##### Table of Contents





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 13, 2008.

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number 0-25087





HOST HOTELS &
RESORTS, L.P.

(Exact Name of Registrant as Specified in Its Charter)







|                                                     |  |                                     
|---------------------------------------------------- |  | ------------------------------------
|Delaware                                             |  | 52-2095412                          
|(State of Incorporation)                             |  | (I.R.S. Employer Identification No.)
|                                                     | 
|6903 Rockledge Drive, Suite 1500, Bethesda, Maryland |  | 20817                               
|(Address of Principal Executive Offices)             |  | (Zip Code)                          

(240) 744-1000 (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.    x  Yes     ̈  No

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.    Large
Accelerated filer   ̈    Accelerated filer   ̈    Non-Accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).     ̈  Yes    x  No



|                                      |  |                                      
|------------------------------------- |  | -------------------------------------
|Class                                 |  | Units outstanding as of July 18, 2008
|Units of limited partnership interest |  | 543,939,392                          









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INDEX



|        |  |                                                                                                                             |  |         
|------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | --------
|        |  |                                                                                                                             |  | Page No.
|        |  | PART I. FINANCIAL INFORMATION                                                                                               |  |         
|        |  |                                                                                                                            
|Item 1. |  | Financial Statements:                                                                                                       |  |         
|        |  |                                                                                                                            
|        |  | Condensed Consolidated Balance Sheets-June 13, 2008 (unaudited) and December 31, 2007                                       |  | 3       
|        |  |                                                                                                                            
|        |  | Condensed Consolidated Statements of Operations (unaudited)-Quarter and Year-to-Date Ended June 
13, 2008 and June 15, 2007 |  | 4       
|        |  |                                                                                                                            
|        |  | Condensed Consolidated Statements of Cash Flows (unaudited)-Year-to-Date Ended June 13, 2008 and June 
15, 2007             |  | 5       
|        |  |                                                                                                                            
|        |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                            |  | 7       
|        |  |                                                                                                                            
|Item 2. |  | Managements Discussion and Analysis of Results of Operations and Financial Condition                                       |  | 18      
|        |  |                                                                                                                            
|Item 3. |  | Quantitative and Qualitative Disclosures about Market Risk                                                                  |  | 37      
|        |  |                                                                                                                            
|Item 4. |  | Controls and Procedures                                                                                                     |  | 37      
|        |  |                                                                                                                            
|        |  | PART II. OTHER INFORMATION                                                                                                  |  |         
|        |  |                                                                                                                            
|Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                 |  | 38      
|        |  |                                                                                                                            
|Item 6. |  | Exhibits                                                                                                                    |  | 38      



2



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CONDENSED CONSOLIDATED BALANCE SHEETS

June 13, 2008 and December 31, 2007

(in millions)



|                                                                                                                                                                                 |  |              |        |                  |   |       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ---------------- | - | ------
|                                                                                                                                                                                 |  | June 13,2008 |        | December 31,2007
|                                                                                                                                                                                 |  | (unaudited)  |        |                 
|ASSETS                                                                                                                                                                           |  |              |        |                  |   |       
|Property and equipment, net                                                                                                                                                      |  | $            | 10,718 |                  | $ | 10,588
|Due from managers                                                                                                                                                                |  |              | 134    |                  |   | 106   
|Investments in affiliates                                                                                                                                                        |  |              | 203    |                  |   | 194   
|Deferred financing costs, net                                                                                                                                                    |  |              | 54     |                  |   | 51    
|Furniture, fixtures and equipment replacement fund                                                                                                                               |  |              | 143    |                  |   | 122   
|Other                                                                                                                                                                            |  |              | 225    |                  |   | 196   
|Restricted cash                                                                                                                                                                  |  |              | 61     |                  |   | 65    
|Cash and cash equivalents                                                                                                                                                        |  |              | 505    |                  |   | 488   
|                                                                                                                                                                                 |  |              |        |                  |   |       
|Total assets                                                                                                                                                                     |  | $            | 12,043 |                  | $ | 11,810
|                                                                                                                                                                                 |  |              |        |                  |   |       
|LIABILITIES AND PARTNERS CAPITAL                                                                                                                                                |  |              |        |                  |   |       
|Debt                                                                                                                                                                             |  |              |        |                  |   |       
|Senior notes, including $1,090 million and $1,088 million, respectively, net of discount, of Exchangeable Senior
Debentures                                                      |  | $            | 4,116  |                  | $ | 4,114 
|Mortgage debt                                                                                                                                                                    |  |              | 1,499  |                  |   | 1,423 
|Credit facility, including the $210 million term loan                                                                                                                            |  |              | 210    |                  |   |      
|Other                                                                                                                                                                            |  |              | 87     |                  |   | 88    
|                                                                                                                                                                                 |  |              |        |                  |   |       
|Total debt                                                                                                                                                                       |  |              | 5,912  |                  |   | 5,625 
|Accounts payable and accrued expenses                                                                                                                                            |  |              | 84     |                  |   | 315   
|Other                                                                                                                                                                            |  |              | 215    |                  |   | 215   
|                                                                                                                                                                                 |  |              |        |                  |   |       
|Total liabilities                                                                                                                                                                |  |              | 6,211  |                  |   | 6,155 
|                                                                                                                                                                                 |  |              |        |                  |   |       
|Minority interest (redemption value of $92 million at June 13, 2008)                                                                                                             |  |              | 29     |                  |   | 28    
|Limited partnership interests of third parties at redemption value (representing 23.7 million units and 18.3 million units at
June 13, 2008 and December 31, 2007, respectively) |  |              | 369    |                  |   | 312   
|                                                                                                                                                                                 |  |             
|Partners capital                                                                                                                                                                |  |              |        |                  |   |       
|General partner                                                                                                                                                                  |  |              | 1      |                  |   | 1     
|Cumulative redeemable preferred limited partner                                                                                                                                  |  |              | 97     |                  |   | 97    
|Limited partner                                                                                                                                                                  |  |              | 5,287  |                  |   | 5,172 
|Accumulated other comprehensive income                                                                                                                                           |  |              | 49     |                  |   | 45    
|                                                                                                                                                                                 |  |              |        |                  |   |       
|Total partners capital                                                                                                                                                          |  |              | 5,434  |                  |   | 5,315 
|                                                                                                                                                                                 |  |              |        |                  |   |       
|Total liabilities and partners capital                                                                                                                                          |  | $            | 12,043 |                  | $ | 11,810
|                                                                                                                                                                                 |  |              |        |                  |   |       

See notes to condensed consolidated statements.



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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Quarter and Year-to-Date Ended June 13, 2008 and June 15, 2007

(unaudited, in millions, except per unit amounts)



|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|-------------------------------------- |  | ------------- | ----- | - | ------------------ | - | ----- | ------------ |  | - | ------------ | - |  | - | ----- | -
|                                       |  | Quarter ended |       |   | Year-to-date ended |  
|                                       |  | June 13,2008  |       |   | June 15,2007       |   |       | June 13,2008 |  |   | June 15,2007 |  
|REVENUES                               |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Rooms                                  |  | $             | 856   |   |                    | $ | 839   |              |  | $ | 1,480        |   |  | $ | 1,447 |  
|Food and beverage                      |  |               | 440   |   |                    |   | 427   |              |  |   | 774          |   |  |   | 748   |  
|Other                                  |  |               | 92    |   |                    |   | 90    |              |  |   | 162          |   |  |   | 159   |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Total hotel sales                      |  |               | 1,388 |   |                    |   | 1,356 |              |  |   | 2,416        |   |  |   | 2,354 |  
|Rental income                          |  |               | 27    |   |                    |   | 25    |              |  |   | 57           |   |  |   | 56    |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Total revenues                         |  |               | 1,415 |   |                    |   | 1,381 |              |  |   | 2,473        |   |  |   | 2,410 |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|EXPENSES                               |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Rooms                                  |  |               | 199   |   |                    |   | 193   |              |  |   | 356          |   |  |   | 343   |  
|Food and beverage                      |  |               | 301   |   |                    |   | 295   |              |  |   | 544          |   |  |   | 531   |  
|Hotel departmental expenses            |  |               | 325   |   |                    |   | 314   |              |  |   | 583          |   |  |   | 563   |  
|Management fees                        |  |               | 73    |   |                    |   | 71    |              |  |   | 125          |   |  |   | 116   |  
|Other property-level expenses          |  |               | 96    |   |                    |   | 94    |              |  |   | 177          |   |  |   | 175   |  
|Depreciation and amortization          |  |               | 131   |   |                    |   | 118   |              |  |   | 255          |   |  |   | 233   |  
|Corporate and other expenses           |  |               | 14    |   |                    |   | 15    |              |  |   | 31           |   |  |   | 37    |  
|Gain on insurance settlement           |  |               |      |   |                    |   |      |              |  |   | (7           | ) |  |   |      |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Total operating costs and expenses     |  |               | 1,139 |   |                    |   | 1,100 |              |  |   | 2,064        |   |  |   | 1,998 |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|OPERATING PROFIT                       |  |               | 276   |   |                    |   | 281   |              |  |   | 409          |   |  |   | 412   |  
|Interest income                        |  |               | 5     |   |                    |   | 12    |              |  |   | 9            |   |  |   | 18    |  
|Interest expense                       |  |               | (81   | ) |                    |   | (136  | )            |  |   | (157         | ) |  |   | (230  | )
|Net gains on property transactions     |  |               | 1     |   |                    |   | 1     |              |  |   | 2            |   |  |   | 2     |  
|Minority interest expense              |  |               | (1    | ) |                    |   |      |              |  |   | (8           | ) |  |   | (4    | )
|Equity in earnings of affiliates       |  |               | 2     |   |                    |   | 3     |              |  |   | 2            |   |  |   | 5     |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|INCOME BEFORE INCOME TAXES             |  |               | 202   |   |                    |   | 161   |              |  |   | 257          |   |  |   | 203   |  
|Provision for income taxes             |  |               | (14   | ) |                    |   | (11   | )            |  |   | (7           | ) |  |   | (5    | )
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|INCOME FROM CONTINUING OPERATIONS      |  |               | 188   |   |                    |   | 150   |              |  |   | 250          |   |  |   | 198   |  
|Income from discontinued operations    |  |               | 11    |   |                    |   | 4     |              |  |   | 12           |   |  |   | 150   |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|NET INCOME                             |  |               | 199   |   |                    |   | 154   |              |  |   | 262          |   |  |   | 348   |  
|Less: Distributions on preferred Units |  |               | (2    | ) |                    |   | (2    | )            |  |   | (4           | ) |  |   | (4    | )
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|NET INCOME AVAILABLE TO UNITHOLDERS    |  | $             | 197   |   |                    | $ | 152   |              |  | $ | 258          |   |  | $ | 344   |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Basic earnings per common unit:        |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Continuing operations                  |  | $             | .34   |   |                    | $ | .27   |              |  | $ | .45          |   |  | $ | .36   |  
|Discontinued operations                |  |               | .02   |   |                    |   | .01   |              |  |   | .02          |   |  |   | .28   |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Basic earnings per common unit         |  | $             | .36   |   |                    | $ | .28   |              |  | $ | .47          |   |  | $ | .64   |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Diluted earnings per common unit:      |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Continuing operations                  |  | $             | .33   |   |                    | $ | .26   |              |  | $ | .44          |   |  | $ | .36   |  
|Discontinued operations                |  |               | .02   |   |                    |   | .01   |              |  |   | .02          |   |  |   | .26   |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Diluted earnings per common unit       |  | $             | .35   |   |                    | $ | .27   |              |  | $ | .46          |   |  | $ | .62   |  
|                                       |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  

See notes to condensed consolidated statements.



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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year-to-Date Ended June 13, 2008 and June 15, 2007

(unaudited, in millions)



|                                                            |  |                    |      |   |               |   |       |  
|----------------------------------------------------------- |  | ------------------ | ---- | - | ------------- | - | ----- | -
|                                                            |  | Year-to-Date ended |     
|                                                            |  | June 13, 2008      |      |   | June 15, 2007 |  
|OPERATING ACTIVITIES                                        |  |                    |      |   |               |   |       |  
|Net income                                                  |  | $                  | 262  |   |               | $ | 348   |  
|Adjustments to reconcile to cash provided by operations:    |  |                    |      |   |               |   |       |  
|Discontinued operations:                                    |  |                    |      |   |               |   |       |  
|Gain on dispositions                                        |  |                    | (10  | ) |               |   | (139  | )
|Depreciation                                                |  |                    |     |   |               |   | 3     |  
|Depreciation and amortization                               |  |                    | 255  |   |               |   | 233   |  
|Amortization of deferred financing costs                    |  |                    | 5    |   |               |   | 6     |  
|Deferred income taxes                                       |  |                    | 3    |   |               |   | 2     |  
|Net gains on property transactions                          |  |                    | (2   | ) |               |   | (2    | )
|Equity in earnings of affiliates                            |  |                    | (2   | ) |               |   | (5    | )
|Distributions from investments in affiliates                |  |                    | 3    |   |               |   | 2     |  
|Minority interest expense                                   |  |                    | 8    |   |               |   | 4     |  
|Change in due from managers                                 |  |                    | (29  | ) |               |   | (73   | )
|Changes in other assets                                     |  |                    | (20  | ) |               |   | (19   | )
|Changes in other liabilities                                |  |                    | (32  | ) |               |   | (40   | )
|                                                            |  |                    |      |   |               |   |       |  
|Cash provided by operations                                 |  |                    | 441  |   |               |   | 320   |  
|                                                            |  |                    |      |   |               |   |       |  
|INVESTING ACTIVITIES                                        |  |                    |      |   |               |   |       |  
|Proceeds from sales of assets, net                          |  |                    | 23   |   |               |   | 330   |  
|Acquisitions                                                |  |                    |     |   |               |   | (15   | )
|Investments in affiliates                                   |  |                    | (5   | ) |               |   |      |  
|Capital expenditures:                                       |  |                    |      |   |               |   |       |  
|Renewals and replacements                                   |  |                    | (170 | ) |               |   | (104  | )
|Repositionings and other investments                        |  |                    | (140 | ) |               |   | (133  | )
|Change in furniture, fixtures and equipment (FF&E) reserves |  |                    | (21  | ) |               |   | (32   | )
|Change in restricted cash designated for FF&E reserves      |  |                    |     |   |               |   | 34    |  
|Other                                                       |  |                    | 13   |   |               |   | 17    |  
|                                                            |  |                    |      |   |               |   |       |  
|Cash provided by (used in) investing activities             |  |                    | (300 | ) |               |   | 97    |  
|                                                            |  |                    |      |   |               |   |       |  
|FINANCING ACTIVITIES                                        |  |                    |      |   |               |   |       |  
|Financing costs                                             |  |                    | (8   | ) |               |   | (8    | )
|Debt issuances                                              |  |                    | 510  |   |               |   | 1,025 |  
|Repayment of credit facility, net of draws                  |  |                    |     |   |               |   | (250  | )
|Debt prepayments                                            |  |                    | (211 | ) |               |   | (825  | )
|Scheduled principal repayments                              |  |                    | (9   | ) |               |   | (24   | )
|Common Unit repurchase                                      |  |                    | (72  | ) |               |   |      |  
|Distributions on common Units                               |  |                    | (326 | ) |               |   | (245  | )
|Distributions on preferred Units                            |  |                    | (4   | ) |               |   | (4    | )
|Distributions to minority interests                         |  |                    | (7   | ) |               |   | (5    | )
|Change in restricted cash                                   |  |                    | 3    |   |               |   | 52    |  
|                                                            |  |                    |      |   |               |   |       |  
|Cash used in financing activities                           |  |                    | (124 | ) |               |   | (284  | )
|                                                            |  |                    |      |   |               |   |       |  
|INCREASE IN CASH AND CASH EQUIVALENTS                       |  |                    | 17   |   |               |   | 133   |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD              |  |                    | 488  |   |               |   | 364   |  
|                                                            |  |                    |      |   |               |   |       |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                    |  | $                  | 505  |   |               | $ | 497   |  
|                                                            |  |                    |      |   |               |   |       |  

See notes to condensed consolidated statements.



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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year-to-Date Ended June 13, 2008 and June 15, 2007

(unaudited, in millions)

Supplemental disclosure of cash flow information:



|                  |  |                    |     |              |   |    
|----------------- |  | ------------------ | --- | ------------ | - | ---
|                  |  | Year-to-date ended
|                  |  | June 13,2008       |     | June 15,2007
|Interest paid     |  | $                  | 168 |              | $ | 187
|Income taxes paid |  |                    | 4   |              |   | 4  

Supplemental disclosure of noncash investing and financing activities:

In 2008 and 2007, minority partners converted operating partnership units, or, OP Units, valued at approximately $3 million and $9 million,
respectively, in exchange for approximately 0.2 million and 0.3 million shares, respectively, of Host Hotels & Resorts, Inc., or Host, common stock.

On March 12, 2008, we acquired the remaining limited partnership interests in Pacific Gateway Ltd., a subsidiary partnership of ours, which owns the San Diego Marriott Hotel and Marina, and other economic rights,
including the right to receive 1.7% of the hotels sales, in exchange for 5,575,540 OP Units. The OP Units were valued at $93 million based on the closing stock price of $16.68 on such date for Host Hotels & Resorts, Inc.

See notes to condensed consolidated statements.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|1. | Organization
|-- | ------------

Host
Hotels & Resorts, L.P. (Host LP), a Delaware limited partnership, operating through an umbrella partnership structure with Host Hotels & Resorts, Inc., or Host, as the sole general partner, is the owner of hotel properties. Host
operates as a self-managed and self-administered real estate investment trust, or REIT, with its operations conducted solely through us and our subsidiaries. As of June 13, 2008, Host held 96% of our operating partnership interests, or OP
Units.



|2. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles, or GAAP, in the accompanying unaudited condensed
consolidated financial statements. We believe the disclosures made are adequate to prevent the information presented from being misleading. However, the unaudited condensed consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in our Annual Report on Form 10K for the year ended December 31, 2007.

In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of June 13, 2008 and the results of our
operations for the quarterly and year-to-date periods ended June 13, 2008 and June 15, 2007 and cash flows for the year-to-date periods ended June 13, 2008 and June 15, 2007. Interim results are not necessarily
indicative of full year performance because of the impact of seasonal and short-term variations.

Certain prior year
financial statement amounts have been reclassified to conform to the current presentation.

Reporting Periods

The results we report are based on results of our hotels reported to us by our hotel managers. Our hotel managers use different reporting
periods. Marriott, the manager of the majority of our properties, uses a fiscal year ending on the Friday closest to December 31 and reports twelve weeks of operations for each of the first three quarters of the year and sixteen or seventeen
weeks for the fourth quarter of the year. In contrast, other managers of our hotels, such as Starwood and Hyatt, report results on a monthly basis. For results reported by hotel managers using a monthly reporting period (approximately 42% of our
hotels), the month of operation that ends after our fiscal quarter-end is included in our results of operations in the following fiscal quarter. Accordingly, our results of operations include results from hotel managers reporting results on a
monthly basis as follows: first quarter (January, February), second quarter (March to May), third quarter (June to August), and fourth quarter (September to December). We elected to adopt the reporting period used by Marriott modified so that our
fiscal year always ends on December 31. Accordingly, our first three quarters of operations end on the same day as Marriott but our fourth quarter ends on December 31.

Distributions from investments in affiliates

We classify the distributions from our equity investments in the statement of cash flows based upon an evaluation of the specific facts and circumstances of each distribution to determine its nature. For example,
distributions from cash generated by property operations are classified as cash flows from operating activities. However, distributions received as a result of property sales would be classified as cash flows from investing activities.

Application of New Accounting Standards

The FASB recently issued FASB staff position (FSP) APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)
(FSP 14-1). FSP 14-1 specifies that issuers of such instruments should separately account for the liability and equity



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



components in a manner that will reflect the entitys nonconvertible debt borrowing rate on the instruments issuance date when interest cost is
recognized. Our $600 million 25/8%
Exchangeable Senior Debentures (the 2007 Debentures) and our $500 million 3.25% Exchangeable Senior Debentures (the 2004 Debentures) are within the scope of FSP 14-1; therefore, we will be required to record the
debt components of the debentures at fair value as of the date of issuance and amortize the discount as an increase to interest expense over the expected life of the debt. The implementation of this standard will result in a decrease to net income
and earnings per common unit for all periods presented; however, there is no effect on our cash interest payments. FSP 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years and shall be applied retrospectively to all periods presented. Early adoption of FSP 14-1 is not permitted. We anticipate that as a result of the application of this standard, our annual diluted earnings per common unit
will decrease by approximately $.03 to $.04 per unit. Additionally, we anticipate that the application of this standard will decrease our debt balance as of December 31, 2008 by approximately $89 million, with a corresponding increase to
partners capital.



|3. | Earnings per Common Unit
|-- | ------------------------

Basic
earnings per common unit is computed by dividing net income available to common unitholders by the weighted average number of common OP Units outstanding. Diluted earnings per common unit is computed by dividing net income available to common
unitholders as adjusted for potentially dilutive securities, by the weighted average number of common OP Units outstanding plus potentially dilutive securities. Dilutive securities may include units distributed to Host for Host common shares granted
under comprehensive stock plans, preferred OP Units held by minority partners, exchangeable debt securities and other minority interests that have the option to convert their interests to common OP Units. No effect is shown for securities that are
anti-dilutive.



|                                                                                                                                                         |  |                                        |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | --- | - | ------------- | ----- | -------------- | - | ---- | ------ |  | - | ----- | - | -------------- | ----- |  | - | ---- | -
|                                                                                                                                                         |  | Quarter ended                          |    
|                                                                                                                                                         |  | June 13, 2008                          |     |   | June 15, 2007 |      
|                                                                                                                                                         |  | (in millions, except per unit amounts) |    
|                                                                                                                                                         |  | Income                                 |     |   | Units         |       | Per UnitAmount |   |      | Income |  |   | Units |   | Per UnitAmount |      
|Net income                                                                                                                                               |  | $                                      | 199 |   |               | 544.3 |                | $ | .36  |        |  | $ | 154   |   |                | 540.6 |  | $ | .28  |  
|Distributions on preferred units                                                                                                                         |  |                                        | (2  | ) |               |      |                |   |     |        |  |   | (2    | ) |                |      |  |   |     |  
|                                                                                                                                                         |  |                                        |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|Basic earnings available to common unitholders                                                                                                           |  |                                        | 197 |   |               | 544.3 |                |   | .36  |        |  |   | 152   |   |                | 540.6 |  |   | .28  |  
|Assuming distribution of units to Host for Host shares granted under its comprehensive stock plan, less shares assumed purchased at average
market price |  |                                        |    |   |               | .3    |                |   |     |        |  |   |      |   |                | .7    |  |   |     |  
|Assuming conversion of minority OP Units issuable                                                                                                        |  |                                        |    |   |               |      |                |   |     |        |  |   |      |   |                | 1.2   |  |   |     |  
|Assuming conversion of 2004 Exchangeable Senior Debentures to common unitholders                                                                         |  |                                        | 4   |   |               | 30.9  |                |   | (.01 | )      |  |   | 4     |   |                | 29.0  |  |   | (.01 | )
|                                                                                                                                                         |  |                                        |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|Diluted earnings available to common unitholders                                                                                                         |  | $                                      | 201 |   |               | 575.5 |                | $ | .35  |        |  | $ | 156   |   |                | 571.5 |  | $ | .27  |  
|                                                                                                                                                         |  |                                        |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  



8



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|                                                                                                                                                         |  |                                        |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | --- | - | ------------- | ----- | -------------- | - | ---- | ------ |  | - | ----- | - | -------------- | ----- |  | - | ---- | -
|                                                                                                                                                         |  | Year-to-Date ended                     |    
|                                                                                                                                                         |  | June 13, 2008                          |     |   | June 15, 2007 |      
|                                                                                                                                                         |  | (in millions, except per unit amounts) |    
|                                                                                                                                                         |  | Income                                 |     |   | Units         |       | Per UnitAmount |   |      | Income |  |   | Units |   | Per UnitAmount |      
|Net income                                                                                                                                               |  | $                                      | 262 |   |               | 543.0 |                | $ | .48  |        |  | $ | 348   |   |                | 540.4 |  | $ | .65  |  
|Distributions on preferred units                                                                                                                         |  |                                        | (4  | ) |               |      |                |   | (.01 | )      |  |   | (4    | ) |                |      |  |   | (.01 | )
|                                                                                                                                                         |  |                                        |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|Basic earnings available to common unitholders                                                                                                           |  |                                        | 258 |   |               | 543.0 |                |   | .47  |        |  |   | 344   |   |                | 540.4 |  |   | .64  |  
|Assuming distribution of Units to Host for Host shares granted under its comprehensive stock plan, less shares assumed purchased at average
market price |  |                                        |    |   |               | .3    |                |   |     |        |  |   |      |   |                | .8    |  |   |     |  
|Assuming conversion of minority OP units issuable                                                                                                        |  |                                        |    |   |               |      |                |   |     |        |  |   |      |   |                | 1.2   |  |   |     |  
|Assuming conversion of 2004 Exchangeable Senior Debentures                                                                                               |  |                                        | 9   |   |               | 30.9  |                |   | (.01 | )      |  |   | 9     |   |                | 29.0  |  |   | (.02 | )
|                                                                                                                                                         |  |                                        |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|Diluted earnings available to common unitholders                                                                                                         |  | $                                      | 267 |   |               | 574.2 |                | $ | .46  |        |  | $ | 353   |   |                | 571.4 |  | $ | .62  |  
|                                                                                                                                                         |  |                                        |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  



|4. | Property and Equipment
|-- | ----------------------

Property
and equipment consists of the following as of:



|                                               |  |               |        |   |                  |   |        |  
|---------------------------------------------- |  | ------------- | ------ | - | ---------------- | - | ------ | -
|                                               |  | June 13,2008  |        |   | December 31,2007 |  
|                                               |  | (in millions) |       
|Land and land improvements                     |  | $             | 1,619  |   |                  | $ | 1,621  |  
|Buildings and leasehold improvements           |  |               | 11,185 |   |                  |   | 10,907 |  
|Furniture and equipment                        |  |               | 1,613  |   |                  |   | 1,530  |  
|Construction in progress                       |  |               | 253    |   |                  |   | 230    |  
|                                               |  |               |        |   |                  |   |        |  
|                                               |  |               | 14,670 |   |                  |   | 14,288 |  
|Less accumulated depreciation and amortization |  |               | (3,952 | ) |                  |   | (3,700 | )
|                                               |  |               |        |   |                  |   |        |  
|                                               |  | $             | 10,718 |   |                  | $ | 10,588 |  
|                                               |  |               |        |   |                  |   |        |  



|5. | Debt
|-- | ----

Credit Facility Term
Loan. During the second quarter of 2008, we entered into a $210 million term loan, which was an expansion of our existing $600 million credit facility. The term loan was completed in two phases, with $165 million closing in April 2008 and
an additional $45 million, with the same terms, closing in May 2008. The term loan has a maturity date of September 9, 2011, which we can extend for one year, subject certain conditions. The term loan is prepayable without penalty after
October 22, 2009 and may be prepaid prior to that date for a fee. The term loan bears interest at LIBOR plus 175 basis points (4.18% at June 13, 2008), with a LIBOR floor of 2.25%. The proceeds from the term loan were used to repay
the $100 million then outstanding balance under the credit facility and for general corporate purposes. Currently, we have $600 million available under the credit facility.

The term loan is subject to the same covenants and restrictions as the credit facility. It is also guaranteed by certain of our existing
subsidiaries and is secured by pledges of equity interests in many of our subsidiaries. The guarantees and pledges ratably benefit the term loan and the credit facility, as well as notes outstanding under our senior notes indenture and certain other
indebtedness.



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(Unaudited)



Mortgage Debt.On June 12, 2008, we refinanced the $208 million,
7.48% mortgage on the Orlando World Center Marriott with a non-amortizing $300 million mortgage that bears interest at a rate of LIBOR plus 350 basis points (5.96% at June 13, 2008) and has a maturity date of July 1, 2011, which we
have the option to extend for two, one-year periods upon the satisfaction of certain conditions. Interest is payable monthly. Excess proceeds from the refinancing were used for general corporate purposes.



|6. | Partners Capital
|-- | -----------------

Distributions.On June 16, 2008, Hosts Board of Directors declared a cash dividend of $0.20 per share on its common stock. The dividend was paid on July 15, 2008 to stockholders of record as of June 30,
2008. Accordingly, we made a similar distribution on our common OP Units.

On June 16, 2008, Hosts Board of
Directors declared a cash dividend of $0.5546875 per share on its Class E cumulative redeemable preferred stock. The dividend was paid on July 15, 2008 to preferred stockholders of record as of June 30, 2008. Accordingly, we made a similar
distribution on our Class E cumulative preferred OP Units.

Stock Repurchase.Hosts Board of Directors
authorized a program to repurchase up to $500 million of Hosts common stock and equity related securities. These securities may be purchased in the open market or through private transactions, dependent upon market conditions. We will
redeem an equivalent number of common OP Units from Host for each common share repurchased. The plan does not obligate Host to repurchase any specific number of shares and may be suspended at any time at managements discretion. As of
June 13, 2008, Host has repurchased 4.35 million shares valued at approximately $72 million of which 2.2 million shares valued at approximately $37 million were purchased in the second quarter. The shares repurchased
constitute authorized but unissued shares.



|7. | Geographic Information
|-- | ----------------------

We consider
each one of our hotels to be an operating segment, none of which meets the threshold for a reportable segment. We also allocate resources and assess operating performance based on individual hotels. Our hotels meet the aggregation criteria for
financial reporting and, accordingly, we report one business segment, hotel ownership. Our foreign operations consist of four properties located in Canada, two properties located in Chile and one property located in Mexico. There were no
intercompany sales between our domestic properties and our foreign properties. The following table presents revenues for each of the geographical areas in which we operate:



|              |  |               |       |                    |   |               |  |              |       |  |   |      
|------------- |  | ------------- | ----- | ------------------ | - | ------------- |  | ------------ | ----- |  | - | -----
|              |  | Quarter ended |       | Year-to-Date ended
|              |  | June 13,2008  |       | June 15,2007       |   | June 13,2008  |  | June 15,2007
|              |  |               |       |                    |   | (in millions) |  |             
|United States |  | $             | 1,365 |                    | $ | 1,339         |  | $            | 2,389 |  | $ | 2,340
|Canada        |  |               | 33    |                    |   | 28            |  |              | 58    |  |   | 49   
|Chile         |  |               | 9     |                    |   | 7             |  |              | 14    |  |   | 10   
|Mexico        |  |               | 8     |                    |   | 7             |  |              | 12    |  |   | 11   
|              |  |               |       |                    |   |               |  |              |       |  |   |      
|Total revenue |  | $             | 1,415 |                    | $ | 1,381         |  | $            | 2,473 |  | $ | 2,410
|              |  |               |       |                    |   |               |  |              |       |  |   |      



|8. | Comprehensive Income
|-- | --------------------

Other
comprehensive income consists of unrealized gains and losses on foreign currency translation adjustments and hedging instruments. During 2008, we have entered into three foreign currency forward



10



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



purchase contracts totaling 60 million (approximately $88 million) to hedge a portion of the foreign currency exposure resulting from the
eventual repatriation of our net investment in the joint venture in Europe. The following table summarizes our three foreign currency forward purchase contracts (in millions):



|                 |  |                            |    |                              |   |                      |  |              
|---------------- |  | -------------------------- | -- | ---------------------------- | - | -------------------- |  | -------------
|Transaction Date |  | TransactionAmount in Euros |    | TransactionAmount in Dollars |   | Forward PurchaseDate
|February 2008    |  |                           | 30 |                              | $ | 43                   |  | August 2011  
|February 2008    |  |                            | 15 |                              |   | 22                   |  | February 2013
|May 2008         |  |                            | 15 |                              |   | 23                   |  | May 2014     

These derivatives are considered a hedge of the foreign currency exposure of a net
investment in a foreign operation, and, in accordance with SFAS 133, are marked-to-market with changes in fair value recorded to accumulated other comprehensive income within the partners capital portion of our condensed consolidated
balance sheet. Year-to-date, we have recorded a decline in the fair value of the derivative instruments totaling approximately $(1) million, which is equal to the fair value as of June 13, 2008 included in accumulated other comprehensive
income. The following table presents comprehensive income for all periods presented:



|                                  |  |               |     |                    |              |   |               |  |              |     |  |   |    
|--------------------------------- |  | ------------- | --- | ------------------ | ------------ | - | ------------- |  | ------------ | --- |  | - | ---
|                                  |  | Quarter ended |     | Year-to-Date ended
|                                  |  | June 13,2008  |     |                    | June 15,2007 |   | June 13,2008  |  | June 15,2007
|                                  |  |               |     |                    |              |   | (in millions) |  |             
|Net income                        |  | $             | 199 |                    |              | $ | 154           |  | $            | 262 |  | $ | 348
|Other comprehensive income (loss) |  |               | (13 | )                  |              |   | 4             |  |              | 4   |  |   | 4  
|                                  |  |               |     |                    |              |   |               |  |              |     |  |   |    
|Comprehensive income              |  | $             | 186 |                    |              | $ | 158           |  | $            | 266 |  | $ | 352
|                                  |  |               |     |                    |              |   |               |  |              |     |  |   |    



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(Unaudited)



|9. | Dispositions
|-- | ------------

Assets held for
sale.During the first quarter, we executed an agreement with the County of Sacramento, California related to the expansion of the airport, which will result in the disposition of the Host Airport Hotel, Sacramento by August 2008 in exchange for
$15 million. We deferred the recognition of any potential gain on the transaction pending final disposition. We reclassified the assets and liabilities related to this hotel as held for sale as of June 13, 2008. The following table
summarizes the property and equipment, other assets and other liabilities for the Host Airport Hotel Sacramento as of June 13, 2008, which are included in other assets in our condensed consolidated balance sheet as of June 13, 2008 (in
millions):



|                            |  |   |  
|--------------------------- |  | - | -
|Property and equipment, net |  | $ | 1
|Other assets                |  |   | 1
|                            |  |   |  
|Total assets                |  | $ | 2
|                            |  |   |  
|Other liabilities           |  |   | 
|                            |  |   |  
|Total liabilities           |  | $ | 
|                            |  |   |  

Dispositions.For year-to-date 2008, we sold the Sheraton Tampa Suites for a
total sales price of approximately $24 million and recorded a gain on sale of approximately $10 million. The following table summarizes the revenues, income before taxes, and the gain on dispositions, net of tax, of the hotels which have
been reclassified to discontinued operations, which includes assets held for sale and the results of sold hotels prior to their disposition, in the consolidated statements of operations for the periods presented:



|                                        |  |               |    |              |                    |    |              |  |              |    |  |   |    
|--------------------------------------- |  | ------------- | -- | ------------ | ------------------ | -- | ------------ |  | ------------ | -- |  | - | ---
|                                        |  | Quarter ended |    |              | Year-to-Date ended
|                                        |  | June 13,2008  |    | June 15,2007 |                    |    | June 13,2008 |  | June 15,2007
|                                        |  | (in millions)
|Revenues                                |  | $             | 3  |              | $                  | 10 |              |  | $            | 6  |  | $ | 32 
|Income before income taxes              |  |               | 1  |              |                    | 6  |              |  |              | 2  |  |   | 12 
|Gain (loss) on dispositions, net of tax |  |               | 10 |              |                    | (2 | )            |  |              | 10 |  |   | 139



|10. | Supplemental Guarantor and Non-Guarantor Subsidiary Information
|--- | ---------------------------------------------------------------

Generally, all of our subsidiaries guarantee our senior notes except those owning 27 of the full-service hotels, our taxable REIT subsidiaries and HMH HPT RIBM LLC and HMH HPT CBM LLC, the lessees of the Residence Inn
and Courtyard properties, respectively. The separate financial statements of each guaranteeing subsidiary (each, a Guarantor Subsidiary) are not presented because we have concluded that such financial statements are not material to
investors. The guarantee of each Guarantor Subsidiary is full and unconditional and joint and several and each Guarantor Subsidiary is wholly owned.

The following condensed consolidating information sets forth the financial position as of June 13, 2008 and December 31, 2007, results of operations for the quarter and year-to-date periods ended
June 13, 2008 and June 15, 2007 and cash flows for the year-to-date periods ended June 13, 2008 and June 15, 2007 of the parent, Guarantor Subsidiaries and the Non-Guarantor Subsidiaries:



12



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(Unaudited)



Supplemental Condensed Consolidating Balance Sheets

(in millions)

June 13, 2008



|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|------------------------------------------------------------- |  | ------ | ----- | - | --------------------- | - | ------------------------- |  | ------------ | ----- |  | ------------ | ------ | - |  | - | ------
|                                                              |  | Parent |       |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | Eliminations |       |  | Consolidated
|Property and equipment, net                                   |  | $      | 847   |   |                       | $ | 4,259                     |  | $            | 5,612 |  | $            |       |   |  | $ | 10,718
|Due from managers                                             |  |        | (5    | ) |                       |   | 6                         |  |              | 133   |  |              |       |   |  |   | 134   
|Investments in affiliates                                     |  |        | 6,071 |   |                       |   | 1,958                     |  |              | 35    |  |              | (7,861 | ) |  |   | 203   
|Rent receivable                                               |  |        |      |   |                       |   | 45                        |  |              |      |  |              | (45    | ) |  |   |      
|Deferred financing costs, net                                 |  |        | 45    |   |                       |   | 1                         |  |              | 8     |  |              |       |   |  |   | 54    
|Furniture, fixtures and equipment replacement fund            |  |        | 37    |   |                       |   | 25                        |  |              | 81    |  |              |       |   |  |   | 143   
|Other                                                         |  |        | 643   |   |                       |   | 30                        |  |              | 319   |  |              | (767   | ) |  |   | 225   
|Restricted cash                                               |  |        |      |   |                       |   |                          |  |              | 61    |  |              |       |   |  |   | 61    
|Cash and cash equivalents                                     |  |        | 319   |   |                       |   | 13                        |  |              | 173   |  |              |       |   |  |   | 505   
|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total assets                                                  |  | $      | 7,957 |   |                       | $ | 6,337                     |  | $            | 6,422 |  | $            | (8,673 | ) |  | $ | 12,043
|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Debt                                                          |  | $      | 2,039 |   |                       | $ | 2,562                     |  | $            | 1,639 |  | $            | (328   | ) |  | $ | 5,912 
|Rent payable                                                  |  |        |      |   |                       |   |                          |  |              | 45    |  |              | (45    | ) |  |   |      
|Other liabilities                                             |  |        | 115   |   |                       |   | 283                       |  |              | 340   |  |              | (439   | ) |  |   | 299   
|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total liabilities                                             |  |        | 2,154 |   |                       |   | 2,845                     |  |              | 2,024 |  |              | (812   | ) |  |   | 6,211 
|Minority interests                                            |  |        |      |   |                       |   |                          |  |              | 29    |  |              |       |   |  |   | 29    
|Limited partner interest of third parties at redemption value |  |        | 369   |   |                       |   |                          |  |              |      |  |              |       |   |  |   | 369   
|Partners capital                                             |  |        | 5,434 |   |                       |   | 3,492                     |  |              | 4,369 |  |              | (7,861 | ) |  |   | 5,434 
|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total liabilities and partners capital                       |  | $      | 7,957 |   |                       | $ | 6,337                     |  | $            | 6,422 |  | $            | (8,673 | ) |  | $ | 12,043
|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       

December 31, 2007



|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|------------------------------------------------------------- |  | ------ | ----- | - | --------------------- | - | ------------------------- |  | ------------ | ----- |  | ------------ | ------ | - |  | - | ------
|                                                              |  | Parent |       |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | Eliminations |       |  | Consolidated
|Property and equipment, net                                   |  | $      | 884   |   |                       | $ | 4,376                     |  | $            | 5,328 |  | $            |       |   |  | $ | 10,588
|Due from managers                                             |  |        | (22   | ) |                       |   | 12                        |  |              | 116   |  |              |       |   |  |   | 106   
|Investments in affiliates                                     |  |        | 6,210 |   |                       |   | 1,984                     |  |              | 36    |  |              | (8,036 | ) |  |   | 194   
|Rent receivable                                               |  |        |      |   |                       |   | 33                        |  |              |      |  |              | (33    | ) |  |   |      
|Deferred financing costs, net                                 |  |        | 44    |   |                       |   | 2                         |  |              | 5     |  |              |       |   |  |   | 51    
|Furniture, fixtures and equipment replacement fund            |  |        | 37    |   |                       |   | 25                        |  |              | 60    |  |              |       |   |  |   | 122   
|Other                                                         |  |        | 369   |   |                       |   | 28                        |  |              | 267   |  |              | (468   | ) |  |   | 196   
|Restricted cash                                               |  |        |      |   |                       |   |                          |  |              | 65    |  |              |       |   |  |   | 65    
|Cash and cash equivalents                                     |  |        | 296   |   |                       |   | 18                        |  |              | 174   |  |              |       |   |  |   | 488   
|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total assets                                                  |  | $      | 7,818 |   |                       | $ | 6,478                     |  | $            | 6,051 |  | $            | (8,537 | ) |  | $ | 11,810
|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Debt                                                          |  | $      | 1,824 |   |                       | $ | 2,559                     |  | $            | 1,526 |  | $            | (284   | ) |  | $ | 5,625 
|Rent payable                                                  |  |        |      |   |                       |   |                          |  |              | 33    |  |              | (33    | ) |  |   |      
|Other liabilities                                             |  |        | 367   |   |                       |   | 190                       |  |              | 157   |  |              | (184   | ) |  |   | 530   
|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total liabilities                                             |  |        | 2,191 |   |                       |   | 2,749                     |  |              | 1,716 |  |              | (501   | ) |  |   | 6,155 
|Minority interests                                            |  |        |      |   |                       |   |                          |  |              | 28    |  |              |       |   |  |   | 28    
|Limited partner interest of third parties at redemption value |  |        | 312   |   |                       |   |                          |  |              |      |  |              |       |   |  |   | 312   
|Partners capital                                             |  |        | 5,315 |   |                       |   | 3,729                     |  |              | 4,307 |  |              | (8,036 | ) |  |   | 5,315 
|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total liabilities and partners capital                       |  | $      | 7,818 |   |                       | $ | 6,478                     |  | $            | 6,051 |  | $            | (8,537 | ) |  | $ | 11,810
|                                                              |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       



13



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(Unaudited)



Supplemental Condensed Consolidating Statements of Operations

(in millions)

Quarter ended
June 13, 2008



|                                          |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|----------------------------------------- |  | ------ | --- | - | --------------------- | - | --- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ----- | -
|                                          |  | Parent |     |   | GuarantorSubsidiaries |   |     | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                  |  | $      | 203 |   |                       | $ | 116 |                           |  | $ | 1,395        |   |  | $            | (299 | ) |  | $ | 1,415 |  
|Hotel operating expenses                  |  |        |    |   |                       |   |    |                           |  |   | (898         | ) |  |              |     |   |  |   | (898  | )
|Property-level expenses                   |  |        | (7  | ) |                       |   | (33 | )                         |  |   | (56          | ) |  |              |     |   |  |   | (96   | )
|Depreciation and amortization             |  |        | (15 | ) |                       |   | (54 | )                         |  |   | (62          | ) |  |              |     |   |  |   | (131  | )
|Corporate and other expenses              |  |        | (6  | ) |                       |   | (5  | )                         |  |   | (3           | ) |  |              |     |   |  |   | (14   | )
|Rental expense                            |  |        |    |   |                       |   |    |                           |  |   | (299         | ) |  |              | 299  |   |  |   |      |  
|Interest income                           |  |        | 5   |   |                       |   | 2   |                           |  |   | 5            |   |  |              | (7   | ) |  |   | 5     |  
|Interest expense                          |  |        | (48 | ) |                       |   | (16 | )                         |  |   | (24          | ) |  |              | 7    |   |  |   | (81   | )
|Net gains on property transactions        |  |        |    |   |                       |   |    |                           |  |   | 1            |   |  |              |     |   |  |   | 1     |  
|Minority interest expense                 |  |        |    |   |                       |   |    |                           |  |   | (1           | ) |  |              |     |   |  |   | (1    | )
|Equity in earnings (losses) of affiliates |  |        | 68  |   |                       |   | 21  |                           |  |   | 1            |   |  |              | (88  | ) |  |   | 2     |  
|                                          |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Income (loss) before income taxes         |  |        | 200 |   |                       |   | 31  |                           |  |   | 59           |   |  |              | (88  | ) |  |   | 202   |  
|Provision for income taxes                |  |        | (1  | ) |                       |   |    |                           |  |   | (13          | ) |  |              |     |   |  |   | (14   | )
|                                          |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS  |  |        | 199 |   |                       |   | 31  |                           |  |   | 46           |   |  |              | (88  | ) |  |   | 188   |  
|Income from discontinued operations       |  |        |    |   |                       |   | 11  |                           |  |   |             |   |  |              |     |   |  |   | 11    |  
|                                          |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|NET INCOME (LOSS)                         |  | $      | 199 |   |                       | $ | 42  |                           |  | $ | 46           |   |  | $            | (88  | ) |  | $ | 199   |  
|                                          |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  

Quarter ended June 15, 2007



|                                           |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|------------------------------------------ |  | ------ | --- | - | --------------------- | - | --- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ----- | -
|                                           |  | Parent |     |   | GuarantorSubsidiaries |   |     | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                   |  | $      | 221 |   |                       | $ | 106 |                           |  | $ | 1,363        |   |  | $            | (309 | ) |  | $ | 1,381 |  
|Hotel operating expenses                   |  |        |    |   |                       |   |    |                           |  |   | (873         | ) |  |              |     |   |  |   | (873  | )
|Property-level expenses                    |  |        | (7  | ) |                       |   | (30 | )                         |  |   | (57          | ) |  |              |     |   |  |   | (94   | )
|Depreciation and amortization              |  |        | (14 | ) |                       |   | (51 | )                         |  |   | (53          | ) |  |              |     |   |  |   | (118  | )
|Corporate and other expenses               |  |        | (5  | ) |                       |   | (6  | )                         |  |   | (4           | ) |  |              |     |   |  |   | (15   | )
|Rental expense                             |  |        |    |   |                       |   |    |                           |  |   | (309         | ) |  |              | 309  |   |  |   |      |  
|Interest income                            |  |        | 12  |   |                       |   | 3   |                           |  |   | 5            |   |  |              | (8   | ) |  |   | 12    |  
|Interest expense                           |  |        | (48 | ) |                       |   | (27 | )                         |  |   | (69          | ) |  |              | 8    |   |  |   | (136  | )
|Net gains on property transactions         |  |        |    |   |                       |   |    |                           |  |   | 1            |   |  |              |     |   |  |   | 1     |  
|Equity in earnings (losses) of affiliates  |  |        | (8  | ) |                       |   | (20 | )                         |  |   | 1            |   |  |              | 30   |   |  |   | 3     |  
|                                           |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Income (loss) before income taxes          |  |        | 151 |   |                       |   | (25 | )                         |  |   | 5            |   |  |              | 30   |   |  |   | 161   |  
|Provision for income taxes                 |  |        | (2  | ) |                       |   |    |                           |  |   | (9           | ) |  |              |     |   |  |   | (11   | )
|                                           |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS   |  |        | 149 |   |                       |   | (25 | )                         |  |   | (4           | ) |  |              | 30   |   |  |   | 150   |  
|Income (loss) from discontinued operations |  |        | 5   |   |                       |   | (1  | )                         |  |   |             |   |  |              |     |   |  |   | 4     |  
|                                           |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|NET INCOME (LOSS)                          |  | $      | 154 |   |                       | $ | (26 | )                         |  | $ | (4           | ) |  | $            | 30   |   |  | $ | 154   |  
|                                           |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  



14



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Supplemental Condensed Consolidating Statements of Operations

(in millions)

Year-to-date ended
June 13, 2008



|                                          |  |        |     |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|----------------------------------------- |  | ------ | --- | - | --------------------- | - | ---- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ------ | -
|                                          |  | Parent |     |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                  |  | $      | 335 |   |                       | $ | 212  |                           |  | $ | 2,436        |   |  | $            | (510 | ) |  | $ | 2,473  |  
|Hotel operating expenses                  |  |        |    |   |                       |   |     |                           |  |   | (1,608       | ) |  |              |     |   |  |   | (1,608 | )
|Property-level expenses                   |  |        | (11 | ) |                       |   | (61  | )                         |  |   | (105         | ) |  |              |     |   |  |   | (177   | )
|Depreciation and amortization             |  |        | (29 | ) |                       |   | (105 | )                         |  |   | (121         | ) |  |              |     |   |  |   | (255   | )
|Corporate and other expenses              |  |        | (3  | ) |                       |   | (12  | )                         |  |   | (16          | ) |  |              |     |   |  |   | (31    | )
|Gain on insurance settlement              |  |        |    |   |                       |   |     |                           |  |   | 7            |   |  |              |     |   |  |   | 7      |  
|Rental expense                            |  |        |    |   |                       |   |     |                           |  |   | (510         | ) |  |              | 510  |   |  |   |       |  
|Interest income                           |  |        | 8   |   |                       |   | 5    |                           |  |   | 10           |   |  |              | (14  | ) |  |   | 9      |  
|Interest expense                          |  |        | (82 | ) |                       |   | (43  | )                         |  |   | (46          | ) |  |              | 14   |   |  |   | (157   | )
|Net gains on property transactions        |  |        |    |   |                       |   |     |                           |  |   | 2            |   |  |              |     |   |  |   | 2      |  
|Minority interest expense                 |  |        |    |   |                       |   |     |                           |  |   | (8           | ) |  |              |     |   |  |   | (8     | )
|Equity in earnings (losses) of affiliates |  |        | 44  |   |                       |   | 24   |                           |  |   | 2            |   |  |              | (68  | ) |  |   | 2      |  
|                                          |  |        |     |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|Income (loss) before income taxes         |  |        | 262 |   |                       |   | 20   |                           |  |   | 43           |   |  |              | (68  | ) |  |   | 257    |  
|Provision for income taxes                |  |        | (1  | ) |                       |   |     |                           |  |   | (6           | ) |  |              |     |   |  |   | (7     | )
|                                          |  |        |     |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS  |  |        | 261 |   |                       |   | 20   |                           |  |   | 37           |   |  |              | (68  | ) |  |   | 250    |  
|Income from discontinued operations       |  |        | 1   |   |                       |   | 11   |                           |  |   |             |   |  |              |     |   |  |   | 12     |  
|                                          |  |        |     |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|NET INCOME (LOSS)                         |  | $      | 262 |   |                       | $ | 31   |                           |  | $ | 37           |   |  | $            | (68  | ) |  | $ | 262    |  
|                                          |  |        |     |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  

Year-to-date ended June 15, 2007



|                                          |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |        |  
|----------------------------------------- |  | ------ | --- | - | --------------------- | - | --- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ------ | -
|                                          |  | Parent |     |   | GuarantorSubsidiaries |   |     | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                  |  | $      | 357 |   |                       | $ | 192 |                           |  | $ | 2,374        |   |  | $            | (513 | ) |  | $ | 2,410  |  
|Hotel operating expenses                  |  |        |    |   |                       |   |    |                           |  |   | (1,553       | ) |  |              |     |   |  |   | (1,553 | )
|Property-level expenses                   |  |        | (11 | ) |                       |   | (57 | )                         |  |   | (107         | ) |  |              |     |   |  |   | (175   | )
|Depreciation and amortization             |  |        | (28 | ) |                       |   | (99 | )                         |  |   | (106         | ) |  |              |     |   |  |   | (233   | )
|Corporate and other expenses              |  |        | (4  | ) |                       |   | (15 | )                         |  |   | (18          | ) |  |              |     |   |  |   | (37    | )
|Rental expense                            |  |        |    |   |                       |   |    |                           |  |   | (513         | ) |  |              | 513  |   |  |   |       |  
|Interest income                           |  |        | 18  |   |                       |   | 6   |                           |  |   | 8            |   |  |              | (14  | ) |  |   | 18     |  
|Interest expense                          |  |        | (82 | ) |                       |   | (59 | )                         |  |   | (103         | ) |  |              | 14   |   |  |   | (230   | )
|Net gains on property transactions        |  |        |    |   |                       |   |    |                           |  |   | 2            |   |  |              |     |   |  |   | 2      |  
|Minority interest expense                 |  |        |    |   |                       |   |    |                           |  |   | (4           | ) |  |              |     |   |  |   | (4     | )
|Equity in earnings (losses) of affiliates |  |        | 55  |   |                       |   | (31 | )                         |  |   | 2            |   |  |              | (21  | ) |  |   | 5      |  
|                                          |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |        |  
|Income (loss) before income taxes         |  |        | 305 |   |                       |   | (63 | )                         |  |   | (18          | ) |  |              | (21  | ) |  |   | 203    |  
|Provision for income taxes                |  |        | (1  | ) |                       |   |    |                           |  |   | (4           | ) |  |              |     |   |  |   | (5     | )
|                                          |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |        |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS  |  |        | 304 |   |                       |   | (63 | )                         |  |   | (22          | ) |  |              | (21  | ) |  |   | 198    |  
|Income from discontinued operations       |  |        | 44  |   |                       |   | 104 |                           |  |   | 2            |   |  |              |     |   |  |   | 150    |  
|                                          |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |        |  
|NET INCOME (LOSS)                         |  | $      | 348 |   |                       | $ | 41  |                           |  | $ | (20          | ) |  | $            | (21  | ) |  | $ | 348    |  
|                                          |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |        |  



15



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Supplemental Condensed Consolidating Statements of Cash Flows

(in millions)

Year-to-Date ended
June 13, 2008



|                                                             |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|------------------------------------------------------------ |  | ------ | ---- | - | --------------------- | - | ---- | ------------------------- |  | - | ------------ | - |  | - | ---- | -
|                                                             |  | Parent |      |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiaries |  |   | Consolidated |  
|OPERATING ACTIVITIES                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Cash provided by operations                                  |  | $      | 226  |   |                       | $ | 87   |                           |  | $ | 128          |   |  | $ | 441  |  
|                                                             |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|INVESTING ACTIVITIES                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Proceeds from sales of assets, net                           |  |        |     |   |                       |   | 23   |                           |  |   |             |   |  |   | 23   |  
|Investment in affiliates                                     |  |        | (5   | ) |                       |   |     |                           |  |   |             |   |  |   | (5   | )
|Capital expenditures                                         |  |        | (25  | ) |                       |   | (123 | )                         |  |   | (162         | ) |  |   | (310 | )
|Change in furniture, fixtures and equipment replacement fund |  |        | (2   | ) |                       |   | 1    |                           |  |   | (20          | ) |  |   | (21  | )
|Other                                                        |  |        | 13   |   |                       |   |     |                           |  |   |             |   |  |   | 13   |  
|                                                             |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Cash used in investing activities                            |  |        | (19  | ) |                       |   | (99  | )                         |  |   | (182         | ) |  |   | (300 | )
|                                                             |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|FINANCING ACTIVITIES                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Financing costs                                              |  |        | (3   | ) |                       |   |     |                           |  |   | (5           | ) |  |   | (8   | )
|Issuances of debt                                            |  |        | 210  |   |                       |   |     |                           |  |   | 300          |   |  |   | 510  |  
|Debt prepayments                                             |  |        |     |   |                       |   |     |                           |  |   | (211         | ) |  |   | (211 | )
|Scheduled principal repayments                               |  |        |     |   |                       |   | (3   | )                         |  |   | (6           | ) |  |   | (9   | )
|Common unit repurchase                                       |  |        | (72  | ) |                       |   |     |                           |  |   |             |   |  |   | (72  | )
|Distributions on common units                                |  |        | (326 | ) |                       |   |     |                           |  |   |             |   |  |   | (326 | )
|Distributions on preferred units                             |  |        | (4   | ) |                       |   |     |                           |  |   |             |   |  |   | (4   | )
|Distributions to minority interest                           |  |        |     |   |                       |   |     |                           |  |   | (7           | ) |  |   | (7   | )
|Change in restricted cash                                    |  |        |     |   |                       |   |     |                           |  |   | 3            |   |  |   | 3    |  
|Transfers to/from Parent                                     |  |        | 11   |   |                       |   | 10   |                           |  |   | (21          | ) |  |   |     |  
|                                                             |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Cash provided by (used in) financing activities              |  |        | (184 | ) |                       |   | 7    |                           |  |   | 53           |   |  |   | (124 | )
|                                                             |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             |  | $      | 23   |   |                       | $ | (5   | )                         |  | $ | (1           | ) |  | $ | 17   |  
|                                                             |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  



16



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Supplemental Condensed Consolidating Statements of Cash Flows

(in millions)

Year-to-Date ended
June 15, 2007



|                                                               |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |       |  
|-------------------------------------------------------------- |  | ------ | ---- | - | --------------------- | - | ---- | ------------------------- |  | - | ------------ | - |  | - | ----- | -
|                                                               |  | Parent |      |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiaries |  |   | Consolidated |  
|OPERATING ACTIVITIES                                           |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |       |  
|Cash provided by operations                                    |  | $      | 258  |   |                       | $ | 43   |                           |  | $ | 19           |   |  | $ | 320   |  
|                                                               |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |       |  
|INVESTING ACTIVITIES                                           |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |       |  
|Proceeds from sale of assets, net                              |  |        | 58   |   |                       |   | 272  |                           |  |   |             |   |  |   | 330   |  
|Acquisitions                                                   |  |        | (15  | ) |                       |   |     |                           |  |   |             |   |  |   | (15   | )
|Capital expenditures                                           |  |        | (19  | ) |                       |   | (99  | )                         |  |   | (119         | ) |  |   | (237  | )
|Change in furniture, fixtures and equipment replacement fund   |  |        | 9    |   |                       |   | (4   | )                         |  |   | (37          | ) |  |   | (32   | )
|Change in restricted cash designated for FF&E replacement fund |  |        |     |   |                       |   | 4    |                           |  |   | 30           |   |  |   | 34    |  
|Other                                                          |  |        | 17   |   |                       |   |     |                           |  |   |             |   |  |   | 17    |  
|                                                               |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |       |  
|Cash provided by (used in) investing activities                |  |        | 50   |   |                       |   | 173  |                           |  |   | (126         | ) |  |   | 97    |  
|                                                               |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |       |  
|FINANCING ACTIVITIES                                           |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |       |  
|Financing costs                                                |  |        | (5   | ) |                       |   |     |                           |  |   | (3           | ) |  |   | (8    | )
|Issuance of debt                                               |  |        | 591  |   |                       |   |     |                           |  |   | 434          |   |  |   | 1,025 |  
|Repayment of credit facility                                   |  |        | (250 | ) |                       |   |     |                           |  |   |             |   |  |   | (250  | )
|Debt prepayments                                               |  |        | (6   | ) |                       |   | (33  | )                         |  |   | (786         | ) |  |   | (825  | )
|Scheduled principal repayments                                 |  |        | (1   | ) |                       |   | (2   | )                         |  |   | (21          | ) |  |   | (24   | )
|Distributions on common units                                  |  |        | (245 | ) |                       |   |     |                           |  |   |             |   |  |   | (245  | )
|Distributions on preferred units                               |  |        | (4   | ) |                       |   |     |                           |  |   |             |   |  |   | (4    | )
|Distributions to minority interests                            |  |        |     |   |                       |   |     |                           |  |   | (5           | ) |  |   | (5    | )
|Change in restricted cash                                      |  |        | 1    |   |                       |   | 6    |                           |  |   | 45           |   |  |   | 52    |  
|Transfers to/from Parent                                       |  |        | (390 | ) |                       |   | (190 | )                         |  |   | 580          |   |  |   |      |  
|                                                               |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |       |  
|Cash provided by (used in) financing activities                |  |        | (309 | ) |                       |   | (219 | )                         |  |   | 244          |   |  |   | (284  | )
|                                                               |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |       |  
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS               |  | $      | (1   | ) |                       | $ | (3   | )                         |  | $ | 137          |   |  | $ | 133   |  
|                                                               |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |       |  



17



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Results of Operations and Financial Condition
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and related notes included
elsewhere in this report. Host Hotels & Resorts, Inc. is a Maryland corporation and operates as a self-managed and self-administered real estate investment trust, or REIT. Host Hotels & Resorts, Inc. owns properties and conducts
operations through Host Hotels & Resorts, L.P., a Delaware limited partnership of which Host Hotels & Resorts, Inc. is the sole general partner and in which it holds approximately 96% of the partnership interests. In this report,
we use the terms we or our to refer to Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. together, unless the context indicates otherwise. We also use the term Host to specifically
refer to Host Hotels & Resorts, Inc. and the terms operating partnership or Host LP to refer to Host Hotels & Resorts, L.P. in cases where it is important to distinguish between Host and Host LP.

Forward-Looking Statements

In this report on Form
10-Q, we make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by their use of terms and phrases such as anticipate,
believe, could, expect, may, intend, predict, project, plan, will, estimate and other similar terms and phrases. Forward-looking
statements are based on managements current expectations and assumptions and are not guarantees of future performance that involve known and unknown risks, uncertainties and other factors which may cause our actual results to differ materially
from those anticipated at the time the forward-looking statements are made. These risks and uncertainties include those risk factors discussed in our Annual Report on Form 10K for the year ended December 31, 2007 and in other filings with
the Securities and Exchange Commission (SEC). Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that we will attain these expectations or that any
deviations will not be material. Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release updates to any forward-looking statement contained in this report to conform the statement
to actual results or changes in our expectations.

Outlook

As of July 18, 2008, we own 118 hotel properties, which operate primarily in the luxury and upper upscale hotel sectors. For a general overview of our business and a discussion of our reporting periods, see
our most recent Annual Report on Form 10-K.

Consistent with the trends we experienced in the fourth quarter of 2007, our corporate
transient and leisure business experienced weakness and, through April 2008, we saw no evidence of acceleration of this weakness in demand or in our group bookings or group cancellation rates. However, in May and June, our group and transient
business further weakened. The decrease in demand for our transient business was most prominent in our higher-rated corporate, premium and special corporate accounts due to the slowdown in business travel in certain markets. Leisure demand,
particularly on weekends, was soft. Economic weakness combined with higher costs, especially energy, food and commodities, is putting considerable pressure on both consumer and business spending. We expect our leisure business will further weaken
throughout the year and that corporate travel will continue to decline as businesses seek to cut costs. For the quarter, our group business, while above the prior year level, fell slightly short of our expectations, as short-term bookings in the
quarter were lower than anticipated. Our group booking pace for the rest of the year is below the comparable prior year level. We have also seen a slight increase in cancellations and this trend may accelerate. In addition, airline ticket prices
have increased and airline capacity will be reduced in the second half of the year due to high fuel costs, which will likely further reduce lodging demand, particularly in the leisure market.

To help mitigate the effect of some of these trends, our operators are adjusting the business mix of our properties in order to maximize the average rate
and to manage off-peak time periods to ensure that our properties capture their share of available business. Additionally, our operators are aggressively managing costs and each of our properties have implemented some level of contingency plans such
as matching the level of staffing to the reduced level of occupancy, eliminating discretionary spending, modifying restaurant outlet operation hours and delaying the implementation of brand standards. New supply forecasts for the markets in which we
own hotels suggest that supply growth has been increasing, however, it continues to be affected by increased building costs due to inflation and increased cost of financing because of continued uncertainty in the credit markets.



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Due to the combination of these trends, particularly in projections for 2008 for GDP, business investment
and employment, all key drivers of lodging demand, we have reduced our outlook for the second half of the year. We believe that the full year 2008 comparable hotel RevPAR will range from a decrease of 1% to an increase of 1% compared to our previous
full year RevPAR guidance of an increase of 2% to 4%. Additionally, operating results will also be adversely effected by certain operating costs and other expenses, including wages, benefits, real estate taxes and utilities, increasing at a rate
greater than inflation, which will likely result in reduced operating profit margins.

Due to the size and number of capital expenditures
and investments projects we completed in early 2008, the disruption to our properties was particularly significant in the first half of the year, and, as a result, our RevPAR growth and operating margins were adversely affected. Additionally,
certain properties will continue to experience temporary business interruption during the second half of 2008, although not to the same extent as the first half of 2008. Overall, we expect to continue our current level of capital expenditures and
investment projects throughout the remainder of 2008. Over the long term, we expect to see improvements in RevPAR and operating margins as these projects are expected to enhance our properties competitive market position and profitability.

We believe the general economic trends and its effect on the lodging industry create an uncertain operating environment in 2008, and,
therefore, there can be no assurances that we will not experience further deceleration in the growth rate of hotel revenues or earnings at our properties for any number of reasons, including, but not limited to, slower than anticipated growth in the
economy and changes in travel patterns.

Application of New Accounting Standards

The FASB recently issued FASB staff position (FSP) APB 14-1, Accounting for Convertible
Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement) (FSP 14-1). FSP 14-1 specifies that issuers of such instruments should separately account for the liability and equity components
in a manner that will reflect the entitys nonconvertible debt borrowing rate on the instruments issuance date when interest cost is recognized. Our $600 million 25/8% Exchangeable Senior Debentures (the 2007 Debentures) and our $500 million 3.25% Exchangeable
Senior Debentures (the 2004 Debentures) are within the scope of FSP 14-1 and therefore, we will be required to record the debt components of the debentures at fair value as of the date of issuance and amortize the discount as an
increase to interest expense over the expected life of the debt. The implementation of this standard will result in a decrease to net income, earnings per common unit and FFO per diluted common unit for all periods presented; however, there is no
effect on our cash interest payments. FSP 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years and shall be applied retrospectively to all
periods presented. Early adoption of FSP 14-1 is not permitted. We anticipate that as a result of the application of this standard, our annual diluted earnings per common unit and FFO per diluted common unit will decrease by approximately $.03 to
$.04 per unit. Additionally, we anticipate that the application of this standard will decrease our debt balance as of December 31, 2008 by approximately $89 million, with a corresponding increase to partners capital.



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Results of Operations

The following table reflects certain line items from our statements of operations and other significant operating statistics (in millions, except operating statistics and percentages):



|                                           |  |                    |        |   |              |   |        |                      |  |       |       
|------------------------------------------ |  | ------------------ | ------ | - | ------------ | - | ------ | -------------------- |  | ----- | ------
|                                           |  | Quarter ended      |        |   |              |  
|                                           |  | June 13,2008       |        |   | June 15,2007 |   |        | % Increase(Decrease) | 
|Revenues                                   |  |                    |        |   |              |   |        |                      |  |       |       
|Total hotel sales                          |  | $                  | 1,388  |   |              | $ | 1,356  |                      |  | 2.4   | %     
|Operating costs and expenses:              |  |                    |        |   |              |   |        |                      |  |       |       
|Property-level costs (1)                   |  |                    | 1,125  |   |              |   | 1,085  |                      |  | 3.7   |       
|Corporate and other expenses               |  |                    | 14     |   |              |   | 15     |                      |  | (6.7  | )     
|Operating profit                           |  |                    | 276    |   |              |   | 281    |                      |  | (1.8  | )     
|Interest expense                           |  |                    | 81     |   |              |   | 136    |                      |  | (40.4 | )     
|Minority interest expense                  |  |                    | 1      |   |              |   |       |                      |  | N/M   | (4)   
|Income from discontinued operations        |  |                    | 11     |   |              |   | 4      |                      |  | N/M   | (4)   
|Net income                                 |  |                    | 199    |   |              |   | 154    |                      |  | 29.2  |       
|                                           |  |                    |       
|All hotel operating statistics (2):        |  |                    |        |   |              |   |        |                      |  |       |       
|RevPAR                                     |  | $                  | 156.20 |   |              | $ | 152.49 |                      |  | 2.4   | %     
|Average room rate                          |  | $                  | 205.10 |   |              | $ | 199.50 |                      |  | 2.8   | %     
|Average occupancy                          |  |                    | 76.2   | % |              |   | 76.4   | %                    |  | (0.2  | ) pts.
|Comparable hotel operating statistics (3): |  |                    |        |   |              |   |        |                      |  |       |       
|RevPAR                                     |  | $                  | 158.91 |   |              | $ | 156.28 |                      |  | 1.7   | %     
|Average room rate                          |  | $                  | 207.62 |   |              | $ | 202.34 |                      |  | 2.6   | %     
|Average occupancy                          |  |                    | 76.5   | % |              |   | 77.2   | %                    |  | (0.7  | ) pts.
|                                           |  |                   
|                                           |  | Year-to-Date ended |        |   |              |  
|                                           |  | June 13,2008       |        |   | June 15,2007 |   |        | % Increase(Decrease) | 
|Revenues                                   |  |                    |        |   |              |   |        |                      |  |       |       
|Total hotel sales                          |  | $                  | 2,416  |   |              | $ | 2,354  |                      |  | 2.6   | %     
|Operating costs and expenses:              |  |                    |        |   |              |   |        |                      |  |       |       
|Property-level costs (1)                   |  |                    | 2,040  |   |              |   | 1,961  |                      |  | 4.0   |       
|Corporate and other expenses               |  |                    | 31     |   |              |   | 37     |                      |  | (16.2 | )     
|Gain on insurance settlement               |  |                    | 7      |   |              |   |       |                      |  | N/M   | (4)   
|Operating profit                           |  |                    | 409    |   |              |   | 412    |                      |  | (0.7  | )     
|Interest expense                           |  |                    | 157    |   |              |   | 230    |                      |  | (31.7 | )     
|Minority interest expense                  |  |                    | 8      |   |              |   | 4      |                      |  | 100.0 |       
|Income from discontinued operations        |  |                    | 12     |   |              |   | 150    |                      |  | (92.0 | )     
|Net income                                 |  |                    | 262    |   |              |   | 348    |                      |  | (24.7 | )     
|                                           |  |                    |       
|All hotel operating statistics (2):        |  |                    |        |   |              |   |        |                      |  |       |       
|RevPAR                                     |  | $                  | 147.46 |   |              | $ | 143.33 |                      |  | 2.9   | %     
|Average room rate                          |  | $                  | 201.99 |   |              | $ | 194.93 |                      |  | 3.6   | %     
|Average occupancy                          |  |                    | 73.0   | % |              |   | 73.5   | %                    |  | (0.5  | ) pts.
|Comparable hotel operating statistics (3): |  |                    |        |   |              |   |        |                      |  |       |       
|RevPAR                                     |  | $                  | 149.59 |   |              | $ | 146.72 |                      |  | 2.0   | %     
|Average room rate                          |  | $                  | 204.57 |   |              | $ | 198.22 |                      |  | 3.2   | %     
|Average occupancy                          |  |                    | 73.1   | % |              |   | 74.0   | %                    |  | (0.9  | ) pts.



|(1) | Amount represents total operating costs and expenses per our condensed consolidated statements of operations less corporate expenses and the gain on insurance settlement.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(2) | Operating statistics are for all properties as of June 13, 2008 and June 15, 2007 and include the results of operations for hotels we have sold prior to their disposition.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Comparable hotel operating statistics for June 13, 2008 and June 15, 2007 are based on 115 comparable hotels as of June 13, 2008.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(4) | N/M=Not Meaningful.
|--- | -------------------

2008 Compared to 2007

Hotel Sales Overview



|                  |  |                    |       |              |   |                      |  |     |  
|----------------- |  | ------------------ | ----- | ------------ | - | -------------------- |  | --- | -
|                  |  | Quarter ended      |       |              |  
|                  |  | June 13,2008       |       | June 15,2007 |   | % Increase(Decrease) | 
|                  |  | (in millions)      |       |              |  
|Revenues          |  |                    |       |              |   |                      |  |     |  
|Rooms             |  | $                  | 856   |              | $ | 839                  |  | 2.0 | %
|Food and beverage |  |                    | 440   |              |   | 427                  |  | 3.0 |  
|Other             |  |                    | 92    |              |   | 90                   |  | 2.2 |  
|                  |  |                    |       |              |   |                      |  |     |  
|Total hotel sales |  | $                  | 1,388 |              | $ | 1,356                |  | 2.4 |  
|                  |  |                    |       |              |   |                      |  |     |  
|                  |  |                   
|                  |  | Year-to-Date ended |       |              |  
|                  |  | June 13,2008       |       | June 15,2007 |   | % Increase(Decrease) | 
|                  |  | (in millions)      |       |              |  
|Revenues          |  |                    |       |              |   |                      |  |     |  
|Rooms             |  | $                  | 1,480 |              | $ | 1,447                |  | 2.3 | %
|Food and beverage |  |                    | 774   |              |   | 748                  |  | 3.5 |  
|Other             |  |                    | 162   |              |   | 159                  |  | 1.9 |  
|                  |  |                    |       |              |   |                      |  |     |  
|Total hotel sales |  | $                  | 2,416 |              | $ | 2,354                |  | 2.6 |  
|                  |  |                    |       |              |   |                      |  |     |  

Hotel sales grew 2.4% and 2.6% for the quarter and year-to-date 2008, respectively, reflecting
increases in RevPAR, as well as increases in food and beverage and other revenues. Sales for properties sold or classified as held for sale in 2008 or 2007 have been reclassified as discontinued operations. See Discontinued Operations
below.

We discuss operating results for our hotels on a comparable basis. Comparable hotels are those properties that we have owned for
the entirety of the reporting periods being compared. Comparable hotels do not include the results of properties acquired or sold, or that incurred significant property damage and business interruption or large scale capital improvements during
these periods. As of June 13, 2008, 115 of our 118 hotels have been classified as comparable hotels. See Comparable Hotel Operating Statistics for a complete description of our comparable hotels. We discuss our operating
results by property type (i.e. urban, suburban, resort/convention or airport), geographic region and mix of business (i.e. transient, group or contract).

Comparable hotel sales increased 1.9% to approximately $1.4 billion for the quarter and increased 2.5% to approximately $2.4 billion year-to-date. The revenue growth reflects the increase in comparable
RevPAR of 1.7% for the quarter and 2.0% year-to-date, as a result of an increase in average room rates of 2.6% for the quarter and 3.2% year-to-date, offset by a decrease in occupancy of 0.7 percentage points for the quarter and 0.9 percentage
points year-to-date. The year-to-date increase also includes one extra day of results for approximately 42% of our hotels that report results on a monthly basis as 2008 is a leap year.

Food and beverage revenues for our comparable hotels increased 2.6% for the quarter and 3.2% year-to-date, primarily due to increased sales from our
banquet and audio visual sales. Food and beverage revenues also benefited from a strong performance at the Orlando World Center Marriott and its recently opened 105,000 square foot Cypress ballroom/exhibit hall. Other revenues for our comparable
hotels, which primarily represent spa, golf, parking, internet connectivity and attrition fees, increased 1.1% for the quarter and 1.2% year-to-date.



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##### Table of Contents

Comparable Hotel Sales by Property Type

The following tables set forth performance information for our comparable hotels by property type as of June 13, 2008 and June 15, 2007:

Comparable Hotels by Property Type (a)



|                  |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |  |   |        |  |     |  
|----------------- |  | ------------------- |  | -------------------------------- |  | -------------------------------- | ------ | --------------------------- | ---- | - | ------ | - | ---------------- |  | --------------------------- | ------ |  | ------ | - |  | - | ------ |  | --- | -
|                  |  | As of June 13, 2008 |  | Quarter ended June 13, 2008      |  | Quarter ended June 15, 2007      |        | PercentChange inRevPAR      |     
|                  |  | No. ofProperties    |  | No. ofRooms                      |  | AverageRoom Rate                 |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoom Rate |  | AverageOccupancyPercentages |        |  | RevPAR |  
|Urban             |  | 55                  |  | 32,989                           |  | $                                | 220.48 |                             | 78.3 | % |        | $ | 172.65           |  | $                           | 212.39 |  | 79.9   | % |  | $ | 169.75 |  | 1.7 | %
|Suburban          |  | 32                  |  | 12,311                           |  |                                  | 161.83 |                             | 69.1 |   |        |   | 111.81           |  |                             | 158.38 |  | 69.8   |   |  |   | 110.52 |  | 1.2 |  
|Resort/Convention |  | 13                  |  | 8,082                            |  |                                  | 274.55 |                             | 78.5 |   |        |   | 215.40           |  |                             | 275.92 |  | 76.6   |   |  |   | 211.23 |  | 2.0 |  
|Airport           |  | 15                  |  | 7,208                            |  |                                  | 140.59 |                             | 78.9 |   |        |   | 110.94           |  |                             | 139.29 |  | 78.3   |   |  |   | 109.03 |  | 1.8 |  
|                  |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |  |   |        |  |     |  
|All Types         |  | 115                 |  | 60,590                           |  |                                  | 207.62 |                             | 76.5 |   |        |   | 158.91           |  |                             | 202.34 |  | 77.2   |   |  |   | 156.28 |  | 1.7 |  
|                  |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |  |   |        |  |     |  
|                  |  |                     |  |                                 
|                  |  | As of June 13, 2008 |  | Year-to-Date ended June 13, 2008 |  | Year-to-Date ended June 15, 2007 |        | PercentChange inRevPAR      |     
|                  |  | No. ofProperties    |  | No. ofRooms                      |  | AverageRoom Rate                 |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoom Rate |  | AverageOccupancyPercentages |        |  | RevPAR |  
|Urban             |  | 55                  |  | 32,989                           |  | $                                | 213.78 |                             | 74.5 | % |        | $ | 159.30           |  | $                           | 205.35 |  | 76.3   | % |  | $ | 156.64 |  | 1.7 | %
|Suburban          |  | 32                  |  | 12,311                           |  |                                  | 162.28 |                             | 65.7 |   |        |   | 106.68           |  |                             | 157.44 |  | 67.2   |   |  |   | 105.73 |  | 0.9 |  
|Resort/Convention |  | 13                  |  | 8,082                            |  |                                  | 279.07 |                             | 77.4 |   |        |   | 216.04           |  |                             | 278.99 |  | 74.7   |   |  |   | 208.39 |  | 3.7 |  
|Airport           |  | 15                  |  | 7,208                            |  |                                  | 142.11 |                             | 74.7 |   |        |   | 106.14           |  |                             | 139.78 |  | 74.8   |   |  |   | 104.54 |  | 1.5 |  
|                  |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |  |   |        |  |     |  
|All Types         |  | 115                 |  | 60,590                           |  |                                  | 204.57 |                             | 73.1 |   |        |   | 149.59           |  |                             | 198.22 |  | 74.0   |   |  |   | 146.72 |  | 2.0 |  
|                  |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |  |   |        |  |     |  



|(a) | The reporting period for our comparable operating statistics for the year-to-date periods ended June 13, 2008 and June 15, 2007 is from December 29, 2007 to
June 13, 2008 and December 30, 2006 to June 15, 2007, respectively. For further discussion, see Reporting Periods in our most recent Annual Report on Form 10-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For the second quarter of 2008, our resort/convention properties led the portfolio with a 2.0% growth in RevPAR. This property type was led by the
Orlando World Center Marriott, which continues to benefit from the opening of its new 105,000 square foot Cypress ballroom/exhibit hall, which offset weaker group results at our Hawaiian resort properties. RevPAR growth at our urban, airport and
suburban hotels was moderate due to the overall decline in lodging demand, which led to decreased occupancy at these properties.



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##### Table of Contents

Comparable Hotel Sales by Geographic Region

The following tables set forth performance information for our comparable hotels by geographic region as of June 13, 2008 and June 15, 2007:

Comparable Hotels by Region (a)



|              |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |  |   |        |  |      |  
|------------- |  | ------------------- |  | -------------------------------- |  | -------------------------------- | ------ | --------------------------- | ---- | - | ------ | - | ---------------- |  | --------------------------- | ------ |  | ------ | - |  | - | ------ |  | ---- | -
|              |  | As of June 13, 2008 |  | Quarter ended June 13, 2008      |  | Quarter ended June 15, 2007      |        | PercentChange inRevPAR      |     
|              |  | No. ofProperties    |  | No. ofRooms                      |  | AverageRoom Rate                 |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoom Rate |  | AverageOccupancyPercentages |        |  | RevPAR |  
|Pacific       |  | 27                  |  | 15,936                           |  | $                                | 206.12 |                             | 76.5 | % |        | $ | 157.60           |  | $                           | 204.17 |  | 76.8   | % |  | $ | 156.89 |  | 0.5  | %
|Mid-Atlantic  |  | 11                  |  | 8,684                            |  |                                  | 265.87 |                             | 81.9 |   |        |   | 217.73           |  |                             | 254.96 |  | 85.3   |   |  |   | 217.38 |  | 0.2  |  
|North Central |  | 14                  |  | 6,175                            |  |                                  | 158.64 |                             | 70.7 |   |        |   | 112.15           |  |                             | 154.80 |  | 72.1   |   |  |   | 111.65 |  | 0.4  |  
|Florida       |  | 9                   |  | 5,676                            |  |                                  | 236.85 |                             | 78.3 |   |        |   | 185.51           |  |                             | 231.75 |  | 76.7   |   |  |   | 177.77 |  | 4.4  |  
|DC Metro      |  | 13                  |  | 5,666                            |  |                                  | 214.09 |                             | 83.8 |   |        |   | 179.31           |  |                             | 206.99 |  | 85.1   |   |  |   | 176.05 |  | 1.8  |  
|New England   |  | 11                  |  | 5,663                            |  |                                  | 185.14 |                             | 77.5 |   |        |   | 143.52           |  |                             | 177.62 |  | 76.3   |   |  |   | 135.45 |  | 6.0  |  
|South Central |  | 8                   |  | 4,358                            |  |                                  | 172.07 |                             | 71.8 |   |        |   | 123.62           |  |                             | 167.42 |  | 74.3   |   |  |   | 124.44 |  | (0.7 | )
|Mountain      |  | 8                   |  | 3,372                            |  |                                  | 182.61 |                             | 69.8 |   |        |   | 127.49           |  |                             | 183.00 |  | 70.1   |   |  |   | 128.26 |  | (0.6 | )
|Atlanta       |  | 7                   |  | 2,589                            |  |                                  | 196.56 |                             | 70.5 |   |        |   | 138.66           |  |                             | 204.27 |  | 71.9   |   |  |   | 146.88 |  | (5.6 | )
|International |  | 7                   |  | 2,471                            |  |                                  | 181.20 |                             | 74.0 |   |        |   | 134.00           |  |                             | 154.69 |  | 70.9   |   |  |   | 109.69 |  | 22.2 |  
|              |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |  |   |        |  |      |  
|All Regions   |  | 115                 |  | 60,590                           |  |                                  | 207.62 |                             | 76.5 |   |        |   | 158.91           |  |                             | 202.34 |  | 77.2   |   |  |   | 156.28 |  | 1.7  |  
|              |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |  |   |        |  |      |  
|              |  |                     |  |                                 
|              |  | As of June 13, 2008 |  | Year-to-Date ended June 13, 2008 |  | Year-to-Date ended June 15, 2007 |        | PercentChange inRevPAR      |     
|              |  | No. ofProperties    |  | No. ofRooms                      |  | AverageRoom Rate                 |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoom Rate |  | AverageOccupancyPercentages |        |  | RevPAR |  
|Pacific       |  | 27                  |  | 15,936                           |  | $                                | 206.10 |                             | 74.7 | % |        | $ | 154.01           |  | $                           | 203.13 |  | 74.8   | % |  | $ | 151.96 |  | 1.4  | %
|Mid-Atlantic  |  | 11                  |  | 8,684                            |  |                                  | 253.22 |                             | 78.1 |   |        |   | 197.72           |  |                             | 241.06 |  | 80.6   |   |  |   | 194.39 |  | 1.7  |  
|North Central |  | 14                  |  | 6,175                            |  |                                  | 149.20 |                             | 63.1 |   |        |   | 94.21            |  |                             | 145.50 |  | 67.4   |   |  |   | 98.10  |  | (4.0 | )
|Florida       |  | 9                   |  | 5,676                            |  |                                  | 242.60 |                             | 79.7 |   |        |   | 193.29           |  |                             | 239.45 |  | 76.4   |   |  |   | 183.01 |  | 5.6  |  
|DC Metro      |  | 13                  |  | 5,666                            |  |                                  | 208.75 |                             | 74.4 |   |        |   | 155.40           |  |                             | 202.59 |  | 77.6   |   |  |   | 157.28 |  | (1.2 | )
|New England   |  | 11                  |  | 5,663                            |  |                                  | 174.42 |                             | 70.1 |   |        |   | 122.25           |  |                             | 166.22 |  | 68.6   |   |  |   | 114.06 |  | 7.2  |  
|South Central |  | 8                   |  | 4,358                            |  |                                  | 169.81 |                             | 71.8 |   |        |   | 121.89           |  |                             | 164.25 |  | 75.1   |   |  |   | 123.28 |  | (1.1 | )
|Mountain      |  | 8                   |  | 3,372                            |  |                                  | 192.74 |                             | 67.4 |   |        |   | 129.99           |  |                             | 187.75 |  | 69.2   |   |  |   | 129.94 |  |     |  
|Atlanta       |  | 7                   |  | 2,589                            |  |                                  | 195.77 |                             | 70.0 |   |        |   | 136.98           |  |                             | 198.26 |  | 70.8   |   |  |   | 140.34 |  | (2.4 | )
|International |  | 7                   |  | 2,471                            |  |                                  | 172.90 |                             | 71.9 |   |        |   | 124.29           |  |                             | 149.15 |  | 68.0   |   |  |   | 101.35 |  | 22.6 |  
|              |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |  |   |        |  |      |  
|All Regions   |  | 115                 |  | 60,590                           |  |                                  | 204.57 |                             | 73.1 |   |        |   | 149.59           |  |                             | 198.22 |  | 74.0   |   |  |   | 146.72 |  | 2.0  |  
|              |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |  |   |        |  |      |  



|(a) | The reporting period for our comparable operating statistics for the year-to-date periods ended June 13, 2008 and June 15, 2007 is from December 29, 2007 to
June 13, 2008 and December 30, 2006 to June 15, 2007, respectively. For further discussion, see Reporting Periods in our most recent Annual Report on Form 10-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For the second quarter of 2008, our International region was the top performing region due to outstanding RevPAR growth at our Chilean and Canadian
hotels and the relative weakness of the U.S. Dollar. The New England region also performed well as our Boston hotels benefited from strong group bookings and an increase in citywide events. Comparable hotel RevPAR growth in our Florida region was
driven by double-digit RevPAR growth at the Orlando World Center Marriott attributable to the new exhibit hall. We expect overall performance in both the New England and Florida regions to be weaker in the second half of 2008.

The 1.8% increase in RevPAR in our DC Metro region in the second quarter was due to strong performance at our downtown hotels, particularly the JW
Marriott Hotel, Washington, D.C. and Hyatt Regency Washington on Capitol Hill. The performance at the downtown hotels was offset by RevPAR declines at the suburban properties in the region due to weaker transient business and short-term group
demand. The Pacific region had slight improvements in RevPAR that were supported by strong results at our Los Angeles properties, due to improved



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transient and group demand. The San Diego market also performed well, driven by the strong performance at the San Diego Marriott Hotel & Marina. San
Francisco had mixed results as several properties were completing significant capital projects. Our Hawaiian properties experienced decreases in RevPAR because of lower leisure transient demand which was driven by a reduction in airline capacity as
well as higher travel costs. RevPAR growth in our Mid-Atlantic region was moderate as RevPAR growth at our large New York hotels, the New York Marriott Marquis and the New York Sheraton Hotel and Towers, was offset by RevPAR declines at several of
the other hotels in the region due to room displacement as a result of renovations.

The Atlanta region significantly underperformed in
comparison to the overall portfolio due to weak group bookings, lower transient demand and a disruptive rooms renovation at The Ritz-Carlton, Buckhead. The South Central region also underperformed; however results varied by market. The Houston
market performed well due to strong group bookings while RevPAR declined in the San Antonio market due to increased supply and due to room displacement as a result of renovations at the San Antonio Marriott Riverwalk.

Hotels Sales by Business Mix.The majority of our customers fall into three broad groups: transient, group and contract business. Individual
travelers are referred to as Transient customers. Those traveling as part of an organized group, meeting or convention are referred to as Group customers. Contract customers represent blocks of rooms sold to a
specific company for an extended period of time at significantly discounted rates, such as airline crews. The information below is derived from business mix data for 108 of our hotels for which business mix data is available from our managers. For
further detail on our business mix, see our annual report on Form 10-K.

Transient business was weak during the quarter as room nights
decreased approximately 3.7%, which was partially offset by an increase in the average room rate of 1.6%. The decrease in demand was most prominent in our higher rated corporate and special corporate segments due to the slowdown in business travel
in some of our markets.

During the second quarter, group business performed well compared to last year, as group room nights increased
approximately 2.0% and the average room rate increased 4.0%. The net result was an increase in group revenues of approximately 6.1% for the quarter. However, group booking pace for the second half of 2008 has slowed and we have seen a slight
increase in cancellations which could result in further slowing in group revenues.

Property-level Operating Expenses



|                                        |  |               |       |              |   |                      |  |      |  
|--------------------------------------- |  | ------------- | ----- | ------------ | - | -------------------- |  | ---- | -
|                                        |  | Quarter ended |       |              |  
|                                        |  | June 13,2008  |       | June 15,2007 |   | % Increase(Decrease) | 
|                                        |  | (in millions) |       |              |  
|Rooms                                   |  | $             | 199   |              | $ | 193                  |  | 3.1  | %
|Food and beverage                       |  |               | 301   |              |   | 295                  |  | 2.0  |  
|Hotel departmental expenses             |  |               | 325   |              |   | 314                  |  | 3.5  |  
|Management fees                         |  |               | 73    |              |   | 71                   |  | 2.8  |  
|Other property-level expenses           |  |               | 96    |              |   | 94                   |  | 2.1  |  
|Depreciation and amortization           |  |               | 131   |              |   | 118                  |  | 11.0 |  
|                                        |  |               |       |              |   |                      |  |      |  
|Total property-level operating expenses |  | $             | 1,125 |              | $ | 1,085                |  | 3.7  |  
|                                        |  |               |       |              |   |                      |  |      |  



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|                                        |  |                    |       |              |   |                      |  |     |  
|--------------------------------------- |  | ------------------ | ----- | ------------ | - | -------------------- |  | --- | -
|                                        |  | Year-to-Date ended |       |              |  
|                                        |  | June 13,2008       |       | June 15,2007 |   | % Increase(Decrease) | 
|                                        |  | (in millions)      |       |              |  
|Rooms                                   |  | $                  | 356   |              | $ | 343                  |  | 3.8 | %
|Food and beverage                       |  |                    | 544   |              |   | 531                  |  | 2.4 |  
|Hotel departmental expenses             |  |                    | 583   |              |   | 563                  |  | 3.6 |  
|Management fees                         |  |                    | 125   |              |   | 116                  |  | 7.8 |  
|Other property-level expenses           |  |                    | 177   |              |   | 175                  |  | 1.1 |  
|Depreciation and amortization           |  |                    | 255   |              |   | 233                  |  | 9.4 |  
|                                        |  |                    |       |              |   |                      |  |     |  
|Total property-level operating expenses |  | $                  | 2,040 |              | $ | 1,961                |  | 4.0 |  
|                                        |  |                    |       |              |   |                      |  |     |  

Operating expenses for the quarter and year-to-date increased 3.7% and 4.0%, respectively. Our
operating expenses, which are both fixed and variable, are primarily affected by changes in occupancy, inflation and revenues, though the effect on specific costs will differ. For example, management fees are primarily affected by changes in
revenues and operating profit at each property. The growth in expenses was primarily the result of a 3.0% and 3.4% increase in wages and benefits for the quarter and year-to-date, respectively, which represent approximately 64% and 63% of the
overall increase, for both periods, respectively. While increases in energy costs broadly effect operating costs, utilities, which increased 7% for the second quarter, only represent approximately 5% of total operating expenses. We also experienced
significant increases in real estate taxes both for the quarter and year-to-date. These costs were partially offset by a decrease in insurance expense of approximately 8.1% and 6.2% for the quarter and year-to-date, respectively. We expect the
increases in operating expenses will continue to adversely affect margins throughout 2008. Property-level operating expenses exclude the costs for hotels we have sold, which are included in discontinued operations.

Corporate and Other Expenses.Corporate and other expenses primarily consist of employee salaries and bonuses and other costs such as employee
stock-based compensation expense, travel, corporate insurance, audit fees, building rent and system costs. Corporate expenses decreased approximately $1 million for the quarter and approximately $6 million year-to-date from the same period
last year due to the decrease in compensation expense recorded for the stock-based compensation awards primarily due to the decline in Hosts stock price.

Gain on Insurance Settlement. The gain on insurance settlement of $7 million for year-to-date 2008, primarily represents the release of contingencies related to an insurance settlement reached for business
interruption incurred at the New Orleans Marriott following Hurricane Katrina. As a result of recognizing this gain, we paid $2 million of management fees, which are included in management fee expense.

Interest Expense.Interest expense decreased $55 million and $73 million for the quarter and year-to-date 2008, respectively. During
2007, interest expense included $45 million for both the second quarter and year-to-date of call premiums and the acceleration of the amortization of deferred financing costs associated with debt prepayments. There were no such expenses for
2008. The reduction in interest expense also reflects the decline in the weighted average interest rate of 20 basis points when compared to the second quarter of 2007.

Equity in Earnings of Affiliates.Our share of income of affiliates decreased by $1 million and $3 million for the quarter and year-to-date, respectively, due to a decrease in earnings from our joint
venture in Europe, primarily as a result of an increase in local country income taxes.

Minority Interest Expense.Minority interest
expense increased $1 million and $4 million for the quarter and year-to-date, respectively. The increase reflects the increase in the net income attributable to the outside partners in certain of our consolidated partnerships.

Discontinued Operations. Discontinued operations consist of one hotel sold and one hotel classified as held-for-sale as of
June 13, 2008 and nine hotels sold during 2007 and represent the results of operations and the gains on the disposition of these hotels during the period. The following table summarizes the revenues, income before taxes, and the gain on
dispositions, net of tax, of the hotels which have been reclassified to discontinued operations, which includes assets held for sale and the results of sold hotels prior to their disposition in the condensed consolidated statements of operations for
the periods presented:



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|                              |  |               |    |              |                    |    |              |  |              |    |  |   |    
|----------------------------- |  | ------------- | -- | ------------ | ------------------ | -- | ------------ |  | ------------ | -- |  | - | ---
|                              |  | Quarter ended |    |              | Year-to-Date ended
|                              |  | June 13,2008  |    | June 15,2007 |                    |    | June 13,2008 |  | June 15,2007
|                              |  | (in millions)
|Revenue                       |  | $             | 3  |              | $                  | 10 |              |  | $            | 6  |  | $ | 32 
|Income before taxes           |  |               | 1  |              |                    | 6  |              |  |              | 2  |  |   | 12 
|Gain on disposals, net of tax |  |               | 10 |              |                    | (2 | )            |  |              | 10 |  |   | 139

Liquidity and Capital Resources

Cash Requirements

We use cash primarily for acquisitions, capital expenditures, debt payments and
distributions to unitholders. As a REIT, Host is required to distribute to its stockholders at least 90% of its taxable income, excluding net capital gain, in the form of dividends on an annual basis. Funds used by Host to make these dividends are
provided by us. We depend primarily on external sources of capital to finance future growth, including acquisitions.

Cash
Balances. As of June 13, 2008, we had $505 million of cash and cash equivalents, which was an increase of $17 million from December 31, 2007. Additionally, we have $600 million available under our credit facility. The
net increase in cash is primarily due to cash from operations, the issuance and refinancing of debt, for which we received net proceeds of approximately $300 million during the year and hotel dispositions. Uses of cash during the year primarily
consisted of distribution payments, capital expenditures and OP Unit repurchases in connection with Hosts repurchase of an equivalent amount of common shares. Excluding amounts necessary for working capital, we intend to use available funds
over time to further invest in our portfolio, acquire new properties, repurchase OP Units or make additional debt repayments. We believe we have ample liquidity and access to capital markets to take advantage of acquisition opportunities which may
arise, continue our capital expenditures program, deal with our near term debt maturities and to withstand an unanticipated decline in the cash flow from our business.

Debt Transactions.During the second quarter 2008, we entered into a $210 million term loan, which is provided for under our existing $600 million credit facility agreement and used the proceeds to
repay $100 million outstanding under the credit facility and for general corporate purposes. See Debt for further discussion.

On June 12, 2008, we refinanced the $208 million, 7.48% mortgage on the Orlando World Center Marriott with a $300 million mortgage that bears interest at a rate of LIBOR plus 350 basis points (5.96% at
June 13, 2008). See Debt for further discussion.

We may continue to redeem or refinance senior notes (which include
the senior debentures exchangeable for Host common stock) and mortgage debt from time to time to take advantage of favorable market conditions. We may purchase senior notes for cash through open market purchases, privately negotiated transactions, a
tender offer or, in some cases, through the early redemption of such securities pursuant to their terms. Repurchases of debt, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other
factors. Any refinancing or retirement before the maturity date would affect earnings and Funds From Operations, or FFO, per diluted unit, as defined below, as a result of the payment of any applicable call premiums and the acceleration of
previously deferred financing costs.

Partners Capital Transactions.On February 19, 2008, Hosts Board of Directors
authorized a program to repurchase up to $500 million of Hosts common stock and equity related securities. These securities may be purchased in the open market or through private transactions, dependent upon market conditions. We will
redeem an equivalent number of common OP Units from Host for each common share repurchased. The plan does not obligate Host to repurchase any specific number of shares and may be suspended at any time at managements discretion. As of
June 13, 2008, Host has repurchased 4.35 million shares valued at approximately $72 million of which 2.2 million shares valued at approximately $37 million were purchased in the second quarter.



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Acquisitions and Dispositions.While we expect acquisition opportunities will be limited in
domestic markets, we continue to believe that international markets are more likely to provide opportunities that meet our investment return criteria, particularly through the use of joint ventures. For example, in April 2008 the European joint
venture acquired the Crowne Plaza Amsterdam City Centre for approximately 72 million. We own a 32.1% interest in the European joint venture and serve as the general partner. During the second quarter of 2008, we also sold the Sheraton Tampa
Suites Airport for approximately $24 million. We anticipate that the continued turmoil in the credit markets will continue to restrict potential buyers and limit our ability to dispose of non-core assets and therefore, we believe that potential
proceeds from dispositions will range from $0 to $150 million for the remainder of the year.

Capital Expenditures. Our capital
expenditures generally fall into three broad categories; renewal and replacement expenditures, repositioning/return on investment (or ROI) projects and value enhancement projects. ROI/repositioning capital expenditures are selective
capital improvements outside the scope of the typical renewal and replacement capital expenditures. These projects include, for example, significant repositionings of guest rooms, lobbies or food and beverage platforms and expanding ballroom, spa or
conference facilities. Value enhancement projects are opportunities where we seek to enhance the value of our portfolio by identifying and executing strategies that maximize the highest and best use of all aspects of our properties, such as the
development of timeshare or condominium units on excess land.

For year-to-date 2008, total capital expenditures increased $73 million
to $310 million, primarily as a result of the timing of various projects across the portfolio including the completion of a 26,000 square foot ballroom at the Atlanta Marriott Marquis, which was the final phase in the $81 million repositioning
of this property, and the addition of an 8,300 square foot of new meeting space at the San Francisco Marriott. Our renewal and replacement capital expenditures were approximately $170 million, which reflects an increase of approximately 63%
from year-to-date 2007. We expect total renewal and replacement capital expenditures for 2008 to be approximately $380 million. Our renewal and replacement capital expenditures are generally funded by the furniture, fixture and equipment funds
established at certain of our hotels (typically funded with approximately 5% of property revenues) and by our available cash. We also spent approximately $140 million for year-to-date 2008 on repositioning and return on investment (ROI)
projects, which reflects an increase of approximately 5% from year-to-date 2007. We expect total repositioning/ROI expenditures for 2008 to be approximately $270 million.

Sources and Uses of Cash

Our principal sources of cash are cash from operations, the sale of assets,
borrowing under our credit facility and our ability to obtain additional financing through various capital market transactions. Our principal uses of cash are debt service, asset acquisitions, capital expenditures, operating costs, corporate
expenses and distributions to unit holders.

Cash Provided by Operations.Our cash provided by operations year-to-date 2008
increased $121 million from year-to-date 2007 to $441 million, due primarily to a reduction in interest expense and a decrease in advances to our managers for certain capital expenditure projects.

Cash Used in Investing Activities.Approximately $300 million of cash was used in investing activities during the first half of 2008. This
included approximately $310 million of capital expenditures, partially offset by the proceeds from the disposition of the Sheraton Tampa Suites Airport and cash received from the planned disposition of the Host Airport Hotel Sacramento.



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Cash Used in Financing Activities.Approximately $124 million of cash was used in financing
activities during 2008 and primarily consisted of the payment of the fourth quarter 2007 and first quarter 2008 distributions on OP Units of $330 million, an increase of $81 million from year-to-date 2007. Cash used in financing activities also
consisted of scheduled principal repayments of $9 million and the repurchase of 4.35 million of our units from Host for approximately $72 million in connection with Hosts repurchase of an equivalent number of common shares. We
also received net proceeds of approximately $300 million through debt issuances and refinancings. The following table summarizes the significant financing transactions as of July 18, 2008 (in millions), excluding the non-cash acquisition
of the remaining limited partnership interests in Pacific Gateway, Ltd. through the issuance of $93 million of OP Units (in millions):



|                 |  |                                                                            |  |                   |      |  
|---------------- |  | -------------------------------------------------------------------------- |  | ----------------- | ---- | -
|Transaction Date |  | Description of Transaction                                                 |  | TransactionAmount |     
|Debt             |  |                                                                            |  |                   |      |  
|June             |  | Proceeds from 5.96% Orlando World Center Marriott mortgage refinancing (1) |  | $                 | 300  |  
|June             |  | Repayment of the 7.48% mortgage on the Orlando World Center Marriott       |  |                   | (208 | )
|May              |  | Proceeds from the Credit Facility Term Loan                                |  |                   | 45   |  
|April            |  | Repayment of the draw on the Credit Facility Revolver                      |  |                   | (100 | )
|April            |  | Proceeds from the Credit Facility Term Loan                                |  |                   | 165  |  
|March            |  | Draw on the Credit Facility Revolver                                       |  |                   | 100  |  
|2008             |  | Principal amortization                                                     |  |                   | (9   | )
|Equity           |  |                                                                            |  |                   |      |  
|March-June       |  | OP Unit repurchases                                                        |  |                   | (72  | )



|(1) | The Orlando World Center Marriott mortgage loan has a floating rate of interest of LIBOR plus 350 basis points. The interest rate shown reflects the rate as of June 13, 2008.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Debt

As of
June 13, 2008, our total debt was $5.9 billion. The weighted average interest rate of our debt was approximately 5.9% and the weighted average maturity was 5.2 years. Additionally, 91% of our debt had a fixed rate of interest as of
June 13, 2008. Currently, we are in compliance with the financial covenants under our debt agreements.

As of June 13, 2008 and
December 31, 2007, our debt was comprised of (in millions):



|                                                                                                                                                                                                 |  |              |       |                  |   |      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | ----- | ---------------- | - | -----
|                                                                                                                                                                                                 |  | June 13,2008 |       | December 31,2007
|Series K senior notes, with a rate of 71/8% due November 2013                                                                                                                                    |  | $            | 725   |                  | $ | 725  
|Series M senior notes, with a rate of 7% due August 2012                                                                                                                                         |  |              | 347   |                  |   | 347  
|Series O senior notes, with a rate of 63/8% due March 2015                                                                                                                                       |  |              | 650   |                  |   | 650  
|Series Q senior notes, with a rate of 63/4% due June 2016                                                                                                                                        |  |              | 800   |                  |   | 800  
|Series S senior notes, with a rate of 67/8% due November 2014                                                                                                                                    |  |              | 497   |                  |   | 497  
|$500 million Exchangeable Senior Debentures, with a rate of 3.25% due April 2024                                                                                                                 |  |              | 497   |                  |   | 496  
|$600 million Exchangeable Senior Debentures, with a rate of 25/8% due April 2027                                                                                                                 |  |              | 593   |                  |   | 592  
|Senior notes, with a rate of 10.0%, due May 2012                                                                                                                                                 |  |              | 7     |                  |   | 7    
|                                                                                                                                                                                                 |  |              |       |                  |   |      
|Total senior notes                                                                                                                                                                               |  |              | 4,116 |                  |   | 4,114
|Mortgage debt (non-recourse) secured by $2.2 billion of real estate assets, with an average interest rate of 6.3% at
June 13, 2008 and 6.6% at December 31, 2007, maturing through December 2023 |  |              | 1,499 |                  |   | 1,423
|Credit facility, including the $210 million term loan                                                                                                                                            |  |              | 210   |                  |   |     
|Other                                                                                                                                                                                            |  |              | 87    |                  |   | 88   
|                                                                                                                                                                                                 |  |              |       |                  |   |      
|Total debt                                                                                                                                                                                       |  | $            | 5,912 |                  | $ | 5,625
|                                                                                                                                                                                                 |  |              |       |                  |   |      



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$600 million Exchangeable Senior
Debentures.On March 23, 2007, we issued $600 million 25/8% Exchangeable Senior Debentures (the 2007 Debentures) and received proceeds of $589 million, net of underwriting fees and expenses and original issue discount. The 2007 Debentures mature on April 15,
2027 and are equal in right of payment with all of our other senior notes. Interest is payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year beginning on July 15, 2007. We can
redeem for cash all, or part of, the 2007 Debentures at any time on or after April 20, 2012 upon 15 days notice at a redemption price of 100% of the principal amount plus accrued interest. Holders have the right to require us to repurchase the
2007 Debentures on April 15, 2012, April 15, 2017 and April 15, 2022 for cash equal to 100% of the principal amount plus accrued interest. Holders may exchange their 2007 Debentures prior to maturity under certain conditions,
including when the closing sale price of Hosts common stock is more than 130% of the exchange price per share for at least 20 of 30 consecutive trading days during certain periods or any time up to two days prior to the date on which the
debentures have been called for redemption. On exchange, we must deliver cash in an amount equal to not less than the lower of the exchange value (which is the applicable exchange rate multiplied by the average price of Hosts common shares)
and the aggregate principal amount of the 2007 Debentures to be exchanged, and, at our option, Hosts shares, cash or a combination thereof for any excess above the principal value. We can redeem for cash all, or part of, the 2007 Debentures at
any time on or after April 20, 2012 upon 15 days notice at a redemption price of 100% of the principal amount plus accrued interest. If we elect to redeem the debentures and the exchange value exceeds the cash redemption price, we would expect
holders to elect to exchange their debentures at the exchange value described above rather than receive the cash redemption price. The current exchange rate is 31.35 shares of Host common stock per $1,000 principal amount of debentures, which is
equivalent to an exchange price of $31.90 per share of Host common stock. Upon issuance of such shares by Host, we will issue to Host an equivalent number of common OP Units. The exchange rate may be adjusted under certain circumstances including
the payment of common dividends exceeding $.20 per share in any given quarter. The 2007 Debentures are not currently exchangeable.

$500 million Exchangeable Senior Debentures. On March 16, 2004, Host LP issued $500 million of 3.25% Exchangeable Senior Debentures (the 2004 Debentures) and received proceeds of $484 million,
net of discounts, underwriting fees and expenses. The 2004 Debentures mature on April 15, 2024 and are equal in right of payment with all of our other senior debt. Interest is payable quarterly in arrears on
January 15, April 15, July 15 and October 15 of each year. Holders have the right to require us to repurchase the 2004 Debentures on April 15, 2010, April 15, 2014 and April 15, 2019 for cash equal
to 100% of the principal amount. Holders may exchange their 2004 Debentures prior to maturity under certain conditions, including at any time at which the closing sale price of Hosts common stock is more than 120% of the exchange price per
share, for at least 20 of 30 consecutive trading days during certain periods or any time up to two days prior to the date on which the debentures have been called for redemption. The current exchange rate is 62.5107 shares for each $1,000 of
principal amount of the 2004 Debentures, (which is equivalent to an exchange price of $16.00 per share). Upon issuance of such shares by Host, we will issue to Host an equivalent number of common OP Units. The exchange rate is adjusted for certain
circumstances, including the payment of all common dividends. The 2004 Debentures are not currently exchangeable. We can redeem for cash all or part of, the 2004 Debentures at any time subsequent to April 19, 2009 upon 30 days notice at the
applicable redemption price as set forth in the indenture. If we elect to redeem the debentures and the exchange value exceeds the cash redemption price, we would expect holders to elect to exchange their debentures for stock rather than receive the
cash redemption price.

Credit Facility Term Loan. During the second quarter of 2008, we entered into a $210 million term loan,
which was an expansion of our existing $600 million credit facility. The term loan was completed in two phases, with $165 million closing in April 2008 and an additional $45 million, with the same terms, closing in May 2008. The term
loan has a maturity date of September 9, 2011, which we can extend for one year, subject to certain conditions. The term loan is prepayable without penalty after October 22, 2009 and may be prepaid prior to that date for a fee. The term
loan bears interest at LIBOR plus 175 basis points (4.18% at June 13, 2008), with a LIBOR floor of 2.25%. The proceeds from the term loan were used to repay the $100 million outstanding balance under the credit facility revolver and
for general corporate purposes. Currently, we have $600 million available under the credit facility.

The term loan is subject to the
same covenants and restrictions as the credit facility. It is also guaranteed by certain of our existing subsidiaries and is secured by pledges of equity interests in many of our subsidiaries. The guarantees and pledges ratably benefit the term loan
and the credit facility, as well as notes outstanding under our senior notes indenture and certain other indebtedness.



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Mortgage Debt.On June 12, 2008, we refinanced the $208 million, 7.48% mortgage due on
the Orlando World Center Marriott with a non-amortizing $300 million mortgage that bears interest at a rate of LIBOR plus 350 basis points (5.96% at June 13, 2008) and has a maturity date of July 1, 2011, which we have the option to
extend for two, one-year periods upon the satisfaction of certain conditions. Excess proceeds from the refinancing were used for general corporate purposes.

Distribution Policy

Host is required to distribute to its stockholders at least 90% of its annual taxable income, excluding
net capital gains, to qualify as a REIT, including taxable income recognized for federal income tax purposes but with regard to which we do not receive corresponding cash. Funds used by Host to pay dividends on its common and preferred stock are
provided through distributions from Host LP. For every share of common and preferred stock of Host, Host LP has issued to Host a corresponding common OP Unit and preferred OP Unit, respectively. As of July 18, 2008, Host is the owner of
substantially all of the preferred OP Units and approximately 96% of the common OP Units. The remaining common OP Units are held by various third-party limited partners.

Investors should take into account the 4% minority position in Host LP common OP Units when analyzing common and preferred dividend payments by Host to its stockholders, as these holders share, on a pro rata basis, in
amounts being distributed by Host LP to holders of its corresponding common and preferred OP Units. When Host pays a common or preferred dividend, Host LP pays an equivalent per unit distribution on all common or corresponding preferred OP Units.
For example, if Host paid a $1 per share dividend on its common stock, it would be based on payment of a $1 per unit distribution by Host LP to Host, as well as to other common OP unit holders.

Hosts current policy on common dividends is generally to distribute, over time, 100% of its annual taxable income. Host intends to pay a regular
quarterly dividend of $0.20 per share, and, in addition, to declare a special dividend during the fourth quarter of each year, the amount of which will vary depending on Hosts estimated taxable income. Based on Hosts current outlook,
Host expects that the fourth quarter special dividend will be in the range of $0.15 to $0.20, resulting in a full year dividend of $0.95 to $1.00. Host currently intends to continue paying dividends on its preferred stock, regardless of the amount
of taxable income, unless contractually restricted. The amount of any dividends will be determined by Hosts Board of Directors.

On
June 16, 2008, Hosts Board of Directors declared a cash dividend of $0.20 per share on its common stock. The dividend was paid on July 15, 2008 to stockholders of record as of June 30, 2008. Accordingly, we made a similar
distribution to our common OP unitholders, which included the common OP Units held by Host as well as the 4% minority position in Host LP common OP Units held by the third-party limited partners.

On June 16, 2008, Hosts Board of Directors also declared a cash dividend of $0.5546875 per share on its Class E cumulative redeemable
preferred stock. The dividend was paid on July 15, 2008 to preferred stockholders of record as of June 30, 2008. Accordingly, we made a similar distribution on our Class E preferred OP Units.



30



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##### Table of Contents

Comparable Hotel Operating Statistics

We present certain operating statistics (i.e., RevPAR, average daily rate and average occupancy) and operating results (revenues, expenses and adjusted
operating profit) for the periods included in this report on a comparable hotel basis. We define our comparable hotels as properties (i) that are owned or leased by us and the operations of which are included in our consolidated results,
whether as continuing operations or discontinued operations for the entirety of the reporting periods being compared and (ii) that have not sustained substantial property damage or business interruption, or undergone large-scale capital
projects during the reporting periods being compared. Of the 118 hotels that we owned on June 13, 2008, 115 have been classified as comparable hotels. The operating results of the following hotels that we owned as of June 13, 2008 are
excluded from comparable hotel results for these periods:



| |  |  | Atlanta Marriott Marquis (a two-year major renovation project that was completed in June 2008);
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | New Orleans Marriott (property damage and business interruption from Hurricane Katrina in August 2005); and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Host Airport Hotel Sacramento (we executed an agreement with the County of Sacramento related to the expansion of the airport, which will result in the closing of
the hotel by August 2008).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The operating results of the ten hotels we disposed of during 2008 and 2007 are also not
included in comparable hotel results for the periods presented herein. Moreover, because these statistics and operating results are for our hotel properties, they exclude results for our non-hotel properties and other real estate investments.

Non-GAAP Financial Measures

We use
certain non-GAAP financial measures, which are measures of our historical financial performance that are not calculated and presented in accordance with GAAP, within the meaning of applicable SEC rules. They are as follows:
(i) Funds From Operations (FFO) per diluted unit, and (ii) Comparable Hotel Operating Results. A complete discussion of these measures (including the reasons why we believe they are useful to investors, the additional purposes for which
management uses these measures and their limitations) is included in our most recent Annual Report on Form 10K.

FFO per Diluted Unit

We present FFO per diluted unit as a non-GAAP measure of our performance in addition to our earnings per unit (calculated in accordance
with GAAP). We calculate FFO per diluted unit for a given operating period as our FFO (defined as set forth below) for such period divided by the number of fully diluted units outstanding during such period. The National Association of Real Estate
Investment Trusts (NAREIT) defines FFO as net income (calculated in accordance with GAAP) excluding gains (or losses) from sales of real estate, the cumulative effect of changes in accounting principles, real estate-related depreciation and
amortization and adjustments for unconsolidated partnerships and joint ventures. FFO is presented on a per unit basis after making adjustments for the effects of dilutive securities, including the payment of preferred OP Unit distributions, in
accordance with NAREIT guidelines. We believe that FFO per diluted unit is a useful supplemental measure of our operating performance and that presentation of FFO per diluted unit, when combined with the primary GAAP presentation of earnings per
unit, provides beneficial information to investors.



31



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The following table provides a reconciliation of net income available to common unitholders per unit to
FFO per diluted unit (in millions, except per unit amounts):

Reconciliation of Net Income Available to

Common Unitholders to Funds From Operations per Diluted Unit



|                                                                                                                                                           |  |                    |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --- | - | ------------- | ----- | -------------- | - | ---- | ------ |  | - | ----- | - | -------------- | ----- |  | - | ---- | -
|                                                                                                                                                           |  | Quarter ended      |    
|                                                                                                                                                           |  | June 13, 2008      |     |   | June 15, 2007 |      
|                                                                                                                                                           |  | Income             |     |   | Units         |       | Per UnitAmount |   |      | Income |  |   | Units |   | Per UnitAmount |      
|Net income available to common unitholders                                                                                                                 |  | $                  | 197 |   |               | 544.3 |                | $ | .36  |        |  | $ | 152   |   |                | 540.6 |  | $ | .28  |  
|Adjustments:                                                                                                                                               |  |                    |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|Loss (gain) on dispositions, net of taxes                                                                                                                  |  |                    | (10 | ) |               |      |                |   | (.02 | )      |  |   | 2     |   |                |      |  |   |     |  
|Amortization of deferred gains, net of taxes                                                                                                               |  |                    | (1  | ) |               |      |                |   |     |        |  |   | (1    | ) |                |      |  |   |     |  
|Depreciation and amortization                                                                                                                              |  |                    | 130 |   |               |      |                |   | .24  |        |  |   | 117   |   |                |      |  |   | .22  |  
|Partnership adjustments                                                                                                                                    |  |                    | 3   |   |               |      |                |   | .01  |        |  |   | 1     |   |                |      |  |   |     |  
|Adjustments for dilutive securities:                                                                                                                       |  |                    |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|Assuming distribution of OP Units to Host for Host shares granted under its comprehensive stock plan less shares assumed purchased at average
market price |  |                    |    |   |               | .3    |                |   |     |        |  |   |      |   |                | .7    |  |   |     |  
|Assuming conversion of 2004 Exchangeable Senior Debentures                                                                                                 |  |                    | 4   |   |               | 30.9  |                |   | (.03 | )      |  |   | 4     |   |                | 29.0  |  |   | (.02 | )
|                                                                                                                                                           |  |                    |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|FFO per diluted unit (a)                                                                                                                                   |  | $                  | 323 |   |               | 575.5 |                | $ | .56  |        |  | $ | 275   |   |                | 570.3 |  | $ | .48  |  
|                                                                                                                                                           |  |                    |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|                                                                                                                                                           | 
|                                                                                                                                                           |  | Year-to-Date ended |    
|                                                                                                                                                           |  | June 13, 2008      |     |   | June 15, 2007 |      
|                                                                                                                                                           |  | Income             |     |   | Units         |       | Per UnitAmount |   |      | Income |  |   | Units |   | Per UnitAmount |      
|Net income available to common unitholders                                                                                                                 |  | $                  | 258 |   |               | 543.0 |                | $ | .47  |        |  | $ | 344   |   |                | 540.4 |  | $ | .64  |  
|Adjustments:                                                                                                                                               |  |                    |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|Gain on dispositions, net of taxes                                                                                                                         |  |                    | (10 | ) |               |      |                |   | (.02 | )      |  |   | (139  | ) |                |      |  |   | (.26 | )
|Amortization of deferred gains, net of taxes                                                                                                               |  |                    | (2  | ) |               |      |                |   |     |        |  |   | (2    | ) |                |      |  |   |     |  
|Depreciation and amortization                                                                                                                              |  |                    | 254 |   |               |      |                |   | .47  |        |  |   | 234   |   |                |      |  |   | .43  |  
|Partnership adjustments                                                                                                                                    |  |                    | 5   |   |               |      |                |   | .01  |        |  |   | 1     |   |                |      |  |   |     |  
|Adjustments for dilutive securities:                                                                                                                       |  |                    |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|Assuming distribution of units to Host for Host shares granted under its comprehensive stock plan less shares assumed purchased at average
market price    |  |                    |    |   |               | .3    |                |   |     |        |  |   |      |   |                | .8    |  |   |     |  
|Assuming conversion of 2004 Exchangeable Senior Debentures                                                                                                 |  |                    | 9   |   |               | 30.9  |                |   | (.04 | )      |  |   | 9     |   |                | 29.0  |  |   | (.03 | )
|                                                                                                                                                           |  |                    |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  
|FFO per diluted unit (a)(b)                                                                                                                                |  | $                  | 514 |   |               | 574.2 |                | $ | .89  |        |  | $ | 447   |   |                | 570.2 |  | $ | .78  |  
|                                                                                                                                                           |  |                    |     |   |               |       |                |   |      |        |  |   |       |   |                |       |  |   |      |  



|(a) | FFO per diluted unit in accordance with NAREIT is adjusted for the effects of dilutive securities. Dilutive securities may include OP Units granted to Host for Host shares granted
under Hosts comprehensive stock plans, preferred OP Units held by minority partners, exchangeable debt securities and other minority interests that have the option to convert their limited partnership interest to common OP Units. No effect is
shown for securities if they are anti-dilutive.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



32



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|(b) | The following table presents significant transactions affecting earnings per unit and FFO per diluted unit for all periods presented (in millions, except per unit amounts):
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Schedule of Significant Transactions Affecting Earnings per Unit

and Funds From Operations per Diluted Unit



|                                                  |  |                    |       |               |   |                  |  |   |       |   |  |   |       |  
|------------------------------------------------- |  | ------------------ | ----- | ------------- | - | ---------------- |  | - | ----- | - |  | - | ----- | -
|                                                  |  | Quarter ended      |      
|                                                  |  | June 13, 2008      |       | June 15, 2007 |  
|                                                  |  | Net Income(Loss)   |       | FFO           |   | Net Income(Loss) |  |   | FFO   |  
|Senior notes redemptions and debt prepayments (1) |  | $                  |      |               | $ |                 |  | $ | (46   | ) |  | $ | (46   | )
|Gain (loss) on hotel dispositions, net of taxes   |  |                    | 10    |               |   |                 |  |   | (2    | ) |  |   |      |  
|Assuming conversion of minority OP Units issuable |  |                    |      |               |   |                 |  |   |      |   |  |   | (1    | )
|                                                  |  |                    |       |               |   |                  |  |   |       |   |  |   |       |  
|Total                                             |  | $                  | 10    |               | $ |                 |  | $ | (48   | ) |  | $ | (47   | )
|                                                  |  |                    |       |               |   |                  |  |   |       |   |  |   |       |  
|Diluted units                                     |  |                    | 575.5 |               |   |                 |  |   | 571.5 |   |  |   | 571.5 |  
|Per diluted unit                                  |  | $                  | .02   |               | $ |                 |  | $ | (.08  | ) |  | $ | (.08  | )
|                                                  |  |                    |       |               |   |                  |  |   |       |   |  |   |       |  
|                                                  | 
|                                                  |  | Year-to-Date ended |      
|                                                  |  | June 13, 2008      |       | June 15, 2007 |  
|                                                  |  | Net Income(Loss)   |       | FFO           |   | Net Income(Loss) |  |   | FFO   |  
|Senior note redemptions and debt prepayments (1)  |  | $                  |      |               | $ |                 |  | $ | (46   | ) |  | $ | (46   | )
|Gain on hotel dispositions, net of taxes          |  |                    | 10    |               |   |                 |  |   | 139   |   |  |   |      |  
|                                                  |  |                    |       |               |   |                  |  |   |       |   |  |   |       |  
|Total                                             |  | $                  | 10    |               | $ |                 |  | $ | 93    |   |  | $ | (46   | )
|                                                  |  |                    |       |               |   |                  |  |   |       |   |  |   |       |  
|Diluted units                                     |  |                    | 574.2 |               |   |                 |  |   | 571.4 |   |  |   | 570.2 |  
|Per diluted unit                                  |  | $                  | .02   |               | $ |                 |  | $ | .16   |   |  | $ | (.08  | )
|                                                  |  |                    |       |               |   |                  |  |   |       |   |  |   |       |  



|(1) | Represents call premiums and the acceleration of original issue discounts and deferred financing costs, as well as incremental interest during the call or prepayment notice period,
included in interest expense in the consolidated statements of operations. We recognized these costs in conjunction with the prepayment or refinancing of senior notes and mortgages during certain periods presented.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



33



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Comparable Hotel Operating Results

We present certain operating results for our hotels, such as hotel revenues, expenses and adjusted operating profit, on a comparable hotel, or same store basis as supplemental information for investors. We
present these hotel operating results on a comparable hotel basis because we believe that doing so provides investors and management with useful information for evaluating the period-to-period performance of our hotels and facilitates comparisons
with other hotel REITs and hotel owners. The following table presents certain operating results and statistics for our comparable hotels for the periods presented herein:

Comparable Hotel Results (a)

(in millions, except hotel statistics)



|                                                         |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|-------------------------------------------------------- |  | ------------- | ------ | - | ------------------ | - | ------ | ------------ |  | - | ------------ | - |  | - | ------ | -
|                                                         |  | Quarter ended |        |   | Year-to-Date ended |  
|                                                         |  | June 13,2008  |        |   | June 15,2007       |   |        | June 13,2008 |  |   | June 15,2007 |  
|Number of hotels                                         |  |               | 115    |   |                    |   | 115    |              |  |   | 115          |   |  |   | 115    |  
|Number of rooms                                          |  |               | 60,590 |   |                    |   | 60,590 |              |  |   | 60,590       |   |  |   | 60,590 |  
|Percent change in Comparable Hotel RevPAR                |  |               | 1.7    | % |                    |   |        |              |  |   | 2.0          | % |  |   |        |  
|                                                         |  |               |        |  
|Comparable hotel sales                                   |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Room                                                     |  | $             | 841    |   |                    | $ | 827    |              |  | $ | 1,463        |   |  | $ | 1,431  |  
|Food and beverage (b)                                    |  |               | 436    |   |                    |   | 425    |              |  |   | 772          |   |  |   | 748    |  
|Other                                                    |  |               | 93     |   |                    |   | 92     |              |  |   | 165          |   |  |   | 163    |  
|                                                         |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Comparable hotel sales (c)                               |  |               | 1,370  |   |                    |   | 1,344  |              |  |   | 2,400        |   |  |   | 2,342  |  
|                                                         |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Comparable hotel expenses                                |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Room                                                     |  |               | 195    |   |                    |   | 189    |              |  |   | 350          |   |  |   | 338    |  
|Food and beverage (d)                                    |  |               | 298    |   |                    |   | 293    |              |  |   | 541          |   |  |   | 529    |  
|Other                                                    |  |               | 49     |   |                    |   | 49     |              |  |   | 87           |   |  |   | 87     |  
|Management fees, ground rent and other costs             |  |               | 415    |   |                    |   | 406    |              |  |   | 750          |   |  |   | 725    |  
|                                                         |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Comparable hotel expenses (e)                            |  |               | 957    |   |                    |   | 937    |              |  |   | 1,728        |   |  |   | 1,679  |  
|                                                         |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Comparable hotel adjusted operating profit               |  |               | 413    |   |                    |   | 407    |              |  |   | 672          |   |  |   | 663    |  
|Non-comparable hotel results, net (f)                    |  |               | 9      |   |                    |   | 8      |              |  |   | 17           |   |  |   | 20     |  
|Office buildings and limited service properties, net (g) |  |               | (1     | ) |                    |   | (1     | )            |  |   | (1           | ) |  |   | (1     | )
|Depreciation and amortization                            |  |               | (131   | ) |                    |   | (118   | )            |  |   | (255         | ) |  |   | (233   | )
|Corporate and other expenses                             |  |               | (14    | ) |                    |   | (15    | )            |  |   | (31          | ) |  |   | (37    | )
|Gain on insurance settlement                             |  |               |       |   |                    |   |       |              |  |   | 7            |   |  |   |       |  
|                                                         |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Operating profit                                         |  | $             | 276    |   |                    | $ | 281    |              |  | $ | 409          |   |  | $ | 412    |  
|                                                         |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  



|(a) | The reporting period for our comparable operating statistics for the second quarter of 2008 is from December 29, 2007 to June 13, 2008 and for the second quarter of 2007
from December 30, 2006 to June 15, 2007. For further discussion, see Reporting Periods in our most recent Annual Report of Form 10K.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(b) | The reconciliation of total food and beverage sales per the consolidated statements of operations to the comparable food and beverage sales is as follows:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                           |  |               |     |   |                    |   |     |              |  |   |              |   |  |   |     |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --- | - | ------------------ | - | --- | ------------ |  | - | ------------ | - |  | - | --- | -
|                                                                                                                           |  | Quarter ended |     |   | Year-to-Date ended |  
|                                                                                                                           |  | June 13,2008  |     |   | June 15,2007       |   |     | June 13,2008 |  |   | June 15,2007 |  
|Food and beverage sales per the consolidated statements of operations                                                      |  | $             | 440 |   |                    | $ | 427 |              |  | $ | 774          |   |  | $ | 748 |  
|Non-comparable food and beverage sales                                                                                     |  |               | (11 | ) |                    |   | (9  | )            |  |   | (25          | ) |  |   | (20 | )
|Food and beverage sales for the property for which we record rental income                                                 |  |               | 7   |   |                    |   | 7   |              |  |   | 16           |   |  |   | 16  |  
|Adjustment for food and beverage sales for comparable hotels to reflect Marriotts fiscal year for Marriott-managed
hotels |  |               |    |   |                    |   |    |              |  |   | 7            |   |  |   | 4   |  
|                                                                                                                           |  |               |     |   |                    |   |     |              |  |   |              |   |  |   |     |  
|Comparable food and beverage sales                                                                                         |  | $             | 436 |   |                    | $ | 425 |              |  | $ | 772          |   |  | $ | 748 |  
|                                                                                                                           |  |               |     |   |                    |   |     |              |  |   |              |   |  |   |     |  



|(c) | The reconciliation of total revenues per the consolidated statements of operations to the comparable hotel sales is as follows:
|--- | -------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------- | ----- | - | ------------------ | - | ----- | ------------ |  | - | ------------ | - |  | - | ----- | -
|                                                                                                                |  | Quarter ended |       |   | Year-to-Date ended |  
|                                                                                                                |  | June 13,2008  |       |   | June 15,2007       |   |       | June 13,2008 |  |   | June 15,2007 |  
|Revenues per the consolidated statements of operations                                                          |  | $             | 1,415 |   |                    | $ | 1,381 |              |  | $ | 2,473        |   |  | $ | 2,410 |  
|Non-comparable hotel sales                                                                                      |  |               | (40   | ) |                    |   | (33   | )            |  |   | (83          | ) |  |   | (72   | )
|Hotel sales for the property for which we record rental income, net                                             |  |               | 14    |   |                    |   | 14    |              |  |   | 27           |   |  |   | 27    |  
|Rental income for office buildings and select service hotels                                                    |  |               | (19   | ) |                    |   | (18   | )            |  |   | (38          | ) |  |   | (37   | )
|Adjustment for hotel sales for comparable hotels to reflect Marriotts fiscal year for Marriott- managed hotels |  |               |      |   |                    |   |      |              |  |   | 21           |   |  |   | 14    |  
|                                                                                                                |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Comparable hotel sales                                                                                          |  | $             | 1,370 |   |                    | $ | 1,344 |              |  | $ | 2,400        |   |  | $ | 2,342 |  
|                                                                                                                |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  



|(d) | The reconciliation of total food and beverage expenses per the consolidated statements of operations to the comparable food and beverage expenses is as follows:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                              |  |               |     |   |                    |   |     |              |  |   |              |   |  |   |     |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --- | - | ------------------ | - | --- | ------------ |  | - | ------------ | - |  | - | --- | -
|                                                                                                                              |  | Quarter ended |     |   | Year-to-Date ended |  
|                                                                                                                              |  | June 13,2008  |     |   | June 15,2007       |   |     | June 13,2008 |  |   | June 15,2007 |  
|Food and beverage expenses per the consolidated statements of operations                                                      |  | $             | 301 |   |                    | $ | 295 |              |  | $ | 544          |   |  | $ | 531 |  
|Non-comparable food and beverage expense                                                                                      |  |               | (8  | ) |                    |   | (6  | )            |  |   | (18          | ) |  |   | (14 | )
|Food and beverage expenses for the property for which we record rental income                                                 |  |               | 5   |   |                    |   | 4   |              |  |   | 10           |   |  |   | 9   |  
|Adjustment for food and beverage expenses for comparable hotels to reflect Marriotts fiscal year for Marriott-managed
hotels |  |               |    |   |                    |   |    |              |  |   | 5            |   |  |   | 3   |  
|                                                                                                                              |  |               |     |   |                    |   |     |              |  |   |              |   |  |   |     |  
|Comparable food and beverage expenses                                                                                         |  | $             | 298 |   |                    | $ | 293 |              |  | $ | 541          |   |  | $ | 529 |  
|                                                                                                                              |  |               |     |   |                    |   |     |              |  |   |              |   |  |   |     |  



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|(e) | The reconciliation of operating costs per the consolidated statements of operations to the comparable hotel expenses is as follows (in millions):
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                  |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------- | ----- | - | ------------------ | - | ----- | ------------ |  | - | ------------ | - |  | - | ----- | -
|                                                                                                                  |  | Quarter ended |       |   | Year-to-Date ended |  
|                                                                                                                  |  | June 13,2008  |       |   | June 15,2007       |   |       | June 13,2008 |  |   | June 15,2007 |  
|Operating costs and expenses per the consolidated statements of operations                                        |  | $             | 1,139 |   |                    | $ | 1,100 |              |  | $ | 2,064        |   |  | $ | 1,998 |  
|Non-comparable hotel expenses                                                                                     |  |               | (30   | ) |                    |   | (24   | )            |  |   | (61          | ) |  |   | (50   | )
|Hotel expenses for the property for which we record rental income                                                 |  |               | 13    |   |                    |   | 13    |              |  |   | 28           |   |  |   | 29    |  
|Rent expense for office buildings and select service hotels                                                       |  |               | (20   | ) |                    |   | (19   | )            |  |   | (39          | ) |  |   | (38   | )
|Adjustment for hotel expenses for comparable hotels to reflect Marriotts fiscal year for Marriott-managed hotels |  |               |      |   |                    |   |      |              |  |   | 15           |   |  |   | 10    |  
|Depreciation and amortization                                                                                     |  |               | (131  | ) |                    |   | (118  | )            |  |   | (255         | ) |  |   | (233  | )
|Corporate and other expenses                                                                                      |  |               | (14   | ) |                    |   | (15   | )            |  |   | (31          | ) |  |   | (37   | )
|Gain on insurance settlement                                                                                      |  |               |      |   |                    |   |      |              |  |   | 7            |   |  |   |      |  
|                                                                                                                  |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  
|Comparable hotel expenses                                                                                         |  | $             | 957   |   |                    | $ | 937   |              |  | $ | 1,728        |   |  | $ | 1,679 |  
|                                                                                                                  |  |               |       |   |                    |   |       |              |  |   |              |   |  |   |       |  



|(f) | Non-comparable hotel results, net includes the following items: (i) the results of operations of our non-comparable hotels whose operations are included in our consolidated
statements of operations as continuing operations and (ii) the difference between the number of days of operations reflected in the comparable hotel results and the number of days of operations reflected in the consolidated statements of
operations. For further detail, see Reporting Periods in our most recent Annual Report on Form 10K.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(g) | Represents rental income less rental expense for select service properties and office buildings.
|--- | ------------------------------------------------------------------------------------------------



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##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

Interest Rate Sensitivity

As of June 13, 2008 and December 31, 2007, 91% and 100%, respectively, of our
outstanding debt bore interest at fixed rates. See our most recent Annual Report on Form 10K. A change in the LIBOR rate of 100 basis points would result in an increase or decrease of approximately $5 million in interest expense on
an annual basis.

Exchange Rate Sensitivity

As we have non-U.S. operations (specifically, the ownership of hotels in Canada, Mexico and Chile and investments in our European joint venture), currency exchange risk arises as a normal part of our business. To
manage the currency exchange risk applicable to ownership in non-U.S. hotels, where possible, we may enter into forward or option contracts. The foreign currency exchange agreements that we have entered into were strictly to hedge foreign currency
risk and not for trading purposes.

During 2008, we have entered into three foreign currency forward purchase contracts totaling
60 million (approximately $88 million) to hedge a portion of the foreign currency exposure resulting from the eventual repatriation of our net investment in the European joint venture. These derivatives are considered a hedge of the
foreign currency exposure of a net investment in a foreign operation, and, in accordance with SFAS 133, are marked-to-market with changes in fair value recorded to accumulated other comprehensive income within the stockholders equity
portion of our balance sheet.Year-to-date, we have recorded a decline in the fair value of the derivative instruments totaling approximately $(1) million, which is equal to the fair value as of June 13, 2008 included in accumulated
other comprehensive income. The following table summarizes our three foreign currency purchase contracts (in millions):



|                 |  |                            |    |                              |   |                      |  |              
|---------------- |  | -------------------------- | -- | ---------------------------- | - | -------------------- |  | -------------
|Transaction Date |  | TransactionAmount in Euros |    | TransactionAmount in Dollars |   | Forward PurchaseDate
|February 2008    |  |                           | 30 |                              | $ | 43                   |  | August 2011  
|February 2008    |  |                            | 15 |                              |   | 22                   |  | February 2013
|May 2008         |  |                            | 15 |                              |   | 23                   |  | May 2014     



|Item 4. | Controls and Procedures
|------- | -----------------------

Disclosure Controls
and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Changes to Internal Control over
Financial Reporting

There have been no changes in our internal controls over financial reporting during our most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

Issuer Purchases of Equity Securities



|                               |  |                                       |     |  |                                                        |  |                                                                                     |  |                                                                                                               
|------------------------------ |  | ------------------------------------- | --- |  | ------------------------------------------------------ |  | ----------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------
|Period                         |  | Total Number of CommonUnits purchased |     |  | Average Price Paid per Common Unit                     |  | Total Number of CommonUnits Purchased as Part ofPublicly Announced Plansor Programs |  | Maximum Number (orApproximate Dollar Value) ofCommon Units that May YetBe Purchased Under thePlans or
Programs
|March 22, 2008 April 21, 2008 |  | 5,870                                 | (a) |  | 1 share of Host Hotels & Resorts, Inc. common stock(a) |  |                                                                                    |  |                                                                                                              
|                               |  |                                       |     | 
|April 22, 2008 May 21, 2008   |  | 152,133                               | (a) |  | 1 share of Host Hotels & Resorts, Inc. common stock(a) |  |                                                                                    |  |                                                                                                              
|                               |  |                                       |     | 
|May 22, 2008 June 13, 2008    |  | 2,201,895                             | (b) |  | $18.82(b)                                              |  |                                                                                    |  |                                                                                                              
|                               |  |                                       |     | 
|Total                          |  | 2,359,898                             |     |  |                                                        |  |                                                                                     |  |                                                                                                               



|(a) | Reflects (i) common OP units redeemed by holders in exchange for 1 share of Host common stock for each unit redeemed, and (ii) common OP units cancelled upon cancellation
of a corresponding number of shares of Host common stock by Host.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | On February 20, 2008, Host announced that its Board of Directors had authorized a program to repurchase up to $500 million of common stock in open market transactions or through
private transactions. The plan does not obligate Host to repurchase any specific number of shares and may be suspended at any time. There is no expiration date for the program. Under Host LPs partnership agreement, Host LP is obligated to
repurchase from Host common OP Units equal to the number of shares of common stock purchased by Host. Of the common OP Units purchased, (i) 2,200,000 units were purchased from Host equal to the number of common shares purchased by Host under
this program, and (ii) 1,895 units reflect common OP Units redeemed by holders in exchange for 1 share of Host common stock for each unit.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 6. | Exhibits
|------- | --------

The exhibits listed on the accompanying Exhibit Index are
filed as part of this report and such Exhibit Index is incorporated herein by reference.



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.40       |  | Amendment No. 1 to the Second Amended and Restated Credit Agreement, dated as of April 22, 2008, among Host Hotels & Resorts, L.P., Host Euro Business Trust, Certain Canadian
Subsidiaries of Host Hotels & Resorts, L.P., Deutsche Bank AG New York Branch, Bank of America, N.A., Citicorp North America, Inc., Société Générale, Calyon New York Branch, and Various Lenders (incorporated by
reference to Exhibit 10.41 of Host Hotels & Resorts, Inc. Current Report on Form 8-K filed on April 28, 2008).
|            | 
|12.1        |  | Computation of Ratio of Earnings to Fixed Charges and Preferred OP Unit Distributions.                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 
|31.1        |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|32         |  | Certificate of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                     



| | This certificate is being furnished solely to accompany the report pursuant to 18 U.S.C. 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURE

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



|              |  |                                             |  |                                                 
|------------- |  | ------------------------------------------- |  | ------------------------------------------------
|              |  | HOST HOTELS & RESORTS, L.P.                
|              |  | By:                                         |  | Host Hotels & Resorts, Inc., its general partner
|              | 
|July 23, 2008 |  | /s/ Brian G. Macnamara                     
|              |  | Brian G. Macnamara                         
|              |  | Senior Vice President, Corporate Controller



39