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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

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

For the quarterly period ended September 10, 2010

OR



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

Commission file number 0-25087





HOST
HOTELS & RESORTS, L.P.

(Exact name of registrant as specified in its charter)







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

(240)
744-1000

(Registrants telephone number, including area code)





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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).      ̈  Yes     ̈  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  | x  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

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 October 13,
2010
|Units of limited partnership interest |  | 662,474,513                             









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INDEX



|        |  |                                                                                                                                      |  |         
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | --------
|        |  | PART I. FINANCIAL INFORMATION                                                                                                        |  |         
|        |  |                                                                                                                                      |  | Page No.
|        |  |                                                                                                                                     
|Item 1. |  | Financial Statements:                                                                                                                |  |         
|        |  | Condensed Consolidated Balance Sheets-September 10, 2010 (unaudited) and December 31,
2009                                           |  | 3       
|        |  |                                                                                                                                     
|        |  | Condensed Consolidated Statements of Operations (unaudited)-Quarter and Year-to-date Ended September 10,
2010 and September 11, 2009 |  | 4       
|        |  |                                                                                                                                     
|        |  | Condensed Consolidated Statements of Cash Flows (unaudited)-Year-to-Date Ended September 10, 2010 and September
 11, 2009            |  | 5       
|        |  |                                                                                                                                     
|        |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                     |  | 7       
|        |  |                                                                                                                                     
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                                                |  | 24      
|        |  |                                                                                                                                     
|Item 3. |  | Quantitative and Qualitative Disclosures about Market Risk                                                                           |  | 47      
|        |  |                                                                                                                                     
|Item 4. |  | Controls and Procedures                                                                                                              |  | 47      
|        |  |                                                                                                                                     
|        |  | PART II. OTHER INFORMATION                                                                                                           |  |         
|        |  |                                                                                                                                     
|Item 1. |  | Legal Proceedings                                                                                                                    |  | 48      
|        |  |                                                                                                                                     
|Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                          |  | 48      
|        |  |                                                                                                                                     
|Item 6. |  | Exhibits                                                                                                                             |  | 49      



2



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CONDENSED CONSOLIDATED BALANCE SHEETS

September 10, 2010 and December 31, 2009

(in millions)



|                                                                                                                            |  |                   |        |                  |   |       
|--------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | ---------------- | - | ------
|                                                                                                                            |  | September 10,2010 |        | December 31,2009
|                                                                                                                            |  | (unaudited)       |        |                 
|ASSETS                                                                                                                     
|                                                                                                                            |  |                  
|Property and equipment, net                                                                                                 |  | $                 | 10,452 |                  | $ | 10,231
|Assets held for sale                                                                                                        |  |                   |       |                  |   | 8     
|Due from managers                                                                                                           |  |                   | 59     |                  |   | 29    
|Investments in affiliates                                                                                                   |  |                   | 136    |                  |   | 153   
|Deferred financing costs, net                                                                                               |  |                   | 39     |                  |   | 49    
|Furniture, fixtures and equipment replacement fund                                                                          |  |                   | 153    |                  |   | 124   
|Other                                                                                                                       |  |                   | 333    |                  |   | 264   
|Restricted cash                                                                                                             |  |                   | 84     |                  |   | 53    
|Cash and cash equivalents                                                                                                   |  |                   | 838    |                  |   | 1,642 
|                                                                                                                            |  |                   |        |                  |   |       
|Total assets                                                                                                                |  | $                 | 12,094 |                  | $ | 12,553
|                                                                                                                            |  |                   |        |                  |   |       
|                                                                                                                           
|LIABILITIES, LIMITED PARTNERSHIP INTEREST OF THIRD PARTIES AND CAPITAL                                                     
|                                                                                                                            |  |                  
|Debt                                                                                                                        |  |                   |        |                  |   |       
|Senior notes, including $1,146 million and $1,123 million, respectively, net of discount, of Exchangeable Senior
Debentures |  | $                 | 3,989  |                  | $ | 4,534 
|Credit facility                                                                                                             |  |                   | 57     |                  |   |      
|Mortgage debt                                                                                                               |  |                   | 1,270  |                  |   | 1,217 
|Other                                                                                                                       |  |                   | 108    |                  |   | 86    
|                                                                                                                            |  |                   |        |                  |   |       
|Total debt                                                                                                                  |  |                   | 5,424  |                  |   | 5,837 
|Accounts payable and accrued expenses                                                                                       |  |                   | 187    |                  |   | 174   
|Other                                                                                                                       |  |                   | 201    |                  |   | 194   
|                                                                                                                            |  |                   |        |                  |   |       
|Total liabilities                                                                                                           |  |                   | 5,812  |                  |   | 6,205 
|                                                                                                                            |  |                   |        |                  |   |       
|                                                                                                                            |  |                  
|Limited partnership interests of third parties                                                                              |  |                   | 154    |                  |   | 139   
|                                                                                                                            |  |                  
|Host Hotels & Resorts, L.P. capital:                                                                                        |  |                   |        |                  |   |       
|General partner                                                                                                             |  |                   | 1      |                  |   | 1     
|Cumulative redeemable preferred limited partner                                                                             |  |                   |       |                  |   | 97    
|Limited partner                                                                                                             |  |                   | 6,085  |                  |   | 6,077 
|Accumulated other comprehensive income                                                                                      |  |                   | 9      |                  |   | 12    
|                                                                                                                            |  |                   |        |                  |   |       
|Total Host Hotels & Resorts, L.P. capital                                                                                   |  |                   | 6,095  |                  |   | 6,187 
|Non-controlling interestsconsolidated partnerships                                                                         |  |                   | 33     |                  |   | 22    
|                                                                                                                            |  |                   |        |                  |   |       
|Total capital                                                                                                               |  |                   | 6,128  |                  |   | 6,209 
|                                                                                                                            |  |                   |        |                  |   |       
|Total liabilities, limited partnership interest of third parties and capital                                                |  | $                 | 12,094 |                  | $ | 12,553
|                                                                                                                            |  |                   |        |                  |   |       

See notes to condensed consolidated statements.



3



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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Quarter and Year-to-date Ended September 10, 2010 and September 11, 2009

(unaudited, in millions, except per unit amounts)



|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|------------------------------------------------------------ |  | ----------------- | ----- | - | ------------------ | - | ---- | ----------------- |  | - | ----------------- | - |  | - | ----- | -
|                                                             |  | Quarter ended     |       |   | Year-to-date ended |  
|                                                             |  | September 10,2010 |       |   | September 11,2009  |   |      | September 10,2010 |  |   | September 11,2009 |  
|REVENUES                                                     |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Rooms                                                        |  | $                 | 629   |   |                    | $ | 574  |                   |  | $ | 1,785             |   |  | $ | 1,696 |  
|Food and beverage                                            |  |                   | 254   |   |                    |   | 239  |                   |  |   | 849               |   |  |   | 823   |  
|Other                                                        |  |                   | 63    |   |                    |   | 68   |                   |  |   | 192               |   |  |   | 223   |  
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Total full-service hotel sales                               |  |                   | 946   |   |                    |   | 881  |                   |  |   | 2,826             |   |  |   | 2,742 |  
|Other revenues                                               |  |                   | 60    |   |                    |   | 22   |                   |  |   | 117               |   |  |   | 76    |  
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Total revenues                                               |  |                   | 1,006 |   |                    |   | 903  |                   |  |   | 2,943             |   |  |   | 2,818 |  
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|EXPENSES                                                     |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Rooms                                                        |  |                   | 178   |   |                    |   | 167  |                   |  |   | 497               |   |  |   | 465   |  
|Food and beverage                                            |  |                   | 213   |   |                    |   | 203  |                   |  |   | 641               |   |  |   | 627   |  
|Other departmental and support expenses                      |  |                   | 277   |   |                    |   | 259  |                   |  |   | 778               |   |  |   | 754   |  
|Management fees                                              |  |                   | 37    |   |                    |   | 32   |                   |  |   | 112               |   |  |   | 106   |  
|Other property-level expenses                                |  |                   | 124   |   |                    |   | 94   |                   |  |   | 306               |   |  |   | 270   |  
|Depreciation and amortization                                |  |                   | 134   |   |                    |   | 137  |                   |  |   | 409               |   |  |   | 429   |  
|Corporate and other expenses                                 |  |                   | 20    |   |                    |   | 19   |                   |  |   | 69                |   |  |   | 50    |  
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Total operating costs and expenses                           |  |                   | 983   |   |                    |   | 911  |                   |  |   | 2,812             |   |  |   | 2,701 |  
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|OPERATING PROFIT (LOSS)                                      |  |                   | 23    |   |                    |   | (8   | )                 |  |   | 131               |   |  |   | 117   |  
|Interest income                                              |  |                   | 2     |   |                    |   | 1    |                   |  |   | 3                 |   |  |   | 5     |  
|Interest expense                                             |  |                   | (89   | ) |                    |   | (95  | )                 |  |   | (268              | ) |  |   | (264  | )
|Net gains on property transactions and other                 |  |                   |      |   |                    |   | 11   |                   |  |   |                  |   |  |   | 13    |  
|Gain (loss) on foreign currency transactions and derivatives |  |                   | (1    | ) |                    |   | 1    |                   |  |   | (6                | ) |  |   | 5     |  
|Equity in losses of affiliates                               |  |                   | (1    | ) |                    |   | (2   | )                 |  |   | (5                | ) |  |   | (36   | )
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|LOSS BEFORE INCOME TAXES                                     |  |                   | (66   | ) |                    |   | (92  | )                 |  |   | (145              | ) |  |   | (160  | )
|Benefit for income taxes                                     |  |                   | 5     |   |                    |   | 25   |                   |  |   | 21                |   |  |   | 29    |  
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|LOSS FROM CONTINUING OPERATIONS                              |  |                   | (61   | ) |                    |   | (67  | )                 |  |   | (124              | ) |  |   | (131  | )
|Income (loss) from discontinued operations, net of tax       |  |                   |      |   |                    |   | 9    |                   |  |   | (2                | ) |  |   | (55   | )
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|NET LOSS                                                     |  |                   | (61   | ) |                    |   | (58  | )                 |  |   | (126              | ) |  |   | (186  | )
|Less: Net loss attributable to non-controlling interests     |  |                   | 2     |   |                    |   | 2    |                   |  |   |                  |   |  |   | 1     |  
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|NET LOSS ATTRIBUTABLE TO HOST HOTELS & RESORTS, L.P          |  |                   | (59   | ) |                    |   | (56  | )                 |  |   | (126              | ) |  |   | (185  | )
|Less: Distributions on preferred units                       |  |                   |      |   |                    |   | (2   | )                 |  |   | (4                | ) |  |   | (6    | )
|Issuance costs of redeemed preferred units                   |  |                   |      |   |                    |   |     |                   |  |   | (4                | ) |  |   |      |  
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|NET LOSS AVAILABLE TO COMMON UNITHOLDERS                     |  | $                 | (59   | ) |                    | $ | (58  | )                 |  | $ | (134              | ) |  | $ | (191  | )
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Basic and diluted earnings (loss) per common unit:           |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Continuing operations                                        |  | $                 | (.09  | ) |                    | $ | (.10 | )                 |  | $ | (.21              | ) |  | $ | (.24  | )
|Discontinued operations                                      |  |                   |      |   |                    |   | .01  |                   |  |   |                  |   |  |   | (.09  | )
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Basic and diluted loss per common unit                       |  | $                 | (.09  | ) |                    | $ | (.09 | )                 |  | $ | (.21              | ) |  | $ | (.33  | )
|                                                             |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  

See notes to condensed consolidated statements.



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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year-to-date Ended September 10, 2010 and September 11, 2009

(unaudited, in millions)



|                                                                         |  |                    |       |   |                   |   |       |  
|------------------------------------------------------------------------ |  | ------------------ | ----- | - | ----------------- | - | ----- | -
|                                                                         |  | Year-to-date ended |      
|                                                                         |  | September 10,2010  |       |   | September 11,2009 |  
|OPERATING ACTIVITIES                                                     |  |                    |       |   |                   |   |       |  
|Net loss                                                                 |  | $                  | (126  | ) |                   | $ | (186  | )
|Adjustments to reconcile to cash provided by operations:                 |  |                    |       |   |                   |   |       |  
|Discontinued operations:                                                 |  |                    |       |   |                   |   |       |  
|(Gain) loss on dispositions                                              |  |                    | 1     |   |                   |   | (27   | )
|Depreciation                                                             |  |                    |      |   |                   |   | 86    |  
|Depreciation and amortization                                            |  |                    | 409   |   |                   |   | 429   |  
|Amortization of deferred financing costs                                 |  |                    | 8     |   |                   |   | 11    |  
|Amortization of debt premiums/discounts, net                             |  |                    | 24    |   |                   |   | 22    |  
|Deferred income taxes                                                    |  |                    | (22   | ) |                   |   | (33   | )
|Net gains on property transactions and other                             |  |                    |      |   |                   |   | (13   | )
|(Gain) loss on foreign currency transactions and derivatives             |  |                    | 6     |   |                   |   | (5    | )
|Non-cash loss (gain) on extinguishment of debt                           |  |                    | 4     |   |                   |   | (4    | )
|Equity in losses of affiliates, net                                      |  |                    | 5     |   |                   |   | 36    |  
|Distributions from equity investments                                    |  |                    | 2     |   |                   |   | 1     |  
|Change in due from managers                                              |  |                    | (25   | ) |                   |   | 11    |  
|Changes in other assets                                                  |  |                    | 24    |   |                   |   | (20   | )
|Changes in other liabilities                                             |  |                    | 18    |   |                   |   | 62    |  
|                                                                         |  |                    |       |   |                   |   |       |  
|Cash provided by operations                                              |  |                    | 328   |   |                   |   | 370   |  
|                                                                         |  |                    |       |   |                   |   |       |  
|                                                                         |  |                   
|INVESTING ACTIVITIES                                                     |  |                    |       |   |                   |   |       |  
|Proceeds from sales of assets, net                                       |  |                    | 12    |   |                   |   | 199   |  
|Acquisitions                                                             |  |                    | (292  | ) |                   |   |      |  
|Proceeds from sale of interest in CBM Joint Venture LLC                  |  |                    |      |   |                   |   | 13    |  
|Return of capital from investments in affiliates                         |  |                    |      |   |                   |   | 39    |  
|Purchase of mortgage note on a portfolio of hotels                       |  |                    | (53   | ) |                   |   |      |  
|Capital expenditures:                                                    |  |                    |       |   |                   |   |       |  
|Renewals and replacements                                                |  |                    | (99   | ) |                   |   | (114  | )
|Repositionings and other investments                                     |  |                    | (50   | ) |                   |   | (141  | )
|Change in furniture, fixtures and equipment (FF&E) replacement fund      |  |                    | (20   | ) |                   |   | (20   | )
|Change in FF&E replacement funds designated as restricted cash           |  |                    | 4     |   |                   |   | (11   | )
|                                                                         |  |                    |       |   |                   |   |       |  
|Cash used in investing activities                                        |  |                    | (498  | ) |                   |   | (35   | )
|                                                                         |  |                    |       |   |                   |   |       |  
|                                                                         |  |                   
|FINANCING ACTIVITIES                                                     |  |                    |       |   |                   |   |       |  
|Financing costs                                                          |  |                    |      |   |                   |   | (10   | )
|Issuances of debt                                                        |  |                    |      |   |                   |   | 506   |  
|Draw (repayment) on credit facility                                      |  |                    | 56    |   |                   |   | (410  | )
|Repurchase/redemption of senior notes, including exchangeable debentures |  |                    | (571  | ) |                   |   | (115  | )
|Mortgage debt prepayments and scheduled maturities                       |  |                    | (124  | ) |                   |   | (342  | )
|Scheduled principal repayments                                           |  |                    | (8    | ) |                   |   | (11   | )
|Common stock issuance                                                    |  |                    | 158   |   |                   |   | 588   |  
|Redemption of preferred OP units                                         |  |                    | (101  | ) |                   |   |      |  
|Distributions on common OP units                                         |  |                    | (14   | ) |                   |   | (27   | )
|Distributions on preferred OP units                                      |  |                    | (6    | ) |                   |   | (7    | )
|Distributions to non-controlling interests                               |  |                    | (3    | ) |                   |   | (2    | )
|Contributions from non-controlling interests                             |  |                    | 7     |   |                   |   |      |  
|Change in restricted cash other than FF&E replacement fund               |  |                    | (28   | ) |                   |   | 6     |  
|                                                                         |  |                    |       |   |                   |   |       |  
|Cash provided by (used in) financing activities                          |  |                    | (634  | ) |                   |   | 176   |  
|                                                                         |  |                    |       |   |                   |   |       |  
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         |  |                    | (804  | ) |                   |   | 511   |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                           |  |                    | 1,642 |   |                   |   | 508   |  
|                                                                         |  |                    |       |   |                   |   |       |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                 |  | $                  | 838   |   |                   | $ | 1,019 |  
|                                                                         |  |                    |       |   |                   |   |       |  

See notes to condensed consolidated statements.



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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year-to-date Ended September 10, 2010 and September 11, 2009

(unaudited)

Supplemental disclosure of cash flow information (in millions):



|                  |  |                    |     |                   |   |    
|----------------- |  | ------------------ | --- | ----------------- | - | ---
|                  |  | Year-to-date ended
|                  |  | September 10,2010  |     | September 11,2009
|Interest paid     |  | $                  | 209 |                   | $ | 216
|Income taxes paid |  |                    | 3   |                   |   | 4  

Supplemental disclosure of noncash
investing and financing activities:

For the year-to-date periods ended September 10, 2010 and September 11,
2009, limited partners converted operating partnership units, or OP units, valued at approximately $12 million and $17 million, respectively, in exchange for approximately 1.1 million and 3.3 million shares, respectively, of Host
Hotels & Resorts, Inc. common stock.

On September 2, 2010, we acquired a 90% controlling interest in the W New
York, Union Square hotel through a consolidated joint venture in which we are the controlling member. In conjunction with the acquisition, the joint venture assumed a $115 million mortgage debt with a fair value of $119 million and
contingent and deferred consideration valued at $8 million.

On July 22, 2010, we acquired a leasehold interest in the Le
Meridien Piccadilly in London, England. In conjunction with the acquisition, we assumed a $51 million (£33 million) mortgage loan and recorded a $21 million (£14 million) capital lease obligation.

See notes to condensed consolidated statements.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



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

Host Hotels & Resorts, L.P., or Host LP, a Delaware limited partnership operating through an umbrella partnership structure with Host Hotels & Resorts, Inc., or Host, as the sole general
partner, is the owner of hotel properties. Host operates as a self-managed and self-administered real estate investment trust, or REIT, with its operations conducted solely through us and our subsidiaries. As of, September 10, 2010 Host held
98% of our operating partnership interests, or OP units.



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

We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles, or GAAP, in
the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made are adequate to prevent the information presented from being misleading. However, the unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10K for the year ended December 31, 2009.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

In our opinion, the accompanying unaudited condensed consolidated financial
statements reflect all adjustments necessary to present fairly our financial position as of September 10, 2010 and the results of our operations for the quarterly and year-to-date periods ended September 10, 2010 and September 11,
2009 and cash flows for the year-to-date periods ended September 10, 2010 and September 11, 2009. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.



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

Basic earnings (loss) per common unit is computed by dividing net income (loss) 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 (loss) 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 non-controlling partners and exchangeable debt securities. No effect is shown for securities that are anti-dilutive.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|                                                                                |  |                                        |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|------------------------------------------------------------------------------- |  | -------------------------------------- | ----- | - | ------------------ | - | ----- | ----------------- |  | - | ----------------- | - |  | - | ----- | -
|                                                                                |  | Quarter ended                          |       |   | Year-to-date ended |  
|                                                                                |  | September 10,2010                      |       |   | September 11,2009  |   |       | September 10,2010 |  |   | September 11,2009 |  
|                                                                                |  | (in millions, except per unit amounts) |      
|Net loss                                                                        |  | $                                      | (61   | ) |                    | $ | (58   | )                 |  | $ | (126              | ) |  | $ | (186  | )
|Net loss attributable to non-controlling interests                              |  |                                        | 2     |   |                    |   | 2     |                   |  |   |                  |   |  |   | 1     |  
|Distributions on preferred units                                                |  |                                        |      |   |                    |   | (2    | )                 |  |   | (4                | ) |  |   | (6    | )
|Issuance costs of redeemed preferred OP units (a)                               |  |                                        |      |   |                    |   |      |                   |  |   | (4                | ) |  |   |      |  
|                                                                                |  |                                        |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|Loss available to common unitholders                                            |  |                                        | (59   | ) |                    |   | (58   | )                 |  |   | (134              | ) |  |   | (191  | )
|Assuming deduction of gain recognized for the repurchase of 2004 Debentures (b) |  |                                        |      |   |                    |   |      |                   |  |   |                  |   |  |   | (2    | )
|                                                                                |  |                                        |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|Diluted loss available to common unitholders                                    |  | $                                      | (59   | ) |                    | $ | (58   | )                 |  | $ | (134              | ) |  | $ | (193  | )
|                                                                                |  |                                        |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|                                                                                |  |                                        |       |  
|Basic weighted average units outstanding                                        |  |                                        | 651.4 |   |                    |   | 617.9 |                   |  |   | 648.8             |   |  |   | 581.7 |  
|                                                                                |  |                                        |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|Diluted weighted average units outstanding                                      |  |                                        | 651.4 |   |                    |   | 617.9 |                   |  |   | 648.8             |   |  |   | 583.0 |  
|                                                                                |  |                                        |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|                                                                                |  |                                        |       |  
|Basic and diluted loss per unit                                                 |  | $                                      | (.09  | ) |                    | $ | (.09  | )                 |  | $ | (.21              | ) |  | $ | (.33  | )



|(a) | Represents the original issuance costs associated with the Class E preferred OP units, which were redeemed during the second quarter 2010.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

|(b) | During 2009, we repurchased $75 million face amount of our
31/4% Exchangeable Senior Debentures (the
2004 Debentures) with a carrying value of $72 million for $69 million. The adjustments to dilutive earnings per common unit include the $3 million gain, net of interest expense on the repurchased debentures.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

Property and equipment consists of the following as of (in millions):



|                                               |  |                   |        |   |                  |   |        |  
|---------------------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------ | -
|                                               |  | September 10,2010 |        |   | December 31,2009 |  
|Land and land improvements                     |  | $                 | 1,645  |   |                  | $ | 1,574  |  
|Buildings and leasehold improvements           |  |                   | 11,960 |   |                  |   | 11,502 |  
|Furniture and equipment                        |  |                   | 1,874  |   |                  |   | 1,794  |  
|Construction in progress                       |  |                   | 92     |   |                  |   | 104    |  
|                                               |  |                   |        |   |                  |   |        |  
|                                               |  |                   | 15,571 |   |                  |   | 14,974 |  
|Less accumulated depreciation and amortization |  |                   | (5,119 | ) |                  |   | (4,743 | )
|                                               |  |                   |        |   |                  |   |        |  
|                                               |  | $                 | 10,452 |   |                  | $ | 10,231 |  
|                                               |  |                   |        |   |                  |   |        |  



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

Senior Notes.On August 25, 2010, we redeemed $225 million of the outstanding $725 million of our
71/8% Series K senior notes that are due in
November 2013. As a result of the repurchase, we recorded a $7 million loss on debt extinguishment which is included in interest expense.

Mortgage Debt.On September 2, 2010, we assumed a $115 million mortgage loan as part of our acquisition of a 90% controlling interest in a consolidated joint venture that owns the W New
York, Union Square with a fair value of $119 million. The mortgage loan bears interest at a fixed rate of 6.3847% and matures October 11, 2011.



8



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



On July 22, 2010, we assumed a £33 million
($51 million) mortgage loan as part of our acquisition of the leasehold interest in the Le Meridien Piccadilly. The loan bears interest at 3-month LIBOR plus 118 basis points and matures on January 20, 2011, with two one-year extensions
subject to the satisfaction of certain financial covenants.

Credit Facility.On
July 20, 2010, we drew £37 million ($56 million) under our credit facility at an interest rate of one-month LIBOR plus 90 basis points to fund the acquisition of the leasehold interest in the Le Meridien Piccadilly.



|6. | Capital
|-- | -------

Dividends. On September 16, 2010, Hosts Board of Directors declared a dividend of $0.01 per share on its
common stock. The dividend was paid on October 15, 2010 to stockholders of record as of September 30, 2010. Accordingly, we made a distribution of $.01021494 per unit on our common OP Units based on the current conversion ratio.

Common Stock Offering.During the third quarter of 2010, Host issued the remaining 3.8 million
shares of common stock available under the 2009 Sales Agency Financing Agreement with BNY Mellon Capital Markets, LLC. On August 19, 2010, Host entered into a new Sales Agency Financing Agreement with BNY Mellon Capital Markets, LLC, through
which Host may issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $400 million. The sales will be made in at the market offerings under Securities and Exchange Commission (SEC)
rules, including sales made directly on the New York Stock Exchange. BNY Mellon Capital Markets, LLC is acting as sales agent. During the third quarter, Host issued approximately 3.6 million shares of common stock through this new program. For
the quarter, Host issued 7.4 million shares under its stock issuance programs at an average price of $14.08 per share for net proceeds of $103.5 million. Host may continue to sell shares of common stock under its new program from time to
time based on market conditions, although they are not under an obligation to sell any shares. In exchange for the shares issued by Host, Host LP issued OP units based on the conversion ratio of 1.021494shares per unit. Host has approximately
$350 million remaining under the new program.

Capital is allocated between controlling and
non-controlling interests as follows (in millions):



|                                           |  |                     |       |   |                          |   |    |              |  |   |                                             |   |  |   |     |  
|------------------------------------------ |  | ------------------- | ----- | - | ------------------------ | - | -- | ------------ |  | - | ------------------------------------------- | - |  | - | --- | -
|                                           |  | Capital ofHost L.P. |       |   | Non-controllinginterests |   |    | TotalCapital |  |   | LimitedPartnershipInterests
ofThird Parties |  
|Balance, December 31, 2009                 |  | $                   | 6,187 |   |                          | $ | 22 |              |  | $ | 6,209                                       |   |  | $ | 139 |  
|Net income (loss)                          |  |                     | (124  | ) |                          |   |   |              |  |   | (124                                        | ) |  |   | (2  | )
|Issuance of common OP units                |  |                     | 158   |   |                          |   |   |              |  |   | 158                                         |   |  |   |    |  
|Redemption of preferred OP units           |  |                     | (101  | ) |                          |   |   |              |  |   | (101                                        | ) |  |   |    |  
|Other changes in ownership                 |  |                     | (22   | ) |                          |   | 11 |              |  |   | (11                                         | ) |  |   | 17  |  
|Other comprehensive income (loss) (note 8) |  |                     | (3    | ) |                          |   |   |              |  |   | (3                                          | ) |  |   |    |  
|                                           |  |                     |       |   |                          |   |    |              |  |   |                                             |   |  |   |     |  
|Balance, September 10, 2010                |  | $                   | 6,095 |   |                          | $ | 33 |              |  | $ | 6,128                                       |   |  | $ | 154 |  
|                                           |  |                     |       |   |                          |   |    |              |  |   |                                             |   |  |   |     |  
|                                           |  |                     |       |  
|Balance, December 31, 2008                 |  | $                   | 5,588 |   |                          | $ | 24 |              |  | $ | 5,612                                       |   |  | $ | 158 |  
|Net income (loss)                          |  |                     | (181  | ) |                          |   | (1 | )            |  |   | (182                                        | ) |  |   | (4  | )
|Issuance of common OP units                |  |                     | 611   |   |                          |   |   |              |  |   | 611                                         |   |  |   |    |  
|Other changes in ownership                 |  |                     | 30    |   |                          |   | (1 | )            |  |   | 29                                          |   |  |   | (30 | )
|Other comprehensive income (loss) (note 8) |  |                     | 1     |   |                          |   |    |              |  |   | 1                                           |   |  |   |    |  
|                                           |  |                     |       |   |                          |   |    |              |  |   |                                             |   |  |   |     |  
|Balance, September 11, 2009                |  | $                   | 6,049 |   |                          | $ | 22 |              |  | $ | 6,071                                       |   |  | $ | 124 |  
|                                           |  |                     |       |   |                          |   |    |              |  |   |                                             |   |  |   |     |  



9



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



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

We consider each one of our hotels to be an operating segment, none of which meets the threshold for a reportable segment. We also allocate resources and assess operating performance based on individual
hotels. All of our other real estate investment activities (primarily our leased hotels and office buildings) are immaterial and meet the aggregation criteria, and thus, we report one segment: hotel ownership. Our foreign operations consist of four
properties in Canada, two properties in Chile, one property in Mexico and one property in the United Kingdom. There were no intercompany sales during the periods presented. The following table presents total revenues for each of the geographical
areas in which we operate (in millions):



|               |  |                   |       |                    |   |                   |  |                   |       |  |   |      
|-------------- |  | ----------------- | ----- | ------------------ | - | ----------------- |  | ----------------- | ----- |  | - | -----
|               |  | Quarter ended     |       | Year-to-date ended
|               |  | September 10,2010 |       | September 11,2009  |   | September 10,2010 |  | September 11,2009
|United States  |  | $                 | 969   |                    | $ | 874               |  | $                 | 2,838 |  | $ | 2,731
|Canada         |  |                   | 22    |                    |   | 20                |  |                   | 71    |  |   | 61   
|Chile          |  |                   | 6     |                    |   | 5                 |  |                   | 17    |  |   | 15   
|Mexico         |  |                   | 5     |                    |   | 4                 |  |                   | 13    |  |   | 11   
|United Kingdom |  |                   | 4     |                    |   |                  |  |                   | 4     |  |   |     
|               |  |                   |       |                    |   |                   |  |                   |       |  |   |      
|Total revenue  |  | $                 | 1,006 |                    | $ | 903               |  | $                 | 2,943 |  | $ | 2,818
|               |  |                   |       |                    |   |                   |  |                   |       |  |   |      



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

Other comprehensive income consists of unrealized gains and losses on foreign currency translation adjustments and hedging instruments.

The following table presents comprehensive income for all periods presented (in millions):



|                                                                       |  |                   |     |   |                    |   |     |                   |  |   |                   |   |  |   |      |  
|---------------------------------------------------------------------- |  | ----------------- | --- | - | ------------------ | - | --- | ----------------- |  | - | ----------------- | - |  | - | ---- | -
|                                                                       |  | Quarter ended     |     |   | Year-to-date ended |  
|                                                                       |  | September 10,2010 |     |   | September 11,2009  |   |     | September 10,2010 |  |   | September 11,2009 |  
|Net loss                                                               |  | $                 | (61 | ) |                    | $ | (58 | )                 |  | $ | (126              | ) |  | $ | (186 | )
|Other comprehensive income (loss)                                      |  |                   | 7   |   |                    |   | 4   |                   |  |   | (3                | ) |  |   | 1    |  
|                                                                       |  |                   |     |   |                    |   |     |                   |  |   |                   |   |  |   |      |  
|Comprehensive loss                                                     |  |                   | (54 | ) |                    |   | (54 | )                 |  |   | (129              | ) |  |   | (185 | )
|Comprehensive loss attributable to the non-controlling interests       |  |                   | 2   |   |                    |   | 2   |                   |  |   |                  |   |  |   | 1    |  
|                                                                       |  |                   |     |   |                    |   |     |                   |  |   |                   |   |  |   |      |  
|Comprehensive income (loss) attributable to Host Hotels & Resorts, L.P |  | $                 | (52 | ) |                    | $ | (52 | )                 |  | $ | (129              | ) |  | $ | (184 | )
|                                                                       |  |                   |     |   |                    |   |     |                   |  |   |                   |   |  |   |      |  



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

Dispositions.We have disposed of two hotels in 2010 for net proceeds of approximately $12 million. The following table summarizes the revenues, income (loss) before taxes, and the gain (loss)
on dispositions, net of income tax, of the hotels which have been included in discontinued operations for all periods presented (in millions):



|                                        |  |                   |   |                    |   |                   |  |   |                   |   |  |   |     |  
|--------------------------------------- |  | ----------------- | - | ------------------ | - | ----------------- |  | - | ----------------- | - |  | - | --- | -
|                                        |  | Quarter ended     |   | Year-to-date ended |  
|                                        |  | September 10,2010 |   | September 11,2009  |   | September 10,2010 |  |   | September 11,2009 |  
|Revenues                                |  | $                 |  |                    | $ | 14                |  | $ | 5                 |   |  | $ | 61  |  
|Loss before income taxes                |  |                   |  |                    |   |                  |  |   | (2                | ) |  |   | (81 | )
|Gain (loss) on dispositions, net of tax |  |                   |  |                    |   | 9                 |  |   | (1                | ) |  |   | 26  |  



10



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Net income attributable to Host Hotels & Resorts, L.P. is
allocated between continuing and discontinued operations as follows (in millions):



|                                                     |  |                   |     |   |                    |   |     |                   |  |   |                   |   |  |   |      |  
|---------------------------------------------------- |  | ----------------- | --- | - | ------------------ | - | --- | ----------------- |  | - | ----------------- | - |  | - | ---- | -
|                                                     |  | Quarter ended     |     |   | Year-to-date ended |  
|                                                     |  | September 10,2010 |     |   | September 11,2009  |   |     | September 10,2010 |  |   | September 11,2009 |  
|Loss from continuing operations, net of tax          |  | $                 | (59 | ) |                    | $ | (65 | )                 |  | $ | (124              | ) |  | $ | (130 | )
|Discontinued operations, net of tax                  |  |                   |    |   |                    |   | 9   |                   |  |   | (2                | ) |  |   | (55  | )
|                                                     |  |                   |     |   |                    |   |     |                   |  |   |                   |   |  |   |      |  
|Net loss attributable to Host Hotels & Resorts, L.P. |  | $                 | (59 | ) |                    | $ | (56 | )                 |  | $ | (126              | ) |  | $ | (185 | )
|                                                     |  |                   |     |   |                    |   |     |                   |  |   |                   |   |  |   |      |  



|10. | Acquisitions
|--- | ------------

For our acquisitions, we record the assets acquired, liabilities assumed and non-controlling interests at fair value as of the acquisition date. Furthermore, acquisition-related costs, such as broker
fees, due diligence costs and legal and accounting fees, are expensed in the period incurred and are not capitalized or applied in determining the fair value of the acquired assets. During 2010, we have acquired four hotel assets; three in the third
quarter and one subsequent to quarter end. For the acquisitions described below, we recorded $5 million of acquisition-related expenses, $1 million of which will be reflected in the fourth quarter. The acquisitions are consistent with our
strategy of acquiring luxury and upper-upscale hotels in major urban markets. We recorded the purchase price of the acquired assets and liabilities at the estimated fair value on the date of purchase. The purchase price allocations are estimated
based on available information, however, we are still in the process of finalizing the acquisition accounting for the below transactions:



| |  |  | On September 30, 2010, subsequent to quarter end, we acquired the 245-room JW Marriott, Rio de Janeiro for approximately R$81 million
($48 million);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On September 2, 2010, we formed a joint venture with a subsidiary of Istithmar World to purchase the 270-room W New York, Union Square. We have a
90% interest and serve as the managing member of the joint venture and, therefore, consolidate the entity. The joint venture purchased the hotel for $188 million, which, in addition to cash consideration, includes the assumption of $115 million of
mortgage debt, with a fair value of $119 million, and contingent and deferred consideration valued at $8 million. Additionally, in conjunction with the acquisition, the joint venture purchased restricted cash, FF&E reserve funds and other
working capital at the hotel of $10 million. The joint venture acquired the hotel as part of the settlement agreement reached with the previous owners and mezzanine lenders on July 22, 2010;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On August 11, 2010, we acquired the 424-room Westin Chicago River North for approximately $165 million; and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | On July 22, 2010, we acquired the leasehold interest in the 266-room Le Meridien Piccadilly in London, England for £64 million ($98
million), including cash consideration of approximately £31 million ($47 million) and the assumption of a £33 million ($51 million) mortgage. As part of the purchase of the leasehold interest, we acquired restricted cash
and working capital at the hotel of £4 million ($6 million). In connection with the acquisition, we assumed a capital lease obligation which we valued at £14 million ($21 million). The capital lease obligation is included in
debt on the accompanying balance sheet and increased the book value of the leasehold interest purchased. We also recorded a deferred tax liability and corresponding goodwill of £11 million ($17 million) related to the difference in the
hotel valuation measured at fair value on the acquisition date and the tax basis of the asset. We drew £37 million ($56 million) from our credit facility to fund the cash portion of the acquisition. For accounting purposes, the above
allocations are based on estimates from the best current information available. The final allocation of the fair value of assets and the capital lease obligation are in part dependent upon valuation determined by third party appraisals, which have
not been completed.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



The following table summarizes the estimated fair value of the assets
acquired and liabilities assumed in our acquisitions (in millions):



|                                               |  |   |      |  
|---------------------------------------------- |  | - | ---- | -
|Property and equipment                         |  | $ | 524  |  
|Goodwill                                       |  |   | 17   |  
|Restricted cash, FF&E reserve and other assets |  |   | 19   |  
|                                               |  |   |      |  
|Total assets                                   |  |   | 560  |  
|                                               | 
|Mortgage debt                                  |  |   | (170 | )
|Capital lease obligation                       |  |   | (21  | )
|Deferred tax liability                         |  |   | (17  | )
|Other liabilities                              |  |   | (10  | )
|                                               |  |   |      |  
|Net assets acquired                            |  | $ | 342  |  
|                                               |  |   |      |  

Our summarized unaudited consolidated pro forma results of operations, assuming the
acquisitions occurred on January 1, 2009, are as follows (in millions, except per share amounts):



|                                         |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|---------------------------------------- |  | ----------------- | ----- | - | ------------------ | - | ---- | ----------------- |  | - | ----------------- | - |  | - | ----- | -
|                                         |  | Quarter ended     |       |   | Year-to-date ended |  
|                                         |  | September 10,2010 |       |   | September 11,2009  |   |      | September 10,2010 |  |   | September 11,2009 |  
|Revenues                                 |  | $                 | 1,046 |   |                    | $ | 935  |                   |  | $ | 3,035             |   |  | $ | 2,897 |  
|Loss from continuing operations          |  |                   | (59   | ) |                    |   | (66  | )                 |  |   | (130              | ) |  |   | (134  | )
|Net loss 332                             |  |                   | (59   | ) |                    |   | (57  | )                 |  |   | (132              | ) |  |   | (189  | )
|Net loss available to common unitholders |  |                   | (57   | ) |                    |   | (57  | )                 |  |   | (140              | ) |  |   | (194  | )
|Basic earnings (loss) per common unit:   |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Continuing operations                    |  | $                 | (.09  | ) |                    | $ | (.10 | )                 |  | $ | (.22              | ) |  | $ | (.24  | )
|Discontinued operations                  |  |                   |      |   |                    |   | .01  |                   |  |   |                  |   |  |   | (.09  | )
|                                         |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Basic loss per common unit               |  | $                 | (.09  | ) |                    | $ | (.09 | )                 |  | $ | (.22              | ) |  | $ | (.33  | )
|                                         |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Diluted earnings (loss) per common unit: |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Continuing operations                    |  | $                 | (.09  | ) |                    | $ | (.10 | )                 |  | $ | (.22              | ) |  | $ | (.25  | )
|Discontinued operations                  |  |                   |      |   |                    |   | .01  |                   |  |   |                  |   |  |   | (.09  | )
|                                         |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Diluted loss per common unit             |  | $                 | (.09  | ) |                    | $ | (.09 | )                 |  | $ | (.22              | ) |  | $ | (.34  | )
|                                         |  |                   |       |   |                    |   |      |                   |  |   |                   |   |  |   |       |  

For the third quarter and year-to-date 2010, we have included $3.4 million of revenues and
$0.2 million of net income in our condensed consolidated statements of operations related to the operations of our acquisitions.

Other investments.On April 13, 2010, we acquired, at a discount, the two most junior tranches of a 427 million ($581 million) mortgage loan that is secured by six hotels
located in Europe. The two junior tranches purchased by us have a face value of 64 million ($87 million) and are subordinate to 363 million ($494 million) of senior debt. Interest payments for the tranches are based on the
90-day EURIBOR rate plus 303 basis points, or approximately 3.8%, and the loan is performing. The loan matures in October of 2010 and there are two, one-year extension options, subject to debt service coverage requirements. We anticipate that these
coverage requirements will be met for the initial one-year extension, and that the borrower will exercise the first extension option through October of 2011.



|11. | Fair Value Measurements
|--- | -----------------------

We have adopted the provisions under GAAP for both recurring and non-recurring fair value measurements. Our recurring fair value measurements consist of the valuation of our derivative instruments, which
may or may not be designated as accounting hedges. In evaluating the fair value of both financial and non-financial assets and liabilities, GAAP outlines a valuation framework and creates a fair value hierarchy that distinguishes between market
assumptions based on market data (observable inputs) and a reporting entitys own assumptions about market data (unobservable inputs). Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability at
the measurement date in an orderly transaction (an exit price) and includes an evaluation of counterparty credit risk.



12



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



The following table details the fair value of our financial assets and
liabilities that are required to be measured at fair value on a recurring basis and the change in the fair value of the derivative instruments at September 10, 2010 (in millions).



|                                                |  |                                                            |   |                                             |   |                                        |  |                                                                           |   |  |   |      |  
|----------------------------------------------- |  | ---------------------------------------------------------- | - | ------------------------------------------- | - | -------------------------------------- |  | ------------------------------------------------------------------------- | - |  | - | ---- | -
|                                                |  | Fair Value at Measurement Date Using                       |   |                                             |  
|                                                |  | Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) |   | Significant 
OtherObservableInputs(Level 2) |   | SignificantUnobservableInputs(Level 3) |  | Change in theFair 
Value for theyear-to-dateperiod endedSeptember
10,2010 |  
|Fair Value Measurements on a Recurring          |  |                                                            |   |                                             |   |                                        |  |                                                                           |   |  |   |      |  
|Basis:                                          |  |                                                            |   |                                             |   |                                        |  |                                                                           |   |  |   |      |  
|Interest rate swap derivatives (1)              |  | $                                                          |  |                                             | $ | 12.5                                   |  | $                                                                         |  |  | $ | 13.5 |  
|Interest rate cap derivative                    |  |                                                            |  |                                             |   | 0.1                                    |  |                                                                           |  |  |   | (1.7 | )
|Foreign currency forward purchase contracts (1) |  |                                                            |  |                                             |   | 11.6                                   |  |                                                                           |  |  |   | 9.9  |  



|(1) | These derivative contracts have been designated as hedging instruments.
|--- | -----------------------------------------------------------------------

Interest Rate Swap Derivatives.We have three interest rate swap agreements for an aggregate notional amount
of $300 million. We entered into these derivative instruments in order to hedge changes in the fair value of the fixed-rate debt that occur as a result of changes in market interest rates. We have designated these derivatives as fair value
hedges. The derivatives are valued based on the benchmark yield curve on the date of measurement. We also evaluate counterparty credit risk in the calculation of the fair value of the swaps. As of September 10, 2010 and December 31, 2009,
we recorded an asset of $12.5 million and a liability of $1 million, respectively, related to the fair value of the swaps. We record the change in the fair value of the underlying debt due to change in the LIBOR rate as an addition to the
carrying amount of the debt. The difference between the change in the fair value of the swap and the change in the fair value in the underlying debt is considered the ineffective portion of the hedging relationship. We recognized a loss of
$0.2 million and $0.5 million related to the ineffective portion of the hedging relationship for the third quarter of 2010 and 2009, respectively. For year-to-date 2010 and 2009, we recognized a loss of $1.0 million and
$0.5 million, respectively. These loss amounts exclude the actual interest savings from the interest rate swaps included in our results of operations of $1.4 million and $4.5 million for the quarter and year-to-date 2010 periods,
respectively.

Interest Rate Cap Derivative.We have one interest rate cap agreement related to
variable rate mortgage debt. The interest rate cap is valued based on the benchmark yield curve on the date of measurement. We recognized a loss of $0.3 million and $1.0 million based on the changes in the fair value of the derivative
during the third quarter of 2010 and 2009, respectively. For year-to-date 2010 and 2009, we recognized a loss of $1.7 million and a gain of $0.3 million, respectively. The fair value of the cap was $0.1 million and $1.8 million
at September 10, 2010 and December 31, 2009, respectively. Changes in the fair value of this instrument are recorded in gain (loss) on foreign currency transactions and derivatives.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Foreign Currency Forward Purchase Contracts. As of
September 10, 2010, we had four foreign currency forward purchase contracts to hedge a portion of the foreign currency exposure resulting from the eventual repatriation of our net investment in the European joint venture. These derivatives are
considered a hedge of the foreign currency exposure of a net investment in a foreign operation with changes in fair value recorded to accumulated other comprehensive income. The forward purchase contracts are valued based on the forward yield curve
of the Euro to U.S. Dollar forward exchange rate on the date of measurement. The following table summarizes our foreign currency forward purchase contracts (in millions):



|                 |  |                           |    |                             |   |                     |  |               |                   |   |                                          |  |   |     |   |  |   |     |  |   |      |  
|---------------- |  | ------------------------- | -- | --------------------------- | - | ------------------- |  | ------------- | ----------------- | - | ---------------------------------------- |  | - | --- | - |  | - | --- |  | - | ---- | -
|Transaction Date |  | TransactionAmountin Euros |    | TransactionAmountin Dollars |   | ForwardPurchaseDate |  | Fair Value at |                   |   | Change in Fair Valuefor the period
ended | 
|                 |  |                           |    | September 10,2010           |   | December 31,2009    |  |               | September 10,2010 |   | September 11,2009                        | 
|                 |  |                           |    |                             |   |                    
|February 2008    |  |                          | 30 |                             | $ | 43                  |  | August 2011   |                   | $ | 4.7                                      |  | $ | (.1 | ) |  | $ | 4.8 |  | $ | (2.6 | )
|February 2008    |  |                           | 15 |                             |   | 22                  |  | February 2013 |                   |   | 3.1                                      |  |   | .7  |   |  |   | 2.4 |  |   | (1.5 | )
|May 2008         |  |                           | 15 |                             |   | 23                  |  | May 2014      |                   |   | 3.7                                      |  |   | 1.1 |   |  |   | 2.6 |  |   | (1.6 | )
|July 2010        |  |                           | 20 |                             |   | 26                  |  | October 2014  |                   |   | 0.1                                      |  |   |    |   |  |   | 0.1 |  |   |     |  
|                 |  |                           |    |                             |   |                     |  |               |                   |   |                                          |  |   |     |   |  |   |     |  |   |      |  
|Total            |  |                          | 80 |                             | $ | 114                 |  |               |                   | $ | 11.6                                     |  | $ | 1.7 |   |  | $ | 9.9 |  | $ | (5.7 | )
|                 |  |                           |    |                             |   |                     |  |               |                   |   |                                          |  |   |     |   |  |   |     |  |   |      |  

Fair Value of Other Financial Assets and Liabilities.We did not elect the
fair value measurement option for any of our other financial assets or liabilities. Notes receivable and other financial assets are valued based on the expected future cash flows discounted at risk-adjusted rates and are adjusted to reflect the
effects of foreign currency translation. Valuations for secured debt and the credit facility are determined based on the expected future payments discounted at risk-adjusted rates. Senior notes and the exchangeable senior debentures are valued based
on quoted market prices. The fair values of financial instruments not included in this table are estimated to be equal to their carrying amounts. The fair value of certain financial assets and liabilities are shown below (in millions):



|                                               |  |                    |       |                   |   |                |  |           |       |  |   |      
|---------------------------------------------- |  | ------------------ | ----- | ----------------- | - | -------------- |  | --------- | ----- |  | - | -----
|                                               |  | September 10, 2010 |       | December 31, 2009
|                                               |  | CarryingAmount     |       | FairValue         |   | CarryingAmount |  | FairValue
|Financial assets                               |  |                    |       |                   |   |                |  |           |       |  |   |      
|Mortgage notes                                 |  | $                  | 49    |                   | $ | 49             |  | $         |      |  | $ |     
|Other notes receivable                         |  |                    |      |                   |   |               |  |           | 11    |  |   | 11   
|Financial liabilities                          |  |                    |       |                   |   |                |  |           |       |  |   |      
|Senior notes                                   |  |                    | 2,843 |                   |   | 2,970          |  |           | 3,411 |  |   | 3,473
|Exchangeable Senior Debentures                 |  |                    | 1,146 |                   |   | 1,330          |  |           | 1,123 |  |   | 1,246
|Credit facility                                |  |                    | 57    |                   |   | 56             |  |           |      |  |   |     
|Mortgage debt and other, net of capital leases |  |                    | 1,355 |                   |   | 1,364          |  |           | 1,303 |  |   | 1,269



|12. | Non-controlling Interests of Consolidated Partnerships
|--- | ------------------------------------------------------

As of September 10, 2010, we consolidate four majority-owned partnerships that have third-party, non-controlling ownership interests. The third-party partnership interests are included in
non-controlling interest-other consolidated partnerships on the consolidated balance sheets and totaled $33 million and $22 million as of September 10, 2010 and December 31, 2009, respectively. Three of the partnerships have finite lives
ranging from 99 to 100 years that terminate between 2081 and 2095, and the associated non-controlling interests are mandatorily redeemable. At September 10, 2010 and December 31, 2009, the fair values of the non-controlling interests in
the partnerships with finite lives were approximately $58 million and $44 million, respectively.



|13. | Other Real Estate Investments
|--- | -----------------------------

We own a leasehold interest in 53 Courtyard by Marriott properties and 18 Residence Inn by Marriott properties, which were sold to Hospitality Properties Trust (HPT) and leased back to us in
1995 and 1996. In conjunction with our conversion to a REIT, in 1999 we entered into subleases for these 71 properties with a



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



third party. In late June 2010, HPT sent notices of default because the subtenants
failed to meet net worth covenants, which would have triggered an event of default by us under the master leases between us and HPT. As a result, we terminated the subleases effective July 6, 2010 and we started to act as owner under the
management agreements. Accordingly, for the remaining portion of the third quarter of 2010, we recorded the operations of the hotels as opposed to rental income. As a result, we recorded $50 million of hotel revenues for the 71 properties, as
well as $6 million of rental income earned prior to the termination of the subleases in the third quarter, which are included in other revenues on the condensed consolidated statements of operations. Additionally, we recorded $37 million
of hotel expenses related to the 71 properties, as well as $19 million of rental expense due to HPT in the third quarter, which are included in other property-level expenses on the condensed consolidated statements of operations. The property
revenues and rental income recorded less the hotel expenses and rental expenses resulted in a slight loss for all periods presented.

We will continue to perform all obligations under the master leases. The subtenants remain obligated to us for outstanding rent payment obligations to the extent that operating cash generated by the
hotels is less than rent that would have been paid under the terminated subleases. At the expiration of the master leases, HPT is obligated to pay us deferred proceeds related to the initial sale of the properties of approximately $67 million,
subject to damages arising out of an event of default, if any, under the master leases, plus additional amounts of approximately $7.8 million. We gave notice to HPT that we will not extend the term of the master lease on the 18 Residence Inn
properties which results in the termination and expiration of the master lease on those properties effective December 31, 2010, at which time we expect that $17 million of deferred proceeds will be paid to us by HPT. In the fourth quarter
of 2010, we also intend to give notice that we will not extend the term of the master lease on the 53 Courtyard by Marriott properties, which will result in termination and expiration of the master lease on those properties effective
December 31, 2012.



|14. | Supplemental Guarantor and Non-Guarantor Subsidiary Information
|--- | ---------------------------------------------------------------

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



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



The following condensed consolidating financial information sets forth
the financial position as of September 10, 2010 and December 31, 2009, results of operations for the quarter and year-to-date periods ended September 10, 2010 and September 11, 2009 and cash flows for the year-to-date periods
ended September 10, 2010 and September 11, 2009 of the parent, Guarantor Subsidiaries and the Non-Guarantor Subsidiaries:

Supplemental Condensed Consolidating Balance Sheets

(in millions)

September 10, 2010



|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|---------------------------------------------------------------------------- |  | ------ | ----- | - | --------------------- | - | ------------------------- |  | ------------ | ----- |  | ------------ | ------ | - |  | - | ------
|                                                                             |  | Parent |       |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | Eliminations |       |  | Consolidated
|Property and equipment, net                                                  |  | $      | 1,000 |   |                       | $ | 5,268                     |  | $            | 4,184 |  | $            |       |   |  | $ | 10,452
|Due from managers                                                            |  |        | (3    | ) |                       |   | 2                         |  |              | 62    |  |              | (2     | ) |  |   | 59    
|Investments in affiliates                                                    |  |        | 6,448 |   |                       |   | 1,304                     |  |              | 22    |  |              | (7,638 | ) |  |   | 136   
|Rent receivable                                                              |  |        |      |   |                       |   | 32                        |  |              |      |  |              | (32    | ) |  |   |      
|Deferred financing costs, net                                                |  |        | 33    |   |                       |   |                          |  |              | 6     |  |              |       |   |  |   | 39    
|Furniture, fixtures and equipment replacement fund                           |  |        | 50    |   |                       |   | 42                        |  |              | 61    |  |              |       |   |  |   | 153   
|Other                                                                        |  |        | 432   |   |                       |   | 116                       |  |              | 348   |  |              | (563   | ) |  |   | 333   
|Restricted cash                                                              |  |        | 35    |   |                       |   | 1                         |  |              | 48    |  |              |       |   |  |   | 84    
|Cash and cash equivalents                                                    |  |        | 504   |   |                       |   | 27                        |  |              | 307   |  |              |       |   |  |   | 838   
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total assets                                                                 |  | $      | 8,499 |   |                       | $ | 6,792                     |  | $            | 5,038 |  | $            | (8,235 | ) |  | $ | 12,094
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Debt                                                                         |  | $      | 2,104 |   |                       | $ | 2,463                     |  | $            | 1,254 |  | $            | (397   | ) |  | $ | 5,424 
|Rent payable                                                                 |  |        |      |   |                       |   |                          |  |              | 32    |  |              | (32    | ) |  |   |      
|Other liabilities                                                            |  |        | 146   |   |                       |   | 156                       |  |              | 254   |  |              | (168   | ) |  |   | 388   
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total liabilities                                                            |  |        | 2,250 |   |                       |   | 2,619                     |  |              | 1,540 |  |              | (597   | ) |  |   | 5,812 
|Limited partnership interests of third parties                               |  |        | 154   |   |                       |   |                          |  |              |      |  |              |       |   |  |   | 154   
|Capital                                                                      |  |        | 6,095 |   |                       |   | 4,173                     |  |              | 3,465 |  |              | (7,638 | ) |  |   | 6,095 
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total liabilities and capital                                                |  |        | 8,499 |   |                       |   | 6,792                     |  |              | 5,005 |  |              | (8,235 | ) |  |   | 12,061
|Non-controlling interests  other consolidated partnerships                  |  |        |      |   |                       |   |                          |  |              | 33    |  |              |       |   |  |   | 33    
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total liabilities, limited partnership interest of third parties and capital |  | $      | 8,499 |   |                       | $ | 6,792                     |  | $            | 5,038 |  | $            | (8,235 | ) |  | $ | 12,094
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Supplemental Condensed Consolidating Balance Sheets

(in millions)

December 31, 2009



|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|---------------------------------------------------------------------------- |  | ------ | ----- | - | --------------------- | - | ------------------------- |  | ------------ | ----- |  | ------------ | ------ | - |  | - | ------
|                                                                             |  | Parent |       |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | Eliminations |       |  | Consolidated
|Property and equipment, net                                                  |  | $      | 722   |   |                       | $ | 5,210                     |  | $            | 4,299 |  | $            |       |   |  | $ | 10,231
|Assets held for sale                                                         |  |        |      |   |                       |   | 8                         |  |              |      |  |              |       |   |  |   | 8     
|Due from managers                                                            |  |        | (23   | ) |                       |   | 1                         |  |              | 53    |  |              | (2     | ) |  |   | 29    
|Investments in affiliates                                                    |  |        | 5,887 |   |                       |   | 1,199                     |  |              | 28    |  |              | (6,961 | ) |  |   | 153   
|Rent receivable                                                              |  |        |      |   |                       |   | 37                        |  |              |      |  |              | (37    | ) |  |   |      
|Deferred financing costs, net                                                |  |        | 42    |   |                       |   |                          |  |              | 7     |  |              |       |   |  |   | 49    
|Furniture, fixtures and equipment replacement fund                           |  |        | 40    |   |                       |   | 32                        |  |              | 52    |  |              |       |   |  |   | 124   
|Other                                                                        |  |        | 256   |   |                       |   | 64                        |  |              | 344   |  |              | (400   | ) |  |   | 264   
|Restricted cash                                                              |  |        |      |   |                       |   |                          |  |              | 53    |  |              |       |   |  |   | 53    
|Cash and cash equivalents                                                    |  |        | 1,340 |   |                       |   | 34                        |  |              | 268   |  |              |       |   |  |   | 1,642 
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total assets                                                                 |  | $      | 8,264 |   |                       | $ | 6,585                     |  | $            | 5,104 |  | $            | (7,400 | ) |  | $ | 12,553
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Debt                                                                         |  | $      | 1,799 |   |                       | $ | 3,004                     |  | $            | 1,327 |  | $            | (293   | ) |  | $ | 5,837 
|Rent payable                                                                 |  |        |      |   |                       |   |                          |  |              | 37    |  |              | (37    | ) |  |   |      
|Other liabilities                                                            |  |        | 139   |   |                       |   | 172                       |  |              | 166   |  |              | (109   | ) |  |   | 368   
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total liabilities                                                            |  |        | 1,938 |   |                       |   | 3,176                     |  |              | 1,530 |  |              | (439   | ) |  |   | 6,205 
|Limited partnership interests of third parties                               |  |        | 139   |   |                       |   |                          |  |              |      |  |              |       |   |  |   | 139   
|Capital                                                                      |  |        | 6,187 |   |                       |   | 3,409                     |  |              | 3,552 |  |              | (6,961 | ) |  |   | 6,187 
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total liabilities and capital                                                |  |        | 8,264 |   |                       |   | 6,585                     |  |              | 5,082 |  |              | (7,400 | ) |  |   | 12,531
|Non-controlling interests  consolidated partnerships                        |  |        |      |   |                       |   |                          |  |              | 22    |  |              |       |   |  |   | 22    
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       
|Total liabilities, limited partnership interest of third parties and capital |  | $      | 8,264 |   |                       | $ | 6,585                     |  | $            | 5,104 |  | $            | (7,400 | ) |  | $ | 12,553
|                                                                             |  |        |       |   |                       |   |                           |  |              |       |  |              |        |   |  |   |       



17



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Supplemental Condensed Consolidating Statements of Operations

(in millions)

Quarter ended September 10, 2010



|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|------------------------------------------------------------- |  | ------ | --- | - | --------------------- | - | --- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ----- | -
|                                                              |  | Parent |     |   | GuarantorSubsidiaries |   |     | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                                      |  | $      | 16  |   |                       | $ | 138 |                           |  | $ | 1,004        |   |  | $            | (152 | ) |  | $ | 1,006 |  
|Hotel operating expenses                                      |  |        |    |   |                       |   |    |                           |  |   | (705         | ) |  |              |     |   |  |   | (705  | )
|Property-level expenses                                       |  |        | (6  | ) |                       |   | (30 | )                         |  |   | (88          | ) |  |              |     |   |  |   | (124  | )
|Depreciation and amortization                                 |  |        | (12 | ) |                       |   | (69 | )                         |  |   | (53          | ) |  |              |     |   |  |   | (134  | )
|Corporate and other expenses                                  |  |        | (3  | ) |                       |   | (10 | )                         |  |   | (7           | ) |  |              |     |   |  |   | (20   | )
|Rental expense                                                |  |        |    |   |                       |   |    |                           |  |   | (152         | ) |  |              | 152  |   |  |   |      |  
|Interest income                                               |  |        | 1   |   |                       |   | 1   |                           |  |   | 3            |   |  |              | (3   | ) |  |   | 2     |  
|Interest expense                                              |  |        | (28 | ) |                       |   | (47 | )                         |  |   | (17          | ) |  |              | 3    |   |  |   | (89   | )
|Net gains (losses) on property transactions and other         |  |        | (12 | ) |                       |   |    |                           |  |   | 12           |   |  |              |     |   |  |   |      |  
|Gain (loss) on foreign currency transactions and derivatives  |  |        |    |   |                       |   |    |                           |  |   | (1           | ) |  |              |     |   |  |   | (1    | )
|Equity in earnings (losses) of affiliates                     |  |        | (17 | ) |                       |   | 7   |                           |  |   | 3            |   |  |              | 6    |   |  |   | (1    | )
|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Income (loss) before income taxes                             |  |        | (61 | ) |                       |   | (10 | )                         |  |   | (1           | ) |  |              | 6    |   |  |   | (66   | )
|Income tax benefit                                            |  |        |    |   |                       |   |    |                           |  |   | 5            |   |  |              |     |   |  |   | 5     |  
|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                      |  |        | (61 | ) |                       |   | (10 | )                         |  |   | 4            |   |  |              | 6    |   |  |   | (61   | )
|Income (loss) from discontinued operations, net of tax        |  |        |    |   |                       |   |    |                           |  |   |             |   |  |              |     |   |  |   |      |  
|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|NET INCOME (LOSS)                                             |  |        | (61 | ) |                       |   | (10 | )                         |  |   | 4            |   |  |              | 6    |   |  |   | (61   | )
|Less: Net loss attributable to non-controlling interests      |  |        |    |   |                       |   |    |                           |  |   | 2            |   |  |              |     |   |  |   | 2     |  
|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  
|Net income (loss) attributable to Host Hotels & Resorts, L.P. |  | $      | (61 | ) |                       | $ | (10 | )                         |  | $ | 6            |   |  | $            | 6    |   |  | $ | (59   | )
|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |       |  



18



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Supplemental Condensed Consolidating Statements of Operations

(in millions)

Quarter ended September 11, 2009



|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |      |  
|------------------------------------------------------------- |  | ------ | --- | - | --------------------- | - | --- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ---- | -
|                                                              |  | Parent |     |   | GuarantorSubsidiaries |   |     | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                                      |  | $      | 6   |   |                       | $ | 135 |                           |  | $ | 901          |   |  | $            | (139 | ) |  | $ | 903  |  
|Hotel operating expenses                                      |  |        |    |   |                       |   |    |                           |  |   | (661         | ) |  |              |     |   |  |   | (661 | )
|Property-level expenses                                       |  |        | (5  | ) |                       |   | (35 | )                         |  |   | (54          | ) |  |              |     |   |  |   | (94  | )
|Depreciation and amortization                                 |  |        | (14 | ) |                       |   | (66 | )                         |  |   | (57          | ) |  |              |     |   |  |   | (137 | )
|Corporate and other expenses                                  |  |        |    |   |                       |   | (10 | )                         |  |   | (9           | ) |  |              |     |   |  |   | (19  | )
|Rental expense                                                |  |        |    |   |                       |   |    |                           |  |   | (139         | ) |  |              | 139  |   |  |   |     |  
|Interest income                                               |  |        | 2   |   |                       |   | 1   |                           |  |   | 2            |   |  |              | (4   | ) |  |   | 1    |  
|Interest expense                                              |  |        | (22 | ) |                       |   | (59 | )                         |  |   | (18          | ) |  |              | 4    |   |  |   | (95  | )
|Net gains on property transactions and other                  |  |        | 1   |   |                       |   |    |                           |  |   | 10           |   |  |              |     |   |  |   | 11   |  
|Gain on foreign currency transactions and derivatives         |  |        | 1   |   |                       |   |    |                           |  |   |             |   |  |              |     |   |  |   | 1    |  
|Equity in earnings (losses) of affiliates                     |  |        | (36 | ) |                       |   | 10  |                           |  |   |             |   |  |              | 24   |   |  |   | (2   | )
|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |      |  
|Income (loss) before income taxes                             |  |        | (67 | ) |                       |   | (24 | )                         |  |   | (25          | ) |  |              | 24   |   |  |   | (92  | )
|Income tax benefit                                            |  |        |    |   |                       |   |    |                           |  |   | 25           |   |  |              |     |   |  |   | 25   |  
|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |      |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                      |  |        | (67 | ) |                       |   | (24 | )                         |  |   |             |   |  |              | 24   |   |  |   | (67  | )
|Income (loss) from discontinued operations                    |  |        | 9   |   |                       |   | 3   |                           |  |   | (1           | ) |  |              | (2   | ) |  |   | 9    |  
|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |      |  
|NET INCOME (LOSS)                                             |  |        | (58 | ) |                       |   | (21 | )                         |  |   | (1           | ) |  |              | 22   |   |  |   | (58  | )
|Less: Net loss attributable to non-controlling interests      |  |        |    |   |                       |   |    |                           |  |   | 2            |   |  |              |     |   |  |   | 2    |  
|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |      |  
|Net income (loss) attributable to Host Hotels & Resorts, L.P. |  | $      | (58 | ) |                       | $ | (21 | )                         |  | $ | 1            |   |  | $            | 22   |   |  | $ | (56  | )
|                                                              |  |        |     |   |                       |   |     |                           |  |   |              |   |  |              |      |   |  |   |      |  



19



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Supplemental Condensed Consolidating Statements of Operations

(in millions)

Year-to-date ended September 10, 2010



|                                                              |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|------------------------------------------------------------- |  | ------ | ---- | - | --------------------- | - | ---- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ------ | -
|                                                              |  | Parent |      |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                                      |  | $      | 142  |   |                       | $ | 387  |                           |  | $ | 2,939        |   |  | $            | (525 | ) |  | $ | 2,943  |  
|Hotel operating expenses                                      |  |        |     |   |                       |   |     |                           |  |   | (2,028       | ) |  |              |     |   |  |   | (2,028 | )
|Property-level expenses                                       |  |        | (19  | ) |                       |   | (97  | )                         |  |   | (190         | ) |  |              |     |   |  |   | (306   | )
|Depreciation and amortization                                 |  |        | (39  | ) |                       |   | (204 | )                         |  |   | (166         | ) |  |              |     |   |  |   | (409   | )
|Corporate and other expenses                                  |  |        | (6   | ) |                       |   | (35  | )                         |  |   | (28          | ) |  |              |     |   |  |   | (69    | )
|Rental expense                                                |  |        |     |   |                       |   |     |                           |  |   | (525         | ) |  |              | 525  |   |  |   |       |  
|Interest income                                               |  |        | 3    |   |                       |   | 2    |                           |  |   | 8            |   |  |              | (10  | ) |  |   | 3      |  
|Interest expense                                              |  |        | (76  | ) |                       |   | (151 | )                         |  |   | (51          | ) |  |              | 10   |   |  |   | (268   | )
|Net gains (losses) on property transactions                   |  |        | (12  | ) |                       |   |     |                           |  |   | 12           |   |  |              |     |   |  |   |       |  
|Loss on foreign currency and derivatives                      |  |        | (3   | ) |                       |   |     |                           |  |   | (3           | ) |  |              |     |   |  |   | (6     | )
|Equity in earnings (losses) of affiliates                     |  |        | (114 | ) |                       |   | 26   |                           |  |   | 3            |   |  |              | 80   |   |  |   | (5     | )
|                                                              |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|Income (loss) before income taxes                             |  |        | (124 | ) |                       |   | (72  | )                         |  |   | (29          | ) |  |              | 80   |   |  |   | (145   | )
|Income tax benefit                                            |  |        |     |   |                       |   |     |                           |  |   | 21           |   |  |              |     |   |  |   | 21     |  
|                                                              |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                      |  |        | (124 | ) |                       |   | (72  | )                         |  |   | (8           | ) |  |              | 80   |   |  |   | (124   | )
|Income (loss) from discontinued operations, net of tax        |  |        | (2   | ) |                       |   |     |                           |  |   | (1           | ) |  |              | 1    |   |  |   | (2     | )
|                                                              |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|NET INCOME (LOSS)                                             |  |        | (126 | ) |                       |   | (72  | )                         |  |   | (9           | ) |  |              | 81   |   |  |   | (126   | )
|Less: Net income attributable to non-controlling interests    |  |        |     |   |                       |   |     |                           |  |   |             |   |  |              |     |   |  |   |       |  
|                                                              |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|Net income (loss) attributable to Host Hotels & Resorts, L.P. |  | $      | (126 | ) |                       | $ | (72  | )                         |  | $ | (9           | ) |  | $            | 81   |   |  | $ | (126   | )
|                                                              |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  



20



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Supplemental Condensed Consolidating Statements of Operations

(in millions)

Year-to-date ended September 11, 2009



|                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|-------------------------------------------------------- |  | ------ | ---- | - | --------------------- | - | ---- | ------------------------- |  | - | ------------ | - |  | ------------ | ---- | - |  | - | ------ | -
|                                                         |  | Parent |      |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |     
|REVENUES                                                 |  | $      | 134  |   |                       | $ | 382  |                           |  | $ | 2,814        |   |  | $            | (512 | ) |  | $ | 2,818  |  
|Hotel operating expenses                                 |  |        |     |   |                       |   |     |                           |  |   | (1,952       | ) |  |              |     |   |  |   | (1,952 | )
|Property-level expenses                                  |  |        | (17  | ) |                       |   | (101 | )                         |  |   | (152         | ) |  |              |     |   |  |   | (270   | )
|Depreciation and amortization                            |  |        | (41  | ) |                       |   | (220 | )                         |  |   | (168         | ) |  |              |     |   |  |   | (429   | )
|Corporate and other expenses                             |  |        | (2   | ) |                       |   | (26  | )                         |  |   | (22          | ) |  |              |     |   |  |   | (50    | )
|Rental expense                                           |  |        |     |   |                       |   |     |                           |  |   | (512         | ) |  |              | 512  |   |  |   |       |  
|Interest income                                          |  |        | 9    |   |                       |   | 2    |                           |  |   | 8            |   |  |              | (14  | ) |  |   | 5      |  
|Interest expense                                         |  |        | (58  | ) |                       |   | (169 | )                         |  |   | (51          | ) |  |              | 14   |   |  |   | (264   | )
|Net gains on property transactions                       |  |        | 1    |   |                       |   |     |                           |  |   | 12           |   |  |              |     |   |  |   | 13     |  
|Gain on foreign currency and derivatives                 |  |        | 4    |   |                       |   |     |                           |  |   | 1            |   |  |              |     |   |  |   | 5      |  
|Equity in earnings (losses) of affiliates                |  |        | (161 | ) |                       |   | 36   |                           |  |   |             |   |  |              | 89   |   |  |   | (36    | )
|                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|Income (loss) before income taxes                        |  |        | (131 | ) |                       |   | (96  | )                         |  |   | (22          | ) |  |              | 89   |   |  |   | (160   | )
|Income tax benefit                                       |  |        |     |   |                       |   |     |                           |  |   | 29           |   |  |              |     |   |  |   | 29     |  
|                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                 |  |        | (131 | ) |                       |   | (96  | )                         |  |   | 7            |   |  |              | 89   |   |  |   | (131   | )
|Income (loss) from discontinued operations               |  |        | (55  | ) |                       |   | (11  | )                         |  |   | (4           | ) |  |              | 15   |   |  |   | (55    | )
|                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|NET INCOME (LOSS)                                        |  |        | (186 | ) |                       |   | (107 | )                         |  |   | 3            |   |  |              | 104  |   |  |   | (186   | )
|Less: Net loss attributable to non-controlling interests |  |        |     |   |                       |   |     |                           |  |   | 1            |   |  |              |     |   |  |   | 1      |  
|                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  
|Net income (loss) attributable to common unitholders     |  | $      | (186 | ) |                       | $ | (107 | )                         |  | $ | 4            |   |  | $            | 104  |   |  | $ | (185   | )
|                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |              |      |   |  |   |        |  



21



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Supplemental Condensed Consolidating Statements of Cash Flows

(in millions)

Year-to-date ended September 10, 2010



|                                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|------------------------------------------------------------------------ |  | ------ | ---- | - | --------------------- | - | ---- | ------------------------- |  | - | ------------ | - |  | - | ---- | -
|                                                                         |  | Parent |      |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiaries |  |   | Consolidated |  
|OPERATING ACTIVITIES                                                     |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Cash provided by operations                                              |  | $      | 65   |   |                       | $ | 124  |                           |  | $ | 139          |   |  | $ | 328  |  
|                                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|                                                                         |  |        |      |  
|INVESTING ACTIVITIES                                                     |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Proceeds from sales of assets, net                                       |  |        | 3    |   |                       |   | 9    |                           |  |   |             |   |  |   | 12   |  
|Acquisitions                                                             |  |        |     |   |                       |   | (165 | )                         |  |   | (127         | ) |  |   | (292 | )
|Purchase of mortgage note on a portfolio of hotels                       |  |        |     |   |                       |   | (53  | )                         |  |   |             |   |  |   | (53  | )
|Capital expenditures                                                     |  |        | (14  | ) |                       |   | (75  | )                         |  |   | (60          | ) |  |   | (149 | )
|Change in furniture, fixtures and equipment (FF&E) replacement fund      |  |        | (1   | ) |                       |   | (10  | )                         |  |   | (9           | ) |  |   | (20  | )
|Change in FF&E replacement funds designated as restricted cash           |  |        |     |   |                       |   |     |                           |  |   | 4            |   |  |   | 4    |  
|                                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Cash used in investing activities                                        |  |        | (12  | ) |                       |   | (294 | )                         |  |   | (192         | ) |  |   | (498 | )
|                                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|                                                                         |  |        |      |  
|FINANCING ACTIVITIES                                                     |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Draw on credit facility                                                  |  |        | 56   |   |                       |   |     |                           |  |   |             |   |  |   | 56   |  
|Repurchase/redemption of senior notes, including exchangeable debentures |  |        | (571 | ) |                       |   |     |                           |  |   |             |   |  |   | (571 | )
|Mortgage debt prepayments and scheduled maturities                       |  |        |     |   |                       |   |     |                           |  |   | (124         | ) |  |   | (124 | )
|Scheduled principal repayments                                           |  |        |     |   |                       |   | (1   | )                         |  |   | (7           | ) |  |   | (8   | )
|Common OP unit issuance                                                  |  |        | 158  |   |                       |   |     |                           |  |   |             |   |  |   | 158  |  
|Redemption of preferred OP units                                         |  |        | (101 | ) |                       |   |     |                           |  |   |             |   |  |   | (101 | )
|Distributions on common OP units                                         |  |        | (14  | ) |                       |   |     |                           |  |   |             |   |  |   | (14  | )
|Distributions on preferred OP units                                      |  |        | (6   | ) |                       |   |     |                           |  |   |             |   |  |   | (6   | )
|Contributions from non-controlling interests                             |  |        |     |   |                       |   |     |                           |  |   | 7            |   |  |   | 7    |  
|Distributions to non-controlling interests                               |  |        |     |   |                       |   |     |                           |  |   | (3           | ) |  |   | (3   | )
|Change in restricted cash other than FF&E replacement fund               |  |        | (27  | ) |                       |   | (1   | )                         |  |   |             |   |  |   | (28  | )
|Transfers to/from Parent                                                 |  |        | (384 | ) |                       |   | 165  |                           |  |   | 219          |   |  |   |     |  
|                                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Cash provided by (used in) financing activities                          |  |        | (889 | ) |                       |   | 163  |                           |  |   | 92           |   |  |   | (634 | )
|                                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         |  | $      | (836 | ) |                       | $ | (7   | )                         |  | $ | 39           |   |  | $ | (804 | )
|                                                                         |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  



22



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Supplemental Condensed Consolidating Statements of Cash Flows

(in millions)

Year-to-date ended September 11, 2009



|                                                                |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|--------------------------------------------------------------- |  | ------ | ---- | - | --------------------- | - | ---- | ------------------------- |  | - | ------------ | - |  | - | ---- | -
|                                                                |  | Parent |      |   | GuarantorSubsidiaries |   |      | Non-GuarantorSubsidiaries |  |   | Consolidated |  
|OPERATING ACTIVITIES                                            |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Cash provided by operations                                     |  | $      | 72   |   |                       | $ | 98   |                           |  | $ | 200          |   |  | $ | 370  |  
|                                                                |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|                                                                |  |        |      |  
|INVESTING ACTIVITIES                                            |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Proceeds from sales of assets, net                              |  |        | 30   |   |                       |   | 143  |                           |  |   | 26           |   |  |   | 199  |  
|Proceeds from sale of interest in CBM Joint Venture LLC         |  |        | 13   |   |                       |   |     |                           |  |   |             |   |  |   | 13   |  
|Investments in and return of capital from affiliates, net       |  |        | 39   |   |                       |   |     |                           |  |   |             |   |  |   | 39   |  
|Capital expenditures                                            |  |        | (18  | ) |                       |   | (130 | )                         |  |   | (107         | ) |  |   | (255 | )
|Change in furniture, fixtures and equipment replacement fund    |  |        | (4   | ) |                       |   |     |                           |  |   | (16          | ) |  |   | (20  | )
|Changes in restricted cash designated for FF&E replacement fund |  |        | (8   | ) |                       |   | 5    |                           |  |   | (8           | ) |  |   | (11  | )
|                                                                |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Cash provided by (used in) investing activities                 |  |        | 52   |   |                       |   | 18   |                           |  |   | (105         | ) |  |   | (35  | )
|                                                                |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|                                                                |  |        |      |  
|FINANCING ACTIVITIES                                            |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Financing costs                                                 |  |        | (6   | ) |                       |   |     |                           |  |   | (4           | ) |  |   | (10  | )
|Issuances of debt                                               |  |        | 386  |   |                       |   |     |                           |  |   | 120          |   |  |   | 506  |  
|Repayments on credit facility                                   |  |        | (410 | ) |                       |   |     |                           |  |   |             |   |  |   | (410 | )
|Repurchase of senior notes, including exchangeable debentures   |  |        | (115 | ) |                       |   |     |                           |  |   |             |   |  |   | (115 | )
|Debt prepayments and scheduled maturities                       |  |        |     |   |                       |   | (342 | )                         |  |   |             |   |  |   | (342 | )
|Scheduled principal repayments                                  |  |        |     |   |                       |   | (3   | )                         |  |   | (8           | ) |  |   | (11  | )
|Common stock issuance                                           |  |        | 588  |   |                       |   |     |                           |  |   |             |   |  |   | 588  |  
|Distributions on common units                                   |  |        | (27  | ) |                       |   |     |                           |  |   |             |   |  |   | (27  | )
|Distributions on preferred units                                |  |        | (7   | ) |                       |   |     |                           |  |   |             |   |  |   | (7   | )
|Distributions to non-controlling interests                      |  |        |     |   |                       |   |     |                           |  |   | (2           | ) |  |   | (2   | )
|Change in restricted cash, other than FF&E replacement fund     |  |        | 1    |   |                       |   | 1    |                           |  |   | 4            |   |  |   | 6    |  
|Transfers to/from Parent                                        |  |        | (24  | ) |                       |   | 210  |                           |  |   | (186         | ) |  |   |     |  
|                                                                |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|Cash provided by (used in) financing activities                 |  |        | 386  |   |                       |   | (134 | )                         |  |   | (76          | ) |  |   | 176  |  
|                                                                |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                |  | $      | 510  |   |                       | $ | (18  | )                         |  | $ | 19           |   |  | $ | 511  |  
|                                                                |  |        |      |   |                       |   |      |                           |  |   |              |   |  |   |      |  



23



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

The following discussion and analysis should be read in conjunction with the condensed
consolidated financial statements and related notes included elsewhere in this report. Host Hotels & Resorts, Inc. is a Maryland corporation and operates as a self-managed and self-administered real estate investment trust, or REIT. Host
Hotels & Resorts, Inc. owns properties and conducts operations through Host Hotels & Resorts, L.P., a Delaware limited partnership, of which Host Hotels & Resorts, Inc. is the sole general partner and in which it holds
approximately 98% of the partnership interests as of September 10, 2010. 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 term 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. The following factors, among
others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:



| |  |  | national and local economic and business conditions, including the changing economic environment as well as the potential for terrorist attacks, that
will affect our results of operations, occupancy rates at our hotels and the demand for hotel products and services;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | operating risks associated with the hotel business;
| | - |  | ---------------------------------------------------



| |  |  | risks associated with the level of our indebtedness;
| | - |  | ----------------------------------------------------



| |  |  | risks associated with our ability to meet covenants in our debt agreements and to enter into derivative contracts in order to hedge risks associated
with changes in interest rates and foreign currency exchange rates;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | relationships with property managers and joint venture partners;
| | - |  | ----------------------------------------------------------------



| |  |  | our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | costs associated with litigation judgments or settlements;
| | - |  | ----------------------------------------------------------



| |  |  | the ability of Host and each of the REIT entities acquired, established or to be established by Host, to continue to satisfy complex rules to qualify
as REITs for federal income tax purposes, Host LPs ability to satisfy the rules to maintain its status as a partnership for federal income tax purposes, the ability of certain of our subsidiaries to maintain their status as taxable REIT
subsidiaries for federal income tax purposes and Hosts ability and the ability of its subsidiaries, and similar entities to be acquired or established by Host, to operate effectively within the limitations imposed by these rules;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to acquire or develop additional properties and the risk that potential acquisitions or developments may not perform in accordance with
expectations;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the relatively fixed nature of our property-level operating costs and expenses; and
| | - |  | -----------------------------------------------------------------------------------



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| |  |  | our ability to recover fully under our existing insurance for terrorist acts, to maintain adequate or full replacement cost all-risk
property insurance on our properties on commercially reasonable terms and to satisfy the insurance requirements of our lenders.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We undertake no obligation to publically update forward-looking statements, whether as a result of new information, future events, or otherwise. Achievement of future results is subject to risks,
uncertainties and potentially inaccurate assumptions, including those risk factors discussed in our Annual Report on Form 10K for the year ended December 31, 2009 and in other filings with the 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.

Outlook

We currently
own 113 hotel properties, which operate primarily in the luxury and upper upscale hotel sectors. For a general overview of our business and a discussion of our reporting periods, see our most recent Annual Report on Form 10-K.

Operating Outlook.The positive trends that we experienced in the first half of 2010 continued to improve in the third quarter as
RevPAR at our comparable hotels increased 8.8% for the quarter. The RevPAR growth was driven by a 290 basis point increase in occupancy and a 4.5% improvement in average rate. Both our transient and group business experienced improvements in
occupancy and rate in the quarter. As demand levels have improved across the board, our managers have shifted business away from discounted leisure business, although lower-rated contracts negotiated in 2009 for special corporate and group business
continue to hinder rate growth in the near-term. Year-to-date, comparable hotel RevPAR is up 5.6%.

RevPAR changes that are
driven predominately by occupancy have different implications on overall revenue levels, as well as incremental operating profit, than do changes that are driven predominately by average rate. For example, increases in occupancy would lead to
increases in rooms revenues and ancillary revenues, such as food and beverage, as well as incremental costs (including housekeeping services, utilities and room amenity costs). RevPAR increases due to higher room rates, however, would not result in
additional room-related costs. As a result, changes in RevPAR driven by increases or decreases in average room rates have a greater effect on profitability than changes in RevPAR caused by occupancy levels. For the third quarter, revenue growth was
driven by both occupancy and rate improvements, and as a result, we experienced some growth in our operating profit margins. However, year-to-date, our growth has been driven primarily by occupancy improvements. Therefore, while we have experienced
strong RevPAR growth for the year, we continue to see pressure on year-to-date operating margins. We would not anticipate strong growth in operating margins until we experience sustained growth in average room rates at our properties. Additionally,
margins continue to be affected by a decline in attrition and cancellation fees, compared to 2009.

We are encouraged by the
improvement in key economic indicators, particularly business investment and corporate profits, as we believe these trends will continue to facilitate improvements in corporate travel, which is an important catalyst of overall demand at our
properties. However, other factors, such as low GDP growth, continued high unemployment and weak consumer spending, continue to slow the overall economic recovery. Based on these indicators, we believe that the overall trends experienced in the
second and third quarters of 2010 will continue and that comparable hotel RevPAR will increase 5.5% to 6.5% for 2010. However, the effect of this improvement on our operating results is slightly offset by a more cautious outlook with respect to food
and beverage and auxiliary revenues.

While we believe the positive trends in the lodging industry create the opportunity for
business improvements during the remainder of 2010, 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.



25



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Investing activities outlook

Property acquisitions.During the third quarter, we purchased three hotel assets located in London, New York and Chicago,
respectively, for approximately $430 million. Consideration paid included cash of $285 million, $166 million of mortgage debt assumed with a fair value of $170 million and contingent and deferred consideration valued at $8 million (debt and
liabilities presented are the consolidated amounts and include amounts that are attributable to the 10% non-controlling partner of the joint venture which owns the W New York, Union Square). Additionally, subsequent to quarter end, we acquired the
245-room JW Marriott, Rio de Janeiro for approximately R$81 million ($48 million) (see Liquidity and Capital Resources for further discussion). Over the past several months, we have begun to see an increase in the number of
acquisition opportunities available, and from time to time, we have been, and continue to be, engaged in discussions concerning possible acquisitions. Nevertheless, the significant business considerations surrounding these transactions make the
timing of any future acquisitions difficult to predict.

We may acquire properties using various structures, including
transactions involving single assets, portfolios, joint ventures or acquisitions of all or substantially all of the securities or assets of other REITs or similar real estate entities. Acquisitions are financed through available cash or a
combination of cash and other sources, including proceeds from equity offerings of Host or issuance of OP Units by Host LP, the incurrence of debt, proceeds from sales of properties and advances under our credit facility.

Capital expenditures. During 2010, we intend to renovate approximately 4,900 guest rooms, 181,000 square feet of ballroom and
meeting space and 94,100 square feet of public space, including lobbies and restaurants. We will also develop a new 21,000 square foot ballroom at the Westin Kierland Resort & Spa. Our 2010 program also includes the start of an extensive
$190 million project at the 1,362-room San Diego Marriott Hotel & Marina, which will include a complete renovation of all guest rooms, the pool and fitness center, as well as the expansion and development of new meeting space and an
exhibit hall. Year-to-date, we have spent $149 million on capital expenditures, including $50 million on repositioning and return on investment projects. We expect that capital expenditures will be between $300 million to
$320 million during 2010.

Financing activities outlook

Debt transactions.Over time, we intend to continue to lower our debt-to-equity ratio as we believe lower overall leverage will
reduce our cost of capital and earnings volatility and provide us with the necessary flexibility to take advantage of opportunities that have historically developed in periods of market duress, which we consider a key competitive advantage. However,
at any point, we expect to issue debt depending on market conditions and liquidity requirements, which could temporarily increase our debt-to-equity ratios. We have repaid $695 million of debt thus far in 2010. Additionally, during the third
quarter, we incurred or assumed $243 million of debt with a fair value of $247 million, which includes a $21 million capital lease obligation and the $56 million draw under our credit facility, to partially fund our acquisitions
described above. Additionally, we intend to defease the $115 million mortgage loan assumed with the acquisition of the W New York, Union Square in the fourth quarter.

Equity transactions. During the third quarter, Host issued 7.4 million common shares under its at the market offering programs. The shares were issued at an average price of $14.08
for net proceeds of $103.5 million. Year-to-date, Host has issued 11.8 million shares at an average price of $13.60 per share for net proceeds of $158.2 million. Host may continue to sell shares of common stock under this program from
time to time based on market conditions, although it is not under an obligation to sell any shares.



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Results of Operations

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



|                                                       |  |                    |        |   |                   |   |        |                      |  |          |   
|------------------------------------------------------ |  | ------------------ | ------ | - | ----------------- | - | ------ | -------------------- |  | -------- | --
|                                                       |  | Quarter ended      |        |   |                   |  
|                                                       |  | September 10,2010  |        |   | September 11,2009 |   |        | % Increase(Decrease) | 
|Revenues:                                              |  |                    |        |   |                   |   |        |                      |  |          |   
|Total full-service hotel sales                         |  | $                  | 946    |   |                   | $ | 881    |                      |  | 7.4      | % 
|Other revenues (1)                                     |  |                    | 60     |   |                   |   | 22     |                      |  | N/M      | * 
|Operating costs and expenses:                          |  |                    |        |   |                   |   |        |                      |  |          |   
|Property-level costs (2)                               |  |                    | 963    |   |                   |   | 892    |                      |  | 8.0      |   
|Corporate and other expenses                           |  |                    | 20     |   |                   |   | 19     |                      |  | 5.3      |   
|Operating profit (loss)                                |  |                    | 23     |   |                   |   | (8     | )                    |  | N/M      |   
|Interest expense                                       |  |                    | 89     |   |                   |   | 95     |                      |  | (6.3     | ) 
|Loss attributable to non-controlling interests         |  |                    | 2      |   |                   |   | 2      |                      |  |         |   
|Income from discontinued operations                    |  |                    |       |   |                   |   | 9      |                      |  | N/M      |   
|Net loss attributable to Host Hotels & Resorts, L.P    |  |                    | (59    | ) |                   |   | (56    | )                    |  | 5.4      |   
|                                                       |  |                    |       
|All hotel operating statistics (3):                    |  |                    |        |   |                   |   |        |                      |  |          |   
|RevPAR                                                 |  | $                  | 120.10 |   |                   | $ | 108.49 |                      |  | 10.7     | % 
|Average room rate                                      |  | $                  | 163.16 |   |                   | $ | 154.90 |                      |  | 5.3      | % 
|Average occupancy                                      |  |                    | 73.6   | % |                   |   | 70.0   | %                    |  | 3.6 pts. |   
|Comparable hotel operating statistics (4):             |  |                    |        |   |                   |   |        |                      |  |          |   
|RevPAR                                                 |  | $                  | 118.66 |   |                   | $ | 109.05 |                      |  | 8.8      | % 
|Average room rate                                      |  | $                  | 161.80 |   |                   | $ | 154.83 |                      |  | 4.5      | % 
|Average occupancy                                      |  |                    | 73.3   | % |                   |   | 70.4   | %                    |  | 2.9 pts. |   
|                                                       |  |                   
|                                                       |  | Year-to-date ended |        |   |                   |  
|                                                       |  | September 10,2010  |        |   | September 11,2009 |   |        | % Increase(Decrease) | 
|Revenues:                                              |  |                    |        |   |                   |   |        |                      |  |          |   
|Total full-service hotel sales                         |  | $                  | 2,826  |   |                   | $ | 2,742  |                      |  | 3.1      | % 
|Other revenues (1)                                     |  |                    | 117    |   |                   |   | 76     |                      |  | 53.9     |   
|Operating costs and expenses:                          |  |                    |        |   |                   |   |        |                      |  |          |   
|Property-level costs (2)                               |  |                    | 2,743  |   |                   |   | 2,651  |                      |  | 3.5      |   
|Corporate and other expenses                           |  |                    | 69     |   |                   |   | 50     |                      |  | 38.0     |   
|Operating profit                                       |  |                    | 131    |   |                   |   | 117    |                      |  | 12.0     |   
|Interest expense                                       |  |                    | 268    |   |                   |   | 264    |                      |  | 1.5      |   
|Loss attributable to non-controlling interests         |  |                    |       |   |                   |   | 1      |                      |  | N/M      |   
|Loss from discontinued operations                      |  |                    | 2      |   |                   |   | 55     |                      |  | (96.4    | ) 
|Net loss attributable to Host Hotels & Resorts, L.P... |  |                    | (126   | ) |                   |   | (185   | )                    |  | (31.9    | ) 
|                                                       |  |                    |       
|All hotel operating statistics (3):                    |  |                    |        |   |                   |   |        |                      |  |          |   
|RevPAR                                                 |  | $                  | 119.88 |   |                   | $ | 112.09 |                      |  | 6.9      | % 
|Average room rate                                      |  | $                  | 168.52 |   |                   | $ | 169.40 |                      |  | (0.5     | )%
|Average occupancy                                      |  |                    | 71.1   | % |                   |   | 66.2   | %                    |  | 4.9 pts. |   
|Comparable hotel operating statistics (4):             |  |                    |        |   |                   |   |        |                      |  |          |   
|RevPAR                                                 |  | $                  | 119.56 |   |                   | $ | 113.18 |                      |  | 5.6      | % 
|Average room rate                                      |  | $                  | 167.81 |   |                   | $ | 169.70 |                      |  | (1.1     | )%
|Average occupancy                                      |  |                    | 71.2   | % |                   |   | 66.7   | %                    |  | 4.5 pts. |   



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|(1) | Includes the results of the 71 hotels leased from HPT whose operations we now consolidate as of July 7, 2010 as a result of the termination of the subleases with
our subtenant. The line item also includes rental income earned prior to the lease terminations.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amount represents total operating costs and expenses per our condensed consolidated statements of operations less corporate expenses and includes costs associated with
the properties leased from Hotel Properties Trust.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Operating statistics are for all properties as of September 10, 2010 and September 11, 2009, and include the results of operations for disposed hotels prior
to their disposition.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Comparable hotel operating statistics for September 10, 2010 and September 11, 2009 are based on 108 comparable hotels as of September 10, 2010.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

*N/M = Not meaningful.

2010 Compared to 2009

Hotel Sales Overview



|                               |  |                    |       |                   |   |                      |  |       |  
|------------------------------ |  | ------------------ | ----- | ----------------- | - | -------------------- |  | ----- | -
|                               |  | Quarter ended      |       |                   |  
|                               |  | September 10,2010  |       | September 11,2009 |   | % Increase(Decrease) | 
|                               |  | (in millions)      |       |                   |  
|Revenues:                      |  |                    |       |                   |   |                      |  |       |  
|Rooms                          |  | $                  | 629   |                   | $ | 574                  |  | 9.6   | %
|Food and beverage              |  |                    | 254   |                   |   | 239                  |  | 6.3   |  
|Other                          |  |                    | 63    |                   |   | 68                   |  | (7.4  | )
|                               |  |                    |       |                   |   |                      |  |       |  
|Total full-service hotel sales |  |                    | 946   |                   |   | 881                  |  | 7.4   |  
|Other revenues                 |  |                    | 60    |                   |   | 22                   |  | N/M   |  
|                               |  |                    |       |                   |   |                      |  |       |  
|Total revenues                 |  | $                  | 1,006 |                   | $ | 903                  |  | 11.4  |  
|                               |  |                    |       |                   |   |                      |  |       |  
|                               |  |                   
|                               |  | Year-to-date ended |       |                   |  
|                               |  | September 10,2010  |       | September 11,2009 |   | % Increase(Decrease) | 
|                               |  | (in millions)      |       |                   |  
|Revenues:                      |  |                    |       |                   |   |                      |  |       |  
|Rooms                          |  | $                  | 1,785 |                   | $ | 1,696                |  | 5.2   | %
|Food and beverage              |  |                    | 849   |                   |   | 823                  |  | 3.2   |  
|Other                          |  |                    | 192   |                   |   | 223                  |  | (13.9 | )
|                               |  |                    |       |                   |   |                      |  |       |  
|Total full-service hotel sales |  |                    | 2,826 |                   |   | 2,742                |  | 3.1   |  
|Other revenues                 |  |                    | 117   |                   |   | 76                   |  | 53.9  |  
|                               |  |                    |       |                   |   |                      |  |       |  
|Total revenues                 |  | $                  | 2,943 |                   | $ | 2,818                |  | 4.4   |  
|                               |  |                    |       |                   |   |                      |  |       |  

Hotel sales grew 7.4% and 3.1% for the quarter and year-to-date, respectively, reflecting strong
growth in RevPAR at our properties for our consolidated full-service hotels, as well as increases in rooms and food and beverage revenues, partially offset by a decline in other revenues as a result of a decline in attrition and cancellation fees.
Revenues for properties sold in 2010 or 2009 have been reclassified to discontinued operations. See Discontinued Operations below.

On July 6, 2010, we terminated the subleases for 71 hotels leased from HPT because the subtenants failed to meet net worth covenants. Accordingly, beginning on July 7, 2010, we record the
operations of the hotels instead of rental income, which we recorded in other revenues on our consolidated statements of operations. For the third quarter of 2010, we recognized revenues for hotels leased from HPT of $50 million, as well as
$6 million of rental income earned prior to the termination of the sublease. Year-to-date 2010, revenues for hotels leased from HPT include hotel revenues of $50 million and rental income of $43 million. For the third quarter and
year-to-date 2009, revenues for hotels leased from HPT include rental income of $18 million and $55 million, respectively, related to the 71 properties. The property revenues and rental income recorded less the hotel expenses and rental
expenses resulted in a slight loss for all periods presented.



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We discuss operating results for our hotels on a comparable basis. Comparable hotels are
those properties that we have consolidated for the entirety of the reporting periods being compared. Comparable hotels do not include the results of properties acquired or sold, or that incurred significant property damage or business interruption
or large scale capital improvements during these periods. As of September 10, 2010, 108 of our 112 owned hotels have been classified as comparable hotels. The four non-comparable hotels include the three acquired this quarter and the San Diego
Marriott Hotel & Marina, which is currently undergoing significant renovations. See Comparable Hotel Operating Statistics for a complete description of our comparable hotels. We also discuss our comparable operating results by
property type (i.e. urban, suburban, resort/conference or airport), geographic region and mix of business (i.e. transient, group or contract).

For the quarter, comparable hotel sales increased 6.9% to approximately $925 million and 3.7% to approximately $2.8 billion year-to-date. The revenue growth reflects the increase in comparable RevPAR
of 8.8% for the quarter and 5.6% year-to-date, as well as increases in food and beverage sales, which were partially offset by a decline in other revenues, reflecting the decline in attrition and cancellation fees. The improvements in RevPAR reflect
an increase in occupancy of 2.9 percentage points and average room rate of 4.5% for the quarter, and an increase in occupancy of 4.5 percentage points and a decrease in average room rate of 1.1% for year-to-date. We have adopted a reporting calendar
that is closely aligned with the reporting calendar used by Marriott International, the manager of a majority of our properties, whose third quarter ended on September 10, 2010. As a result of the reporting calendar we adopted, for our
non-Marriott managed hotels (covering approximately 42% of total revenues of our hotels), we are unable to report September operations until the fourth quarter because our hotel managers using a monthly reporting period do not make mid-month results
available to us. For further discussion see Reporting Periods in our most recent Annual Report on Form 10-K.

Food
and beverage revenues for our comparable hotels increased 6.2% for the quarter and 4.3% year-to-date. The increase in the quarter was driven by an increase in banquet and audio visual sales. Other revenues for our comparable hotels, which primarily
represent spa, golf, parking, internet connectivity and attrition and cancellation fees, decreased 6.6% for the quarter and 13.6% year-to-date. The decline is primarily due to a reduction in attrition and cancellation fees compared to 2009, when
several large groups and business travelers cancelled their travel plans, which disproportionately affected some of the larger hotels in the portfolio. Excluding the incremental attrition and cancellation fees in 2009 of $5 million and
$33 million for the third quarter and year-to-date, respectively, other revenues would have increased by 1.6% and 1.8%, respectively.

Comparable Hotel Sales by Property Type

The following tables set forth
performance information for our comparable hotels by property type as of September 10, 2010 and September 11, 2009:

Comparable Hotels by Property Type (a)



|                  |  |                          |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |     |  
|----------------- |  | ------------------------ |  | -------------------------------- |  | -------------------------------- | ------ | --------------------------- | ---- | - | ------ | - | ---------------- |  | --------------------------- | ------ |  | ------ | - | ---------------------- | - | ------ |  | --- | -
|                  |  | As of September 10, 2010 |  | Quarter ended September 10, 2010 |  | Quarter ended September 11, 2009 |        |                             |     
|                  |  | No. ofProperties         |  | No. ofRooms                      |  | AverageRoom Rate                 |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoom Rate |  | AverageOccupancyPercentages |        |  | RevPAR |   | PercentChange inRevPAR |  
|Urban             |  | 52                       |  | 33,122                           |  | $                                | 174.64 |                             | 77.4 | % |        | $ | 135.13           |  | $                           | 165.07 |  | 75.1   | % |                        | $ | 123.97 |  | 9.0 | %
|Suburban          |  | 29                       |  | 10,964                           |  |                                  | 136.31 |                             | 68.0 |   |        |   | 92.68            |  |                             | 132.75 |  | 64.3   |   |                        |   | 85.33  |  | 8.6 |  
|Resort/Conference |  | 13                       |  | 8,082                            |  |                                  | 183.34 |                             | 63.2 |   |        |   | 115.79           |  |                             | 181.51 |  | 58.7   |   |                        |   | 106.50 |  | 8.7 |  
|Airport           |  | 14                       |  | 6,956                            |  |                                  | 111.92 |                             | 74.3 |   |        |   | 83.13            |  |                             | 107.88 |  | 71.5   |   |                        |   | 77.13  |  | 7.8 |  
|                  |  |                          |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |     |  
|All Types         |  | 108                      |  | 59,124                           |  |                                  | 161.80 |                             | 73.3 |   |        |   | 118.66           |  |                             | 154.83 |  | 70.4   |   |                        |   | 109.05 |  | 8.8 |  
|                  |  |                          |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |     |  



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|                  |  |                          |  |                                       |  |                                       |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |     |  
|----------------- |  | ------------------------ |  | ------------------------------------- |  | ------------------------------------- | ------ | --------------------------- | ---- | - | ------ | - | ---------------- |  | --------------------------- | ------ |  | ------ | - | ---------------------- | - | ------ |  | --- | -
|                  |  | As of September 10, 2010 |  | Year-to-date ended September 10, 2010 |  | Year-to-date ended September 11, 2009 |        |                             |     
|                  |  | No. ofProperties         |  | No. ofRooms                           |  | AverageRoom Rate                      |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoom Rate |  | AverageOccupancyPercentages |        |  | RevPAR |   | PercentChange inRevPAR |  
|Urban             |  | 52                       |  | 33,122                                |  | $                                     | 178.42 |                             | 73.4 | % |        | $ | 130.97           |  | $                           | 177.33 |  | 69.0   | % |                        | $ | 122.38 |  | 7.0 | %
|Suburban          |  | 29                       |  | 10,964                                |  |                                       | 137.71 |                             | 66.3 |   |        |   | 91.27            |  |                             | 141.67 |  | 61.1   |   |                        |   | 86.51  |  | 5.5 |  
|Resort/Conference |  | 13                       |  | 8,082                                 |  |                                       | 209.63 |                             | 68.4 |   |        |   | 143.37           |  |                             | 221.67 |  | 63.7   |   |                        |   | 141.28 |  | 1.5 |  
|Airport           |  | 14                       |  | 6,956                                 |  |                                       | 114.69 |                             | 72.1 |   |        |   | 82.74            |  |                             | 116.70 |  | 68.0   |   |                        |   | 79.41  |  | 4.2 |  
|                  |  |                          |  |                                       |  |                                       |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |     |  
|All Types         |  | 108                      |  | 59,124                                |  |                                       | 167.81 |                             | 71.2 |   |        |   | 119.56           |  |                             | 169.70 |  | 66.7   |   |                        |   | 113.18 |  | 5.6 |  
|                  |  |                          |  |                                       |  |                                       |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |     |  



|(a) | The reporting period for our comparable operating statistics for the year-to-date periods ended September 10, 2010 and September 11, 2009 is from
January 2, 2010 to September 10, 2010 and January 3, 2009 to September 11, 2009, respectively. For further discussion, see Reporting Periods in our most recent Annual Report on Form 10-K.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the third quarter of 2010, comparable hotel RevPAR increased across all of our hotel property types. Our
urban properties led the portfolio, with a 9% increase in RevPAR for the quarter. The continued improvement in demand has allowed our operators to begin to increase the average room rates at our urban properties, which improved 5.8% overall for the
quarter. Our suburban properties also experienced a significant RevPAR increase in the third quarter driven by strength in the suburban Boston, Orange County, San Francisco and Denver markets. Our resort/conference hotels showed strong growth for
the quarter, as occupancy increased 4.5 percentage points, and room rates increased 1%, driven by strong improvement in our resort/conference properties in our Florida and Hawaii regions. RevPAR at our Airport properties improved 7.8% for the
quarter driven by strong demand growth in the Chicago and San Francisco airport markets. Year-to-date, we experienced growth for all of our property types, driven primarily by improved occupancy. Our urban properties were the only property type that
has experienced rate growth year-to-date.

Comparable Hotel Sales by Geographic Region

The following tables set forth performance information for our comparable hotels by geographic region as of September 10, 2010 and
September 11, 2009:

Comparable Hotels by Region (a)



|              |  |                          |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |      |  
|------------- |  | ------------------------ |  | -------------------------------- |  | -------------------------------- | ------ | --------------------------- | ---- | - | ------ | - | ---------------- |  | --------------------------- | ------ |  | ------ | - | ---------------------- | - | ------ |  | ---- | -
|              |  | As of September 10, 2010 |  | Quarter ended September 10, 2010 |  | Quarter ended September 11, 2009 |        |                             |     
|              |  | No. ofProperties         |  | No. ofRooms                      |  | AverageRoom Rate                 |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoom Rate |  | AverageOccupancyPercentages |        |  | RevPAR |   | PercentChange inRevPAR |  
|Pacific       |  | 26                       |  | 14,581                           |  | $                                | 161.40 |                             | 78.8 | % |        | $ | 127.20           |  | $                           | 155.71 |  | 75.1   | % |                        | $ | 116.86 |  | 8.8  | %
|Mid-Atlantic  |  | 10                       |  | 8,328                            |  |                                  | 210.06 |                             | 82.3 |   |        |   | 172.96           |  |                             | 195.30 |  | 80.2   |   |                        |   | 156.62 |  | 10.4 |  
|North Central |  | 13                       |  | 5,897                            |  |                                  | 138.44 |                             | 70.8 |   |        |   | 97.99            |  |                             | 129.60 |  | 69.8   |   |                        |   | 90.48  |  | 8.3  |  
|South Central |  | 9                        |  | 5,687                            |  |                                  | 129.87 |                             | 64.7 |   |        |   | 84.07            |  |                             | 128.42 |  | 64.1   |   |                        |   | 82.38  |  | 2.1  |  
|Florida       |  | 9                        |  | 5,677                            |  |                                  | 145.43 |                             | 64.5 |   |        |   | 93.76            |  |                             | 144.33 |  | 58.1   |   |                        |   | 83.84  |  | 11.8 |  
|DC Metro      |  | 12                       |  | 5,416                            |  |                                  | 171.91 |                             | 77.7 |   |        |   | 133.55           |  |                             | 164.33 |  | 76.7   |   |                        |   | 126.11 |  | 5.9  |  
|Atlanta       |  | 8                        |  | 4,252                            |  |                                  | 144.72 |                             | 63.2 |   |        |   | 91.53            |  |                             | 144.45 |  | 60.5   |   |                        |   | 87.34  |  | 4.8  |  
|New England   |  | 7                        |  | 3,924                            |  |                                  | 170.94 |                             | 81.9 |   |        |   | 139.94           |  |                             | 159.94 |  | 77.0   |   |                        |   | 123.13 |  | 13.7 |  
|Mountain      |  | 7                        |  | 2,889                            |  |                                  | 124.10 |                             | 59.2 |   |        |   | 73.46            |  |                             | 123.59 |  | 58.2   |   |                        |   | 71.87  |  | 2.2  |  
|International |  | 7                        |  | 2,473                            |  |                                  | 151.89 |                             | 66.6 |   |        |   | 101.22           |  |                             | 139.39 |  | 60.9   |   |                        |   | 84.83  |  | 19.3 |  
|              |  |                          |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |      |  
|All Regions   |  | 108                      |  | 59,124                           |  |                                  | 161.80 |                             | 73.3 |   |        |   | 118.66           |  |                             | 154.83 |  | 70.4   |   |                        |   | 109.05 |  | 8.8  |  
|              |  |                          |  |                                  |  |                                  |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |      |  



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|              |  |                          |  |                                       |  |                                       |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |      |  
|------------- |  | ------------------------ |  | ------------------------------------- |  | ------------------------------------- | ------ | --------------------------- | ---- | - | ------ | - | ---------------- |  | --------------------------- | ------ |  | ------ | - | ---------------------- | - | ------ |  | ---- | -
|              |  | As of September 10, 2010 |  | Year-to-date ended September 10, 2010 |  | Year-to-date ended September 11, 2009 |        |                             |     
|              |  | No. ofProperties         |  | No. ofRooms                           |  | AverageRoom Rate                      |        | AverageOccupancyPercentages |      |   | RevPAR |   | AverageRoom Rate |  | AverageOccupancyPercentages |        |  | RevPAR |   | PercentChange inRevPAR |  
|Pacific       |  | 26                       |  | 14,581                                |  | $                                     | 160.70 |                             | 72.9 | % |        | $ | 117.19           |  | $                           | 169.06 |  | 68.1   | % |                        | $ | 115.11 |  | 1.8  | %
|Mid-Atlantic  |  | 10                       |  | 8,328                                 |  |                                       | 208.00 |                             | 79.9 |   |        |   | 166.11           |  |                             | 203.13 |  | 73.9   |   |                        |   | 150.17 |  | 10.6 |  
|North Central |  | 13                       |  | 5,897                                 |  |                                       | 130.17 |                             | 64.4 |   |        |   | 83.77            |  |                             | 128.84 |  | 61.5   |   |                        |   | 79.21  |  | 5.8  |  
|South Central |  | 9                        |  | 5,687                                 |  |                                       | 142.95 |                             | 68.5 |   |        |   | 97.97            |  |                             | 144.63 |  | 64.8   |   |                        |   | 93.72  |  | 4.5  |  
|Florida       |  | 9                        |  | 5,677                                 |  |                                       | 184.48 |                             | 71.7 |   |        |   | 132.30           |  |                             | 189.56 |  | 65.0   |   |                        |   | 123.22 |  | 7.4  |  
|DC Metro      |  | 12                       |  | 5,416                                 |  |                                       | 188.18 |                             | 76.0 |   |        |   | 142.97           |  |                             | 190.83 |  | 75.4   |   |                        |   | 143.89 |  | (0.6 | )
|Atlanta       |  | 8                        |  | 4,252                                 |  |                                       | 149.12 |                             | 63.8 |   |        |   | 95.17            |  |                             | 152.94 |  | 59.9   |   |                        |   | 91.59  |  | 3.9  |  
|New England   |  | 7                        |  | 3,924                                 |  |                                       | 169.37 |                             | 70.6 |   |        |   | 119.51           |  |                             | 163.00 |  | 63.5   |   |                        |   | 103.46 |  | 15.5 |  
|Mountain      |  | 7                        |  | 2,889                                 |  |                                       | 148.74 |                             | 64.6 |   |        |   | 96.02            |  |                             | 162.28 |  | 59.6   |   |                        |   | 96.67  |  | (0.7 | )
|International |  | 7                        |  | 2,473                                 |  |                                       | 154.43 |                             | 65.2 |   |        |   | 100.71           |  |                             | 138.55 |  | 60.9   |   |                        |   | 84.39  |  | 19.3 |  
|              |  |                          |  |                                       |  |                                       |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |      |  
|All Regions   |  | 108                      |  | 59,124                                |  |                                       | 167.81 |                             | 71.2 |   |        |   | 119.56           |  |                             | 169.70 |  | 66.7   |   |                        |   | 113.18 |  | 5.6  |  
|              |  |                          |  |                                       |  |                                       |        |                             |      |   |        |   |                  |  |                             |        |  |        |   |                        |   |        |  |      |  



|(a) | The reporting period for our comparable operating statistics for the year-to-date periods ended September 10, 2010 and September 11, 2009 is from
January 2, 2010 to September 10, 2010 and January 3, 2009 to September 11, 2009, respectively. For further discussion, see Reporting Periods in our most recent Annual Report on Form 10-K.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For the third quarter of 2010, comparable hotel RevPAR improved across all of our geographic regions when
compared to the third quarter of 2009. Additionally, all of our regions experienced improvement in both occupancy and room rates. Our New England region was the top performing U.S. region with RevPAR growth of 13.7%, which was driven by RevPAR
growth of 14.5% in the Boston market. This increase was due to strong group and transient demand, as occupancy increased 5.8 percentage points, which led to an increase in average room rates of 6.9%.

Our Florida region outperformed the portfolio as well, led by strong performance at the Orlando World Center Marriott. RevPAR at the
Orlando World Center Marriott increased 26.7% for the quarter, reflecting a significant increase in group demand, particularly association business, as occupancy increased 14 percentage points.

RevPAR in our Mid-Atlantic region grew 10.4% for the quarter, driven by RevPAR growth at our New York properties of 12.9%. For our New
York properties, rate improved 12.4%. While occupancy only increased slightly, the hotels limited the number of groups and drove transient business and rates.

Our Pacific region had an increase in RevPAR of 8.8% for the quarter, benefiting from RevPAR growth in all of its major markets. Most significantly, our Hawaii hotels experienced their first increase in
RevPAR since the first quarter of 2008, with an increase of 11.8%. Occupancy improved by 8.3 percentage points due to strong transient and group demand, while rates were up slightly. The increase in airline capacity helped to drive results.

The RevPAR increase for the quarter in our North Central region was driven by our Chicago hotels as RevPAR increased 14.2%
due to strong transient demand and a 9.4% increase in rate.

For the quarter, results in our Mountain region were mixed, as
the Denver market experienced an 11.8% increase in RevPAR primarily due to strong transient demand. The Phoenix market had a 9.8% RevPAR decline. The poor performance in the Phoenix market can be somewhat attributed to the renovation of a
significant amount of meeting space at two hotels and the construction of a new ballroom at the Westin Kierland. Our South Central region results were also mixed, with 28.3% growth in the New Orleans market, while the San Antonio market had a RevPAR
decline of 7%. The strength in the New Orleans market was driven by a significant increase in group demand and contract business related to the gulf oil spill clean-up, which led to a 12.4 percentage point improvement in occupancy and room rate
growth of 8.3%. San Antonio struggled due to lower transient and group demand as occupancy fell 6.6 percentage points and rate increased 2.3%.

Year-to-date, our top performing regions were the New England and Mid-Atlantic regions. The RevPAR growth for the International region primarily reflects changes due to currency fluctuations. On a
constant dollar



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basis, RevPAR in the International region increased 5.3% year-to-date. The growth in the New England and Mid-Atlantic regions reflects strong demand in our east coast urban markets. The
year-to-date RevPAR decline in our Mountain region was driven by the decline in our Phoenix market. The year-to-date decline in our DC Metro region reflects difficult comparisons to prior year, particularly during the first quarter, due to the 2009
presidential inauguration and other government-related activities.

Additionally, we expect that the fourth quarter operating
results in certain markets, including New York, Boston, Phoenix and Orlando, will be disproportionately affected by renovation disruption when compared to the first three quarters of 2010. We have scheduled the majority of our renovation work for
2010 to be completed in the fourth quarter, in particular during November and December.

Hotels Sales by Business Mix.The majority of our customers fall into three broad groups: transient, group and contract business. The information below is derived from business mix data for 101 of our hotels for which business mix data is available from our managers. For
further detail on our business mix, see Managements Discussion and Analysis of Results of Operations and Financial Condition in our most recent Annual Report on Form 10-K.

In the third quarter of 2010, overall transient RevPAR increased 8.6% when compared to 2009, reflecting an increase in total room nights
of 1.8%, and an increase in average rates of 6.8%. The rate increase was driven primarily by increases in average rate of 11% in corporate transient business.

During the third quarter, group RevPAR increased approximately 9.2%, reflecting an increase in total room nights of 7.9% and an increase in average rates of 1.3%. Typically, recovery in the group segment
will follow improvement in transient demand due to longer booking lead times; therefore, while we did experience improvements in group demand and average rates during the quarter, the growth in group room rates continues to lag compared to transient
rate growth.

Property-level Operating Expenses



|                                        |  |                    |       |                   |   |                      |  |      |  
|--------------------------------------- |  | ------------------ | ----- | ----------------- | - | -------------------- |  | ---- | -
|                                        |  | Quarter ended      |       |                   |  
|                                        |  | September 10,2010  |       | September 11,2009 |   | % Increase(Decrease) | 
|                                        |  | (in millions)      |       |                   |  
|Rooms                                   |  | $                  | 178   |                   | $ | 167                  |  | 6.6  | %
|Food and beverage                       |  |                    | 213   |                   |   | 203                  |  | 4.9  |  
|Other departmental and support expenses |  |                    | 277   |                   |   | 259                  |  | 6.9  |  
|Management fees                         |  |                    | 37    |                   |   | 32                   |  | 15.6 |  
|Other property-level expenses           |  |                    | 124   |                   |   | 94                   |  | 31.9 |  
|Depreciation and amortization           |  |                    | 134   |                   |   | 137                  |  | (2.2 | )
|                                        |  |                    |       |                   |   |                      |  |      |  
|Total property-level operating expenses |  | $                  | 963   |                   | $ | 892                  |  | 8.0  |  
|                                        |  |                    |       |                   |   |                      |  |      |  
|                                        |  |                   
|                                        |  | Year-to-date ended |       |                   |  
|                                        |  | September 10,2010  |       | September 11,2009 |   | % Increase(Decrease) | 
|                                        |  | (in millions)      |       |                   |  
|Rooms                                   |  | $                  | 497   |                   | $ | 465                  |  | 6.9  | %
|Food and beverage                       |  |                    | 641   |                   |   | 627                  |  | 2.2  |  
|Other departmental and support expenses |  |                    | 778   |                   |   | 754                  |  | 3.2  |  
|Management fees                         |  |                    | 112   |                   |   | 106                  |  | 5.7  |  
|Other property-level expenses           |  |                    | 306   |                   |   | 270                  |  | 13.3 |  
|Depreciation and amortization           |  |                    | 409   |                   |   | 429                  |  | (4.7 | )
|                                        |  |                    |       |                   |   |                      |  |      |  
|Total property-level operating expenses |  | $                  | 2,743 |                   | $ | 2,651                |  | 3.5  |  
|                                        |  |                    |       |                   |   |                      |  |      |  

The overall increase in operating expenses is consistent with higher overall RevPAR at our
properties and improvement in occupancy at our hotels. Our operating costs and expenses, which are both fixed and variable, are affected by changes in occupancy, inflationary increases and revenues (which affect management fees), though the



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effect on specific costs will differ. Also, wages and benefits account for 55% of the property-level operating expenses and increased 4% for the quarter, driven by a significant increase in the
property-level bonus expense in the third quarter of 2010. Property-level operating expenses exclude the costs associated with hotels we have sold during the periods presented, which are included in discontinued operations.

Rooms. The increase in room expenses is consistent with the overall increase in occupancy and was also affected by higher wage
rates.

Food and beverage. During the third quarter the increase in food and beverage costs reflects the increase in
revenues, partially offset by the positive shift in the mix of business to more catering and audio visual revenues. However, weak productivity in banquet sales hurt overall profitability.

Other departmental and support expenses.The increase in revenues drove an increase in non-controllable hotel expenses, such as
credit card commissions, bonus expense, loyalty rewards program expenses and cluster and shared service allocations. Additionally, we experienced unseasonably warm weather throughout the quarter in certain markets, particularly in Boston, New York
and Washington, D.C., which drove increases in utilities costs of 6.2%.

Management fees. Our base management
fees, which are generally calculated as a percentage of total revenues, increased 7.2% for the quarter and 4.0% year-to-date, which is consistent with the increase in revenues. The incentive management fees, which are based on the level of operating
profit at each property after the owner has received a priority return on its investment, increased 35.2% and 17.2% during the quarter and year-to-date, respectively, due to an increase in operating profit at certain properties that are expected to
earn incentive management fees during 2010.

Other property-level expenses. These expenses generally do not vary
significantly based on occupancy and include expenses such as property taxes and insurance. For the quarter and year-to-date 2010, the decrease was primarily driven by decreases in property insurance costs due to the reduction in premiums for our
insurance program that runs from June 1, 2010 to May 31, 2011.

As previously discussed, beginning on July 7,
2010, we record the operations of 71 hotels leased from HPT. For the third quarter of 2010, expenses for hotels leased from HPT represent $37 million of hotel expenses, as well as $19 million of the associated rental expense due to HPT.
Year-to-date 2010, expenses for hotels leased from HPT include rental expense of $57 million due to HPT, as well as the $37 million of hotel expenses incurred subsequent to the sublease termination. For the third quarter and year-to-date 2009,
expenses for hotels leased from HPT represent rental expense due from HPT of $19 million and $56 million, respectively, related to the 71 properties.

Depreciation and amortization.The year-to-date decline in depreciation expense is due to impairment charges recorded in year-to-date 2009 of approximately $20 million. Other impairment
charges for 2009 are included in equity in losses of affiliates or discontinued operations. No impairment charges have been recorded in 2010.

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, legal fees, acquisition related costs, audit fees, building rent and systems costs. The $1 million and $18 million increase for the quarter and year-to-date, respectively, is primarily due to an increase in stock-based
compensation expense and bonus accruals, as well as an increase of $4 million associated with consummated property acquisitions. Previously, the acquisition costs would have been capitalized as part of the acquisition; however, under new
accounting requirements, these costs are expensed. The expense for the stock-based compensation awards is based on personal performance, as well as Hosts year-to-date shareholder return relative to other REITs and to other lodging companies
and will vary significantly due to fluctuations in Hosts stock price. The increase reflects an improvement in Hosts shareholder return relative to other REITs and other lodging companies, a 34.7% increase in Hosts stock price since
the third quarter of 2009 and the overall improvement in operations.



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Interest Expense. Interest expense decreased $6 million for the third quarter of
2010, which is primarily the result of a net decrease in our overall debt balance, which resulted in interest savings of $9 million. The decrease in interest expense was partially offset by costs associated with debt extinguishments for the third
quarter of 2010 (including the acceleration of deferred financing costs) totaling $7 million compared to $2 million for the third quarter of 2009. In addition, the fixed-to-floating interest rate swap that we entered into in the second
half of 2009 for our $300 million mortgage on The Ritz-Carlton, Naples and Newport Beach Marriott Hotel & Spa reduced interest expense by $1.2 million for the third quarter of 2010 compared to the third quarter of 2009.

The increase in interest expense for year-to-date 2010 is due to costs associated with debt extinguishments (including the
acceleration of deferred financing costs and original issue discounts) totaling $15 million; while, by comparison, in 2009 we recorded a net gain of $8 million on debt extinguishments. This increase was partially offset by a net decrease
in our overall debt balance, which resulted in interest savings of approximately $18 million. Additionally, the swap transaction mentioned above reduced interest expense by $4.3 million for year-to-date 2010 compared to year-to-date 2009.

Equity in Earnings (losses) of Affiliates.The improvement in losses of affiliates year-to-date is a result of an
impairment charge of $34 million recorded in the second quarter of 2009 related to our investment in the European joint venture.

Income Tax Benefit.We lease substantially all of our properties to consolidated subsidiaries designated as taxable REIT subsidiaries (TRS) for federal income tax purposes. The
difference between hotel-level operating cash flow and the aggregate rent paid to Host LP by the TRS represents taxable income or loss, on which we record an income tax provision or benefit. The decrease in the tax benefit in the third quarter of
2010 reflects lower expenses at our TRS and the overall improvement in operating results at our properties. As most of the hotels are paying the minimum rent under the lease agreements, a significant amount of the improvement in profitability is
retained by the TRS and, therefore, decreases taxable loss. Additionally, in the third quarter of 2009 we recognized a $12 million tax benefit with respect to the sale of our remaining interest in the CBM Joint Venture Limited Partnership.

Discontinued Operations.Discontinued operations consist of two hotels sold in 2010 and six hotels sold during 2009
and represent the results of operations and the gains (losses) on the disposition of these hotels during the periods. The losses for year-to-date 2009 include $77 million of impairment charges that were recorded prior to the hotels
dispositions. The following table summarizes the revenues, income (loss) before taxes, and the gain (loss) on dispositions, net of tax, of the hotels which have been reclassified as discontinued operations in the condensed consolidated statements of
operations for the periods presented (in millions):



|                                        |  |                   |   |                    |   |                   |  |   |                   |   |  |   |     |  
|--------------------------------------- |  | ----------------- | - | ------------------ | - | ----------------- |  | - | ----------------- | - |  | - | --- | -
|                                        |  | Quarter ended     |   | Year-to-date ended |  
|                                        |  | September 10,2010 |   | September 11,2009  |   | September 10,2010 |  |   | September 11,2009 |  
|Revenue                                 |  | $                 |  |                    | $ | 14                |  | $ | 5                 |   |  | $ | 61  |  
|Loss before taxes                       |  |                   |  |                    |   |                  |  |   | (2                | ) |  |   | (81 | )
|Gain (loss) on dispositions, net of tax |  |                   |  |                    |   | 9                 |  |   | (1                | ) |  |   | 26  |  

Liquidity and Capital Resources

Cash Requirements

We seek to maintain a capital structure and liquidity profile with an appropriate balance of cash, debt and equity in order to provide financial flexibility given the inherent volatility in the lodging
industry. During the difficult economic period in 2008 and 2009, we worked to preserve capital, increase liquidity and extend debt maturities. During 2010, as the hotel industry and capital markets have strengthened, we have taken advantage of our
liquidity position to repay approximately $695 million of debt and $101 million of preferred stock. Additionally, we have started to deploy our capital to enhance our hotel portfolio through strategic acquisitions, investments and capital
expenditures, while maintaining our disciplined approach to capital allocation. As of September 10, 2010, we have approximately $838 million of cash and cash equivalents and $543 million available under our credit facility.



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Subsequent to quarter end, we purchased the JW Marriott, Rio de Janeiro for $48 million. We also intend to defease the W New York, Union Square mortgage loan for $121 million in the
fourth quarter, which, combined with the acquisition, would reduce our remaining cash and cash equivalents to approximately $670 million. We believe that, as a result of these efforts and the overall strength of our balance sheet, we have
sufficient liquidity and access to the capital markets in order to pay our near-term debt maturities, fund our capital expenditure programs and take advantage of investment opportunities. As described below, we may continue to opportunistically
access the capital markets if favorable market conditions exist to further enhance our liquidity and to fund cash needs.

Host
uses cash primarily for acquisitions, capital expenditures, debt payments and dividends to stockholders. As a REIT, Host is required to distribute to its stockholders at least 90% of its taxable income, excluding net capital gain, on an annual
basis. Funds used by Host to make cash distributions are provided by Host LP.

Capital Resources. As a REIT, Host
depends primarily on external sources of capital to finance future growth, including acquisitions, and to fund our near-term debt maturities and increase our liquidity. If, at any time, Host determines that market conditions are favorable, after
taking into account our liquidity requirements, Host may seek to issue and sell shares of its common stock in registered public offerings, including through sales directly on the NYSE under its current at the market offering program
described below, or to issue and sell shares of its preferred stock. Host also may seek to cause us to issue, in offerings exempt from registration under the securities laws, debentures exchangeable for shares of its common stock or senior notes.
Because a portion of our debt matures every year, we will continue to use our available cash or new debt issuances to redeem or refinance senior notes and mortgage debt over time, taking advantage of favorable market conditions when available. In
February 2010, Hosts Board of Directors authorized repurchases, repayments or redemptions of up to $400 million of senior notes, exchangeable debentures and mortgage debt. Through September 10, 2010, we have redeemed
$225 million of indebtedness pursuant to this authorization. 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 FFO per diluted unit, as defined below, as a result of the payment of any applicable call premiums and the acceleration of previously deferred financing costs. Accordingly, in light of our priorities in managing our capital structure
and liquidity profile, and given the movement of prevailing conditions in the capital markets, we may, at any time, subject to applicable securities laws, be considering, or be in discussions with respect to, the purchase or sale of common stock,
exchangeable debentures and/or senior notes. Any such transactions may, subject to applicable securities laws, occur contemporaneously.

Acquisitions.During 2010, we have invested $532 million ($386 million of cash) for the acquisition of four hotel assets and a mortgage loan receivable. The following acquisitions have been
completed in 2010:



| |  |  | On September 30, 2010, subsequent to quarter end, we acquired the 245-room JW Marriott, Rio de Janeiro for approximately R$81 million
($48 million);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On September 2, 2010, we formed a joint venture with a subsidiary of Istithmar World to purchase the 270-room W New York, Union Square. We have a
90% interest and serve as the managing member of the joint venture and, therefore, consolidate the entity. The joint venture purchased the hotel for $188 million, which, in addition to cash consideration, includes the assumption of $115 million
of mortgage debt, with a fair value of $119 million, and contingent and deferred consideration of $8 million. Additionally, in conjunction with the acquisition, the joint venture purchased restricted cash, FF&E reserve funds and other
working capital at the hotel of $10 million. The joint venture acquired the hotel as part of the settlement agreement reached with the previous owners and mezzanine lenders on July 22, 2010;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On August 11, 2010, we acquired the 424-room Westin Chicago River North for approximately $165 million;
| | - |  | -------------------------------------------------------------------------------------------------------



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| |  |  | On July 22, 2010, we acquired the leasehold interest in the 266-room Le Meridien Piccadilly in London, England for £64 million ($98
million), including cash consideration of approximately £31 million ($47 million) and the assumption of a £33 million ($51 million) mortgage. As part of the purchase of the leasehold interest, we acquired restricted cash
and working capital at the hotel of £4 million ($6 million). In connection with the acquisition, we assumed a capital lease obligation which we valued at £14 million ($21 million). The capital lease obligation is included in
debt on the accompanying balance sheet and increased the book value of the leasehold interest purchased. We also recorded a deferred tax liability and corresponding goodwill of £11 million ($17 million) related to the difference in the
hotel valuation measured at fair value on the acquisition date and the tax basis of the asset. We drew £37 million ($56 million) from our credit facility to fund the cash portion of the acquisition. For accounting purposes, the above
allocations are based on estimates from the best current information available. The final allocation of the fair value of assets and the capital lease obligation are in part dependent upon valuation determined by third party appraisals, which have
not been completed; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On April 13, 2010, we acquired, at a discount, the two most junior tranches of a 427 million ($581 million) mortgage loan that is
secured by six hotels located in Europe. The two junior tranches purchased by us have a face value of 64 million ($87 million) and are subordinate to 363 million ($494 million) of senior debt. Interest payments for the tranches
are based on the 90-day EURIBOR rate plus 303 basis points, or approximately 3.8%, and the loan is performing. The loan matures in October of 2010 and there are two, one-year extension options, subject to debt service coverage requirements. We
anticipate that these coverage requirements will be met for the initial one-year extension, and that the borrower will exercise the first extension option through October of 2011.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Debt Transactions.On August 25, 2010, we redeemed $225 million of the outstanding $725 million of
our 71/8% Series K senior notes that are due in
November 2013. As a result of the repurchase, we recorded a $7 million loss on debt extinguishment, which is included in interest expense. Additionally, during the quarter, we assumed $166 million of debt, with a fair value of
$170 million, assumed a capital lease obligation of $21 million and drew $56 million under our credit facility to partially fund our hotel asset acquisitions.

Equity Transactions.During the third quarter of 2010, Host issued the remaining 3.8 million shares of common stock available under the 2009 Sales Agency Financing Agreement with BNY Mellon
Capital Markets, LLC at an average price of $14.51 per share for proceeds of $54 million, net of $500,000 of commissions. On August 19, 2010, Host entered into a new Sales Agency Financing Agreement with BNY Mellon Capital Markets, LLC on
similar terms, through which Host may issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $400 million. The sales will be made in at the market offerings under Securities and
Exchange Commission (SEC) rules, including sales made directly on the New York Stock Exchange. BNY Mellon Capital Markets, LLC is acting as sales agent. During the third quarter, Host issued approximately 3.6 million shares of common stock
through this new program at an average price of $13.65 per share for proceeds of $49.5 million, net of $500,000 of commissions. Host may continue to sell shares of common stock under its new program from time to time based on market conditions,
although it is not under an obligation to sell any shares. In exchange for the shares issued by Host, Host LP issued OP Units based on the conversion ratio of 1.021494 shares per unit. Host has approximately $350 million remaining under the new
program.

Capital Expenditures. Our capital expenditures generally fall into three broad categories: renewal and
replacement expenditures, repositioning/return on investment (or ROI) projects and value enhancement projects. Repositioning/ROI capital expenditures are selective capital improvements outside the scope of the typical renewal and
replacement capital expenditures. For year-to-date 2010, total capital expenditures decreased by $106 million to $149 million. Our renewal and replacement capital expenditures for year-to-date 2010 were approximately $99 million,
which reflects a decrease of approximately 13.2% from 2009 levels. We also spent approximately $17 million for the third quarter and $50 million for year-to-date 2010 on ROI projects.



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Sources and Uses of Cash

Our principal sources of cash include operations, the sale of assets, and proceeds from debt and equity issuances and debt refinancings. Our principal uses of cash include acquisitions, debt repayments
and repurchases, capital expenditures, operating costs, corporate expenses and distributions to equity holders.

Cash
Provided by Operations. Cash provided by operations during 2010 decreased by $42 million to $328 million compared to 2009, due primarily to timing of cash receipts from our managers and increased costs associated with debt prepayments.

Cash Used in Investing Activities.Approximately $498 million of cash was used in investing activities during the
first three quarters of 2010. This includes our third quarter acquisitions, which is net of debt and other liabilities assumed, $149 million of capital expenditures and the investment in the two junior tranches of a mortgage loan in Europe.

The following table summarizes the significant acquisitions and investments, as well as dispositions, that have been
completed as of October 15, 2010 (in millions):



|                          |  |                                                                             |  |                        |      |  
|------------------------- |  | --------------------------------------------------------------------------- |  | ---------------------- | ---- | -
|Transaction
date          |  | Description of transaction                                                  |  | (Investment)sale price |     
|Acquisitions/ Investments |  |                                                                             |  |                        |      |  
|September                 |  | Acquisition of the JW Marriott, Rio de Janeiro (1)                          |  | $                      | (48  | )
|September                 |  | Acquisition of a 90% ownership interest of the W New York, Union Square (2) |  |                        | (168 | )
|August                    |  | Acquisition of the Westin Chicago River North                               |  |                        | (165 | )
|July                      |  | Acquisition of the Le Meridien Piccadilly (3)                               |  |                        | (98  | )
|April                     |  | Purchase of a mortgage note on a portfolio of hotels                        |  |                        | (53  | )
|                          |  |                                                                             |  |                        |      |  
|                          |  | Total acquisitions/investments                                              |  | $                      | (532 | )
|                          |  |                                                                             |  |                        |      |  
|                          |  |                                                                            
|Dispositions              |  |                                                                             |  |                        |      |  
|June                      |  | Disposition of The Ritz-Carlton, Dearborn                                   |  | $                      | 3    |  
|February                  |  | Disposition of Sheraton Braintree                                           |  |                        | 9    |  
|                          |  |                                                                             |  |                        |      |  
|                          |  |                                                                             |  | $                      | 12   |  
|                          |  |                                                                             |  |                        |      |  



|(1) | The acquisition was R$81 million.
|--- | ---------------------------------

|(2) | The investment price represents our 90% interest in the acquisition of the hotel and includes our portion of the assumption by the joint venture of a $115 million
mortgage loan with a fair value of $119 million at acquisition and deferred and contingent consideration valued at $8 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The acquisition was £64 million, and includes the assumption of a £33 million mortgage loan.
|--- | --------------------------------------------------------------------------------------------



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Cash Provided by Financing Activities. Approximately $634 million of cash was
used in financing activities during the third quarter of 2010. The following table summarizes the significant debt and equity transactions as of October 15, 2010 (in millions):



|                  |  |                                                                                                      |  |                   |      |  
|----------------- |  | ---------------------------------------------------------------------------------------------------- |  | ----------------- | ---- | -
|Transaction
date  |  | Description of transaction                                                                           |  | Transactionamount |     
|Debt              |  |                                                                                                      |  |                   |      |  
|September         |  | Assumption of the mortgage debt on W New York, Union Square                                          |  | $                 | 115  |  
|August            |  | Redemption of the $225 million face amount of
71/8% Series K senior notes                            |  |                   | (230 | )
|July              |  | Draw on credit facility for the acquisition of the Le Meridien Piccadilly (1)                        |  |                   | 56   |  
|July              |  | Assumption of the mortgage debt on the Le Meridien Piccadilly                                        |  |                   | 51   |  
|February          |  | Repayment of the 7.4% mortgage loan secured by the Atlanta Marriott Marquis                          |  |                   | (124 | )
|January           |  | Redemption of the $346 million face amount of 7% Series M senior notes                               |  |                   | (352 | )
|                  |  |                                                                                                      |  |                   |      |  
|                  |  |                                                                                                      |  | $                 | (484 | )
|                  |  |                                                                                                      |  |                   |      |  
|                  |  |                                                                                                     
|Equity            |  |                                                                                                      |  |                   |      |  
|January-September |  | Issuance of approximately 11.5 million common units under Hosts continuous equity offering programs |  | $                 | 158  |  
|June              |  | Preferred unit redemption                                                                            |  |                   | (101 | )
|                  |  |                                                                                                      |  |                   |      |  
|                  |  |                                                                                                      |  | $                 | 57   |  
|                  |  |                                                                                                      |  |                   |      |  



|(1) | We drew £37 million on the credit facility. The $56 million above is based on the U.S. Dollar to British Pound rates effective on the transaction
date.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

Debt

Currently, our total debt is $5.4 billion and 100 of our hotels are unencumbered by mortgage debt, which includes the JW Marriott, Rio de Janeiro which was acquired on September 30, 2010.
Currently 85% of our debt has a fixed rate of interest with an overall average interest rate of 6.5% and an average maturity of 3.9 years.

Senior Notes. During the third quarter, we redeemed $225 million of the outstanding $725 million of our
71/8% Series K senior notes that are due in
November 2013. As a result of the repurchase, we recorded a $7 million loss on debt extinguishment, which is included in interest expense.

Credit Facility. On July 20, 2010, we drew £37 million ($56 million) under our credit facility at an interest rate of one-month LIBOR plus 90 basis points (1.5% at
September 10, 2010) to fund the acquisition of the leasehold interest in the Le Meridien Piccadilly.

Exchangeable Senior Debentures. We currently have three issuances of exchangeable senior debentures
outstanding: $400 million, 21/2% debentures
that were issued on December 22, 2009 (the 2009 Debentures), $526 million, 25/8% debentures that were issued on March 23, 2007 (the 2007 Debentures) and $325 million,
31/4% debentures that were issued on March 16,
2004 (the 2004 Debentures), collectively, the Debentures. The Debentures are equal in right of payment with all of our other senior notes. Holders have the right to require us to purchase the Debentures at a price equal to
100% of the principal amount outstanding plus accrued interest (the put option) on certain dates subsequent to their respective issuances. Holders of the Debentures also have the right to exchange the Debentures prior to maturity under
certain conditions, including at any time at which the closing price of our common stock is more than 120% (for the 2004 Debentures) or 130% (for the 2007 and 2009 Debentures) of the exchange price per share for at least 20 of 30 consecutive trading
days during certain periods or any time up to two days prior to the date on which the Debentures have been called for redemption. We can redeem for cash all, or part of, any of the Debentures at any time subsequent to each of their respective
redemption dates at a redemption price of 100% of the principal amount plus accrued interest. If, at any time, we elect to redeem the Debentures and the exchange value exceeds the cash redemption price, we would expect the holders to elect to
exchange the Debentures at the respective exchange value rather than receive the cash redemption price. The exchange value is equal to the applicable exchange rate multiplied by the price of Hosts common stock. Upon exchange, the 2004
Debentures would be exchanged for Hosts common stock, the 2007 Debentures would be exchanged for a combination of cash (for the principal balance of the debentures) and Hosts common stock (for the remainder of the exchange value) and the
2009 Debentures would be exchanged for Hosts common stock, cash or a combination thereof, at our option. Currently, none of the Debentures are exchangeable by holders.



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The following chart details our current outstanding Debentures:



|                |  |              |  |                    |  |                |  |                            |       |                                                  |         |                                 |   |                              |  |             
|--------------- |  | ------------ |  | ------------------ |  | -------------- |  | -------------------------- | ----- | ------------------------------------------------ | ------- | ------------------------------- | - | ---------------------------- |  | ------------
|                |  | Maturitydate |  | Next putoptiondate |  | Redemptiondate |  | Outstandingprincipalamount |       | Current exchangerate for each$1,000 of principal |         | Currentequivalentexchange price |   | Exchangeableshareequivalents
|                |  |              |  |                    |  |                |  | (in millions)              |       | (in shares)                                      |         |                                 |   | (in shares)                 
|2009 Debentures |  | 10/15/2029   |  | 10/15/2015         |  | 10/20/2015     |  | $                          | 400   |                                                  | 71.0101 |                                 | $ | 14.08                        |  | 28.4 million
|2007 Debentures |  | 4/15/2027    |  | 4/15/2012          |  | 4/20/2012      |  |                            | 526   |                                                  | 32.0239 |                                 |   | 31.23                        |  | 16.8 million
|2004 Debentures |  | 4/15/2024    |  | 4/15/2014          |  | 4/19/2009      |  |                            | 325   |                                                  | 65.3258 |                                 |   | 15.31                        |  | 21.2 million
|                |  |              |  |                    |  |                |  |                            |       |                                                  |         |                                 |   |                              |  |             
|Total           |  |              |  |                    |  |                |  | $                          | 1,251 |                                                  |         |                                 |   |                              |  |             
|                |  |              |  |                    |  |                |  |                            |       |                                                  |         |                                 |   |                              |  |             

We separately account for the liability and equity components of our Debentures to reflect the
fair value of the liability component based on our non-convertible borrowing cost at the issuance date. Accordingly, we record the liability components of the Debentures at fair value as of the date of issuance and amortize the resulting discount as
an increase to interest expense through the initial put option date of the Debentures, which is the expected life of the debt. However, there is no effect on our cash interest payments. The following chart details the initial allocations between the
debt and equity components of the debentures, net of the original issue discount, based on the effective interest rate at the time of issuance, as well as the debt balances at September 10, 2010 (in millions):



|                |  |                    |       |                  |   |                     |  |                                  |     |                              |   |                               |  |   |       |  |   |    
|--------------- |  | ------------------ | ----- | ---------------- | - | ------------------- |  | -------------------------------- | --- | ---------------------------- | - | ----------------------------- |  | - | ----- |  | - | ---
|                |  | Initial faceamount |       | Initialdebtvalue |   | Initial equityvalue |  | Face amountoutstanding at9/10/10 |     | Debt carryingvalue at9/10/10 |   | Unamortizeddiscount at9/10/10
|2009 Debentures |  | $                  | 400   |                  | $ | 316                 |  | $                                | 82  |                              | $ | 400                           |  | $ | 325   |  | $ | 75 
|2007 Debentures |  |                    | 600   |                  |   | 502                 |  |                                  | 89  |                              |   | 526                           |  |   | 496   |  |   | 30 
|2004 Debentures |  |                    | 500   |                  |   | 413                 |  |                                  | 76  |                              |   | 325                           |  |   | 325   |  |   |   
|                |  |                    |       |                  |   |                     |  |                                  |     |                              |   |                               |  |   |       |  |   |    
|Total           |  | $                  | 1,500 |                  | $ | 1,231               |  | $                                | 247 |                              | $ | 1,251                         |  | $ | 1,146 |  | $ | 105
|                |  |                    |       |                  |   |                     |  |                                  |     |                              |   |                               |  |   |       |  |   |    

Interest expense recorded for the Debentures for the
periods presented consists of the following (in millions):



|                                                       |  |                   |    |                    |   |                   |  |                   |    |  |   |   
|------------------------------------------------------ |  | ----------------- | -- | ------------------ | - | ----------------- |  | ----------------- | -- |  | - | --
|                                                       |  | Quarter ended     |    | Year-to-date ended
|                                                       |  | September 10,2010 |    | September 11,2009  |   | September 10,2010 |  | September 11,2009
|Contractual interest expense (cash)                    |  | $                 | 8  |                    | $ | 7                 |  | $                 | 24 |  | $ | 21
|Non-cash interest expense due to discount amortization |  |                   | 7  |                    |   | 6                 |  |                   | 23 |  |   | 19
|                                                       |  |                   |    |                    |   |                   |  |                   |    |  |   |   
|Total interest expense                                 |  | $                 | 15 |                    | $ | 13                |  | $                 | 47 |  | $ | 40
|                                                       |  |                   |    |                    |   |                   |  |                   |    |  |   |   

Mortgage Debt.During the third quarter,
we assumed $166 million of mortgage debt with fair value of $170 million in connection with hotel acquisitions. For further discussion, see Cash Provided by Financing Activities.

Credit Ratings.Currently, we have approximately $4.0 billion of senior notes outstanding that are rated BB+ by
Standard & Poors Ratings and Ba1 by Moodys Investors Service, and both ratings services have a stable outlook for Host. If our operations decline, the ratings on our securities could be reduced. In such case, and if we are
unable to improve our ratings, our cost to issue senior notes, either in a refinancing or otherwise, or preferred stock would likely increase. For a more detailed discussion of the effect of ratings of our securities on our liquidity and cost of
funds, investors should refer to the discussion of our credit ratings in our Annual Report on Form 10-K.

Financial Covenants

Credit Facility Covenants. Our credit facility contains certain important financial covenants concerning
allowable leverage, unsecured interest coverage and required fixed charge coverage. Despite the recent improvement



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in operations, our unsecured interest coverage ratio and fixed charge coverage ratio have declined and our leverage ratio has increased over the prior two years. Total debt used in the
calculation of our leverage ratio is based on a net debt concept under which cash and cash equivalents in excess of $100 million are deducted from our total debt balance. To the extent no amounts are outstanding under the credit
facility, breaching these covenants would not be an event of default thereunder.

The credit facility has an initial scheduled
maturity of September 2011, which we have an option to extend for an additional year if certain conditions are met. These conditions include the payment of a fee to the lenders, that no default or event of default exists and maintaining a leverage
ratio below 6.75x. We are in compliance with all of our financial covenants under the credit facility. The following table summarizes the financial tests contained in the credit facility as of September 10, 2010:



|                                  |  |              |  |                      |  |       |  |      
|--------------------------------- |  | ------------ |  | -------------------- |  | ----- |  | -----
|                                  |  | Actual Ratio |  | Covenant Requirement
|                                  |  |              |  |                      |  | 2010  |  | 2011 
|Leverage ratio                    |  | 5.6x         |  | Maximum ratio of:    |  | 7.25x |  | 7.25x
|Fixed charge coverage ratio       |  | 1.9x         |  | Minimum ratio of:    |  | 1.10x |  | 1.15x
|Unsecured interest coverage ratio |  | 3.0x         |  | Minimum ratio of:    |  | 1.75x |  | 1.75x

Senior Notes
Indenture Covenants.Under the terms of our senior notes indenture, which includes our Debentures, our ability to incur indebtedness and pay dividends is subject to certain restrictions and the satisfaction of various financial conditions,
including maintaining a certain EBITDA-to-interest coverage ratio and levels of indebtedness and secured indebtedness relative to adjusted total assets. As noted above, despite the recent improvement in operations there has been a similar decline in
our EBITDA-to-interest coverage ratio over the prior two years. Even if we are below the coverage levels otherwise required to incur debt and pay dividends, we are still permitted to incur certain types of debt, including (i) credit facility
debt, (ii) refinancing debt, (iii) up to $300 million of mortgage debt whose proceeds would be used to repay debt under the credit facility (and permanently reduce our ability to borrow under the credit facility by such amount), and
(iv) up to $100 million of other debt. Host LP is still permitted to pay distributions in the amount of Hosts estimated taxable income necessary to maintain Hosts status as a REIT.

In addition, our senior notes indenture also imposes a requirement to maintain unencumbered assets (as defined in the indenture based on
undepreciated property costs) of not less than 125% of the aggregate amount of senior note debt plus other debt not secured by mortgages. This coverage must be maintained at all times and is distinct from the coverage requirements necessary to incur
debt or to pay dividends as discussed above (whose consequences, where we fall below the coverage level, are limited to restricting our ability to incur new debt or to pay dividends, but which would not otherwise cause a default under our senior
notes indenture).

We are in compliance with all of our financial covenants under the senior notes indenture. The following
table summarizes the financial tests contained in the senior notes indenture as of September 10, 2010:



|                                     |  |              |   |  |                      
|------------------------------------ |  | ------------ | - |  | ---------------------
|                                     |  | Actual Ratio |   |  | Covenant Requirement 
|Unencumbered assets tests            |  | 340          | % |  | Minimum ratio of 125%
|Total indebtedness to total assets   |  | 32           | % |  | Maximum ratio of 65% 
|Secured indebtedness to total assets |  | 7            | % |  | Maximum ratio of 45% 
|EBITDA-to-interest coverage ratio    |  | 2.7x         |   |  | Minimum ratio of 2.0x

For
further detail on our credit facility and senior notes, see our 2009 Annual Report on Form 10-K.

Distribution Policy

Host is required to distribute at least 90% of its annual taxable income, excluding net capital gains, to its stockholders in order to
maintain its qualification as a REIT, including taxable income recognized for federal income tax purposes but with regard to which we do not receive cash. Funds used by Host to pay dividends on its common stock are provided through distributions
from Host LP. As of September 10, 2010, Host is the owner of approximately 98% of the common OP Units. The remaining 2% of common OP Units are held by various third party limited partners. Each OP Unit may be redeemed for cash or, at the
election of Host, Host common stock based on the conversion ratio. The current conversion ratio is 1.021494 shares of Host common stock for each OP Unit.



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Investors should take into account the 2% non-controlling interest in Host LP common OP
Units when analyzing common dividend payments by Host to its stockholders, as these holders share, on a pro rata basis, in cash amounts being distributed by Host LP to holders of its corresponding common units. For example, if Host paid a $1 per
share dividend on its common stock, it would be based on payment of a $1.021494 per common unit distribution by Host LP to Host, as well as to other common OP Unit holders.

Hosts current policy on common dividends is generally to distribute, over time, 100% of its annual taxable income; however, Host intends to pay a quarterly common dividend of $0.01 per share with
respect to its common stock in 2010, even if we do not generate taxable income. The amount of any dividends will be determined by Hosts Board of Directors.

On September 16, 2010, Hosts Board of Directors declared a dividend of $0.01 per share on Hosts common stock. The dividend was paid on October 15, 2010 to stockholders of record as
of September 30, 2010. Accordingly, Host LP made a distribution of $.01021494 per unit on its common OP units.

Critical Accounting
Policies

Our consolidated financial statements have been prepared in conformity with GAAP, which requires management to
make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. While we do not believe that the reported
amounts would be materially different, application of these policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We evaluate our
estimates and judgments, including those related to the impairment of long-lived assets, on an ongoing basis. We base our estimates on experience and on various other assumptions that are believed to be reasonable under the circumstances. All of our
significant accounting policies, including certain critical accounting policies, are disclosed in our Annual Report on Form 10-K.

Comparable Hotel Operating Statistics

We present certain operating statistics (i.e., RevPAR, average daily rate and average occupancy) and operating results (revenues, expenses and adjusted operating profit) for the periods included in this
report on a comparable hotel basis. We define our comparable hotels as properties (i) that are consolidated 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 112
full-service hotels that we owned on September 10, 2010, 108 have been classified as comparable hotels. The 71 select-service hotels leased from HPT are not included as comparable hotels. The operating results of the following hotels that we
owned or leased as of September 10, 2010 are excluded from comparable hotel results for these periods:



| |  |  | Le Meridien Piccadilly (acquired leasehold interest in July 2010);
| | - |  | ------------------------------------------------------------------



| |  |  | Westin Chicago River North (acquired in August 2010);
| | - |  | -----------------------------------------------------



| |  |  | W New York, Union Square (acquired in September 2010);
| | - |  | ------------------------------------------------------



| |  |  | San Diego Marriott Hotel & Marina (significant renovations); and
| | - |  | ----------------------------------------------------------------



| |  |  | 53 Courtyard by Marriott properties and 18 Residence Inn by Marriott properties leased from HPT.
| | - |  | ------------------------------------------------------------------------------------------------

The operating results of the eight hotels we disposed of during the first three quarters of 2010 and during 2009 are not included in
comparable hotel results for the periods presented herein. Moreover, because these statistics and operating results are for our hotel properties, they exclude results for our non-hotel properties and other real estate investments. Due to the current
significant renovations associated with a multi-year capital project at the San Diego Marriott Hotel & Marina, this hotel has been classified as non-comparable for all periods presented.



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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) and 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.



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##### Table of Contents

FFO and FFO per Diluted Unit

We present FFO and FFO per diluted unit as non-GAAP measures 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 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. The
following table provides a reconciliation of net income available to common unitholders per unit to FFO per diluted unit (in millions, except per unit amounts):

Reconciliation of Net Income Available to

Common Unitholders to Funds
From Operations per Diluted Unit



|                                                                                    |  |                   |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|----------------------------------------------------------------------------------- |  | ----------------- | ----- | - | ------------------ | - | ----- | ----------------- |  | - | ----------------- | - |  | - | ----- | -
|                                                                                    |  | Quarter ended     |       |   | Year-to-date ended |  
|                                                                                    |  | September 10,2010 |       |   | September 11,2009  |   |       | September 10,2010 |  |   | September 11,2009 |  
|                                                                                    |  |                   |       |  
|Net loss                                                                            |  | $                 | (61   | ) |                    | $ | (58   | )                 |  | $ | (126              | ) |  | $ | (186  | )
|Less: Net loss attributable to non-controlling interests                            |  |                   | 2     |   |                    |   | 2     |                   |  |   |                  |   |  |   | 1     |  
|Dividends on preferred units                                                        |  |                   |      |   |                    |   | (2    | )                 |  |   | (4                | ) |  |   | (6    | )
|Issuance costs of redeemed preferred OP units                                       |  |                   |      |   |                    |   |      |                   |  |   | (4                | ) |  |   |      |  
|                                                                                    |  |                   |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|Net loss available to common unitholders                                            |  |                   | (59   | ) |                    |   | (58   | )                 |  |   | (134              | ) |  |   | (191  | )
|Adjustments:                                                                        |  |                   |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|(Gains) losses on dispositions, net of taxes                                        |  |                   |      |   |                    |   | (14   | )                 |  |   | 1                 |   |  |   | (31   | )
|Amortization of deferred gains and other property transactions, net of taxes        |  |                   |      |   |                    |   | (1    | )                 |  |   |                  |   |  |   | (4    | )
|Depreciation and amortization (a)                                                   |  |                   | 133   |   |                    |   | 138   |                   |  |   | 409               |   |  |   | 417   |  
|Partnership adjustments                                                             |  |                   | 2     |   |                    |   | 2     |                   |  |   | 4                 |   |  |   | 5     |  
|                                                                                    |  |                   |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|Funds From Operations                                                               |  |                   | 76    |   |                    |   | 67    |                   |  |   | 280               |   |  |   | 196   |  
|Adjustments for dilutive securities (b):                                            |  |                   |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|Assuming deduction of gain recognized for the repurchase of the 2004 Debentures (c) |  |                   |      |   |                    |   |      |                   |  |   |                  |   |  |   | (2    | )
|Assuming conversion of 2004 Debentures                                              |  |                   | 2     |   |                    |   |      |                   |  |   |                  |   |  |   |      |  
|                                                                                    |  |                   |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|Diluted FFO (b)(d)                                                                  |  | $                 | 78    |   |                    | $ | 67    |                   |  | $ | 280               |   |  | $ | 194   |  
|                                                                                    |  |                   |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|                                                                                    |  |                   |       |  
|Diluted weighted average units outstanding - Earnings per Unit                      |  |                   | 651.4 |   |                    |   | 617.9 |                   |  |   | 648.8             |   |  |   | 583.0 |  
|Assuming issuance of common units granted under the Comprehensive Stock Plan        |  |                   | 2.0   |   |                    |   | 1.4   |                   |  |   | 2.0               |   |  |   | 1.0   |  
|Assuming conversion of 2004 Exchangeable Debentures                                 |  |                   | 20.8  |   |                    |   |      |                   |  |   |                  |   |  |   |      |  
|                                                                                    |  |                   |       |   |                    |   |       |                   |  |   |                   |   |  |   |       |  
|Diluted weighted average units outstanding - FFO (b)(d)                             |  |                   | 674.2 |   |                    |   | 619.3 |                   |  |   | 650.8             |   |  |   | 584.0 |  
|Diluted FFO per unit (b)(d)                                                         |  | $                 | .12   |   |                    | $ | .11   |                   |  | $ | .43               |   |  | $ | .33   |  



43



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##### Table of Contents



|(a) | In accordance with the guidance on FFO per diluted unit provided by NAREIT, we do not adjust net income for the non-cash impairment charges when determining our FFO per
diluted unit.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Earnings/loss per diluted unit and FFO per diluted unit in accordance with NAREIT are 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 non-controlling partners, exchangeable debt securities and other non-controlling 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | During 2009, we repurchased $75 million of the 2004 Debentures with a carrying value of $72 million for $69 million. The adjustments to dilutive FFO
related to the 2004 Debentures repurchased during the year include the $3 million gain on repurchase, net of interest expense on the repurchased exchangeable debentures.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | FFO per diluted unit and earnings per diluted unit were significantly affected by certain transactions, the effects of which are shown in the table below (in millions,
except per unit amounts):
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                |  |                                      |       |   |                                      |   |       |                 |  |   |       |   |  |   |       |  
|----------------------------------------------- |  | ------------------------------------ | ----- | - | ------------------------------------ | - | ----- | --------------- |  | - | ----- | - |  | - | ----- | -
|                                                |  | Quarter endedSeptember 10, 2010      |       |   | Quarter endedSeptember 11, 2009      |  
|                                                |  | NetIncome(Loss)                      |       |   | FFO                                  |   |       | NetIncome(Loss) |  |   | FFO   |  
|Gain on hotel dispositions, net of taxes        |  | $                                    |      |   |                                      | $ |      |                 |  | $ | 14    |   |  | $ |      |  
|Loss on debt extinguishments (1)                |  |                                      | (7    | ) |                                      |   | (7    | )               |  |   | (2    | ) |  |   | (2    | )
|Acquisition costs (2)                           |  |                                      | (3    | ) |                                      |   | (3    | )               |  |   |      |   |  |   |      |  
|                                                |  |                                      |       |   |                                      |   |       |                 |  |   |       |   |  |   |       |  
|Total                                           |  | $                                    | (10   | ) |                                      | $ | (10   | )               |  | $ | 12    |   |  | $ | (2    | )
|                                                |  |                                      |       |   |                                      |   |       |                 |  |   |       |   |  |   |       |  
|Diluted units                                   |  |                                      | 651.4 |   |                                      |   | 674.2 |                 |  |   | 617.9 |   |  |   | 619.3 |  
|Per diluted unit                                |  | $                                    | (.01  | ) |                                      | $ | (.01  | )               |  | $ | .02   |   |  | $ |      |  
|                                                |  |                                      |       |   |                                      |   |       |                 |  |   |       |   |  |   |       |  
|                                                |  |                                     
|                                                |  | Year-to-date endedSeptember 10, 2010 |       |   | Year-to-date endedSeptember 11, 2009 |  
|                                                |  | NetIncome(Loss)                      |       |   | FFO                                  |   |       | NetIncome(Loss) |  |   | FFO   |  
|Gain (loss) on hotel dispositions, net of taxes |  | $                                    | (1    | ) |                                      | $ |      |                 |  | $ | 31    |   |  | $ |      |  
|Non-cash impairment charges (3)                 |  |                                      |      |   |                                      |   |      |                 |  |   | (131  | ) |  |   | (131  | )
|Gain (loss) on debt extinguishments (1)         |  |                                      | (15   | ) |                                      |   | (15   | )               |  |   | 5     |   |  |   | 5     |  
|Preferred unit redemption (4)                   |  |                                      | (4    | ) |                                      |   | (4    | )               |  |   |      |   |  |   |      |  
|Acquisition costs (2)                           |  |                                      | (4    | ) |                                      |   | (4    | )               |  |   |      |   |  |   |      |  
|Potential loss on litigation (5)                |  |                                      | (4    | ) |                                      |   | (4    | )               |  |   |      |   |  |   |      |  
|                                                |  |                                      |       |   |                                      |   |       |                 |  |   |       |   |  |   |       |  
|Total                                           |  | $                                    | (28   | ) |                                      | $ | (27   | )               |  | $ | (95   | ) |  | $ | (126  | )
|                                                |  |                                      |       |   |                                      |   |       |                 |  |   |       |   |  |   |       |  
|Diluted units                                   |  |                                      | 648.8 |   |                                      |   | 650.8 |                 |  |   | 583.0 |   |  |   | 584.0 |  
|Per diluted unit                                |  | $                                    | (.04  | ) |                                      | $ | (.04  | )               |  | $ | (.16  | ) |  | $ | (.22  | )
|                                                |  |                                      |       |   |                                      |   |       |                 |  |   |       |   |  |   |       |  



|(1) | For 2010, these costs include those associated with the redemption of the Series K and Series M senior notes. For 2009, the costs include gain/losses associated with
the repayment of exchangeable debentures and the term loan. Additionally, as prescribed by the sharing agreement with the successor borrower in connection with the 2007 defeasance of a $514 million collateralized mortgage-backed security, we
received $7 million for year-to-date 2009 and recorded the gain as a reduction of interest expense.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents costs incurred related to acquisitions and investments during 2010. Previously, these costs would have been capitalized as part of the acquisition; however,
under new accounting requirements these costs are expensed and deducted from net income and FFO.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | During 2009, we recorded non-cash impairment charges totaling $131 million in accordance with GAAP based on the difference between the fair value and the carrying
amount of certain properties.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents the original issuance costs of the Class E preferred stock, which were redeemed on June 18, 2010.
|--- | ------------------------------------------------------------------------------------------------------------

|(5) | Includes the accrual of a potential litigation loss in the first quarter of 2010.
|--- | ---------------------------------------------------------------------------------



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Comparable Hotel Operating Results

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

Comparable Hotel Results (a)

(in millions, except hotel statistics)



|                                                |  |                   |        |   |                    |   |        |                   |  |   |                   |   |  |   |        |  
|----------------------------------------------- |  | ----------------- | ------ | - | ------------------ | - | ------ | ----------------- |  | - | ----------------- | - |  | - | ------ | -
|                                                |  | Quarter ended     |        |   | Year-to-date ended |  
|                                                |  | September 10,2010 |        |   | September 11,2009  |   |        | September 10,2010 |  |   | September 11,2009 |  
|Number of hotels                                |  |                   | 108    |   |                    |   | 108    |                   |  |   | 108               |   |  |   | 108    |  
|Number of rooms                                 |  |                   | 59,124 |   |                    |   | 59,124 |                   |  |   | 59,124            |   |  |   | 59,124 |  
|Percent change in Comparable Hotel RevPAR       |  |                   | 8.8    | % |                    |   |       |                   |  |   | 5.6               | % |  |   |       |  
|                                                |  |                   |        |  
|Comparable hotel sales                          |  |                   |        |   |                    |   |        |                   |  |   |                   |   |  |   |        |  
|Room                                            |  | $                 | 611    |   |                    | $ | 562    |                   |  | $ | 1,757             |   |  | $ | 1,662  |  
|Food and beverage                               |  |                   | 252    |   |                    |   | 237    |                   |  |   | 851               |   |  |   | 816    |  
|Other (b)                                       |  |                   | 62     |   |                    |   | 66     |                   |  |   | 188               |   |  |   | 218    |  
|                                                |  |                   |        |   |                    |   |        |                   |  |   |                   |   |  |   |        |  
|Comparable hotel sales (c)                      |  |                   | 925    |   |                    |   | 865    |                   |  |   | 2,796             |   |  |   | 2,696  |  
|                                                |  |                   |        |   |                    |   |        |                   |  |   |                   |   |  |   |        |  
|Comparable hotel expenses                       |  |                   |        |   |                    |   |        |                   |  |   |                   |   |  |   |        |  
|Room                                            |  |                   | 175    |   |                    |   | 165    |                   |  |   | 489               |   |  |   | 458    |  
|Food and beverage                               |  |                   | 211    |   |                    |   | 202    |                   |  |   | 639               |   |  |   | 621    |  
|Other                                           |  |                   | 37     |   |                    |   | 37     |                   |  |   | 107               |   |  |   | 107    |  
|Management fees, ground rent and other costs    |  |                   | 341    |   |                    |   | 323    |                   |  |   | 981               |   |  |   | 945    |  
|                                                |  |                   |        |   |                    |   |        |                   |  |   |                   |   |  |   |        |  
|Comparable hotel expenses (d)                   |  |                   | 764    |   |                    |   | 727    |                   |  |   | 2,216             |   |  |   | 2,131  |  
|                                                |  |                   |        |   |                    |   |        |                   |  |   |                   |   |  |   |        |  
|Comparable hotel adjusted operating profit      |  |                   | 161    |   |                    |   | 138    |                   |  |   | 580               |   |  |   | 565    |  
|Non-comparable hotel results, net (e)           |  |                   | 16     |   |                    |   | 10     |                   |  |   | 28                |   |  |   | 31     |  
|Office buildings and hotels leased from HPT (f) |  |                   |       |   |                    |   |       |                   |  |   | 1                 |   |  |   |       |  
|Depreciation and amortization                   |  |                   | (134   | ) |                    |   | (137   | )                 |  |   | (409              | ) |  |   | (429   | )
|Corporate and other expenses                    |  |                   | (20    | ) |                    |   | (19    | )                 |  |   | (69               | ) |  |   | (50    | )
|                                                |  |                   |        |   |                    |   |        |                   |  |   |                   |   |  |   |        |  
|Operating profit                                |  | $                 | 23     |   |                    | $ | (8     | )                 |  | $ | 131               |   |  | $ | 117    |  
|                                                |  |                   |        |   |                    |   |        |                   |  |   |                   |   |  |   |        |  



|(a) | The reporting period for our comparable operating statistics for the third quarter of 2010 is from June 19, 2010 to September 10, 2010 and for the third
quarter of 2009 is from June 20, 2009 to September 11, 2009. For further discussion, see Reporting Periods in our most recent Annual Report on Form 10K.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Other revenues for 2009 include incremental cancellation and attrition fees of $5 million and $33 million for the third quarter and year-to-date,
respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|                                                                                                               |  |                   |       |   |                    |   |     |                   |  |   |                   |   |  |   |       |  
|-------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----- | - | ------------------ | - | --- | ----------------- |  | - | ----------------- | - |  | - | ----- | -
|                                                                                                               |  | Quarter ended     |       |   | Year-to-date ended |  
|                                                                                                               |  | September 10,2010 |       |   | September 11,2009  |   |     | September 10,2010 |  |   | September 11,2009 |  
|Revenues per the consolidated statements of operations                                                         |  | $                 | 1,006 |   |                    | $ | 903 |                   |  | $ | 2,943             |   |  | $ | 2,818 |  
|Non-comparable hotel sales                                                                                     |  |                   | (34   | ) |                    |   | (28 | )                 |  |   | (81               | ) |  |   | (83   | )
|Hotel sales for the property for which we record rental income, net                                            |  |                   | 10    |   |                    |   | 9   |                   |  |   | 36                |   |  |   | 31    |  
|Rental income for office buildings and revenues for hotels leased from HPT                                     |  |                   | (57   | ) |                    |   | (19 | )                 |  |   | (97               | ) |  |   | (58   | )
|Adjustment for hotel sales for comparable hotels to reflect Marriotts fiscal year for Marriott-managed
hotels |  |                   |      |   |                    |   |    |                   |  |   | (5                | ) |  |   | (12   | )
|                                                                                                               |  |                   |       |   |                    |   |     |                   |  |   |                   |   |  |   |       |  
|Comparable hotel sales                                                                                         |  | $                 | 925   |   |                    | $ | 865 |                   |  | $ | 2,796             |   |  | $ | 2,696 |  
|                                                                                                               |  |                   |       |   |                    |   |     |                   |  |   |                   |   |  |   |       |  



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



|                                                                                                                  |  |                   |      |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|----------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---- | - | ------------------ | - | ---- | ----------------- |  | - | ----------------- | - |  | - | ----- | -
|                                                                                                                  |  | Quarter ended     |      |   | Year-to-date ended |  
|                                                                                                                  |  | September 10,2010 |      |   | September 11,2009  |   |      | September 10,2010 |  |   | September 11,2009 |  
|Operating costs and expenses per the consolidated statements of operations                                        |  | $                 | 983  |   |                    | $ | 911  |                   |  | $ | 2,812             |   |  | $ | 2,701 |  
|Non-comparable hotel expenses                                                                                     |  |                   | (18  | ) |                    |   | (18  | )                 |  |   | (53               | ) |  |   | (56   | )
|Hotel expense for the property for which we record rental income                                                  |  |                   | 10   |   |                    |   | 9    |                   |  |   | 36                |   |  |   | 32    |  
|Rent expense for office buildings and expenses for hotels leased from HPT                                         |  |                   | (57  | ) |                    |   | (19  | )                 |  |   | (96               | ) |  |   | (58   | )
|Adjustment for hotel expenses for comparable hotels to reflect Marriotts fiscal year for Marriott-managed
hotels |  |                   |     |   |                    |   |     |                   |  |   | (5                | ) |  |   | (9    | )
|Depreciation and amortization                                                                                     |  |                   | (134 | ) |                    |   | (137 | )                 |  |   | (409              | ) |  |   | (429  | )
|Corporate and other expenses                                                                                      |  |                   | (20  | ) |                    |   | (19  | )                 |  |   | (69               | ) |  |   | (50   | )
|                                                                                                                  |  |                   |      |   |                    |   |      |                   |  |   |                   |   |  |   |       |  
|Comparable hotel expenses                                                                                         |  | $                 | 764  |   |                    | $ | 727  |                   |  | $ | 2,216             |   |  | $ | 2,131 |  
|                                                                                                                  |  |                   |      |   |                    |   |      |                   |  |   |                   |   |  |   |       |  



|(e) | 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
condensed 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 condensed
consolidated statements of operations. For further detail, see Reporting Periods in our most recent Annual Report on Form 10K.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(f) | Represents rental income less rental expense for office buildings, as well as rental income less rental expense for hotels leased from HPT through July 6, 2010.
Beginning on July 7, 2010, we record the operations of the hotels instead of rental income.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity

As of September 10, 2010 and December 31, 2009, 85% and 88%, respectively, of our outstanding debt bore interest at fixed rates. To manage interest rate risk applicable to our debt, we may enter
into interest rate swaps or caps. The interest rate derivatives that we enter into are strictly to hedge interest rate risk, and are not for trading purposes. The percentages above reflect the effect of any derivatives that we have entered into to
manage interest rate risk. See Item 7A of our most recent Annual Report on Form 10K and Note 11  Fair Value Measurements.

Exchange Rate Sensitivity

As we have non-U.S. operations (specifically, the ownership of hotels in Canada, Mexico, Chile and the United Kingdom and investments in our European joint venture), currency exchange risks arise as a
normal part of our business. To manage the currency exchange risk applicable to ownership in non-U.S. hotels, where possible, we may enter into forward or option contracts. On July 9, 2010, we entered into an additional 20 million
($26 million) forward purchase contract to hedge a portion of the foreign currency exposure resulting from the eventual repatriation of the net investment in the European joint venture. We will sell the Euro amount and receive the U.S. dollar
amount on the forward purchase date of October 1, 2014. To date, we have hedged 80 million ($114 million) of our net investment in the European joint venture. The foreign currency exchange agreements that we have entered into
are strictly to hedge foreign currency risk and not for trading purposes. See Item 7A of our most recent Annual Report on Form 10-K and Note 11  Fair Value Measurements.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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

Changes to Internal Control over Financial Reporting

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



47



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

On
April 27, 2005, we initiated a lawsuit against Keystone-Texas Property Holding Corporation seeking a declaration that a provision of the ground lease for the property under the San Antonio Marriott Rivercenter was valid and claiming that
Keystone had breached that lease provision. On October 18, 2006, Keystone filed an amended counterclaim and later, a third party claim, alleging that we had tortiously interfered with Keystones attempted sale of the property and that we
slandered Keystones title to the property.

On February 8, 2010, we received an adverse jury
verdict in the 166thJudicial District Court of Bexar
County, Texas. The jury found that we tortiously interfered with the attempted sale by Keystone of the land under the San Antonio Marriott Rivercenter and awarded Keystone $34.3 million in damages plus statutory interest. In addition, the jury found
that we slandered Keystones title to the property and awarded Keystone $39 million in damages plus statutory interest. Keystone will only be entitled to receive one of these damages awards. On February 12, 2010, the jury awarded Keystone
$7.5 million in exemplary damages with respect to the second claim. Based on the range of possible outcomes, we have accrued a potential litigation loss of approximately $47 million consistent with generally accepted accounting principles.

On June 3, 2010, the trial court entered its final judgment, reciting and incorporating the jurys verdict and
awarding Keystone damages for slander of title, interest and attorneys fees. The final judgment did not include any award for exemplary damages since the trial court previously granted our motion to disregard such damages. On August 26,
2010, we filed our notice of appeal based, in part, on what we believe to be numerous erroneous rulings which adversely impacted the jurys verdict. We intend to vigorously pursue these issues on appeal.

We are also involved in various other legal proceedings in the normal course of business and are vigorously defending these claims;
however, no assurances can be given as to the outcome of any pending legal proceedings. We believe, based on currently available information, that the results of such proceedings, in the aggregate, will not have a material adverse effect on our
financial condition, but might be material to our operating results for any particular period, depending, in part, upon the operating results for such period.



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

Issuer Purchases of Equity Securities



|                                   |  |                                |     |  |                                                             |  |                                                                                |  |                                                                                                    |  
|---------------------------------- |  | ------------------------------ | --- |  | ----------------------------------------------------------- |  | ------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------- | -
|Period                             |  | Total Number ofUnits Purchased |     |  | Average Price
Paid per Unit                                 |  | Total Number of UnitsPurchased as Part of PubliclyAnnounced Plans 
or Programs |  | Approximate Dollar Value ofUnits that May Yet BePurchased Under the Plans orPrograms (in millions)
|                                   |  |                                |     | 
|June 19, 2010-July 18, 2010        |  | 56,486                         | *   |  | 1.021494 shares of Host Hotels & Resorts, Inc. common stock |  |                                                                               |  | $                                                                                                  | 
|                                   |  |                                |     | 
|July 19, 2010-August 18, 2010      |  | 13,442                         | **  |  | 1.021494 shares of Host Hotels & Resorts, Inc. common stock |  |                                                                               |  |                                                                                                    | 
|                                   |  |                                |     | 
|August 19, 2010-September 10, 2010 |  | 63,777                         | *** |  | 1.021494 shares of Host Hotels & Resorts, Inc. common stock |  |                                                                               |  |                                                                                                    | 
|                                   |  |                                |     |  |                                                             |  |                                                                                |  |                                                                                                    |  
|                                   |  |                                |     | 
|Total                              |  | 133,705                        |     |  |                                                             |  |                                                                               |  | $                                                                                                  | 
|                                   |  |                                |     |  |                                                             |  |                                                                                |  |                                                                                                    |  



|* | Reflects 56,486 common OP units redeemed by holders in exchange for shares of Hosts common stock.
|- | -------------------------------------------------------------------------------------------------

|** | Reflects (1) 12,958 common OP units redeemed by holding in exchange for shares of Hosts common stock and (2) 484 common OP units cancelled upon
cancellation of 495 shares of Hosts common stock by Host.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*** | Reflects (1) 42,205 common OP units redeemed by holders in exchange for shares of Hosts common stock and (2) 21,572 common OP units cancelled upon
cancellation of 22,036 shares of Host common stock by Host.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



48



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##### Table of Contents

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

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



|            |  |                                                                                                                                                                                                                                                                                                    
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                        
|            | 
|10.44       |  | Sales Agency Financing Agreement, dated August 19, 2010, between Host Hotels & Resorts, Inc. and BNY Mellon Capital Markets, LLC, as sales agent (incorporated by reference to
Exhibit 1.1 of Host Hotels & Resorts, Inc. Current Report on Form 8-K filed with the Commission on August 20, 2010).
|            | 
|12.1*       |  | Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.                                                                                                                                                                                                                   
|            | 
|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.                                                                                                                                        



|* | Filed herewith.
|- | ---------------

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



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##### Table of Contents

SIGNATURES

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



|                 |  |                                             |  |                                                 
|---------------- |  | ------------------------------------------- |  | ------------------------------------------------
|                 |  | HOST HOTELS & RESORTS, L.P.                
|                 |  |                                            
|                 |  | By:                                         |  | Host Hotels & Resorts, Inc., its general partner
|                 | 
|October 15, 2010 |  | /s/ Brian G. Macnamara                     
|                 |  | Brian G. Macnamara                         
|                 |  | Senior Vice President, Corporate Controller



50