Under no circumstances shall the Executive be required to relocate from the Washington, D.C. metropolitan area or provide services under this Agreement in any other location other than in connection with reasonable and customary business travel. During the Term, the Company shall provide the Executive with executive office space, and administrative and secretarial assistance and other support services consistent with his position as Chairman of the Board and Chief Executive Officer and with his duties and responsibilities hereunder.

3. Board of Directors. While it is understood that the right to elect directors of the Company is by law vested in the stockholders and directors of the Company, it is nevertheless mutually contemplated that, subject to such rights, during the Term the Executive will serve as a member of the Company’s Board of Directors.

4. Salary; Additional Compensation; Perquisites and Benefits.

(a) During the Term, the Company and the Partnership will pay the Executive a base salary at an aggregate annual rate of not less than $635,000 per annum, subject to annual review by the Compensation Committee of the Board (the “Compensation Committee”), and in the discretion of such Committee, increased from time to time. Once increased, such base salary may not be decreased. Such salary shall be paid in periodic installments in accordance with the Company’s standard practice, but not less frequently than semi-monthly.

(b) For each fiscal year during the Term, the Executive will be eligible to receive a bonus from the Company. The award and amount of such bonus shall be determined by the Compensation Committee during an annual review of the Executive’s performance. Eighty percent (80%) of this annual bonus shall be based upon the Company’s achievement of predefined operating or performance goals, such as FFO/Share and EBITDA. The remainder of the Executive’s annual bonus shall be determined, at the discretion of the Compensation Committee, upon the Executive’s

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individual performance. The Executive shall have the opportunity to earn an annual bonus in the following amounts: threshold target - 25% of base salary; internal plan - 75% of base salary; target - 125% of base salary; and maximum bonus amount - 150% of base salary. In addition to the foregoing bonus amounts, the Executive will be eligible to receive in 2007 a one-time additional bonus award in stock having a maximum value of $1,250,000 as a long term incentive for the 2004, 2005, and 2006 fiscal years based upon the achievement of certain absolute and relative shareholder returns, the calculation of which shall be made in a manner consistent with the calculation of the Executive’s other long term stock incentive awards for those years. Such one-time additional bonus award shall be in addition to, and not to the exclusion of, any other long-term incentive stock awards to which the Executive might otherwise be entitled to for the 2004, 2005, and 2006 fiscal years.

(c) During the Term, the Executive will participate in all plans now existing or hereafter adopted by the Company or the Partnership for their management employees or the general benefit of their employees, such as any pension, profit-sharing, bonuses, stock option or other incentive compensation plans, life and health insurance plans, or other insurance plans and benefits on the same basis and subject to the same qualifications as other senior executive officers.

(d) At the Board’s sole discretion, Executive shall be eligible for stock option grants from time to time pursuant to the Company’s Incentive Plan and in accordance with the terms thereof.

(e) The Company and the Partnership will reimburse the Executive, in accordance with their standard policies from time to time in effect, for all out-of-pocket business expenses as may be incurred by the Executive in the performance of his duties under this Agreement.

(f) The Executive shall be entitled to vacation time to be credited and taken in accordance with the Company’s policy from time to time in effect for senior executives, which in any event shall not be less than a total of four weeks per calendar year. Such vacation time shall not be carried over year to year, and shall not be paid out upon termination of employment, or upon expiration of this Agreement.

(g) The Company, at its sole cost, shall pay (i) up to $40,000 annually (to be increased annually by the prior year’s consumer price index (“CPI”)) toward the premium of a life insurance policy with a death benefit of at least $2,000,000 payable to a beneficiary designated by the Executive and (ii) up to $12,000 annually (to be increased annually by the prior year’s CPI) toward the premium of a disability policy which, upon a determination of the Executive’s Disability (as hereinafter defined), pays at least $2,000,000 to the Executive.

(h) The Executive shall be granted a car allowance of up to $1,700 per month (to be increased annually by the prior year’s CPI) toward the lease of an automobile to be leased by the Company for the use of the Executive.

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(i) To the fullest extent permitted by applicable law, the Executive shall be indemnified and held harmless by the Company and the Partnership against any and all judgments, penalties, fines, amounts paid in settlement, and other reasonable expenses (including, without limitation, reasonable attorneys’ fees and disbursements) actually incurred by the Executive in connection with any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative, investigative or other) for any action or omission in his capacity as a director, officer or employee of the Company or the Partnership.

Indemnification under this Section 4(i) shall be in addition to, and not in substitution of, any other indemnification by the Company or the Partnership of its officers and directors. Expenses incurred by the Executive in defending an action, suit or proceeding for which he claims the right to be indemnified pursuant to this Section 4(i) shall be paid by the Company or the Partnership, as the case may be, in advance of the final disposition of such action, suit or proceeding upon the Company’s or the Partnership’s receipt of (x) a written affirmation by the Executive of his good faith belief that the standard of conduct necessary for his indemnification hereunder and under the provisions of applicable law has been met and (y) a written undertaking by or on behalf of the Executive to repay the amount advanced if it shall ultimately be determined by a court that the Executive engaged in conduct which precludes indemnification under the provisions of such applicable law. Such written undertaking in clause (y) shall be accepted by the Company or the Partnership, as the case may be, without security therefor and without reference to the financial ability of the Executive to make repayment thereunder. The Company and the Partnership shall use commercially reasonable efforts to maintain in effect for the Term of this Agreement a directors’ and officers’ liability insurance policy, with a policy limit of at least $5,000,000, subject to customary exclusions, with respect to claims made against officers and directors of the Company or the Partnership; provided, however , the Company or the Partnership, as the case may be, shall be relieved of this obligation to maintain directors’ and officers’ liability insurance if, in the good faith judgment of the Company or the Partnership, it cannot be obtained at a reasonable cost.

5. Termination.

(a) The Term will terminate immediately upon the Executive’s death or, upon thirty (30) days’ prior written notice by the Company, in the case of a determination of the Executive’s Disability. As used herein the term “Disability” means the Executive’s inability to perform his duties and responsibilities under this Agreement for a period of more than 120 consecutive days, or for more than 180 days, whether or not continuous, during any 365-day period, due to physical or mental incapacity or impairment. A determination of Disability will be made by a physician reasonably satisfactory to both the Executive and the Company and paid for by the Company or the Partnership whose decision shall be final and binding on the Executive and the Company; provided that if they cannot agree as to a physician, then each shall select and pay for a physician and these two together shall select a third physician whose fee shall be borne equally by the Executive and either the Company or the Partnership and whose determination of Disability shall be binding on the Executive and the Company. Should

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the Executive become incapacitated, his employment shall continue and all base and other compensation due the Executive hereunder shall continue to be paid through the date upon which the Executive’s employment is terminated for Disability in accordance with this section.

(b) The Term may be terminated by the Company upon notice to the Executive upon the occurrence of any event constituting “Cause” as defined herein.

(c) The Term may be terminated by the Executive upon notice to the Company of any event constituting “Good Reason” as defined herein.

6. Severance.

(a) If the Term is terminated by the Company for Cause,

(i) the Company and the Partnership will pay to the Executive an aggregate amount equal to the Executive’s accrued and unpaid base salary through the date of such termination;

(ii) all unvested options and unvested restricted stock will terminate immediately; and

(iii) any vested options issued pursuant to the Company’s Incentive Plan and held by the Executive at termination, will expire ninety (90) days after the termination date.

(b) If the Term is terminated by the Executive other than because of death, Disability or for Good Reason,

(i) the Company and the Partnership will pay to the Executive an aggregate amount equal to the Executive’s accrued and unpaid base salary through the date of such termination;

(ii) all unvested options and unvested restricted stock will terminate immediately; and

(iii) any vested options issued pursuant to the Company’s Incentive Plan and held by the Executive at termination, will expire ninety (90) days after the termination date.

(c) If the Term is terminated upon the Executive’s death or Disability,

(i) the Company and the Partnership will pay to the Executive’s estate or the Executive, as the case may be, a lump sum payment equal to the Executive’s base salary through the termination date, plus a pro rata portion of the Executive’s bonus for the fiscal year in which the termination occurred;

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(ii) the Company will make payments for one (1) year of all compensation otherwise payable to the Executive pursuant to this Agreement, including, but not limited to, base salary, bonus and welfare benefits;

(iii) all of the Executive’s unvested stock options will immediately vest and such options, along with those previously vested and unexercised, will become exercisable for a period of one (1) year thereafter; and

(iv) all of the Executive’s unvested restricted stock will immediately vest and all of the Executive’s restricted stock shall become free from all contractual restrictions; and

(d) Subject to Section 6(e) hereof, if the Term is terminated by the Company without Cause or other than by reason of Executive’s death or Disability, in addition to any other remedies available, or if the Executive terminates the Term for Good Reason,

(i) the Company and the Partnership shall pay the Executive a lump sum equal to the product of (x) the sum of (A) the Executive’s then annual base salary and (B) the amount of the Executive’s bonus for the preceding year, multiplied by (y) the greater of (A) two and one-half (2 ½) and (B) a fraction, the numerator of which is the number of days remaining in the Term (without further extension) and the denominator of which is 365;

(ii) all of the Executive’s unvested stock options will immediately vest and such options, along with those previously vested and unexercised, will become exercisable for a period of one (1) year thereafter;

(iii) all of the Executive’s unvested restricted stock will immediately vest and all of the Executive’s restricted stock shall become free from all contractual restrictions; and

(iv) the Company shall also continue in effect the Executive’s health benefits noted in Section 4(c) hereof or their equivalent for a period equal to the greater of (X) two and one-half (2½) years or the remaining Term, without further extension or (Y) the date on which the Executive obtains health insurance coverage from a subsequent employer.

(e) If, within twenty-four (24) months following a Change in Control, the Term is terminated by the Executive for Good Reason, or by the Company without Cause, or if the Agreement is not renewed by the Company in accordance with Section 1, in addition to any other rights which the Executive may have under law or otherwise, the Executive shall receive the same payments and benefits provided for under Section 6(d) hereof; provided, that the amount of the multiplier described in clause (d)(i)(y)(A) of Section 6 hereof shall be increased from two and one-half (2½) times to three and one-half (3½) times.

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(f) If at any time the Term is not extended pursuant to the proviso to Section 1 hereof as a result of the Company giving notice thereunder that it elects to permit the term of this Agreement to expire without extension, the Company shall be deemed to have terminated the Executive’s employment without Cause.

(g) As used herein, the term “Cause” means:

(i) the Executive’s willful and intentional failure or refusal to perform or observe any of his material duties, responsibilities or obligations set forth in this Agreement; provided, however, that the Company shall not be deemed to have Cause pursuant to this clause (i) unless the Company gives the Executive written notice that the specified conduct has occurred and making specific reference to this Section 6(g)(i) and the Executive fails to cure the conduct within thirty (30) days after receipt of such notice;

(ii) any willful and intentional act of the Executive involving malfeasance, fraud, theft, misappropriation of funds, embezzlement or dishonesty affecting the Company or the Partnership;

(iii) the Executive’s conviction of, or a plea of guilty or nolo contendere to, an offense which is a felony in the jurisdiction involved;

(iv) the Executive’s material breach of this Agreement; or

(vi) Gross misconduct by the Executive that is of such a serious or substantial nature that a substantial likelihood exists that such misconduct would injure the reputation of the Company if the Executive were to remain employed by the Company or the Partnership.

Termination of the Executive for Cause shall be communicated by a Notice of Termination. For purposes of this Agreement, a “Notice of Termination” shall mean delivery to the Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Company’s Board at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and reasonable opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board prior to such vote) of finding that in the good faith opinion of the Board, the Executive was guilty of conduct constituting Cause and specifying the particulars thereof in detail, including, with respect to any termination based upon conduct described in clause (i) above that the Executive failed to cure such conduct during the thirty-day period following the date on which the Company gave written notice of the conduct referred to in such clause (i). For purposes of this Agreement, no such purported termination of the Executive’s employment shall be effective without such Notice of Termination;

7

(h) As used herein, the term “Good Reason” means the occurrence of any of the following, without the prior written consent of the Executive:

(i) assignment of the Executive of duties materially inconsistent with the Executive’s positions as described in Section 2(a) hereof, or any significant diminution in the Executive’s duties or responsibilities, other than in connection with the termination of the Executive’s employment for Cause, Disability or as a result of the Executive’s death or by the Executive other than for Good Reason;

(ii) the failure of the Company to nominate the Executive to the Board or the failure of the Executive to be elected to the Board;

(iii) the change in the location of the Company’s principal executive offices or of the Executive’s principal place of employment to a location outside of the Washington, D.C. metropolitan area;

(iv) any material breach of this Agreement by the Company or the Partnership which is continuing; or

(v) a Change in Control; provided that a Change of Control shall only constitute Good Reason if (i) the Company terminates the Executive without cause within two years following a Change of Control, (ii) the Company changes the location of the Company’s principal executive offices to a location outside of the Washington, D.C. metropolitan area, or (iii) the Company changes the Executive’s job title or responsibilities, or decreases the Executive’s compensation within two years following a Change of Control and the Executive within six months after such change (but not later than two years following the Change of Control) terminates the Term of this Agreement;

provided, however, that the Executive shall not be deemed to have Good Reason pursuant to clauses (h)(i), (ii) or (iv) above unless the Executive gives the Company or the Partnership, as the case may be, written notice that the specified conduct or event has occurred and the Company or the Partnership fails to cure such conduct or event within thirty (30) days of the receipt of such notice.

(i) As used herein, the term “Change in Control” means the occurrence of any one of the following events:

(i) the acquisition (other than from the Company) by any “Person” (as the term is used for purposes of Sections 13(d) or 14(d) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty (30%) percent or more of the combined voting power of the Company’s then outstanding voting securities; or

(ii) the individuals who were members of the Board (the “Incumbent Board”) during the previous twelve (12) month period, cease for any reason to constitute at least a majority of the Board; provided, however, that if the

8

election, or nomination for election by the Company’s stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; or

(iii) approval by the stockholders of the Company of (a) a merger, a transaction (including without limitation a “going private transaction”), or a consolidation involving the Company if the stockholders of the Company, immediately before such merger, transaction or consolidation do not, as a result of such merger, transaction or consolidation, own, directly or indirectly, more than fifty (50%) percent of the combined voting power of the then outstanding voting securities of the corporation resulting from such merger, transaction or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Company outstanding immediately before such merger, transaction or consolidation; or (b) a complete liquidation or dissolution of the Company or an agreement for the sale or other disposition of all or substantially all of the assets of the Company.

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to clause (i) above solely because thirty (30%) percent or more of the combined voting power of the Company’s then outstanding securities is acquired by (a) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries or (b) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition.

(j) The amounts required to be paid and the benefits required to be made available to the Executive under this Section 6 are absolute. Under no circumstances shall the Executive, upon the termination of his employment hereunder, be required to seek alternative employment and, in the event that the Executive does secure other employment, no compensation or other benefits received in respect of such employment shall be set-off or in any other way limit or reduce the obligations of the Company under this Section 6.

(k) Excise Tax Payments.

(i) Gross-Up Payment. If it shall be determined that any payment or distribution of any type to or in respect of the Executive, by the Company, the Partnership, or any other person, whether paid or payable or distributed or distributable pursuant to the terms of the Agreement or otherwise (the “Total Payments”), is or will be subject to the excise tax imposed by Section 4999 of the Internal Code of 1986, as amended (the “Code”) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes

9

(including any interest or penalties imposed with respect to such taxes) imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.

(ii) Determination by Accountant.

(A) All computations and determinations relevant to this Section 6(k) shall be made by a national accounting firm selected by the Company from among the five (5) largest accounting firms in the United States (the “Accounting Firm”) which firm may be the Company’s accountants. Such determinations shall include whether any of the Total Payments are “parachute payments” (within the meaning of Section 280G of the Code). In making the initial determination hereunder as to whether a Gross-Up Payment is required the Accounting Firm shall determine that no Gross-Up Payment is required, if the Accounting Firm is able to conclude that no “Change of Control” has occurred (within the meaning of Section 280G of the Code) on the basis of “substantial authority” (within the meaning of Section 6230 of the Code) and shall provide opinions to that effect to both the Company and the Executive. If the Accounting Firm determines that a Gross-Up Payment is required, the Accounting Firm shall provide its determination (the “Determination”), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter both to the Company and the Executive by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Company or the Executive (if the Executive reasonably believes that any of the Total Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive and the Company with a written statement that such Accounting Firm has concluded that no Excise Tax is payable (including the reasons therefor) and that the Executive has substantial authority not to report any Excise Tax on his federal income tax return.

(B) If a Gross-Up Payment is determined to be payable, it shall be paid to the Executive within twenty (20) days after the later of (i) the Determination (and all accompanying calculations and other material supporting the Determination) is delivered to the Company by the Accounting Firm or (ii) the date of the event which leads to the Gross-up Payment. Any determination by the Accounting Firm shall be binding upon the Company and the Executive, absent manifest error.

(C) As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Company should have been made (“Underpayment”), or that Gross-Up Payments will have been made by the Company which should not have been made (“Overpayments”). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with

10

any interest and penalties payable by the Executive as a result of such Underpayment) shall be promptly paid by the Company to or for the benefit of the Executive.

(D) In the case of an Overpayment, the Executive shall, at the direction and expense of the Company, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Company, and otherwise reasonably cooperate with the Company to correct such Overpayment, provided, however, that (i) the Executive shall not in any event be obligated to return to the Company an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) this provision shall be interpreted in a manner consistent with the intent of Section 6(k)(i), which is to make the Executive whole, on an after-tax basis, from the application of the Excise Taxes, it being acknowledged and understood that the correction of an Overpayment may result in the Executive repaying to the Company an amount which is less than the Overpayment.

(E) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service relating to the possible application of the Excise Tax under Section 4999 of the Code to any of the payments and amounts referred to herein and shall afford the Company, at its expense, the opportunity to control the defense of such claim.

7. Confidential Information and Covenants.

(a) The Executive acknowledges that the Company and its subsidiaries or affiliated ventures (“Company Affiliates”) own and have developed and compiled, and will in the future own, develop and compile, certain Confidential Information and that during the course of his rendering services hereunder Confidential Information will be disclosed to the Executive by the Company Affiliates. The Executive hereby agrees that, during the Term and for a period of three years thereafter, he will not use or disclose, furnish or make accessible to anyone, directly or indirectly, any Confidential Information of the Company Affiliates. In particular, Executive covenants and agrees that Executive shall not, directly or indirectly, communicate or divulge, or use for the benefit of Executive or for any other person, or to the disadvantage of the Company, the Confidential Information or any information in any way relating to the Confidential Information, without prior written consent from the Company.

(b) As used herein, the term “Confidential Information” means any trade secrets, confidential or proprietary information, or other knowledge, know-how, information, documents, materials, owned, developed or possessed by a Company Affiliate pertaining to its businesses, including, but not limited to, records, memoranda, computer files and disks, audio and video tapes, CD’s, and property in any form containing information generally not known in the hospitality industry, including but not limited to trade secrets, techniques, know-how (including designs, plans, procedures, processes and research records), operations, market structure, formulas, data, programs,

11

licenses, prices, costs, software, computer programs, innovations, discoveries, improvements, research, developments, test results, reports, specifications, data, formats, marketing data and business plans and strategies, customer lists, client lists and client contact lists, agreements and other forms of documents, expansion plans, budgets, projections, and salary, staffing and employment information. Notwithstanding the foregoing, Confidential Information shall not in any event include information which (i) was generally known or generally available to the public prior to its disclosure to the Executive, (ii) becomes generally known or generally available to the public subsequent to its disclosure to the Executive through no wrongful act of the Executive, (iii) is or becomes available to the Executive from sources other than the Company Affiliates which sources are not known to the Executive to be under any duty of confidentiality with respect thereto or (iv) the Executive is required to disclose by applicable law or regulation or by order of any court or federal, state or local regulatory or administrative body (provided that the Executive provides the Company with prior notice of the contemplated disclosure and reasonably cooperates with the Company, at the Company’s sole expense, in seeking a protective order or other appropriate protection of such information).

(c) The Executive agrees that during his employment hereunder and for a period of twenty-four (24) months thereafter he will not solicit, raid, entice or induce any person that then is or at any time during the twenty-four (24) month period prior to the end of the Term was an employee of a Company Affiliate (other than a person whose employment with such Company Affiliate has been terminated by such Company Affiliate), to become employed by any person, firm or corporation.

(d) The Executive agrees that during his employment hereunder and for a period of twelve (12) months thereafter he will not solicit or accept the business of, or assist any other person to solicit or accept the business of, any persons or entities who were vendors of the Company, as of, or within one (1) year prior to, the Executive’s termination of employment, for the purposes of providing products or services competitive with the products or services of the Company or to cause such customers to reduce or end their business with the Company.

8. Cooperation with Company. Following the termination of the Executive’s employment for any reason, Executive shall fully cooperate with the Company in all matters relating to the winding up of his pending work on behalf of the Company including, but not limited to, any litigation in which the Company is involved and the orderly transfer of any such pending work to other employees of the Company as may be designated by the Company. The Company agrees to reimburse the Executive for any out-of-pocket expense he incurs in performing any work on behalf of the Company following the termination of his employment.

9. Specific Performance.

(a) The Executive acknowledges that the services to be rendered by him hereunder are of a special, unique, extraordinary and personal character and that the Company Affiliates would sustain irreparable harm in the event of a violation by the

12

Executive of Section 7 hereof. Therefore, in addition to any other remedies available, the Company shall be entitled to specific enforcement and/or an injunction from any court of competent jurisdiction restraining the Executive from committing or continuing any such violation of this Agreement without proving actual damages or posting a bond or other security. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages.

(b) If any of the restrictions on activities of the Executive contained in Section 7 hereof shall for any reason be held by a court of competent jurisdiction to be excessively broad, such restrictions shall be construed so as thereafter to be limited or reduced to be enforceable to the maximum extent compatible with the applicable law as it shall then appear; it being understood that by the execution of this Agreement the parties hereto regard such restrictions as reasonable and compatible with their respective rights.

(c) Notwithstanding anything in this Agreement to the contrary, in the event that the Company fails to make any payment of any amounts or provide any of the benefits to the Executive when due as called for under Section 6 of this Agreement and such failure shall continue for twenty (20) days after notice thereof from the Executive, all restrictions on the activities of the Executive under Section 7 hereof shall be immediately and permanently terminated.

10. Withholding. The parties agree that all payments to be made to the Executive by the Company pursuant to the Agreement shall be subject to all applicable withholding obligations of such company.

11. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed given and received when delivered personally, four (4) days after being mailed if sent by registered or certified mail, postage pre-paid, or by one (1) day after delivery if sent by air courier (for next-day delivery) with evidence of receipt thereof or by facsimile with receipt confirmed by the addressee. Such notices shall be addressed respectively:

If to the Executive, to:

Paul W. Whetsell

[address]

If to the Company or to the Partnership, to:

MeriStar Hospitality Corporation

4501 North Fairfax Drive

Suite 500

Arlington, VA 22203

Attention: Legal Department

or to any other address of which such party may have given notice to the other parties in the manner specified above.

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12. Miscellaneous.

(a) This Agreement is a personal contract calling for the provision of unique services by the Executive, and the Executive’s rights and obligations hereunder may not be sold, transferred, assigned, pledged or hypothecated by the Executive. The rights and obligations of the Company and the Partnership hereunder will be binding upon and run in favor of their respective successors and assigns. The Company will not be deemed to have breached this Agreement if any obligations of the Company to make payments to the Executive are satisfied by the Partnership.

(b) This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to conflict of laws principles.

(c) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.

(d) The headings of the various sections of this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

(e) The provisions of this Agreement which by their terms call for performance subsequent to the expiration or termination of the Term shall survive such expiration or termination.

(f) The Company and the Partnership shall reimburse the Executive for all costs incurred by the Executive in any proceeding for the successful enforcement of the terms of this Agreement, including without limitation all costs of investigation and reasonable attorneys’ fees and expenses.

(g) With the exception of previously executed option agreements and restricted stock agreements executed by the Executive and the Company and/or the Partnership (the “Grant Agreements”), this Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof, all of which, except the Grant Agreements shall be terminated on the Commencement Date. In addition, the parties hereto hereby waive all rights such parties may have under all other prior agreements and undertakings among them, whether written or oral, other than the Grant Agreements. Specifically, but not by way of limitation, the parties hereto hereby waive all rights such parties may have under the Executive Employment Agreement between them effective as of November 1, 2001, as amended, which shall be terminated on the Commencement Date.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first above written.

EXECUTIVE:	COMPANY:
PAUL W. WHETSELL	MERISTAR HOSPITALITY CORPORATION
/s/ Paul W. Whetsell	By:	/s/ Donald D. Olinger
	Name:	Donald D. Olinger
	Title:	Executive Vice President and Chief Financial Officer
		PARTNERSHIP:
		MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
	By:	MERISTAR HOSPITALITY CORPORATION, Its General Partner
	By:	/s/ Donald. D. Olinger
	Name:	Donald D. Olinger
	Title:	Executive Vice President and Chief Financial Officer

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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)

	June 30, 2005 (Unaudited)			December 31, 2004
ASSETS
Property and equipment	$	2,655,676		$	2,581,720
Accumulated depreciation		(545,023	)		(506,632	)
		2,110,653			2,075,088
Assets held for sale		5,063			—
Investments in and advances to unconsolidated affiliates		71,066			84,796
Prepaid expenses and other assets		32,721			34,230
Insurance claim receivable		34,458			76,056
Accounts receivable, net of allowance for doubtful accounts of $349 and $691		42,250			32,979
Restricted cash		69,317			58,413
Cash and cash equivalents		90,967			60,533
	$	2,456,495		$	2,422,095
LIABILITIES AND PARTNERS’ CAPITAL
Long-term debt	$	1,423,033		$	1,369,299
Notes payable to MeriStar Hospitality Corporation		202,552			203,977
Accounts payable and accrued expenses		72,369			71,781
Accrued interest		39,949			41,165
Due to Interstate Hotels & Resorts		14,027			21,799
Other liabilities		13,288			11,553
Total liabilities		1,765,218			1,719,574
Minority interests		2,416			2,418
Redeemable OP units at redemption value, 2,258 and 2,298 outstanding		19,423			19,187
Partners’ capital – Common OP units, 87,497 and 87,367 issued and outstanding		669,438			680,916
	$	2,456,495		$	2,422,095

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

1

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(Dollars in thousands, except per unit amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Revenue:
Hotel operations:
Rooms	$	142,908		$	137,230		$	266,669		$	265,197
Food and beverage		61,006			57,028			112,187			105,572
Other hotel operations		11,815			15,694			23,039			30,945
Office rental, parking and other revenue		1,212			1,328			3,069			2,625
Total revenue		216,941			211,280			404,964			404,339
Hotel operating expenses:
Rooms		33,785			33,208			64,409			64,153
Food and beverage		40,903			39,877			77,752			76,141
Other hotel operating expenses		7,623			9,943			14,626			19,323
Office rental, parking and other expenses		612			670			1,436			1,255
Other operating expenses:
General and administrative, hotel		31,771			30,152			63,095			61,946
General and administrative, corporate		2,828			3,473			6,361			7,106
Property operating costs		31,294			30,048			60,452			59,300
Depreciation and amortization		23,813			24,204			48,197			48,855
Property taxes, insurance and other		12,098			15,232			22,882			31,345
Loss on asset impairments		—			310			—			310
Operating expenses		184,727			187,117			359,210			369,734
Equity in income/loss of and interest earned from unconsolidated affiliates		2,940			1,600			4,575			3,200
Hurricane business interruption insurance gain		2,009			—			4,290			—
Operating income		37,163			25,763			54,619			37,805
Minority interest		7			20			2			24
Interest expense, net		(30,698	)		(30,090	)		(61,411	)		(64,592	)
Loss on early extinguishments of debt		(947	)		(1,980	)		(1,007	)		(7,903	)
Income (loss) before income taxes and discontinued operations		5,525			(6,287	)		(7,797	)		(34,666	)
Income tax (expense) benefit		(402	)		(12	)		(412	)		373
Income (loss) from continuing operations		5,123			(6,299	)		(8,209	)		(34,293	)
Discontinued operations:
Loss from discontinued operations before income tax		(3,709	)		(5,784	)		(4,126	)		(18,747	)
Income tax benefit		—			32			—			102
Loss from discontinued operations		(3,709	)		(5,752	)		(4,126	)		(18,645	)
Net income (loss)	$	1,414		$	(12,051	)	$	(12,335	)	$	(52,938	)
Preferred distributions		—			—			—			(141	)
Net income (loss) applicable to common unitholders	$	1,414		$	(12,051	)	$	(12,335	)	$	(53,079	)
Net income (loss) applicable to general partner unitholders	$	1,378		$	(11,619	)	$	(12,020	)	$	(50,996	)
Net income (loss) applicable to limited partner unitholders	$	36		$	(432	)	$	(315	)	$	(2,083	)
Basic and diluted loss per unit:
Earnings (loss) from continuing operations	$	0.06		$	(0.07	)	$	(0.09	)	$	(0.44	)
Loss from discontinued operations		(0.04	)		(0.07	)		(0.05	)		(0.23	)
Earnings (loss) per basic and diluted unit	$	0.02		$	(0.14	)	$	(0.14	)	$	(0.67	)

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

2

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(Dollars in thousands)

	Six Months Ended June 30,
	2005			2004
Operating activities:
Net loss	$	(12,335	)	$	(52,938	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		48,941			51,985
Loss on asset impairments		2,836			7,441
Loss on sale of assets, before tax effect		1,037			11,530
Loss on early extinguishments of debt		1,007			7,903
Minority interests		(2	)		(24	)
Equity in loss of unconsolidated affiliate		1,164			—
Amortization of unearned stock-based compensation		542			1,090
Deferred income taxes		—			(652	)
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds		35,098			—
Accounts receivable, net		(9,271	)		689
Prepaid expenses and other assets		721			4,864
Receivables from unconsolidated affiliates		12,663			(4,916	)
Due to Interstate Hotels & Resorts		(8,398	)		(3,241	)
Accounts payable, accrued expenses, accrued interest and other liabilities		315			(6,040	)
Net cash provided by operating activities		74,318			17,691
Investing activities:
Acquisition of hotels, net of cash acquired of $3.5 million		—			(182,790	)
Capital expenditures for property and equipment		(109,322	)		(49,898	)
Proceeds from sales of assets		20,500			104,873
Insurance proceeds related to capital expenditures		6,500			—
Increase in restricted cash		(4,580	)		(29,955	)
Costs associated with disposition program and other, net		(596	)		(5,081	)
Net cash used in investing activities		(87,498	)		(162,851	)
Financing activities:
Prepayments on long-term debt		(23,846	)		(105,857	)
Scheduled payments on long-term debt		(5,477	)		(3,691	)
Proceeds from mortgage loans, net of financing costs		73,410			—
Proceeds from debt issuance, net of issuance costs		—			109,687
Distributions to minority investors		—			(141	)
Proceeds from OP units issuance, net of issuance costs		309			72,340
Purchase of subsidiary partnership interests		—			(8,690	)
Repurchase of OP units under employee stock plans		(782	)		(160	)
Other		—			(165	)
Net cash provided by financing activities		43,614			63,323
Effect of exchange rate changes on cash and cash equivalents		—			(227	)
Net increase (decrease) in cash and cash equivalents		30,434			(82,064	)
Cash and cash equivalents, beginning of period		60,533			230,876
Cash and cash equivalents, end of period	$	90,967		$	148,812
Supplemental Cash Flow Information
Cash paid for interest and income taxes:
Interest, net of capitalized interest	$	63,482		$	69,804
Income tax payments, net of (refunds)	$	298		$	(670	)
Non-cash investing and financing activities:
Notes payable to MeriStar Hospitality redeemed in exchange for Common OP units	$	—		$	49,213
Change of fair value of interest rate swap	$	1,430		$	10,074
Issuance of OP units to MeriStar Hospitality for stock bonus	$	1,022		$	—
Redemption of OP units	$	633		$	123

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

3

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2005

1. Organization

MeriStar Hospitality Operating Partnership, L.P. (the “Company”) 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 June 30, 2005, we owned 72 hotels with 20,115 rooms, all of which were leased by our taxable subsidiaries. Seventy 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 72 hotels we owned as of June 30, 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 7.6% 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 U.S. generally accepted accounting principles. 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 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,

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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 term of a ground lease (including consideration of renewal options), 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 June 30, 2005 and 2004, we recognized depreciation expense of $22.4 million and $23.6 million, respectively. During the six months ended June 30, 2005 and 2004, we recognized depreciation expense of $45.8 million and $48.0 million, respectively. For the three months ended June 30, 2005 and 2004, we capitalized interest of $3.1 million and $1.2 million, respectively. For the six months ended June 30, 2005 and 2004, we capitalized interest of $5.8 million and $2.0 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 Sheets.

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 are more likely than not 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 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.

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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 based compensation awards 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 Statements 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 income (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 June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net income (loss), as reported	$	1,414		$	(12,051	)	$	(12,335	)	$	(52,938	)
Add: Stock-based employee compensation expense included in reported net loss, net of related tax effect		613			395			1,374			975
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effect		(620	)		(442	)		(1,387	)		(1,077	)
Net income (loss), pro forma	$	1,407		$	(12,098	)	$	(12,348	)	$	(53,040	)
Earnings (loss) per unit, as reported:
Basic and diluted	$	0.02		$	(0.14	)	$	(0.14	)	$	(0.67	)
Weighted average fair value of options granted		N/A	*	$	0.31			N/A	*	$	0.32
Earnings (loss) per unit, pro forma:
Basic and diluted	$	0.02		$	(0.14	)	$	(0.14	)	$	(0.67	)

* No options were granted during the six months ended June 30, 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.

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

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investment quarterly as it becomes due to us; this investment is reflected in the “investments in and advances to unconsolidated affiliates” line 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 entity in which our investment was made. This investment is also reflected in the “investments in and advances to unconsolidated affiliates” line 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, eight of our hotels were closed for an extended period of time, and four 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 June 30, 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.

As of June 30, 2005 and August 2, 2005, three of our Florida properties remained substantially closed due to hurricane damage. Additionally, as of June 30, 2005 and August 2, 2005, one property that suffered varying amounts of hurricane damage had certain guest rooms, its restaurants, lounge, registration area 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 sustained income losses. 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. 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, during the three and six months ended June 30, 2005, we have recorded a business interruption recovery gain of $2.0 million and $4.3 million, respectively, 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 June 30, 2005, we have incurred recoverable costs related to both property damage and business interruption recoveries totaling $64.9 million. In addition, we recorded a receivable of $65.5 million related to the

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write-off of the net book value of the damaged portion of our assets. We had collected $100.2 million in insurance advances through June 30, 2005. We have collected an additional $2.5 million in insurance proceeds from July 1 through August 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):

Insurance claim receivable June 30, 2005
Fixed assets net book value write down	$	65.5
Recoverable costs incurred		64.9
Business interruption insurance gain		4.3
Payments received		(100.2	)
	$	34.5

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.

In June 2005, the FASB issued Statement No. 154, “Accounting Changes and Error Corrections a Replacement of APB Opinion No. 20 and FASB Statement No. 3”, which changes the requirements for the accounting for and reporting of a change in accounting principle, and applies to all voluntary changes in accounting principle. This Statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless the change is required by a new pronouncement and the pronouncement states specific transition provisions. This Statement carries forward without change the guidance contained in Opinion 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. We are required to adopt this Statement for accounting changes and corrections of errors made during and after the first quarter of 2006. We do not expect the adoption of this statement to have a material effect on our results of operations.

Emerging Issues Task Force (“EITF”) Issue 04-5, “Investor’s Accounting for an Investment in a Limited Partnership When the Investor Is the Sole General Partner and the Limited Partners Have Certain Rights” was ratified by the FASB in June 2005. At issue is what rights held by the limited partner(s) preclude consolidation in circumstances in which the sole general partner would consolidate the limited partnership. The assessment of limited partners’ rights and their impact on the presumption of control of the limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if there is a change to the terms or in the exercisability of the rights of the limited partners, the sole general partner increases or decreases its ownership of limited partnership interests, or there is an increase or decrease in the number of outstanding limited partnership interests. We are required to adopt the provisions of EITF Issue 04-5 for the first quarter of 2006, and for the third quarter of 2005 for new or modified arrangements. We do not expect the adoption of this EITF to have a material effect on our financial statements.

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

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3. Comprehensive Income (loss)

Comprehensive loss equaled net income (loss) for the three and six months ended June 30, 2005, as we no longer have foreign operations. Comprehensive loss was $10.8 million and $52.0 million for the three and six months ended June 30, 2004, respectively, which consisted of net loss ($12.1 million and $52.9 million, respectively) 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 unit for the three and six months ended June 30, 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 June 30, 2004			Six Months Ended June 30, 2004
Total revenue	$	227,046		$	431,516
Net loss		(10,709	)		(50,773	)
Net loss per unit:
Basic and diluted	$	(0.12	)	$	(0.64	)

5. Property and Equipment

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

	June 30, 2005		December 31, 2004
Land	$	241,528	$	244,088
Buildings and improvements		1,928,195		1,926,813
Furniture, fixtures and equipment		315,127		295,562
Construction-in-progress		170,826		115,257
	$	2,655,676	$	2,581,720

We incurred no impairment losses during the first quarter of 2005. During the second quarter of 2005, we recognized an impairment loss of $2.8 million which is recorded in discontinued operations (see Note 12). During the first and second quarters of 2004, we recognized impairment losses of $5.0 million and $2.4 million, respectively, of which $5.0 million and $2.1 million, respectively, are recorded in discontinued operations as of June 30, 2005 (see Note 12).

The impairment charges recorded during 2005 and 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. Assets Held for Sale

At December 31, 2004, none of our properties met the criteria as prescribed by SFAS No. 144 to classify them as held for sale. At June 30, 2005, one of our properties met our criteria for classification as held for sale. In July 2005, this property was sold. No other assets met the criteria as prescribed by SFAS No. 144 to classify them as held for sale.

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Assets held for sale as of June 30, 2005 consisted of the following (in thousands):

	June 30, 2005
Land	$	392
Buildings and improvements		4,332
Furniture, fixtures and equipment		264
Construction-in-progress		75
	$	5,063

7. 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 “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. During the three and six months ended June 30, 2005, we recognized interest income of $1.4 million and $2.9 million, respectively, on the mezzanine loan, which is recognized as earned. Our outstanding loan balance of $40.5 million includes $0.5 million of 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 and six months ended June 30, 2005, we recognized $0.2 million and ($1.2) million, respectively, of equity in income (losses) on our equity investment.

Investment in MIP. In 1999, we invested $40.0 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 is subordinate only to the MIP debt; and $12.5 million of our $40.0 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. There have been no changes in circumstances in 2004 and 2005 that would require an additional impairment. After recognition of this impairment loss, 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 June 30, 2005, our total MIP carrying value was $22.1 million, consisting of the $15.0 million adjusted investment balance and $7.1 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

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months ended June 30, 2005 and 2004, we recognized a preferred return of $1.3 million and $1.6 million, respectively, from this investment. For the six months ended June 30, 2005 and 2004, we recognized a preferred return of $2.9 million and $3.2 million, respectively, from this investment. As of June 30, 2005 and December 31, 2004, cumulative preferred returns of $7.1 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.

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

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

	June 30, 2005			December 31, 2004
Senior unsecured notes due 2011 – 9.125%	$	347,665		$	355,665
Senior unsecured notes due 2008 – 9.0%		265,500			270,500
Senior unsecured notes due 2009 – 10.5%		215,687			224,187
Secured facility, due 2009		299,765			302,979
Secured facility, due 2013		98,498			99,293
Mortgage and other debt		205,234			125,051
Unamortized issue discount		(3,212	)		(3,702	)
	$	1,429,137		$	1,373,973
Fair value adjustment for interest rate swap		(6,104	)		(4,674	)
Long-term debt	$	1,423,033		$	1,369,299
Notes payable to MeriStar Hospitality	$	202,740		$	204,225
Unamortized issue discount		(188	)		(248	)
Notes payable to MeriStar Hospitality	$	202,552		$	203,977
Total long-term debt and notes payable to MeriStar Hospitality	$	1,625,585		$	1,573,276

Aggregate future maturities as of June 30, 2005 were as follows (in thousands):

2005 (six months)	$	5,671
2006		12,031
2007		45,544
2008		280,116
2009		495,949
Thereafter		792,378
	$	1,631,689
Fair value adjustment for interest rate swap		(6,104	)
	$	1,625,585

Credit facility. In August 2005, we completed a $100 million expansion of our $50 million credit facility to a total capacity of $150 million. The total $150 million facility will carry an annual interest rate of the London Interbank Offered Rate, or LIBOR, plus 350 basis points, which is 100 basis points less than the original annual interest rate of LIBOR plus 450 basis points. The additional $100 million will mature in August 2006 and consists of $25 million in additional revolver capacity and $75 million of term loan capacity. Asset disposition proceeds in excess of $30 million must be used to pay down any outstanding balance under the facility and permanently reduce the availability if repaying borrowings under the term loan. The original $50 million revolving facility matures in December 2006, as originally provided. There are currently no outstanding borrowings under the facility.

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

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Senior unsecured notes. During the six months ended June 30, 2005, we repurchased, using available cash, $21.5 million of our senior unsecured notes, consisting of $5.0 million of the 9.0% notes due 2008, $8.0 million of the 9.125% notes due 2011, and $8.5 million of the 10.5% notes due 2009. We recorded a loss on early extinguishment of debt of $0.9 million and wrote off deferred financing costs of $0.2 million related to these repurchases which is included in depreciation and amortization expense on the accompanying Consolidated Statements of Operations. Between June 30, 2005 and August 2, 2005, using cash on hand, we repurchased an additional $1.0 million of our 9.0% notes due 2008, $5.0 million of our 9.125% notes due 2011, and $6.8 million of our 10.5% notes due 2009, and recorded an additional loss on early extinguishment of debt of $1.0 million and wrote off deferred financing costs of $0.1 million.

Notes payable to MeriStar Hospitality. During the six months ended June 30, 2005, we repurchased, using available cash, $1.5 million of our 8.75% notes payable to MeriStar Hospitality due 2007 (plus $0.06 million of accrued interest). We recorded a loss on early extinguishment of debt of $0.06 million related to this activity.

In July 2005, MeriStar Hospitality provided irrevocable notice that they would exercise their option to redeem all of their outstanding 8.75% senior subordinated notes due 2007 at a price equal to their outstanding principal amount plus interest to the date of redemption. The redemption date is scheduled to be August 15, 2005. In conjunction with MeriStar Hospitality’s redemption of these senior subordinated notes, we will redeem our 8.75% notes payable to MeriStar Hospitality due 2007 under the same terms. As of June 30, 2005, there was $32.7 million principal amount of these notes outstanding. The redemption will total $34.2 million, consisting of $32.7 million of principal plus interest. We expect to record a loss on early extinguishment of debt of $0.2 million 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 monthly payments of interest only 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 due at the end of the ten year term. Our net proceeds of $34.7 million are net of a $3.0 million escrow reserve for future capital expenditures. We incurred financing costs of $0.8 million related to this mortgage.

On June 17, 2005, we entered into a $44.0 million mortgage loan on our Hilton Clearwater hotel that bears interest at a fixed rate of 5.68%. The mortgage requires monthly payments of interest only 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 due at the end of the ten year term. Our net proceeds of $40.7 million are net of a $3.3 million escrow reserve for future capital expenditures. We incurred financing costs of $1.1 million related to this mortgage.

Derivatives. As of June 30, 2005 and December 31, 2004, the fair value of our interest rate swap was approximately a $6.1 million liability and a $4.7 million liability, respectively. This amount is recorded on our Consolidated Balance Sheets in the other liabilities line with a corresponding debit recorded to long-term debt. During the three and six months ended June 30, 2005, we earned net cash payments of $0.3 million and $1.2 million, respectively, under the swap, which were recorded as a reduction in interest expense. During the three and six months ended June 30, 2004, we earned net cash payments of $1.7 million under the swap, which also were recorded as a reduction in interest expense. In conjunction with the interest rate swap, we have posted collateral of $12.3 million and $12.0 million as of June 30, 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 six months ended June 30, 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 June 30, 2005. We will receive all remaining collateral upon maturity of the swap.

9. 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 six months ended June 30, 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 tax withholding requirements, and 70,002 shares were

12

issued. In conjunction with this award, we issued 70,002 OP Units to MeriStar Hospitality. During the six months ended June 30, 2005, we issued 6,302 OP Units to MeriStar Hospitality in conjunction with their issuance of common stock with a value of $0.04 million, related to shares issued under the employee stock purchase plan.

Common OP Unit holders converted 39,385 and 25,141 of their OP Units, with a value of $0.6 million and $0.1 million, respectively, into common stock during the six months ended June 30, 2005 and 2004, respectively. A POPs unit holder converted 25,000 POPs for cash during the six months ended June 30, 2004.

10. Earnings (Loss) Per Unit

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2005		2004			2005			2004
Basic and Diluted Earnings (Loss) Per Unit:
Income (loss) from continuing operations	$	5,123	$	(6,299	)	$	(8,209	)	$	(34,293	)
Preferred distributions		—		—			—			(141	)
Income (loss) available to common unitholders	$	5,123	$	(6,299	)	$	(8,209	)	$	(34,434	)
Weighted average number of OP units outstanding		89,755		85,933			89,722			78,841
Basic and diluted earnings (loss) per unit from continuing operations	$	0.06	$	(0.07	)	$	(0.09	)	$	(0.44	)

11. 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 has negotiated, subject to final approval, a closing agreement with the Internal Revenue Service that resolves 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, as of June 30, 2005, we have entered into contractual obligations with vendors to acquire capital assets and perform renovations totaling approximately $33 million to be expended over the next 12 months. Additionally, as of June 30, 2005, we have entered into contractual obligations related to capital expenditures as a result of hurricanes in the amount of $33 million to be expended over the next 12 months, most of which we expect to be reimbursed by our insurance carriers.

12. Dispositions

One hotel was disposed of in the six months ended June 30, 2005. We disposed of 15 hotels in the six months ended June 30, 2004. As of June 30, 2005, one of our hotels met our criteria for held-for-sale classification (see Note 6). None of our hotels met our criteria for held-for-sale classification as of December 31, 2004. Operating results for the hotels which either have been sold or are classified as held-for-sale, and where applicable, the gain or loss on final disposition, are included in discontinued operations.

13

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Revenue	$	3,209		$	17,304		$	6,281		$	42,425
Loss on asset impairments	$	(2,836	)	$	(2,120	)	$	(2,836	)	$	(7,131	)
Pretax (loss) gain from operations		164			920			(253	)		(85	)
Loss on disposal		(1,037	)		(4,584	)		(1,037	)		(11,531	)
	$	(3,709	)	$	(5,784	)	$	(4,126	)	$	(18,747	)

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

13. 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 June 30, 2005 and December 31, 2004, consolidating statements of operations for the three and six months ended June 30, 2005 and 2004, and consolidating statements of cash flows for the six months ended June 30, 2005 and 2004.

14

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: August 5, 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: August 5, 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 June 30, 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: August 5, 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 June 30, 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: August 5, 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.

Consolidating Balance Sheet

June 30, 2005

Unaudited

(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
Assets
Property and equipment	24,625		1,500,837		—	—		—	—	—	10,917		13,997		96,029
Accumulated depreciation	(15,612	)	(305,684	)	—	—		—	—	—	(1,097	)	(3,508	)	(15,966	)
	9,013		1,195,153		—	—		—	—	—	9,820		10,489		80,063
Assets held for sale	—		—		—	—		—	—	—	—		—		—
Investments in and advances to unconsolidated affiliates	2,430,439		7,992		40,712	8,291		32	72	2,989	—		—		—
Due to/from subsidiaries	(1,188,328	)	591,695		3,954	812		—	9	73	8,450		7,320		27,423
Note receivable from subsidiaries	266,548		—		—	—		—	—	—	—		—		—
Prepaid expenses and other assets	19,525		1,849		—	(30	)	—	—	—	9		7		—
Insurance claim receivable	34,458		—		—	—		—	—	—	—		—		—
Accounts receivable, net of allowance for doubtful accounts	16,614		146		—	—		—	—	—	—		—		63
Restricted cash	59,470		5,216		—	—		—	—	—	—		—		—
Cash and cash equivalents	65,606		—		—	—		—	—	—	—		—		—
	1,713,345		1,802,051		44,666	9,073		32	81	3,062	18,279		17,816		107,549
Liabilities and Partners’ Capital
Long-term debt	819,536		510,669		—	—		—	—	—	—		—		—
Notes payable to MeriStar Hospitality Corporation	202,552		—		—	—		—	—	—	—		—		—
Accounts payable and accrued expenses	11,031		6,674		—	—		—	—	—	43		18		(122	)
Accrued interest	37,325		2,174		—	—		—	—	—	—		—		—
Due to Interstate Hotels & Resorts	10,575		—		—	—		—	—	—	—		—		—
Other liabilities	6,808		—		—	—		—	—	—	—		142		—
Total liabilities	1,087,827		519,517		—	—		—	—	—	43		160		(122	)
Minority interests	2,416		—		—	—		—	—	—	—		—		—
Redeemable OP units at redemption value	19,423		—		—	—		—	—	—	—		—		—
Partners’ capital - Common OP units	603,679		1,282,534		44,666	9,073		32	81	3,062	18,236		17,656		107,671
	1,713,345		1,802,051		44,666	9,073		32	81	3,062	18,279		17,816		107,549

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

June 30, 2005

Unaudited

(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.
Assets
Property and equipment	27,760		16,161		9,895		12,377		17,710		—		—	18,492		52,357		—
Accumulated depreciation	(7,932	)	(3,891	)	(640	)	(804	)	(4,690	)	—		—	(3,588	)	(12,235	)	(1	)
	19,828		12,270		9,255		11,573		13,020		—		—	14,904		40,122		(1	)
Assets held for sale	—		—		—		—		—		—		—	—		—		—
Investments in and advances to unconsolidated affiliates	—		—		—		—		—		43		—	—		—		—
Due to/from subsidiaries	(4,431	)	8,067		3,805		4,802		7,519		(43	)	—	10,295		56,744		7,074
Note receivable from subsidiaries	—		—		—		—		—		—		—	—		—		—
Prepaid expenses and other assets	37		—		6		—		23		—		—	—		777		—
Insurance claim receivable	—		—		—		—		—		—		—	—		—		—
Accounts receivable, net of allowance for doubtful accounts	—		—		—		—		—		—		—	110		—		—
Restricted cash	—		—		—		—		—		—		—	—		3,014		—
Cash and cash equivalents	—		—		—		—		—		—		—	—		—		—
	15,434		20,337		13,066		16,375		20,562		—		—	25,309		100,657		7,073
Liabilities and Partners’ Capital
Long-term debt	—		—		—		—		—		—		—	—		37,650		—
Notes payable to MeriStar Hospitality Corporation	—		—		—		—		—		—		—	—		—		—
Accounts payable and accrued expenses	54		3		156		44		213		—		—	(222	)	98		—
Accrued interest	—		—		—		—		—		—		—	—		183		—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—		—	—		—		—
Other liabilities	—		—		—		—		—		—		—	—		—		—
Total liabilities	54		3		156		44		213		—		—	(222	)	37,931		—
Minority interests	—		—		—		—		—		—		—	—		—		—
Redeemable OP units at redemption value	—		—		—		—		—		—		—	—		—		—
Partners’ capital - Common OP units	15,380		20,334		12,910		16,331		20,349		—		—	25,531		62,726		7,073
	15,434		20,337		13,066		16,375		20,562		—		—	25,309		100,657		7,073

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

June 30, 2005

Unaudited

(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
Assets
Property and equipment	21,337		28,632		24,522		—	—	1	20,302		23,710		—	—
Accumulated depreciation	(4,832	)	(899	)	(6,075	)	—	—	—	(4,262	)	(8,063	)	—	—
	16,505		27,733		18,447		—	—	1	16,040		15,647		—	—
Assets held for sale	—		—		—		—	—	—	—		—		5,063	—
Investments in and advances to unconsolidated affiliates	—		—		—		—	—	—	—		—		—	—
Due to/from subsidiaries	15,679		3,700		10,271		11,439	—	3,413	6,469		9,546		8,944	9,900
Note receivable from subsidiaries	—		—		—		—	—	—	—		—		—	—
Prepaid expenses and other assets	1		9		—		—	—	—	—		2		49	—
Insurance claim receivable	—		—		—		—	—	—	—		—		—	—
Accounts receivable, net of allowance for doubtful accounts	96		—		—		—	—	—	—		—		—	—
Restricted cash	—		—		—		—	—	—	—		—		—	—
Cash and cash equivalents	—		—		—		—	—	—	—		—		—	—
	32,281		31,442		28,718		11,439	—	3,414	22,509		25,195		14,056	9,900
Liabilities and Partners’ Capital
Long-term debt	28		—		—		—	—	—	—		—		—	—
Notes payable to MeriStar Hospitality Corporation	—		—		—		—	—	—	—		—		—	—
Accounts payable and accrued expenses	50		125		63		—	—	—	123		73		12	—
Accrued interest	—		—		—		—	—	—	—		—		—	—
Due to Interstate Hotels & Resorts	—		—		—		—	—	—	—		—		—	—
Other liabilities	—		—		—		—	—	—	—		—		—	—
Total liabilities	78		125		63		—	—	—	123		73		12	—
Minority interests	—		—		—		—	—	—	—		—		—	—
Redeemable OP units at redemption value	—		—		—		—	—	—	—		—		—	—
Partners’ capital - Common OP units	32,203		31,317		28,655		11,439	—	3,414	22,386		25,122		14,044	9,900
	32,281		31,442		28,718		11,439	—	3,414	22,509		25,195		14,056	9,900

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

June 30, 2005

Unaudited

(Dollars in thousands)

	MeriStar Sub 2B, LLC	MeriStar Sub 3A, LLC	MeriStar Sub 4A, L.P.	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
Assets
Property and equipment	—	—	—	—	—	—	4,016		—	20,202		70,978
Accumulated depreciation	—	—	—	—	—	—	(938	)	—	(4,563	)	(15,364	)
	—	—	—	—	—	—	3,078		—	15,639		55,614
Assets held for sale	—	—	—	—	—	—	—		—	—		—
Investments in and advances to unconsolidated affiliates	—	—	—	—	—	—	—		—	—		—
Due to/from subsidiaries	—	4,976	—	—	—	20,297	2,976		—	11,175		23,149
Note receivable from subsidiaries	—	—	—	—	—	—	—		—	—		—
Prepaid expenses and other assets	—	—	—	—	—	—	9		—	13		—
Insurance claim receivable	—	—	—	—	—	—	—		—	—		—
Accounts receivable, net of allowance for doubtful accounts	—	—	—	—	—	178	—		—	—		—
Restricted cash	—	—	—	—	—	—	—		—	—		—
Cash and cash equivalents	—	—	—	—	—	—	—		—	—		—
	—	4,976	—	—	—	20,475	6,063		—	26,827		78,763
Liabilities and Partners’ Capital
Long-term debt	—	—	—	—	—	—	—		—	—		—
Notes payable to MeriStar Hospitality Corporation	—	—	—	—	—	—	—		—	—		—
Accounts payable and accrued expenses	—	—	—	—	—	—	60		—	86		18
Accrued interest	—	—	—	—	—	—	—		—	—		—
Due to Interstate Hotels & Resorts	—	—	—	—	—	—	—		—	—		—
Other liabilities	—	—	—	—	—	—	—		—	—		—
Total liabilities	—	—	—	—	—	—	60		—	86		18
Minority interests	—	—	—	—	—	—	—		—	—		—
Redeemable OP units at redemption value	—	—	—	—	—	—	—		—	—		—
Partners’ capital - Common OP units	—	4,976	—	—	—	20,475	6,003		—	26,741		78,745
	—	4,976	—	—	—	20,475	6,063		—	26,827		78,763

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

June 30, 2005

Unaudited

(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
Assets
Property and equipment	—	56,182		—	12,203		—	42,549		—	—	—	—
Accumulated depreciation	—	(11,927	)	—	(2,838	)	—	(10,211	)	—	—	—	—
	—	44,255		—	9,365		—	32,338		—	—	—	—
Assets held for sale	—	—		—	—		—	—		—	—	—	—
Investments in and advances to unconsolidated affiliates	—	—		—	—		—	51,368		—	—	—	—
Due to/from subsidiaries	—	27,569		2,370	3,297		—	(6,058	)	—	—	—	—
Note receivable from subsidiaries	—	—		—	—		—	—		—	—	—	—
Prepaid expenses and other assets	—	98		—	—		—	17		—	—	—	—
Insurance claim receivable	—	—		—	—		—	—		—	—	—	—
Accounts receivable, net of allowance for doubtful accounts	—	1,607		—	—		—	—		—	—	—	—
Restricted cash	—	—		—	—		—	—		—	—	—	—
Cash and cash equivalents	—	—		—	—		—	—		—	—	—	—
	—	73,529		2,370	12,662		—	77,665		—	—	—	—
Liabilities and Partners’ Capital
Long-term debt	—	—		—	—		—	24,000		—	—	—	—
Notes payable to MeriStar Hospitality Corporation	—	—		—	—		—	—		—	—	—	—
Accounts payable and accrued expenses	—	2,434		—	14		—	304		—	—	—	—
Accrued interest	—	—		—	—		—	—		—	—	—	—
Due to Interstate Hotels & Resorts	—	(200	)	—	—		—	—		—	—	—	—
Other liabilities	—	—		—	—		—	—		—	—	—	—
Total liabilities	—	2,234		—	14		—	24,304		—	—	—	—
Minority interests	—	—		—	—		—	—		—	—	—	—
Redeemable OP units at redemption value	—	—		—	—		—	—		—	—	—	—
Partners’ capital - Common OP units	—	71,295		2,370	12,648		—	53,361		—	—	—	—
	—	73,529		2,370	12,662		—	77,665		—	—	—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

June 30, 2005

Unaudited

(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.
Assets
Property and equipment	35,916		—	21,656		—	9,333		—	—		—		—	172,607
Accumulated depreciation	(7,425	)	—	(1,741	)	—	(913	)	—	—		(1	)	—	(38,824	)
	28,491		—	19,915		—	8,420		—	—		(1	)	—	133,783
Assets held for sale	—		—	—		—	—		—	—		—		—	—
Investments in and advances to unconsolidated affiliates	—		—	—		—	—		—	—		—		—	—
Due to/from subsidiaries	4,168		21,531	8,785		—	2,538		—	(2,360	)	16,930		—	47,470
Note receivable from subsidiaries	—		—	—		—	—		—	—		—		—	—
Prepaid expenses and other assets	28		—	—		—	—		—	—		—		—	290
Insurance claim receivable	—		—	—		—	—		—	—		—		—	—
Accounts receivable, net of allowance for doubtful accounts	—		—	—		—	—		—	—		—		—	—
Restricted cash	—		—	—		—	—		—	—		—		—	—
Cash and cash equivalents	—		—	—		—	—		—	—		—		—	—
	32,687		21,531	28,700		—	10,958		—	(2,360	)	16,929		—	181,543
Liabilities and Partners’ Capital
Long-term debt	—		—	—		—	—		—	—		—		—	—
Notes payable to MeriStar Hospitality Corporation	—		—	—		—	—		—	—		—		—	—
Accounts payable and accrued expenses	162		—	103		—	37		—	—		—		—	571
Accrued interest	—		—	—		—	—		—	—		—		—	—
Due to Interstate Hotels & Resorts	—		—	—		—	—		—	—		—		—	—
Other liabilities	—		—	—		—	—		—	—		—		—	—
Total liabilities	162		—	103		—	37		—	—		—		—	571
Minority interests	—		—	—		—	—		—	—		—		—	—
Redeemable OP units at redemption value	—		—	—		—	—		—	—		—		—	—
Partners’ capital - Common OP units	32,525		21,531	28,597		—	10,921		—	(2,360	)	16,929		—	180,972
	32,687		21,531	28,700		—	10,958		—	(2,360	)	16,929		—	181,543

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

June 30, 2005

Unaudited

(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
Assets
Property and equipment	4,883		39		90,379		15,917		37,875		—	43,819		94,148		—	—
Accumulated depreciation	(486	)	(30	)	(16,640	)	(2,558	)	(12,292	)	—	(9,048	)	(6,061	)	—	—
	4,397		9		73,739		13,359		25,583		—	34,771		88,087		—	—
Assets held for sale	—		—		—		—		—		—	—		—		—	—
Investments in and advances to unconsolidated affiliates	—		—		—		—		4,627		—	—		—		—	—
Due to/from subsidiaries	3,795		3,800		40,141		7,044		9,180		—	5,462		62,393		—	—
Note receivable from subsidiaries	—		—		—		—		—		—	—		—		—	—
Prepaid expenses and other assets	—		—		135		—		—		—	—		379		—	—
Insurance claim receivable	—		—		—		—		—		—	—		—		—	—
Accounts receivable, net of allowance for doubtful accounts	—		38		—		—		—		—	(14	)	(908	)	—	—
Restricted cash	—		—		—		—		—		—	—		—		—	—
Cash and cash equivalents	—		—		—		—		—		—	—		—		—	—
	8,192		3,847		114,015		20,403		39,390		—	40,219		149,951		—	—
Liabilities and Partners’ Capital
Long-term debt	—		—		—		—		23,609		—	—		55,150		—	—
Notes payable to MeriStar Hospitality Corporation	—		—		—		—		—		—	—		—		—	—
Accounts payable and accrued expenses	40		—		456		46		467		—	165		865		—	—
Accrued interest	—		—		—		—		—		—	—		267		—	—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—	—		—		—	—
Other liabilities	—		—		—		—		—		—	—		—		—	—
Total liabilities	40		—		456		46		24,076		—	165		56,282		—	—
Minority interests	—		—		—		—		—		—	—		—		—	—
Redeemable OP units at redemption value	—		—		—		—		—		—	—		—		—	—
Partners’ capital - Common OP units	8,152		3,847		113,559		20,357		15,314		—	40,054		93,669		—	—
	8,192		3,847		114,015		20,403		39,390		—	40,219		149,951		—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

June 30, 2005

Unaudited

(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		Eliminations		Total Consolidated
Assets
Property and equipment	—	—	—	—	—	—	3,313		—		1,130,214		—		2,655,676
Accumulated depreciation	—	—	—	—	—	—	(3,384	)	—		(223,727	)	—		(545,023	)
	—	—	—	—	—	—	(71	)	—		906,487		—		2,110,653
Assets held for sale	—	—	—	—	—	—	—		—		5,063		—		5,063
Investments in and advances to unconsolidated affiliates	—	—	—	—	—	—	42,342		(40,712	)	109,764		(2,477,129	)	71,066
Due to/from subsidiaries	—	—	—	—	—	—	58,725		(3,954	)	596,633		—		—
Note receivable from subsidiaries	—	—	—	—	—	—	—		—		—		(266,548	)	—
Prepaid expenses and other assets	—	—	—	—	—	—	9,488		—		11,347		—		32,721
Insurance claim receivable	—	—	—	—	—	—	—		—		—		—		34,458
Accounts receivable, net of allowance for doubtful accounts	—	—	—	—	—	—	40,714		—		41,884		(16,394	)	42,250
Restricted cash	—	—	—	—	—	—	1,617		—		4,631		—		69,317
Cash and cash equivalents	—	—	—	—	—	—	25,361		—		25,361		—		90,967
	—	—	—	—	—	—	178,176		(44,666	)	1,701,170		(2,760,071	)	2,456,495
Liabilities and Partners’ Capital
Long-term debt	—	—	—	—	—	—	218,939		—		359,376		(266,548	)	1,423,033
Notes payable to MeriStar Hospitality Corporation	—	—	—	—	—	—	—		—		—		—		202,552
Accounts payable and accrued expenses	—	—	—	—	—	—	48,105		—		54,664		—		72,369
Accrued interest	—	—	—	—	—	—	16,394		—		16,844		(16,394	)	39,949
Due to Interstate Hotels & Resorts	—	—	—	—	—	—	3,652		—		3,452		—		14,027
Other liabilities	—	—	—	—	—	—	6,338		—		6,480		—		13,288
Total liabilities	—	—	—	—	—	—	293,428		—		440,816		(282,942	)	1,765,218
Minority interests	—	—	—	—	—	—	—		—		—		—		2,416
Redeemable OP units at redemption value	—	—	—	—	—	—	—		—		—		—		19,423
Partners’ capital - Common OP units	—	—	—	—	—	—	(115,252	)	(44,666	)	1,260,354		(2,477,129	)	669,438
	—	—	—	—	—	—	178,176		(44,666	)	1,701,170		(2,760,071	)	2,456,495

MeriStar Hospitality Operating Partnership, L.P.

Consolidating 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
Assets
Property and equipment	22,301		1,476,952		—	—	—	—	—	10,885		13,687		88,943
Accumulated depreciation	(14,642	)	(286,652	)	—	—	—	—	—	(783	)	(3,179	)	(14,741	)
	7,659		1,190,300		—	—	—	—	—	10,102		10,508		74,202
Assets held for sale	—		—		—	—	—	—	—	—		—		—
Investments in and advances to unconsolidated affiliates	2,492,499		7,992		40,661	9,487	32	72	2,989	—		—		—
Due to/from subsidiaries	(1,106,110	)	522,427		1,181	750	—	9	73	7,830		6,748		31,376
Note receivable from subsidiaries	221,704		—		—	—	—	—	—	—		—		—
Prepaid expenses and other assets	31,287		(3,841	)	—	—	—	—	—	(11	)	(81	)	(101	)
Insurance claim receivable	76,056		—		—	—	—	—	—	—		—		—
Accounts receivable, net of allowance for doubtful accounts	9,596		1,054		—	—	—	—	—	—		—		—
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
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		—
Accrued interest	38,683		2,214		—	—	—	—	—	—		—		—
Due to Interstate Hotels & Resorts	11,347		—		—	—	—	—	—	—		—		—
Other liabilities	5,382		—		—	—	—	—	—	—		—		—
Total liabilities	1,116,142		479,123		—	—	—	—	—	—		6		—
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
	1,829,669		1,719,278		41,842	10,237	32	81	3,062	17,921		17,175		105,477

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

December 31, 2004

(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.
Assets
Property and equipment	27,485		16,028		10,034		11,800		17,581		—		—	18,367		49,971		—
Accumulated depreciation	(7,319	)	(3,618	)	(413	)	(723	)	(4,384	)	—		—	(3,377	)	(11,560	)	(1	)
	20,166		12,410		9,621		11,077		13,197		—		—	14,990		38,411		(1	)
Assets held for sale	—		—		—		—		—		—		—	—		—		—
Investments in and advances to unconsolidated affiliates	—		—		—		—		—		43		—	—		—		—
Due to/from subsidiaries	(4,175	)	7,517		3,135		5,022		6,581		(43	)	—	9,328		22,758		7,015
Note receivable from subsidiaries	—		—		—		—		—		—		—	—		—		—
Prepaid expenses and other assets	(190	)	(26	)	(12	)	(77	)	2		—		—	(21	)	(93	)	—
Insurance claim receivable	—		—		—		—		—		—		—	—		—		—
Accounts receivable, net of allowance for doubtful accounts	—		—		—		—		—		—		—	124		—		64
Restricted cash	—		—		—		—		—		—		—	—		—		—
Cash and cash equivalents	—		—		—		—		—		—		—	—		—		—
	15,801		19,901		12,744		16,022		19,780		—		—	24,421		61,076		7,078
Liabilities and Partners’ Capital
Long-term debt	—		—		—		—		—		—		—	—		—		—
Notes payable to MeriStar Hospitality Corporation	—		—		—		—		—		—		—	—		—		—
Accounts payable and accrued expenses	59		—		153		1		211		—		—	(21	)	(20	)	5
Accrued interest	—		—		—		—		—		—		—	—		—		—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—		—	—		—		—
Other liabilities	—		—		—		—		—		—		—	—		—		—
Total liabilities	59		—		153		1		211		—		—	(21	)	(20	)	5
Minority interests	—		—		—		—		—		—		—	—		—		—
Redeemable OP units at redemption value	—		—		—		—		—		—		—	—		—		—
Partners’ capital - Common OP units	15,742		19,901		12,591		16,021		19,569		—		—	24,442		61,096		7,073
	15,801		19,901		12,744		16,022		19,780		—		—	24,421		61,076		7,078

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

December 31, 2004

(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
Assets
Property and equipment	20,404		18,560		24,167		—	—	1	20,118		22,986		5,500		—
Accumulated depreciation	(4,557	)	(591	)	(5,738	)	—	—	—	(3,974	)	(7,740	)	(2	)	—
	15,847		17,969		18,429		—	—	1	16,144		15,246		5,498		—
Assets held for sale	—		—		—		—	—	—	—		—		—		—
Investments in and advances to unconsolidated affiliates	—		—		—		—	—	—	—		—		—		—
Due to/from subsidiaries	15,571		12,510		8,688		11,439	—	3,413	6,024		9,411		8,518		9,944
Note receivable from subsidiaries	—		—		—		—	—	—	—		—		—		—
Prepaid expenses and other assets	(83	)	(178	)	(35	)	—	—	—	(22	)	(43	)	(96	)	—
Insurance claim receivable	—		—		—		—	—	—	—		—		—		—
Accounts receivable, net of allowance for doubtful accounts	96		—		—		—	—	—	—		—		—		(44	)
Restricted cash	—		—		—		—	—	—	—		—		—		—
Cash and cash equivalents	—		—		—		—	—	—	—		—		—		—
	31,431		30,301		27,082		11,439	—	3,414	22,146		24,614		13,920		9,900
Liabilities and Partners’ Capital
Long-term debt	33		—		—		—	—	—	—		—		—		—
Notes payable to MeriStar Hospitality Corporation	—		—		—		—	—	—	—		—		—		—
Accounts payable and accrued expenses	(7	)	(4	)	61		—	—	—	88		—		2		—
Accrued interest	—		—		—		—	—	—	—		—		—		—
Due to Interstate Hotels & Resorts	—		—		—		—	—	—	—		—		—		—
Other liabilities	—		—		—		—	—	—	—		—		—		—
Total liabilities	26		(4	)	61		—	—	—	88		—		2		—
Minority interests	—		—		—		—	—	—	—		—		—		—
Redeemable OP units at redemption value	—		—		—		—	—	—	—		—		—		—
Partners’ capital - Common OP units	31,405		30,305		27,021		11,439	—	3,414	22,058		24,614		13,918		9,900
	31,431		30,301		27,082		11,439	—	3,414	22,146		24,614		13,920		9,900

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

December 31, 2004

(Dollars in thousands)

	MeriStar Sub 2B, LLC	MeriStar Sub 3A, LLC	MeriStar Sub 4A, L.P.	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
Assets
Property and equipment	—	—	—	—	—	—	3,955		—	19,976		69,500
Accumulated depreciation	—	—	—	—	—	—	(840	)	—	(4,320	)	(14,321	)
	—	—	—	—	—	—	3,115		—	15,656		55,179
Assets held for sale	—	—	—	—	—	—	—		—	—		—
Investments in and advances to unconsolidated affiliates	—	—	—	—	—	—	—		—	—		—
Due to/from subsidiaries	—	4,976	7,612	—	—	20,297	2,879		—	9,835		22,849
Note receivable from subsidiaries	—	—	—	—	—	—	—		—	—		—
Prepaid expenses and other assets	—	—	—	—	—	—	(24	)	—	(6	)	(550	)
Insurance claim receivable	—	—	—	—	—	—	—		—	—		—
Accounts receivable, net of allowance for doubtful accounts	—	—	—	—	—	178	—		—	—		—
Restricted cash	—	—	—	—	—	—	—		—	—		—
Cash and cash equivalents	—	—	—	—	—	—	—		—	—		—
	—	4,976	7,612	—	—	20,475	5,970		—	25,485		77,478
Liabilities and Partners’ Capital
Long-term debt	—	—	—	—	—	—	—		—	—		—
Notes payable to MeriStar Hospitality Corporation	—	—	—	—	—	—	—		—	—		—
Accounts payable and accrued expenses	—	—	—	—	—	—	75		—	59		—
Accrued interest	—	—	—	—	—	—	—		—	—		—
Due to Interstate Hotels & Resorts	—	—	—	—	—	—	—		—	—		—
Other liabilities	—	—	—	—	—	—	—		—	—		—
Total liabilities	—	—	—	—	—	—	75		—	59		—
Minority interests	—	—	—	—	—	—	—		—	—		—
Redeemable OP units at redemption value	—	—	—	—	—	—	—		—	—		—
Partners’ capital - Common OP units	—	4,976	7,612	—	—	20,475	5,895		—	25,426		77,478
	—	4,976	7,612	—	—	20,475	5,970		—	25,485		77,478

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

December 31, 2004

(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
Assets
Property and equipment	—		55,081		—	11,877		—	42,467		—	—	—	—
Accumulated depreciation	—		(11,258	)	—	(2,636	)	—	(9,533	)	—	—	—	—
	—		43,823		—	9,241		—	32,934		—	—	—	—
Assets held for sale	—		—		—	—		—	—		—	—	—	—
Investments in and advances to unconsolidated affiliates	—		—		—	—		—	51,368		—	—	—	—
Due to/from subsidiaries	(262	)	26,640		2,370	2,976		—	(6,151	)	—	—	—	—
Note receivable from subsidiaries	—		—		—	—		—	—		—	—	—	—
Prepaid expenses and other assets	—		46		—	(14	)	—	(77	)	—	—	—	—
Insurance claim receivable	—		—		—	—		—	—		—	—	—	—
Accounts receivable, net of allowance for doubtful accounts	—		1,169		—	—		—	—		—	—	—	—
Restricted cash	—		—		—	—		—	—		—	—	—	—
Cash and cash equivalents	—		—		—	—		—	—		—	—	—	—
	(262	)	71,678		2,370	12,203		—	78,074		—	—	—	—
Liabilities and Partners’ Capital
Long-term debt	—		—		—	—		—	24,000		—	—	—	—
Notes payable to MeriStar Hospitality Corporation	—		—		—	—		—	—		—	—	—	—
Accounts payable and accrued expenses	—		2,381		—	(125	)	—	165		—	—	—	—
Accrued interest	—		—		—	—		—	—		—	—	—	—
Due to Interstate Hotels & Resorts	—		(200	)	—	—		—	—		—	—	—	—
Other liabilities	—		—		—	—		—	—		—	—	—	—
Total liabilities	—		2,181		—	(125	)	—	24,165		—	—	—	—
Minority interests	—		—		—	—		—	—		—	—	—	—
Redeemable OP units at redemption value	—		—		—	—		—	—		—	—	—	—
Partners’ capital - Common OP units	(262	)	69,497		2,370	12,328		—	53,909		—	—	—	—
	(262	)	71,678		2,370	12,203		—	78,074		—	—	—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

December 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.
Assets
Property and equipment	35,341		—	18,969		—	7,263		—	—		—		—	168,827
Accumulated depreciation	(6,923	)	—	(1,607	)	—	(844	)	—	—		(1	)	—	(35,721	)
	28,418		—	17,362		—	6,419		—	—		(1	)	—	133,106
Assets held for sale	—		—	—		—	—		—	—		—		—	—
Investments in and advances to unconsolidated affiliates	—		—	—		—	—		—	—		—		—	—
Due to/from subsidiaries	4,108		21,531	10,741		—	4,524		1,728	(2,360	)	16,930		—	45,208
Note receivable from subsidiaries	—		—	—		—	—		—	—		—		—	—
Prepaid expenses and other assets	(10	)	—	(118	)	—	(39	)	—	—		—		—	(394	)
Insurance claim receivable	—		—	—		—	—		—	—		—		—	—
Accounts receivable, net of allowance for doubtful accounts	—		—	—		—	—		—	—		—		—	—
Restricted cash	—		—	—		—	—		—	—		—		—	—
Cash and cash equivalents	—		—	—		—	—		—	—		—		—	—
	32,516		21,531	27,985		—	10,904		1,728	(2,360	)	16,929		—	177,920
Liabilities and Partners’ Capital
Long-term debt	—		—	—		—	—		—	—		—		—	—
Notes payable to MeriStar Hospitality Corporation	—		—	—		—	—		—	—		—		—	—
Accounts payable and accrued expenses	334		—	—		—	—		—	—		—		—	—
Accrued interest	—		—	—		—	—		—	—		—		—	—
Due to Interstate Hotels & Resorts	—		—	—		—	—		—	—		—		—	—
Other liabilities	—		—	—		—	—		—	—		—		—	—
Total liabilities	334		—	—		—	—		—	—		—		—	—
Minority interests	—		—	—		—	—		—	—		—		—	—
Redeemable OP units at redemption value	—		—	—		—	—		—	—		—		—	—
Partners’ capital - Common OP units	32,182		21,531	27,985		—	10,904		1,728	(2,360	)	16,929		—	177,920
	32,516		21,531	27,985		—	10,904		1,728	(2,360	)	16,929		—	177,920

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

December 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 Pentagon City, LLC		MeriStar Sub 6K, LLC	MeriStar Sub 5E, LLC
Assets
Property and equipment	3,580		39		79,579		13,980		37,074		—	41,862		93,264		—	—
Accumulated depreciation	(448	)	(28	)	(14,819	)	(2,312	)	(11,767	)	—	(8,398	)	(3,478	)	—	—
	3,132		11		64,760		11,668		25,307		—	33,464		89,786		—	—
Assets held for sale	—		—		—		—		—		—	—		—		—	—
Investments in and advances to unconsolidated affiliates	—		—		—		—		4,627		—	—		—		—	—
Due to/from subsidiaries	4,988		3,724		51,127		8,187		8,010		16,379	6,370		58,867		—	—
Note receivable from subsidiaries	—		—		—		—		—		—	—		—		—	—
Prepaid expenses and other assets	(45	)	(10	)	(769	)	(137	)	(78	)	—	(51	)	466		—	—
Insurance claim receivable	—		—		—		—		—		—	—		—		—	—
Accounts receivable, net of allowance for doubtful accounts	—		38		—		—		—		359	(14	)	(361	)	—	—
Restricted cash	—		—		—		—		—		—	—		—		—	—
Cash and cash equivalents	—		—		—		—		—		—	—		—		—	—
	8,075		3,763		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	4		—		126		(18	)	114		—	152		273		—	—
Accrued interest	—		—		—		—		—		—	—		268		—	—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—	—		—		—	—
Other liabilities	—		—		—		—		—		—	—		—		—	—
Total liabilities	4		—		126		(18	)	23,723		—	152		56,050		—	—
Minority interests	—		—		—		—		—		—	—		—		—	—
Redeemable OP units at redemption value	—		—		—		—		—		—	—		—		—	—
Partners’ capital - Common OP units	8,071		3,763		114,992		19,736		14,143		16,738	39,617		92,708		—	—
	8,075		3,763		115,118		19,718		37,866		16,738	39,769		148,758		—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Balance Sheet

December 31, 2004

(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		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
Assets held for sale	—	—	—	—	—	—	—		—		—		—			—
Investments in and advances to unconsolidated affiliates	—	—	—	—	—	—	42,290		(40,661	)	110,908		(2,526,603	)		84,796
Due to/from subsidiaries	—	—	—	—	—	—	40,158		(1,181	)	583,683		—			—
Note receivable from subsidiaries	—	—	—	—	—	—	—		—		—		(221,704	)		—
Prepaid expenses and other assets	—	—	—	—	—	—	9,661		—		6,784		—			34,230
Insurance claim receivable	—	—	—	—	—	—	—		—		—		—			76,056
Accounts receivable, net of allowance for doubtful accounts	—	—	—	—	—	—	30,134		—		31,743		(9,414	)		32,979
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
Total liabilities	—	—	—	—	—	—	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

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2005

Unaudited

(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		1,164		—	—	—	—	—	—	—	—
Participating lease revenue	—		36,774		—	—	—	—	—	384	714	1,935
Total revenue	1		37,938		—	—	—	—	—	384	714	1,935
Hotel operating expenses:
Rooms	—		—		—	—	—	—	—	—	—	—
Food and beverage	—		—		—	—	—	—	—	—	—	—
Other hotel operating expenses	—		—		—	—	—	—	—	—	—	—
Office rental, parking and other expenses	—		381		—	—	—	—	—	—	—	—
Other operating expenses:
General and administrative, hotel	—		—		—	—	—	—	—	—	—	—
General and administrative, corporate	2,788		—		—	—	—	—	—	—	—	—
Property operating costs	—		—		—	—	—	—	—	—	—	—
Depreciation and amortization	1,862		12,948		—	—	—	—	—	157	164	602
Property taxes, insurance and other	104		4,097		—	—	—	—	—	23	364	191
Loss on asset impairments	—		—		—	—	—	—	—	—	—	—
Operating expenses	4,754		17,426		—	—	—	—	—	180	528	793
Equity in income/loss of and interest earned from unconsolidated affiliates	1,347		—		1,416	177	—	—	—	—	—	—
Hurricane business interruption insurance gain	—		—		—	—	—	—	—	—	—	—
Operating income (loss)	(3,406	)	20,512		1,416	177	—	—	—	204	186	1,142
Minority interest	7		—		—	—	—	—	—	—	—	—
Interest expense, net	(16,209	)	(8,197	)	—	—	—	—	—	—	—	—
Loss on early extinguishments of debt	(947	)	—		—	—	—	—	—	—	—	—
Equity in income from consolidated entities	22,462		—		—	—	—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	1,907		12,315		1,416	177	—	—	—	204	186	1,142
Income tax (expense) benefit	(287	)	—		—	—	—	—	—	—	—	—
(Loss) income from continuing operations	1,620		12,315		1,416	177	—	—	—	204	186	1,142
Discontinued operations:
(Loss) income from discontinued operations before income tax	(206	)	(2,445	)	—	—	—	—	—	—	—	—
Income tax (expense) benefit	—		—		—	—	—	—	—	—	—	—
(Loss) income from discontinued operations	(206	)	(2,445	)	—	—	—	—	—	—	—	—
Net (loss) income	1,414		9,870		1,416	177	—	—	—	204	186	1,142

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2005

Unaudited

(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.
Revenue:
Hotel operations:
Rooms	—		—	—	—	—	—	—	—	—		—
Food and beverage	—		—	—	—	—	—	—	—	—		—
Other hotel operations	—		—	—	—	—	—	—	—	—		—
Office rental, parking and other revenue	—		6	—	—	—	—	—	10	(3	)	—
Participating lease revenue	244		386	365	172	534	—	—	812	1,993		—
Total revenue	244		392	365	172	534	—	—	822	1,990		—
Hotel operating expenses:
Rooms	—		—	—	—	—	—	—	—	—		—
Food and beverage	—		—	—	—	—	—	—	—	—		—
Other hotel operating expenses	—		—	—	—	—	—	—	—	—		—
Office rental, parking and other expenses	20		—	—	—	—	—	—	—	4		—
Other operating expenses:
General and administrative, hotel	—		—	—	—	—	—	—	—	—		—
General and administrative, corporate	—		—	—	—	—	—	—	—	—		—
Property operating costs	—		—	—	—	—	—	—	—	—		—
Depreciation and amortization	260		138	94	41	155	—	—	105	322		—
Property taxes, insurance and other	178		37	28	41	90	—	—	79	141		—
Loss on asset impairments	—		—	—	—	—	—	—	—	—		—
Operating expenses	458		175	122	82	245	—	—	184	467		—
Equity in income/loss of and interest earned from unconsolidated affiliates	—		—	—	—	—	—	—	—	—		—
Hurricane business interruption insurance gain	—		—	—	—	—	—	—	—	—		—
Operating income (loss)	(214	)	217	243	90	289	—	—	638	1,523		—
Minority interest	—		—	—	—	—	—	—	—	—		—
Interest expense, net	—		—	—	—	—	—	—	—	(718	)	—
Loss on early extinguishments of debt	—		—	—	—	—	—	—	—	—		—
Equity in income from consolidated entities	—		—	—	—	—	—	—	—	—		—
(Loss) income before income taxes and discontinued operations	(214	)	217	243	90	289	—	—	638	805		—
Income tax (expense) benefit	—		—	—	—	—	—	—	—	—		—
(Loss) income from continuing operations	(214	)	217	243	90	289	—	—	638	805		—
Discontinued operations:
(Loss) income from discontinued operations before income tax	—		—	—	—	—	—	—	—	—		—
Income tax (expense) benefit	—		—	—	—	—	—	—	—	—		—
(Loss) income from discontinued operations	—		—	—	—	—	—	—	—	—		—
Net (loss) income	(214	)	217	243	90	289	—	—	638	805		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2005

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—	—	—		—
Food and beverage	—	—	—	—	—	—	—	—	—		—
Other hotel operations	—	—	—	—	—	—	—	—	—		—
Office rental, parking and other revenue	—	—	—	—	—	—	—	—	—		—
Participating lease revenue	649	616	1,194	—	—	—	358	481	—		—
Total revenue	649	616	1,194	—	—	—	358	481	—		—
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	149	154	171	—	—	—	123	161	—		—
Property taxes, insurance and other	53	117	100	—	—	—	49	32	—		—
Loss on asset impairments	—	—	—	—	—	—	—	—	—		—
Operating expenses	202	271	271	—	—	—	172	193	—		—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—	—		—
Hurricane business interruption insurance gain	—	—	—	—	—	—	—	—	—		—
Operating income (loss)	447	345	923	—	—	—	186	288	—		—
Minority interest	—	—	—	—	—	—	—	—	—		—
Interest expense, net	—	—	—	—	—	—	—	—	—		—
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—	—		—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—	—		—
(Loss) income before income taxes and discontinued operations	447	345	923	—	—	—	186	288	—		—
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—		—
(Loss) income from continuing operations	447	345	923	—	—	—	186	288	—		—
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	—	—	—	—	—	(104	)	—
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—		—
(Loss) income from discontinued operations	—	—	—	—	—	—	—	—	(104	)	—
Net (loss) income	447	345	923	—	—	—	186	288	(104	)	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2005

Unaudited

(Dollars in thousands)

	MeriStar Sub 2B, LLC	MeriStar Sub 3A, LLC	MeriStar Sub 4A, L.P.	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
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—	—	—	—
Food and beverage	—	—	—	—	—	—	—	—	—	—
Other hotel operations	—	—	—	—	—	—	—	—	—	—
Office rental, parking and other revenue	—	—	—	—	—	—	—	—	—	2
Participating lease revenue	—	—	—	—	—	—	135	—	948	1,550
Total revenue	—	—	—	—	—	—	135	—	948	1,552
Hotel operating expenses:
Rooms	—	—	—	—	—	—	—	—	—	—
Food and beverage	—	—	—	—	—	—	—	—	—	—
Other hotel operating expenses	—	—	—	—	—	—	—	—	—	—
Office rental, parking and other expenses	—	—	—	—	—	—	—	—	—	29
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—	—	—	—	—
General and administrative, corporate	—	—	—	—	—	—	—	—	—	—
Property operating costs	—	—	—	—	—	—	—	—	—	—
Depreciation and amortization	—	—	—	—	—	—	49	—	111	459
Property taxes, insurance and other	—	—	—	—	—	—	32	—	76	375
Loss on asset impairments	—	—	—	—	—	—	—	—	—	—
Operating expenses	—	—	—	—	—	—	81	—	187	863
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—	—	—
Hurricane business interruption insurance gain	—	—	—	—	—	—	—	—	—	—
Operating income (loss)	—	—	—	—	—	—	54	—	761	689
Minority interest	—	—	—	—	—	—	—	—	—	—
Interest expense, net	—	—	—	—	—	—	—	—	—	—
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—	—	—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	—	—	—	—	—	—	54	—	761	689
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—	—
(Loss) income from continuing operations	—	—	—	—	—	—	54	—	761	689
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	—	—	—	—	—	—	—
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—	—
(Loss) income from discontinued operations	—	—	—	—	—	—	—	—	—	—
Net (loss) income	—	—	—	—	—	—	54	—	761	689

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2005

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—		—	—	—	—
Food and beverage	—	—	—	—	—	—		—	—	—	—
Other hotel operations	—	—	—	—	—	—		—	—	—	—
Office rental, parking and other revenue	—	—	—	—	—	—		—	—	—	—
Participating lease revenue	—	1,861	—	375	—	695		—	—	—	—
Total revenue	—	1,861	—	375	—	695		—	—	—	—
Hotel operating expenses:
Rooms	—	—	—	—	—	—		—	—	—	—
Food and beverage	—	—	—	—	—	—		—	—	—	—
Other hotel operating expenses	—	—	—	—	—	—		—	—	—	—
Office rental, parking and other expenses	—	203	—	—	—	—		—	—	—	—
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—		—	—	—	—
General and administrative, corporate	—	—	—	—	—	—		—	—	—	—
Property operating costs	—	—	—	—	—	—		—	—	—	—
Depreciation and amortization	—	353	—	89	—	336		—	—	—	—
Property taxes, insurance and other	—	386	—	83	—	82		—	—	—	—
Loss on asset impairments	—	—	—	—	—	—		—	—	—	—
Operating expenses	—	942	—	172	—	418		—	—	—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—		—	—	—	—
Hurricane business interruption insurance gain	—	—	—	—	—	—		—	—	—	—
Operating income (loss)	—	919	—	203	—	277		—	—	—	—
Minority interest	—	—	—	—	—	—		—	—	—	—
Interest expense, net	—	—	—	—	—	(429	)	—	—	—	—
Loss on early extinguishments of debt	—	—	—	—	—	—		—	—	—	—
Equity in income from consolidated entities	—	—	—	—	—	—		—	—	—	—
(Loss) income before income taxes and discontinued operations	—	919	—	203	—	(152	)	—	—	—	—
Income tax (expense) benefit	—	—	—	—	—	—		—	—	—	—
(Loss) income from continuing operations	—	919	—	203	—	(152	)	—	—	—	—
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	—	—	—		—	—	—	—
Income tax (expense) benefit	—	—	—	—	—	—		—	—	—	—
(Loss) income from discontinued operations	—	—	—	—	—	—		—	—	—	—
Net (loss) income	—	919	—	203	—	(152	)	—	—	—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2005

Unaudited

(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	—	—	—	—	—	—	—	—	3
Participating lease revenue	510	—	386	—	105	—	—	—	—	2,989
Total revenue	514	—	386	—	105	—	—	—	—	2,992
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	220	—	67	—	35	—	—	—	—	1,551
Property taxes, insurance and other	83	—	26	—	18	—	—	—	—	491
Loss on asset impairments	—	—	—	—	—	—	—	—	—	—
Operating expenses	303	—	93	—	53	—	—	—	—	2,042
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—	—	—
Hurricane business interruption insurance gain	—	—	—	—	—	—	—	—	—	—
Operating income (loss)	211	—	293	—	52	—	—	—	—	950
Minority interest	—	—	—	—	—	—	—	—	—	—
Interest expense, net	—	—	—	—	—	—	—	—	—	—
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—	—	—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	211	—	293	—	52	—	—	—	—	950
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—	—
(Loss) income from continuing operations	211	—	293	—	52	—	—	—	—	950
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	—	—	—	—	—	—	—
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—	—
(Loss) income from discontinued operations	—	—	—	—	—	—	—	—	—	—
Net (loss) income	211	—	293	—	52	—	—	—	—	950

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2005

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—	—		—	—		—	—	—		—	—
Food and beverage	—	—	—		—	—		—	—	—		—	—
Other hotel operations	—	—	—		—	—		—	—	—		—	—
Office rental, parking and other revenue	—	—	—		—	24		—	1	—		—	—
Participating lease revenue	137	5	—		433	1,780		—	864	3,389		—	—
Total revenue	137	5	—		433	1,804		—	865	3,389		—	—
Hotel operating expenses:
Rooms	—	—	—		—	—		—	—	—		—	—
Food and beverage	—	—	—		—	—		—	—	—		—	—
Other hotel operating expenses	—	—	—		—	—		—	—	—		—	—
Office rental, parking and other expenses	—	—	—		—	—		—	113	—		—	—
Other operating expenses:
General and administrative, hotel	—	—	—		—	—		—	—	—		—	—
General and administrative, corporate	—	—	—		—	—		—	—	—		—	—
Property operating costs	—	—	—		—	—		—	—	—		—	—
Depreciation and amortization	19	1	910		123	255		—	332	1,297		—	—
Property taxes, insurance and other	19	3	(69	)	—	194		—	80	504		—	—
Loss on asset impairments	—	—	—		—	—		—	—	—		—	—
Operating expenses	38	4	841		123	449		—	525	1,801		—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—		—	—		—	—	—		—	—
Hurricane business interruption insurance gain	—	—	—		—	—		—	—	—		—	—
Operating income (loss)	99	1	(841	)	310	1,355		—	340	1,588		—	—
Minority interest	—	—	—		—	—		—	—	—		—	—
Interest expense, net	—	—	—		—	(709	)	—	—	(801	)	—	—
Loss on early extinguishments of debt	—	—	—		—	—		—	—	—		—	—
Equity in income from consolidated entities	—	—	—		—	—		—	—	—		—	—
(Loss) income before income taxes and discontinued operations	99	1	(841	)	310	646		—	340	787		—	—
Income tax (expense) benefit	—	—	—		—	—		—	—	—		—	—
(Loss) income from continuing operations	99	1	(841	)	310	646		—	340	787		—	—
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—		—	—		—	—	—		—	—
Income tax (expense) benefit	—	—	—		—	—		—	—	—		—	—
(Loss) income from discontinued operations	—	—	—		—	—		—	—	—		—	—
Net (loss) income	99	1	(841	)	310	646		—	340	787		—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2005

Unaudited

(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		Eliminations		Total Consolidated
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	142,908		—		142,908		—		142,908
Food and beverage	—	—	—	—	—	—	61,006		—		61,006		—		61,006
Other hotel operations	—	—	—	—	—	—	11,815		—		11,815		—		11,815
Office rental, parking and other revenue	—	—	—	—	—	—	—		—		47		—		1,212
Participating lease revenue	—	—	—	—	—	—	—		—		26,999		(63,773	)	—
Total revenue	—	—	—	—	—	—	215,729		—		242,775		(63,773	)	216,941
Hotel operating expenses:
Rooms	—	—	—	—	—	—	33,785		—		33,785		—		33,785
Food and beverage	—	—	—	—	—	—	40,903		—		40,903		—		40,903
Other hotel operating expenses	—	—	—	—	—	—	7,623		—		7,623		—		7,623
Office rental, parking and other expenses	—	—	—	—	—	—	(138	)	—		231		—		612
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—	31,771		—		31,771		—		31,771
General and administrative, corporate	—	—	—	—	—	—	40		—		40		—		2,828
Property operating costs	—	—	—	—	—	—	31,294		—		31,294		—		31,294
Depreciation and amortization	—	—	—	—	—	—	—		—		9,003		—		23,813
Property taxes, insurance and other	—	—	—	—	—	—	67,764		—		71,670		(63,773	)	12,098
Loss on asset impairments	—	—	—	—	—	—	—		—		—		—		—
Operating expenses	—	—	—	—	—	—	213,042		—		226,320		(63,773	)	184,727
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	1,416		(1,416	)	1,593		—		2,940
Hurricane business interruption insurance gain	—	—	—	—	—	—	2,009		—		2,009		—		2,009
Operating income (loss)	—	—	—	—	—	—	6,112		(1,416	)	20,057		—		37,163
Minority interest	—	—	—	—	—	—	—		—		—		—		7
Interest expense, net	—	—	—	—	—	—	(3,635	)	—		(6,292	)	—		(30,698	)
Loss on early extinguishments of debt	—	—	—	—	—	—	—		—		—		—		(947	)
Equity in income from consolidated entities	—	—	—	—	—	—	—		—		—		(22,462	)	—
(Loss) income before income taxes and discontinued operations	—	—	—	—	—	—	2,477		(1,416	)	13,765		(22,462	)	5,525
Income tax (expense) benefit	—	—	—	—	—	—	(115	)	—		(115	)	—		(402	)
(Loss) income from continuing operations	—	—	—	—	—	—	2,362		(1,416	)	13,650		(22,462	)	5,123
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	—	—	—	(954	)	—		(1,058	)	—		(3,709	)
Income tax (expense) benefit	—	—	—	—	—	—	—		—		—		—		—
(Loss) income from discontinued operations	—	—	—	—	—	—	(954	)	—		(1,058	)	—		(3,709	)
Net (loss) income	—	—	—	—	—	—	1,408		(1,416	)	12,592		(22,462	)	1,414

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2004

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—		—		—	—	—	—	—	—	—		—
Food and beverage	—		—		—	—	—	—	—	—	—		—
Other hotel operations	—		—		—	—	—	—	—	—	—		—
Office rental parking and other revenue	22		663		—	—	—	—	—	—	—		7
Participating lease revenue	—		35,720		—	—	—	373	601	1,863	304		371
Total revenue	22		36,383		—	—	—	373	601	1,863	304		378
Hotel operating expenses:
Rooms	—		—		—	—	—	—	—	—	—		—
Food and beverage	—		—		—	—	—	—	—	—	—		—
Other operating departments	—		—		—	—	—	—	—	—	—		—
Office rental, parking and other expenses	—		271		—	—	—	—	—	—	—		—
Other operating expenses:
General and administrative, hotel	—		21		—	—	—	—	—	—	—		—
General and administrative, corporate	3,185		—		—	—	—	—	—	—	—		—
Property operating costs	—		(187	)	—	—	—	—	—	—	—		—
Depreciation and amortization	2,860		12,009		—	—	—	156	165	602	341		149
Property taxes, insurance and other	(356	)	6,609		—	—	—	26	182	250	169		22
Loss on asset impairments	—		310		—	—	—	—	—	—	—		—
Operating expenses	5,689		19,033		—	—	—	182	347	852	510		171
Equity in income/loss of and interest earned from unconsolidated affiliates	1,600		—		—	—	—	—	—	—	—		—
Hurricane business interruption insurance gain	—		—		—	—	—	—	—	—	—		—
Operating income (loss)	(4,067	)	17,350		—	—	—	191	254	1,011	(206	)	207
Minority interest	20		—		—	—	—	—	—	—	—		—
Interest expense, net	(18,895	)	(8,253	)	—	—	—	—	—	—	—		—
Loss on early extinguishments of debt	(1,980	)	—		—	—	—	—	—	—	—		—
Equity in income from consolidated entities	12,880		—		—	—	—	—	—	—	—		—
(Loss) income before income taxes and discontinued operations	(12,042	)	9,097		—	—	—	191	254	1,011	(206	)	207
Income tax (expense) benefit	(12	)	—		—	—	—	—	—	—	—		—
(Loss) income from continuing operations	(12,054	)	9,097		—	—	—	191	254	1,011	(206	)	207
Discontinued operations:
(Loss) income from discontinued operations before income tax	(29	)	2,385		—	—	—	—	—	—	—		—
Income tax (expense) benefit	32		—		—	—	—	—	—	—	—		—
(Loss) income from discontinued operations	3		2,385		—	—	—	—	—	—	—		—
Net (loss) income	(12,051	)	11,482		—	—	—	191	254	1,011	(206	)	207

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2004

Unaudited

(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.
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—	—		—		—
Food and beverage	—	—	—	—	—	—	—	—		—		—
Other hotel operations	—	—	—	—	—	—	—	—		—		—
Office rental parking and other revenue	—	—	—	—	—	41	—	—		(4	)	—
Participating lease revenue	305	253	432	—	—	582	1,594	—		519		737
Total revenue	305	253	432	—	—	623	1,594	—		515		737
Hotel operating expenses:
Rooms	—	—	—	—	—	—	—	—		—		—
Food and beverage	—	—	—	—	—	—	—	—		—		—
Other operating departments	—	—	—	—	—	—	—	—		—		—
Office rental, parking and other expenses	—	—	—	—	—	—	—	—		—		—
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—	—	—		—		—
General and administrative, corporate	—	—	—	—	—	—	—	—		—		—
Property operating costs	—	—	—	—	—	—	—	—		—		—
Depreciation and amortization	73	39	178	—	—	136	415	—		121		195
Property taxes, insurance and other	32	36	93	—	—	74	135	—		8		89
Loss on asset impairments	—	—	—	—	—	—	—	—		—		—
Operating expenses	105	75	271	—	—	210	550	—		129		284
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—		—		—
Hurricane business interruption insurance gain	—	—	—	—	—	—	—	—		—		—
Operating income (loss)	200	178	161	—	—	413	1,044	—		386		453
Minority interest	—	—	—	—	—	—	—	—		—		—
Interest expense, net	—	—	—	—	—	—	—	—		—		—
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—		—		—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—		—		—
(Loss) income before income taxes and discontinued operations	200	178	161	—	—	413	1,044	—		386		453
Income tax (expense) benefit	—	—	—	—	—	—	—	—		—		—
(Loss) income from continuing operations	200	178	161	—	—	413	1,044	—		386		453
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	—	—	—	—	(886	)	—		—
Income tax (expense) benefit	—	—	—	—	—	—	—	—		—		—
(Loss) income from discontinued operations	—	—	—	—	—	—	—	(886	)	—		—
Net (loss) income	200	178	161	—	—	413	1,044	(886	)	386		453

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2004

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—		—		—	—
Food and beverage	—	—	—	—	—	—	—		—		—	—
Other hotel operations	—	—	—	—	—	—	—		—		—	—
Office rental parking and other revenue	—	—	—	—	—	—	—		—		—	—
Participating lease revenue	1,084	—	—	—	344	378	—		—		—	—
Total revenue	1,084	—	—	—	344	378	—		—		—	—
Hotel operating expenses:
Rooms	—	—	—	—	—	—	—		—		—	—
Food and beverage	—	—	—	—	—	—	—		—		—	—
Other operating departments	—	—	—	—	—	—	—		—		—	—
Office rental, parking and other expenses	—	—	—	—	—	—	—		—		—	—
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—	—		—		—	—
General and administrative, corporate	—	—	—	—	—	—	—		—		—	—
Property operating costs	—	—	—	—	—	—	—		—		—	—
Depreciation and amortization	153	—	—	—	161	190	—		—		—	—
Property taxes, insurance and other	92	—	—	—	48	61	—		—		—	—
Loss on asset impairments	—	—	—	—	—	—	—		—		—	—
Operating expenses	245	—	—	—	209	251	—		—		—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—		—		—	—
Hurricane business interruption insurance gain	—	—	—	—	—	—	—		—		—	—
Operating income (loss)	839	—	—	—	135	127	—		—		—	—
Minority interest	—	—	—	—	—	—	—		—		—	—
Interest expense, net	—	—	—	—	—	—	—		—		—	—
Loss on early extinguishments of debt	—	—	—	—	—	—	—		—		—	—
Equity in income from consolidated entities	—	—	—	—	—	—	—		—		—	—
(Loss) income before income taxes and discontinued operations	839	—	—	—	135	127	—		—		—	—
Income tax (expense) benefit	—	—	—	—	—	—	—		—		—	—
(Loss) income from continuing operations	839	—	—	—	135	127	—		—		—	—
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	142	—	—	—	—	(150	)	(49	)	—	—
Income tax (expense) benefit	—	—	—	—	—	—	—		—		—	—
(Loss) income from discontinued operations	—	142	—	—	—	—	(150	)	(49	)	—	—
Net (loss) income	839	142	—	—	135	127	(150	)	(49	)	—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2004

Unaudited

(Dollars in thousands)

	MeriStar Sub 4A, L.P.	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
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—	—	—		—
Food and beverage	—	—	—	—	—	—	—	—	—		—
Other hotel operations	—	—	—	—	—	—	—	—	—		—
Office rental parking and other revenue	—	—	—	—	—	—	—	55	—		274
Participating lease revenue	—	—	—	—	133	—	754	1,124	—		1,474
Total revenue	—	—	—	—	133	—	754	1,179	—		1,748
Hotel operating expenses:
Rooms	—	—	—	—	—	—	—	—	—		—
Food and beverage	—	—	—	—	—	—	—	—	—		—
Other operating departments	—	—	—	—	—	—	—	—	—		—
Office rental, parking and other expenses	—	—	—	—	—	—	—	35	—		216
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—	—	—	—		—
General and administrative, corporate	—	—	—	—	—	—	—	—	—		—
Property operating costs	—	—	—	—	—	—	—	—	—		—
Depreciation and amortization	—	—	—	—	47	—	140	567	—		431
Property taxes, insurance and other	—	—	—	—	34	—	71	389	—		647
Loss on asset impairments	—	—	—	—	—	—	—	—	—		—
Operating expenses	—	—	—	—	81	—	211	991	—		1,294
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—	—		—
Hurricane business interruption insurance gain	—	—	—	—	—	—	—	—	—		—
Operating income (loss)	—	—	—	—	52	—	543	188	—		454
Minority interest	—	—	—	—	—	—	—	—	—		—
Interest expense, net	—	—	—	—	—	—	—	—	—		—
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—	—		—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—	—		—
(Loss) income before income taxes and discontinued operations	—	—	—	—	52	—	543	188	—		454
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—		—
(Loss) income from continuing operations	—	—	—	—	52	—	543	188	—		454
Discontinued operations:
(Loss) income from discontinued operations before income tax	1	—	—	—	—	—	—	—	(503	)	—
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—		—
(Loss) income from discontinued operations	1	—	—	—	—	—	—	—	(503	)	—
Net (loss) income	1	—	—	—	52	—	543	188	(503	)	454

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2004

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—	—	—		—	—	—	—	—	—
Food and beverage	—	—	—	—		—	—	—	—	—	—
Other hotel operations	—	—	—	—		—	—	—	—	—	—
Office rental parking and other revenue	—	—	—	—		—	—	—	—	6	—
Participating lease revenue	—	356	—	642		—	—	—	—	492	—
Total revenue	—	356	—	642		—	—	—	—	498	—
Hotel operating expenses:
Rooms	—	—	—	—		—	—	—	—	—	—
Food and beverage	—	—	—	—		—	—	—	—	—	—
Other operating departments	—	—	—	—		—	—	—	—	—	—
Office rental, parking and other expenses	—	—	—	—		—	—	—	—	—	—
Other operating expenses:
General and administrative, hotel	—	—	—	—		—	—	—	—	—	—
General and administrative, corporate	—	—	—	—		—	—	—	—	—	—
Property operating costs	—	—	—	—		—	—	—	—	—	—
Depreciation and amortization	—	112	—	369		—	—	—	—	275	—
Property taxes, insurance and other	—	54	—	49		—	—	—	—	98	—
Loss on asset impairments	—	—	—	—		—	—	—	—	—	—
Operating expenses	—	166	—	418		—	—	—	—	373	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—		—	—	—	—	—	—
Hurricane business interruption insurance gain	—	—	—	—		—	—	—	—	—	—
Operating income (loss)	—	190	—	224		—	—	—	—	125	—
Minority interest	—	—	—	—		—	—	—	—	—	—
Interest expense, net	—	—	—	(340	)	—	—	—	—	—	—
Loss on early extinguishments of debt	—	—	—	—		—	—	—	—	—	—
Equity in income from consolidated entities	—	—	—	—		—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	—	190	—	(116	)	—	—	—	—	125	—
Income tax (expense) benefit	—	—	—	—		—	—	—	—	—	—
(Loss) income from continuing operations	—	190	—	(116	)	—	—	—	—	125	—
Discontinued operations:
(Loss) income from discontinued operations before income tax	56	—	—	—		—	—	—	—	—	165
Income tax (expense) benefit	—	—	—	—		—	—	—	—	—	—
(Loss) income from discontinued operations	56	—	—	—		—	—	—	—	—	165
Net (loss) income	56	190	—	(116	)	—	—	—	—	125	165

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2004

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—	—	—		—		—	—	—	—	—
Food and beverage	—	—	—	—		—		—	—	—	—	—
Other hotel operations	—	—	—	—		—		—	—	—	—	—
Office rental parking and other revenue	—	—	—	—		—		—	—	7	—	—
Participating lease revenue	422	—	210	—		—		—	—	2,444	211	321
Total revenue	422	—	210	—		—		—	—	2,451	211	321
Hotel operating expenses:
Rooms	—	—	—	—		—		—	—	—	—	—
Food and beverage	—	—	—	—		—		—	—	—	—	—
Other operating departments	—	—	—	—		—		—	—	—	—	—
Office rental, parking and other expenses	—	—	—	—		—		—	—	—	—	—
Other operating expenses:
General and administrative, hotel	—	—	—	—		—		—	—	—	—	—
General and administrative, corporate	—	—	—	—		—		—	—	—	—	—
Property operating costs	—	—	—	—		—		—	—	—	—	—
Depreciation and amortization	120	—	57	—		—		—	—	1,578	35	1
Property taxes, insurance and other	64	—	25	—		—		—	—	393	24	1
Loss on asset impairments	—	—	—	—		—		—	—	—	—	—
Operating expenses	184	—	82	—		—		—	—	1,971	59	2
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—		—		—	—	—	—	—
Hurricane business interruption insurance gain	—	—	—	—		—		—	—	—	—	—
Operating income (loss)	238	—	128	—		—		—	—	480	152	319
Minority interest	—	—	—	—		—		—	—	—	—	—
Interest expense, net	—	—	—	—		—		—	—	—	—	—
Loss on early extinguishments of debt	—	—	—	—		—		—	—	—	—	—
Equity in income from consolidated entities	—	—	—	—		—		—	—	—	—	—
(Loss) income before income taxes and discontinued operations	238	—	128	—		—		—	—	480	152	319
Income tax (expense) benefit	—	—	—	—		—		—	—	—	—	—
(Loss) income from continuing operations	238	—	128	—		—		—	—	480	152	319
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	(1	)	(667	)	256	—	—	—	—
Income tax (expense) benefit	—	—	—	—		—		—	—	—	—	—
(Loss) income from discontinued operations	—	—	—	(1	)	(667	)	256	—	—	—	—
Net (loss) income	238	—	128	(1	)	(667	)	256	—	480	152	319

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2004

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—	—		—	—	—		—	—	—	—
Food and beverage	—	—	—		—	—	—		—	—	—	—
Other hotel operations	—	—	—		—	—	—		—	—	—	—
Office rental parking and other revenue	—	—	24		—	72	—		—	—	—	—
Participating lease revenue	2,611	516	1,484		—	699	1,406		—	—	—	—
Total revenue	2,611	516	1,508		—	771	1,406		—	—	—	—
Hotel operating expenses:
Rooms	—	—	—		—	—	—		—	—	—	—
Food and beverage	—	—	—		—	—	—		—	—	—	—
Other operating departments	—	—	—		—	—	—		—	—	—	—
Office rental, parking and other expenses	—	—	—		—	148	—		—	—	—	—
Other operating expenses:
General and administrative, hotel	—	—	—		—	—	4		—	—	—	—
General and administrative, corporate	—	—	—		—	—	—		—	—	—	—
Property operating costs	—	—	—		—	—	—		—	—	—	—
Depreciation and amortization	1,395	154	263		—	317	355		—	—	—	—
Property taxes, insurance and other	498	97	201		—	81	177		—	—	—	—
Loss on asset impairments	—	—	—		—	—	—		—	—	—	—
Operating expenses	1,893	251	464		—	546	536		—	—	—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—		—	—	—		—	—	—	—
Hurricane business interruption insurance gain	—	—	—		—	—	—		—	—	—	—
Operating income (loss)	718	265	1,044		—	225	870		—	—	—	—
Minority interest	—	—	—		—	—	—		—	—	—	—
Interest expense, net	—	—	(709	)	—	—	(9	)	—	—	—	—
Loss on early extinguishments of debt	—	—	—		—	—	—		—	—	—	—
Equity in income from consolidated entities	—	—	—		—	—	—		—	—	—	—
(Loss) income before income taxes and discontinued operations	718	265	335		—	225	861		—	—	—	—
Income tax (expense) benefit	—	—	—		—	—	—		—	—	—	—
(Loss) income from continuing operations	718	265	335		—	225	861		—	—	—	—
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—		—	—	—		—	—	—	—
Income tax (expense) benefit	—	—	—		—	—	—		—	—	—	—
(Loss) income from discontinued operations	—	—	—		—	—	—		—	—	—	—
Net (loss) income	718	265	335		—	225	861		—	—	—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Three months ended June 30, 2004

Unaudited

(Dollars in thousands)

	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		Eliminations		Total Consolidated
Revenue:
Hotel operations:
Rooms	—	—	—	—	137,230		—	137,230		—		137,230
Food and beverage	—	—	—	—	57,028		—	57,028		—		57,028
Other hotel operations	—	—	—	—	15,694		—	15,694		—		15,694
Office rental parking and other revenue	—	—	—	—	161		—	643		—		1,328
Participating lease revenue	—	—	—	—	—		—	25,039		(60,759	)	—
Total revenue	—	—	—	—	210,113		—	235,634		(60,759	)	211,280
Hotel operating expenses:
Rooms	—	—	—	—	33,208		—	33,208		—		33,208
Food and beverage	—	—	—	—	39,877		—	39,877		—		39,877
Other operating departments	—	—	—	—	9,943		—	9,943		—		9,943
Office rental, parking and other expenses	—	—	—	—	—		—	399		—		670
Other operating expenses:
General and administrative, hotel	—	—	—	—	30,127		—	30,131		—		30,152
General and administrative, corporate	—	—	—	—	288		—	288		—		3,473
Property operating costs	—	—	—	—	30,235		—	30,235		—		30,048
Depreciation and amortization	—	—	—	—	45		—	9,335		—		24,204
Property taxes, insurance and other	—	—	—	—	65,518		—	69,738		(60,759	)	15,232
Loss on asset impairments	—	—	—	—	—		—	—				310
Operating expenses	—	—	—	—	209,241		—	223,154		(60,759	)	187,117
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—		—	—		—		1,600
Hurricane business interruption insurance gain	—	—	—	—	—		—	—		—		—
Operating income (loss)	—	—	—	—	872		—	12,480		—		25,763
Minority interest	—	—	—	—	—		—	—		—		20
Interest expense, net	—	—	—	—	(1,884	)	—	(2,942	)	—		(30,090	)
Loss on early extinguishments of debt	—	—	—	—	—		—	—		—		(1,980	)
Equity in income from consolidated entities	—	—	—	—	—		—	—		(12,880	)	—
(Loss) income before income taxes and discontinued operations	—	—	—	—	(1,012	)	—	9,538		(12,880	)	(6,287	)
Income tax (expense) benefit	—	—	—	—	—		—	—		—		(12	)
(Loss) income from continuing operations	—	—	—	—	(1,012	)	—	9,538		(12,880	)	(6,299	)
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	—	(6,504	)	—	(8,140	)	—		(5,784	)
Income tax (expense) benefit	—	—	—	—	—		—	—		—		32
(Loss) income from discontinued operations	—	—	—	—	(6,504	)	—	(8,140	)	—		(5,752	)
Net (loss) income	—	—	—	—	(7,516	)	—	1,398		(12,880	)	(12,051	)

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2005

Unaudited

(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	9		2,718		—	—		—	—	—	—	—	—
Participating lease revenue	—		71,385		—	—		—	—	—	677	1,338	3,869
Total revenue	9		74,103		—	—		—	—	—	677	1,338	3,869
Hotel operating expenses:
Rooms	—		—		—	—		—	—	—	—	—	—
Food and beverage	—		—		—	—		—	—	—	—	—	—
Other hotel operating expenses	—		—		—	—		—	—	—	—	—	—
Office rental, parking and other expenses	—		721		—	—		—	—	—	—	—	—
Other operating expenses:
General and administrative, hotel	—		—		—	—		—	—	—	—	—	—
General and administrative, corporate	6,288		—		—	—		—	—	—	—	—	—
Property operating costs	—		—		—	—		—	—	—	—	—	—
Depreciation and amortization	3,873		25,810		—	—		—	—	—	314	329	1,225
Property taxes, insurance and other	—		9,789		—	—		—	—	—	48	522	450
Loss on asset impairments	—		—		—	—		—	—	—	—	—	—
Operating expenses	10,161		36,320		—	—		—	—	—	362	851	1,675
Equity in income/loss of and interest earned from unconsolidated affiliates	2,915		—		2,824	(1,164	)	—	—	—	—	—	—
Hurricane business interruption insurance gain	—		—		—	—		—	—	—	—	—	—
Operating income (loss)	(7,237	)	37,783		2,824	(1,164	)	—	—	—	315	487	2,194
Minority interest	2		—		—	—		—	—	—	—	—	—
Interest expense, net	(33,884	)	(15,866	)	—	—		—	—	—	—	—	—
Loss on early extinguishments of debt	(1,007	)	—		—	—		—	—	—	—	—	—
Equity in income from consolidated entities	30,284		—		—	—		—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	(11,842	)	21,917		2,824	(1,164	)	—	—	—	315	487	2,194
Income tax (expense) benefit	(287	)	—		—	—		—	—	—	—	—	—
(Loss) income from continuing operations	(12,129	)	21,917		2,824	(1,164	)	—	—	—	315	487	2,194
Discontinued operations:
(Loss) income from discontinued operations before income tax	(206	)	(2,352	)	—	—		—	—	—	—	—	—
Income tax (expense) benefit	—		—		—	—		—	—	—	—	—	—
(Loss) income from discontinued operations	(206	)	(2,352	)	—	—		—	—	—	—	—	—
Net (loss) income	(12,335	)	19,565		2,824	(1,164	)	—	—	—	315	487	2,194

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2005

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—		—	—	—	—	—	—	—	—
Food and beverage	—		—	—	—	—	—	—	—	—
Other hotel operations	—		—	—	—	—	—	—	—	—
Office rental, parking and other revenue	—		17	—	—	1	—	—	27	—
Participating lease revenue	658		771	607	465	1,282	—	—	1,430	3,554
Total revenue	658		788	607	465	1,283	—	—	1,457	3,554
Hotel operating expenses:
Rooms	—		—	—	—	—	—	—	—	—
Food and beverage	—		—	—	—	—	—	—	—	—
Other hotel operating expenses	—		—	—	—	—	—	—	—	—
Office rental, parking and other expenses	23		—	—	—	—	—	—	—	4
Other operating expenses:
General and administrative, hotel	—		—	—	—	—	—	—	—	—
General and administrative, corporate	—		—	—	—	—	—	—	—	—
Property operating costs	—		—	—	—	—	—	—	—	—
Depreciation and amortization	613		274	228	81	311	—	—	211	702
Property taxes, insurance and other	385		81	60	75	192	—	—	158	279
Loss on asset impairments	—		—	—	—	—	—	—	—	—
Operating expenses	1,021		355	288	156	503	—	—	369	985
Equity in income/loss of and interest earned from unconsolidated affiliates	—		—	—	—	—	—	—	—	—
Hurricane business interruption insurance gain	—		—	—	—	—	—	—	—	—
Operating income (loss)	(363	)	433	319	309	780	—	—	1,088	2,569
Minority interest	—		—	—	—	—	—	—	—	—
Interest expense, net	—		—	—	—	—	—	—	—	(938	)
Loss on early extinguishments of debt	—		—	—	—	—	—	—	—	—
Equity in income from consolidated entities	—		—	—	—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	(363	)	433	319	309	780	—	—	1,088	1,631
Income tax (expense) benefit	—		—	—	—	—	—	—	—	—
(Loss) income from continuing operations	(363	)	433	319	309	780	—	—	1,088	1,631
Discontinued operations:
(Loss) income from discontinued operations before income tax	—		—	—	—	—	—	—	—	—
Income tax (expense) benefit	—		—	—	—	—	—	—	—	—
(Loss) income from discontinued operations	—		—	—	—	—	—	—	—	—
Net (loss) income	(363	)	433	319	309	780	—	—	1,088	1,631

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	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.	MeriStar Sub 7E, LLC	MeriStar Sub 3D, LLC
Revenue:
Hotel operations:
Rooms	—	—		—	—	—	—	—	—	—
Food and beverage	—	—		—	—	—	—	—	—	—
Other hotel operations	—	—		—	—	—	—	—	—	—
Office rental, parking and other revenue	—	—		—	—	—	—	—	—	—
Participating lease revenue	—	1,169		1,526	2,173	—	—	—	716	925
Total revenue	—	1,169		1,526	2,173	—	—	—	716	925
Hotel operating expenses:
Rooms	—	—		—	—	—	—	—	—	—
Food and beverage	—	—		—	—	—	—	—	—	—
Other hotel operating expenses	—	—		—	—	—	—	—	—	—
Office rental, parking and other expenses	—	(3	)	—	—	—	—	—	—	5
Other operating expenses:
General and administrative, hotel	—	—		—	—	—	—	—	—	—
General and administrative, corporate	—	—		—	—	—	—	—	—	—
Property operating costs	—	—		—	—	—	—	—	—	—
Depreciation and amortization	—	275		308	338	—	—	—	288	323
Property taxes, insurance and other	—	97		206	201	—	—	—	101	89
Loss on asset impairments	—	—		—	—	—	—	—	—	—
Operating expenses	—	369		514	539	—	—	—	389	417
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—		—	—	—	—	—	—	—
Hurricane business interruption insurance gain	—	—		—	—	—	—	—	—	—
Operating income (loss)	—	800		1,012	1,634	—	—	—	327	508
Minority interest	—	—		—	—	—	—	—	—	—
Interest expense, net	—	(2	)	—	—	—	—	—	—	—
Loss on early extinguishments of debt	—	—		—	—	—	—	—	—	—
Equity in income from consolidated entities	—	—		—	—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	—	798		1,012	1,634	—	—	—	327	508
Income tax (expense) benefit	—	—		—	—	—	—	—	—	—
(Loss) income from continuing operations	—	798		1,012	1,634	—	—	—	327	508
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—		—	—	—	—	—	—	—
Income tax (expense) benefit	—	—		—	—	—	—	—	—	—
(Loss) income from discontinued operations	—	—		—	—	—	—	—	—	—
Net (loss) income	—	798		1,012	1,634	—	—	—	327	508

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	MeriStar Sub 1A, LLC	MeriStar Sub 7A Joint Venture	MeriStar Sub 2B, LLC	MeriStar Sub 3A, LLC	MeriStar Sub 4A, L.P.	MeriStar Sub 4D, LLC	MeriStar Sub 2A, LLC	MeriStar Sub 6L, LLC	MDV Limited Partnership
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—	—	—
Food and beverage	—	—	—	—	—	—	—	—	—
Other hotel operations	—	—	—	—	—	—	—	—	—
Office rental, parking and other revenue	—	—	—	—	—	—	—	—	—
Participating lease revenue	—	—	—	—	—	—	—	—	269
Total revenue	—	—	—	—	—	—	—	—	269
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	—	—	—	—	—	—	—	—	98
Property taxes, insurance and other	—	—	—	—	—	—	—	—	63
Loss on asset impairments	—	—	—	—	—	—	—	—	—
Operating expenses	—	—	—	—	—	—	—	—	161
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—	—
Hurricane business interruption insurance gain	—	—	—	—	—	—	—	—	—
Operating income (loss)	—	—	—	—	—	—	—	—	108
Minority interest	—	—	—	—	—	—	—	—	—
Interest expense, net	—	—	—	—	—	—	—	—	—
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—	—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	—	—	—	—	—	—	—	—	108
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—
(Loss) income from continuing operations	—	—	—	—	—	—	—	—	108
Discontinued operations:
(Loss) income from discontinued operations before income tax	126	—	—	—	—	—	—	—	—
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—
(Loss) income from discontinued operations	126	—	—	—	—	—	—	—	—
Net (loss) income	126	—	—	—	—	—	—	—	108

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	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
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—	—	—
Food and beverage	—	—	—	—	—	—	—	—	—
Other hotel operations	—	—	—	—	—	—	—	—	—
Office rental, parking and other revenue	—	—	6	—	—	—	—	—	—
Participating lease revenue	—	1,716	3,131	—	4,037	—	642	—	1,137
Total revenue	—	1,716	3,137	—	4,037	—	642	—	1,137
Hotel operating expenses:
Rooms	—	—	—	—	—	—	—	—	—
Food and beverage	—	—	—	—	—	—	—	—	—
Other hotel operating expenses	—	—	—	—	—	—	—	—	—
Office rental, parking and other expenses	—	—	89	—	556	—	—	—	2
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—	—	—	—
General and administrative, corporate	—	—	—	—	—	—	—	—	—
Property operating costs	—	—	—	—	—	—	—	—	—
Depreciation and amortization	—	250	1,043	—	711	—	202	—	679
Property taxes, insurance and other	—	152	738	—	971	—	120	—	168
Loss on asset impairments	—	—	—	—	—	—	—	—	—
Operating expenses	—	402	1,870	—	2,238	—	322	—	849
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—	—
Hurricane business interruption insurance gain	—	—	—	—	—	—	—	—	—
Operating income (loss)	—	1,314	1,267	—	1,799	—	320	—	288
Minority interest	—	—	—	—	—	—	—	—	—
Interest expense, net	—	—	—	—	—	—	—	—	(837	)
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—	—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	—	1,314	1,267	—	1,799	—	320	—	(549	)
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—
(Loss) income from continuing operations	—	1,314	1,267	—	1,799	—	320	—	(549	)
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	—	—	—	—	—	—
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—
(Loss) income from discontinued operations	—	—	—	—	—	—	—	—	—
Net (loss) income	—	1,314	1,267	—	1,799	—	320	—	(549	)

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	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	MeriStar Sub 5M, LLC	MeriStar Sub 1E, LLC	MeriStar Sub 5O, LLC
Revenue:
Hotel operations:
Rooms	—	—	—	—	—		—	—	—	—
Food and beverage	—	—	—	—	—		—	—	—	—
Other hotel operations	—	—	—	—	—		—	—	—	—
Office rental, parking and other revenue	—	—	—	—	7		—	—	—	—
Participating lease revenue	—	—	—	—	1,021		—	772	—	105
Total revenue	—	—	—	—	1,028		—	772	—	105
Hotel operating expenses:
Rooms	—	—	—	—	—		—	—	—	—
Food and beverage	—	—	—	—	—		—	—	—	—
Other hotel operating expenses	—	—	—	—	—		—	—	—	—
Office rental, parking and other expenses	—	—	—	—	(1	)	—	—	—	—
Other operating expenses:
General and administrative, hotel	—	—	—	—	—		—	—	—	—
General and administrative, corporate	—	—	—	—	—		—	—	—	—
Property operating costs	—	—	—	—	—		—	—	—	—
Depreciation and amortization	—	—	—	—	503		—	134	—	70
Property taxes, insurance and other	—	—	—	—	184		—	26	—	18
Loss on asset impairments	—	—	—	—	—		—	—	—	—
Operating expenses	—	—	—	—	686		—	160	—	88
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—		—	—	—	—
Hurricane business interruption insurance gain	—	—	—	—	—		—	—	—	—
Operating income (loss)	—	—	—	—	342		—	612	—	17
Minority interest	—	—	—	—	—		—	—	—	—
Interest expense, net	—	—	—	—	—		—	—	—	—
Loss on early extinguishments of debt	—	—	—	—	—		—	—	—	—
Equity in income from consolidated entities	—	—	—	—	—		—	—	—	—
(Loss) income before income taxes and discontinued operations	—	—	—	—	342		—	612	—	17
Income tax (expense) benefit	—	—	—	—	—		—	—	—	—
(Loss) income from continuing operations	—	—	—	—	342		—	612	—	17
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	—	—		—	—	—	—
Income tax (expense) benefit	—	—	—	—	—		—	—	—	—
(Loss) income from discontinued operations	—	—	—	—	—		—	—	—	—
Net (loss) income	—	—	—	—	342		—	612	—	17

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	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	MeriStar Sub 5J, LLC		MeriStar Sub 5Q, LLC
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—	—		—
Food and beverage	—	—	—	—	—	—	—	—		—
Other hotel operations	—	—	—	—	—	—	—	—		—
Office rental, parking and other revenue	—	—	—	—	12	—	—	227		—
Participating lease revenue	—	—	—	—	6,978	137	90	—		867
Total revenue	—	—	—	—	6,990	137	90	227		867
Hotel operating expenses:
Rooms	—	—	—	—	—	—	—	—		—
Food and beverage	—	—	—	—	—	—	—	—		—
Other hotel operating expenses	—	—	—	—	—	—	—	—		—
Office rental, parking and other expenses	—	—	—	—	8	—	—	1		—
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—	—	—		—
General and administrative, corporate	—	—	—	—	—	—	—	—		—
Property operating costs	—	—	—	—	—	—	—	—		—
Depreciation and amortization	—	—	—	—	3,102	38	2	1,821		246
Property taxes, insurance and other	—	—	—	—	827	19	4	(162	)	—
Loss on asset impairments	—	—	—	—	—	—	—	—		—
Operating expenses	—	—	—	—	3,937	57	6	1,660		246
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—		—
Hurricane business interruption insurance gain	—	—	—	—	—	—	—	—		—
Operating income (loss)	—	—	—	—	3,053	80	84	(1,433	)	621
Minority interest	—	—	—	—	—	—	—	—		—
Interest expense, net	—	—	—	—	—	—	—	—		—
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—		—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—		—
(Loss) income before income taxes and discontinued operations	—	—	—	—	3,053	80	84	(1,433	)	621
Income tax (expense) benefit	—	—	—	—	—	—	—	—		—
(Loss) income from continuing operations	—	—	—	—	3,053	80	84	(1,433	)	621
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	—	—	—	—	—		—
Income tax (expense) benefit	—	—	—	—	—	—	—	—		—
(Loss) income from discontinued operations	—	—	—	—	—	—	—	—		—
Net (loss) income	—	—	—	—	3,053	80	84	(1,433	)	621

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	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
Revenue:
Hotel operations:
Rooms	—		—	—	—		—	—	—	—	—
Food and beverage	—		—	—	—		—	—	—	—	—
Other hotel operations	—		—	—	—		—	—	—	—	—
Office rental, parking and other revenue	42		—	3	—		—	—	—	—	—
Participating lease revenue	3,476		—	1,494	6,267		—	—	—	—	—
Total revenue	3,518		—	1,497	6,267		—	—	—	—	—
Hotel operating expenses:
Rooms	—		—	—	—		—	—	—	—	—
Food and beverage	—		—	—	—		—	—	—	—	—
Other hotel operating expenses	—		—	—	—		—	—	—	—	—
Office rental, parking and other expenses	1		—	235	—		—	—	—	—	—
Other operating expenses:
General and administrative, hotel	—		—	—	—		—	—	—	—	—
General and administrative, corporate	—		—	—	—		—	—	—	—	—
Property operating costs	—		—	—	—		—	—	—	—	—
Depreciation and amortization	525		—	650	2,620		—	—	—	—	—
Property taxes, insurance and other	405		—	176	1,082		—	—	—	—	—
Loss on asset impairments	—		—	—	—		—	—	—	—	—
Operating expenses	931		—	1,061	3,702		—	—	—	—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—		—	—	—		—	—	—	—	—
Hurricane business interruption insurance gain	—		—	—	—		—	—	—	—	—
Operating income (loss)	2,587		—	436	2,565		—	—	—	—	—
Minority interest	—		—	—	—		—	—	—	—	—
Interest expense, net	(1,417	)	—	—	(1,604	)	—	—	—	—	—
Loss on early extinguishments of debt	—		—	—	—		—	—	—	—	—
Equity in income from consolidated entities	—		—	—	—		—	—	—	—	—
(Loss) income before income taxes and discontinued operations	1,170		—	436	961		—	—	—	—	—
Income tax (expense) benefit	—		—	—	—		—	—	—	—	—
(Loss) income from continuing operations	1,170		—	436	961		—	—	—	—	—
Discontinued operations:
(Loss) income from discontinued operations before income tax	—		—	—	—		—	—	—	—	—
Income tax (expense) benefit	—		—	—	—		—	—	—	—	—
(Loss) income from discontinued operations	—		—	—	—		—	—	—	—	—
Net (loss) income	1,170		—	436	961		—	—	—	—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	Meristar Acquisition Company, LLC	MeriStar Sub 6A, LLC	MeriStar Sub 6F, LLC	MeriStar Hotel Lessee, Inc.		Guarantor Eliminations		Guarantor Subsidiaries Total		Eliminations		Total Consolidated
Revenue:
Hotel operations:
Rooms	—	—	—	266,669		—		266,669		—		266,669
Food and beverage	—	—	—	112,187		—		112,187		—		112,187
Other hotel operations	—	—	—	23,039		—		23,039		—		23,039
Office rental, parking and other revenue	—	—	—	—		—		342		—		3,069
Participating lease revenue	—	—	—	—		—		53,299		(124,684	)	—
Total revenue	—	—	—	401,895		—		455,536		(124,684	)	404,964
Hotel operating expenses:
Rooms	—	—	—	64,409		—		64,409		—		64,409
Food and beverage	—	—	—	77,752		—		77,752		—		77,752
Other hotel operating expenses	—	—	—	14,626		—		14,626		—		14,626
Office rental, parking and other expenses	—	—	—	(205	)	—		715		—		1,436
Other operating expenses:
General and administrative, hotel	—	—	—	63,095		—		63,095		—		63,095
General and administrative, corporate	—	—	—	73		—		73		—		6,361
Property operating costs	—	—	—	60,452		—		60,452		—		60,452
Depreciation and amortization	—	—	—	—		—		18,514		—		48,197
Property taxes, insurance and other	—	—	—	130,042		—		137,777		(124,684	)	22,882
Loss on asset impairments	—	—	—	—		—		—		—		—
Operating expenses	—	—	—	410,244		—		437,413		(124,684	)	359,210
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	2,824		(2,824	)	1,660		—		4,575
Hurricane business interruption insurance gain	—	—	—	4,290		—		4,290		—		4,290
Operating income (loss)	—	—	—	(1,235	)	(2,824	)	24,073		—		54,619
Minority interest	—	—	—	—		—		—		—		2
Interest expense, net	—	—	—	(6,863	)	—		(11,661	)	—		(61,411	)
Loss on early extinguishments of debt	—	—	—	—		—		—		—		(1,007	)
Equity in income from consolidated entities	—	—	—	—		—		—		(30,284	)	—
(Loss) income before income taxes and discontinued operations	—	—	—	(8,098	)	(2,824	)	12,412		(30,284	)	(7,797	)
Income tax (expense) benefit	—	—	—	(125	)	—		(125	)	—		(412	)
(Loss) income from continuing operations	—	—	—	(8,223	)	(2,824	)	12,287		(30,284	)	(8,209	)
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	(1,694	)	—		(1,568	)	—		(4,126	)
Income tax (expense) benefit	—	—	—	—		—		—		—		—
(Loss) income from discontinued operations	—	—	—	(1,694	)	—		(1,568	)	—		(4,126	)
Net (loss) income	—	—	—	(9,917	)	(2,824	)	10,719		(30,284	)	(12,335	)

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2004

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—		—		—	—	—	—	—	—	—		—
Food and beverage	—		—		—	—	—	—	—	—	—		—
Other hotel operations	—		—		—	—	—	—	—	—	—		—
Office rental parking and other revenue	26		1,296		—	—	—	—	—	—	—		16
Participating lease revenue	—		72,017		—	—	—	675	1,202	3,727	726		742
Total revenue	26		73,313		—	—	—	675	1,202	3,727	726		758
Hotel operating expenses:
Rooms	—		—		—	—	—	—	—	—	—		—
Food and beverage	—		—		—	—	—	—	—	—	—		—
Other operating departments	—		—		—	—	—	—	—	—	—		—
Office rental, parking and other expenses	—		561		—	—	—	—	—	—	—		—
Other operating expenses:			—
General and administrative, hotel	—		21		—	—	—	—	—	—	—		—
General and administrative, corporate	7,016		—		—	—	—	—	—	—	—		—
Property operating costs	—		(511	)	—	—	—	—	—	—	—		—
Depreciation and amortization	6,237		24,243		—	—	—	313	329	1,197	697		298
Property taxes, insurance and other	(356	)	15,445		—	—	—	50	305	556	379		84
Loss on asset impairments	—		310		—	—	—	—	—	—	—		—
Operating expenses	12,897		40,069		—	—	—	363	634	1,753	1,076		382
Equity in income/loss of and interest earned from unconsolidated affiliates	3,200		—		—	—	—	—	—	—	—		—
Hurricane business interruption insurance gain	—		—		—	—	—	—	—	—	—		—
Operating income (loss)	(9,671	)	33,244		—	—	—	312	568	1,974	(350	)	376
Minority interest	24		—		—	—	—	—	—	—	—		—
Interest expense, net	(42,325	)	(16,668	)	—	—	—	—	—	—	—		—
Loss on early extinguishments of debt	(7,903	)	—		—	—	—	—	—	—	—		—
Equity in income from consolidated entities	6,014		—		—	—	—	—	—	—	—		—
(Loss) income before income taxes and discontinued operations	(53,861	)	16,576		—	—	—	312	568	1,974	(350	)	376
Income tax (expense) benefit	373		—		—	—	—	—	—	—	—		—
(Loss) income from continuing operations	(53,488	)	16,576		—	—	—	312	568	1,974	(350	)	376
Discontinued operations:
(Loss) income from discontinued operations before income tax	448		2,495		—	—	—	—	—	—	—		—
Income tax (expense) benefit	102		—		—	—	—	—	—	—	—		—
(Loss) income from discontinued operations	550		2,495		—	—	—	—	—	—	—		—
Net (loss) income	(52,938	)	19,071		—	—	—	312	568	1,974	(350	)	376

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2004

Unaudited

(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.
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—	—		—		—
Food and beverage	—	—	—	—	—	—	—	—		—		—
Other hotel operations	—	—	—	—	—	—	—	—		—		—
Office rental parking and other revenue	—	—	1	—	—	90	—	—		(4	)	—
Participating lease revenue	550	630	1,015	—	—	1,014	3,007	—		1,123		1,429
Total revenue	550	630	1,016	—	—	1,104	3,007	—		1,119		1,429
Hotel operating expenses:
Rooms	—	—	—	—	—	—	—	—		—		—
Food and beverage	—	—	—	—	—	—	—	—		—		—
Other operating departments	—	—	—	—	—	—	—	—		—		—
Office rental, parking and other expenses	—	—	—	—	—	—	—	—		—		—
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—	—	—		—		—
General and administrative, corporate	—	—	—	—	—	—	—	—		—		—
Property operating costs	—	—	—	—	—	—	—	—		—		—
Depreciation and amortization	170	77	356	—	—	273	825	—		249		391
Property taxes, insurance and other	61	76	202	—	—	152	288	—		55		187
Loss on asset impairments	—	—	—	—	—	—	—	—		—		—
Operating expenses	231	153	558	—	—	425	1,113	—		304		578
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—		—		—
Hurricane business interruption insurance gain	—	—	—	—	—	—	—	—		—		—
Operating income (loss)	319	477	458	—	—	679	1,894	—		815		851
Minority interest	—	—	—	—	—	—	—	—		—		—
Interest expense, net	—	—	—	—	—	—	—	—		—		—
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—		—		—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—		—		—
(Loss) income before income taxes and discontinued operations	319	477	458	—	—	679	1,894	—		815		851
Income tax (expense) benefit	—	—	—	—	—	—	—	—		—		—
(Loss) income from continuing operations	319	477	458	—	—	679	1,894	—		815		851
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	—	—	—	—	(721	)	—		—
Income tax (expense) benefit	—	—	—	—	—	—	—	—		—		—
(Loss) income from discontinued operations	—	—	—	—	—	—	—	(721	)	—		—
Net (loss) income	319	477	458	—	—	679	1,894	(721	)	815		851

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2004

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—		—	—		—	—	—		—		—	—
Food and beverage	—	—		—	—		—	—	—		—		—	—
Other hotel operations	—	—		—	—		—	—	—		—		—	—
Office rental parking and other revenue	—	—		—	—		1	—	—		—		—	—
Participating lease revenue	1,913	—		—	—		689	754	—		—		—	—
Total revenue	1,913	—		—	—		690	754	—		—		—	—
Hotel operating expenses:
Rooms	—	—		—	—		—	—	—		—		—	—
Food and beverage	—	—		—	—		—	—	—		—		—	—
Other operating departments	—	—		—	—		—	—	—		—		—	—
Office rental, parking and other expenses	—	—		—	—		—	—	—		—		—	—
Other operating expenses:
General and administrative, hotel	—	—		—	—		—	—	—		—		—	—
General and administrative, corporate	—	—		—	—		—	—	—		—		—	—
Property operating costs	—	—		—	—		—	—	—		—		—	—
Depreciation and amortization	362	—		—	—		313	382	—		—		—	—
Property taxes, insurance and other	197	—		—	—		100	126	—		—		—	—
Loss on asset impairments	—	—		—	—		—	—	—		—		—	—
Operating expenses	559	—		—	—		413	508	—		—		—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—		—	—		—	—	—		—		—	—
Hurricane business interruption insurance gain	—	—		—	—		—	—	—		—		—	—
Operating income (loss)	1,354	—		—	—		277	246	—		—		—	—
Minority interest	—	—		—	—		—	—	—		—		—	—
Interest expense, net	—	—		—	—		—	—	—		—		—	—
Loss on early extinguishments of debt	—	—		—	—		—	—	—		—		—	—
Equity in income from consolidated entities	—	—		—	—		—	—	—		—		—	—
(Loss) income before income taxes and discontinued operations	1,354	—		—	—		277	246	—		—		—	—
Income tax (expense) benefit	—	—		—	—		—	—	—		—		—	—
(Loss) income from continuing operations	1,354	—		—	—		277	246	—		—		—	—
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	(61	)	—	(403	)	—	—	(167	)	(713	)	—	89
Income tax (expense) benefit	—	—		—	—		—	—	—		—		—	—
(Loss) income from discontinued operations	—	(61	)	—	(403	)	—	—	(167	)	(713	)	—	89
Net (loss) income	1,354	(61	)	—	(403	)	277	246	(167	)	(713	)	—	89

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2004

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—	—	—	—	—	—	—	—		—
Food and beverage	—	—	—	—	—	—	—	—	—		—
Other hotel operations	—	—	—	—	—	—	—	—	—		—
Office rental parking and other revenue	—	—	—	—	—	—	—	140	—		710
Participating lease revenue	—	—	—	—	263	—	1,250	2,513	—		2,935
Total revenue	—	—	—	—	263	—	1,250	2,653	—		3,645
Hotel operating expenses:
Rooms	—	—	—	—	—	—	—	—	—		—
Food and beverage	—	—	—	—	—	—	—	—	—		—
Other operating departments	—	—	—	—	—	—	—	—	—		—
Office rental, parking and other expenses	—	—	—	—	—	—	—	63	—		415
Other operating expenses:
General and administrative, hotel	—	—	—	—	—	—	—	—	—		—
General and administrative, corporate	—	—	—	—	—	—	—	—	—		—
Property operating costs	—	—	—	—	—	—	—	—	—		—
Depreciation and amortization	—	—	—	—	70	—	281	1,136	—		862
Property taxes, insurance and other	—	—	—	—	63	—	146	807	—		1,305
Loss on asset impairments	—	—	—	—	—	—	—	—	—		—
Operating expenses	—	—	—	—	133	—	427	2,006	—		2,582
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—	—	—	—	—		—
Hurricane business interruption insurance gain	—	—	—	—	—	—	—	—	—		—
Operating income (loss)	—	—	—	—	130	—	823	647	—		1,063
Minority interest	—	—	—	—	—	—	—	—	—		—
Interest expense, net	—	—	—	—	—	—	—	—	—		—
Loss on early extinguishments of debt	—	—	—	—	—	—	—	—	—		—
Equity in income from consolidated entities	—	—	—	—	—	—	—	—	—		—
(Loss) income before income taxes and discontinued operations	—	—	—	—	130	—	823	647	—		1,063
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—		—
(Loss) income from continuing operations	—	—	—	—	130	—	823	647	—		1,063
Discontinued operations:
(Loss) income from discontinued operations before income tax	97	—	—	1,852	—	—	—	—	(787	)	—
Income tax (expense) benefit	—	—	—	—	—	—	—	—	—		—
(Loss) income from discontinued operations	97	—	—	1,852	—	—	—	—	(787	)	—
Net (loss) income	97	—	—	1,852	130	—	823	647	(787	)	1,063

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2004

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—	—	—		—	—	—	—	—	—
Food and beverage	—	—	—	—		—	—	—	—	—	—
Other hotel operations	—	—	—	—		—	—	—	—	—	—
Office rental parking and other revenue	—	—	—	—		—	—	—	—	10	—
Participating lease revenue	—	593	—	1,101		—	—	—	—	984	—
Total revenue	—	593	—	1,101		—	—	—	—	994	—
Hotel operating expenses:
Rooms	—	—	—	—		—	—	—	—	—	—
Food and beverage	—	—	—	—		—	—	—	—	—	—
Other operating departments	—	—	—	—		—	—	—	—	—	—
Office rental, parking and other expenses	—	—	—	—		—	—	—	—	—	—
Other operating expenses:
General and administrative, hotel	—	—	—	—		—	—	—	—	—	—
General and administrative, corporate	—	—	—	—		—	—	—	—	—	—
Property operating costs	—	—	—	—		—	—	—	—	—	—
Depreciation and amortization	—	224	—	738		—	—	—	—	552	—
Property taxes, insurance and other	—	112	—	102		—	—	—	—	187	—
Loss on asset impairments	—	—	—	—		—	—	—	—	—	—
Operating expenses	—	336	—	840		—	—	—	—	739	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—		—	—	—	—	—	—
Hurricane business interruption insurance gain	—	—	—	—		—	—	—	—	—	—
Operating income (loss)	—	257	—	261		—	—	—	—	255	—
Minority interest	—	—	—	—		—	—	—	—	—	—
Interest expense, net	—	—	—	(647	)	—	—	—	—	—	—
Loss on early extinguishments of debt	—	—	—	—		—	—	—	—	—	—
Equity in income from consolidated entities	—	—	—	—		—	—	—	—	—	—
(Loss) income before income taxes and discontinued operations	—	257	—	(386	)	—	—	—	—	255	—
Income tax (expense) benefit	—	—	—	—		—	—	—	—	—	—
(Loss) income from continuing operations	—	257	—	(386	)	—	—	—	—	255	—
Discontinued operations:
(Loss) income from discontinued operations before income tax	103	—	—	—		—	—	—	—	—	429
Income tax (expense) benefit	—	—	—	—		—	—	—	—	—	—
(Loss) income from discontinued operations	103	—	—	—		—	—	—	—	—	429
Net (loss) income	103	257	—	(386	)	—	—	—	—	255	429

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2004

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—	—	—		—		—	—	—	—	—
Food and beverage	—	—	—	—		—		—	—	—	—	—
Other hotel operations	—	—	—	—		—		—	—	—	—	—
Office rental parking and other revenue	—	—	—	—		—		—	—	14	—	—
Participating lease revenue	991	—	471	—		—		—	—	5,506	519	488
Total revenue	991	—	471	—		—		—	—	5,520	519	488
Hotel operating expenses:
Rooms	—	—	—	—		—		—	—	—	—	—
Food and beverage	—	—	—	—		—		—	—	—	—	—
Other operating departments	—	—	—	—		—		—	—	—	—	—
Office rental, parking and other expenses	—	—	—	—		—		—	—	—	—	—
Other operating expenses:
General and administrative, hotel	—	—	—	—		—		—	—	—	—	—
General and administrative, corporate	—	—	—	—		—		—	—	—	—	—
Property operating costs	—	—	—	—		—		—	—	—	—	—
Depreciation and amortization	238	—	114	—		—		—	—	3,150	69	2
Property taxes, insurance and other	135	—	52	—		—		—	—	819	52	3
Loss on asset impairments	—	—	—	—		—		—	—	—	—	—
Operating expenses	373	—	166	—		—		—	—	3,969	121	5
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—		—		—	—	—	—	—
Hurricane business interruption insurance gain	—	—	—	—		—		—	—	—	—	—
Operating income (loss)	618	—	305	—		—		—	—	1,551	398	483
Minority interest	—	—	—	—		—		—	—	—	—	—
Interest expense, net	—	—	—	—		—		—	—	—	—	—
Loss on early extinguishments of debt	—	—	—	—		—		—	—	—	—	—
Equity in income from consolidated entities	—	—	—	—		—		—	—	—	—	—
(Loss) income before income taxes and discontinued operations	618	—	305	—		—		—	—	1,551	398	483
Income tax (expense) benefit	—	—	—	—		—		—	—	—	—	—
(Loss) income from continuing operations	618	—	305	—		—		—	—	1,551	398	483
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—	(217	)	(1,645	)	341	—	—	—	—
Income tax (expense) benefit	—	—	—	—		—		—	—	—	—	—
(Loss) income from discontinued operations	—	—	—	(217	)	(1,645	)	341	—	—	—	—
Net (loss) income	618	—	305	(217	)	(1,645	)	341	—	1,551	398	483

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2004

Unaudited

(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
Revenue:
Hotel operations:
Rooms	—	—	—		—		—	—		—	—	—	—
Food and beverage	—	—	—		—		—	—		—	—	—	—
Other hotel operations	—	—	—		—		—	—		—	—	—	—
Office rental parking and other revenue	—	—	60		—		104	—		—	—	—	—
Participating lease revenue	5,286	1,087	3,115		—		1,353	1,406		—	—	—	—
Total revenue	5,286	1,087	3,175		—		1,457	1,406		—	—	—	—
Hotel operating expenses:
Rooms	—	—	—		—		—	—		—	—	—	—
Food and beverage	—	—	—		—		—	—		—	—	—	—
Other operating departments	—	—	—		—		—	—		—	—	—	—
Office rental, parking and other expenses	—	—	—		—		216	—		—	—	—	—
Other operating expenses:
General and administrative, hotel	—	—	—		—		—	4		—	—	—	—
General and administrative, corporate	—	—	—		—		—	—		—	—	—	—
Property operating costs	—	—	—		—		—	—		—	—	—	—
Depreciation and amortization	2,810	294	532		—		632	355		—	—	—	—
Property taxes, insurance and other	873	154	390		—		172	177		—	—	—	—
Loss on asset impairments	—	—	—		—		—	—		—	—	—	—
Operating expenses	3,683	448	922		—		1,020	536		—	—	—	—
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—		—		—	—		—	—	—	—
Hurricane business interruption insurance gain	—	—	—		—		—	—		—	—	—	—
Operating income (loss)	1,603	639	2,253		—		437	870		—	—	—	—
Minority interest	—	—	—		—		—	—		—	—	—	—
Interest expense, net	—	—	(1,417	)	—		—	(9	)	—	—	—	—
Loss on early extinguishments of debt	—	—	—		—		—	—		—	—	—	—
Equity in income from consolidated entities	—	—	—		—		—	—		—	—	—	—
(Loss) income before income taxes and discontinued operations	1,603	639	836		—		437	861		—	—	—	—
Income tax (expense) benefit	—	—	—		—		—	—		—	—	—	—
(Loss) income from continuing operations	1,603	639	836		—		437	861		—	—	—	—
Discontinued operations:
(Loss) income from discontinued operations before income tax	—	—	—		(857	)	—	—
Income tax (expense) benefit	—	—	—		—		—	—		—	—	—	—
(Loss) income from discontinued operations	—	—	—		(857	)	—	—		—	—	—	—
Net (loss) income	1,603	639	836		(857	)	437	861		—	—	—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Operations

Six months ended June 30, 2004

Unaudited

(Dollars in thousands)

	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		Eliminations		Total Consolidated
Revenue:
Hotel operations:
Rooms	—	—	—	—	265,197		—	265,197		—		265,197
Food and beverage	—	—	—	—	105,572		—	105,572		—		105,572
Other hotel operations	—	—	—	—	30,945		—	30,945		—		30,945
Office rental parking and other revenue	—	—	—	—	161		—	1,303		—		2,625
Participating lease revenue	—	—	—	—	—		—	49,057		(121,074	)	—
Total revenue	—	—	—	—	401,875		—	452,074		(121,074	)	404,339
Hotel operating expenses:
Rooms	—	—	—	—	64,153		—	64,153		—		64,153
Food and beverage	—	—	—	—	76,141		—	76,141		—		76,141
Other operating departments	—	—	—	—	19,323		—	19,323		—		19,323
Office rental, parking and other expenses	—	—	—	—	—		—	694		—		1,255
Other operating expenses:								—
General and administrative, hotel	—	—	—	—	61,921		—	61,925		—		61,946
General and administrative, corporate	—	—	—	—	90		—	90		—		7,106
Property operating costs	—	—	—	—	59,811		—	59,811		—		59,300
Depreciation and amortization	—	—	—	—	84		—	18,375		—		48,855
Property taxes, insurance and other	—	—	—	—	128,963		—	137,330		(121,074	)	31,345
Loss on asset impairments	—	—	—	—	—		—	—		—		310
Operating expenses	—	—	—	—	410,486		—	437,842		(121,074	)	369,734
Equity in income/loss of and interest earned from unconsolidated affiliates	—	—	—	—	—		—	—		—		3,200
Hurricane business interruption insurance gain	—	—	—	—	—		—	—		—		—
Operating income (loss)	—	—	—	—	(8,611	)	—	14,232		—		37,805
Minority interest	—	—	—	—	—		—	—		—		24
Interest expense, net	—	—	—	—	(3,526	)	—	(5,599	)	—		(64,592	)
Loss on early extinguishments of debt	—	—	—	—	—		—	—		—		(7,903	)
Equity in income from consolidated entities	—	—	—	—	—		—	—		(6,014	)	—
(Loss) income before income taxes and discontinued operations	—	—	—	—	(12,137	)	—	(8,633	)	(6,014	)	(34,666	)
Income tax (expense) benefit	—	—	—	—	—		—	—		—		373
(Loss) income from continuing operations	—	—	—	—	(12,137	)	—	8,633		(6,014	)	(34,293	)
Discontinued operations:
(Loss) income from discontinued operations before income tax					(19,030	)		(21,690	)	—		(18,747	)
Income tax (expense) benefit	—	—	—	—	—		—	—		—		102
(Loss) income from discontinued operations	—	—	—	—	(19,030	)	—	(21,690	)	—		(18,645	)
Net (loss) income	—	—	—	—	(31,167	)	—	(13,057	)	(6,014	)	(52,938	)

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flows

Six months ended June 30, 2005

Unaudited

(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.
Operating activities:
Net (loss) income	(12,335	)	19,565		2,824		(1,164	)	—	—	—	315		487
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	3,873		26,388		40		—		—	—	—	314		329
Loss on asset impairments	—		2,504		—		—		—	—	—	—		—
Loss on sale of assets, before tax effect	—		1,037		—		—		—	—	—	—		—
Loss on early extinguishments of debt	1,007		—		—		—		—	—	—	—		—
Minority interests	(2	)	—		—		—		—	—	—	—		—
Equity in earnings of consolidated entities	(30,284	)	—		—		—		—	—	—	—		—
Equity in loss of unconsolidated affiliates	—		—		—		1,164		—	—	—	—		—
Amortization of unearned stock-based compensation	542		—		—		—		—	—	—	—		—
Deferred income taxes	—		—		—		—		—	—	—	—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	35,098		—		—		—		—	—	—	—		—
Accounts receivable, net	(7,018	)	908		—		—		—	—	—	—		—
Prepaid expenses and other assets	10,974		(5,690	)	—		30		—	—	—	(20	)	(88	)
Receivables from unconsolidated affiliates	12,585		—		—		78		—	—	—	—		—
Due to Interstate Hotels & Resorts	(1,398	)	—		—		—		—	—	—	—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	(4,470	)	1,506		—		—		—	—	—	43		154
Due from/to subsidiaries	262,934		(51,604	)	(1,760	)	(108	)	—	—	—	(620	)	(572	)
Net cash provided by (used in) operating activities	271,506		(5,386	)	1,104		—		—	—	—	32		310
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		—		—		—	—	—	—		—
Capital expenditures for property and equipment	(2,591	)	(53,723	)	—		—		—	—	—	(32	)	(310	)
Proceeds from sales of assets	—		20,500		—		—		—	—	—	—		—
Insurance proceeds related to capital expenditures	6,500		—		—		—		—	—	—	—		—
Increase in restricted cash	(3,716	)	(546	)	—		—		—	—	—	—		—
Costs associated with disposition program and other, net	—		(459	)	—		—		—	—	—	—		—
Net cash (used in) provided by investing activities	193		(34,228	)	—		—		—	—	—	(32	)	(310	)
Financing activities:
Prepayments on long-term debt	(23,846	)	—		—		—		—	—	—	—		—
Scheduled payments on long-term debt	(4,009	)	—		(1,104	)	—		—	—	—	—		—
Proceeds from mortgage loans, net of financing costs	(50	)	39,614		—		—		—	—	—	—		—
Proceeds from debt issuance, net of issuance costs	—		—		—		—		—	—	—	—		—
Loans to/from subsidiaries	(218,939	)	—		—		—		—	—	—	—		—
Distributions to minority investors	—		—		—		—		—	—	—	—		—
Proceeds from OP units issuance, net of issuance costs	309		—		—		—		—	—	—	—		—
Purchase of subsidiary partnership interests	—		—		—		—		—	—	—	—		—
Repurchase of OP units under employee stock plans	(782	)	—		—		—		—	—	—	—		—
Other	—		—		—		—		—	—	—	—		—
Net cash (used in) provided by financing activities	(247,317	)	39,614		(1,104	)	—		—	—	—	—		—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—		—	—	—	—		—
Net increase (decrease) in cash and cash equivalents	24,382		—		—		—		—	—	—	—		—
Cash and cash equivalents, beginning of period	41,224		—		—		—		—	—	—	—		—
Cash and cash equivalents, end of period	65,606		—		—		—		—	—	—	—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flows

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	MeriStar Sub 8B, LLC		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
Operating activities:
Net (loss) income	2,194		(363	)	433		319		309		780		—	—	1,088
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1,225		613		274		228		81		311		—	—	211
Loss on asset impairments	—		—		—		—		—		—		—	—	—
Loss on sale of assets, before tax effect	—		—		—		—		—		—		—	—	—
Loss on early extinguishments of debt	—		—		—		—		—		—		—	—	—
Minority interests	—		—		—		—		—		—		—	—	—
Equity in earnings of consolidated entities	—		—		—		—		—		—		—	—	—
Equity in loss of unconsolidated affiliates	—		—		—		—		—		—		—	—	—
Amortization of unearned stock-based compensation	—		—		—		—		—		—		—	—	—
Deferred income taxes	—		—		—		—		—		—		—	—	—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—		—		—		—		—	—	—
Accounts receivable, net	(63	)	—		—		—		—		—		—	—	14
Prepaid expenses and other assets	(101	)	(227	)	(26	)	(18	)	(77	)	(21	)	—	—	(21	)
Receivables from unconsolidated affiliates	—		—		—		—		—		—		—	—	—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—		—	—	—
Accounts payable, accrued expenses, accrued interest and other liabilities	(122	)	(5	)	3		3		43		2		—	—	(201	)
Due from/to subsidiaries	3,953		257		(551	)	(671	)	221		(943	)	—	—	(966	)
Net cash provided by (used in) operating activities	7,086		275		133		(139	)	577		129		—	—	125
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		—		—		—		—		—	—	—
Capital expenditures for property and equipment	(7,086	)	(275	)	(133	)	139		(577	)	(129	)	—	—	(125	)
Proceeds from sales of assets	—		—		—		—		—		—		—	—	—
Insurance proceeds related to capital expenditures	—		—		—		—		—		—		—	—	—
Increase in restricted cash	—		—		—		—		—		—		—	—	—
Costs associated with disposition program and other, net	—		—		—		—		—		—		—	—	—
Net cash (used in) provided by investing activities	(7,086	)	(275	)	(133	)	139		(577	)	(129	)	—	—	(125	)
Financing activities:
Prepayments on long-term debt	—		—		—		—		—		—		—	—	—
Scheduled payments on long-term debt	—		—		—		—		—		—		—	—	—
Proceeds from mortgage loans, net of financing costs	—		—		—		—		—		—		—	—	—
Proceeds from debt issuance, net of issuance costs	—		—		—		—		—		—		—	—	—
Loans to/from subsidiaries	—		—		—		—		—		—		—	—	—
Distributions to minority investors	—		—		—		—		—		—		—	—	—
Proceeds from OP units issuance, net of issuance costs	—		—		—		—		—		—		—	—	—
Purchase of subsidiary partnership interests	—		—		—		—		—		—		—	—	—
Repurchase of OP units under employee stock plans	—		—		—		—		—		—		—	—	—
Other	—		—		—		—		—		—		—	—	—
Net cash (used in) provided by financing activities	—		—		—		—		—		—		—	—	—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—		—		—		—	—	—
Net increase (decrease) in cash and cash equivalents	—		—		—		—		—		—		—	—	—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—		—	—	—
Cash and cash equivalents, end of period	—		—		—		—		—		—		—	—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flows

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	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.	MeriStar Sub 7E, LLC
Operating activities:
Net (loss) income	1,631		—		798		1,012		1,634		—	—	—	327
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	702		—		275		308		338		—	—	—	288
Loss on asset impairments	—		—		—		—		—		—	—	—	—
Loss on sale of assets, before tax effect	—		—		—		—		—		—	—	—	—
Loss on early extinguishments of debt	—		—		—		—		—		—	—	—	—
Minority interests	—		—		—		—		—		—	—	—	—
Equity in earnings of consolidated entities	—		—		—		—		—		—	—	—	—
Equity in loss of unconsolidated affiliates	—		—		—		—		—		—	—	—	—
Amortization of unearned stock-based compensation	—		—		—		—		—		—	—	—	—
Deferred income taxes	—		—		—		—		—		—	—	—	—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—		—		—		—	—	—	—
Accounts receivable, net	—		64		—		—		—		—	—	—	—
Prepaid expenses and other assets	(870	)	—		(84	)	(187	)	(35	)	—	—	—	(22	)
Receivables from unconsolidated affiliates	—		—		—		—		—		—	—	—	—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—	—	—	—
Accounts payable, accrued expenses, accrued interest and other liabilities	301		(5	)	57		129		2		—	—	—	35
Due from/to subsidiaries	(33,210	)	(59	)	(108	)	8,810		(1,584	)	—	—	—	(444	)
Net cash provided by (used in) operating activities	(31,446	)	—		938		10,072		355		—	—	—	184
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		—		—		—		—	—	—	—
Capital expenditures for property and equipment	(2,386	)	—		(933	)	(10,072	)	(355	)	—	—	—	(184	)
Proceeds from sales of assets	—		—		—		—		—		—	—	—	—
Insurance proceeds related to capital expenditures	—		—		—		—		—		—	—	—	—
Increase in restricted cash	(14	)	—		—		—		—		—	—	—	—
Costs associated with disposition program and other, net	—		—		—		—		—		—	—	—	—
Net cash (used in) provided by investing activities	(2,400	)	—		(933	)	(10,072	)	(355	)	—	—	—	(184	)
Financing activities:
Prepayments on long-term debt	—		—		—		—		—		—	—	—	—
Scheduled payments on long-term debt	—		—		(5	)	—		—		—	—	—	—
Proceeds from mortgage loans, net of financing costs	33,846		—		—		—		—		—	—	—	—
Proceeds from debt issuance, net of issuance costs	—		—		—		—		—		—	—	—	—
Loans to/from subsidiaries	—		—		—		—		—		—	—	—	—
Distributions to minority investors	—		—		—		—		—		—	—	—	—
Proceeds from OP units issuance, net of issuance costs	—		—		—		—		—		—	—	—	—
Purchase of subsidiary partnership interests	—		—		—		—		—		—	—	—	—
Repurchase of OP units under employee stock plans	—		—		—		—		—		—	—	—	—
Other	—		—		—		—		—		—	—	—	—
Net cash (used in) provided by financing activities	33,846		—		(5	)	—		—		—	—	—	—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—		—		—	—	—	—
Net increase (decrease) in cash and cash equivalents	—		—		—		—		—		—	—	—	—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—	—	—	—
Cash and cash equivalents, end of period	—		—		—		—		—		—	—	—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flows

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	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
Operating activities:
Net (loss) income	508		126		—		—	—	—	—	—	—
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	323		126		—		—	—	—	—	—	—
Loss on asset impairments	—		332		—		—	—	—	—	—	—
Loss on sale of assets, before tax effect	—		—		—		—	—	—	—	—	—
Loss on early extinguishments of debt	—		—		—		—	—	—	—	—	—
Minority interests	—		—		—		—	—	—	—	—	—
Equity in earnings of consolidated entities	—		—		—		—	—	—	—	—	—
Equity in loss of unconsolidated affiliates	—		—		—		—	—	—	—	—	—
Amortization of unearned stock-based compensation	—		—		—		—	—	—	—	—	—
Deferred income taxes	—		—		—		—	—	—	—	—	—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—		—	—	—	—	—	—
Accounts receivable, net	—		—		(44	)	—	—	—	—	—	—
Prepaid expenses and other assets	(45	)	(145	)	—		—	—	—	—	—	—
Receivables from unconsolidated affiliates	—		—		—		—	—	—	—	—	—
Due to Interstate Hotels & Resorts	—		—		—		—	—	—	—	—	—
Accounts payable, accrued expenses, accrued interest and other liabilities	73		10		—		—	—	—	—	—	—
Due from/to subsidiaries	(135	)	(554	)	44		—	—	—	—	—	—
Net cash provided by (used in) operating activities	724		(105	)	—		—	—	—	—	—	—
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		—		—	—	—	—	—	—
Capital expenditures for property and equipment	(724	)	105		—		—	—	—	—	—	—
Proceeds from sales of assets	—		—		—		—	—	—	—	—	—
Insurance proceeds related to capital expenditures	—		—		—		—	—	—	—	—	—
Increase in restricted cash	—		—		—		—	—	—	—	—	—
Costs associated with disposition program and other, net	—		—		—		—	—	—	—	—	—
Net cash (used in) provided by investing activities	(724	)	105		—		—	—	—	—	—	—
Financing activities:
Prepayments on long-term debt	—		—		—		—	—	—	—	—	—
Scheduled payments on long-term debt	—		—		—		—	—	—	—	—	—
Proceeds from mortgage loans, net of financing costs	—		—		—		—	—	—	—	—	—
Proceeds from debt issuance, net of issuance costs	—		—		—		—	—	—	—	—	—
Loans to/from subsidiaries	—		—		—		—	—	—	—	—	—
Distributions to minority investors	—		—		—		—	—	—	—	—	—
Proceeds from OP units issuance, net of issuance costs	—		—		—		—	—	—	—	—	—
Purchase of subsidiary partnership interests	—		—		—		—	—	—	—	—	—
Repurchase of OP units under employee stock plans	—		—		—		—	—	—	—	—	—
Other	—		—		—		—	—	—	—	—	—
Net cash (used in) provided by financing activities	—		—		—		—	—	—	—	—	—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—	—	—	—	—	—
Net increase (decrease) in cash and cash equivalents	—		—		—		—	—	—	—	—	—
Cash and cash equivalents, beginning of period	—		—		—		—	—	—	—	—	—
Cash and cash equivalents, end of period	—		—		—		—	—	—	—	—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flows

Six months ended June 30, 2005

Unaudited

(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.
Operating activities:
Net (loss) income	108		—	1,314		1,267		—	1,799		—	320		—
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	98		—	250		1,043		—	711		—	202		—
Loss on asset impairments	—		—	—		—		—	—		—	—		—
Loss on sale of assets, before tax effect	—		—	—		—		—	—		—	—		—
Loss on early extinguishments of debt	—		—	—		—		—	—		—	—		—
Minority interests	—		—	—		—		—	—		—	—		—
Equity in earnings of consolidated entities	—		—	—		—		—	—		—	—		—
Equity in loss of unconsolidated affiliates	—		—	—		—		—	—		—	—		—
Amortization of unearned stock-based compensation	—		—	—		—		—	—		—	—		—
Deferred income taxes	—		—	—		—		—	—		—	—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—	—		—		—	—		—	—		—
Accounts receivable, net	—		—	—		—		—	(438	)	—	—		—
Prepaid expenses and other assets	(33	)	—	(19	)	(550	)	—	(52	)	—	(14	)	—
Receivables from unconsolidated affiliates	—		—	—		—		—	—		—	—		—
Due to Interstate Hotels & Resorts	—		—	—		—		—	—		—	—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	(15	)	—	27		18		—	53		—	139		—
Due from/to subsidiaries	(97	)	—	(1,346	)	(300	)	—	(972	)	—	(321	)	—
Net cash provided by (used in) operating activities	61		—	226		1,478		—	1,101		—	326		—
Investing activities:
Acquisition of hotels, net of cash acquired	—		—	—		—		—	—		—	—		—
Capital expenditures for property and equipment	(61	)	—	(226	)	(1,478	)	—	(1,101	)	—	(326	)	—
Proceeds from sales of assets	—		—	—		—		—	—		—	—		—
Insurance proceeds related to capital expenditures	—		—	—		—		—	—		—	—		—
Increase in restricted cash	—		—	—		—		—	—		—	—		—
Costs associated with disposition program and other, net	—		—	—		—		—	—		—	—		—
Net cash (used in) provided by investing activities	(61	)	—	(226	)	(1,478	)	—	(1,101	)	—	(326	)	—
Financing activities:
Prepayments on long-term debt	—		—	—		—		—	—		—	—		—
Scheduled payments on long-term debt	—		—	—		—		—	—		—	—		—
Proceeds from mortgage loans, net of financing costs	—		—	—		—		—	—		—	—		—
Proceeds from debt issuance, net of issuance costs	—		—	—		—		—	—		—	—		—
Loans to/from subsidiaries	—		—	—		—		—	—		—	—		—
Distributions to minority investors	—		—	—		—		—	—		—	—		—
Proceeds from OP units issuance, net of issuance costs	—		—	—		—		—	—		—	—		—
Purchase of subsidiary partnership interests	—		—	—		—		—	—		—	—		—
Repurchase of OP units under employee stock plans	—		—	—		—		—	—		—	—		—
Other	—		—	—		—		—	—		—	—		—
Net cash (used in) provided by financing activities	—		—	—		—		—	—		—	—		—
Effect of exchange rate changes on cash and cash equivalents	—		—	—		—		—	—		—	—		—
Net increase (decrease) in cash and cash equivalents	—		—	—		—		—	—		—	—		—
Cash and cash equivalents, beginning of period	—		—	—		—		—	—		—	—		—
Cash and cash equivalents, end of period	—		—	—		—		—	—		—	—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flows

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	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	MeriStar Sub 5M, LLC		MeriStar Sub 1E, LLC
Operating activities:
Net (loss) income	(549	)	—	—	—	—	342		—	612		—
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	679		—	—	—	—	503		—	134		—
Loss on asset impairments	—		—	—	—	—	—		—	—		—
Loss on sale of assets, before tax effect	—		—	—	—	—	—		—	—		—
Loss on early extinguishments of debt	—		—	—	—	—	—		—	—		—
Minority interests	—		—	—	—	—	—		—	—		—
Equity in earnings of consolidated entities	—		—	—	—	—	—		—	—		—
Equity in loss of unconsolidated affiliates	—		—	—	—	—	—		—	—		—
Amortization of unearned stock-based compensation	—		—	—	—	—	—		—	—		—
Deferred income taxes	—		—	—	—	—	—		—	—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—	—	—	—	—		—	—		—
Accounts receivable, net	—		—	—	—	—	—		—	—		—
Prepaid expenses and other assets	(94	)	—	—	—	—	(38	)	—	(118	)	—
Receivables from unconsolidated affiliates	—		—	—	—	—	—		—	—		—
Due to Interstate Hotels & Resorts	—		—	—	—	—	—		—	—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	139		—	—	—	—	(172	)	—	103		—
Due from/to subsidiaries	(93	)	—	—	—	—	(60	)	—	1,956		—
Net cash provided by (used in) operating activities	82		—	—	—	—	575		—	2,687		—
Investing activities:
Acquisition of hotels, net of cash acquired	—		—	—	—	—	—		—	—		—
Capital expenditures for property and equipment	55		—	—	—	—	(575	)	—	(2,687	)	—
Proceeds from sales of assets	—		—	—	—	—	—		—	—		—
Insurance proceeds related to capital expenditures	—		—	—	—	—	—		—	—		—
Increase in restricted cash	—		—	—	—	—	—		—	—		—
Costs associated with disposition program and other, net	(137	)	—	—	—	—	—		—	—		—
Net cash (used in) provided by investing activities	(82	)	—	—	—	—	(575	)	—	(2,687	)	—
Financing activities:
Prepayments on long-term debt	—		—	—	—	—	—		—	—		—
Scheduled payments on long-term debt	—		—	—	—	—	—		—	—		—
Proceeds from mortgage loans, net of financing costs	—		—	—	—	—	—		—	—		—
Proceeds from debt issuance, net of issuance costs	—		—	—	—	—	—		—	—		—
Loans to/from subsidiaries	—		—	—	—	—	—		—	—		—
Distributions to minority investors	—		—	—	—	—	—		—	—		—
Proceeds from OP units issuance, net of issuance costs	—		—	—	—	—	—		—	—		—
Purchase of subsidiary partnership interests	—		—	—	—	—	—		—	—		—
Repurchase of OP units under employee stock plans	—		—	—	—	—	—		—	—		—
Other	—		—	—	—	—	—		—	—		—
Net cash (used in) provided by financing activities	—		—	—	—	—	—		—	—		—
Effect of exchange rate changes on cash and cash equivalents	—		—	—	—	—	—		—	—		—
Net increase (decrease) in cash and cash equivalents	—		—	—	—	—	—		—	—		—
Cash and cash equivalents, beginning of period	—		—	—	—	—	—		—	—		—
Cash and cash equivalents, end of period	—		—	—	—	—	—		—	—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flows

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	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		MeriStar Sub 5J, LLC
Operating activities:
Net (loss) income	17		—	—	—	—	3,053		80		84		(1,433	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	70		—	—	—	—	3,102		38		2		1,821
Loss on asset impairments	—		—	—	—	—	—		—		—		—
Loss on sale of assets, before tax effect	—		—	—	—	—	—		—		—		—
Loss on early extinguishments of debt	—		—	—	—	—	—		—		—		—
Minority interests	—		—	—	—	—	—		—		—		—
Equity in earnings of consolidated entities	—		—	—	—	—	—		—		—		—
Equity in loss of unconsolidated affiliates	—		—	—	—	—	—		—		—		—
Amortization of unearned stock-based compensation	—		—	—	—	—	—		—		—		—
Deferred income taxes	—		—	—	—	—	—		—		—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—	—	—	—	—		—		—		—
Accounts receivable, net	—		—	—	—	—	—		—		—		—
Prepaid expenses and other assets	(39	)	—	—	—	—	(684	)	(45	)	(10	)	(904	)
Receivables from unconsolidated affiliates	—		—	—	—	—	—		—		—		—
Due to Interstate Hotels & Resorts	—		—	—	—	—	—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	37		—	—	—	—	571		36		—		330
Due from/to subsidiaries	1,985		—	—	—	—	(2,262	)	1,194		(76	)	10,986
Net cash provided by (used in) operating activities	2,070		—	—	—	—	3,780		1,303		—		10,800
Investing activities:
Acquisition of hotels, net of cash acquired	—		—	—	—	—	—		—		—		—
Capital expenditures for property and equipment	(2,070	)	—	—	—	—	(3,780	)	(1,303	)	—		(10,800	)
Proceeds from sales of assets	—		—	—	—	—	—		—		—		—
Insurance proceeds related to capital expenditures	—		—	—	—	—	—		—		—		—
Increase in restricted cash	—		—	—	—	—	—		—		—		—
Costs associated with disposition program and other, net	—		—	—	—	—	—		—		—		—
Net cash (used in) provided by investing activities	(2,070	)	—	—	—	—	(3,780	)	(1,303	)	—		(10,800	)
Financing activities:
Prepayments on long-term debt	—		—	—	—	—	—		—		—		—
Scheduled payments on long-term debt	—		—	—	—	—	—		—		—		—
Proceeds from mortgage loans, net of financing costs	—		—	—	—	—	—		—		—		—
Proceeds from debt issuance, net of issuance costs	—		—	—	—	—	—		—		—		—
Loans to/from subsidiaries	—		—	—	—	—	—		—		—		—
Distributions to minority investors	—		—	—	—	—	—		—		—		—
Proceeds from OP units issuance, net of issuance costs	—		—	—	—	—	—		—		—		—
Purchase of subsidiary partnership interests	—		—	—	—	—	—		—		—		—
Repurchase of OP units under employee stock plans	—		—	—	—	—	—		—		—		—
Other	—		—	—	—	—	—		—		—		—
Net cash (used in) provided by financing activities	—		—	—	—	—	—		—		—		—
Effect of exchange rate changes on cash and cash equivalents	—		—	—	—	—	—		—		—		—
Net increase (decrease) in cash and cash equivalents	—		—	—	—	—	—		—		—		—
Cash and cash equivalents, beginning of period	—		—	—	—	—	—		—		—		—
Cash and cash equivalents, end of period	—		—	—	—	—	—		—		—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flows

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	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
Operating activities:
Net (loss) income	621		1,170		—		436		961		—	—	—	—
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	246		525		—		650		2,620		—	—	—	—
Loss on asset impairments	—		—		—		—		—		—	—	—	—
Loss on sale of assets, before tax effect	—		—		—		—		—		—	—	—	—
Loss on early extinguishments of debt	—		—		—		—		—		—	—	—	—
Minority interests	—		—		—		—		—		—	—	—	—
Equity in earnings of consolidated entities	—		—		—		—		—		—	—	—	—
Equity in loss of unconsolidated affiliates	—		—		—		—		—		—	—	—	—
Amortization of unearned stock-based compensation	—		—		—		—		—		—	—	—	—
Deferred income taxes	—		—		—		—		—		—	—	—	—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—		—		—		—	—	—	—
Accounts receivable, net	—		—		359		—		547		—	—	—	—
Prepaid expenses and other assets	(137	)	(78	)	—		(51	)	87		—	—	—	—
Receivables from unconsolidated affiliates	—		—		—		—		—		—	—	—	—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—	—	—	—
Accounts payable, accrued expenses, accrued interest and other liabilities	64		353		—		13		591		—	—	—	—
Due from/to subsidiaries	1,143		(1,169	)	(359	)	909		(3,563	)	—	—	—	—
Net cash provided by (used in) operating activities	1,937		801		—		1,957		1,243		—	—	—	—
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		—		—		—		—	—	—	—
Capital expenditures for property and equipment	(1,937	)	(801	)	—		(1,957	)	(884	)	—	—	—	—
Proceeds from sales of assets	—		—		—		—		—		—	—	—	—
Insurance proceeds related to capital expenditures	—		—		—		—		—		—	—	—	—
Increase in restricted cash	—		—		—		—		—		—	—	—	—
Costs associated with disposition program and other, net	—		—		—		—		—		—	—	—	—
Net cash (used in) provided by investing activities	(1,937	)	(801	)	—		(1,957	)	(884	)	—	—	—	—
Financing activities:
Prepayments on long-term debt	—		—		—		—		—		—	—	—	—
Scheduled payments on long-term debt	—		—		—		—		(359	)	—	—	—	—
Proceeds from mortgage loans, net of financing costs	—		—		—		—		—		—	—	—	—
Proceeds from debt issuance, net of issuance costs	—		—		—		—		—		—	—	—	—
Loans to/from subsidiaries	—		—		—		—		—		—	—	—	—
Distributions to miniority investors	—		—		—		—		—		—	—	—	—
Proceeds from OP units issuance, net of issuance costs	—		—		—		—		—		—	—	—	—
Purchase of subsidiary partnership interests	—		—		—		—		—		—	—	—	—
Repurchase of OP units under employee stock plans	—		—		—		—		—		—	—	—	—
Other	—		—		—		—		—		—	—	—	—
Net cash (used in) provided by financing activities	—		—		—		—		(359	)	—	—	—	—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—		—		—	—	—	—
Net increase (decrease) in cash and cash equivalents	—		—		—		—		—		—	—	—	—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—	—	—	—
Cash and cash equivalents, end of period	—		—		—		—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flows

Six months ended June 30, 2005

Unaudited

(Dollars in thousands)

	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		Eliminations		Total Consolidated
Operating activities:
Net (loss) income	—	—	—	—	(9,917	)	(2,824	)	10,719		(30,284	)	(12,335	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	—	—	—	—	—		—		18,680		—		48,941
Loss on asset impairments	—	—	—	—	—		—		332		—		2,836
Loss on sale of assets, before tax effect	—	—	—	—	—		—		—		—		1,037
Loss on early extinguishments of debt	—	—	—	—	—		—		—		—		1,007
Minority interests	—	—	—	—	—		—		—		—		(2	)
Equity in earnings of consolidated entities	—	—	—	—	—		—		—		30,284		—
Equity in loss of unconsolidated affiliates	—	—	—	—	—		—		1,164		—		1,164
Amortization of unearned stock-based compensation	—	—	—	—	—		—		—		—		542
Deferred income taxes	—	—	—	—	—		—		—		—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—	—	—	—	—		—		—		—		35,098
Accounts receivable, net	—	—	—	—	(10,580	)	—		(10,141	)	6,980		(9,271	)
Prepaid expenses and other assets	—	—	—	—	173		—		(4,563	)	—		721
Receivables from unconsolidated affiliates	—	—	—	—	—		—		78		—		12,663
Due to Interstate Hotels & Resorts	—	—	—	—	(7,000	)	—		(7,000	)	—		(8,398	)
Accounts payable, accrued expenses, accrued interest and other liabilities	—	—	—	—	7,450		—		10,259		(6,980	)	315
Due from/to subsidiaries	—	—	—	—	(192,709	)	2,824		(211,330	)	—		—
Net cash provided by (used in) operating activities	—	—	—	—	(212,583	)	—		(191,802	)	—		74,318
Investing activities:
Acquisition of hotels, net of cash acquired	—	—	—	—	—		—		—		—		—
Capital expenditures for property and equipment	—	—	—	—	—		—		(53,008	)	—		(109,322	)
Proceeds from sales of assets	—	—	—	—	—		—		—		—		20,500
Insurance proceeds related to capital expenditures	—	—	—	—	—		—		—		—		6,500
Increase in restricted cash	—	—	—	—	(304	)	—		(318	)	—		(4,580	)
Costs associated with disposition program and other, net	—	—	—	—	—		—		(137	)	—		(596	)
Net cash (used in) provided by investing activities	—	—	—	—	(304	)	—		(53,463	)	—		(87,498	)
Financing activities:
Prepayments on long-term debt	—	—	—	—	—		—		—		—		(23,846	)
Scheduled payments on long-term debt	—	—	—	—	—		—		(1,468	)	—		(5,477	)
Proceeds from mortgage loans, net of financing costs	—	—	—	—	—		—		33,846		—		73,410
Proceeds from debt issuance, net of issuance costs	—	—	—	—	—		—		—		—		—
Loans to/from subsidiaries	—	—	—	—	218,939		—		218,939		—		—
Distributions to miniority investors	—	—	—	—	—		—		—		—		—
Proceeds from OP units issuance, net of issuance costs	—	—	—	—	—		—		—		—		309
Purchase of subsidiary partnership interests	—	—	—	—	—		—		—		—		—
Repurchase of OP units under employee stock plans	—	—	—	—	—		—		—		—		(782	)
Other	—	—	—	—	—		—		—		—		—
Net cash (used in) provided by financing activities	—	—	—	—	218,939		—		251,317		—		43,614
Effect of exchange rate changes on cash and cash equivalents	—	—	—	—	—		—		—		—		—
Net increase (decrease) in cash and cash equivalents	—	—	—	—	6,052		—		6,052		—		30,434
Cash and cash equivalents, beginning of period	—	—	—	—	19,309		—		19,309		—		60,533
Cash and cash equivalents, end of period					25,361				25,361		—		90,967

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flow

Six months ended June 30, 2004

Unaudited

(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
Operating activities:
Net (loss) income	(52,938	)	19,071		—	—	—	312		568		1,974		(350	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	6,237		25,793		—	—	—	313		329		1,197		697
Loss on asset impairments	—		3,763		—	—	—	—		—		—		—
Loss on sale of assets, before tax effect	226		(833	)	—	—	—	—		—		—		—
Loss on early extinguishments of debt	7,903		—		—	—	—	—		—		—		—
Minority interests	(24	)	—		—	—	—	—		—		—		—
Equity in earnings of consolidated entities	(6,014	)	—		—	—	—	—		—		—		—
Equity in loss of unconsolidated affiliate	—		—		—	—	—	—		—		—		—
Amortization of unearned stock-based compensation	1,090		—		—	—	—	—		—		—		—
Deferred income taxes	(652	)	—		—	—	—	—		—		—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—	—	—	—		—		—		—
Accounts receivable, net	(3,230	)	149		—	—	—	—		—		—		—
Prepaid expenses and other assets	(1,221	)	2,738		—	—	—	6		22		34		59
Receivables from unconsolidated affiliates	(4,916	)	—		—	—	—	—		—		—		—
Due to Interstate Hotels & Resorts	6,808		—		—	—	—	—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	(12,214	)	707		—	—	—	(118	)	(29	)	(107	)	(16	)
Due to/from subsidiaries	46,887		(26,984	)	—	—	—	(512	)	(857	)	1,684		(134	)
Net cash (used in) provided by operating activities	(12,058	)	24,404		—	—	—	1		33		4,782		256
Investing activities:
Acquisition of hotels, net of cash acquired	—		(92,140	)	—	—	—	—		—		—		—
Capital expenditures for property and equipment	(1,215	)	(23,254	)	—	—	—	(1	)	(33	)	(4,782	)	(256	)
Proceeds from sales of assets	—		42,075		—	—	—	—		—		—		—
Insurance proceeds related to capital expenditures	—		—		—	—	—	—		—		—		—
(Increase) decrease in restricted cash	(27,774	)	309		—	—	—	—		—		—		—
Costs associated with disposition program and other, net	84		(1,654	)	—	—	—	—		—		—		—
Net cash (used in) provided by investing activities	(28,905	)	(74,664	)	—	—	—	(1	)	(33	)	(4,782	)	(256	)
Financing activities:
Prepayments on long-term debt	(85,319	)	(807	)	—	—	—	—		—		—		—
Scheduled payments on long-term debt	—		(3,691	)	—	—	—	—		—		—		—
Proceeds from mortgage loans, net of financing costs	—		—		—	—	—	—		—		—		—
Proceeds from debt issuance, net of issuance costs	(347	)	54,758		—	—	—	—		—		—		—
Loans to/from subsidiaries	(29,460	)	—		—	—	—	—		—		—		—
Distributions to minority investors	(141	)	—		—	—	—	—		—		—		—
Proceeds from OP units issuance, net of issuance costs	72,340		—		—	—	—	—		—		—		—
Purchase of subsidiary partnership interests	(8,690	)	—		—	—	—	—		—		—		—
Repurchase of OP units under employee stock plans	(160	)	—		—	—	—	—		—		—		—
Other	(165	)	—		—	—	—	—		—		—		—
Net cash (used in) provided by financing activities	(51,942	)	50,260		—	—	—	—		—		—		—
Effect of exchange rate changes on cash and cash equivalents	(227	)	—		—	—	—	—		—		—		—
Net increase (decrease) in cash and cash equivalents	(93,132	)	—		—	—	—	—		—		—		—
Cash and cash equivalents, beginning of period	218,645		—		—	—	—	—		—		—		—
Cash and cash equivalents, end of period	125,513		—		—	—	—	—		—		—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flow

Six months ended June 30, 2004

Unaudited

(Dollars in thousands)

	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 (loss) income	376		319		477		458		—	—	679		1,894		(721	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	298		170		77		356		—	—	273		825		149
Loss on asset impairments	—		—		—		—		—	—	—		—		981
Loss on sale of assets, before tax effect	—		—		—		—		—	—	—		—		—
Loss on early extinguishments of debt	—		—		—		—		—	—	—		—		—
Minority interests	—		—		—		—		—	—	—		—		—
Equity in earnings of consolidated entities	—		—		—		—		—	—	—		—		—
Equity in loss of unconsolidated affiliate	—		—		—		—		—	—	—		—		—
Amortization of unearned stock-based compensation	—		—		—		—		—	—	—		—		—
Deferred income taxes	—		—		—		—		—	—	—		—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—		—		—	—	—		—		—
Accounts receivable, net	—		—		—		—		—	—	5		—		—
Prepaid expenses and other assets	9		6		29		9		—	—	7		31		20
Receivables from unconsolidated affiliates	—		—		—		—		—	—	—		—		—
Due to Interstate Hotels & Resorts	—		—		—		—		—	—	—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	9		(51	)	63		72		—	—	98		268		(147	)
Due to/from subsidiaries	(576	)	(400	)	(435	)	(884	)	—	—	(590	)	(598	)	(244	)
Net cash (used in) provided by operating activities	116		44		211		11		—	—	472		2,420		38
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		—		—		—	—	—		—		—
Capital expenditures for property and equipment	(116	)	(44	)	(211	)	(11	)	—	—	(472	)	(2,420	)	(38	)
Proceeds from sales of assets	—		—		—		—		—	—	—		—		—
Insurance proceeds related to capital expenditures	—		—		—		—		—	—	—		—		—
(Increase) decrease in restricted cash	—		—		—		—		—	—	—		—		—
Costs associated with disposition program and other, net	—		—		—		—		—	—	—		—		—
Net cash (used in) provided by investing activities	(116	)	(44	)	(211	)	(11	)	—	—	(472	)	(2,420	)	(38	)
Financing activities:
Prepayments on long-term debt	—		—		—		—		—	—	—		—		—
Scheduled payments on long-term debt	—		—		—		—		—	—	—		—		—
Proceeds from mortgage loans, net of financing costs	—		—		—		—		—	—	—		—		—
Proceeds from debt issuance, net of issuance costs	—		—		—		—		—	—	—		—		—
Loans to/from subsidiaries	—		—		—		—		—	—	—		—		—
Distributions to minority investors	—		—		—		—		—	—	—		—		—
Proceeds from OP units issuance, net of issuance costs	—		—		—		—		—	—	—		—		—
Purchase of subsidiary partnership interests	—		—		—		—		—	—	—		—		—
Repurchase of OP units under employee stock plans	—		—		—		—		—	—	—		—		—
Other	—		—		—		—		—	—	—		—		—
Net cash (used in) provided by financing activities	—		—		—		—		—	—	—		—		—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—		—	—	—		—		—
Net increase (decrease) in cash and cash equivalents	—		—		—		—		—	—	—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—		—	—	—		—		—
Cash and cash equivalents, end of period	—		—		—		—		—	—	—		—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flow

Six months ended June 30, 2004

Unaudited

(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
Operating activities:
Net (loss) income	815		851		1,354		(61	)	—	(403	)	277		246		(167	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	249		391		362		—		—	43		313		382		197
Loss on asset impairments	—		—		—		—		—	—		—		—		544
Loss on sale of assets, before tax effect	—		—		—		110		—	365		—		—		—
Loss on early extinguishments of debt	—		—		—		—		—	—		—		—		—
Minority interests	—		—		—		—		—	—		—		—		—
Equity in earnings of consolidated entities	—		—		—		—		—	—		—		—		—
Equity in loss of unconsolidated affiliate	—		—		—		—		—	—		—		—		—
Amortization of unearned stock-based compensation	—		—		—		—		—	—		—		—		—
Deferred income taxes	—		—		—		—		—	—		—		—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—		—		—	—		—		—		—
Accounts receivable, net	—		—		—		—		—	—		—		—		—
Prepaid expenses and other assets	28		62		12		117		—	(8	)	7		15		30
Receivables from unconsolidated affiliates	—		—		—		—		—	—		—		—		—
Due to Interstate Hotels & Resorts	—		—		—		—		—	—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	(44	)	23		142		839		—	(236	)	34		54		44
Due to/from subsidiaries	(329	)	690		(1,565	)	(6,603	)	—	(4,133	)	938		(553	)	(637	)
Net cash (used in) provided by operating activities	719		2,017		305		(5,598	)	—	(4,372	)	1,569		144		11
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		—		—		—	—		—		—		—
Capital expenditures for property and equipment	(719	)	(2,017	)	(305	)	711		—	(87	)	(1,569	)	(144	)	(11	)
Proceeds from sales of assets	—		—		—		5,000		—	4,650		—		—		—
Insurance proceeds related to capital expenditures	—		—		—		—		—	—		—		—		—
(Increase) decrease in restricted cash	—		—		—		—		—	—		—		—		—
Costs associated with disposition program and other, net	—		—		—		(113	)	—	(191	)	—		—		—
Net cash (used in) provided by investing activities	(719	)	(2,017	)	(305	)	5,598		—	4,372		(1,569	)	(144	)	(11	)
Financing activities:
Prepayments on long-term debt	—		—		—		—		—	—		—		—		—
Scheduled payments on long-term debt	—		—		—		—		—	—		—		—		—
Proceeds from mortgage loans, net of financing costs	—		—		—		—		—	—		—		—		—
Proceeds from debt issuance, net of issuance costs	—		—		—		—		—	—		—		—		—
Loans to/from subsidiaries	—		—		—		—		—	—		—		—		—
Distributions to minority investors	—		—		—		—		—	—		—		—		—
Proceeds from OP units issuance, net of issuance costs	—		—		—		—		—	—		—		—		—
Purchase of subsidiary partnership interests	—		—		—		—		—	—		—		—		—
Repurchase of OP units under employee stock plans	—		—		—		—		—	—		—		—		—
Other	—		—		—		—		—	—		—		—		—
Net cash (used in) provided by financing activities	—		—		—		—		—	—		—		—		—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—		—	—		—		—		—
Net increase (decrease) in cash and cash equivalents	—		—		—		—		—	—		—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—		—	—		—		—		—
Cash and cash equivalents, end of period	—		—		—		—		—	—		—		—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flow

Six months ended June 30, 2004

Unaudited

(Dollars in thousands)

	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
Operating activities:
Net (loss) income	(713	)	—		89		97		—		—		1,852		130		—
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	121		—		51		—		—		—		—		70		—
Loss on asset impairments	1,005		—		—		—		—		—		—		—		—
Loss on sale of assets, before tax effect	—		—		(20	)	45		—		—		(1,827	)	—		—
Loss on early extinguishments of debt	—		—		—		—		—		—		—		—		—
Minority interests	—		—		—		—		—		—		—		—		—
Equity in earnings of consolidated entities	—		—		—		—		—		—		—		—		—
Equity in loss of unconsolidated affiliate	—		—		—		—		—		—		—		—		—
Amortization of unearned stock-based compensation	—		—		—		—		—		—		—		—		—
Deferred income taxes	—		—		—		—		—		—		—		—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—		—		—		—		—		—		—
Accounts receivable, net	—		2,345		—		—		—		2,002		(178	)	—		2
Prepaid expenses and other assets	10		—		1		(9	)	3		—		14		9		(4	)
Receivables from unconsolidated affiliates	—		—		—		—		—		—		—		—		—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	27		—		(104	)	(400	)	—		—		(109	)	6		—
Due to/from subsidiaries	(428	)	(2,345	)	(2,993	)	(2,860	)	(3	)	(2,002	)	(13,739	)	(165	)	2
Net cash (used in) provided by operating activities	22		—		(2,976	)	(3,127	)	—		—		(13,987	)	50		—
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		—		—		—		—		—		—		—
Capital expenditures for property and equipment	(22	)	—		(83	)	(194	)	—		—		(319	)	(50	)	—
Proceeds from sales of assets	—		—		3,300		3,575		—		—		14,775		—		—
Insurance proceeds related to capital expenditures	—		—		—		—		—		—		—		—		—
(Increase) decrease in restricted cash	—		—		—		—		—		—		—		—		—
Costs associated with disposition program and other, net	—		—		(241	)	(254	)	—		—		(469	)	—		—
Net cash (used in) provided by investing activities	(22	)	—		2,976		3,127		—		—		13,987		(50	)	—
Financing activities:
Prepayments on long-term debt	—		—		—		—		—		—		—		—		—
Scheduled payments on long-term debt	—		—		—		—		—		—		—		—		—
Proceeds from mortgage loans, net of financing costs	—		—		—		—		—		—		—		—		—
Proceeds from debt issuance, net of issuance costs	—		—		—		—		—		—		—		—		—
Loans to/from subsidiaries	—		—		—		—		—		—		—		—		—
Distributions to minority investors	—		—		—		—		—		—		—		—		—
Proceeds from OP units issuance, net of issuance costs	—		—		—		—		—		—		—		—		—
Purchase of subsidiary partnership interests	—		—		—		—		—		—		—		—		—
Repurchase of OP units under employee stock plans	—		—		—		—		—		—		—		—		—
Other	—		—		—		—		—		—		—		—		—
Net cash (used in) provided by financing activities	—		—		—		—		—		—		—		—		—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—		—		—		—		—		—
Net increase (decrease) in cash and cash equivalents	—		—		—		—		—		—		—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—		—		—		—
Cash and cash equivalents, end of period	—		—		—		—		—		—		—		—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flow

Six months ended June 30, 2004

Unaudited

(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
Operating activities:
Net (loss) income	823		647		(787	)	1,063		103		257		—		(386	)	—
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	281		1,136		99		862		49		224		—		738		—
Loss on asset impairments	—		—		—		—		—		—		—		—		—
Loss on sale of assets, before tax effect	—		—		1,035		—		(39	)	—		—		—		—
Loss on early extinguishments of debt	—		—		—		—		—		—		—		—		—
Minority interests	—		—		—		—		—		—		—		—		—
Equity in earnings of consolidated entities	—		—		—		—		—		—		—		—		—
Equity in loss of unconsolidated affiliate	—		—		—		—		—		—		—		—		—
Amortization of unearned stock-based compensation	—		—		—		—		—		—		—		—		—
Deferred income taxes	—		—		—		—		—		—		—		—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—		—		—		—		—		—		—
Accounts receivable, net	—		—		—		650		—		—		—		—		—
Prepaid expenses and other assets	8		183		1		31		—		4		—		31		1
Receivables from unconsolidated affiliates	—		—		—		—		—		—		—		—		—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	288		189		(1,602	)	442		6		105		61		359		2
Due to/from subsidiaries	(1,208	)	(1,785	)	(3,147	)	(2,044	)	(1,659	)	73		(61	)	(585	)	(3	)
Net cash (used in) provided by operating activities	192		370		(4,401	)	1,004		(1,540	)	663		—		157		—
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		—		—		—		—		—		—		—
Capital expenditures for property and equipment	(192	)	(370	)	306		(1,004	)	(399	)	(663	)	—		(157	)	—
Proceeds from sales of assets	—		—		4,500		—		2,300		—		—		—		—
Insurance proceeds related to capital expenditures	—		—		—		—		—		—		—		—		—
(Increase) decrease in restricted cash	—		—		—		—		—		—		—		—		—
Costs associated with disposition program and other, net	—		—		(405	)	—		(361	)	—		—		—		—
Net cash (used in) provided by investing activities	(192	)	(370	)	4,401		(1,004	)	1,540		(663	)	—		(157	)	—
Financing activities:
Prepayments on long-term debt	—		—		—		—		—		—		—		—		—
Scheduled payments on long-term debt	—		—		—		—		—		—		—		—		—
Proceeds from mortgage loans, net of financing costs	—		—		—		—		—		—		—		—		—
Proceeds from debt issuance, net of issuance costs	—		—		—		—		—		—		—		—		—
Loans to/from subsidiaries	—		—		—		—		—		—		—		—		—
Distributions to minority investors	—		—		—		—		—		—		—		—		—
Proceeds from OP units issuance, net of issuance costs	—		—		—		—		—		—		—		—		—
Purchase of subsidiary partnership interests	—		—		—		—		—		—		—		—		—
Repurchase of OP units under employee stock plans	—		—		—		—		—		—		—		—		—
Other	—		—		—		—		—		—		—		—		—
Net cash (used in) provided by financing activities	—		—		—		—		—		—		—		—		—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—		—		—		—		—		—
Net increase (decrease) in cash and cash equivalents	—		—		—		—		—		—		—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—		—		—		—
Cash and cash equivalents, end of period	—		—		—		—		—		—		—		—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flow

Six months ended June 30, 2004

Unaudited

(Dollars in thousands)

	MeriStar Sub 7H, LLC		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.
Operating activities:
Net (loss) income	—		—		—		255		429		618		—		305		(217	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	—		—		—		552		648		238		—		114		—
Loss on asset impairments	—		—		—		—		—		—		—		—		—
Loss on sale of assets, before tax effect	—		—		—		—		—		—		—		—		215
Loss on early extinguishments of debt	—		—		—		—		—		—		—		—		—
Minority interests	—		—		—		—		—		—		—		—		—
Equity in earnings of consolidated entities	—		—		—		—		—		—		—		—		—
Equity in loss of unconsolidated affiliate	—		—		—		—		—		—		—		—		—
Amortization of unearned stock-based compensation	—		—		—		—		—		—		—		—		—
Deferred income taxes	—		—		—		—		—		—		—		—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—		—		—		—		—		—		—
Accounts receivable, net	43		—		1,166		—		—		—		198		—		—
Prepaid expenses and other assets	—		1		—		13		64		37		(1	)	13		(4	)
Receivables from unconsolidated affiliates	—		—		—		—		—		—		—		—		—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	—		—		—		(202	)	(1,481	)	98		(14	)	46		(464	)
Due to/from subsidiaries	(43	)	(1	)	(1,166	)	237		589		(944	)	(183	)	(449	)	(6,348	)
Net cash (used in) provided by operating activities	—		—		—		855		249		47		—		29		(6,818	)
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		—		—		—		—		—		—		—
Capital expenditures for property and equipment	—		—		—		(855	)	(249	)	(47	)	—		(29	)	(200	)
Proceeds from sales of assets	—		—		—		—		—		—		—		—		7,500
Insurance proceeds related to capital expenditures	—		—		—		—		—		—		—		—		—
(Increase) decrease in restricted cash	—		—		—		—		—		—		—		—		—
Costs associated with disposition program and other, net	—		—		—		—		—		—		—		—		(482	)
Net cash (used in) provided by investing activities	—		—		—		(855	)	(249	)	(47	)	—		(29	)	6,818
Financing activities:
Prepayments on long-term debt	—		—		—		—		—		—		—		—		—
Scheduled payments on long-term debt	—		—		—		—		—		—		—		—		—
Proceeds from mortgage loans, net of financing costs	—		—		—		—		—		—		—		—		—
Proceeds from debt issuance, net of issuance costs	—		—		—		—		—		—		—		—		—
Loans to/from subsidiaries	—		—		—		—		—		—		—		—		—
Distributions to minority investors	—		—		—		—		—		—		—		—		—
Proceeds from OP units issuance, net of issuance costs	—		—		—		—		—		—		—		—		—
Purchase of subsidiary partnership interests	—		—		—		—		—		—		—		—		—
Repurchase of OP units under employee stock plans	—		—		—		—		—		—		—		—		—
Other	—		—		—		—		—		—		—		—		—
Net cash (used in) provided by financing activities	—		—		—		—		—		—		—		—		—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—		—		—		—		—		—
Net increase (decrease) in cash and cash equivalents	—		—		—		—		—		—		—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—		—		—		—
Cash and cash equivalents, end of period	—		—		—		—		—		—		—		—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flow

Six months ended June 30, 2004

Unaudited

(Dollars in thousands)

	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		MeriStar Sub 5J, LLC		MeriStar Sub 5Q, LLC		MeriStar Sub 5A, LLC
Operating activities:
Net (loss) income	(1,645	)	341		—		1,551		398		483		1,603		639		836
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	—		223		—		3,150		69		2		2,810		294		532
Loss on asset impairments	903		245		—		—		—		—		—		—		—
Loss on sale of assets, before tax effect	1,612		—		—		—		—		—		—		—		—
Loss on early extinguishments of debt	—		—		—		—		—		—		—		—		—
Minority interests	—		—		—		—		—		—		—		—		—
Equity in earnings of consolidated entities	—		—		—		—		—		—		—		—		—
Equity in loss of unconsolidated affiliate	—		—		—		—		—		—		—		—		—
Amortization of unearned stock-based compensation	—		—		—		—		—		—		—		—		—
Deferred income taxes	—		—		—		—		—		—		—		—		—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—		—		—		—		—		—		—
Accounts receivable, net	(7	)	—		—		—		—		—		—		—		—
Prepaid expenses and other assets	(234	)	81		—		228		15		3		292		46		26
Receivables from unconsolidated affiliates	—		—		—		—		—		—		—		—		—
Due to Interstate Hotels & Resorts	—		—		—		—		—		—		—		—		—
Accounts payable, accrued expenses, accrued interest and other liabilities	(217	)	(317	)	22		(478	)	48		—		310		229		559
Due to/from subsidiaries	11,658		(569	)	(22	)	(398	)	(483	)	(488	)	(3,014	)	(1,040	)	(1,315	)
Net cash (used in) provided by operating activities	12,070		4		—		4,053		47		—		2,001		168		638
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		—		—		—		—		—		—		—
Capital expenditures for property and equipment	(81	)	(4	)	—		(4,053	)	(47	)	—		(2,001	)	(168	)	(638	)
Proceeds from sales of assets	8,398		—		—		—		—		—		—		—		—
Insurance proceeds related to capital expenditures	—		—		—		—		—		—		—		—		—
(Increase) decrease in restricted cash	—		—		—		—		—		—		—		—		—
Costs associated with disposition program and other, net	(656	)	—		—		—		—		—		—		—		—
Net cash (used in) provided by investing activities	7,661		(4	)	—		(4,053	)	(47	)	—		(2,001	)	(168	)	(638	)
Financing activities:
Prepayments on long-term debt	(19,731	)	—		—		—		—		—		—		—		—
Scheduled payments on long-term debt	—		—		—		—		—		—		—		—		—
Proceeds from mortgage loans, net of financing costs	—		—		—		—		—		—		—		—		—
Proceeds from debt issuance, net of issuance costs	—		—		—		—		—		—		—		—		—
Loans to/from subsidiaries	—		—		—		—		—		—		—		—		—
Distributions to minority investors	—		—		—		—		—		—		—		—		—
Proceeds from OP units issuance, net of issuance costs	—		—		—		—		—		—		—		—		—
Purchase of subsidiary partnership interests	—		—		—		—		—		—		—		—		—
Repurchase of OP units under employee stock plans	—		—		—		—		—		—		—		—		—
Other	—		—		—		—		—		—		—		—		—
Net cash (used in) provided by financing activities	(19,731	)	—		—		—		—		—		—		—		—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—		—		—		—		—		—
Net increase (decrease) in cash and cash equivalents	—		—		—		—		—		—		—		—		—
Cash and cash equivalents, beginning of period	—		—		—		—		—		—		—		—		—
Cash and cash equivalents, end of period	—		—		—		—		—		—		—		—		—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flow

Six months ended June 30, 2004

Unaudited

(Dollars in thousands)

	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
Operating activities:
Net (loss) income	(857	)	437		861		—	—	—	—	—	—
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	—		632		355		—	—	—	—	—	—
Loss on asset impairments	—		—		—		—	—	—	—	—	—
Loss on sale of assets, before tax effect	899		—		—		—	—	—	—	—	—
Loss on early extinguishments of debt	—		—		—		—	—	—	—	—	—
Minority interests	—		—		—		—	—	—	—	—	—
Equity in earnings of consolidated entities	—		—		—		—	—	—	—	—	—
Equity in loss of unconsolidated affiliate	—		—		—		—	—	—	—	—	—
Amortization of unearned stock-based compensation	—		—		—		—	—	—	—	—	—
Deferred income taxes	—		—		—		—	—	—	—	—	—
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—		—		—		—	—	—	—	—	—
Accounts receivable, net	(359	)	1		—		—	—	—	—	—	—
Prepaid expenses and other assets	14		17		—		—	—	—	—	—	—
Receivables from unconsolidated affiliates	—		—		—		—	—	—	—	—	—
Due to Interstate Hotels & Resorts	—		—		—		—	—	—	—	—	—
Accounts payable, accrued expenses, accrued interest and other liabilities	(76	)	74		325		—	—	—	—	—	—
Due to/from subsidiaries	(7,723	)	(440	)	35,990		—	—	—	—	—	—
Net cash (used in) provided by operating activities	(8,102	)	721		37,531		—	—	—	—	—	—
Investing activities:
Acquisition of hotels, net of cash acquired	—		—		(92,672	)	—	—	—	—	—	—
Capital expenditures for property and equipment	(359	)	(721	)	(135	)	—	—	—	—	—	—
Proceeds from sales of assets	8,800		—		—		—	—	—	—	—	—
Insurance proceeds related to capital expenditures	—		—		—		—	—	—	—	—	—
(Increase) decrease in restricted cash	—		—		—		—	—	—	—	—	—
Costs associated with disposition program and other, net	(339	)	—		—		—	—	—	—	—	—
Net cash (used in) provided by investing activities	8,102		(721	)	(92,807	)	—	—	—	—	—	—
Financing activities:
Prepayments on long-term debt	—		—		—		—	—	—	—	—	—
Scheduled payments on long-term debt	—		—		—		—	—	—	—	—	—
Proceeds from mortgage loans, net of financing costs	—		—		—		—	—	—	—	—	—
Proceeds from debt issuance, net of issuance costs	—		—		55,276		—	—	—	—	—	—
Loans to/from subsidiaries	—		—		—		—	—	—	—	—	—
Distributions to minority investors	—		—		—		—	—	—	—	—	—
Proceeds from OP units issuance, net of issuance costs	—		—		—		—	—	—	—	—	—
Purchase of subsidiary partnership interests	—		—		—		—	—	—	—	—	—
Repurchase of OP units under employee stock plans	—		—		—		—	—	—	—	—	—
Other	—		—		—		—	—	—	—	—	—
Net cash (used in) provided by financing activities	—		—		55,276		—	—	—	—	—	—
Effect of exchange rate changes on cash and cash equivalents	—		—		—		—	—	—	—	—	—
Net increase (decrease) in cash and cash equivalents	—		—		—		—	—	—	—	—	—
Cash and cash equivalents, beginning of period	—		—		—		—	—	—	—	—	—
Cash and cash equivalents, end of period	—		—		—		—	—	—	—	—	—

MeriStar Hospitality Operating Partnership, L.P.

Consolidating Statement of Cash Flow

Six months ended June 30, 2004

Unaudited

(Dollars in thousands)

	MeriStar Sub 6A, LLC	MeriStar Sub 6F, LLC	MeriStar Hotel Lessee, Inc.		Guarantor Eliminations	Guarantor Subsidiaries Total		Eliminations		Total Consolidated
Operating activities:
Net (loss) income	—	—	(31,167	)	—	(13,057	)	(6,014	)	(52,938	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	—	—	84		—	19,955		—		51,985
Loss on asset impairments	—	—	—		—	3,678		—		7,441
Loss on sale of assets, before tax effect	—	—	9,742		—	12,137		—		11,530
Loss on early extinguishments of debt	—	—	—		—	—		—		7,903
Minority interests	—	—	—		—	—		—		(24	)
Equity in earnings of consolidated entities	—	—	—		—	—		6,014		—
Equity in loss of unconsolidated affiliate	—	—	—		—	—		—		—
Amortization of unearned stock-based compensation	—	—	—		—	—		—		1,090
Deferred income taxes	—	—	—		—	—		—		(652	)
Changes in operating assets and liabilities:
Insurance claim receivable, less capital expenditure proceeds	—	—	—		—	—		—		—
Accounts receivable, net	—	—	(6,442	)	—	(574	)	4,344		689
Prepaid expenses and other assets	—	—	1,958		—	3,347		—		4,864
Receivables from unconsolidated affiliates	—	—	—		—	—		—		(4,916	)
Due to Interstate Hotels & Resorts	—	—	(10,049	)	—	(10,049	)	—		(3,241	)
Accounts payable, accrued expenses, accrued interest and other liabilities	—	—	11,181		—	9,811		(4,344	)	(6,040	)
Due to/from subsidiaries	—	—	6,939		—	(19,903	)	—		—
Net cash (used in) provided by operating activities	—	—	(17,754	)	—	5,345		—		17,691
Investing activities:
Acquisition of hotels, net of cash acquired	—	—	2,022		—	(90,650	)	—		(182,790	)
Capital expenditures for property and equipment	—	—	(170	)	—	(25,429	)	—		(49,898	)
Proceeds from sales of assets	—	—	—		—	62,798		—		104,873
Insurance proceeds related to capital expenditures	—	—	—		—	—		—		—
(Increase) decrease in restricted cash	—	—	(2,490	)	—	(2,490	)	—		(29,955	)
Costs associated with disposition program and other, net	—	—	—		—	(3,511	)	—		(5,081	)
Net cash (used in) provided by investing activities	—	—	(638	)	—	(59,282	)	—		(162,851	)
Financing activities:
Prepayments on long-term debt	—	—	—		—	(19,731	)	—		(105,857	)
Scheduled payments on long-term debt	—	—	—		—	—		—		(3,691	)
Proceeds from mortgage loans, net of financing costs	—	—	—		—	—		—		—
Proceeds from debt issuance, net of issuance costs	—	—	—		—	55,276		—		109,687
Loans to/from subsidiaries	—	—	29,460		—	29,460		—		—
Distributions to minority investors	—	—	—		—	—		—		(141	)
Proceeds from OP units issuance, net of issuance costs	—	—	—		—	—		—		72,340
Purchase of subsidiary partnership interests	—	—	—		—	—		—		(8,690	)
Repurchase of OP units under employee stock plans	—	—	—		—	—		—		(160	)
Other	—	—	—		—	—		—		(165	)
Net cash (used in) provided by financing activities	—	—	29,460		—	65,005		—		63,323
Effect of exchange rate changes on cash and cash equivalents	—	—	—		—	—		—		(227	)
Net increase (decrease) in cash and cash equivalents	—	—	11,068		—	11,068		—		(82,064	)
Cash and cash equivalents, beginning of period	—	—	12,231		—	12,231		—		230,876
Cash and cash equivalents, end of period	—	—	23,299		—	23,299		—		148,812