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                                                                   EXHIBIT 10.16




                         MORTGAGE LOAN FUNDING FACILITY

                                                            Dated: July 25, 1995



SLT Realty Limited Partnership and
SLT Realty Company, L.L.C.
11845 West Olympic Boulevard, Suite 550
Los Angeles, California 90064

Attention:   Barry S. Sternlicht, Chairman, Trustee and Chief
             Executive Officer of
             Starwood Lodging Trust (the general partner of SLT Realty Limited
             Partnership and 0.28% member of SLT Realty Company, L.L.C.)

Gentlemen:

                 Lehman Commercial Paper Inc. ("Lehman") hereby agrees to make
available to SLT Realty Limited Partnership ("SLTLP") and SLT Realty Company,
L.L.C. ("SLTLLC", together with SLTLP collectively, the "Customers") a loan
facility (this "Facility") secured by mortgage loans and a participation
interest on the terms set forth in this Mortgage Loan Funding Facility (this
"Facility Agreement").  Capitalized terms not defined herein shall have the
respective meanings given such terms in the Pledge Agreement, dated the date
hereof, between the Customers and Lehman (the "Pledge Agreement").

                 1.       The Advances.  Lehman agrees to make advances from
time to time (each an "Advance" and collectively with any Subsequent Advances,
the "Advances") to Customers and to Reset such Advances (subject to the
requirements of the Relevant Agreements) in an aggregate principal amount not
to exceed at any one time outstanding $44,600,000 (the "Maximum Credit").  The
minimum amount of each Advance or Subsequent Advance shall be one million
dollars ($1,000,000) with additional increments of one hundred thousand dollars
($100,000) thereafter.  This Facility is a commitment to lend and sets forth
the procedures to be used in connection with periodic Advances.  The parties
acknowledge that in the absence of an Event of Default and upon satisfaction of
all of the covenants and conditions precedent in the Relevant Agreements,
Lehman shall make any Advance requested pursuant to this Facility.  All
Advances made by Lehman hereunder shall be evidenced by the Promissory Note.
Although the Promissory Note shall be dated the date of issue, interest in
respect thereof shall be payable only for the periods during which the Advances
evidenced thereby are outstanding, and although the stated amount of the
Promissory Note shall be equal to the Maximum Credit, the Promissory Note shall
be enforceable only to the extent of the unpaid aggregate principal amount of
the Advances then outstanding plus any other amounts due thereunder.  Within
the limits of the Maximum Credit, Customers may borrow, repay pursuant to
Sections 3 and 4 hereof and reborrow pursuant to Section 2 hereof. Lehman shall
note and endorse on its internal records each Advance and payment thereon,
provided, however, failure to do so shall not prejudice Lehman's rights under
the Relevant Agreements.
<PAGE>   2

                 2.       Making the Advances and Resetting of the Interest
Rate.  (a) On any day no later than 2:00 P.M. (New York City time) two (2)
Business Days prior to the date on which Customers desire to borrow funds from
Lehman under this Facility or two (2) Business Days prior to the Reset Date (as
defined below) of an outstanding Advance, if the Customers desire a term until
the next Reset Date with respect to such Advance (each such term, the "Reset
Term") to be other than one month, Customers shall notify Lehman by telephone
or telecopy that Customers wish to borrow money on a specified date in a
specified principal amount and for a specified term or notify Lehman of the
desired Reset Term, if other than one month, as the case may be.

                          (b)     Each such request by Customers shall be
evidenced by a notice (each, a "Notice of Borrowing") substantially in the form
attached hereto, with the blanks appropriately completed and duly executed,
which Notice of Borrowing shall be received no later than 4:00 PM (New York
City time) two (2) Business Days prior to the Reset Date or the date of the
requested Advance, as applicable.  On the date of such Subsequent Advance, as
so agreed by Customers and Lehman, Lehman will make its Advance to Customers
upon the satisfaction of the conditions precedent to such Advance set forth in
Section 6 hereof.  On the Reset Date, the Interest Rate for the requested Reset
Term shall be quoted by Lehman in accordance with Section 2(c) hereof.
Promptly after the Reset Date or the date of any Subsequent Advance, as
applicable, Lehman will send to Customers' a written confirmation of such
Subsequent Advance or Reset Term (each, a "Confirmation"), and Customers'
acceptance of the related proceeds, if applicable, or failure to object in
writing within one Business Day of receipt thereof, shall constitute Customers'
agreement to the terms thereof.

                          (c)     The Reset Term for each Advance shall be one
month (or, in the case of the initial Reset Term related to an Advance or
Subsequent Advance, such shorter period of time from the date of such Advance
or Subsequent Advance to the immediately succeeding Reset Date), unless
otherwise requested in the Notice of Borrowing and confirmed by Lehman in the
Confirmation.  In the event the Reset Term of an Advance or Subsequent Advance
is one month or less and the Reset Date or the date on which the Advance or
Subsequent Advance is made, as applicable, is (i) within the first twelve (12)
months from the date hereof, the interest rate with respect to such Advance or
Subsequent Advance shall be the LIBOR Rate, as determined by Lehman, plus one
hundred fifty (150) basis points, or (ii) after the first twelve (12) months
from the date hereof, the interest rate with respect to such Advance or
Subsequent Advance shall be the LIBOR Rate, plus one hundred seventy-five (175)
basis points (either such rate, the "Interest Rate"). In the event that
One-Month LIBOR is no longer publicly available, the Interest Rate shall be the
Prime Rate plus fifty (50) basis points.  In the event that the Customers
request a Reset Term for an Advance or a Subsequent Advance which is longer
than one month, such request shall be specified on the Notice of Borrowing, and
the Interest Rate shall be the rate quoted by Lehman and agreed to by Customers
(and as specified in the Confirmation).  Notwithstanding the foregoing, Lehman
shall be under no obligation to provide Customers with a quoted rate for a
Reset Term in excess of one month and, if such quoted rate is not mutually
agreeable among the Customers and Lehman or if no Notice of Borrowing is
delivered prior to the then applicable Reset Date, the Reset Term in connection
with the related Advances shall be one month.  All computations

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of interest based on the LIBOR Rate or the rate quoted by Lehman at the
Customers' request shall be made by Lehman on the basis of a year of 360 days
for the actual number of days elapsed during the applicable Interest Period
(including the first day and the last day of the Interest Period).  All
computations of interest based on the Prime Rate shall be made by Lehman on the
basis of a year of 360 days and twelve 30-day months for the actual number of
days elapsed during the applicable Interest Period (including the first day and
the last day of the Interest Period).  In the event that the principal and/or
interest due relating to any Collateral remains due and unpaid for more than 59
days (the "Delinquent Collateral"), then the Interest Rate with respect to the
amount of the outstanding Advances or portion thereof which are secured by such
Delinquent Collateral shall be increased by one hundred fifty (150) basis
points retroactively to the date such Delinquent Collateral became 59 days
delinquent, until the Collateral is no longer Delinquent Collateral.
Notwithstanding the above, Advances shall be deemed secured first by Collateral
which is not Delinquent Collateral and second by Delinquent Collateral, to the
fullest extent possible.  Lehman shall notify the Customers in writing within
30 days following Lehman's actual notice that such Collateral has become
Delinquent Collateral of the revised Collateral Value (including the Delinquent
Collateral) and the amount of outstanding Advances which are secured by such
Delinquent Collateral, as determined in accordance with the Relevant
Agreements.  Any payment to be made hereunder on a day other than a Business
Day shall be made on the applicable Business Day determined in accordance with
the provisions of the term "Interest Period" set forth herein and such
extension or reduction of time shall in such case be included in the
computation of payment of interest.

                          (d)     The Interest Rate for each Advance and
Subsequent Advance shall Reset on each Reset Date in accordance with the terms
of this Section 2 and in accordance with the provisions of the term "Interest
Period" set forth herein.  On each Reset Date, unless the Customers' have
delivered the Notice of Borrowing in accordance with Sections 2(a) and (b),
Customers shall be deemed to have elected to reset the Advance or Subsequent
Advance for the Reset Term of one month at the Interest Rate applicable to such
Reset Term in effect on the Reset Date (or if at such time One Month LIBOR is
no longer publicly available, Customers shall be deemed to have elected to
convert such Advance or Subsequent Advance into an Advance bearing interest at
the Prime Rate plus fifty (50) basis points, effective as of the Reset Date).
Lehman shall send a Confirmation to the Customers after each Reset Date
specifying the new Interest Rate with respect to the related Advances or
Subsequent Advances.

                          (e)     Customers agree to indemnify Lehman and to
hold Lehman harmless from any loss or expense which Lehman may actually sustain
or actually incur as a consequence of (i) default by the Customers in payment
when due of the principal amount of or interest on any Advance, (ii) default by
the Customers in making a borrowing after the Customers have delivered a Notice
of Borrowing to Lehman in accordance with Section 2 hereof or (iii) prepayments
of an Advance prior to a Reset Date or the Facility Termination Date by
Customers. Lehman may fund any Advance in any manner that it in its sole
discretion chooses.  This Section 2(e) shall survive termination of this
Facility and payment of all amounts outstanding under the Relevant Agreements.





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                          (f)(1)  In the event that, from and after the date
hereof, any change in any Requirement of Law or in the interpretation or
application thereof or compliance by Lehman with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the date hereof:

                                  (i)      shall subject Lehman to any tax of
         any kind whatsoever with respect to this Facility, any Advances made
         by it, or change to the basis of taxation of payments to Lehman in
         respect thereof (except for changes in the rate of tax on the overall
         net income of Lehman);

                                  (ii)     shall impose, modify or hold
         applicable any reserve, special deposit, compulsory loan or similar
         requirement against assets held by, deposits or other liabilities in
         or for the account of, advances, loans or other extensions of credit
         by, or any other acquisition of funds by, any office of Lehman which
         are not otherwise included in the determination of the LIBOR Rate or
         the quoted rate; or

                                  (iii)    shall impose on Lehman any other
         condition;  

and the result of any of the foregoing is to increase the cost to Lehman, by
any amount which Lehman deems to be material, of making or maintaining Advances
or to reduce any amount receivable hereunder in respect thereof then, in any
such case, the Customers shall promptly pay Lehman, within ten (10) days
following demand therefor, any additional amounts necessary to compensate
Lehman for such additional cost or reduced amount receivable.  If Lehman
becomes entitled to claim any additional amounts pursuant to this Section 2(f),
it shall promptly notify the Customers of the event by reason of which it has
become so entitled.  A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lehman to the Customers shall
be conclusive in the absence of manifest error. This covenant shall survive the
termination of this Facility and payment of the amounts outstanding under the
Relevant Agreements.

                             (2)  In the event that Lehman shall have 
determined that any change in any Requirement of Law regarding capital adequacy
or in the interpretation or application thereof or compliance by Lehman or any
corporation controlling Lehman with any request or directive regarding capital
adequacy (whether or not having the force of law) from any central bank or
Governmental Authority made subsequent to the date hereof does or shall have
the effect of reducing the rate of return on Lehman's or such corporation's
capital as a consequence of its obligations hereunder to a level below that
which Lehman or such corporation could have achieved but for such change or
compliance (taking into consideration Lehman's or such corporation's policies
with respect to capital adequacy) by an amount deemed by Lehman to be material,
then from time to time, after submission by Lehman to the Customers of a
written request therefor (including calculations of any such additional amounts
in reasonable detail), the Customers shall pay to Lehman such additional amount
or amounts as will compensate Lehman for such reduction.

                          (g)     All payments made by the Customers under this
Facility and the Relevant Agreements shall be made free and clear of, and
without deduction or withholding





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for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on Lehman as a result of a present or former
connection between the jurisdiction of the government or taxing authority
imposing such tax and Lehman (excluding a connection arising solely from Lehman
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Facility or the Relevant Agreements) or any political
subdivision or taxing authority thereof or therein (all such non-excluded
taxes, levies, imposts, duties, charges, fee, deductions and withholdings being
hereinafter called "Taxes").  If any Taxes are required to be withheld from any
amounts payable to Lehman hereunder or under the Relevant Agreements, the
amounts so payable to Lehman shall be increased to the extent necessary to
yield to Lehman (after payment of all Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Facility and
the Relevant Agreements.  Whenever any Taxes are payable by the Customers, as
promptly as possible thereafter the Customers shall send to Lehman for its own
account a certified copy of an original official receipt received by the
Customers showing payment thereof.  If the Customers fail to pay any Taxes when
due to the appropriate taxing authority or fail to remit to Lehman the required
receipts or other required documentary evidence, the Customers shall indemnify
Lehman for any incremental taxes, interest or penalties that may become payable
by Lehman as a result of any such failure.  The agreements in this Section
shall survive the termination of this Facility and the payment of the
Promissory Note and all other amounts payable under the Relevant Agreements.
The Customers agree that each transferee or assignee of Lehman or participant
who purchases a participation in this Facility (collectively, the
"Transferees") shall be entitled to the benefits of this Section 2(g) with
respect to its interest in this Facility and the Advances outstanding from time
to time as if it were "Lehman", provided that the Transferees shall not be
entitled to receive any greater amount pursuant to this Section 2(g) than
Lehman would have been entitled to receive in respect of the amount of the
interest transferred by Lehman to such Transferees had no such transfer
occurred.  The Customers shall not be required to indemnify Lehman (or a
Transferee), pursuant to this Section 2(g) to the extent that the Taxes are a
result of the transfer of this Facility, to an office of Lehman (or such
Transferee) in another jurisdiction, after the date Lehman (or such Transferee)
obtains its interest hereunder.

                          (h)     The following terms have the meanings
indicated when used herein:

                 "Interest Period" means with respect to any Advance or
Subsequent Advance:

                 (a)      initially the period commencing on the date such
Advance is made and ending on the date immediately preceding the Reset Date set
forth in the related Notice of Borrowing;

                 (b)      thereafter, each period commencing on the next
preceding Reset Date applicable to such Advance and ending one month thereafter
on the date immediately





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preceding the next Reset Date or the date specified in the related Notice of
Borrowing, as applicable;

                 provided that,:

                           any Interest Period or Reset Date that would
         otherwise extend beyond the Facility Termination Date shall end on the
         Facility Termination Date or such date of final payment, as the case
         may be.

                 "Interest Rate" means the rate of interest determined in
accordance with Section 2(c) hereof.

                 "LIBOR Rate" means with respect to each day during each
Interest Period pertaining to an Advance, a rate per annum determined for such
Interest Period in accordance with the following formula (rounded upwards to
the nearest 1/100th of one percent):

                                One-Month LIBOR
                      __________________________________
                      1.00  -  LIBOR Reserve Requirements

                 "LIBOR Reserve Requirements" means, with respect to Lehman or
any Transferee, for any day, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
applicable to Lehman or such Transferee (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the
Board of Governors of the Federal Reserve System or other Governmental
Authority having jurisdiction with respect thereto), dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.

                 "One-Month LIBOR" shall mean, with respect to each day during
an Interest Period pertaining to an Advance or Subsequent Advance with a Reset
Term of  one month or less, a rate per annum equal to (a) in the case of an
Advance or Subsequent Advance made on a date other than a Reset Date, the
interpolated rate per annum based on such rates appearing at page 314 of the
Telerate Screen on the first day of such initial Interest Period and with
durations most closely approximating the number of days from such date to the
next succeeding Reset Date, and (b) in the case of an Advance or Subsequent
Advance made on a Reset Date or reset on a Reset Date, the rate appearing at
page 3750 of the Telerate Screen as one-month LIBOR on the first day of such
Interest Period, in each case determined at or about 11:00 a.m. (London,
England time).   If either such rate shall not be so quoted, the One-Month
LIBOR shall be the rate per annum at which deposits in Dollars are offered by a
prime bank in the London interbank market designated by Lehman at approximately
11:00 a.m. (London, England time) on such date  and in an amount comparable to
the amount of the Advance to be outstanding during such Interest Period.

                 "Reset Date" shall mean the first day of a calendar month on
which commercial banks are not required to be closed in New York, New York
and/or in which dealings in U.S. dollar deposits are carried on in the London
interbank market.





                                      -6-
<PAGE>   7
                 "Telerate Screen" shall mean the screens broadcast by the Dow
Jones Telerate Service, its successors and assigns.

                 3.       Payment of Principal and Interest.  Customers shall
repay, and shall pay interest on, each Advance in accordance with the terms
hereof and of the Promissory Note, it being understood that upon each
disbursement of funds as set forth in Section 2 above Customers shall have
effected a borrowing from Lehman hereunder and shall be indebted to Lehman for
the principal amount thereof, plus interest thereon, in accordance with the
terms hereof and of the Promissory Note.  Interest accrued on an Advance shall
be payable in arrears on the first Business Day of each month which such
Advance is outstanding and upon the payment or prepayment in full thereof,
except that interest payable on any amount not paid in full when due shall be
payable from time to time on demand.  Customers shall have the right to prepay
any principal amount of any Advance without the prior written consent of Lehman
on any Reset Date and Customers may prepay an Advance prior to the Reset Date
of such Advance if Customers pay to Lehman on the date of such prepayment (the
"Prepayment Date") the principal of such Advance together with the related
interest on such Advance from the date of such Advance through and including
the Prepayment Date plus the amounts due to Lehman pursuant to Section 2(e)
hereof.

                 4.       Procedures for Payments.  Customers may, at their
option repay each Advance made to Customers, but in any event shall pay the
interest on each Advance, not later than 2:00 P.M. (New York City time) each
Reset Date with respect to such Advance as specified in the related
Confirmation, in United States Dollars and in same day funds, provided,
however, no Reset Date for any Advance shall occur later than the date which is
eighteen (18) months from the date hereof (the "Facility Termination Date").
Notwithstanding the foregoing, in the event that the Reset Term of an Advance
is longer than one month, Customer shall pay to Lehman no later than 2:00 P.M.
(New York City time) the accrued interest, on the first Business Day of each
month during such Reset Term while such Advance is outstanding, based upon the
applicable Interest Rate.

                 5.       Representations, Warranties and Covenants.  As of the
date hereof, and as of the date of the initial Advance and each Subsequent
Advance SLTLP and SLTLLC each hereby represents, warrants and covenants as
follows:

                     (a)          SLTLP and SLTLLC are respectively, a limited
partnership and limited liability company, are each duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
organization and each is qualified to do business in its state of formation and
is, to the extent required by applicable law, qualified to do business in its
respective principal place of business.  SLTLP is a 99% member of SLTLLC.

                     (b)          SLTLP's and SLTLLC's execution, delivery and
performance of the Relevant Agreements are within SLTLP's and SLTLLC's
organizational documents and organizational powers, have been duly authorized
by all necessary organizational action, and do not contravene (i) SLTLP's and
SLTLLC's organizational or operating documents or (ii) any regulation, law or
contractual restriction binding on or affecting SLTLP and SLTLLC or





                                      -7-
<PAGE>   8

SLTLP's or SLTLLC's Property.

                     (c)          No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for SLTLP's or SLTLLC's due execution, delivery and
performance of the Relevant Agreements.

                     (d)          The Relevant Agreements are SLTLP's or
SLTLLC's legal, valid and binding obligations enforceable against SLTLP and
SLTLLC in accordance with their respective terms.

                     (e)          The available audited and unaudited
consolidated balance sheets, statements of income and changes in financial
condition of Starwood Lodging Trust (the "Guarantor") and its consolidated
Subsidiaries (and in any case, SLTLP and SLTLLC) as of Guarantor's most
recently completed fiscal year and quarter, are true, correct and fairly
present Guarantor's and its consolidated Subsidiaries (and in any case, SLTLP
and SLTLLC) financial condition and results of operations for the period then
ended and are in accordance with generally accepted accounting principles
consistently applied, and copies of such statements, together with the most
recent opinion with respect to such audited statements of an independent public
accounting firm, have been provided to Lehman, and since such date there has
been no material adverse change in such financial condition, operations or
business prospects.

                     (f)          There is no pending or, to the best of
SLTLP's and SLTLLC's knowledge, threatened action or proceeding affecting
SLTLP, SLTLLC or Guarantor before any court, governmental agency or arbitrator,
which may materially adversely affect the financial condition, operations or
business prospects of SLTLP, SLTLLC or Guarantor.

                     (g)          SLTLP and SLTLLC are each duly licensed and
qualified in every state where each transacts business to the extent required
by applicable law.

                     (h)          The Relevant Agreements are not entered into
in contemplation of insolvency or with intent to hinder, delay or defraud any
of SLTLP's or SLTLLC's creditors.

                     (i)          The consummation of the transactions 
contemplated by the Relevant Agreements are in the ordinary course of business
of SLTLP and SLTLLC.

                     (j)          Neither the execution and delivery of the 
Relevant Agreements, the servicing responsibilities by the Servicer or the
transactions contemplated hereby, nor the fulfillment of or compliance with the
terms and conditions of this or any of the Relevant Agreements, will in any
material respect conflict with or result in a breach of any of the terms,
conditions or provisions of the SLTLP's or SLTLLC's organizational or operating
documents or any legal restriction or any agreement or instrument to which
SLTLP or SLTLLC is now a party or by which they are bound, or constitute a
default or result in an acceleration under any of the foregoing, or result in
the violation of any law, rule, regulation, order, judgment or decree to which
SLTLP and/or SLTLLC or its property is subject, or impair the ability of the





                                      -8-
<PAGE>   9

Servicer to service the Mortgage Loans, or impair the value of the Mortgage
Loans and the Participation Interest.

                     (k)          SLTLP and SLTLLC do not believe, nor do they
have any reason or cause to believe, that they cannot perform each and every
covenant contained in the Relevant Agreements.

                     (l)          There has occurred no Material Adverse Effect.

                     (m)          Customers are not in default with respect to
any order, writ, injunction or decree of any Governmental Authority or, in
violation of any law, statute, rule or regulation to which Customers or their
Property are subject.

                     (n)          The information, reports, financial 
statements, exhibits and schedules furnished in writing by or on behalf of
Customers in connection with the negotiation, preparation or delivery of this
Facility and the Relevant Agreements or included herein or therein or delivered
pursuant hereto or thereto, when taken as a whole, do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements herein or therein, in light of the circumstances under which
they were made at the time they were made, not misleading.  All written
information furnished after the date hereof by Customers to Lehman in
connection with this Facility and the Relevant Agreements and the transactions
contemplated hereby and thereby will be true, complete and accurate in every
material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified. 
There is no fact known to either SLTLP or SLTLLC that, after due inquiry, could
reasonably be expected to have a Material Adverse Effect that has not been
disclosed herein, in the Relevant Agreements or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
Lehman for use in connection with the transactions contemplated hereby or
thereby.

                     (o)          All of the covenants set forth in this

Facility and in the Relevant Agreements required to be complied with as of the
date hereof have been complied with.

                     (p)          No condition which would cause an Event of
Default (as  defined in the Promissory Note) exists.

                     (q)          The Guarantor is the sole general partner of
SLTLP and is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and its principal place of business,
and is substantially in compliance with applicable law and  the Guarantor's
execution, delivery and performance of the Relevant Agreements are within the
Guarantor's organizational documents and organizational powers, have been duly
authorized by all necessary organizational action, and do not contravene (i)
the Guarantor's organizational or operating documents or (ii) any regulation,
law or contractual restriction binding on or affecting the Guarantor or its
Property.





                                      -9-
<PAGE>   10


                     (r)          The Guarantor is listed and in good standing
on the New York Stock Exchange, is qualified as a REIT and currently is in
compliance in all material respects with all provisions of the Code applicable
to the qualification of the Guarantor as a REIT.

                     (s)          The Unfunded Liabilities of all Single
Employer Plans do not in the aggregate have a Material Adverse Effect.  Neither
the Guarantor nor any other member of the Controlled Group has incurred, or is
reasonably expected to incur, any withdrawal liability to Multiemployer Plans
which in the aggregate have a Material Adverse Effect.  The extent to which any
Plan fails to comply with all applicable requirements of law and regulations
does not have a Material Adverse Effect.  Neither the Guarantor nor any other
members of the Controlled Group has withdrawn from any Plan or any
multiemployer plan as defined in Section 3(37) of ERISA or initiated steps to
do so, and no steps have been taken to reorganize or terminate any Plan, which
withdrawal, reorganization or termination would have a Material Adverse Effect.

                 6.       Conditions Precedent.  (a)        Initial Advance.
As conditions precedent to the making of the initial Advance (1) Customers
shall reimburse Lehman for all of its costs and expenses in connection with the
closing of this Facility on the date hereof; (2) Lehman shall have completed
its due diligence review, (including without limitation, review of the Mortgage
Loan documents and pay histories, and review of mortgagor, operating
statements, appraisals, environmental and engineering reports with respect to
the Collateral); (3) all of the representations, and warranties contained in
the Relevant Agreements shall be accurate, true and correct in all material
respects and there shall exist no Event of Default thereunder; and (4) subject
to the Post Closing Agreement Lehman shall have received on or before the day
of such Advance the following, in form and substance reasonably satisfactory to
Lehman and duly executed by Customers, or the relevant Person as applicable:

                                    (i)    The Facility Documents;

                                   (ii)    Evidence that all other actions
necessary or, in the reasonable opinion of Lehman, desirable to perfect and
protect the security interests created by the Pledge Agreement have been taken
including, but not limited to, state and county Uniform Commercial Code
financing statement searches of SLTLP and SLTLLC and the Guarantor in the state
of their formation;

                                  (iii)    With respect to each Facility
Document to which SLTLP, SLTLLC and the Guarantor is a party, a certified copy
of resolutions of SLTLP, SLTLLC and Guarantor, as applicable, approving the
Facility Documents and borrowings thereunder (either specifically or by general
resolution approving borrowings of the type described in the Facility
Documents), and all documents evidencing other necessary corporate action or
governmental approvals as may be reasonably required in connection with the
Relevant Agreements;

                                   (iv)    A certificate of SLTLP's, SLTLLC's
and Guarantor's secretary certifying the names, true signatures and titles of
SLTLP's, SLTLLC's and Guarantor's officers duly authorized to request Advances
and sign the Facility Documents and the other documents to be delivered
thereunder;





                                      -10-
<PAGE>   11

                                    (v)    An opinion letter, dated the date
hereof, of counsel to Customers, reasonably satisfactory to Lehman;

                                   (vi)    evidence in form and substance
reasonably satisfactory to Lehman that the Guarantor and Starwood have
completed the issuance of equity which yielded a minimum of two hundred million
dollars ($200,000,000) of net proceeds;

                                  (vii)    A certified copy of the
organizational documents of SLTLP, SLTLLC and the Guarantor and satisfactory
evidence of their due organization, existence and good standing certificates
issued by their respective states of organization and in the states where
required to conduct business;

                                 (viii)    The most recent consolidated
quarterly unaudited and annual audited financial statements of the Guarantor
and its consolidated Subsidiaries, and, in any case, SLTLP and SLTLLC, which
annual audited consolidated financial statements shall be certified without
qualification by independent certified public accountants of recognized
national standing pursuant to an audit conducted in accordance with generally
accepted auditing standards;

                                   (ix)    A Comfort Letter;

                                    (x)    Customers have delivered the
original certificates and copies of policies of insurance for the Mortgagors,
Customers, and Servicer as required by and reasonably satisfactory to Lehman
under the terms and conditions of the Relevant Agreements;

                                   (xi)    Evidence, including, without
limitation, the results of a search of the records of state and local recording
offices responsible for the retention of filed financing statements in the
state in which SLTLP and SLTLLC were organized, that all filings, registrations
and recordings required to be filed under this Facility Agreement in order to
create, in favor of Lehman, a perfected first-priority security interest in the
Collateral hereunder with respect to which a security interest may be perfected
by filing under the Uniform Commercial Code as then in effect in any applicable
jurisdiction have been made;

                                  (xii)     An executed amended and restated
Intercreditor Agreement, dated as of March 23, 1995, by and between SLTLP and
Starwood-Nomura Hotel Investors, L.P.;

                                 (xiii)    A consent of the Minority Interest
to the transfer of the Participation Interest to Lehman;

                                  (xiv)    Title endorsements in favor of 
Lehman with respect to each Mortgage Loan; and





                                      -11-
<PAGE>   12

                                   (xv)    Such other documents, instruments,
opinions and assurances in form and substance reasonably satisfactory to Lehman
and Lehman's counsel, as Lehman may reasonably require in connection herewith.

                 By execution of this Facility Agreement Lehman confirms that
conditions (1), (2) and (4) have been satisfied subject to the Post Closing
Agreement.

                 (b)      Each Advance.  As conditions precedent to making the
Advance and each Subsequent Advance:

                                    (i)    Customers shall reimburse Lehman for
all of its reasonable out-of-pocket costs and expenses in connection with such
Advance;

                                    (ii)   Lehman shall have received on or
before the day of such Advance, in form and substance reasonably satisfactory
to Lehman and duly executed:

                                    (A)    A Notice of Borrowing and the 
                                           related additional Collateral
                                           Submission Summary;

                                    (B)    If the additional Collateral, if
                                           any, being delivered in connection
                                           with such Advance is subject to a
                                           lien immediately prior to the
                                           Advance, a letter from such
                                           lienholder releasing the additional
                                           Collateral from such lien upon
                                           receipt of a stated sum which is
                                           less than or equal to the related
                                           Advance; and

                                    (C)    Such other documents as Lehman may 
                                           reasonably request;

                                  (iii)    The Collateral satisfies in all
material respects all of the representations and warranties set forth in
Exhibit A and Exhibit B to the Pledge Agreement, as applicable;

                                   (iv)    Lehman has completed its due
diligence review, (including without limitation, review of the Mortgage Loan
documents and pay histories, and review of mortgagor, operating statements,
appraisals, environmental and engineering reports with respect to any
additional Collateral) and has approved such additional Collateral;

                                    (v)    No Event of Default shall have 
occurred and be continuing under any Facility Document; and

                                   (vi)    The representations and warranties
made by the Customers in Section 5 hereof, and by the Customers and the
Guarantor in each of the other Relevant Agreements shall be true and correct in
every material respect on and as of the date of the making of such Advance with
the same force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date).





                                      -12-
<PAGE>   13

                 7.       Lehman Entitled to Rely.  Lehman shall incur no
liability to Customers in acting upon any request or other communication which
Lehman believes to have been given or made by a person authorized to borrow on
Customers' behalf, whether or not such person is listed on the certificate
delivered pursuant to Section 6(a)(4)(iv) hereof.

                 8.       Termination.  This Facility shall remain in effect
until the Facility Termination Date; but no such termination shall affect the
Customers' obligations with respect to the Advances hereunder outstanding at
the time of such termination. The Customers' obligation to indemnify Lehman
pursuant to this Facility shall survive the termination hereof.

                 9.       Assignment; Amendments, Etc.  The Relevant Documents
are not assignable by the Customers.  The Relevant Agreements are assignable by
Lehman in accordance with Section 13 hereof, provided, however, notwithstanding
such assignment Lehman shall remain liable to Customers for all of Lehman's
obligations in accordance with the terms of the Relevant Agreement.  No
amendment or waiver of any provision of this Facility or the Promissory Note
nor consent to any departure by Customers therefrom, shall in any event be
effective unless the same shall be in writing and signed by Lehman, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.  The Facility Documents
supersede all previous letters of intent and other agreements between the
parties that deal with the same subject matter.

                 10.      Indemnification.  Customers shall indemnify Lehman
for all reasonable losses, costs and expenses which Lehman may sustain in
connection with the enforcement of Lehman's rights under or the exercise of
Lehman's remedies under the Relevant Agreements or any other instrument or
document delivered in connection therewith.

                 11.      Notices.  All written communications hereunder shall
be mailed, telecopied or delivered at the respective addresses as listed in the
Custody Agreement or at such other address as shall be designated by a party in
a written notice to the other parties.  All such notices and communications
shall be effective when delivered to the party to which such notice is to be
given.

                 12.      GOVERNING LAW; CONSENT TO JURISDICTION.  THIS
FACILITY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE
LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.  CUSTOMERS AND LEHMAN WAIVE TRIAL BY JURY.  CUSTOMERS
HEREBY IRREVOCABLY CONSENT TO THE NONEXCLUSIVE JURISDICTION OF ANY COURT OF THE
STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE RELEVANT AGREEMENTS IN
ANY ACTION OR PROCEEDING.  CUSTOMERS HEREBY SUBMIT TO PERSONAL JURISDICTION AND
VENUE, IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, OVER ANY DISPUTES ARISING OUT OF
OR RELATING TO THE RELEVANT AGREEMENTS.

                 13.      Hypothecation or Pledge of Mortgage Loans and the
Participation Interest.  Nothing in the Facility Documents shall preclude
Lehman from engaging in repurchase transactions with respect to the Mortgage
Loans and Participation Interest or





                                      -13-
<PAGE>   14

otherwise pledging, repledging, hypothecating, or rehypothecating the Mortgage
Loans and/or Participation Interest, provided, however, notwithstanding such
pledging, repledging, hypothecating, or rehypothecating the Mortgage Loans
and/or Participation Interest Lehman shall remain liable to customers for all
of Lehman's obligations in accordance with the terms of the Relevant
Agreements.  Nothing contained in this Facility shall obligate Lehman to
segregate any Mortgage Loans or Participation Interest delivered to Lehman.
Lehman agrees to indemnify Customers and hold Customers harmless from any loss
or expense which Customers may actually sustain or actually incur (including
without limitation reasonable and necessary legal fees and disbursements) in
connection with any matters arising from misrepresentations or omissions by
Lehman in connection with Lehman's participation of the Facility pursuant to
this Section 13.

                 14.      Commitment Fee.  In the event both (i) the weighted
average aggregate amount of all Advances outstanding during the first twelve
months from the date hereof is less than thirty-five million dollars
($35,000,000) for a period of not less than four months and (ii) Lehman and the
Customers fail to enter into the Line of Credit within twelve months of the
date hereof, the Customers shall promptly pay Lehman a commitment fee (the
"Commitment Fee") in the amount of one quarter of one percent (0.25%) of the
Maximum Credit within five (5) Business Days of the expiration of such twelve
month period.  The provision in this Facility and the Relevant Agreements in
connection with the Line of Credit are merely an expression of interest on the
part of Lehman and nothing set forth herein and in the Relevant Agreements
shall be deemed to be a commitment on the part of Lehman to provide such Line
of Credit, or any obligation on the part of Customers to close the Line of
Credit.

                 15.      Purpose of Facility.  Advances borrowed under this
Facility may be utilized by the Customers to acquire hospitality properties,
complete renovations and capital improvements to existing hotels, and for
general corporate purposes, including, without limitation Distributions.

                 16.      Concerning the Customers and the Guarantor.  SLTLP
and SLTLLC shall be jointly and severally liable for the obligations of the
Customers hereunder and under the Relevant Agreements.

                 The Guarantor's name of "Starwood Lodging Trust" is a
designation of the Guarantor and its trustees (as trustees but not personally)
under a Declaration of Trust dated August 15, 1969, as amended and restated as
of June 6, 1988, as further amended on February 1, 1995, as further amended on
June 19, 1995 and as the same may be further amended from time to time, and all
persons dealing with the Guarantor shall look solely to the Guarantor's assets
for the enforcement of any claims against the Guarantor, as the trustees,
officers, agents and security holders of the Guarantor assume no personal
liability for obligations entered into on behalf of the Guarantor, and their
respective individual assets shall not be subject to the claims of any person
relating to such obligations.  The foregoing shall govern all direct and
indirect obligations of the Guarantor under this Facility Agreement.





                                      -14-
<PAGE>   15
                 17.      Counterparts.  For the purpose of facilitating the
execution of this Facility Agreement as herein provided and for other purposes,
this Facility Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute and be one and the same instrument.





                                      -15-
<PAGE>   16
                 If the terms of this Facility Agreement are satisfactory to
Customers, please indicate Customers' agreement and acceptance thereof by
signing this Facility Agreement and returning it to us whereupon this Facility
Agreement shall become an agreement between us as of the date of this Facility
Agreement.

Very truly yours,

Lehman Commercial Paper Inc.

By:____________________________________

Name:_________________________________

Title:_________________________________

AGREED AND ACCEPTED:

Customers:



SLT REALTY LIMITED PARTNERSHIP

By:      STARWOOD LODGING TRUST

         its general partner

By:      ______________________________

         Name:  Jeffrey C. Lapin
         Title:    President

SLT REALTY COMPANY, L.L.C.

By:      SLT REALTY LIMITED PARTNERSHIP
         its 99% member

By:      STARWOOD LODGING TRUST
         its general partner

By:      ______________________________

         Name:  Jeffrey C. Lapin
         Title:    President

Telephone #:          (310) 575-3900
Facsimile #:          (310) 575-9143





                                      -16-
<PAGE>   17
                        NOTICE OF BORROWING NO. _______

Lehman Commercial Paper Inc.
3 World Financial Center
200 Vesey Street, 9th Floor
New York, New York 10285
Attention: Mr. Frank Gilhool
Facsimile (212) 528-8986

cc:  Mr. John Regan

                                     [Date]

                 Pursuant to the Mortgage Loan Funding Facility dated July 25,
1995 (as amended from time to time, the "Facility Agreement") between you and
the undersigned, the undersigned hereby gives notice of its election to borrow
from you an Advance and, in connection therewith, sets forth below the
following information (all capitalized terms used herein shall have the meaning
specified therefor in the Facility Agreement):

1.       The principal amount of this Advance is $ _________.

2.       The Interest Rate for this Advance shall equal the rate determined in
         accordance with Section 2(c) of the Facility Agreement.

3.       The beginning Business Day of this Advance is _______, 199_.

4.       The aggregate balance of all outstanding Advances (including this
         Advance) is $___________.

5.       The [initial] Reset Date of this Advance is __________, 199_ and the
         next Reset Date thereafter is ________, 199__].

[6.      This  is a request for a different Reset Term relating to the prior
         Advance requested pursuant to Notice of Borrowing No.  _______.]

                 The undersigned hereby certifies that the following statements
are true and correct on the date hereof and shall be true and correct on the
date of the Advance requested herein, before and after giving effect thereto:

A.       Each of the representations and warranties contained in the Facility
Agreement and the Pledge Agreement are true and correct in all material
respects;

B.       Each of the covenants contained in the Facility Agreement and the
Pledge Agreement have been complied with in all material respects.






                                      -17-
<PAGE>   18

C.       No Event of Default (as defined in the Promissory Note) has occurred
and is continuing; and

D.       Customers have either satisfied all of the conditions precedent as
specified in Section 6 of the Facility Agreement or the same have been waived
by Lehman in writing.

                 The Advance made pursuant hereto shall be made in connection
with the items of Collateral (as defined in the Pledge Agreement) described in
the undersigned's Collateral Submission Summary (as defined in the Pledge
Agreement) No. ____ dated ___ _________, 199_.

                 The Guarantor's name of "Starwood Lodging Trust" is a
designation of the Guarantor and its trustees (as trustees but not personally)
under a Declaration of Trust dated August 15, 1969, as amended and restated as
of June 6, 1988, as further amended on February 1, 1995, as further amended on
June 19, 1995 and as the same may be further amended from time to time, and all
persons dealing with the Guarantor shall look solely to the Guarantor's assets
for the enforcement of any claims against the Guarantor, as the trustees,
officers, agents and security holders of the Guarantor assume no personal
liability for obligations entered into on behalf of the Guarantor, and their
respective individual assets shall not be subject to the claims of any person
relating to such obligations.  The foregoing shall govern all direct and
indirect obligations of the Guarantor under this Notice of Borrowing.

Customers:



SLT REALTY LIMITED PARTNERSHIP

By:      STARWOOD LODGING TRUST
         its general partner

By:      ______________________________

         Name:
         Title:

SLT REALTY COMPANY, L.L.C.

By:      SLT REALTY LIMITED PARTNERSHIP
         its 99% member

By:      STARWOOD LODGING TRUST
         its general partner

By:      ______________________________

         Name:
         Title:

Telephone #:  ________________________

Facsimile #:  _________________________





                                      -18-
<PAGE>   19

                                                                EXHIBIT 10.16



                                AMENDMENT NO. 1

                     TO THE MORTGAGE LOAN FUNDING FACILITY

                 This is Amendment No. 1 ("Amendment No. 1"), dated as of
October 31, 1995, by and between SLT Realty Limited Partnership ("SLTLP"), SLT
Realty Company, L.L.C. ("SLTLLC," together with SLTLP, the "Customers") and
Lehman Commercial Paper Inc. ("Lehman") to that certain Mortgage Loan Funding
Facility, dated July 25, 1995, between the Customers and Lehman ("Facility
Agreement").

                              W I T N E S S E T H

                 WHEREAS, heretofore Lehman entered into that certain loan
facility secured by certain mortgage loans and a participation interest
("Assets") subject to the Facility Agreement;

                 WHEREAS, Lehman and the Customers wish to amend the Facility
Agreement to increase the Maximum Credit thereunder as more particularly
described herein.

                 NOW THEREFORE, in consideration of the mutual premises and
mutual obligations set forth herein, Lehman and the Customers agree as follows:

                 1.       All capitalized terms not defined herein shall have
                          the meaning assigned to them in the Facility
                          Agreement.

                 2.       The Facility Agreement shall be amended as follows:

                          a)      The Maximum Credit shall be increased from 
                                  $44,600,000 to $71,000,000;

                          b)      In consideration for the commitment to
                                  increase the Maximum Credit under the
                                  Facility, Customers shall pay Lehman a
                                  one-time fee (the "Modification Fee") in the
                                  amount of 0.50% of $26,400,000 upon execution
                                  of this Amendment No. 1.

                 3.       All other terms, conditions, and provisions of the
                          Facility Agreement, as amended, are hereby affirmed
                          and shall remain in full force and effect as written.

                 4.       THIS AMENDMENT NO. 1 SHALL BE CONSTRUED IN ACCORDANCE
                          WITH THE LAWS OF THE STATE OF NEW YORK, AND THE
                          OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
                          HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
                          LAWS.
<PAGE>   20

                 5.       This Amendment No. 1 may be executed in one or more
                          counterparts and by different parties hereto on
                          separate counterparts, each of which, when so
                          executed, shall constitute one and the same
                          agreement.

                 6.       This Amendment No. 1 shall inure to the benefit of
                          and be binding upon Lehman and the Customers, and
                          their respective successors and permitted assigns
                          under the Facility Agreement.



                   [Signatures Commence on Following Page]





                                     -2-
<PAGE>   21
\                 IN WITNESS WHEREOF, the parties have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.

                                        LEHMAN COMMERCIAL PAPER INC.

                                        By:__________________________________
                                           
                                        Name:________________________________
                                        
                                        Title:_______________________________
                                        

                                        Customers:

                                        SLT REALTY LIMITED PARTNERSHIP

                                        By:     STARWOOD LODGING TRUST
                                                its general partner
                                        By: _________________________________
                                               
                                            Name: ___________________________
                                                              
                                            Title: __________________________
                                                 
                                                 

                                        SLT REALTY COMPANY, L.L.C.

                                        By:     SLT REALTY LIMITED PARTNERSHIP
                                                its 99% member

                                        By:     STARWOOD LODGING TRUST
                                                its general partner
                                        By: _________________________________
                                                  
                                            Name: ___________________________
                                                         
                                            Title: __________________________
                                                  
                                                  
                                        Telephone #:     (310) 575-3900

                                        Facsimile #:     (310) 575-9143





                                     -3-