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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934.

OR

 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934



|                                              |  |                               
|--------------------------------------------- |  | ------------------------------
|For the quarterly period ended June 16, 2006. |  | 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 17, 2006
|Units of limited partnership interest |  | 539,556,252                          



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##### Table of Contents

INDEX



|                              |  |                                                                                                                      |  |         
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | --------
|                              |  |                                                                                                                      |  | Page No.
|PART I. FINANCIAL INFORMATION |  |                                                                                                                     
|                              |  |                                                                                                                     
|Item 1.                       |  | Financial Statements (unaudited):                                                                                    |  |         
|                              |  | Condensed Consolidated Balance Sheets-June 16, 2006 and December 31, 2005                                            |  | 1       
|                              |  |                                                                                                                     
|                              |  | Condensed Consolidated Statements of Operations-Quarter Ended and Year-to-Date Ended June 16, 2006 and June 17, 2005 |  | 2       
|                              |  |                                                                                                                     
|                              |  | Condensed Consolidated Statements of Cash Flows-Year-to-Date Ended June 16, 2006 and June 17, 2005                   |  | 3       
|                              |  |                                                                                                                     
|                              |  | Notes to Condensed Consolidated Financial Statements                                                                 |  | 5       
|                              |  |                                                                                                                     
|Item 2.                       |  | Managements Discussion and Analysis of Results of Operations and Financial Condition                                |  | 20      
|                              |  |                                                                                                                     
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                           |  | 39      
|                              |  |                                                                                                                     
|Item 4.                       |  | Controls and Procedures                                                                                              |  | 39      
|                              |  |                                                                                                                     
|                              |  | PART II. OTHER INFORMATION                                                                                           |  |         
|                              |  |                                                                                                                     
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                          |  | 40      
|                              |  |                                                                                                                     
|Item 6.                       |  | Exhibits                                                                                                             |  | 40      



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##### Table of Contents

CONDENSED CONSOLIDATED BALANCE SHEETS

June 16, 2006 and December 31, 2005

(unaudited, in millions)



|                                                                                                                                                                                 |  |              |        |                  |   |      
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ---------------- | - | -----
|                                                                                                                                                                                 |  | June 16,2006 |        | December 31,2005
|ASSETS                                                                                                                                                                           |  |              |        |                  |   |      
|Property and equipment, net                                                                                                                                                      |  | $            | 10,328 |                  | $ | 7,434
|Assets held for sale                                                                                                                                                             |  |              |       |                  |   | 73   
|Due from managers                                                                                                                                                                |  |              | 117    |                  |   | 41   
|Investments in affiliates                                                                                                                                                        |  |              | 101    |                  |   | 24   
|Deferred financing costs, net                                                                                                                                                    |  |              | 62     |                  |   | 63   
|Furniture, fixtures and equipment replacement fund                                                                                                                               |  |              | 140    |                  |   | 143  
|Other                                                                                                                                                                            |  |              | 199    |                  |   | 154  
|Restricted cash                                                                                                                                                                  |  |              | 102    |                  |   | 109  
|Cash and cash equivalents                                                                                                                                                        |  |              | 524    |                  |   | 184  
|                                                                                                                                                                                 |  |              |        |                  |   |      
|Total assets                                                                                                                                                                     |  | $            | 11,573 |                  | $ | 8,225
|                                                                                                                                                                                 |  |              |        |                  |   |      
|                                                                                                                                                                                 |  |             
|LIABILITIES AND PARTNERS CAPITAL                                                                                                                                                |  |              |        |                  |   |      
|Debt                                                                                                                                                                             |  |              |        |                  |   |      
|Senior notes, including $494 million and $493 million, respectively, net of discount, of Exchangeable Senior Debentures                                                          |  | $            | 3,710  |                  | $ | 3,050
|Mortgage debt                                                                                                                                                                    |  |              | 1,918  |                  |   | 1,823
|Convertible debt obligation to Host Hotels & Resorts, Inc.                                                                                                                       |  |              |       |                  |   | 387  
|Other                                                                                                                                                                            |  |              | 88     |                  |   | 110  
|                                                                                                                                                                                 |  |              |        |                  |   |      
|Total debt                                                                                                                                                                       |  |              | 5,716  |                  |   | 5,370
|Accounts payable and accrued expenses                                                                                                                                            |  |              | 215    |                  |   | 165  
|Other                                                                                                                                                                            |  |              | 231    |                  |   | 148  
|                                                                                                                                                                                 |  |              |        |                  |   |      
|Total liabilities                                                                                                                                                                |  |              | 6,162  |                  |   | 5,683
|                                                                                                                                                                                 |  |              |        |                  |   |      
|Minority interest                                                                                                                                                                |  |              | 28     |                  |   | 26   
|Limited partnership interests of third parties at redemption value (representing 19.1 million units and 19.8 million units at
June 16, 2006 and December 31, 2005, respectively) |  |              | 407    |                  |   | 379  
|Partners capital                                                                                                                                                                |  |              |        |                  |   |      
|General partner                                                                                                                                                                  |  |              | 1      |                  |   | 1    
|Cumulative redeemable preferred limited partner                                                                                                                                  |  |              | 97     |                  |   | 241  
|Limited partner                                                                                                                                                                  |  |              | 4,857  |                  |   | 1,880
|Accumulated other comprehensive income                                                                                                                                           |  |              | 21     |                  |   | 15   
|                                                                                                                                                                                 |  |              |        |                  |   |      
|Total partners capital                                                                                                                                                          |  |              | 4,976  |                  |   | 2,137
|                                                                                                                                                                                 |  |              |        |                  |   |      
|Total liabilities and partners capital                                                                                                                                          |  | $            | 11,573 |                  | $ | 8,225
|                                                                                                                                                                                 |  |              |        |                  |   |      

See notes to condensed consolidated statements.



1



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##### Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Quarter and Year-to-Date Ended June 16, 2006 and
June 17, 2005

(unaudited, in millions except per unit amounts)



|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|------------------------------------------------- |  | ------------- | ----- | - | ------------------ | - | ---- | ------------ |  | - | ------------ | - |  | - | ----- | -
|                                                  |  | Quarter ended |       |   | Year-to-date ended |  
|                                                  |  | June 16,2006  |       |   | June 17,2005       |   |      | June 16,2006 |  |   | June 17,2005 |  
|REVENUES                                          |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|Rooms                                             |  | $             | 737   |   |                    | $ | 572  |              |  | $ | 1,244        |   |  | $ | 1,039 |  
|Food and beverage                                 |  |               | 374   |   |                    |   | 298  |              |  |   | 635          |   |  |   | 542   |  
|Other                                             |  |               | 75    |   |                    |   | 63   |              |  |   | 126          |   |  |   | 113   |  
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|Total hotel sales                                 |  |               | 1,186 |   |                    |   | 933  |              |  |   | 2,005        |   |  |   | 1,694 |  
|Rental income                                     |  |               | 26    |   |                    |   | 25   |              |  |   | 55           |   |  |   | 54    |  
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|Total revenues                                    |  |               | 1,212 |   |                    |   | 958  |              |  |   | 2,060        |   |  |   | 1,748 |  
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|EXPENSES                                          |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|Rooms                                             |  |               | 168   |   |                    |   | 132  |              |  |   | 289          |   |  |   | 246   |  
|Food and beverage                                 |  |               | 258   |   |                    |   | 212  |              |  |   | 447          |   |  |   | 392   |  
|Hotel departmental expenses                       |  |               | 282   |   |                    |   | 242  |              |  |   | 493          |   |  |   | 452   |  
|Management fees                                   |  |               | 58    |   |                    |   | 43   |              |  |   | 93           |   |  |   | 75    |  
|Other property-level expenses                     |  |               | 85    |   |                    |   | 69   |              |  |   | 152          |   |  |   | 133   |  
|Depreciation and amortization                     |  |               | 107   |   |                    |   | 83   |              |  |   | 196          |   |  |   | 164   |  
|Corporate and other expenses                      |  |               | 21    |   |                    |   | 14   |              |  |   | 41           |   |  |   | 28    |  
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|Total operating costs and expenses                |  |               | 979   |   |                    |   | 795  |              |  |   | 1,711        |   |  |   | 1,490 |  
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|OPERATING PROFIT                                  |  |               | 233   |   |                    |   | 163  |              |  |   | 349          |   |  |   | 258   |  
|Interest income                                   |  |               | 9     |   |                    |   | 5    |              |  |   | 14           |   |  |   | 12    |  
|Interest expense                                  |  |               | (107  | ) |                    |   | (115 | )            |  |   | (198         | ) |  |   | (224  | )
|Net gains on property transactions                |  |               | 1     |   |                    |   | 74   |              |  |   | 2            |   |  |   | 77    |  
|Gain on foreign currency and derivative contracts |  |               |      |   |                    |   |     |              |  |   |             |   |  |   | 2     |  
|Minority interest expense                         |  |               | (3    | ) |                    |   | (2   | )            |  |   | (7           | ) |  |   | (6    | )
|Equity in earnings (losses) of affiliates         |  |               | (6    | ) |                    |   | 3    |              |  |   | (5           | ) |  |   | (1    | )
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|INCOME BEFORE INCOME TAXES                        |  |               | 127   |   |                    |   | 128  |              |  |   | 155          |   |  |   | 118   |  
|Provision for income taxes                        |  |               | (17   | ) |                    |   | (38  | )            |  |   | (18          | ) |  |   | (38   | )
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|INCOME FROM CONTINUING OPERATIONS                 |  |               | 110   |   |                    |   | 90   |              |  |   | 137          |   |  |   | 80    |  
|Income from discontinued operations               |  |               | 233   |   |                    |   | 6    |              |  |   | 387          |   |  |   | 22    |  
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|NET INCOME                                        |  |               | 343   |   |                    |   | 96   |              |  |   | 524          |   |  |   | 102   |  
|Less: Distributions on preferred units            |  |               | (4    | ) |                    |   | (7   | )            |  |   | (10          | ) |  |   | (15   | )
|Issuance costs of redeemed preferred units        |  |               | (6    | ) |                    |   | (4   | )            |  |   | (6           | ) |  |   | (4    | )
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|NET INCOME AVAILABLE TO COMMON UNITHOLDERS        |  | $             | 333   |   |                    | $ | 85   |              |  | $ | 508          |   |  | $ | 83    |  
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|BASIC EARNINGS PER COMMON UNIT:                   |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|Continuing operations                             |  | $             | .19   |   |                    | $ | .21  |              |  | $ | .27          |   |  | $ | .16   |  
|Discontinued operations                           |  |               | .46   |   |                    |   | .02  |              |  |   | .85          |   |  |   | .06   |  
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|BASIC EARNINGS PER COMMON UNIT                    |  | $             | .65   |   |                    | $ | .23  |              |  | $ | 1.12         |   |  | $ | .22   |  
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|DILUTED EARNINGS PER COMMON UNIT:                 |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|Continuing operations                             |  | $             | .19   |   |                    | $ | .21  |              |  | $ | .26          |   |  | $ | .16   |  
|Discontinued operations                           |  |               | .43   |   |                    |   | .01  |              |  |   | .85          |   |  |   | .06   |  
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  
|DILUTED EARNINGS PER COMMON UNIT                  |  | $             | .62   |   |                    | $ | .22  |              |  | $ | 1.11         |   |  | $ | .22   |  
|                                                  |  |               |       |   |                    |   |      |              |  |   |              |   |  |   |       |  

See notes to condensed consolidated statements.



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##### Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year-to-Date Ended June 16, 2006 and June 17, 2005

(unaudited, in millions)



|                                                                         |  |                    |      |   |              |   |      |  
|------------------------------------------------------------------------ |  | ------------------ | ---- | - | ------------ | - | ---- | -
|                                                                         |  | Year-to-date ended |     
|                                                                         |  | June 16,2006       |      |   | June 17,2005 |  
|OPERATING ACTIVITIES                                                     |  |                    |      |   |              |   |      |  
|Net income                                                               |  | $                  | 524  |   |              | $ | 102  |  
|Adjustments to reconcile to cash provided by operations:                 |  |                    |      |   |              |   |      |  
|Discontinued operations:                                                 |  |                    |      |   |              |   |      |  
|Gain on dispositions                                                     |  |                    | (387 | ) |              |   | (12  | )
|Depreciation                                                             |  |                    | 1    |   |              |   | 6    |  
|Depreciation and amortization                                            |  |                    | 196  |   |              |   | 164  |  
|Amortization of deferred financing costs                                 |  |                    | 6    |   |              |   | 6    |  
|Deferred tax provision                                                   |  |                    | 16   |   |              |   | 32   |  
|Net gains on property transactions                                       |  |                    | (2   | ) |              |   | (73  | )
|Gain on foreign currency and derivative contracts                        |  |                    |     |   |              |   | (2   | )
|Equity in (earnings) losses of affiliates                                |  |                    | 5    |   |              |   | 1    |  
|Distributions from equity investments                                    |  |                    | 2    |   |              |   | 1    |  
|Minority interest expense                                                |  |                    | 7    |   |              |   | 6    |  
|Change in due from managers                                              |  |                    | (84  | ) |              |   | (35  | )
|Changes in other assets                                                  |  |                    | (3   | ) |              |   | (13  | )
|Changes in other liabilities                                             |  |                    | 6    |   |              |   | (10  | )
|                                                                         |  |                    |      |   |              |   |      |  
|Cash provided by operations                                              |  |                    | 287  |   |              |   | 173  |  
|                                                                         |  |                    |      |   |              |   |      |  
|INVESTING ACTIVITIES                                                     |  |                    |      |   |              |   |      |  
|Proceeds from sales of assets, net of expenses                           |  |                    | 676  |   |              |   | 100  |  
|Proceeds from sale of interest in CBM Joint Venture LLC, net of expenses |  |                    |     |   |              |   | 91   |  
|Acquisitions                                                             |  |                    | (14  | ) |              |   |     |  
|Starwood acquisition, net of cash acquired                               |  |                    | (727 | ) |              |   |     |  
|Investment in affiliates                                                 |  |                    | (13  | ) |              |   |     |  
|Capital expenditures:                                                    |  |                    |      |   |              |   |      |  
|Renewals and replacements                                                |  |                    | (131 | ) |              |   | (100 | )
|Repositionings and other investments                                     |  |                    | (110 | ) |              |   | (30  | )
|Change in furniture, fixtures and equipment replacement fund             |  |                    | 5    |   |              |   |     |  
|Other                                                                    |  |                    |     |   |              |   | (13  | )
|                                                                         |  |                    |      |   |              |   |      |  
|Cash provided by (used in) investing activities                          |  |                    | (314 | ) |              |   | 48   |  
|                                                                         |  |                    |      |   |              |   |      |  
|FINANCING ACTIVITIES                                                     |  |                    |      |   |              |   |      |  
|Financing costs                                                          |  |                    | (19  | ) |              |   | (11  | )
|Issuance of debt                                                         |  |                    | 916  |   |              |   | 650  |  
|Repayment of credit facility                                             |  |                    | (20  | ) |              |   |     |  
|Debt prepayments                                                         |  |                    | (222 | ) |              |   | (609 | )
|Scheduled principal repayments                                           |  |                    | (29  | ) |              |   | (30  | )
|Redemption of preferred units                                            |  |                    | (150 | ) |              |   | (100 | )
|Distributions on common OP units                                         |  |                    | (103 | ) |              |   | (30  | )
|Distributions on preferred OP units                                      |  |                    | (13  | ) |              |   | (18  | )
|Distributions to minority interests                                      |  |                    | (4   | ) |              |   | (3   | )
|Change in restricted cash                                                |  |                    | 11   |   |              |   | (13  | )
|                                                                         |  |                    |      |   |              |   |      |  
|Cash provided by (used in) financing activities                          |  |                    | 367  |   |              |   | (164 | )
|                                                                         |  |                    |      |   |              |   |      |  
|INCREASE IN CASH AND CASH EQUIVALENTS                                    |  |                    | 340  |   |              |   | 57   |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                           |  |                    | 184  |   |              |   | 347  |  
|                                                                         |  |                    |      |   |              |   |      |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                 |  | $                  | 524  |   |              | $ | 404  |  
|                                                                         |  |                    |      |   |              |   |      |  

See notes to condensed consolidated statements.



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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year-to-Date Ended June 16, 2006 and June 17, 2005

(unaudited, in millions)

Supplemental disclosure of noncash investing and financing activities:

During 2006, Host Hotels & Resorts, Inc., or Host, issued approximately 24.0 million shares of its common stock upon the conversion of
approximately 7.4 million of its Convertible Subordinated Debentures valued at approximately $368 million. For each share of common stock issued by Host, we issued an equivalent number of operating partnership units, or OP units, to Host.

Through year-to-date June 16, 2006 and June 17, 2005, minority partners converted OP units valued at approximately $14 million
and $13 million, respectively, in exchange for approximately 0.7 million and 0.8 million shares, respectively, of Host common stock.

On April 10, 2006, we acquired 28 hotels from Starwood Hotels & Resorts Worldwide, Inc. (Starwood) for a purchase price of approximately $3.1 billion. The total consideration included the issuance by Host of
$2.27 billion in equity (133.5 million shares of Host common stock) and the assumption of $77 million of mortgage debt, which had a fair value of $86 million on April 10, 2006. For each share of Host common stock issued
in the transaction, we issued an equivalent OP unit to Host.

On May 2, 2006, we contributed the Sheraton Warsaw Hotel &
Towers, which we acquired on April 10, 2006 for approximately $59 million, along with cash to the European joint venture in exchange for a 32.1% general and limited partnership interest. The joint venture currently owns six hotels located
throughout Europe. See Note 6 for additional information.

On January 3, 2005, we transferred $47 million of preferred units of
Vornado Realty Trust, which we had purchased on December 30, 2004, in redemption of a minority partners interest in a consolidated partnership.

On January 6, 2005, we sold the Hartford Marriott at Farmington for a purchase price of approximately $25 million, including the assumption of approximately $20 million of mortgage debt by the buyer.

See notes to condensed consolidated statements.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



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

On April 17, 2006, the
partnership changed its name from Host Marriott, L.P. to Host Hotels & Resorts, L.P., or Host LP. 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 primarily 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 16, 2006, Host held approximately 96% of the 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, 2005.

In our
opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of June 16, 2006 and the results of our operations for the quarterly and year-to-date
periods ended June 16, 2006 and June 17, 2005 and cash flows for the year-to-date periods ended June 16, 2006 and June 17, 2005. 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 with 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 International, Inc., 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 for its
Marriott-managed hotels. 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 40% of our full-service
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 International 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 International but our fourth quarter ends on December 31.

Interest and Income Taxes Paid

Cash
payments for interest and income taxes were as follows (in millions):



|                  |  |                    |     |              |   |    
|----------------- |  | ------------------ | --- | ------------ | - | ---
|                  |  | Year-to-date ended
|                  |  | June 16,2006       |     | June 17,2005
|Interest paid     |  | $                  | 192 |              | $ | 215
|Income taxes paid |  |                    | 3   |              |   | 6  



5



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



Application of New Accounting Standards

In July 2006, the FASB issued FASB Interpretation Number 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement
No. 109, (FIN48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. The Company must determine whether it is
more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets
the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. FIN 48 applies to all tax positions related to income taxes subject to FASB Statement No. 109,
Accounting for Income Taxes.The interpretation clearly scopes out income tax positions related to FASB Statement No. 5, Accounting for Contingencies. We will adopt the provisions of this statement beginning in the first quarter
of 2007. The cumulative effect of applying the provisions of FIN 48 will be reported as an adjustment to the opening balance of retained earnings on January 1, 2007. We do not anticipate that the adoption of this statement will have a material
effect on our financial position or results of operations.



|3. | Adoption of SFAS No.123R
|-- | ------------------------

In December 2004, the
FASB issued SFAS No. 123R, Share-Based Payment (SFAS 123R), which requires that the cost from share-based payment transactions be recognized in the financial statements. The statement requires the cost of employee services received
in exchange for an award of equity instruments to be measured based on the fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award, the requisite
service period. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. We adopted the fair value provisions of SFAS 123 in 2002 and, therefore, have recognized the costs associated with all
share-based payment awards granted after January 1, 2002. Host has instituted a new restricted stock program that is accounted for using the provisions of SFAS 123R, which were effective January 1, 2006.

In connection with Hosts conversion to a REIT, we assumed the employee obligations of Host. Upon the issuance of Host common stock under either of
the two stock-based compensation plans described below, we will issue Host an equal number of OP units. Accordingly, these liabilities and related disclosures are included in our consolidated financial statements.

Restricted Stock.    Host awards restricted stock shares to executives and certain members of senior management. The service
period for the shares granted in the 2003 stock plan ended on December 31, 2005. All shares earned under the 2003 stock plan were fully vested for the year ended December 31, 2005. During the first quarter of 2006, Host granted shares to
be distributed over the next three years in annual installments. These stock awards are considered liability awards and, accordingly, Host re-evaluates the fair value of the awards quarterly. Vesting for these shares is determined both on continued
employment, as well as certain market conditions based on Hosts achievement of total shareholder return on an absolute and relative basis. For the shares that vest solely on continued employment, we recognize compensation expense over the
requisite period based on the market price at the balance sheet date. For shares that vest based on market conditions, we recognize compensation expense over the requisite service period based on the fair value of the shares at the balance sheet
date, which is estimated using a simulation or Monte Carlo method. For the purpose of the simulation, we assumed Hosts common stock had a volatility of 20.9%, which is calculated based on the volatility of Hosts stock price over the last
three years, a risk-free interest rate of 5.13%, which reflects the yield on a 3-year Treasury bond, and a stock beta of 0.859 compared to the REIT composite index based on three years of historical price data. The number of shares issued is
adjusted for forfeitures.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



Host made an additional grant of shares to executives and certain members of senior management in
February 2006 (2006 supplemental grant). Twenty-five percent of the awards vested immediately and were expensed during the first quarter, while the remaining 75% vest over a three-year period based on continued employment. We recognize
compensation expense for the outstanding portion of this grant based on the market price at the balance sheet date. This grant, as with all of the executive restricted stock awards, allows executive employees to have a percentage of the restricted
stock awards withheld to meet tax requirements and, accordingly, they are classified as liability awards.

During the first quarter of 2006
and 2005, executives and certain members of senior management were granted a total of approximately 3.4 million and 18,000 restricted shares, respectively. We recorded compensation expense of approximately $6.1 million and
$4.6 million during the second quarter of 2006 and 2005, respectively, and $12.8 million and $8.4 million year-to-date 2006 and 2005, respectively, related to these awards. The total compensation cost, based on the valuation criteria
above, that relates to nonvested restricted stock awards not yet recognized at June 16, 2006 was approximately $43 million, which, if earned, will be recognized over the weighted average of 2.3 years. Under these awards, approximately
3.2 million shares were outstanding at June 16, 2006. Hosts executive restricted stock awards allow executive employees to have a percentage of the restricted stock awards withheld to meet tax requirements. For the prior years
awards and the 2006 supplemental grant issued for the year-to-date periods ended June 16, 2006 and June 17, 2005, we withheld $11.7 million and $7.7 million, respectively, to meet these tax requirements.

Host also maintains a restricted stock program for upper-middle management. Vesting for these shares is determined based on continued employment and,
accordingly, we recognize compensation expense ratably over the vesting period. These stock awards are considered equity awards, whereby compensation costs related to the awards are measured based on the fair market value as of the grant date.
During 2006 and 2005, approximately 88,000 shares and 78,000 shares were granted, respectively. During 2006 and 2005, approximately 91,000 upper middle-management shares have been issued, approximately 4,000 have been forfeited, and approximately
71,000 remain unvested. The weighted average grant date fair value of the outstanding shares is $19.22. Approximately 48,000 of these shares will vest during 2006. We recorded approximately $.3 million during both the second quarter of 2006 and
2005, respectively, and $.7 million and $.6 million year-to-date 2006 and 2005, respectively, of compensation expense related to these shares. The total compensation cost, measured on the grant date, that relates to nonvested restricted
stock awards not yet recognized at June 16, 2006 was approximately $2 million, which, if earned, will be recognized over the weighted average of 1.9 years.

Employee Stock Purchase Plan.    Under the terms of Hosts employee stock purchase plan, eligible employees may purchase common stock through payroll deductions at 90% of the lower of
market value at the beginning or end of the plan year, which runs from February 1 through January 31. We record compensation expense for Hosts employee stock purchase plan based on the fair value of the employees purchase
rights on the grant date, which is estimated using an option-pricing model with the following assumptions for the 2006 and 2005 plan years: Risk-free interest rate of 4.7% and 4.3%, respectively, volatility of 33% and expected life of one year for
all periods. We assume a dividend yield of 0% for these grants, as no dividends are accrued during the one year vesting period. Approximately 14,000 shares were issued in both year-to-date 2006 and 2005. The weighted average fair value of the shares
granted was $4.73 and $4.27 for 2006 and 2005, respectively. The compensation expense was not material for the periods presented.

Employee Stock Options.    Effective January 1, 2002, we adopted the expense recognition provisions of SFAS 123 for employee stock options granted on or after January 1, 2002 only. Host has not granted
any stock options after December 2002. Options granted prior to 2002 were fully vested as of December 31, 2005. Options granted during 2002 will be fully vested during 2006.



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(Unaudited)



The fair value of the 2002 stock options was estimated on the date of grant using an option-pricing
model. Compensation expense for the stock options is recognized on a straight-line basis over the vesting period. The weighted average fair value per option granted during 2002 was $1.41. We recorded compensation expense of approximately $53,000 and
$55,000 for the second quarter of 2006 and 2005, respectively, and $106,000 and $111,000 for year-to-date 2006 and 2005, respectively. The aggregate intrinsic values of the outstanding and exercisable options at June 16, 2006 were approximately
$17 million and $14 million, respectively.

The following table is a summary of the status of Hosts stock option plans for
the year-to-date June 16, 2006 and year ended December 31, 2005.



|                    |  |                     |   |                   |                                |   |                     |      |   |                                |   |  
|------------------- |  | ------------------- | - | ----------------- | ------------------------------ | - | ------------------- | ---- | - | ------------------------------ | - | -
|                    |  | June 16, 2006       |   | December 31, 2005
|                    |  | Shares(in millions) |   |                   | WeightedAverage Exercise Price |   | Shares(in millions) |      |   | WeightedAverage Exercise Price
|Beginning balance   |  | 1.4                 |   |                   | $                              | 6 |                     | 2.6  |   |                                | $ | 6
|Granted             |  |                    |   |                   |                                |  |                     |     |   |                                |   | 
|Exercised           |  | (.3                 | ) |                   |                                | 7 |                     | (1.1 | ) |                                |   | 6
|Forfeited/expired   |  |                    |   |                   |                                |  |                     | (.1  | ) |                                |   | 6
|                    |  |                     |   |                   |                                |   |                     |      |   |                                |   |  
|Ending balance      |  | 1.1                 |   |                   |                                | 6 |                     | 1.4  |   |                                |   | 6
|                    |  |                     |   |                   |                                |   |                     |      |   |                                |   |  
|Options exercisable |  | .9                  |   |                   |                                |   |                     | 1.2  |   |                                |   |  
|                    |  |                     |   |                   |                                |   |                     |      |   |                                |   |  

The following table summarizes information about Hosts stock options at June 16, 2006:



|                         |  |                     |  |                                           |  |                                 |    |                     |    |                                |   |   
|------------------------ |  | ------------------- |  | ----------------------------------------- |  | ------------------------------- | -- | ------------------- | -- | ------------------------------ | - | --
|                         |  | Options Outstanding |  | Options Exercisable                      
|Range of Exercise Prices |  | Shares(in millions) |  | WeightedAverage RemainingContractual Life |  | Weighted Average Exercise Price |    | Shares(in millions) |    | WeightedAverage Exercise Price
|$1  3                   |  | .4                  |  | 1                                         |  | $                               | 3  |                     | .4 |                                | $ | 3 
|4  6                    |  | .1                  |  | 2                                         |  |                                 | 6  |                     | .1 |                                |   | 6 
|7  9                    |  | .5                  |  | 10                                        |  |                                 | 8  |                     | .3 |                                |   | 8 
|10  12                  |  | .1                  |  | 9                                         |  |                                 | 11 |                     | .1 |                                |   | 11
|13  19                  |  |                    |  | 6                                         |  |                                 | 18 |                     |   |                                |   | 18
|                         |  |                     |  |                                           |  |                                 |    |                     |    |                                |   |   
|                         |  | 1.1                 |  |                                           |  |                                 |    |                     | .9 |                                |   |   
|                         |  |                     |  |                                           |  |                                 |    |                     |    |                                |   |   

Deferred Stock.    Host discontinued issuing deferred stock to
employees in 2003. Prior to that time, deferred stock granted generally vested over 10 years in annual installments commencing one year after the date of grant. Certain employees may elect to defer payments until termination or retirement. We accrue
compensation expense on a straight-line basis over the vesting period for the fair market value of the shares on the date of grant, less estimated forfeitures. As of June 16, 2006, approximately .9 million shares, valued at approximately
$5 million based on the grant date fair value, are outstanding. Approximately .8 million of these shares are vested as of June 16, 2006. The compensation cost related to deferred stock was not material for all periods presented. The
implementation of SFAS 123R did not effect the calculation of compensation expense for the deferred stock.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|4. | 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, convertible 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 16, 2006                          |     |   | June 17, 2005 |      
|                                                                                                                                                         |  | Income/(loss)                          |     |   | Units         |       | PerUnitAmount |   |      | Income/(loss) |  |   | Units |   | PerUnitAmount |      
|                                                                                                                                                         |  | (in millions, except per unit amounts) |    
|Net income                                                                                                                                               |  | $                                      | 343 |   |               | 511.9 |               | $ | .67  |               |  | $ | 96    |   |               | 373.1 |  | $ | .26  |  
|Distributions on preferred units                                                                                                                         |  |                                        | (4  | ) |               |      |               |   | (.01 | )             |  |   | (7    | ) |               |      |  |   | (.02 | )
|Issuance costs of redeemed preferred units(1)                                                                                                            |  |                                        | (6  | ) |               |      |               |   | (.01 | )             |  |   | (4    | ) |               |      |  |   | (.01 | )
|                                                                                                                                                         |  |                                        |     |   |               |       |               |   |      |               |  |   |       |   |               |       |  |   |      |  
|Basic earnings (loss) available to common unitholders                                                                                                    |  |                                        | 333 |   |               | 511.9 |               |   | .65  |               |  |   | 85    |   |               | 373.1 |  |   | .23  |  
|Assuming distribution of units to Host for Host shares granted under its comprehensive stock plan, less shares assumed purchased at average
market price |  |                                        |    |   |               | 2.0   |               |   |     |               |  |   |      |   |               | 2.2   |  |   |     |  
|Assuming conversion of minority OP units issuable                                                                                                        |  |                                        |    |   |               | 2.5   |               |   | (.01 | )             |  |   |      |   |               | 1.8   |  |   |     |  
|Assuming conversion of Exchangeable Senior Debentures                                                                                                    |  |                                        | 4   |   |               | 28.1  |               |   | (.02 | )             |  |   | 4     |   |               | 27.5  |  |   | (.01 | )
|                                                                                                                                                         |  |                                        |     |   |               |       |               |   |      |               |  |   |       |   |               |       |  |   |      |  
|Diluted earnings available to common unitholders                                                                                                         |  | $                                      | 337 |   |               | 544.5 |               | $ | .62  |               |  | $ | 89    |   |               | 404.6 |  | $ | .22  |  
|                                                                                                                                                         |  |                                        |     |   |               |       |               |   |      |               |  |   |       |   |               |       |  |   |      |  



|                                                                                                                                                         |  |                                        |     |   |               |       |               |   |      |               |  |   |       |   |               |       |  |   |      |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | --- | - | ------------- | ----- | ------------- | - | ---- | ------------- |  | - | ----- | - | ------------- | ----- |  | - | ---- | -
|                                                                                                                                                         |  | Year-to-date ended                     |    
|                                                                                                                                                         |  | June 16, 2006                          |     |   | June 17, 2005 |      
|                                                                                                                                                         |  | Income/(loss)                          |     |   | Units         |       | PerUnitAmount |   |      | Income/(loss) |  |   | Units |   | PerUnitAmount |      
|                                                                                                                                                         |  | (in millions, except per unit amounts) |    
|Net income                                                                                                                                               |  | $                                      | 524 |   |               | 455.1 |               | $ | 1.15 |               |  | $ | 102   |   |               | 372.9 |  | $ | .27  |  
|Distributions on preferred units                                                                                                                         |  |                                        | (10 | ) |               |      |               |   | (.02 | )             |  |   | (15   | ) |               |      |  |   | (.04 | )
|Issuance costs of redeemed preferred units(1)                                                                                                            |  |                                        | (6  | ) |               |      |               |   | (.01 | )             |  |   | (4    | ) |               |      |  |   | (.01 | )
|                                                                                                                                                         |  |                                        |     |   |               |       |               |   |      |               |  |   |       |   |               |       |  |   |      |  
|Basic earnings available to common unitholders                                                                                                           |  |                                        | 508 |   |               | 455.1 |               |   | 1.12 |               |  |   | 83    |   |               | 372.9 |  |   | .22  |  
|Assuming distribution of units to Host for Host shares granted under its comprehensive stock plan, less shares assumed purchased at average
market price |  |                                        |    |   |               | 2.0   |               |   | (.01 | )             |  |   |      |   |               | 2.2   |  |   |     |  
|Assuming conversion of minority OP units issuable                                                                                                        |  |                                        |    |   |               | 2.5   |               |   |     |               |  |   |      |   |               |      |  |   |     |  
|                                                                                                                                                         |  |                                        |     |   |               |       |               |   |      |               |  |   |       |   |               |       |  |   |      |  
|Diluted earnings available to common unitholders                                                                                                         |  | $                                      | 508 |   |               | 459.6 |               | $ | 1.11 |               |  | $ | 83    |   |               | 375.1 |  | $ | .22  |  
|                                                                                                                                                         |  |                                        |     |   |               |       |               |   |      |               |  |   |       |   |               |       |  |   |      |  

---

|(1) | Represents the original issuance costs associated with the redemption of the Class C preferred units in 2006 and the Class B preferred units in 2005. For more information, see Note
8.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|5. | Property and Equipment
|-- | ----------------------

Property and equipment
consists of the following as of:



|                                               |  |               |        |   |                  |   |        |  
|---------------------------------------------- |  | ------------- | ------ | - | ---------------- | - | ------ | -
|                                               |  | June 16,2006  |        |   | December 31,2005 |  
|                                               |  | (in millions) |       
|Land and land improvements                     |  | $             | 1,196  |   |                  | $ | 864    |  
|Buildings and leasehold improvements           |  |               | 10,613 |   |                  |   | 8,163  |  
|Furniture and equipment                        |  |               | 1,413  |   |                  |   | 1,176  |  
|Construction in progress                       |  |               | 186    |   |                  |   | 179    |  
|                                               |  |               |        |   |                  |   |        |  
|                                               |  |               | 13,408 |   |                  |   | 10,382 |  
|Less accumulated depreciation and amortization |  |               | (3,080 | ) |                  |   | (2,948 | )
|                                               |  |               |        |   |                  |   |        |  
|                                               |  | $             | 10,328 |   |                  | $ | 7,434  |  
|                                               |  |               |        |   |                  |   |        |  



|6. | Investment in Affiliates
|-- | ------------------------

In connection with the
Starwood acquisition, we entered into an Agreement of Limited Partnership on March 24, 2006, forming a joint venture in The Netherlands with Stichting Pensioenfonds ABP, the Dutch pension fund (ABP), and Jasmine Hotels Pte Ltd, an
affiliate of GIC Real Estate Pte Ltd (GIC RE), the real estate investment company of the Government of Singapore Investment Corporation Pte Ltd (GIC). The purpose of the joint venture is the acquisition and ownership of hotels located in
Europe.

The joint venture has total assets of approximately 535 million, and total capital of approximately
185 million, of which approximately 57 million, or $72 million, was contributed by us in the form of cash and through the contribution of the Sheraton Warsaw Hotel & Towers in Warsaw, Poland, which we acquired on
April 10, 2006. Through newly-formed Dutch BVs (private companies with limited liability), Host LP is a limited partner (together with ABP and GIC RE, the Limited Partners) and serves as the general partner. The percentage
interests of the parties are 19.9% for ABP, 48% for GIC RE and 32.1% for Host LP (including its limited and general partner interests).

In
addition to our contribution of the Sheraton Warsaw Hotel & Towers, the joint venture acquired from Starwood the following four hotels: the Sheraton Roma Hotel & Conference Center, Rome, Italy; The Westin Palace, Madrid, Spain; the
Sheraton Skyline Hotel & Conference Centre, Hayes, United Kingdom; and The Westin Palace, Milan, Italy, on May 3, 2006. The joint venture subsequently acquired The Westin Europa & Regina, Venice, Italy, on June 13, 2006.

On July 21, 2006, the joint venture signed a definitive agreement to purchase the Hotel Arts Barcelona for approximately
417 million, including the assumption of approximately 280 million of mortgage debt with an interest rate under 5%. The 483-room Ritz-Carlton managed hotel is located on the Mediterranean Sea in Barcelona, Spain. The sale is
expected to close in the third quarter of 2006, subject to customary closing conditions. The joint venture agreement was amended to increase the overall investment commitment levels from the partners to accommodate this acquisition.

The partners are contemplating entering into an agreement to further expand the joint venture, which would be subject to antitrust clearance. In the
event that such approval is obtained, the partners would increase the aggregate size of the joint venture to approximately 533 million of equity (of which approximately 171 million would be contributed by Host LP) and, after
giving effect to indebtedness the joint venture would be expected to incur, aggregate funds available for investment are expected to be approximately 1.5 billion. In connection with



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



the expanded joint venture, subject to certain exceptions, the partners would agree that they would not make investments that are consistent with the joint
ventures investment parameters for a period of two years (three years in the case of Host LP) outside of the joint venture, or until at least 90% of the joint ventures committed capital is called or reserved for use prior to such date.

Pursuant to the agreements, distributions to partners will be made on a pro-rata basis (based on their limited partnership interests)
until certain return thresholds are met. As those thresholds are met, our general partnership interest will receive an increasing percentage of the distributions. An affiliate of Host LP has entered into an asset management agreement with the joint
venture to provide asset management services in return for a quarterly asset management fee. Host LP or its affiliates will be responsible for paying certain expenses related to asset management, including all salaries and employee benefits of
employees and related overhead, including rent, utilities, office equipment, necessary administrative and clerical functions and other similar overhead expenses. The initial term of the joint venture is ten years subject to two one-year extensions
with partner approval. Due to the ownership structure of the joint venture described above and the non-Host limited partners rights to cause the dissolution and liquidation of the joint venture at any time, the joint venture is not
consolidated in our financial statements.



|7. | Debt
|-- | ----

On April 4, 2006, we issued
$800 million of 63/4% Series P senior notes and received net proceeds of approximately $787 million.
The Series P senior notes mature on June 1, 2016 and are equal in right of payment with all of our other senior indebtedness. Interest is payable semiannually in arrears on June 1 and December 1, beginning on
December 1, 2006. A portion of the proceeds from the offering was used for the Starwood acquisition. During the second quarter, we used the remaining proceeds to redeem the remaining $136 million of our 77/8% Series B senior notes and related prepayment premiums and to redeem the $150 million 10% Class C preferred
units and accrued distributions.

On April 5, 2006, we redeemed the remaining $2 million of outstanding
Convertible Subordinated Debentures held by third parties and redeemed the remaining $17 million of Convertible Subordinated Debentures held by related parties for cash. As a result, we eliminated our Convertible debt obligation to Host
Hotels & Resorts, Inc.

On April 10, 2006, we assumed $77 million of mortgage debt related to two hotels acquired in the
Starwood transaction. The debt had a fair value of $86 million on April 10, 2006.

On June 1, 2006, we repaid the
$84 million mortgage debt on the Boston Marriott Copley Place.



|8. | Preferred Units Redemption
|-- | --------------------------

On May 19, 2006,
we redeemed, at par, all 5,980,000 units of our 10% Class C Cumulative Preferred units, or Class C preferred units, for approximately $151 million, including accrued distributions. The fair value of the Class C preferred units (which is equal
to the redemption price) exceeded the carrying value of the preferred units by approximately $6 million. The $6 million represents the original issuance costs. Accordingly, this amount has been reflected in the determination of net income available
to common unitholders for the purpose of calculating our basic and diluted earnings per unit.



|9. | Distributions
|-- | -------------

On June 15, 2006,
Hosts Board of Directors declared a cash dividend of $0.17 per share on its common stock. The dividend was paid on July 17, 2006 to stockholders of record as of June 30, 2006. Accordingly, we made a $0.17 distribution per common
OP unit.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



Additionally, on June 15, 2006, Hosts Board of Directors declared a quarterly cash
dividend of $0.5546875 per share on its Class E preferred stock. The dividend was paid on July 17, 2006 to preferred stockholders of record as of June 30, 2006. Accordingly, we made a similar distribution on our Class E preferred OP
units.



|10. | Geographic Information
|--- | ----------------------

We consider each one of our
full-service 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. All of our non-full-service hotel activities
(primarily our limited-service leased hotels and office buildings) are immaterial. Accordingly, we report one business segment, hotel ownership. As of June 16, 2006, 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 16,2006  |       | June 17,2005       |   | June 16,2006 |  | June 17,2005
|              |  | (in millions)
|United States |  | $             | 1,175 |                    | $ | 930          |  | $            | 1,999 |  | $ | 1,699
|Canada        |  |               | 27    |                    |   | 23           |  |              | 47    |  |   | 40   
|Chile         |  |               | 3     |                    |   |             |  |              | 3     |  |   |     
|Mexico        |  |               | 7     |                    |   | 5            |  |              | 11    |  |   | 9    
|              |  |               |       |                    |   |              |  |              |       |  |   |      
|Total revenue |  | $             | 1,212 |                    | $ | 958          |  | $            | 2,060 |  | $ | 1,748
|              |  |               |       |                    |   |              |  |              |       |  |   |      



|11. | Comprehensive Income
|--- | --------------------

Our other comprehensive
income consists of unrealized gains and losses on foreign currency translation adjustments and the receipt of cash from HMS Host Corporation, or HM Services, subsequent to the exercise of the options held by certain former and current employees of
Marriott International, pursuant to our distribution agreement with HM Services.



|                           |  |               |     |              |                    |    |              |  |              |     |  |   |   
|-------------------------- |  | ------------- | --- | ------------ | ------------------ | -- | ------------ |  | ------------ | --- |  | - | --
|                           |  | Quarter ended |     |              | Year-to-date ended
|                           |  | June 16,2006  |     | June 17,2005 |                    |    | June 16,2006 |  | June 17,2005
|                           |  | (in millions)
|Net income                 |  | $             | 330 |              | $                  | 91 |              |  | $            | 502 |  | $ | 97
|Other comprehensive income |  |               | 6   |              |                    | (1 | )            |  |              | 6   |  |   |  
|                           |  |               |     |              |                    |    |              |  |              |     |  |   |   
|Comprehensive income       |  | $             | 336 |              | $                  | 90 |              |  | $            | 508 |  | $ | 97
|                           |  |               |     |              |                    |    |              |  |              |     |  |   |   



|12. | Dispositions
|--- | ------------

Dispositions.We sold four hotels during the first quarter of 2006 and one hotel during the second quarter of 2006 for total net proceeds of approximately $676 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 in the consolidated statements of operations for the periods presented:



|                                 |  |               |     |                    |   |              |  |              |     |  |   |   
|-------------------------------- |  | ------------- | --- | ------------------ | - | ------------ |  | ------------ | --- |  | - | --
|                                 |  | Quarter ended |     | Year-to-date ended
|                                 |  | June 16,2006  |     | June 17,2005       |   | June 16,2006 |  | June 17,2005
|                                 |  | (in millions)
|Revenues                         |  | $             | 4   |                    | $ | 34           |  | $            | 18  |  | $ | 63
|Income before taxes              |  |               | 1   |                    |   | 6            |  |              | 2   |  |   | 10
|Gain on dispositions, net of tax |  |               | 232 |                    |   |             |  |              | 385 |  |   | 12



12



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|13. | Starwood Acquisition
|--- | --------------------

On April 10, 2006,
we acquired 25 domestic hotels and three foreign hotels from Starwood Hotels & Resorts Worldwide, Inc., or Starwood, through a series of transactions, including the merger of Starwood Hotels & Resorts, a Maryland real estate
investment trust, or Starwood Trust, with and into a subsidiary of Host, the acquisition of the capital stock of Sheraton Holding Corporation and the acquisition of four domestic hotels in a purchase structured to allow Hosts subsidiaries to
complete like-kind exchange transactions for federal income tax purposes. These transactions were completed pursuant to the Master Agreement and Plan of Merger, dated as of November 14, 2005, and amended as of March 24, 2006, (the
Master Agreement) among Host, Host LP, Starwood, Starwood Trust and certain of their respective affiliates. A joint venture in Europe, in which we own a 32.1% general and limited partner interest, acquired four European hotels on
May 3, 2006 and one European hotel on June 13, 2006. We contributed the Sheraton Warsaw Hotel & Towers, which we acquired in the Starwood transaction on April 10, 2006, and cash to the joint venture on May 2, 2006. For
more information on the joint venture, see Note 6. Starwood and Host have agreed that Starwood will retain the two Fijian hotels included in the Merger Agreement. The contract purchase price of these assets totaled $129 million, including
$31 million of debt.

For the 28 hotels included in the initial closing, the total consideration paid by Host to Starwood and its
shareholders included the issuance of $2.27 billion of equity (133,529,412 shares of Host common stock) to Starwood stockholders, the assumption of $77 million in debt and the cash payment of approximately $727 million. An exchange price of
Host common stock of $16.97 per share was calculated based on guidance set forth in Emerging Issues Task Force Issue No. 99-12, as the average of the closing prices of Host common stock during the range of trading days from two days before and
after the November 14, 2005 announcement date. For each share of Host common stock issued in the transaction, we issued an equivalent OP unit to Host.

The purchase price of the acquired assets and liabilities has been initially recorded based on our estimates of fair value. Property and equipment has been recorded on a stepped-up basis from historical costs and the
fair value of assumed debt has been based on expected future debt service payments discounted at risk-adjusted rates. Other assets and liabilities are recorded at historical costs, which is believed to be equivalent to fair value. While the purchase
price has been allocated among individual hotels, we are still in the process of evaluating the fair value of the allocation of the purchase price among each individual hotels assets and liabilities, including land, property and equipment
items, other assets and liabilities, and assumed agreements, including ground and retail space leases and other intangible assets. We are in the process of obtaining third-party valuations of certain assets and we expect to finalize the allocations
by the end of the year. Accordingly, the purchase price allocations may be subject to refinement. The operating results of each of the consolidated acquired hotels are included in our statement of operations from the date acquired.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed in the Starwood transaction, less the Sheraton
Warsaw Hotel & Towers, which was contributed to the European joint venture on May 2, 2006 (in millions):



|                            |  |   |       |  
|--------------------------- |  | - | ----- | -
|Property and equipment, net |  | $ | 3,055 |  
|Other assets                |  |   | 8     |  
|                            |  |   |       |  
|Total assets                |  |   | 3,063 |  
|Debt(a)                     |  |   | (326  | )
|Other liabilities           |  |   | (18   | )
|                            |  |   |       |  
|Net assets acquired         |  | $ | 2,719 |  
|                            |  |   |       |  

---

|(a) | For purposes of the preparation of the Starwood transaction assets and liabilities and the pro forma income statement below, we assumed that $240 million of the proceeds from
the issuance of the Series P senior notes (see Note 7) were used to fund a portion of the acquisition. In addition, we assumed $77 million of mortgage debt with a fair value of $86 million in the transaction.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



13



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



Our summarized unaudited consolidated pro forma results of operations, assuming the Starwood
acquisition occurred on January 1, 2005, are as follows (in millions, except per share amounts):



|                                           |  |               |       |                    |   |              |  |              |       |  |   |      
|------------------------------------------ |  | ------------- | ----- | ------------------ | - | ------------ |  | ------------ | ----- |  | - | -----
|                                           |  | Quarter ended |       | Year-to-date ended
|                                           |  | June 16,2006  |       | June 17,2005       |   | June 16,2006 |  | June 17,2005
|Revenues                                   |  | $             | 1,321 |                    | $ | 1,193        |  | $            | 2,308 |  | $ | 2,108
|Income from continuing operations          |  |               | 124   |                    |   | 114          |  |              | 142   |  |   | 91   
|Net income                                 |  |               | 357   |                    |   | 120          |  |              | 529   |  |   | 113  
|Net income available to common unitholders |  |               | 347   |                    |   | 109          |  |              | 513   |  |   | 94   
|Basic earnings per common unit:            |  |               |       |                    |   |              |  |              |       |  |   |      
|Continuing operations                      |  | $             | .21   |                    | $ | .20          |  | $            | .24   |  | $ | .14  
|Discontinued operations                    |  |               | .43   |                    |   | .01          |  |              | .72   |  |   | .04  
|                                           |  |               |       |                    |   |              |  |              |       |  |   |      
|Basic earnings per common unit             |  | $             | .64   |                    | $ | .21          |  | $            | .96   |  | $ | .18  
|                                           |  |               |       |                    |   |              |  |              |       |  |   |      
|Diluted earnings per common unit:          |  |               |       |                    |   |              |  |              |       |  |   |      
|Continuing operations                      |  | $             | .20   |                    | $ | .19          |  | $            | .23   |  | $ | .14  
|Discontinued operations                    |  |               | .41   |                    |   | .01          |  |              | .72   |  |   | .04  
|                                           |  |               |       |                    |   |              |  |              |       |  |   |      
|Diluted earnings per common unit           |  | $             | .61   |                    | $ | .20          |  | $            | .95   |  | $ | .18  
|                                           |  |               |       |                    |   |              |  |              |       |  |   |      



|14. | Acquisitions
|--- | ------------

On May 17, 2006, we signed a
definitive agreement to purchase The Westin Kierland Resort & Spa in Scottsdale, Arizona for approximately $393 million, which includes the assumption of $135 million of mortgage debt with an interest rate of approximately 5.08%.
The 732-room resort includes a 27-hole golf course and a full-service spa. The sale is subject to customary closing conditions and is expected to close during the third quarter of 2006.



|15. | Supplemental Guarantor and Non-Guarantor Subsidiary Information
|--- | ---------------------------------------------------------------

Many of our subsidiaries guarantee our senior notes except those owning 29 of the full-service hotels and HMH HPT RIBM LLC and HMH HPT CBM LLC, the lessees of the Residence Inn and Courtyard properties, respectively.
The separate financial statements of each guaranteeing subsidiary (each, a Guarantor Subsidiary) are not presented because 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 16, 2006 and December 31, 2005, results of operations for the quarterly and year-to-date periods ended June 16, 2006 and June 17, 2005 and cash flows for the
year-to-date periods ended June 16, 2006 and June 17, 2005 of the parent, Guarantor Subsidiaries and the Non-Guarantor Subsidiaries:



14



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



Supplemental Condensed Consolidating Balance Sheets

(in millions)

June 16, 2006



|                                                              |  |        |       |                        |   |                             |  |              |       |  |              |        |   |  |   |       
|------------------------------------------------------------- |  | ------ | ----- | ---------------------- | - | --------------------------- |  | ------------ | ----- |  | ------------ | ------ | - |  | - | ------
|                                                              |  | Parent |       | Guarantor Subsidiaries |   | Non- Guarantor Subsidiaries |  | Eliminations |       |  | Consolidated
|Property and equipment, net                                   |  | $      | 915   |                        | $ | 4,572                       |  | $            | 4,841 |  | $            |       |   |  | $ | 10,328
|Due from managers                                             |  |        | 12    |                        |   | 14                          |  |              | 101   |  |              | (10    | ) |  |   | 117   
|Investments in affiliates                                     |  |        | 6,889 |                        |   | 630                         |  |              | 30    |  |              | (7,448 | ) |  |   | 101   
|Rent receivable                                               |  |        | 4     |                        |   | 46                          |  |              | 217   |  |              | (267   | ) |  |   |      
|Deferred financing costs, net                                 |  |        | 46    |                        |   | 3                           |  |              | 13    |  |              |       |   |  |   | 62    
|Furniture, fixtures and equipment replacement fund            |  |        | 26    |                        |   | 33                          |  |              | 81    |  |              |       |   |  |   | 140   
|Other                                                         |  |        | 292   |                        |   | 467                         |  |              | 178   |  |              | (738   | ) |  |   | 199   
|Restricted cash                                               |  |        | 1     |                        |   | 6                           |  |              | 95    |  |              |       |   |  |   | 102   
|Cash and cash equivalents                                     |  |        | 360   |                        |   | 19                          |  |              | 145   |  |              |       |   |  |   | 524   
|                                                              |  |        |       |                        |   |                             |  |              |       |  |              |        |   |  |   |       
|Total assets                                                  |  | $      | 8,545 |                        | $ | 5,790                       |  | $            | 5,701 |  | $            | (8,463 | ) |  | $ | 11,573
|                                                              |  |        |       |                        |   |                             |  |              |       |  |              |        |   |  |   |       
|Debt                                                          |  | $      | 3,028 |                        | $ | 1,327                       |  | $            | 1,868 |  | $            | (507   | ) |  | $ | 5,716 
|Other liabilities                                             |  |        | 134   |                        |   | 404                         |  |              | 642   |  |              | (734   | ) |  |   | 446   
|                                                              |  |        |       |                        |   |                             |  |              |       |  |              |        |   |  |   |       
|Total liabilities                                             |  |        | 3,162 |                        |   | 1,731                       |  |              | 2,510 |  |              | (1,241 | ) |  |   | 6,162 
|Minority interests                                            |  |        |      |                        |   |                            |  |              | 28    |  |              |       |   |  |   | 28    
|Limited partner interest of third parties at redemption value |  |        | 407   |                        |   |                            |  |              |      |  |              |       |   |  |   | 407   
|Partners capital                                             |  |        | 4,976 |                        |   | 4,059                       |  |              | 3,163 |  |              | (7,222 | ) |  |   | 4,976 
|                                                              |  |        |       |                        |   |                             |  |              |       |  |              |        |   |  |   |       
|Total liabilities and partners capital                       |  | $      | 8,545 |                        | $ | 5,790                       |  | $            | 5,701 |  | $            | (8,463 | ) |  | $ | 11,573
|                                                              |  |        |       |                        |   |                             |  |              |       |  |              |        |   |  |   |       

December 31, 2005



|                                                              |  |        |       |   |                        |   |                             |  |              |       |  |              |        |   |  |   |      
|------------------------------------------------------------- |  | ------ | ----- | - | ---------------------- | - | --------------------------- |  | ------------ | ----- |  | ------------ | ------ | - |  | - | -----
|                                                              |  | Parent |       |   | Guarantor Subsidiaries |   | Non- Guarantor Subsidiaries |  | Eliminations |       |  | Consolidated
|Property and equipment, net                                   |  | $      | 875   |   |                        | $ | 3,549                       |  | $            | 3,010 |  | $            |       |   |  | $ | 7,434
|Assets held for sale                                          |  |        | 38    |   |                        |   | 35                          |  |              |      |  |              |       |   |  |   | 73   
|Due from managers                                             |  |        | (7    | ) |                        |   | 5                           |  |              | 46    |  |              | (3     | ) |  |   | 41   
|Investments in affiliates                                     |  |        | 3,887 |   |                        |   | 702                         |  |              | 29    |  |              | (4,594 | ) |  |   | 24   
|Rent receivable                                               |  |        |      |   |                        |   | 21                          |  |              | 175   |  |              | (196   | ) |  |   |     
|Deferred financing costs, net                                 |  |        | 46    |   |                        |   | 1                           |  |              | 16    |  |              |       |   |  |   | 63   
|Furniture, fixtures and equipment replacement fund            |  |        | 34    |   |                        |   | 26                          |  |              | 83    |  |              |       |   |  |   | 143  
|Other                                                         |  |        | 431   |   |                        |   | 431                         |  |              | 133   |  |              | (841   | ) |  |   | 154  
|Restricted cash                                               |  |        | 1     |   |                        |   |                            |  |              | 108   |  |              |       |   |  |   | 109  
|Cash and cash equivalents                                     |  |        | 84    |   |                        |   | 23                          |  |              | 77    |  |              |       |   |  |   | 184  
|                                                              |  |        |       |   |                        |   |                             |  |              |       |  |              |        |   |  |   |      
|Total assets                                                  |  | $      | 5,389 |   |                        | $ | 4,793                       |  | $            | 3,677 |  | $            | (5,634 | ) |  | $ | 8,225
|                                                              |  |        |       |   |                        |   |                             |  |              |       |  |              |        |   |  |   |      
|Debt                                                          |  | $      | 2,701 |   |                        | $ | 1,308                       |  | $            | 1,875 |  | $            | (514   | ) |  | $ | 5,370
|Other liabilities                                             |  |        | 172   |   |                        |   | 281                         |  |              | 386   |  |              | (526   | ) |  |   | 313  
|                                                              |  |        |       |   |                        |   |                             |  |              |       |  |              |        |   |  |   |      
|Total liabilities                                             |  |        | 2,873 |   |                        |   | 1,589                       |  |              | 2,261 |  |              | (1,040 | ) |  |   | 5,683
|Minority interests                                            |  |        |      |   |                        |   |                            |  |              | 26    |  |              |       |   |  |   | 26   
|Limited partner interest of third parties at redemption value |  |        | 379   |   |                        |   |                            |  |              |      |  |              |       |   |  |   | 379  
|Partners capital                                             |  |        | 2,137 |   |                        |   | 3,204                       |  |              | 1,390 |  |              | (4,594 | ) |  |   | 2,137
|                                                              |  |        |       |   |                        |   |                             |  |              |       |  |              |        |   |  |   |      
|Total liabilities and partners capital                       |  | $      | 5,389 |   |                        | $ | 4,793                       |  | $            | 3,677 |  | $            | (5,634 | ) |  | $ | 8,225
|                                                              |  |        |       |   |                        |   |                             |  |              |       |  |              |        |   |  |   |      



15



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



Supplemental Condensed Consolidating Statements of Operations

(in millions)

Quarter ended
June 16, 2006



|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |       |  
|----------------------------------------- |  | ------ | --- | - | ---------------------- | - | --- | --------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ----- | -
|                                          |  | Parent |     |   | Guarantor Subsidiaries |   |     | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                  |  | $      | (82 | ) |                        | $ | 99  |                             |  | $ | 1,193        |   |  | $            | 2    |   |  | $ | 1,212 |  
|Hotel operating expenses                  |  |        |    |   |                        |   |    |                             |  |   | (766         | ) |  |              |     |   |  |   | (766  | )
|Property-level expenses                   |  |        | (5  | ) |                        |   | (29 | )                           |  |   | (51          | ) |  |              |     |   |  |   | (85   | )
|Depreciation and amortization             |  |        | (13 | ) |                        |   | (48 | )                           |  |   | (46          | ) |  |              |     |   |  |   | (107  | )
|Corporate and other expenses              |  |        | (4  | ) |                        |   | (9  | )                           |  |   | (8           | ) |  |              |     |   |  |   | (21   | )
|Rental expense                            |  |        |    |   |                        |   |    |                             |  |   | (141         | ) |  |              | 141  |   |  |   |      |  
|Interest income                           |  |        | 14  |   |                        |   | 3   |                             |  |   | 4            |   |  |              | (12  | ) |  |   | 9     |  
|Interest expense                          |  |        | (55 | ) |                        |   | (30 | )                           |  |   | (34          | ) |  |              | 12   |   |  |   | (107  | )
|Gains on property transactions            |  |        |    |   |                        |   |    |                             |  |   | 1            |   |  |              |     |   |  |   | 1     |  
|Minority interest expense                 |  |        |    |   |                        |   |    |                             |  |   | (3           | ) |  |              |     |   |  |   | (3    | )
|Equity in earnings (losses) of affiliates |  |        | 483 |   |                        |   | 234 |                             |  |   |             |   |  |              | (723 | ) |  |   | (6    | )
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |       |  
|Income (loss) before income taxes         |  |        | 338 |   |                        |   | 220 |                             |  |   | 149          |   |  |              | (580 | ) |  |   | 127   |  
|Provision for income taxes                |  |        |    |   |                        |   |    |                             |  |   | (17          | ) |  |              |     |   |  |   | (17   | )
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |       |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS  |  |        | 338 |   |                        |   | 220 |                             |  |   | 132          |   |  |              | (580 | ) |  |   | 110   |  
|Income from discontinued operations       |  |        | 5   |   |                        |   |    |                             |  |   | 228          |   |  |              |     |   |  |   | 233   |  
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |       |  
|NET INCOME (LOSS)                         |  | $      | 343 |   |                        | $ | 220 |                             |  | $ | 360          |   |  | $            | (580 | ) |  | $ | 343   |  
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |       |  

Quarter ended June 17, 2005



|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |      |  
|----------------------------------------- |  | ------ | --- | - | ---------------------- | - | --- | --------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ---- | -
|                                          |  | Parent |     |   | Guarantor Subsidiaries |   |     | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                  |  | $      | 61  |   |                        | $ | 79  |                             |  | $ | 871          |   |  | $            | (53  | ) |  | $ | 958  |  
|Hotel operating expenses                  |  |        |    |   |                        |   |    |                             |  |   | (629         | ) |  |              |     |   |  |   | (629 | )
|Property-level expenses                   |  |        | (9  | ) |                        |   | (23 | )                           |  |   | (37          | ) |  |              |     |   |  |   | (69  | )
|Depreciation and amortization             |  |        | (12 | ) |                        |   | (37 | )                           |  |   | (34          | ) |  |              |     |   |  |   | (83  | )
|Corporate and other expenses              |  |        |    |   |                        |   | (9  | )                           |  |   | (5           | ) |  |              |     |   |  |   | (14  | )
|Rental expense                            |  |        |    |   |                        |   |    |                             |  |   | (160         | ) |  |              | 160  |   |  |   |     |  
|Interest income                           |  |        | 11  |   |                        |   |    |                             |  |   | 1            |   |  |              | (7   | ) |  |   | 5    |  
|Interest expense                          |  |        | (47 | ) |                        |   | (40 | )                           |  |   | (35          | ) |  |              | 7    |   |  |   | (115 | )
|Gains on property transactions            |  |        | 3   |   |                        |   |    |                             |  |   | 71           |   |  |              |     |   |  |   | 74   |  
|Minority interest expense                 |  |        |    |   |                        |   |    |                             |  |   | (2           | ) |  |              |     |   |  |   | (2   | )
|Equity in earnings (losses) of affiliates |  |        | 87  |   |                        |   | 60  |                             |  |   | 2            |   |  |              | (146 | ) |  |   | 3    |  
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |      |  
|Income (loss) before income taxes         |  |        | 94  |   |                        |   | 30  |                             |  |   | 43           |   |  |              | (39  | ) |  |   | 128  |  
|Provision for income taxes                |  |        | (2  | ) |                        |   |    |                             |  |   | (36          | ) |  |              |     |   |  |   | (38  | )
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |      |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS  |  |        | 92  |   |                        |   | 30  |                             |  |   | 7            |   |  |              | (39  | ) |  |   | 90   |  
|Income from discontinued operations       |  |        | 4   |   |                        |   | 1   |                             |  |   | 1            |   |  |              |     |   |  |   | 6    |  
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |      |  
|NET INCOME (LOSS)                         |  | $      | 96  |   |                        | $ | 31  |                             |  | $ | 8            |   |  | $            | (39  | ) |  | $ | 96   |  
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |      |  



16



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



Supplemental Condensed Consolidating Statements of Operations

(in millions)

Year-to-date ended
June 16, 2006



|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |        |  
|----------------------------------------- |  | ------ | --- | - | ---------------------- | - | --- | --------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ------ | -
|                                          |  | Parent |     |   | Guarantor Subsidiaries |   |     | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                  |  | $      | 172 |   |                        | $ | 173 |                             |  | $ | 2,023        |   |  | $            | (308 | ) |  | $ | 2,060  |  
|Hotel operating expenses                  |  |        |    |   |                        |   |    |                             |  |   | (1,322       | ) |  |              |     |   |  |   | (1,322 | )
|Property-level expenses                   |  |        | (17 | ) |                        |   | (51 | )                           |  |   | (84          | ) |  |              |     |   |  |   | (152   | )
|Depreciation and amortization             |  |        | (26 | ) |                        |   | (89 | )                           |  |   | (81          | ) |  |              |     |   |  |   | (196   | )
|Corporate and other expenses              |  |        | (4  | ) |                        |   | (18 | )                           |  |   | (19          | ) |  |              |     |   |  |   | (41    | )
|Rental expense                            |  |        |    |   |                        |   |    |                             |  |   | (308         | ) |  |              | 308  |   |  |   |       |  
|Interest income                           |  |        | 18  |   |                        |   | 5   |                             |  |   | 6            |   |  |              | (15  | ) |  |   | 14     |  
|Interest expense                          |  |        | (84 | ) |                        |   | (60 | )                           |  |   | (69          | ) |  |              | 15   |   |  |   | (198   | )
|Gains on property transactions            |  |        |    |   |                        |   |    |                             |  |   | 2            |   |  |              |     |   |  |   | 2      |  
|Minority interest expense                 |  |        |    |   |                        |   |    |                             |  |   | (7           | ) |  |              |     |   |  |   | (7     | )
|Equity in earnings (losses) of affiliates |  |        | 351 |   |                        |   | 234 |                             |  |   |             |   |  |              | (590 | ) |  |   | (5     | )
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |        |  
|Income (loss) before income taxes         |  |        | 410 |   |                        |   | 194 |                             |  |   | 141          |   |  |              | (590 | ) |  |   | 155    |  
|Provision for income taxes                |  |        | (2  | ) |                        |   |    |                             |  |   | (16          | ) |  |              |     |   |  |   | (18    | )
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |        |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS  |  |        | 408 |   |                        |   | 194 |                             |  |   | 125          |   |  |              | (590 | ) |  |   | 137    |  
|Income from discontinued operations       |  |        | 116 |   |                        |   | 43  |                             |  |   | 228          |   |  |              |     |   |  |   | 387    |  
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |        |  
|NET INCOME (LOSS)                         |  | $      | 524 |   |                        | $ | 237 |                             |  | $ | 353          |   |  | $            | (590 | ) |  | $ | 524    |  
|                                          |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |        |  

Year-to-date ended June 17, 2005



|                                                         |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |        |  
|-------------------------------------------------------- |  | ------ | --- | - | ---------------------- | - | --- | --------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ------ | -
|                                                         |  | Parent |     |   | Guarantor Subsidiaries |   |     | Non- Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                                 |  | $      | 176 |   |                        | $ | 146 |                             |  | $ | 1,602        |   |  | $            | (176 | ) |  | $ | 1,748  |  
|Hotel operating expenses                                 |  |        |    |   |                        |   |    |                             |  |   | (1,165       | ) |  |              |     |   |  |   | (1,165 | )
|Property-level expenses                                  |  |        | (16 | ) |                        |   | (44 | )                           |  |   | (73          | ) |  |              |     |   |  |   | (133   | )
|Depreciation and amortization                            |  |        | (23 | ) |                        |   | (74 | )                           |  |   | (67          | ) |  |              |     |   |  |   | (164   | )
|Corporate and other expenses                             |  |        | (4  | ) |                        |   | (12 | )                           |  |   | (12          | ) |  |              |     |   |  |   | (28    | )
|Rental expense                                           |  |        |    |   |                        |   |    |                             |  |   | (284         | ) |  |              | 284  |   |  |   |       |  
|Interest income                                          |  |        | 20  |   |                        |   |    |                             |  |   | 4            |   |  |              | (12  | ) |  |   | 12     |  
|Interest expense                                         |  |        | (96 | ) |                        |   | (71 | )                           |  |   | (69          | ) |  |              | 12   |   |  |   | (224   | )
|Gains on property transactions                           |  |        | 3   |   |                        |   |    |                             |  |   | 74           |   |  |              |     |   |  |   | 77     |  
|Gain (loss) on foreign currency and derivative Contracts |  |        | 1   |   |                        |   | (1  | )                           |  |   | 2            |   |  |              |     |   |  |   | 2      |  
|Minority interest expense                                |  |        |    |   |                        |   |    |                             |  |   | (6           | ) |  |              |     |   |  |   | (6     | )
|Equity in earnings (losses) of affiliates                |  |        | 38  |   |                        |   | 50  |                             |  |   | (3           | ) |  |              | (86  | ) |  |   | (1     | )
|                                                         |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |        |  
|Income (loss) before income taxes                        |  |        | 99  |   |                        |   | (6  | )                           |  |   | 3            |   |  |              | 22   |   |  |   | 118    |  
|Provision for income taxes                               |  |        | (4  | ) |                        |   |    |                             |  |   | (34          | ) |  |              |     |   |  |   | (38    | )
|                                                         |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |        |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                 |  |        | 95  |   |                        |   | (6  | )                           |  |   | (31          | ) |  |              | 22   |   |  |   | 80     |  
|Income (loss) from discontinued operations               |  |        | 7   |   |                        |   | 23  |                             |  |   | (8           | ) |  |              |     |   |  |   | 22     |  
|                                                         |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |        |  
|NET INCOME (LOSS)                                        |  | $      | 102 |   |                        | $ | 17  |                             |  | $ | (39          | ) |  | $            | 22   |   |  | $ | 102    |  
|                                                         |  |        |     |   |                        |   |     |                             |  |   |              |   |  |              |      |   |  |   |        |  



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



Supplemental Condensed Consolidating Statements of Cash Flows

(in millions)

Year-to-date
June 16, 2006



|                                                             |  |        |      |   |                        |   |      |                             |  |   |              |   |  |   |      |  
|------------------------------------------------------------ |  | ------ | ---- | - | ---------------------- | - | ---- | --------------------------- |  | - | ------------ | - |  | - | ---- | -
|                                                             |  | Parent |      |   | Guarantor Subsidiaries |   |      | Non- Guarantor Subsidiaries |  |   | Consolidated |  
|OPERATING ACTIVITIES                                         |  |        |      |   |                        |   |      |                             |  |   |              |   |  |   |      |  
|Cash provided by operations                                  |  | $      | 68   |   |                        | $ | 51   |                             |  | $ | 168          |   |  | $ | 287  |  
|                                                             |  |        |      |   |                        |   |      |                             |  |   |              |   |  |   |      |  
|INVESTING ACTIVITIES                                         |  |        |      |   |                        |   |      |                             |  |   |              |   |  |   |      |  
|Proceeds from sale of assets, net                            |  |        | 139  |   |                        |   | 111  |                             |  |   | 426          |   |  |   | 676  |  
|Acquisitions                                                 |  |        |     |   |                        |   | (14  | )                           |  |   |             |   |  |   | (14  | )
|Starwood acquisition, net of cash acquired                   |  |        |     |   |                        |   | (512 | )                           |  |   | (215         | ) |  |   | (727 | )
|Investment in affiliates                                     |  |        | (13  | ) |                        |   |     |                             |  |   |             |   |  |   | (13  | )
|Capital expenditures                                         |  |        | (21  | ) |                        |   | (107 | )                           |  |   | (113         | ) |  |   | (241 | )
|Change in furniture, fixtures and equipment replacement fund |  |        | 10   |   |                        |   | (7   | )                           |  |   | 2            |   |  |   | 5    |  
|                                                             |  |        |      |   |                        |   |      |                             |  |   |              |   |  |   |      |  
|Cash provided by (used in) investing activities              |  |        | 115  |   |                        |   | (529 | )                           |  |   | 100          |   |  |   | (314 | )
|                                                             |  |        |      |   |                        |   |      |                             |  |   |              |   |  |   |      |  
|FINANCING ACTIVITIES                                         |  |        |      |   |                        |   |      |                             |  |   |              |   |  |   |      |  
|Financing costs                                              |  |        | (17  | ) |                        |   | (2   | )                           |  |   |             |   |  |   | (19  | )
|Issuance of debt                                             |  |        | 800  |   |                        |   | 116  |                             |  |   |             |   |  |   | 916  |  
|Repayment of credit facility                                 |  |        | (20  | ) |                        |   |     |                             |  |   |             |   |  |   | (20  | )
|Debt prepayments                                             |  |        | (138 | ) |                        |   | (84  | )                           |  |   |             |   |  |   | (222 | )
|Scheduled principal repayments                               |  |        |     |   |                        |   | (4   | )                           |  |   | (25          | ) |  |   | (29  | )
|Redemption of preferred OP units                             |  |        | (150 | ) |                        |   |     |                             |  |   |             |   |  |   | (150 | )
|Distributions on common OP units                             |  |        | (103 | ) |                        |   |     |                             |  |   |             |   |  |   | (103 | )
|Distributions on preferred OP units                          |  |        | (13  | ) |                        |   |     |                             |  |   |             |   |  |   | (13  | )
|Distributions to minority interests                          |  |        |     |   |                        |   |     |                             |  |   | (4           | ) |  |   | (4   | )
|Change in restricted cash                                    |  |        | 4    |   |                        |   | (6   | )                           |  |   | 13           |   |  |   | 11   |  
|Transfers to/from Parent                                     |  |        | (270 | ) |                        |   | 454  |                             |  |   | (184         | ) |  |   |     |  
|                                                             |  |        |      |   |                        |   |      |                             |  |   |              |   |  |   |      |  
|Cash provided by (used in) financing activities              |  |        | 93   |   |                        |   | 474  |                             |  |   | (200         | ) |  |   | 367  |  
|                                                             |  |        |      |   |                        |   |      |                             |  |   |              |   |  |   |      |  
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             |  | $      | 276  |   |                        | $ | (4   | )                           |  | $ | 68           |   |  | $ | 340  |  
|                                                             |  |        |      |   |                        |   |      |                             |  |   |              |   |  |   |      |  



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)

Supplemental Condensed Consolidating Statements of Cash Flows

(in millions)



Year-to-date June 17, 2005



|                                                             |  |        |      |   |                        |   |      |                            |  |   |              |   |  |   |      |  
|------------------------------------------------------------ |  | ------ | ---- | - | ---------------------- | - | ---- | -------------------------- |  | - | ------------ | - |  | - | ---- | -
|                                                             |  | Parent |      |   | Guarantor Subsidiaries |   |      | Non- GuarantorSubsidiaries |  |   | Consolidated |  
|OPERATING ACTIVITIES                                         |  |        |      |   |                        |   |      |                            |  |   |              |   |  |   |      |  
|Cash provided by (used in) operations                        |  | $      | 170  |   |                        | $ | 32   |                            |  | $ | (29          | ) |  | $ | 173  |  
|                                                             |  |        |      |   |                        |   |      |                            |  |   |              |   |  |   |      |  
|INVESTING ACTIVITIES                                         |  |        |      |   |                        |   |      |                            |  |   |              |   |  |   |      |  
|Proceeds from sale of assets, net                            |  |        |     |   |                        |   | 15   |                            |  |   | 85           |   |  |   | 100  |  
|Proceeds from sale of interest in CBM Joint Venture LLC, net |  |        | 91   |   |                        |   |     |                            |  |   |             |   |  |   | 91   |  
|Capital expenditures                                         |  |        | (16  | ) |                        |   | (59  | )                          |  |   | (55          | ) |  |   | (130 | )
|Change in furniture, fixtures and equipment replacement fund |  |        | (3   | ) |                        |   | 3    |                            |  |   |             |   |  |   |     |  
|Other                                                        |  |        | (13  | ) |                        |   |     |                            |  |   |             |   |  |   | (13  | )
|                                                             |  |        |      |   |                        |   |      |                            |  |   |              |   |  |   |      |  
|Cash provided by (used in) investing activities              |  |        | 59   |   |                        |   | (41  | )                          |  |   | 30           |   |  |   | 48   |  
|                                                             |  |        |      |   |                        |   |      |                            |  |   |              |   |  |   |      |  
|FINANCING ACTIVITIES                                         |  |        |      |   |                        |   |      |                            |  |   |              |   |  |   |      |  
|Financing costs                                              |  |        | (11  | ) |                        |   |     |                            |  |   |             |   |  |   | (11  | )
|Issuance of debt                                             |  |        | 650  |   |                        |   |     |                            |  |   |             |   |  |   | 650  |  
|Debt prepayments                                             |  |        | (469 | ) |                        |   | (140 | )                          |  |   |             |   |  |   | (609 | )
|Scheduled principal repayments                               |  |        | (1   | ) |                        |   | (7   | )                          |  |   | (22          | ) |  |   | (30  | )
|Redemption of preferred OP units                             |  |        | (100 | ) |                        |   |     |                            |  |   |             |   |  |   | (100 | )
|Distributions on common OP units                             |  |        | (30  | ) |                        |   |     |                            |  |   |             |   |  |   | (30  | )
|Distributions on preferred OP units                          |  |        | (18  | ) |                        |   |     |                            |  |   |             |   |  |   | (18  | )
|Distributions to minority interests                          |  |        |     |   |                        |   |     |                            |  |   | (3           | ) |  |   | (3   | )
|Change in restricted cash                                    |  |        | (20  | ) |                        |   | 4    |                            |  |   | 3            |   |  |   | (13  | )
|Transfers to/from Parent                                     |  |        | (230 | ) |                        |   | 154  |                            |  |   | 76           |   |  |   |     |  
|                                                             |  |        |      |   |                        |   |      |                            |  |   |              |   |  |   |      |  
|Cash provided by (used in) financing activities              |  |        | (229 | ) |                        |   | 11   |                            |  |   | 54           |   |  |   | (164 | )
|                                                             |  |        |      |   |                        |   |      |                            |  |   |              |   |  |   |      |  
|INCREASE IN CASH AND CASH EQUIVALENTS                        |  | $      |     |   |                        | $ | 2    |                            |  | $ | 55           |   |  | $ | 57   |  
|                                                             |  |        |      |   |                        |   |      |                            |  |   |              |   |  |   |      |  



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|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. (formerly, Host Marriott Corporation), 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. (formerly, Host Marriott, L.P.), a Delaware limited partnership of which Host Hotels & Resorts, Inc. is the sole general partner and in which
it holds 96% of the partnership interests on July 17, 2006. 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, 2005 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.

Recent Events

On May 17, 2006, we signed a definitive agreement to purchase The Westin Kierland Resort & Spa
in Scottsdale, Arizona for approximately $393 million, which includes the assumption of $135 million of mortgage debt with an interest rate of approximately 5.08%. The 732-room resort, which opened in November 2002, is situated on 252
acres of fee simple property, including approximately five acres of undeveloped land, and includes a 27-hole golf course and a full-service spa. The sale is expected to close during the third quarter of 2006, subject to customary closing conditions.

Currently, we have $3.7 billion of senior notes outstanding and $100 million of Host preferred stock that are rated by
Standard & Poors and Moodys Investors Service. On June 23, 2006, Standard & Poors upgraded our senior note debt from a BB- rating to a BB rating. Currently, Standard & Poors has a B rating on
Hosts preferred stock. Moodys current rating on our senior debt is Ba2 and the rating on Hosts preferred stock is B1.

In
connection with the Starwood acquisition, we entered into an Agreement of Limited Partnership, forming a joint venture (the European joint venture). On July 21, 2006, the European joint venture (described below) signed a definitive
agreement to purchase the Hotel Arts Barcelona for approximately 417 million, including the assumption of approximately 280 million of mortgage debt with an interest rate under 5%. The 483-room Ritz-Carlton managed hotel is
located on the Mediterranean Sea in Barcelona, Spain. The sale is expected to close in the third quarter of 2006, subject to customary closing conditions. The joint venture agreement was amended to increase the overall investment commitment levels
from the partners to accommodate this acquisition.

Starwood Acquisition

On April 10, 2006, we acquired 25 domestic hotels and three foreign hotels from Starwood Hotels & Resorts Worldwide, Inc., or Starwood,
for total consideration of approximately $3.1 billion. Total consideration



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included the issuance by Host of $2.27 billion of equity (133,529,412 shares of Host common stock) to Starwood stockholders, the assumption of $77 million in
debt and the net payment of approximately $727 million in cash. For each share of Host common stock issued in the transaction, we issued an equivalent OP unit to Host. These transactions were completed pursuant to the Master Agreement and Plan
of Merger, dated as of November 14, 2005, and amended as of March 24, 2006, (the Master Agreement) among Host, Starwood and certain of their respective affiliates. In connection with the Starwood acquisition, we entered into an
Agreement of Limited Partnership, forming the European joint venture, in which we own a 32.1% general and limited partner interest, in The Netherlands with Stichting Pensioenfonds ABP, the Dutch pension fund (ABP), and Jasmine Hotels Pte
Ltd, an affiliate of GIC Real Estate Pte Ltd (GIC RE), the real estate investment company of the Government of Singapore Investment Corporation Pte Ltd (GIC). As of June 30, 2006, the joint venture has total assets of approximately
535 million, and total capital of approximately 185 million, of which approximately 57 million, or $72 million, was contributed by us in cash and through the contribution of the Sheraton Warsaw Hotel &
Towers on May 2, 2006, which we acquired on April 10, 2006. The European joint venture acquired four hotels, from Starwood, on May 3, 2006, and one hotel on June 13, 2006. For more information on the acquisition and the
European joint venture, see Notes 6 and 13 to the financial statements. Starwood and Host have agreed that Starwood will retain the two Fijian hotels included in the Merger Agreement. The contract purchase price of these assets totaled
$129 million, including $31 million of debt. The cash designated for the acquisition of the Fijian assets will be used for general corporate purposes.

Overview

As of July 15, 2006, we own 129 full-service hotel properties, which operate primarily in the luxury and
upper upscale hotel sectors. For a general overview of our business, see our most recent Annual Report on Form 10-K.

We believe lodging
demand will continue to grow through the remainder of 2006, which should allow our managers to continue to increase room rates at our hotels, while maintaining or slightly increasing occupancy levels. In the second quarter of 2006, RevPAR for our
comparable hotels increased 9.7% over the same period last year. Based on a June 30 calendar quarter end, our comparable hotel RevPAR increased 9% over the second calendar quarter of 2005 and increased 8.9% over the first six months of 2005.
See discussion of our Reporting Periods in our most recent annual report on Form 10-K. For the 27 hotels acquired from Starwood that we consolidate, RevPAR increased 13% for the second quarter of 2006 compared to the second quarter of 2005, which
includes periods prior to our ownership. RevPAR is defined as the product of the average of the daily room rates charged and the average daily occupancy achieved and is generally considered a key performance indicator for hotels. Improvements in
RevPAR at our comparable hotels for the second quarter of 2006 were driven by an 8.9% increase in average room rate, while occupancy increased slightly by .6 percentage points. This is a result of a number of positive trends such as strong United
States GDP growth, growth in business investment and corporate profits, low supply growth of new luxury and upper upscale hotels, particularly in the markets for our comparable hotels, and strengthening in group and transient demand. As a result of
these trends, we expect comparable hotel RevPAR to increase approximately 8.5% to 10% for full year 2006 and 9% to 10% for the third quarter of 2006.

Although strong industry performance has begun to increase the pace of new hotel construction, the majority of new projects are concentrated in the limited service segments and outside of major urban markets. Lodging
Econometrics most recent Supply Side Forecast indicates gross supply increases for the entire U.S. lodging industry of 1.9%, 2.6% and 2.8% for 2006, 2007 and 2008, respectively. Despite the increasing growth rates, projects currently
under construction remain 40% below the peak experienced in 1998. Supply growth in the industry has also been adversely affected by the recent increase in the anticipated costs of construction and renovation projects. These increases have been
primarily driven by the strong demand for construction labor and higher prices for steel, energy and other commodities. We believe, based on a review of forecast supply growth in the specific geographic markets where we have hotels, that the supply
growth of hotels potentially competitive with our hotels will be meaningfully lower than the industry-wide growth as forecasted by Lodging Econometrics.



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The performance of our portfolio is also significantly affected by: the property type, which includes
urban, resort, airport and suburban hotels; the property size and composition; as well as specific competitive factors in the individual markets in which the properties operate. For example, while some of our larger properties in certain markets
such as Orlando and Boston had lagged the portfolio for several quarters, we saw significant improvements in the operations of these hotels beginning in the second quarter of 2006 as their respective markets have strengthened. We are continuing our
capital expenditure plan at many of our properties, which we believe will enhance their competitive market position and improve their operating performance. We expect increasing demand to continue to improve operations at our hotels as markets
strengthen, which should positively affect margin and RevPAR growth.

We assess profitability by measuring changes in our operating
margins, which are calculated as operating profit as a percentage of total revenues. Operating margins continued to improve during the second quarter, as average room rate increases at our hotels exceeded the rate of inflation, which is a trend we
expect to continue. Operating margins continue to be affected, however, by certain costs, primarily insurance, wages, benefits and utilities, which increased at a rate greater than inflation, a trend that we expect to continue in the near term.
Labor costs will likely be affected by union negotiations being held in various cities with the operators of our properties. The outcome of these negotiations is difficult to predict, though we anticipate some increase in costs. As a result of the
large-scale devastation due to hurricanes in 2005, we expect insurance costs, which reflect approximately 1% of our expenses, to increase approximately 40% for the full year. We expect utility costs, which represent approximately 5% of our expenses,
to increase by approximately 10% in 2006.

Operating margins are also affected by our food and beverage operations, which historically
represent approximately 30% of our revenues. During the second quarter, there was significant growth in food and beverage revenue at our comparable hotels of 7.7%, with a food and beverage margin increase of 2.4 percentage points. As the economy
continues to grow, we expect food and beverage revenue to continue to increase, in particular catering revenue, which should result in continued growth in our operating margins.

We also expect to see improvements in RevPAR and operating margins as we continue our strategy of recycling assets. Over the past two years, we have
acquired luxury and upper upscale properties in urban and resort/convention destinations, where further large-scale lodging development typically is limited, and have generally disposed of individual assets in suburban and secondary markets. The
assets we have acquired have higher RevPAR, higher margins and, we believe, higher growth potential than those we have sold. Over time, these assets should contribute to improvements in overall RevPAR and margins, as well as an increase in the
average per room replacement cost of our portfolio. In addition to the recycling of assets, we may also dispose of core assets when we have the opportunity to capitalize on the inherent real estate value of our properties and apply the proceeds to
other business objectives. Examples of these types of dispositions are the sale of the Swissôtel, The Drake, New York and the Fort Lauderdale Marina Marriott for a total of approximately $586 million in 2006, where we were able to sell
the properties at a significant gain of $346 million. We used the proceeds from these dispositions to finance a portion of the Starwood acquisition.

We also expect to see improvements in the operations of our hotels as we complete the significant repositioning/return on investment projects within our existing portfolio. Thus far during 2006, we have spent
approximately $110 million on these types of projects, and we expect to spend a total of $245 million to $255 million on these projects for the full year 2006. These projects have historically generated strong returns and, over the
next several years, we expect to spend several hundred million dollars on such investments.

While we believe the combination of improving
demand trends and low supply trends in the lodging industry, discussed here and in our Annual Report on Form 10-K, creates the opportunity for business improvements in 2006 and 2007, there can be no assurances that any increases in hotel revenues or
earnings at our properties will continue for any number of reasons, including, but not limited to, slower than anticipated growth in the economy and changes in travel patterns.



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##### Table of Contents

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 16,2006       |        |   | June 17,2005 |   |        | % Increase(Decrease) | 
|Revenues                               |  |                    |        |   |              |   |        |                      |  |       |     
|Total hotel sales                      |  | $                  | 1,186  |   |              | $ | 933    |                      |  | 27.1  | %   
|Operating costs and expenses:          |  |                    |        |   |              |   |        |                      |  |       |     
|Property-level costs(1)                |  |                    | 958    |   |              |   | 781    |                      |  | 22.7  |     
|Corporate and other expenses           |  |                    | 21     |   |              |   | 14     |                      |  | 50.0  |     
|Operating profit                       |  |                    | 233    |   |              |   | 163    |                      |  | 42.9  |     
|Interest expense                       |  |                    | 107    |   |              |   | 115    |                      |  | (7.0  | )   
|Minority interest expense              |  |                    | 3      |   |              |   | 2      |                      |  | 50.0  |     
|Income from discontinued operations    |  |                    | 233    |   |              |   | 6      |                      |  | N/M   |     
|Net income                             |  |                    | 343    |   |              |   | 96     |                      |  | N/M   |     
|Comparable hotel operating statistics: |  |                    |        |   |              |   |        |                      |  |       |     
|RevPAR                                 |  | $                  | 145.52 |   |              | $ | 132.62 |                      |  | 9.7   | %   
|Average room rate                      |  | $                  | 189.37 |   |              | $ | 173.94 |                      |  | 8.9   | %   
|Average occupancy                      |  |                    | 76.8   | % |              |   | 76.2   | %                    |  | 0.6   | pts.
|                                       |  |                   
|                                       |  | Year-to-date ended |        |   |              |  
|                                       |  | June16,2006        |        |   | June17,2005  |   |        | %Increase(Decrease)  | 
|Revenues                               |  |                    |        |   |              |   |        |                      |  |       |     
|Total hotel sales                      |  | $                  | 2,005  |   |              | $ | 1,694  |                      |  | 18.4  | %   
|Operating costs and expenses:          |  |                    |        |   |              |   |        |                      |  |       |     
|Property-level costs(1)                |  |                    | 1,670  |   |              |   | 1,462  |                      |  | 14.2  |     
|Corporate and other expenses           |  |                    | 41     |   |              |   | 28     |                      |  | 46.4  |     
|Operating profit                       |  |                    | 349    |   |              |   | 258    |                      |  | 35.3  |     
|Interest expense                       |  |                    | 198    |   |              |   | 224    |                      |  | (11.6 | )   
|Minority interest expense              |  |                    | 7      |   |              |   | 6      |                      |  | 16.7  |     
|Income from discontinued operations    |  |                    | 387    |   |              |   | 22     |                      |  | N/M   |     
|Net income                             |  |                    | 524    |   |              |   | 102    |                      |  | N/M   |     
|Comparable hotel operating statistics: |  |                    |        |   |              |   |        |                      |  |       |     
|RevPAR                                 |  | $                  | 137.22 |   |              | $ | 126.20 |                      |  | 8.7   | %   
|Average room rate                      |  | $                  | 185.36 |   |              | $ | 171.13 |                      |  | 8.3   | %   
|Average occupancy                      |  |                    | 74.0   | % |              |   | 73.7   | %                    |  | 0.3   | pts.

---

|(1) | Amount represents total operating costs and expenses per our consolidated statements of operations less corporate expenses.
|--- | ---------------------------------------------------------------------------------------------------------------------------

|(2) | N/M=Not meaningful
|--- | ------------------



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2006 Compared to 2005

Hotel Sales Overview.    Hotel sales increased $253 million, or 27.1%, to $1.2 billion for the second quarter of 2006 and increased $311 million, or 18.4%, to
$2.0 billion year-to-date. Second quarter and year-to-date 2006 hotel sales include $154 million of sales from the hotels purchased on April 10, 2006 in the Starwood transaction. Also, hotel sales include approximately
$22 million and $31 million for the second quarter and year-to-date 2006, respectively, of sales from a hotel acquired in September 2005 and exclude sales for the properties we sold in 2006. Sales for properties sold in 2006 or 2005 have
been reclassified as discontinued operations on our condensed consolidated statements of operations. See Discontinued Operations below.

We discuss operating results for our full-service 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 (including the Starwood portfolio) or sold, or that incurred significant property damage and business interruption or large scale capital improvements during these periods. As of June 16, 2006, 97 of our 129 full-service
hotels have been classified as comparable hotels. The following discussion is of the sales results of our comparable hotels considering property type (i.e. urban, suburban, resort/convention or airport) and geographic region. See Comparable
Hotel Operating Statistics for a complete description of our comparable hotels and further detail on these classifications. We also discuss the sales results of our hotels considering the mix of business (i.e. transient, group or contract).

Comparable hotel sales increased 8.3% to $988 million, for the quarter and 7.9% to $1.8 billion year-to-date compared to last year.
The growth in revenue reflects the increase in comparable RevPAR of 9.7% for the second quarter of 2006, as a result of an increase in average room rates of 8.9%, and an increase in occupancy of 0.6 percentage points. The year-to-date revenue growth
reflects the increase in comparable RevPAR of 8.7%, as a result of an increase in average room rates of 8.3% and an increase in occupancy of 0.3 percentage points. Food and beverage revenues for our comparable hotels increased 7.7% for the quarter
and 7.6% year-to-date, primarily due to an increase in catering and outlet revenues.

Customer Mix.    Our hotel
customers consist of three broad groups: transient, group and contract business. Transient demand broadly represents individual business or leisure travelers. Group demand represents clusters of guestrooms booked together, usually with a minimum of
10 rooms. Contract demand refers to blocks of rooms sold to a specific company for an extended period of time at significantly discounted rates. Contract rates are usually utilized by hotels that are located in markets that are experiencing
consistently low levels of demand. Similar to the majority of the lodging industry, we further categorize business within these groups based on characteristics they have in common. For further detail on these groups, see our annual report on Form
10-K.

Demand remained strong in the second quarter of 2006, enabling our operators to significantly increase average daily room rates,
particularly in the premium and corporate transient segments. For our Marriott, Ritz-Carlton and newly acquired Starwood hotels, transient average room rate increased approximately 10% for both quarter and year-to-date, respectively, driven by the
increase in the corporate average daily rates and a shift in business to our higher-rated premium segment.

Total group room revenue for
our Marriott, Ritz-Carlton and newly acquired Starwood hotels was up approximately 9% for the quarter and 6% year-to-date compared to last year, and average room rate increased approximately 7% and 6% for the quarter and year-to-date, respectively.
We expect continued improvements in group booking pace for the remainder of the year as room nights are expected to increase. In addition, a significant percentage of our 2006 group business was booked in prior years when average room rates were
lower. We expect that average group rates will increase in future periods as a greater percentage of business will consist of higher-rated groups that were booked in more recent periods.

Comparable Hotel Sales by Property Type.For the second quarter of 2006, revenues increased significantly across all of our
hotel property types. Our resort/convention hotels had the strongest quarter with RevPAR growth of 10.8%, led by 19% RevPAR growth at the 2000-room Orlando World Center Marriott.



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Year-to-date, RevPAR has increased 7.4% at our resort/convention hotels. Our suburban hotels also had a strong quarter as comparable hotel RevPAR increased
9.5% and 10.4% for the second quarter and year-to-date, respectively, which reflected an average room rate increase of 8.2% and 9.0% for the quarter and year-to-date, respectively. Our urban hotels performed well thus far in 2006, with comparable
hotel RevPAR growth of 9.5% to $159.81 and 8.8% to $147.86 for the quarter and year-to-date, respectively. The significant increase in comparable hotel RevPAR at our urban properties was primarily driven by the increases in average room rate of 8.9%
and 8.3% for the quarter and year-to-date, respectively while average occupancy improved by 0.5 and 0.4 percentage points for the quarter and year-to-date, respectively. Our airport hotels experienced comparable hotel RevPAR increases of 8.9% and
8.6% for the quarter and year-to-date, respectively, which reflected an average room rate increase of 10.7% and 10.4% for the quarter and year-to-date, respectively.

Comparable Hotel Sales by Geographic Region.During the second quarter, the majority of our geographic regions experienced strong growth in comparable hotel RevPAR with the New England,
Atlanta, Mountain, International, North Central and Florida regions all experiencing double-digit comparable hotel RevPAR growth. Year-to-date, comparable hotel RevPAR increased in all of our geographic regions.

Our New England region was the top performing region for the quarter with a comparable hotel RevPAR increase of 26.2% during the quarter and 21.2%
year-to-date. The growth in the region was primarily attributable to the strength in the downtown Boston area, where comparable hotel RevPAR increased 27.3% for the quarter and 22.5% year-to-date due to very strong group and transient demand.

Comparable hotel RevPAR for our Atlanta region increased 21.7% for the quarter and 19.2% year-to-date. The region has benefited from
strong city-wide and in-house group demand, as occupancy increased 5.7 percentage points and 4.8 percentage points for the quarter and year-to-date, respectively.

The North Central region of our portfolio experienced increases in comparable hotel RevPAR of 15.0% for the quarter and 17.3% year-to-date as the average room rate increased 7.6% and 6.8%, respectively, and the
average occupancy increased 4.8 and 6.3 percentage points, respectively. The improvement was the result of increased group demand at our six hotels in our Chicago market, which are benefiting from a 50% increase in city-wide events in 2006.

Our Florida region improved significantly in the second quarter, as strong group bookings and improved transient demand at several of our
resorts generated RevPAR growth of 10.5% for the quarter and 6.9% year to date. In particular, RevPAR at our Orlando World Center hotel increased by 19.0% for the quarter as a result of strong group bookings.

Comparable hotel RevPAR for our Mid-Atlantic region increased 9.2% for the quarter and 9.3% year-to-date, which was driven by comparable hotel RevPAR
growth of 12.6% and 13.7% for the quarter and year-to-date, respectively, at our New York City hotels. This was slightly offset by the performance of our Philadelphia hotels, where RevPAR grew just 4% for the quarter and 4.2% year-to-date.

Our DC Metro region experienced moderate comparable hotel RevPAR growth for the quarter and year-to-date of 5.6% and 1.0%, respectively.
The year-to-date results have been negatively affected by the renovations at the JW Marriott, Washington, D.C., which had a significant number of rooms out of service for the first quarter and second quarter of 2006, as well as a reduction in group
business compared to the same period in 2005, which included the effect of the Presidential inauguration.

Our Pacific region had a
comparable hotel RevPAR increase of 4.1% for the quarter and 5.9% year-to-date. The region was led by our Hawaii market, where comparable hotel RevPAR increased 12.8% for the quarter and 11.7% year-to-date. This was offset by a RevPAR decline of
2.9% for the quarter in the San Diego market, due to reduced group activity, and a RevPAR increase of just 1.9% for the quarter in the San Francisco market.



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Our Mountain region experienced a comparable hotel RevPAR increase of 13.4% for the quarter and 11.2%
year-to-date. The region was led by our Denver market, which experienced an increase in comparable hotel RevPAR of 18.0% for the quarter and 12.2% year-to-date.

Comparable hotel RevPAR in our South Central region grew by 3.1% for the quarter and 6.2% year-to-date, driven primarily by strong increases in occupancy and average room rate at our three properties in Houston.

Comparable hotel RevPAR for our international properties increased 19.1% for the quarter and 15.8% year-to-date. Our four Canadian
properties, three of which are in Toronto, experienced an increase in comparable hotel RevPAR of 20.6% for the quarter and 16.3% year-to-date.

Property-level Operating Costs.    Property-level operating costs and expenses increased $177 million, or 22.7% from the second quarter of 2005 and increased $208 million, or 14.2%, year-to-date. During
the second quarter and year-to-date 2006, property-level operating costs include $120 million related to the operations of the hotels acquired in the Starwood transaction. Property-level operating costs and expenses exclude the costs for hotels
we have sold, which are included in discontinued operations. Our operating costs and expenses, which are both fixed and variable, are affected by changes in occupancy, inflation and revenues, though the effect on specific costs will differ. For
example, utility costs at our comparable hotels increased 12.4% and 14.3% for the quarter and year-to-date, respectively, primarily due to increases in oil and gas prices. We expect operating costs to continue to increase during the remainder of
2006 as a result of variable costs increasing with occupancy increases, and certain costs increasing at a rate above inflation, particularly wages and benefits, utilities, insurance and real estate taxes.

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 increased by $7 million, or 50%, for the second quarter and $13 million, or 46.4%,
year-to-date due to an increase in compensation expense based on the strong performance of Hosts stock price and an increase in overall staffing levels. Additionally, we had non-recurring costs associated with the Starwood transaction and
other transactions of $3 million and $5 million for the second quarter and year-to-date of 2006, respectively.

Interest
Income.Interest income increased $4 million for the second quarter and $2 million year-to-date due to an increase in our cash balance and an increase in the interest rate earned on the balance.

Interest Expense.Interest expense decreased $8 million for the second quarter and $26 million year-to-date as a
result of call premiums and the acceleration of deferred financing costs and original issue discounts associated with debt prepayments totaling $18 million and $30 million for the second quarter and year-to-date 2005, compared to only
$3 million for the second quarter and year-to-date 2006, respectively. In addition, interest expense for the second quarter and year-to-date 2006, includes approximately $5 million of non-recurring bridge loan fees and expenses related to
the Starwood acquisition. The decline in prepayment premiums during the second quarter of 2006 was partially offset by the interest expense incurred due to the issuance of $800 million of 63/4% Series P senior notes on April 4, 2006 and by increasing interest rates for our variable rate debt, which represents approximately 14% of our total
debt balance.

Minority Interest Expense.    Minority interest expense consists of our minority
partners share of income in consolidated hotel partnerships. The year-to-date increase in minority interest expense is due to the improvement in operations at certain of our consolidated partnerships.

Equity in Earnings (Losses) of Affiliates.Equity in earnings (losses) of affiliates decreased by $9 million for the
second quarter and $4 million year-to-date primarily due to the $7 million loss recorded from our European joint venture in the second quarter of 2006.



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Discontinued Operations.    Discontinued operations for 2006 consist of five
sold hotels and discontinued operations for 2005 consist of 10 sold hotels. Discontinued operations represent results of operations and the gain or loss on the disposition of the hotels. For year-to-date 2006 and 2005, revenues for these properties
were $18 million and $63 million, respectively, and income before taxes was $2 million and $10 million, respectively. For the second quarter of 2006 and 2005, revenues for these properties were $4 million and
$34 million, respectively, and income before taxes was $1 million and $6 million, respectively. We recognized a gain, net of tax, of approximately $385 million and $12 million for year-to-date 2006 and 2005, respectively, on
the disposition of these hotels.

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 full-service 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 129 full-service hotels that we owned on June 16, 2006, 97 have been classified as comparable hotels. The operating results of the following hotels that we owned as of
June 16, 2006 are excluded from comparable hotel results for these periods:



| |  |  | Newport Beach Marriott Hotel & Spa (major renovation started in July 2004);
| | - |  | ---------------------------------------------------------------------------



| |  |  | Mountain Shadows Resort and Golf Club (closed hotel to be sold pending completion of significant contingencies, which have not been resolved as of June 16, 2006);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Atlanta Marriott Marquis (major renovation started in August 2005);
| | - |  | -------------------------------------------------------------------



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



| |  |  | Hyatt Regency Washington on Capitol Hill, Washington, D.C. (acquired in September 2005); and
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the 27 consolidated hotels that we acquired from Starwood on April 10, 2006.
| | - |  | ----------------------------------------------------------------------------

In addition, the operating results of the ten hotels we disposed of during either 2006 or 2005 are also not included in comparable hotel results for the periods presented herein. Moreover, because these statistics and
operating results are for our full-service hotel properties, they exclude results for our non-hotel properties and leased limited-service hotels.



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We evaluate the operating performance of our comparable hotels based on both geographic region and
property type. These divisions are generally consistent with industry data provided by hospitality research firms such as Smith Travel Research. For further discussion of our geographic regions and property types see our most recent Annual Report on
Form 10-K. The following tables set forth performance information for our comparable full-service hotels by geographic region for the periods presented.

Comparable by Region(a)



|              |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                 |  |                             |        |  |        |   |                        |   |        |  |      |  
|------------- |  | ------------------- |  | -------------------------------- |  | -------------------------------- | ------ | --------------------------- | ---- | - | ------ | - | --------------- |  | --------------------------- | ------ |  | ------ | - | ---------------------- | - | ------ |  | ---- | -
|              |  | As of June 16, 2006 |  | Quarter ended June 16, 2006      |  | Quarter ended June 17, 2005      |        |                             |     
|              |  | No. ofProperties    |  | No. ofRooms                      |  | AverageRoomRate                  |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoomRate |  | AverageOccupancyPercentages |        |  | RevPAR |   | PercentChange inRevPAR |  
|Pacific       |  | 21                  |  | 11,485                           |  | $                                | 203.38 |                             | 76.1 | % |        | $ | 154.73          |  | $                           | 190.57 |  | 78.0   | % |                        | $ | 148.62 |  | 4.1  | %
|Florida       |  | 10                  |  | 6,448                            |  |                                  | 212.47 |                             | 75.5 |   |        |   | 160.44          |  |                             | 195.04 |  | 74.5   |   |                        |   | 145.26 |  | 10.5 |  
|Mid-Atlantic  |  | 8                   |  | 5,865                            |  |                                  | 225.27 |                             | 82.3 |   |        |   | 185.39          |  |                             | 203.08 |  | 83.6   |   |                        |   | 169.74 |  | 9.2  |  
|DC Metro      |  | 13                  |  | 5,335                            |  |                                  | 192.50 |                             | 81.7 |   |        |   | 157.20          |  |                             | 176.71 |  | 84.3   |   |                        |   | 148.91 |  | 5.6  |  
|North Central |  | 13                  |  | 5,130                            |  |                                  | 149.35 |                             | 75.3 |   |        |   | 112.50          |  |                             | 138.82 |  | 70.5   |   |                        |   | 97.82  |  | 15.0 |  
|South Central |  | 7                   |  | 4,126                            |  |                                  | 149.95 |                             | 73.4 |   |        |   | 110.07          |  |                             | 137.55 |  | 77.7   |   |                        |   | 106.81 |  | 3.1  |  
|Atlanta       |  | 8                   |  | 3,069                            |  |                                  | 193.10 |                             | 74.3 |   |        |   | 143.48          |  |                             | 171.74 |  | 68.6   |   |                        |   | 117.86 |  | 21.7 |  
|New England   |  | 6                   |  | 3,032                            |  |                                  | 177.97 |                             | 83.0 |   |        |   | 147.74          |  |                             | 161.94 |  | 72.3   |   |                        |   | 117.09 |  | 26.2 |  
|Mountain      |  | 6                   |  | 2,210                            |  |                                  | 138.79 |                             | 65.3 |   |        |   | 90.63           |  |                             | 124.32 |  | 64.3   |   |                        |   | 79.91  |  | 13.4 |  
|International |  | 5                   |  | 1,953                            |  |                                  | 154.33 |                             | 75.3 |   |        |   | 116.23          |  |                             | 133.48 |  | 73.1   |   |                        |   | 97.63  |  | 19.1 |  
|              |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                 |  |                             |        |  |        |   |                        |   |        |  |      |  
|All Regions   |  | 97                  |  | 48,653                           |  |                                  | 189.37 |                             | 76.8 |   |        |   | 145.52          |  |                             | 173.94 |  | 76.2   |   |                        |   | 132.62 |  | 9.7  |  
|              |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                 |  |                             |        |  |        |   |                        |   |        |  |      |  
|              |  |                     |  |                                 
|              |  | As of June 16, 2006 |  | Year-to-date ended June 16, 2006 |  | Year-to-date ended June 17, 2005 |        |                             |     
|              |  | No. ofProperties    |  | No. ofRooms                      |  | AverageRoomRate                  |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoomRate |  | AverageOccupancyPercentages |        |  | RevPAR |   | PercentChange inRevPAR |  
|Pacific       |  | 21                  |  | 11,485                           |  | $                                | 200.20 |                             | 74.9 | % |        | $ | 149.93          |  | $                           | 185.51 |  | 76.3   | % |                        | $ | 141.59 |  | 5.9  | %
|Florida       |  | 10                  |  | 6,448                            |  |                                  | 217.17 |                             | 76.6 |   |        |   | 166.34          |  |                             | 200.49 |  | 77.6   |   |                        |   | 155.61 |  | 6.9  |  
|Mid-Atlantic  |  | 8                   |  | 5,865                            |  |                                  | 215.34 |                             | 77.7 |   |        |   | 167.22          |  |                             | 194.59 |  | 78.6   |   |                        |   | 152.92 |  | 9.3  |  
|DC Metro      |  | 13                  |  | 5,335                            |  |                                  | 187.86 |                             | 73.1 |   |        |   | 137.38          |  |                             | 174.42 |  | 78.0   |   |                        |   | 136.08 |  | 1.0  |  
|North Central |  | 13                  |  | 5,130                            |  |                                  | 139.78 |                             | 70.3 |   |        |   | 98.30           |  |                             | 130.86 |  | 64.0   |   |                        |   | 83.81  |  | 17.3 |  
|South Central |  | 7                   |  | 4,126                            |  |                                  | 146.53 |                             | 74.7 |   |        |   | 109.45          |  |                             | 135.75 |  | 75.9   |   |                        |   | 103.06 |  | 6.2  |  
|Atlanta       |  | 8                   |  | 3,069                            |  |                                  | 188.64 |                             | 73.5 |   |        |   | 138.75          |  |                             | 169.57 |  | 68.7   |   |                        |   | 116.42 |  | 19.2 |  
|New England   |  | 6                   |  | 3,032                            |  |                                  | 163.60 |                             | 74.0 |   |        |   | 121.02          |  |                             | 151.22 |  | 66.0   |   |                        |   | 99.87  |  | 21.2 |  
|Mountain      |  | 6                   |  | 2,210                            |  |                                  | 147.50 |                             | 64.3 |   |        |   | 94.81           |  |                             | 134.27 |  | 63.5   |   |                        |   | 85.29  |  | 11.2 |  
|International |  | 5                   |  | 1,953                            |  |                                  | 148.51 |                             | 71.9 |   |        |   | 106.78          |  |                             | 129.74 |  | 71.1   |   |                        |   | 92.25  |  | 15.8 |  
|              |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                 |  |                             |        |  |        |   |                        |   |        |  |      |  
|All Regions   |  | 97                  |  | 48,653                           |  |                                  | 185.36 |                             | 74.0 |   |        |   | 137.22          |  |                             | 171.13 |  | 73.7   |   |                        |   | 126.20 |  | 8.7  |  
|              |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                 |  |                             |        |  |        |   |                        |   |        |  |      |  



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Comparable by Property Type(a)



|                  |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                 |  |                             |        |  |        |   |                        |   |        |  |      |  
|----------------- |  | ------------------- |  | -------------------------------- |  | -------------------------------- | ------ | --------------------------- | ---- | - | ------ | - | --------------- |  | --------------------------- | ------ |  | ------ | - | ---------------------- | - | ------ |  | ---- | -
|                  |  | As of June 16, 2006 |  | Quarter ended June 16, 2006      |  | Quarter ended June 17, 2005      |        |                             |     
|                  |  | No. ofProperties    |  | No. ofRooms                      |  | AverageRoomRate                  |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoomRate |  | AverageOccupancyPercentages |        |  | RevPAR |   | PercentChange inRevPAR |  
|Urban             |  | 40                  |  | 23,124                           |  | $                                | 198.86 |                             | 80.4 | % |        | $ | 159.81          |  | $                           | 182.54 |  | 79.9   | % |                        | $ | 145.89 |  | 9.5  | %
|Suburban          |  | 30                  |  | 11,363                           |  |                                  | 147.04 |                             | 70.1 |   |        |   | 103.13          |  |                             | 135.88 |  | 69.3   |   |                        |   | 94.19  |  | 9.5  |  
|Airport           |  | 16                  |  | 7,328                            |  |                                  | 135.60 |                             | 75.2 |   |        |   | 101.91          |  |                             | 122.47 |  | 76.4   |   |                        |   | 93.58  |  | 8.9  |  
|Resort/Convention |  | 11                  |  | 6,838                            |  |                                  | 272.70 |                             | 77.8 |   |        |   | 212.19          |  |                             | 254.71 |  | 75.2   |   |                        |   | 191.43 |  | 10.8 |  
|                  |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                 |  |                             |        |  |        |   |                        |   |        |  |      |  
|All Types         |  | 97                  |  | 48,653                           |  |                                  | 189.37 |                             | 76.8 |   |        |   | 145.52          |  |                             | 173.94 |  | 76.2   |   |                        |   | 132.62 |  | 9.7  |  
|                  |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                 |  |                             |        |  |        |   |                        |   |        |  |      |  
|                  |  |                     |  |                                 
|                  |  | As of June 16, 2006 |  | Year-to-date ended June 16, 2006 |  | Year-to-date ended June 17, 2005 |        |                             |     
|                  |  | No. ofProperties    |  | No. ofRooms                      |  | AverageRoomRate                  |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoomRate |  | AverageOccupancyPercentages |        |  | RevPAR |   | PercentChange inRevPAR |  
|Urban             |  | 40                  |  | 23,124                           |  | $                                | 192.83 |                             | 76.7 | % |        | $ | 147.86          |  | $                           | 178.06 |  | 76.3   | % |                        | $ | 135.90 |  | 8.8  | %
|Suburban          |  | 30                  |  | 11,363                           |  |                                  | 145.88 |                             | 67.7 |   |        |   | 98.76           |  |                             | 133.83 |  | 66.8   |   |                        |   | 89.43  |  | 10.4 |  
|Airport           |  | 16                  |  | 7,328                            |  |                                  | 136.05 |                             | 73.5 |   |        |   | 100.06          |  |                             | 123.25 |  | 74.7   |   |                        |   | 92.12  |  | 8.6  |  
|Resort/Convention |  | 11                  |  | 6,838                            |  |                                  | 271.08 |                             | 76.2 |   |        |   | 206.48          |  |                             | 254.55 |  | 75.6   |   |                        |   | 192.34 |  | 7.4  |  
|                  |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                 |  |                             |        |  |        |   |                        |   |        |  |      |  
|All Types         |  | 97                  |  | 48,653                           |  |                                  | 185.36 |                             | 74.0 |   |        |   | 137.22          |  |                             | 171.13 |  | 73.7   |   |                        |   | 126.20 |  | 8.7  |  
|                  |  |                     |  |                                  |  |                                  |        |                             |      |   |        |   |                 |  |                             |        |  |        |   |                        |   |        |  |      |  

---

|(a) | The reporting period for our comparable operating statistics for the second quarter of 2006 is from March 25, 2006 to June 16, 2006 and for the second quarter of 2005 from
March 26, 2005 to June 17, 2005. The reporting period for year-to-date 2006 is from December 31, 2005 to June 16, 2006 and for year-to-date 2005 is from January 1, 2005 to June 17, 2005. For further discussion, see
Reporting Periods in our most recent Annual Report of Form 10-K.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following statistics are for all of our
full-service properties as of June 16, 2006 and June 17, 2005, respectively. The operating statistics include the results of operations prior to their disposition for hotels we have sold.

All Full-Service Properties



|                  |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|----------------- |  | ------------- | ------ | - | ------------------ | - | ------ | ------------ |  | - | ------------ | - |  | - | ------ | -
|                  |  | Quarter ended |        |   | Year-to-date ended |  
|                  |  | June 16,2006  |        |   | June 17,2005       |   |        | June 16,2006 |  |   | June 17,2005 |  
|Average Room Rate |  | $             | 186.66 |   |                    | $ | 172.03 |              |  | $ | 183.49       |   |  | $ | 169.17 |  
|Average Occupancy |  |               | 76.3   | % |                    |   | 75.5   | %            |  |   | 73.8         | % |  |   | 73.3   | %
|RevPAR            |  | $             | 142.51 |   |                    | $ | 129.95 |              |  | $ | 135.42       |   |  | $ | 123.96 |  

Liquidity and Capital Resources

Cash Requirements

Host uses cash primarily for acquisitions, capital expenditures, debt payment and dividends to stockholders. As a REIT, Host is required to distribute to its stockholders at least 90% of its taxable income on an annual basis. Funds used by
Host to make these distributions are provided by Host LP. We depend primarily on external sources of capital to finance future growth, including acquisitions.

Cash Balances.    As of June 16, 2006, we had $524 million of cash and cash equivalents, which was an increase of $340 million from December 31, 2005. The
increase is primarily attributable to the issuance of our 63/4% Series P senior notes on April 4, 2006. We
expect to use approximately $260 million of our cash balance to purchase the Westin Kierland Resort & Spa in the third quarter and approximately $60 million to invest in the European joint venture for its purchase of the Hotel
Arts Barcelona. Currently, our cash balance is in excess of the $100 million to $125 million range that management believes is appropriate given the current operating



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environment and the flexibility and capacity provided by our credit facility. In addition to the purchase of The Westin Kierland Resort & Spa and
the investment in the European joint venture, we expect to lower our cash balances to within the $100 million to $125 million range over the next few quarters through additional investments in our existing portfolio, debt repayments and
acquisitions.

As of June 16, 2006, we also had $102 million of cash that was restricted as a result of lender requirements.
The restricted cash balances do not have a significant effect on our liquidity. We have approximately $88 million of debt that will mature prior to 2007, which can be extended for two one-year terms if certain conditions are met. We also
have scheduled principal repayments totaling approximately $29 million for the remainder of 2006. We believe we have sufficient cash, or availability under our line of credit, to deal with our near-term maturities, as well as any unexpected
decline in the cash flow from our business. Currently, we have the full amount of $575 million available under our credit facility.

Debt Repayments and Refinancings.    Reducing our interest coverage and leverage ratios remains a key management priority. During the first half of 2006, we issued $800 million of 63/4% Series P senior notes and assumed or issued additional mortgage debt with a fair value of $202 million. We
used the proceeds from the senior notes issuance to redeem or prepay $136 million of 77/8% Series B senior
notes and related prepayment premiums, $84 million of 8.39% mortgage debt and approximately $150 million of 10% Class C preferred units and accrued distributions. Additionally, we converted or redeemed the $387 million remaining
balance of the Convertible Subordinated Debentures. The remaining proceeds of the senior note and mortgage debt issuances were used for asset acquisitions and general corporate purposes. While the net effect of these transactions resulted in a net
increase in our debt balances of approximately $395 million, we have increased our partners capital balance (including the limited partnership interests of third parties) by approximately $2.9 billion during the year, primarily
through the issuance of an equivalent OP unit to Host for each share of Host common stock that was issued as part of the acquisition of the Starwood portfolio. Overall, we have significantly improved our interest coverage and leverage ratios during
the year.

We may continue to redeem or refinance senior notes 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 share, as defined below, as a result of the payment of any applicable call premiums and the acceleration of previously deferred financing costs. Specifically, interest expense includes $3 million for year-to-date 2006 and
$30 million for year-to-date 2005 for call premiums and acceleration of deferred financing costs and original issue discounts associated with debt prepayments.

Capital Expenditures.    During the first half of 2006, our renewal and replacement capital expenditures were approximately $131 million. We expect total renewal and replacement capital
expenditures for 2006 to be approximately $275 million to $285 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.

In the first half of 2006, we spent approximately
$110 million in repositioning/return on investment (ROI) projects. These projects include, for example, expanding ballroom, spa or conference facilities and major guest rooms repositionings. We expect to spend approximately $245 million to
$255 million in 2006 on these investment projects. In addition, we expect to spend several hundred million on such investments over the next several years. For further discussion of these projects and capital expenditures, see our most recent
Annual Report on Form 10-K.

Acquisitions.    On April 10, 2006, we acquired 25 domestic hotels
and three foreign hotels from Starwood for total consideration of approximately $3.1 billion. Total consideration included the issuance by Host of $2.27 billion of equity (133,529,412 shares of Host common stock) to Starwood stockholders, the
assumption of $77 million in debt and the net payment of approximately $727 million in cash. For each share of Host common stock



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issued in the transaction, we issued an equivalent OP unit to Host. On May 17, 2006, we signed a definitive agreement to purchase The Westin Kierland
Resort & Spa in Scottsdale, Arizona, for approximately $393 million, which includes the assumption of approximately $135 million of mortgage debt with an interest rate of approximately 5.08%. We remain interested in pursuing
single asset and portfolio acquisitions, both domestically and abroad. We believe that there are, and will continue to be, opportunities to acquire assets that are consistent with our target profile of luxury and upper upscale properties in urban
and resort/convention locations where further large scale lodging development is limited. Any acquisitions may be funded, in part, from our available cash, draws under our credit facility or other debt financing, proceeds from asset sales or through
equity offerings by Host or the issuance of debt or OP units by Host LP. We may acquire properties through various structures, including through the European joint venture or through similar joint ventures with other partners. We cannot be certain
as to the size or timing of acquisition opportunities or of our ability to obtain additional acquisition financing, if needed.

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 markets. Our principal uses of cash are debt service, asset acquisitions, capital expenditures, operating costs, corporate expenses and distributions to equity holders.

Cash Provided by Operations.Our cash provided by operations for year-to-date 2006 increased $114 million to
$287 million from $173 million for year-to-date 2005, due primarily to the increase in operating profit in 2006.

Cash
Provided (Used in) by Investing Activities.    Approximately $314 million of cash was used in investing activities for the second quarter 2006. The primary use of cash in investing activities was the acquisition of the
Starwood portfolio. For more information, see Starwood Acquisition. Activity for year-to-date 2006 included the sale of five properties in the first half of 2006 for net proceeds of approximately $676 million. Additionally, we
increased our capital expenditures by $111 million to $241 million as part of our strategy to maximize the value of our existing portfolio.

The following table summarizes the significant investing activities that have been completed since the beginning of 2006 (in millions):



|                 |  |      |  |                                                                                  |  |                           |        |  
|---------------- |  | ---- |  | -------------------------------------------------------------------------------- |  | ------------------------- | ------ | -
|Transaction Date |  |      |  | Description of Transaction                                                       |  | (Investment)/ Sales Price |       
|May/June         |  | 2006 |  | Investment in European joint venture(1)                                          |  | $                         | (72    | )
|April            |  | 2006 |  | Purchase of 28 hotels from Starwood(2)                                           |  |                           | (3,070 | )
|March            |  | 2006 |  | Sale of Swissôtel The Drake, New York                                            |  |                           | 440    |  
|January          |  | 2006 |  | Sale of Chicago Marriott Suites Deerfield and Marriott at Research Triangle Park |  |                           | 55     |  
|January          |  | 2006 |  | Sale of Fort Lauderdale Marina Marriott and Albany Marriott                      |  |                           | 204    |  

---

|(1) | Investment price includes the contribution of the Sheraton Warsaw Hotel & Towers on May 2, 2006, which was acquired from Starwood on April 10, 2006, and cash to
the joint venture.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Investment price includes the assumption of $77 million of mortgage debt and the issuance by Host of $2.27 billion of Host common stock (representing approximately
133.5 million shares of Host common stock) and excludes transaction expenses. For each share of Host common stock issued in the transaction, we issued an equivalent OP unit to Host. The investment price includes $59 million for the
Sheraton Warsaw Hotel & Towers, which was subsequently contributed to the joint venture on May 2, 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In
addition to the sale of five properties in the first half of 2006, we believe that dispositions for the remainder of 2006 will be approximately $200 million to $300 million. The net proceeds from any dispositions will be used to repay
debt, fund acquisitions or repositioning/ROI projects or for general corporate purposes.



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Cash Provided by Financing Activities.Approximately $367 million of
cash was provided by financing activities for the second quarter through the issuance of the 63/4% Series P
senior notes for net proceeds of approximately $787 million, partially offset by the $136 million redemption of the remaining 77/8% Series B senior notes and the $150 million redemption of the 10% Class C preferred units. See Series P Senior Notes for more information. Also, activities for year-to-date 2006
consisted of distributions on our preferred and common OP units of $116 million and scheduled principal repayments of $29 million. The following table summarizes the significant financing transactions (not including the conversion of
Convertible Subordinated Debentures in the first quarter of 2006 or the issuance of approximately 133.5 million shares of Host common stock issued in the Starwood acquisition) since the beginning of 2006 (in millions):



|                 |  |      |  |                                                                       |  |                    |      |  
|---------------- |  | ---- |  | --------------------------------------------------------------------- |  | ------------------ | ---- | -
|Transaction Date |  |      |  | Description of Transaction                                            |  | Transaction Amount |     
|Debt             |  |      |  |                                                                       |  |                    |      |  
|June             |  | 2006 |  | Repayment of 8.39% mortgage on the Boston Marriott Copley Place       |  | $                  | (84  | )
|May              |  | 2006 |  | Redemption of remaining 77/8% Series B senior notes                   |  |                    | (136 | )
|April            |  | 2006 |  | Assumption of mortgage debt from Starwood (fair value of $86 million) |  |                    | 77   |  
|April            |  | 2006 |  | Redemption of outstanding Convertible Preferred Securities            |  |                    | (2   | )
|March            |  | 2006 |  | Proceeds from the issuance of 63/4% Series P senior notes             |  |                    | 787  |  
|March            |  | 2006 |  | Repayment of the credit facility                                      |  |                    | (20  | )
|January          |  | 2006 |  | Proceeds from the issuance of 5.195% Canadian mortgage loan           |  |                    | 116  |  
|                 |  |      | 
|Equity           |  |      |  |                                                                       |  |                    |      |  
|June             |  | 2006 |  | Redemption of the 10% Class C preferred units                         |  |                    | (151 | )

Debt

As of June 16, 2006, our total debt was $5.7 billion. The weighted average interest rate of our debt was approximately 7.2% and the weighted average maturity was 5.8 years. Additionally, approximately 86% of our debt has a
fixed rate of interest.

As of June 16, 2006 and December 31, 2005, our debt was comprised of (in millions):



|                                                                                                                                                                              |  |              |       |                  |   |      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----- | ---------------- | - | -----
|                                                                                                                                                                              |  | June 16,2006 |       | December 31,2005
|Series B senior notes, with a rate of 77/8% due August 2008                                                                                                                   |  | $            |      |                  | $ | 136  
|Series G senior notes, with a rate of 91/4% due October 2007(1)                                                                                                               |  |              | 234   |                  |   | 236  
|Series I senior notes, with a rate of 91/2% due January 2007(2)                                                                                                               |  |              | 448   |                  |   | 451  
|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                                                                                                                      |  |              | 346   |                  |   | 346  
|Series O senior notes, with a rate of 63/8% due March 2015                                                                                                                    |  |              | 650   |                  |   | 650  
|Series P senior notes , with a rate of 63/4% due June 2016                                                                                                                    |  |              | 800   |                  |   |     
|Exchangeable Senior Debentures, with a rate of 3.25% due April 2024                                                                                                           |  |              | 494   |                  |   | 493  
|Senior notes, with an average rate of 9.7%, maturing through 2012                                                                                                             |  |              | 13    |                  |   | 13   
|                                                                                                                                                                              |  |              |       |                  |   |      
|Total senior notes                                                                                                                                                            |  |              | 3,710 |                  |   | 3,050
|Mortgage debt (non-recourse) secured by $3.0 billion of real estate assets, with an average interest rate of 7.7% at June 16, 2006
and 7.8% at December 31, 2005 respectively |  |              | 1,918 |                  |   | 1,823
|Credit facility                                                                                                                                                               |  |              |      |                  |   | 20   
|Convertible debt obligation to Host Hotels & Resorts, Inc., with a rate of 63/4% due December 2026                                                                            |  |              |      |                  |   | 387  
|Other                                                                                                                                                                         |  |              | 88    |                  |   | 90   
|                                                                                                                                                                              |  |              |       |                  |   |      
|Total debt                                                                                                                                                                    |  | $            | 5,716 |                  | $ | 5,370
|                                                                                                                                                                              |  |              |       |                  |   |      

---

|(1) | Includes the fair value of the interest rate swap agreements of $(8) million and $(6) million as of June 16, 2006 and December 31, 2005, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes the fair value of the interest rate swap agreement of $(2) million and $1 million as of June 16, 2006 and December 31, 2005, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------



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Exchangeable Senior Debentures.During 2004, we issued $500 million of
3.25% Exchangeable Senior Debentures which currently are exchangeable into shares of Hosts common stock at a rate of 56.97 shares for each $1,000 of principal amount of the debentures, or a total of approximately 28 million shares, which
is equivalent to an exchange price of $17.55 per share of Hosts common stock. The exchange rate is adjusted for certain circumstances, including Hosts payment of common dividends. Holders may exchange their Exchangeable Senior 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 trading days.

Series P Senior Notes.On April 4, 2006, Host LP issued $800 million aggregate principal amount of senior notes
bearing interest at a rate of 63/4% per year due in 2016. The notes pay interest semi-annually in arrears.
The notes were offered in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. Under the terms of the senior notes indenture, the senior notes are equal in right of payment with all of Host
LPs unsubordinated indebtedness and senior to all subordinated obligations of Host LP subject to certain limitations set forth in the senior notes indenture. The senior notes are guaranteed by certain of our subsidiaries and are currently
secured by pledges of equity interests in many of our subsidiaries. The guarantees and pledges ratably benefit the notes outstanding under the senior notes indenture, as well as our credit facility, certain other senior debt, and interest rate swap
agreements and other hedging agreements with lenders that are parties to the credit facility. As with our other senior notes, our ability to incur indebtedness and pay distributions is subject to restrictions and the satisfaction of various
conditions. The senior notes indenture also imposes restrictions on customary matters, such as limitations on the capital expenditures, acquisitions, investments, and transactions with affiliates and the incurrence of liens.

At any time prior to June 1, 2011, the Series P senior notes will be redeemable at our option, in whole but not in part, for 100% of their principal
amount, plus a make-whole premium and accrued and unpaid interest to the applicable redemption date. Beginning June 1, 2011, Host LP may redeem, in whole or in part, the Series P senior notes at any time subject to the payment of a redemption
price together with any accrued and unpaid interest to the applicable redemption date. The redemption price includes a call premium that varies (from 3.375% to 0%) depending on the year of redemption. In addition, prior to June 1, 2009, Host LP
may also redeem up to 35% of the aggregate principal amount of the Series P senior notes at a redemption price equal to 106.75% of the principal amount thereof, together with any accrued and unpaid interest to the applicable redemption date, with
the net cash proceeds of sales of equity securities by Host or Host LP.

On July 17, 2006, Host LP launched an offer to exchange all
of its outstanding 63/4% Series P senior notes for 63/4% Series Q senior notes with substantially identical terms, except that the Series Q senior notes are registered under the Securities Act of 1933 and are,
therefore, freely transferable. The exchange offer is scheduled to expire on August 15, 2006.

Mortgage
Debt.    Substantially all of our mortgage debt is recourse solely to specific assets except in instances of fraud, misapplication of funds and other customary recourse provisions. As of June 16, 2006, we have 28
assets that are encumbered by mortgage debt. We have certain restrictive covenants on one loan, which we refer to as the CMBS loan, that is secured by mortgages on eight properties. These restrictive covenants require the mortgage servicer to retain
and hold in escrow the cash flow after debt service when it declines below specified operating levels. We are currently above the specified operating levels. The remaining mortgage loans generally do not have restrictive covenants that require such
escrows.

On April 10, 2006, as part of the Starwood transaction, we assumed $77 million of mortgage debt on The Westin Tabor
Center and The Westin Indianapolis. The mortgage debt had a fair value of $86 million on the date of acquisition.

On June 1,
2006, we repaid the $84 million mortgage debt on the Boston Marriott Copley Place.

Convertible Debt Obligation to Host
Hotels & Resorts, Inc.On April 5, 2006, we redeemed the remaining $2 million of outstanding Convertible Subordinated Debentures held by third parties and redeemed the remaining $17 million of
Convertible Subordinated Debentures held by related parties for cash. As a result, we eliminated our convertible debt obligation to Host Hotels & Resorts, Inc.



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Distribution Policy

Host is required to distribute to its stockholders at least 90% of its annual taxable income in order to qualify as a REIT, including taxable income recognized for 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. As of July 17, 2006, Host is the owner of substantially all of the preferred OP units and approximately 96% of the common OP units. The remaining 4% of the common OP units are held by various
third-party limited partners.

As a result of the minority position in Host LP common OP units, these third-party limited partners share,
on a pro rata basis, in amounts being distributed by Host LP. 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. For this reason, investors should also take into account the 4% minority position in Host LP and
the requirement that they share pro rata in distributions from Host LP when analyzing dividend payments by Host to its stockholders.

Hosts policy on common dividends is generally to distribute at least 100% of its annual taxable income, unless otherwise contractually restricted. Host intends to continue paying dividends on its preferred stock, regardless of the
amount of its taxable income, unless similarly contractually restricted. Host is not currently restricted in its ability to pay dividends, except to the extent necessary to maintain its REIT status.

On June 15, 2006, Hosts Board of Directors declared a cash dividend of $0.17 per share on its common stock. The dividend was paid on
July 17, 2006 to stockholders of record as of June 30, 2006. Accordingly, we made a $0.17 distribution per common OP unit. The amount of any future common dividend will be determined by Hosts Board of Directors.

On June 15, 2006, Hosts Board of Directors also declared a cash dividend of $0.5546875 per share on its Class E preferred stock. The
dividend was paid on July 17, 2006 to stockholders of record as of June 30, 2006. Accordingly, we made a similar distribution on our Class E preferred OP units.

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.



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Comparable Hotel Operating Results

We present certain operating results for our full-service hotels, such as hotel revenues, expenses and adjusted operating profit, on a comparable hotel,
or same store basis as supplemental information for investors. See Comparable Hotel Operating Statistics above for a description of what we consider our comparable hotels. 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 provides a reconciliation of net income (loss) available to common unitholders per unit to FFO per diluted unit (in
millions, except per unit amounts):

Reconciliation of Net Income (Loss) Available to

Common Unitholders to Funds From Operations per Diluted Unit



|                                                                                                                                                           |  |                    |      |   |               |       |                 |   |      |               |  |   |       |   |                |       |  |   |      |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---- | - | ------------- | ----- | --------------- | - | ---- | ------------- |  | - | ----- | - | -------------- | ----- |  | - | ---- | -
|                                                                                                                                                           |  | Quarter ended      |     
|                                                                                                                                                           |  | June 16, 2006      |      |   | June 17, 2005 |      
|                                                                                                                                                           |  | Income (Loss)      |      |   | Units         |       | Per Unit Amount |   |      | Income (Loss) |  |   | Units |   | Per UnitAmount |      
|Net income (loss) available to common unitholders                                                                                                          |  | $                  | 333  |   |               | 511.9 |                 | $ | .65  |               |  | $ | 85    |   |                | 373.1 |  | $ | .23  |  
|Adjustments:                                                                                                                                               |  |                    |      |   |               |       |                 |   |      |               |  |   |       |   |                |       |  |   |      |  
|Gain on dispositions, net of taxes                                                                                                                         |  |                    | (232 | ) |               |      |                 |   | (.45 | )             |  |   | (41   | ) |                |      |  |   | (.11 | )
|Amortization of deferred gains, net of taxes                                                                                                               |  |                    | (1   | ) |               |      |                 |   |     |               |  |   | (2    | ) |                |      |  |   | (.01 | )
|Depreciation and amortization                                                                                                                              |  |                    | 106  |   |               |      |                 |   | .20  |               |  |   | 86    |   |                |      |  |   | .23  |  
|Partnership adjustments                                                                                                                                    |  |                    |     |   |               |      |                 |   |     |               |  |   | (3    | ) |                |      |  |   | (.01 | )
|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 |  |                    |     |   |               | 2.0   |                 |   |     |               |  |   |      |   |                | 2.2   |  |   |     |  
|Assuming conversion of Exchangeable Senior Debentures                                                                                                      |  |                    | 4    |   |               | 28.1  |                 |   | (.01 | )             |  |   | 4     |   |                | 27.5  |  |   | (.01 | )
|Assuming conversion of Convertible Debt Obligation to Host Hotels & Resorts, Inc.                                                                          |  |                    |     |   |               |      |                 |   |     |               |  |   | 7     |   |                | 30.9  |  |   | (.01 | )
|                                                                                                                                                           |  |                    |      |   |               |       |                 |   |      |               |  |   |       |   |                |       |  |   |      |  
|FFO per diluted unit(a)(b)                                                                                                                                 |  | $                  | 210  |   |               | 542.0 |                 | $ | .39  |               |  | $ | 136   |   |                | 433.7 |  | $ | .31  |  
|                                                                                                                                                           |  |                    |      |   |               |       |                 |   |      |               |  |   |       |   |                |       |  |   |      |  
|                                                                                                                                                           | 
|                                                                                                                                                           |  | Year-to-date ended |     
|                                                                                                                                                           |  | June 16, 2006      |      |   | June 17, 2005 |      
|                                                                                                                                                           |  | Income (Loss)      |      |   | Units         |       | Per Unit Amount |   |      | Income (Loss) |  |   | Units |   | Per UnitAmount |      
|Net income available to common unitholders                                                                                                                 |  | $                  | 508  |   |               | 455.1 |                 | $ | 1.12 |               |  | $ | 83    |   |                | 372.9 |  | $ | .22  |  
|Adjustments:                                                                                                                                               |  |                    |      |   |               |       |                 |   |      |               |  |   |       |   |                |       |  |   |      |  
|Gain on dispositions, net of taxes                                                                                                                         |  |                    | (385 | ) |               |      |                 |   | (.85 | )             |  |   | (54   | ) |                |      |  |   | (.15 | )
|Amortization of deferred gains, net of taxes                                                                                                               |  |                    | (2   | ) |               |      |                 |   |     |               |  |   | (4    | ) |                |      |  |   | (.01 | )
|Depreciation and amortization                                                                                                                              |  |                    | 195  |   |               |      |                 |   | .42  |               |  |   | 169   |   |                |      |  |   | .45  |  
|Partnership adjustments                                                                                                                                    |  |                    |     |   |               |      |                 |   |     |               |  |   | 3     |   |                |      |  |   | .01  |  
|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 |  |                    |     |   |               | 2.0   |                 |   |     |               |  |   |      |   |                | 2.2   |  |   |     |  
|Assuming conversion of Exchangeable Senior Debentures                                                                                                      |  |                    | 9    |   |               | 28.1  |                 |   | (.02 | )             |  |   | 9     |   |                | 27.5  |  |   | (.01 | )
|Assuming conversion of Convertible Debt Obligation to Host Hotels & Resorts, Inc.                                                                          |  |                    | 2    |   |               | 4.1   |                 |   |     |               |  |   | 15    |   |                | 30.9  |  |   |     |  
|                                                                                                                                                           |  |                    |      |   |               |       |                 |   |      |               |  |   |       |   |                |       |  |   |      |  
|FFO per diluted unit(a)(b)                                                                                                                                 |  | $                  | 327  |   |               | 489.3 |                 | $ | .67  |               |  | $ | 221   |   |                | 433.5 |  | $ | .51  |  
|                                                                                                                                                           |  |                    |      |   |               |       |                 |   |      |               |  |   |       |   |                |       |  |   |      |  



35



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---

|(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, convertible 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | FFO per diluted unit and earnings (loss) per diluted unit for certain periods presented were significantly affected by certain transactions, the effect of which is shown in the
table below (in millions, except per unit amounts):
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                  |  |                   |       |   |               |   |       |                   |  |   |       |   |  |   |       |  
|------------------------------------------------- |  | ----------------- | ----- | - | ------------- | - | ----- | ----------------- |  | - | ----- | - |  | - | ----- | -
|                                                  |  | Quarter ended     |      
|                                                  |  | June 16, 2006     |       |   | June 17, 2005 |  
|                                                  |  | Net Income (Loss) |       |   | FFO           |   |       | Net Income (Loss) |  |   | FFO   |  
|Non-recurring Starwood acquisition costs(1)       |  | $                 | (13   | ) |               | $ | (13   | )                 |  | $ |      |   |  | $ |      |  
|Senior notes redemptions and debt prepayments(2)  |  |                   | (4    | ) |               |   | (4    | )                 |  |   | (20   | ) |  |   | (20   | )
|Preferred unit redemptions(3)                     |  |                   | (8    | ) |               |   | (8    | )                 |  |   | (4    | ) |  |   | (4    | )
|Gain on CBM Joint Venture LLC sale(4)             |  |                   |      |   |               |   |      |                   |  |   | 42    |   |  |   |      |  
|Gain on dispositions, net of taxes                |  |                   | 232   |   |               |   |      |                   |  |   |      |   |  |   |      |  
|Assuming conversion of minority OP Units issuable |  |                   |      |   |               |   | (1    | )                 |  |   |      |   |  |   |      |  
|                                                  |  |                   |       |   |               |   |       |                   |  |   |       |   |  |   |       |  
|Total                                             |  | $                 | 207   |   |               | $ | (26   | )                 |  | $ | 18    |   |  | $ | (24   | )
|                                                  |  |                   |       |   |               |   |       |                   |  |   |       |   |  |   |       |  
|Per diluted unit                                  |  | $                 | .38   |   |               | $ | (.04  | )                 |  | $ | .04   |   |  | $ | (.06  | )
|Diluted units                                     |  |                   | 544.5 |   |               |   | 544.5 |                   |  |   | 404.6 |   |  |   | 433.7 |  



|                                                 |  |                    |       |   |               |   |       |                   |  |   |       |   |  |   |       |  
|------------------------------------------------ |  | ------------------ | ----- | - | ------------- | - | ----- | ----------------- |  | - | ----- | - |  | - | ----- | -
|                                                 |  | Year-to-date ended |      
|                                                 |  | June 16, 2006      |       |   | June 17, 2005 |  
|                                                 |  | Net Income (Loss)  |       |   | FFO           |   |       | Net Income (Loss) |  |   | FFO   |  
|Non-recurring Starwood acquisition costs(1)      |  | $                  | (13   | ) |               | $ | (13   | )                 |  | $ |      |   |  | $ |      |  
|Senior notes redemptions and debt prepayments(2) |  |                    | (4    | ) |               |   | (4    | )                 |  |   | (34   | ) |  |   | (34   | )
|Preferred unit redemptions(3)                    |  |                    | (8    | ) |               |   | (8    | )                 |  |   | (4    | ) |  |   | (4    | )
|Gain on CBM Joint Venture LLC sale(4)            |  |                    |      |   |               |   |      |                   |  |   | 42    |   |  |   |      |  
|Gain on dispositions, net of taxes               |  |                    | 385   |   |               |   |      |                   |  |   | 12    |   |  |   |      |  
|                                                 |  |                    |       |   |               |   |       |                   |  |   |       |   |  |   |       |  
|Total                                            |  | $                  | 360   |   |               | $ | (25   | )                 |  | $ | 16    |   |  | $ | (38   | )
|                                                 |  |                    |       |   |               |   |       |                   |  |   |       |   |  |   |       |  
|Per diluted unit                                 |  | $                  | .78   |   |               | $ | (.05  | )                 |  | $ | .04   |   |  | $ | (.09  | )
|Diluted units                                    |  |                    | 459.6 |   |               |   | 489.3 |                   |  |   | 375.1 |   |  |   | 433.5 |  

---

|(1) | Represents non-recurring costs incurred in conjunction with the acquisition of the Starwood portfolio that are required to be expensed under generally accepted accounting
principles, including start-up costs, bridge loan fees and expenses and our portion of a foreign currency hedge loss by the European joint venture, as the venture hedged a portion of its initial investment for the acquisition of its six hotels.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents the original issue costs and incremental dividends during the redemption notice period associated with the redemption of the Class C preferred units in 2006 and the Class
B preferred units in 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents the gain, net of tax, on the sale of 85% of our interest in CBM Joint Venture LLC.
|--- | ---------------------------------------------------------------------------------------------



36



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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 16,2006  |        |   | June 17,2005       |   |        | June 16,2006 |  |   | June 17,2005 |  
|Number of hotels                                       |  |               | 97     |   |                    |   | 97     |              |  |   | 97           |   |  |   | 97     |  
|Number of rooms                                        |  |               | 48,653 |   |                    |   | 48,653 |              |  |   | 48,653       |   |  |   | 48,653 |  
|Percent change in Comparable Hotel RevPAR              |  |               | 9.7    | % |                    |   |        |              |  |   | 8.7          | % |  |   |        |  
|Comparable hotel sales                                 |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Room                                                   |  | $             | 608    |   |                    | $ | 554    |              |  | $ | 1,094        |   |  | $ | 1,007  |  
|Food and beverage                                      |  |               | 315    |   |                    |   | 293    |              |  |   | 572          |   |  |   | 531    |  
|Other                                                  |  |               | 65     |   |                    |   | 65     |              |  |   | 117          |   |  |   | 115    |  
|                                                       |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Comparable hotel sales(b)                              |  |               | 988    |   |                    |   | 912    |              |  |   | 1,783        |   |  |   | 1,653  |  
|                                                       |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Comparable hotel expenses(c)                           |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Room                                                   |  |               | 138    |   |                    |   | 128    |              |  |   | 254          |   |  |   | 238    |  
|Food and beverage                                      |  |               | 216    |   |                    |   | 208    |              |  |   | 400          |   |  |   | 384    |  
|Other                                                  |  |               | 37     |   |                    |   | 39     |              |  |   | 68           |   |  |   | 71     |  
|Management fees, ground rent and other costs           |  |               | 304    |   |                    |   | 285    |              |  |   | 559          |   |  |   | 532    |  
|                                                       |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Comparable hotel expenses                              |  |               | 695    |   |                    |   | 660    |              |  |   | 1,281        |   |  |   | 1,225  |  
|                                                       |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Comparable hotel adjusted operating profit             |  |               | 293    |   |                    |   | 252    |              |  |   | 502          |   |  |   | 428    |  
|Non-comparable hotel results, net(d)                   |  |               | 68     |   |                    |   | 8      |              |  |   | 85           |   |  |   | 22     |  
|Office building and limited service properties, net(e) |  |               |       |   |                    |   |       |              |  |   | (1           | ) |  |   |       |  
|Depreciation and amortization                          |  |               | (107   | ) |                    |   | (83    | )            |  |   | (196         | ) |  |   | (164   | )
|Corporate and other expenses                           |  |               | (21    | ) |                    |   | (14    | )            |  |   | (41          | ) |  |   | (28    | )
|                                                       |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  
|Operating profit                                       |  | $             | 233    |   |                    | $ | 163    |              |  | $ | 349          |   |  | $ | 258    |  
|                                                       |  |               |        |   |                    |   |        |              |  |   |              |   |  |   |        |  

---

|(a) | The reporting period for our comparable operating statistics for the second quarter of 2006 is from March 25, 2006 to June 16, 2006 and for the second quarter of 2005 from
March 26, 2005 to June 17, 2005. The reporting period for year-to-date 2006 is from December 31, 2005 to June 16, 2006 and for year-to-date 2005 is from January 1, 2005 to June 17, 2005. For further discussion, see
Reporting Periods in our most recent Annual Report of Form 10-K.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | 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 16,2006  |       |   | June 17,2005       |   |     | June 16,2006 |  |   | June 17,2005 |  
|Revenues per the consolidated statements of operations                                                         |  | $             | 1,212 |   |                    | $ | 958 |              |  | $ | 2,060        |   |  | $ | 1,748 |  
|Non-comparable hotel sales                                                                                     |  |               | (220  | ) |                    |   | (40 | )            |  |   | (274         | ) |  |   | (83   | )
|Hotel sales for the property for which we record rental income, net                                            |  |               | 14    |   |                    |   | 12  |              |  |   | 26           |   |  |   | 24    |  
|Rental income for office buildings and limited service hotels                                                  |  |               | (18   | ) |                    |   | (18 | )            |  |   | (36          | ) |  |   | (36   | )
|Adjustment for hotel sales for comparable hotels to reflect Marriotts fiscal year for Marriott-managed hotels |  |               |      |   |                    |   |    |              |  |   | 7            |   |  |   |      |  
|                                                                                                               |  |               |       |   |                    |   |     |              |  |   |              |   |  |   |       |  
|Comparable hotel sales                                                                                         |  | $             | 988   |   |                    | $ | 912 |              |  | $ | 1,783        |   |  | $ | 1,653 |  
|                                                                                                               |  |               |       |   |                    |   |     |              |  |   |              |   |  |   |       |  



37



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##### Table of Contents

|(c) | 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 16,2006  |      |   | June 17,2005       |   |     | June 16,2006 |  |   | June 17,2005 |  
|Operating costs and expenses per the consolidated statements of operations                                        |  | $             | 979  |   |                    | $ | 795 |              |  | $ | 1,711        |   |  | $ | 1,490 |  
|Non-comparable hotel expenses                                                                                     |  |               | (152 | ) |                    |   | (33 | )            |  |   | (190         | ) |  |   | (64   | )
|Hotel expenses for the property for which we record rental income                                                 |  |               | 14   |   |                    |   | 13  |              |  |   | 29           |   |  |   | 27    |  
|Rent expense for office buildings and limited service hotels                                                      |  |               | (18  | ) |                    |   | (18 | )            |  |   | (37          | ) |  |   | (36   | )
|Adjustment for hotel expenses for comparable hotels to reflect Marriotts fiscal year for Marriott-managed hotels |  |               |     |   |                    |   |    |              |  |   | 5            |   |  |   |      |  
|Depreciation and amortization                                                                                     |  |               | (107 | ) |                    |   | (83 | )            |  |   | (196         | ) |  |   | (164  | )
|Corporate and other expenses                                                                                      |  |               | (21  | ) |                    |   | (14 | )            |  |   | (41          | ) |  |   | (28   | )
|                                                                                                                  |  |               |      |   |                    |   |     |              |  |   |              |   |  |   |       |  
|Comparable hotel expenses                                                                                         |  | $             | 695  |   |                    | $ | 660 |              |  | $ | 1,281        |   |  | $ | 1,225 |  
|                                                                                                                  |  |               |      |   |                    |   |     |              |  |   |              |   |  |   |       |  

|(d) | 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



38



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##### Table of Contents

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

Interest Rate Sensitivity

The percentage of our debt that is floating rate was 14% at June 16, 2006 and 15% at December 31, 2005. Accordingly, there have been no material changes in our interest rate sensitivity. See our most
recent Annual Report on Form 10-K.



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

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods
specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer of Host, our sole general partner, as appropriate, to allow
for timely decisions regarding required disclosure based closely on the definition of disclosure controls and procedures in Rule 13a-15(e). In designing and evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Also, we have investments in certain unconsolidated entities. As we do not control or manage these entities, our disclosure controls and procedures at the end of the period with respect to such
entities are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.

We carried out
an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer of Host, of the effectiveness of the design and operation of our disclosure controls and procedures
as of the end of the period covered by this report. Based on the foregoing, the Chief Executive Officer and Chief Financial Officer of Host concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

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 reports.



39



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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 Common Units Purchased |  | Average Price Paid per Common Unit |   |  | Total Number ofCommon Units Purchased as Partof Publicly AnnouncedPlans or Programs |  | Maximum Number (Or Approximate Dollar Value)of Common Units thatMay Yet Be PurchasedUnder the Plans orPrograms
|March 25, 2006April 24, 2006 |  | 21,107                                 |  | 1 share of Host common stock       | * |  |                                                                                    |  |                                                                                                              
|April 25, 2006May 24, 2006   |  | 31,385                                 |  | 1 share of Host common stock       | * |  |                                                                                    |  |                                                                                                              
|May 25, 2006June 16, 2006    |  | 32,942                                 |  | 1 share of Host common stock       | * |  |                                                                                    |  |                                                                                                              
|                              |  |                                        |  |                                    |   |  |                                                                                     |  |                                                                                                               
|Total                         |  | 85,434                                 |  | 1 share of Host common stock       | * |  |                                                                                     |  |                                                                                                               
|                              |  |                                        |  |                                    |   |  |                                                                                     |  |                                                                                                               

---

|* | Reflects common operating partnership units redeemed by holders in exchange for 1 share of Host Hotels & Resorts, Inc. common stock for each operating partnership unit.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                              
|---------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.26       |  | Nineteenth Supplemental Indenture, dated April 4, 2006, by and among Host Marriott, L.P., the Subsidiary Guarantors named therein and The Bank of New York as successor to HSBC Bank USA
(formerly, Marine Midland Bank), as trustee, to the Amended and Restated Indenture dated August 5, 1998 (incorporated by reference to Exhibit 4.26 of Host Marriott Corporations Current Report on Form 8-K, filed April 10,
2006).
|           | 
|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.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



40



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##### Table of Contents

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.
|              |  |  | 
|July 24, 2006 |  |  |  | By: |  | Host Hotels & Resorts, Inc.
|              |  |  |  |     |  | Its General Partner        
|              |  |  | 
|              |  |  |  |     |  | /s/    LARRY K. HARVEY     
|              |  |  |  |     |  |                             |  | Larry K. Harvey                                                              
|              |  |  |  |     |  |                             |  | Senior Vice President,Chief Accounting Officer of Host Hotels & Resorts, Inc.



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