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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                   FORM 10-K/A

                                (Amendment No.2)

       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                     For fiscal year ended December 31, 2001

                                       OR

     [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

             For the transition period from _________ to ___________

                        COMMISSION FILE NUMBER 333-63768

         MERISTAR HOSPITALITY                      MERISTAR HOSPITALITY
     OPERATING PARTNERSHIP, L.P.                       FINANCE CORP.
       (Exact name of Registrant                 (Exact name of Registrant
     as specified in its Charter)              as specified in its Charter)

               DELAWARE                                  DELAWARE
       (State of Incorporation)                  (State of Incorporation)

              75-2648837                                52-2321015
  (IRS Employer Identification No.)          (IRS Employer Identification No.)

      1010 WISCONSIN AVENUE, N.W.               1010 WISCONSIN AVENUE, N.W.
        WASHINGTON, D.C. 20007                    WASHINGTON, D.C. 20007
            (202) 965-4455                            (202) 965-4455
   (Address, including zip code, and         (Address, including zip code, and
telephone number, including area code,    telephone number, including area code,
   of Principal Executive Offices)            of Principal Executive Offices)

        Securities registered pursuant to Section 12(b) of the Act: None.

        Securities registered pursuant to Section 12(g) of the Act: None.

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 than the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [_].


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Explanatory Note:

This annual report of Form 10-K is being filed jointly by MeriStar Hospitality
Operating Partnership, L.P., or MHOP, and by MeriStar Hospitality Finance Corp.,
or MeriStar Finance. No separate financial or other information of MeriStar
Finance is material to holders of the securities of MHOP or MeriStar Finance,
since as of December 31, 2001 MeriStar Finance had no operations; no employees;
only nominal assets; and no liabilities other than its obligations under the
indenture governing its senior unsecured notes issued in January 2001 and for
related financing costs.

                                     PART I

ITEM 1. BUSINESS

                MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

MeriStar Hospitality Operating Partnership, L.P. owns a portfolio of upscale,
full-service hotels. Our hotels are diversified geographically as well as by
franchise and brand affiliations. We are the operating partnership of MeriStar
Hospitality Corporation, a real estate investment trust that operates all of its
business through us. MeriStar Hospitality Corporation is our sole general
partner and controls us. As of December 31, 2001, we owned 112 hotels with
28,653 rooms. Our hotels are located in major metropolitan areas or rapidly
growing secondary markets in the United States and Canada. A majority of the
hotels are operated under nationally recognized brand names such as Hilton(R),
Sheraton(R), Westin(R), Marriott(R), Radisson(R), Doubletree(R) and Embassy
Suites(R).

We believe the upscale, full-service segment of the lodging industry offers
strong potential operating results and investment opportunities. The real estate
market has recently experienced a significant slowdown in the construction of
upscale, full-service hotels. Also, upscale, full-service hotels have particular
appeal to both business executives and upscale leisure travelers. We believe the
combination of these factors offers good potential ownership opportunities for
us in this sector of the lodging industry.

We were created on August 3, 1998, as a result of the merger between CapStar
Hotel Company and American General Hospitality Corporation, and the subsequent
formation of MeriStar Hospitality Corporation, the merged entity. MeriStar
Hospitality, a real estate investment trust, or REIT, is our general partner and
owns a one percent interest of us as of December 31, 2001. The limited partners
are:

      .     MeriStar LP, Inc. (a wholly-owned subsidiary of MeriStar
            Hospitality), which owns approximately a 90 percent interest as of
            December 31, 2001; and

      .     various third parties, which own, in the aggregate, a nine percent
            interest as of December 31, 2001.

Partners' capital on our balance sheet includes the partnership interests of
MeriStar Hospitality and MeriStar LP, Inc. MeriStar Hospitality held 482,533 of
our common operating partnership units, or OP units, as of December 31, 2001.
MeriStar LP, Inc. held 44,041,614 common OP units as of December 31, 2001. Due
to the redemption rights of the limited partnership units held by third parties,
we have excluded these units from partners' capital. Instead, we have classified
them as Redeemable OP units, and recorded them at redemption value. At December
31, 2001 there were 4,508,855 redeemable OP units outstanding.

In connection with the merger between CapStar and American General, MeriStar
Hospitality created MeriStar Hotels & Resorts, Inc., a separate publicly traded
company, to be the lessee and manager of nearly all of our hotels. At December
31, 2001, MeriStar Hotels managed all of our hotels. We share certain key
executive officers and five board members with MeriStar Hotels. Also, an
intercompany agreement aligns our interests with the interests of MeriStar
Hotels, with the objective of benefiting both companies' shareholders.

Changes to the federal tax laws governing Real Estate Investment Trusts, or
REITs, were enacted in 1999 and became effective on January 1, 2001. Under those
changes, we are permitted to create subsidiaries that lease the properties we
currently own, and these subsidiaries are taxable in a manner similar to
subchapter C corporations. Because of these changes in the tax laws, we have
formed a number of wholly-owned taxable subsidiaries to which subsidiaries of
MeriStar Hotels assigned their participating leases. In connection with the
assignment, the taxable subsidiaries executed new management agreements with a
subsidiary of MeriStar Hotels to manage our hotels. Under these management
agreements, the taxable subsidiaries pay MeriStar Hotels a


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management fee. The taxable subsidiaries in turn make rental payments to us
under the participating leases. The management agreements were structured to
substantially mirror the economics and terms of the former leases.

BUSINESS

Given the challenging operating environment that has resulted from a slowing
economy coupled with the disruptions caused by the events of September 11, 2001,
we intend to focus on maximizing the profitability of our existing hotels by
actively overseeing their operation by MeriStar Hotels. In addition, we have
taken steps to strengthen our balance sheet and to maintain financial
flexibility and liquidity. We believe these steps will position us to take
advantage of opportunities that may arise in the future.

The Intercompany Agreement

MeriStar Hospitality and we are a party to an intercompany agreement with
MeriStar Hotels. So long as the agreement remains in effect, MeriStar Hotels is
prohibited from making real property investments a REIT could make unless:

            .     MeriStar Hospitality and we are first given the opportunity,
                  but elect not to pursue the investment;

            .     The investment is on land already owned or leased by MeriStar
                  Hotels or subject to a lease or purchase option in favor of
                  MeriStar Hotels;

            .     MeriStar Hotels will operate the property under a trade name
                  owned by MeriStar Hotels; or

            .     The investment is a minority investment made as part of a
                  lease or management agreement arrangement. MeriStar
                  Hospitality and we have a right of first refusal with respect
                  to any real property investment to be sold by MeriStar Hotels.

The intercompany agreement will generally grant MeriStar Hotels the right of
first refusal with respect to any management opportunity at any of our
properties MeriStar Hospitality does not elect to have managed by a hotel brand
owner. We will make such an opportunity available to MeriStar Hotels only if
MeriStar Hospitality determines that:

            .     Consistent with MeriStar Hospitality's status as a REIT, it
                  must enter into a management agreement with an unaffiliated
                  third party with respect to the property;

            .     MeriStar Hotels is qualified to be the manager of that
                  property; and

            .     The property is not to be operated by the owner of a
                  hospitality trade name under that trade name.

Because of the provisions of the intercompany agreement, we are restricted in
the nature of our business and the opportunities we may pursue.

Provision of Services

MeriStar Hotels may provide MeriStar Hospitality or us with services as MeriStar
Hospitality or we may reasonably request from time to time. These may include
administrative, renovation supervision, corporate, accounting, financial, risk
management, legal, tax, information technology, human resources, acquisition
identification and due diligence, and operational services. MeriStar Hospitality
and we compensate MeriStar Hotels for services provided in an amount determined
in good faith by MeriStar Hotels as the amount a third party would charge
MeriStar Hospitality or us for comparable services. The arrangements relating to
the provision of these services were not subject to arms-length negotiation.

Equity Offerings

If either MeriStar Hospitality, we or MeriStar Hotels desire to engage in a
securities issuance, the issuing party will give notice to the other party as
promptly as practicable of its desire to engage in a securities issuance. The
notice will include the proposed material terms of such issuance, to the extent
determined by the issuing party, including whether the issuance is proposed to
be pursuant to public or private offering, the amount of securities proposed to
be issued and the manner of determining the offering price, and other terms of
the securities. The non-issuing party will cooperate with the issuing party to
effect any securities issuance of the issuing party by assisting in the
preparation of any registration statement or other document required in
connection with the issuance and, in connection with that issuance, providing
the issuing party with such information as may be required to be included in the
registration statement or other document.

Term

The intercompany agreement will terminate upon the earlier of August 3, 2008, or
the date of a change in ownership or control of MeriStar Hotels.


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Loan to MeriStar Hotels

We are obligated to lend MeriStar Hotels up to $50 million for general corporate
purposes under a revolving credit agreement. The interest rate on the revolving
credit facility equals 650 basis points over the 30-day London Interbank Offered
Rate and the maturity date of the facility is the 91st day following the
maturity of MeriStar Hotels' senior credit facility, as amended, restated,
refinanced or renewed. As of December 31 2001, there was $36.0 million
outstanding under this revolving credit agreement. We amended the revolving
credit agreement with MeriStar Hotels to include covenants similar to those in
its senior credit facility.

MeriStar Hotels also issued us a term note effective January 1, 2002. This $13.1
million term note refinances outstanding accounts payable MeriStar Hotels owed
to us. The term note bears interest at 650 basis points over the 30-day LIBOR.
The maturity date is the same as that of the revolving credit agreement.

Recent Events

Amendment to our Senior Secured Credit Agreement

In December 2001, we amended our senior secured credit agreement to allow us to
extend the maturity of the revolving credit facility from July 2002 to July 2003
and provide financial covenant relief through the maturity of the facility,
among other revisions.

On February 25, 2002, we amended our revolving credit agreement. The amendment
allows us to reduce the revolving commitments to below $300 million. On March 1,
2002, we reduced the borrowing capacity on our revolving credit agreement from
$310 million to $150 million.

Senior Note Offerings

On February 7, 2002, we and our wholly owned subsidiary, MeriStar Hospitality
Finance Corp. III, issued $200 million aggregate principal amount of 9.125%
senior notes due 2011 to "Qualified Institutional Buyers" as defined in Rule
144A under the Securities Act of 1933.

On December 19, 2001, we and our wholly owned subsidiary, MeriStar Hospitality
Finance Corp. II, issued $250 million aggregate principal amount of 10.50%
senior notes due 2009 to "Qualified Institutional Buyers" as defined in Rule
144A under the Securities Act of 1933.

These notes are unsecured obligations of our company and MeriStar Hospitality.
MeriStar Hospitality and a number of its direct and indirect subsidiaries
guarantee payments of principal and interest on the notes on a senior unsecured
basis. We used the net proceeds of approximately $423.0 million from these
offerings to repay outstanding term loans and revolving indebtedness under our
senior secured credit agreement.

REIT Modernization Act

Until January 1, 2001, in order for MeriStar Hospitality to maintain its tax
status as a REIT, we were not permitted to engage in the operations of our hotel
properties. To comply with this requirement, we leased all of our real property
to third-party lessee/managers - MeriStar Hotels and Prime Hospitality. On
January 1, 2001, changes to the U.S. federal tax laws governing REITs, commonly
known as the "REIT Modernization Act" became effective. As a result, we are now
permitted to create taxable subsidiaries, which are subject to taxation similar
to a subchapter C-Corporation, and are permitted to lease our real property.

Although a taxable subsidiary may lease real property, it is restricted from
being involved in certain activities prohibited by the REIT Modernization Act.
First, a taxable subsidiary is not permitted to manage the properties itself; it
must enter into an "arm's length" management agreement with an independent
third-party manager that is actively involved in the trade or business of hotel
management and manages properties on behalf of other owners. Second, the taxable
subsidiary is not permitted to lease a property that contains gambling
operations. Third, the taxable subsidiary is restricted from owning a brand or
franchise.

We believe establishing taxable subsidiaries to lease our properties provides a
more efficient alignment of and ability to capture the economic interests of
property ownership. In 2000, MeriStar Hospitality established a subcommittee of
independent members of its Board of Directors to negotiate the transfer of our
existing leases with subsidiaries of MeriStar Hotels to our taxable
subsidiaries. Accordingly, effective January 1, 2001, our taxable subsidiaries
executed agreements with subsidiaries of MeriStar Hotels. These agreements
assigned our existing leases to our taxable subsidiaries. In connection with the
assignment, the taxable subsidiaries executed new management agreements with a
subsidiary of MeriStar Hotels for each property they previously leased. The
management agreements were structured to substantially mirror the economics of
the former lease agreements.


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The Management Agreements

MeriStar Hotels manages all 112 of our hotels under management agreements with
our taxable subsidiaries.

Management Fees and Performance Standards

Each taxable subsidiary pays MeriStar Hotels a management fee for each hotel
equal to a specified percentage of aggregate hotel operating revenues, increased
or reduced, as the case may be, by 20% of the positive or negative difference
between:

      .     The actual excess of total operating revenues over total operating
            expenses; and

      .     A projected excess of total operating revenues over total operating
            expenses.

The total management fee for a hotel in any fiscal year will not be less than
2.5% or greater than 4.0% of aggregate hotel operating revenues.

Term and Termination

The management agreements with MeriStar Hotels generally have initial terms of
10 years with three renewal periods of five years each, except for four
management agreements which have initial terms of one year which renew annually
thereafter. A renewal will not go into effect if a change in the federal tax
laws permits us or one of our subsidiaries to operate the hotel directly without
adversely affecting MeriStar Hospitality's ability to qualify as a REIT or if
MeriStar Hotels elects not to renew the agreement. We may elect not to renew the
management agreements only as provided below.

Our taxable subsidiaries have the right to terminate a management agreement for
a hotel upon the sale of the hotel to a third party or if the hotel is not
restored after a significant casualty loss. Upon that termination, the relevant
taxable subsidiary will be required to pay MeriStar Hotels the fair market value
of the management agreement. That fair market value will be equal to the present
value of the remaining payments (discounted using a 10% rate) of the existing
term under the agreement, based on the operating results for the 12 months
preceding the termination. Our taxable subsidiaries will be able to credit
against any termination payments, the present value of projected fees
(discounted using a 10% rate) under any management agreements or leases entered
into between MeriStar Hotels and us (or our subsidiaries) after August 3, 1998.

If a hotel's gross operating profit is less than 85% of the amount projected in
the hotel's budget in any fiscal year and gross operating profit from that hotel
is less than 90% of the projected amount in the next fiscal year, our taxable
subsidiaries will have the right to terminate the management agreement for the
hotel, unless:

      .     We did not materially comply with the capital expenditures
            contemplated by the budget for either or both of the applicable
            fiscal years; or

      .     MeriStar Hotels cures the shortfall by agreeing to reduce its
            management fee for the next fiscal year by the amount of the
            shortfall between the actual operating profit for the second fiscal
            year and 90% of the projected gross operating profit for that year.

MeriStar Hotels can only use the cure right once during the term of each
management agreement.

Assignment

MeriStar Hotels does not have the right to assign a management agreement without
the prior written consent of the relevant taxable subsidiary. A change in
control of MeriStar Hotels will require the consent of the relevant taxable
subsidiary, and that subsidiary may grant or withhold its consent in its sole
discretion.

Acquisition Strategy

We focus our attention on investments in hotels located in markets with
economic, demographic and supply dynamics favorable to hotel owners. Through an
extensive due diligence process, we select those acquisition targets where we
believe selective capital improvements and well selected third-party management
will increase the hotel's ability to attract key demand segments, enhance hotel
operations and increase long-term value. In order to evaluate the relative
merits of each investment opportunity, our senior management and MeriStar Hotels
create detailed plans covering all areas of renovation and operation. These
plans serve as the basis for our acquisition decisions and guide subsequent
renovation and operating plans.

Until January 1, 2001, in order to maintain its qualification as a REIT,
MeriStar Hospitality was required to make annual


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distributions to its stockholders of at least 95% of our real estate investment
trust taxable income, determined without regard to the deduction for dividends
paid and by excluding net capital gains. After January 1, 2001, pursuant to the
REIT Modernization Act, the percentage of required annual distributions was
reduced to 90%. As a result of this annual distribution requirement, we rely
heavily on our ability to raise new capital through debt and equity offerings in
order to complete acquisitions. That ability is dependent on the then-current
status of the capital markets.

Competition

We compete primarily in the upper upscale sector of the full-service segment of
the lodging industry. Each geographic market where we own hotels has other full-
and limited-service hotels that compete with our hotels. Competition in the U.S.
lodging industry is based on a number of factors, most notably convenience of
location, brand affiliation, price, range of services and guest amenities
offered, quality of customer service and overall product.

Employees

As of December 31, 2001, MeriStar Hospitality and we employed approximately 30
persons, all of whom work at our corporate headquarters.

Franchises

We employ a flexible branding strategy based on each particular hotel's market
environment and other unique characteristics. Accordingly, we use various
national brand names pursuant to licensing arrangements with national
franchisors. We have included a listing of all of our properties, along with the
affiliated brand names, under Item 2 of this Form 10-K.

Governmental Regulation

Americans with Disabilities Act - Under the Americans with Disabilities Act, all
public accommodations are required to meet certain requirements related to
access and use by disabled persons. These requirements became effective in 1992.
Although significant amounts have been and continue to be invested in ADA
required upgrades to our hotels, a determination that we are not in compliance
with the ADA could result in a judicial order requiring compliance, imposition
of fines or an award of damages to private litigants. We are likely to incur
additional costs of complying with the ADA; however, such costs are not expected
to have a material adverse effect on our results of operations or financial
condition.

Environmental Laws - Under various federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be liable for the costs of removal or remediation of hazardous or
toxic substances on, under or in property. Laws often impose liability whether
or not the owner or operator knew of, or was responsible for, the presence of
hazardous or toxic substances. In addition, the presence of contamination from
hazardous or toxic substances, or the failure to properly remediate contaminated
property, may adversely affect the owner's ability to sell or rent real property
or to borrow funds using real property as collateral. Persons who arrange for
the disposal or treatment of hazardous or toxic substances may also be liable
for the costs of removal or remediation of these substances at the disposal or
treatment facility, whether or not the facility is or ever was owned or operated
by those persons.

Federal and state laws also regulate the operation and removal of underground
storage tanks. In connection with the ownership and operation of the hotels, we
could be held liable for the costs of remedial action with respect to the
regulated substances and storage tanks and claims related thereto. Activities
have been undertaken to close or remove storage tanks located on the property of
several of the hotels.

All of our hotels have undergone Phase I environmental site assessments, which
generally provide a nonintrusive physical inspection and database search, but
not soil or groundwater analyses, by a qualified independent environmental
engineer. The purpose of a Phase I is to identify potential sources of
contamination for which the hotels may be responsible and to assess the status
of environmental regulatory compliance. The Phase I assessments have not
revealed any environmental liability or compliance concerns that we believe
would have a material adverse effect on our results of operations or financial
condition, nor are we aware of any material environmental liability or concerns.
Nevertheless, it is possible that these environmental site assessments did not
reveal all environmental liabilities or compliance concerns or that material
environmental liabilities or compliance concerns exist of which we are currently
unaware.

In addition, our hotels have been inspected to determine the presence of
asbestos. Federal, state and local environmental laws, ordinances and
regulations also require abatement or removal of asbestos-containing materials
and govern emissions of and exposure to asbestos fibers in the air.
Asbestos-containing materials are present in various building materials such as
sprayed-on ceiling treatments, roofing materials or floor tiles at some of the
hotels. Operations and maintenance programs for maintaining


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asbestos-containing materials have been or are in the process of being designed
and implemented, or the asbestos-containing materials have been scheduled to be
or have been abated, at these hotels. Any liability resulting from
non-compliance or other claims relating to environmental matters are not
expected to have a material adverse effect on our results of operations or
financial condition.

                                  RISK FACTORS

Financing Risks

Our significant amount of debt could limit our operational flexibility or
otherwise adversely affect our financial condition.

We are subject to the risks normally associated with debt financing, including
the risks that:

      .     Our cash flow from operations may be insufficient to make required
            payments of principal and interest;

      .     We are unable to be able to refinance existing indebtedness,
            including secured indebtedness; and

      .     The terms of any refinancing may not be as favorable as the terms of
            existing indebtedness.

We may be required to refinance our indebtedness, and the failure to refinance
our indebtedness may have an adverse effect on us.

As of February 15, 2002, we, and our respective subsidiaries had $15.3 million
of debt maturing in 2002, $75.6 million of debt maturing in 2003 and $171.2
million of debt maturing in 2004. If we do not have sufficient funds to repay
our indebtedness at maturity, we may have to refinance the indebtedness through
additional debt financing. This additional financing might include private or
public offerings of debt securities and additional non-recourse or other
collateralized indebtedness. If we are unable to refinance our indebtedness
on acceptable terms, we might be forced to dispose of hotels or other assets on
disadvantageous terms. This could potentially result in losses and adverse
effects on cash flow from operating activities. If we are unable to make
required payments of principal and interest on indebtedness secured by our
hotels, these properties could be foreclosed upon by the lender with a
consequent loss of income and asset value.

Our senior secured credit facility and other debt instruments have restrictive
covenants that could affect our financial condition.

As of February 15, 2002, we, MeriStar Hospitality and our respective
subsidiaries had approximately $67.0 million outstanding under our senior
secured credit agreement. Our ability to borrow under the credit agreement is
subject to financial covenants, including leverage and interest rate coverage
ratios and minimum net worth requirements. Our credit agreement limits our
ability to effect mergers, asset sales and change of control events, and limits
dividends to the lesser of 90% of funds from operations and 100% of funds from
operations less a capital reserve equal to 4% of gross room revenues. The credit
agreement also contains a cross-default provision which would be triggered by a
default or acceleration of $20 million or more of indebtedness secured by our
assets or $5 million or more of any other indebtedness. The recent amendment to
our credit facility limits dividends paid in each of the first three quarters of
2002 to the lesser of (1) $0.01 per share of common stock of MeriStar
Hospitality Corporation or (2) $750,000.

As of February 15, 2002, we had outstanding the following borrowings:

      .     $300 million of senior unsecured notes due 2008 bearing interest at
            9%;

      .     $400 million of senior unsecured notes due 2011 bearing interest at
            9.125%;

      .     $250 million of senior unsecured notes due 2009 bearing interest at
            10.50%;

      .     $205 million of notes payable to MeriStar Hospitality due 2007
            bearing interest at a weighted-average annual rate of 8.69%; and

      .     $154.3 million of notes payable to MeriStar Hospitality due 2004
            bearing interest at 4.75%.

Some of our indirect subsidiaries have guaranteed the issuers' payment
obligations under the senior unsecured notes on a senior unsecured basis. The
issuers and the subsidiary guarantors have guaranteed our payment obligations
under the senior subordinated notes on an unsecured, senior subordinated basis.

The indentures relating to all of the notes contain limitations on our ability
to effect mergers and change of control events, as well as other limitations,
including limitations on:

      .     Incurring additional indebtedness and issuing capital stock;

      .     Declaring and paying dividends;


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      .     Selling our assets;

      .     Conducting transactions with our affiliates; and

      .     Incurring liens.

Debt instruments we issue in future offerings will likely contain similar
restrictive covenants.

We may be able to incur substantially more debt, which would increase the risks
associated with our substantial leverage.

Although the terms of our debt instruments restrict our ability to incur
additional indebtedness, our organizational documents do not limit the amount of
indebtedness we may incur. If we add new debt to our current debt, the related
risks we now face could intensify and increase the risk of default on our
indebtedness.

Rising interest rates could have an adverse effect on our cash flow and interest
expense.

Some of our borrowings under our credit facility bear interest at a variable
rate. In addition, in the future we may incur indebtedness bearing interest at a
variable rate, or we may be required to retain our existing indebtedness at
higher interest rates. Accordingly, increases in interest rates could increase
our interest expense and adversely affect our cash flow, reducing the amounts
available to make payments on our other indebtedness.

Operating Risks

The recent economic slowdown and the September 11, 2001 terrorist attacks have
adversely affected our REVPAR performance and, if it worsens or continues, these
effects could be material.

We have experienced declines in revenue per available room, or RevPAR, as
follows:

      .     16.1% decline during the third quarter of 2001, as compared to the
            comparable period of 2000;

      .     24.1% decline during the fourth quarter of 2001, as compared to the
            comparable period of 2000; and

      .     10.4% decline during full year 2001, as compared to full year 2000.

These declines are due to the economic slowdown that began in 2001, as well as
the terrorist attacks of September 11, 2001. A sharper-than-anticipated decline
in business and leisure travel was the primary cause of the declines, which were
principally reflected in decreased occupancies. We expect that RevPAR in 2002
will decline approximately 2.5% compared to 2001. If the current economic
slowdown worsens significantly or continues for a protracted period of time, the
declines in occupancy could also lead to further declines in average daily room
rates and could have a material adverse effect on our EBITDA, funds from
operations and earnings.

The economic slowdown and the resulting declines in RevPAR began in March 2001.
Those trends are currently continuing. The decline in occupancy during the
second, third and fourth quarters of 2001 has led to declines in room rates as
hotels compete more aggressively for guests.

If the hotel industry is negatively affected by one or more particular risks,
our operating results could suffer.

Until January 1, 2001, we leased all but eight of our hotels to MeriStar Hotels.
Each of those leases was a 12-year participating lease under which MeriStar
Hotels was required to pay us a fixed base rent plus participating rent based on
a percentage of revenues at the hotel. As a result of changes to the federal tax
laws governing REITs, which became effective on January 1, 2001, MeriStar Hotels
assigned those leases to our taxable REIT subsidiaries and those subsidiaries
have entered into management agreements with MeriStar Hotels to manage our
hotels. As a result of this new lease structure, we report operating revenues
and expenses from the hotels subject to this new lease structure. Therefore, we
are subject to the risk of fluctuating hotel operating margins at those hotels.
Hotel operating expenses include but are not limited to wage and benefit costs,
supplies, repair and maintenance expenses, utilities, insurance and other
operating expenses. These operating expenses are more difficult to predict and
control than percentage lease revenue, resulting in increased unpredictability
in our operating margins.

Various factors could adversely affect our hotel revenues, which are subject to
all of the operating risks inherent in the lodging industry. These risks include
the following:

      .     changes in general and local economic conditions;

      .     cyclical overbuilding in the lodging industry;

      .     varying levels of demand for rooms and related services;

      .     competition from other hotels, motels and recreational properties,
            some of which may be owned or operated by


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            companies having greater marketing and financial resources than we
            do;

      .     dependence on business and commercial travelers and tourism, which
            may fluctuate and be seasonal;

      .     decreases in air travel;

      .     fluctuations in operating costs;

      .     the recurring costs of necessary renovations, refurbishment and
            improvements of hotel properties;

      .     changes in governmental regulations that influence or determine
            wages, prices and construction and maintenance costs; and

      .     changes in interest rates and the availability of credit.

In addition, demographic, geographic or other changes in one or more of the
markets of our hotels could impact the convenience or desirability of the sites
of some hotels, which would in turn affect their operations. Also, due to the
level of fixed costs required to operate full-service hotels, we generally
cannot reduce significant expenditures necessary for the operation of hotels
when circumstances cause a reduction in revenue.

Acts of terrorism, the threat of terrorism and the ongoing war against terrorism
have impacted and will continue to impact our industry and our results of
operations.

The terrorist attacks of September 11, 2001 have had a negative impact on our
hotel operations in the third and fourth quarters causing lower than expected
performance in an already slowing economy. The events of September 11 have
caused a significant decrease in our hotels' occupancy and average daily rate
due to disruptions in business and leisure travel patterns, and concerns about
travel safety. Major metropolitan area and airport hotels have been adversely
affected by concerns about air travel safety and a significant overall decrease
in the amount of air travel.

Prior to the September 11 terrorist attacks, RevPAR at our hotels for the third
quarter was down 8.9% from the RevPAR for the same period in 2000 and occupancy
was down 4.5%. For the remainder of September following the terrorist attacks,
RevPAR was down 41.7% from the corresponding period in 2000 and occupancy was
down 34.3%. During October, November and December 2001, RevPAR was down 25.6%,
24.1%, and 21.7% respectively, and occupancy was down 17.5%, 15.8% and 13.2%,
respectively, from the same periods in 2000.

In addition, the September 11, 2001 terrorist attacks have had a dramatic effect
on the insurance and reinsurance industries. Many countries are being subjected
to losses or cancellations of insurance policies, or renewals of existing
coverages but with extreme price increases. At our insurance policy renewals in
mid-2002, we may be subject to restrictions as compared to our current coverage
types or levels; price increases; or a combination of both restrictions and
price increases.

The September 11 terrorist attacks were unprecedented in scope, and in their
immediate, dramatic impact on travel patterns. We have not previously
experienced such events, and it is currently not possible to accurately predict
if and when travel patterns will be restored to pre-September 11 levels. While
we have had improvements in our operating levels from the period immediately
following the attacks, we believe the uncertainty associated with subsequent
incidents, threats and the possibility of future attacks will continue to hamper
business and leisure travel patterns for the next several quarters.

We and MeriStar Hospitality have significant operational and financing
relationships with MeriStar Hotels, and MeriStar Hotels' operating or financial
difficulties could adversely affect our hotels' operations or our financial
position.

MeriStar Hotels manages all 112 of our hotels. As a result, we depend heavily on
MeriStar Hotels' ability to provide efficient, effective management services to
our hotels. Although we monitor the performance of our properties on an on-going
basis, MeriStar Hotels is responsible for the day-to-day management of the
properties. In addition to this operating relationship with MeriStar Hotels, we
have a revolving credit agreement that allows MeriStar Hotels to borrow from us.
That revolving credit agreement matures 91 days following the maturity of
MeriStar Hotels' senior credit facility. The maturity date of MeriStar Hotels'
senior credit facility is February 28, 2003. MeriStar Hotels has borrowed $36
million as of December 31, 2001 under their revolving credit agreement with us.
MeriStar Hotels has incurred significant net losses of $(18.9) million and
$(9.4) million for the years ended December 31, 2001 and 2000, respectively. If
MeriStar Hotels were unable to continue in business as a hotel operator, we
would have to find a new manager for our hotels. This transition could
significantly disrupt the operations of our hotels, and lead to lower operating
results from our properties. In addition, if MeriStar Hotels was unable to repay
its borrowings from us, we would experience a loss from the write-off of this
asset.

The lodging business is seasonal.

Generally, hotel revenues are greater in the second and third calendar quarters
than in the first and fourth calendar quarters. This may not be true, however,
for hotels in major tourist destinations. Revenues for hotels in tourist areas
generally are substantially greater during tourist season than other times of
the year. Because of the September 11 events, our operating results for the 2001


                                       9

<PAGE>

third and fourth quarters were lower than expected. Seasonal variations in
revenue at our hotels will cause quarterly fluctuations in our revenues. Events
beyond our control, such as extreme weather conditions, economic factors and
other considerations affecting travel, may also adversely affect our earnings.

We may be adversely affected by the limitations in our franchise and licensing
agreements.

As of December 31, 2001, approximately 88% of our hotels were operated pursuant
to existing franchise or license agreements with nationally recognized hotel
brands. The franchise agreements generally contain specific standards for, and
restrictions and limitations on, the operation and maintenance of a hotel in
order to maintain uniformity within the franchisor system. Those limitations may
conflict with our philosophy, shared with MeriStar Hotels, of creating specific
business plans tailored to each hotel and to each market. Standards are often
subject to change over time, in some cases at the discretion of the franchisor,
and may restrict a franchisee's ability to make improvements or modifications to
a hotel without the consent of the franchisor. In addition, compliance with
standards could require a franchisee to incur significant expenses or capital
expenditures. Action or inaction on our part or by our third-party operator
could result in a breach of standards or other terms and conditions of the
franchise agreements, and could result in the loss or cancellation of a
franchise license. Loss of franchise licenses without replacement would likely
have an adverse effect on our hotel revenues.

In connection with terminating or changing the franchise affiliation of a
currently-owned hotel or a subsequently acquired hotel, we may be required to
incur significant expenses or capital expenditures. Moreover, the loss of a
franchise license could have a material adverse effect upon the operations or
the underlying value of the hotel covered by the franchise due to the loss of
associated name recognition marketing support and centralized reservation
systems provided by the franchisor. The franchise agreements covering the hotels
expire or terminate, without specified renewal rights, at various times and have
differing remaining terms. As a condition to renewal, the franchise agreements
frequently contemplate a renewal application process, which may require
substantial capital improvements to be made to the hotel. Unexpected capital
expenditures could adversely affect our results of operations and our ability to
make payments on our indebtedness.

The lodging industry is highly competitive.

We have no single competitor or small number of competitors that are considered
to be dominant in the industry. We operate in areas that contain numerous
competitors, some of which may have substantially greater resources than us.
Competition in the lodging industry is based generally on location,
availability, room rates or accommodations price, range and quality of services
and guest amenities offered. New or existing competitors could significantly
lower rates, offer greater conveniences, services or amenities; or significantly
expand, improve or introduce new facilities in markets in which we compete. All
of these factors could adversely affect our operations and the number of
suitable business opportunities.

Costs of compliance with environmental laws could adversely affect our operating
results.

Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in property. Laws often impose liability whether or not the owner
or operator knew of, or was responsible for, the presence of hazardous or toxic
substances. In addition, the presence of contamination from hazardous or toxic
substances, or the failure to properly remediate contaminated property, may
adversely affect the owner's ability to sell or rent real property or to borrow
funds using real property as collateral. Persons who arrange for the disposal or
treatment of hazardous or toxic substances may also be liable for the costs of
removal or remediation of these substances at the disposal or treatment
facility, whether or not the facility is or ever was owned or operated by those
persons.

Federal and state laws also regulate the operation and removal of underground
storage tanks. In connection with the ownership and operation of the hotels, we
could be held liable for the costs of remedial action with respect to the
regulated substances and storage tanks and claims related thereto. Activities
have been undertaken to close or remove storage tanks located on the property of
several of the hotels.

All of our hotels have undergone Phase I environmental site assessments, which
generally provide a nonintrusive physical inspection and database search, but
not soil or groundwater analyses, by a qualified independent environmental
engineer. The purpose of a Phase I is to identify potential sources of
contamination for which the hotels may be responsible and to assess the status
of environmental regulatory compliance. The Phase I assessments have not
revealed any environmental liability or compliance concerns that we believe
would have a material adverse effect on our results of operations or financial
condition, nor are we aware of any material environmental liability or concerns.
Nevertheless, it is possible that these environmental site assessments did not
reveal all environmental liabilities or compliance concerns or that material
environmental liabilities or compliance concerns exist of which we are currently
unaware.


                                       10

<PAGE>

In addition, our hotels have been inspected to determine the presence of
asbestos. Federal, state and local environmental laws, ordinances and
regulations also require abatement or removal of asbestos-containing materials
and govern emissions of and exposure to asbestos fibers in the air.
Asbestos-containing materials are present in various building materials such as
sprayed-on ceiling treatments, roofing materials or floor tiles at some of the
hotels. Operations and maintenance programs for maintaining asbestos-containing
materials have been or are in the process of being designed and implemented, or
the asbestos-containing materials have been scheduled to be or have been abated,
at these hotels. Any liability resulting from non-compliance or other claims
relating to environmental matters could have a material adverse effect on our
results of operations or financial condition.

Aspects of our operations are subject to government regulation, and changes in
that regulation may have significant effects on our business.

A number of states regulate the licensing of hotels and restaurants, including
liquor license grants, by requiring registration, disclosure statements and
compliance with specific standards of conduct. MeriStar Hotels believes our
hotels are substantially in compliance with these requirements or, in the case
of liquor licenses, that they have or will promptly obtain the appropriate
licenses. Compliance with, or changes in, these laws could reduce the revenue
and profitability of our hotels and could otherwise adversely affect our
revenues, results of operations and financial condition.

Under the Americans with Disabilities Act, or ADA, all public accommodations are
required to meet federal requirements related to access and use by disabled
persons. These requirements became effective in 1992. Although significant
amounts have been and continue to be invested in ADA required upgrades to our
hotels, a determination that our hotels are not in compliance with the ADA could
result in a judicial order requiring compliance, imposition of fines or an award
of damages to private litigants.

We invest in a single industry.

Our current strategy is to acquire interests only in hospitality and lodging. As
a result, we are subject to the risks inherent in investing in a single
industry. The effects on cash available for distribution resulting from a
downturn in the hotel industry may be more pronounced than if we had diversified
our investments.

We have a high concentration of hotels in the upscale, full-service segment,
which may increase our susceptibility to an economic downturn.

As a percentage of total rooms, we currently have 85% of our hotels in the
upper-upscale, full-service segment. This hotel segment generally demands higher
room rates. In an economic downturn, hotels in this segment may be more
susceptible to a decrease in revenues, as compared to hotels in other segments
that have lower room rates. This characteristic may result from hotels in this
segment generally targeting business and high-end leisure travelers. In periods
of economic difficulties, business and leisure travelers may seek to reduce
travel costs by limiting trips or seeking to reduce costs on their trips. This
could have a material adverse effect on our revenues and results of operations.

Corporate Structure Risks

We and MeriStar Hospitality have overlapping officers and directors with
MeriStar Hotels.

MeriStar Hospitality shares five of the ten members of its board of directors
and several senior executives with MeriStar Hotels. MeriStar Hospitality's and
our relationship with MeriStar Hotels is governed by an intercompany agreement.
That agreement restricts each party from taking advantage of business
opportunities without first presenting those opportunities to the other party.
We may have conflicting views with MeriStar Hotels on operation and management
of our hotels, and with respect to lease arrangements, acquisitions and
dispositions. Inherent potential conflicts of interest will be present in all of
the numerous transactions among MeriStar Hotels and us.

We have restrictions on our business and on our future opportunities that could
affect our business.

We and MeriStar Hospitality are a party to an intercompany agreement with
MeriStar Hotels. So long as the agreement remains in effect, MeriStar Hotels is
prohibited from making real property investments a REIT could make unless:

      .     We are first given the opportunity, but elect not to pursue the
            investments;

      .     The investment is on land already owned or leased by MeriStar Hotels
            or subject to a lease or purchase option in favor of MeriStar
            Hotels;

      .     MeriStar Hotels will operate the property under a trade name owned
            by MeriStar Hotels; or

      .     The investment is a minority investment made as part of a lease or
            management agreement.


                                       11

<PAGE>

The intercompany agreement generally grants MeriStar Hotels the right of first
refusal with respect to any management opportunity at any of our properties we
do not elect to have managed by a hotel brand owner. We and MeriStar Hospitality
will make such an opportunity available to MeriStar Hotels only if MeriStar
Hospitality determines that:

      .     Consistent with MeriStar Hospitality's status as a real estate
            investment trust, it must enter into a management agreement with an
            unaffiliated third party with respect to the property;

      .     MeriStar Hotels is qualified to be the manager of that property; and

      .     MeriStar Hospitality decides to have the property operated by the
            owner of a hospitality trade name under that trade name.

Because of the provisions of the intercompany agreement, we are restricted in
the nature of our business and the opportunities we may pursue.

In addition, under the intercompany agreement, each party must cooperate with
the other party to effect any securities issuance of the other party by
assisting in the preparation of any registration statement or other document
required in connection with the issuance.

We may have conflicts relating to sale of hotels subject to management
agreements.

Our management agreements with MeriStar Hotels require us to pay a termination
fee to MeriStar Hotels if we elect to sell a hotel or if we elect not to restore
a hotel after a casualty. We must pay this fee if we do not replace the hotel
with another hotel subject to a management agreement with a fair market value
equal to the fair market value of MeriStar Hotels' remaining management fee due
under the management agreement to be terminated. Where applicable, the
termination fee is equal to the present value of the remaining payments
(discounted using a 10% rate) of the existing term under the agreement, based on
the operating results of the hotel for the 12 months preceding termination. Our
decision to sell a hotel may, therefore, have significantly different
consequences for MeriStar Hotels and us.

We lack control over management and operations of the hotels.

We depend on the ability of MeriStar Hotels to operate and manage our hotels. In
order for MeriStar Hospitality to maintain its REIT status, we cannot operate
our hotels. As a result, we are unable to directly implement strategic business
decisions for the operation and marketing of our hotels, such as decisions with
respect to the setting of room rates, food and beverage operations and similar
matters.

Our relationship with MeriStar Hotels could have a negative impact on our
acquisitions.

Our relationship with MeriStar Hotels could negatively impact our ability to
acquire additional hotels because hotel management companies, franchisees and
others who would have approached us with acquisition opportunities in hopes of
establishing lessee or management relationships may not do so knowing that we
will rely primarily on MeriStar Hotels to manage the acquired properties. These
persons may instead provide acquisition opportunities to hotel companies that
will allow them to manage the properties following the sale. This could have a
negative impact on our acquisition activities in the future.

There are potential conflicts of interest relating to our relationship with
MeriStar Hotels.

The terms of the intercompany agreement were not negotiated on an arm's-length
basis. Because the two companies share some of the same executive officers and
directors, there is a potential conflict of interest with respect to the
enforcement and termination of the intercompany agreement to our benefit and to
the detriment of MeriStar Hotels, or to the benefit of MeriStar Hotels and to
our detriment. Furthermore, because of the independent trading of the two
companies, stockholders in each company may develop divergent interests which
could lead to conflicts of interest. The divergence of interests could also
reduce the anticipated benefits of our intercompany agreement with MeriStar
Hotels.

Federal Income Tax Risks

Requirements imposed on us relating to MeriStar Hospitality's REIT status could
cause us to operate in a manner that might be disadvantageous to noteholders.

We are the operating partnership through which MeriStar Hospitality holds its
assets and conducts its operations. MeriStar Hospitality has operated and
intends to continue to operate in a manner designed to permit it to qualify as a
REIT for federal income tax purposes.


                                       12

<PAGE>

To obtain the favorable tax treatment accorded to REITs under the Internal
Revenue Code, MeriStar Hospitality normally will be required each year to
distribute to its stockholders at least 90% of its REIT income, determined
without regard to the deduction for dividends paid and by excluding net capital
gain. MeriStar Hospitality will be subject to income tax on undistributed REIT
income and net capital gain, and to a 4% nondeductible excise tax on the amount,
if any, by which distributions it pays with respect to any calendar year are
less than the sum of:

      -     85% of its ordinary income for the calendar year;

      -     95% of its capital gain net income for that year; and

      -     100% of its undistributed income from prior years.

MeriStar Hospitality's income consists primarily of its share of our income and
its cash flow consists primarily of its share of distributions made by us.

Our partnership agreement provides that we will not take, or refrain from
taking, any action which, in the judgment of MeriStar Hospitality, as our
general partner,

            (a)   could adversely affect the ability of MeriStar Hospitality to
                  continue to qualify as a REIT, unless MeriStar Hospitality
                  otherwise ceases to qualify as a REIT, or

            (b)   could subject MeriStar Hospitality to additional income or
                  excise taxes applicable to REITs under the Internal Revenue
                  Code

unless such action or inaction has been specifically consented to by MeriStar
Hospitality in writing. Our partnership agreement also provides that MeriStar
Hospitality, as our general partner, shall use its best efforts to cause us to
make sufficient distributions to enable MeriStar Hospitality to meet the
distribution requirements described above and to avoid any federal income or
excise tax liability, except to the extent that such distributions would
contravene the terms of any notes or other debt obligations to which we are
subject in conjunction with borrowed funds. Finally, our partnership agreement
generally requires us to make pro rata distributions to all holders of common
units, not just to MeriStar Hospitality. Thus, whenever distributions are made
to MeriStar Hospitality in order to satisfy the foregoing requirements,
equivalent distributions must be made to other partners holding common units.

These provisions of our partnership agreement could in the future cause us to
distribute amounts that otherwise would be spent on future acquisitions,
unanticipated capital expenditures or repayment of debt, which would require us
to borrow funds or to sell assets to fund the cost of these items. In addition,
it is possible that differences in timing between the receipt of income and the
payment of expenses in arriving at our taxable income or the taxable income of
MeriStar Hospitality and the effect of nondeductible capital expenditures, the
creation of reserves or required debt amortization payments could in the future
require us to borrow funds on a short or long-term basis to enable MeriStar
Hospitality to continue to qualify as a REIT and avoid federal income taxes and
the 4% nondeductible excise tax. In these circumstances, we might need to borrow
funds in order to avoid adverse tax consequences to MeriStar Hospitality even if
we believe that the then prevailing market conditions generally are not
favorable for those borrowings or that those borrowings are not advisable in the
absence of these tax considerations.

Distributions by us will be determined by MeriStar Hospitality, our general
partner, and are dependent on a number of factors, including:

      -     the amount of cash available for distribution;

      -     our financial condition;

      -     our decision to reinvest funds rather than to distribute the funds;

      -     restrictions in our debt instruments;

      -     our capital expenditure requirements;

      -     the annual distribution requirements under the real estate
            investment trust provisions of the Internal Revenue Code; and

      -     other factors as we deem relevant.

Although we intend to continue to make distributions so that MeriStar
Hospitality may satisfy the annual distribution requirement to avoid corporate
income taxation on the earnings that it in turn distributes, we may not be able
to do so.

If we were subject to federal income taxation as a corporation, our ability to
make payments on our borrowings could be substantially reduced.

We currently are classified as a partnership for federal income tax purposes.
Although we are organized and operated with a view to maintaining that status,
if the Internal Revenue Service were successfully to determine that we should
properly be treated for federal income tax purposes as a corporation rather than
as a partnership, we would be required to pay federal income tax at


                                       13

<PAGE>

corporate tax rates on our taxable income. As described above, we generally
expect to make distributions to our partners each year at least equal to the
amount of our taxable income so that MeriStar Hospitality can make distributions
to its stockholders sufficient to avoid federal income and excise taxes. To the
extent we had made such distributions to our partners, we might be required to
borrow funds or to liquidate assets to pay the applicable corporate income tax.
In addition to the direct impact on us, our treatment as a corporation for
federal income tax purposes would also cause MeriStar Hospitality to cease to
qualify as a REIT, which would have the possible results described below.

If MeriStar Hospitality fails to qualify as a REIT, it will be subject to
federal income tax at corporate rates and its ability to satisfy its obligations
as a guarantor of our borrowings might be impaired.

Qualification as a REIT involves the application of highly technical and complex
provisions of the Internal Revenue Code of 1986 for which there are only limited
judicial and administrative interpretations. In addition, there are not yet any
judicial or administrative interpretations of the federal tax legislation
enacted in 1999 with respect to our taxable REIT subsidiaries. The determination
of various factual matters and circumstances not entirely within the control of
MeriStar Hospitality may affect its ability to continue to qualify as a REIT.
The complexity of these provisions and of the applicable income tax regulations
that have been promulgated under the Internal Revenue Code is greater in the
case of a REIT that holds its assets through a partnership, such as MeriStar
Hospitality does. Moreover, legislation, new regulations, administrative
interpretations or court decisions might change the tax laws with respect to
qualification as a REIT or the federal income tax consequences of that
qualification.

If MeriStar Hospitality fails to qualify as a REIT in any taxable year, it will
not be allowed a deduction for distributions to its stockholders in computing
its taxable income and it will be subject to federal income tax, including any
applicable alternative minimum tax, on its taxable income at the applicable
corporate rate. In addition, unless it was entitled to relief under statutory
provisions, it would be disqualified from treatment as a REIT for the four
taxable years following the year during which qualification is lost. This
disqualification might reduce the funds available to MeriStar Hospitality to
satisfy any obligations it might have as a guarantor of our borrowings because
of the additional tax liability for the year or years involved. In addition, to
the extent that distributions to stockholders would have been made in
anticipation of MeriStar Hospitality qualifying as a REIT, it might be required
to borrow funds or to liquidate assets to pay the applicable corporate income
tax, including assets held by us.

Other Risks

We rely on the knowledge and experience of some key personnel, and the loss of
these personnel may have a material adverse effect on our operations.

We place substantial reliance on the lodging industry knowledge and experience
and the continued services of our senior management, led by Paul W. Whetsell and
John Emery. While we believe that, if necessary, we could find replacements for
these key personnel, the loss of their services could have a material adverse
effect on our operations. In addition, Messrs. Whetsell and Emery are currently
engaged, and in the future will continue to engage, in the management of
MeriStar Hotels. Messrs. Whetsell and Emery may experience conflicts of interest
in allocating management time, services and functions between MeriStar Hotels
and us.

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Information both included and incorporated by reference in this annual report on
Form 10-K may contain forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act, and as such may
involve known and unknown risks, uncertainties and other factors which may cause
our actual results, performance or achievements to be materially different from
future results, performance or achievements expressed or implied by such
forward-looking statements. Forward-looking statements, which are based on
certain assumptions and describe our future plans, strategies and expectations,
are generally identifiable by use of the words "may," "will," "should,"
"expect," "anticipate," "estimate," "believe," "intend" or "project" or the
negative thereof or other variations thereon or comparable terminology. Factors
which could have a material adverse effect on our operations and future
prospects include, but are not limited to:

      .     the current slowdown of the national economy;

      .     economic conditions generally and the real estate market
            specifically;

      .     the impact of the September 11, 2001 terrorist attacks or actual or
            threatened future terrorist incidents;

      .     legislative/regulatory changes, including changes to laws governing
            the taxation of REITs;

      .     availability of capital;

      .     interest rates;

      .     competition;

      .     supply and demand for hotel rooms in our current and proposed market
            areas; and

      .     changes in generally accepted accounting principles, policies and
            guidelines applicable to REITs.


                                       14

<PAGE>

These risks and uncertainties, along with the risk factors discussed above under
"Risk Factors", should be considered in evaluating any forward-looking
statements contained in this supplemental information.

We undertake no obligation to update or revise publicly any forward-looking
statement, whether as a result If new information, future events, or otherwise,
other than as required by law.


                                       15

<PAGE>

ITEM 2. PROPERTIES

We and MeriStar Hospitality maintain our corporate headquarters in Washington,
D.C. and own hotel properties throughout the United States and Canada. As of
December 31, 2001, we owned 112 hotels. We lease land for thirteen of our
hotels: Hilton Hotel - Washington, DC; Hilton Hotel - San Pedro, California;
Jekyll Inn - Jekyll Island, Georgia; Hilton Hotel - Clearwater, Florida; Doral
Forrestal - Princeton, New Jersey; Hilton Hartford - Hartford, Connecticut;
Hotel Maison de Ville - New Orleans, Louisiana; Courtyard by Marriott
Meadowlands - Secaucus, New Jersey; Wyndham Hotel Albuquerque - Albuquerque, New
Mexico; Hilton Hotel Toledo -Toledo, Ohio; Wyndham Airport Hotel - San Jose,
California; Courtyard by Marriott - Lake Buena Vista, Florida; and Radisson
Hotel - Rochester, New York. We also lease part of the land for three of our
hotels: Westin Morristown - Morristown, New Jersey; Doral Palm Springs - Palm
Springs, California; and Westin Resort Key Largo - Key Largo, Florida. No one
hotel property is material to our operations. A typical hotel has meeting and
banquet facilities, food and beverage facilities, and guest rooms and suites.

Our hotels generally feature comfortable, modern guest rooms, extensive meeting
and convention facilities and full-service restaurant and catering facilities.
Our hotels are designed to attract meeting, convention, and banquet/reception
functions from groups and associations, upscale business and vacation travelers,
and the local community.

The following table sets forth certain information with respect to the hotels
for the year ended December 31, 2001:

                                                                           Guest
                Hotel                         Location                     Rooms
                -----                         --------                     -----

Sheraton Hotel......................    Mesa, AZ                            273
Crowne Plaza Hotel..................    Phoenix, AZ                         250
Embassy Suites......................    Tucson, AZ                          204
Courtyard by Marriott...............    Century City, CA                    134
Hilton Hotel........................    Irvine, CA                          289
Marriott Hotel......................    Los Angeles, CA                     469
Courtyard by Marriott...............    Marina Del Rey, CA                  276
Hilton Hotel........................    Monterey, CA                        204
Doral Palm Springs..................    Palm Springs, CA                    285
Hilton Hotel........................    Sacramento, CA                      331
Holiday Inn Select..................    San Diego, CA                       317
Sheraton Hotel......................    San Francisco, CA                   525
Crowne Plaza Hotel..................    San Jose, CA                        239
Wyndham Hotel.......................    San Jose, CA                        355
Hilton Hotel........................    San Pedro, CA                       226
Santa Barbara Inn...................    Santa Barbara, CA                    71
Holiday Inn.........................    Colorado Springs, CO                200
Sheraton Hotel......................    Colorado Springs, CO                500
Embassy Suites......................    Englewood, CO                       236
Hilton Hotel........................    Hartford, CT                        388
Ramada Hotel........................    Meriden, CT                         150
Ramada Hotel........................    Shelton, CT                         155
Doubletree Bradley Airport..........    Windsor Locks, CT                   200
Embassy Row Hilton Hotel............    Washington, DC                      193
Georgetown Inn......................    Washington, DC                       96
The Latham Hotel....................    Washington, DC                      143
South Seas Plantation...............    Captiva, FL                         579
Hilton Hotel........................    Clearwater, FL                      426
Ramada Hotel........................    Clearwater, FL                      289


                                       16

<PAGE>

Hilton Hotel........................    Cocoa Beach, FL                     296
Holiday Inn.........................    Ft. Lauderdale, FL                  240
Howard Johnson Resort...............    Key Largo, FL                       100
Westin Hotel........................    Key Largo, FL                       200
Courtyard by Marriott...............    Lake Buena Vista, FL                314
Sheraton Hotel......................    Lake Buena Vista, FL                489
Radisson Hotel......................    Marco Island, FL                    268
Holiday Inn.........................    Madeira Beach, FL                   149
Radisson Hotel......................    Orlando, FL                         742
Safety Harbor Resort and Spa........    Safety Harbor, FL                   193
Best Western Hotel..................    Sanibel Island, FL                   46
Sanibel Inn.........................    Sanibel Island, FL                   96
Seaside Inn.........................    Sanibel Island, FL                   32
Song of the Sea.....................    Sanibel Island, FL                   30
Sundial Beach Resort................    Sanibel Island, FL                  243
Doubletree Hotel....................    Tampa, FL                           496
Doubletree Guest Suites.............    Atlanta, GA                         155
Westin Atlanta Airport..............    Atlanta, GA                         495
Jekyll Inn..........................    Jekyll Island, GA                   262
Wyndham Hotel.......................    Marietta, GA                        218
Radisson Hotel......................    Arlington Heights, IL               247
Radisson Hotel & Suites.............    Chicago, IL                         350
Holiday Inn.........................    Rosemont, IL                        507
Radisson Hotel......................    Schaumburg, IL                      200
Doubletree Guest Suites.............    Indianapolis, IN                    137
Radisson Plaza......................    Lexington, KY                       367
Hilton Hotel........................    Louisville, KY                      321
Holiday Inn Select..................    Kenner, LA                          303
Hilton Hotel & Towers...............    Lafayette, LA                       327
Maison de Ville.....................    New Orleans, LA                      23
Radisson Hotel......................    Annapolis, MD                       219
Radisson Hotel......................    Baltimore, MD                       148
Sheraton Hotel......................    Columbia, MD                        287
Hilton Hotel........................    Detroit, MI                         151
Hilton Hotel........................    Grand Rapids, MI                    224
Holiday Inn Sports Complex..........    Kansas City, MO                     163
Sheraton Airport Plaza..............    Charlotte, NC                       222
Hilton Hotel........................    Durham, NC                          194
Courtyard by Marriott...............    Durham, NC                          146
Ramada Hotel........................    Mahwah, NJ                          139
Sheraton Hotel......................    Mahwah, NJ                          225
Westin Hotel........................    Morristown, NJ                      199
Four Points Hotel...................    Mt. Arlington, NJ                   124
Doral Forrestal.....................    Princeton, NJ                       290
Courtyard by Marriott...............    Secaucus, NJ                        165
Marriott Hotel......................    Somerset, NJ                        440
Doubletree Hotel....................    Albuquerque, NM                     295
Wyndham Hotel.......................    Albuquerque, NM                     276
Crowne Plaza Hotel..................    Las Vegas, NV                       201
St. Tropez Suites...................    Las Vegas, NV                       149
Radisson Hotel......................    Rochester, NY                       171
Radisson Hotel......................    Middleburg Heights, OH              237
Hilton Hotel........................    Toledo, OH                          213
Westin Hotel........................    Oklahoma City, OK                   395
Crowne Plaza Hotel..................    Lake Oswego, OR                     161
Sheraton Hotel......................    Frazer, PA                          198


                                       17

<PAGE>

Embassy Suites......................    Philadelphia, PA                    288
Holiday Inn Select..................    Trevose, PA                         215
Hilton Hotel........................    Arlington, TX                       309
Doubletree Hotel....................    Austin, TX                          350
Hilton & Towers.....................    Austin, TX                          320
Holiday Inn Select..................    Bedford, TX                         243
Radisson Hotel......................    Dallas, TX                          304
Renaissance Hotel...................    Dallas, TX                          289
Sheraton Hotel......................    Dallas, TX                          348
Hilton Hotel........................    Houston, TX                         291
Marriott Hotel......................    Houston, TX                         302
Hilton Hotel........................    Houston, TX                         295
Sheraton Hotel......................    Houston, TX                         382
Holiday Inn Select..................    Irving, TX                          409
Hilton Hotel........................    Midland, TX                         249
Hilton Hotel........................    Salt Lake City, UT                  287
Holiday Inn.........................    Alexandria, VA                      178
Radisson Hotel......................    Alexandria, VA                      253
Hilton Hotel........................    Arlington, VA                       209
Hilton Hotel........................    Arlington, VA                       386
Hilton Hotel........................    Bellevue, WA                        179
Crowne Plaza Hotel..................    Madison, WI                         226
Holiday Inn.........................    Madison, WI                         194
Holiday Inn.........................    Calgary, Alberta, Canada            170
Sheraton Hotel......................    Guildford, B.C., Canada             278
Holiday Inn.........................    Vancouver, B.C., Canada             100
Ramada Hotel........................    Vancouver, B.C., Canada             118
                                                                         -------
Total Rooms                                                              28,653
                                                                         ======


                                       18

<PAGE>

ITEM 3. LEGAL PROCEEDINGS

In the course of our normal business activities, various lawsuits, claims and
proceedings have been or may be instituted or asserted against us. Based on
currently available facts, we believe that the disposition of matters pending or
asserted will not have a material adverse effect on our consolidated financial
position, results of operations or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We have not submitted any matters to a vote of security holders during the
fourth quarter of 2001.


                                       19

<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is not an established public trading market for our OP units. The OP
units, however, are redeemable at the option of holder for a like number of
shares of common stock MeriStar Hospitality, or, at the option of MeriStar
Hospitality for the cash equivalent thereof. The following information is
provided regarding the common stock of MeriStar Hospitality. MeriStar
Hospitality common stock is listed on the New York Stock Exchange under the
symbol "MHX." The following table sets forth for the periods indicated the high
and low closing sale prices for our common stock on the NYSE.


                                                                   Price
                                                                   -----
                                                              High        Low
                                                              ----        ---

2002:
      First Quarter (through March 25, 2002)                 $17.99     $13.75
2001:
      Fourth Quarter (ended December 31, 2001)                14.22       9.24
      Third Quarter (ended September 30, 2001)                23.30       8.65
      Second Quarter (ended June 30, 2001)                    23.75      18.50
      First Quarter (ended March 31, 2001)                    22.00      19.08
2000:
      Fourth Quarter (ended December 31, 2000)                20.63      18.38
      Third Quarter (ended September 30, 2000)                22.81      20.25
      Second Quarter (ended June 30, 2000)                    21.02      17.63
      First Quarter (ended March 31, 2000)                    17.44      15.06

The last reported sale price of MeriStar Hospitality's common stock on the NYSE
on March 25, 2002 was $17.99. As of March 25, 2002, there were approximately 610
holders of record of MeriStar Hospitality's common stock.

On December 17, 2001, MeriStar Hospitality declared a dividend of $0.01 per
share relating to the fourth quarter of 2001. That dividend was paid on January
31, 2002 to stockholders of record as of December 28, 2001.

MeriStar Hospitality intends to make regular quarterly distributions to their
stockholders. Based on the current outlook, they expect to retain their
quarterly dividend at $0.01 per share for the first and second quarters of 2002
(expected to be paid in the second and third quarters of 2002). Any future
distributions will be at the discretion of their Board of Directors and will be
determined by factors including our operating results, capital expenditure
requirements, the economic outlook, the Internal Revenue Service dividend payout
requirements for REITs and such other factors as their Board of Directors deems
relevant. Also, the indentures related to MeriStar Hospitality's senior
unsecured notes, senior subordinated notes and convertible notes contain
limitations on their ability to declare and pay dividends. Therefore, MeriStar
Hospitality cannot provide assurance that any such distributions will be made in
the future.

In order to maintain MeriStar Hospitality's qualification as a REIT, they were
required to make annual distributions to their stockholders of at least 90% of
their taxable income (excluding net capital gains). Under certain circumstances,
they may be required to make distributions in excess of cash available for
distribution in order to meet these distribution requirements. In that event,
they would seek to borrow the amount to obtain the cash necessary to make
distributions to retain their qualification as a REIT for Federal income tax
purposes. The distributions made for 2001 were 59% return of capital and 41%
ordinary income.

Recent Sales of Unregistered Securities

On January 7, 1999, we privately issued 65,875 common OP Units as part of the
purchase of the Holiday Inn Madison, Wisconsin.

On March 29, 2000, we issued 462,500 Profits-Only OP Units, or POPs, to certain
of our employees pursuant to our POPs Plan.

On April 16, 2001, we issued 350,000 POPs to certain of our employees pursuant
to our POPs Plan.


                                       20

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth our selected historical financial data. We have
extracted the selected operating results and balance sheet data from our
consolidated financial statements for each of the periods presented. The
following information should be read in conjunction with our consolidated
financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                                      -----------------------
                                                                    2001          2000          1999          1998          1997
                                                                    ----          ----          ----          ----          ----
                                                                 (amounts in thousands, except per share amounts and operating data)
<S>                                                              <C>           <C>           <C>           <C>           <C>
Total revenues ................................................. $1,084,888    $  400,685    $  374,820    $  522,031    $  292,554
Net operating income ...........................................     81,656       230,340       218,299       135,910        58,537
Interest expense, net ..........................................    122,376       117,524       100,387        50,492        20,968
Income (loss) before gain (loss) on sale of assets, and
    extraordinary gain (loss) ..................................    (39,628)      111,197       116,207        86,304        21,290
Gain (loss) on sale of assets, net of tax (A) ..................     (2,137)        3,439          --            --            --
Extraordinary gain (loss), net of tax (B) ......................     (2,720)        3,400        (4,551)       (1,238)       (4,092)
Net income (loss) .............................................. $  (44,485)   $  118,036    $  111,656    $   85,066    $   17,198
Net income applicable to common unit holders ................... $  (45,050)   $  117,471    $  111,091    $   84,416    $   17,198

Basic earnings per OP unit before extraordinary gain (loss) .... $    (0.89)   $     2.25    $     2.22    $     2.38    $     1.29
Diluted earnings per OP unit before extraordinary gain (loss) .. $    (0.89)   $     2.18    $     2.15    $     2.25    $     1.27
Distributions per common OP unit (C) ........................... $    1.525    $     2.02    $     2.02    $     0.82          --
Number of OP units outstanding (D) .............................     49,033        48,851        52,193        51,460        26,763

Other Financial Data:
EBITDA (E) ..................................................... $  198,055    $  341,028    $  320,094    $  194,752    $   78,891
Net cash provided by operating activities ......................    150,135       224,088       228,329       186,891        55,417
Net cash used in investing activities ..........................    (68,890)      (14,286)     (187,952)     (785,505)     (579,758)
Net cash (used in) provided by financing activities ............    (58,350)     (212,173)      (41,948)      520,457       584,220
Balance Sheet Data:
Investments in hotel properties, gross ......................... $3,183,677    $3,193,730    $3,118,723    $2,957,543    $  950,052
Total assets ...................................................  3,004,586     3,006,500     3,086,096     2,989,609     1,042,223
Long-term debt .................................................  1,700,134     1,638,319     1,676,771     1,602,352       491,790
Redeemable units ...............................................     67,147        88,545        81,401        89,435        66,847
Partners' Capital ..............................................  1,045,055     1,142,772     1,203,518     1,170,220       396,838

Operating Data:
Owned Hotels and Properties:
    Number of hotels (D) .......................................        112           114           116           117            47
    Number of guest rooms (D) ..................................     28,653        29,090        29,348        29,351        12,019
    Total revenues (in thousands) .............................. $1,084,888    $  400,685    $  374,820    $  522,031    $  292,554
    Average occupancy (F) ......................................       66.0%         72.2%         71.6%         71.5%         72.0%
    ADR (G) .................................................... $   105.04    $   107.60    $   101.14    $    95.00    $    86.87
    RevPAR (H) ................................................. $    69.37    $    77.71    $    72.44    $    67.90    $    62.55
</TABLE>

      (A) During 2001, we sold two hotels and realized a loss on sales of the
      assets. During 2000, we sold three limited service hotels and realized a
      gain on sales of the assets.

      (B) In accordance with generally accepted accounting principles, we have
      recorded the following transactions as extraordinary items:


                  .     During 1997, 1998, and 1999 we refinanced some loan
                        facilities. The write-offs of deferred costs associated
                        with these facilities were extraordinary.

                  .     During 2000, we repurchased some of our notes payable
                        to MeriStar Hospitality at a discount.


                                       21

<PAGE>

                        That gain on the repurchase was recorded as
                        extraordinary.

                  .     During 2001, we repaid term loans under the credit
                        facility. The write-off of deferred financing costs
                        associated with this facility was recorded as
                        extraordinary.

      (C) No distribution or dividends were declared prior to August 3, 1998,
      the date of the merger between American General and CapStar.

      (D) As of December 31 for the periods presented.

      (E) EBITDA represents earnings before interest expense, income taxes,
      depreciation and amortization. Management believes that EBITDA is a useful
      measure of operating performance because (i) it is industry practice to
      evaluate hotel properties based on operating income before interest,
      depreciation and amortization and minority interests of common and
      preferred OP Unit holders, which is generally equivalent to EBITDA, and
      (ii) EBITDA is unaffected by the debt and equity structure of the entity.
      EBITDA does not represent cash flow from operations as defined by
      generally accepted accounting principles, or GAAP, is not necessarily
      indicative of cash available to fund all cash flow needs, should not be
      considered as an alternative to net income under GAAP for purposes of
      evaluating our results of operations, and may not be comparable to other
      similarly titled measures used by other companies.

      (F) Represents total number of rooms occupied by hotel guests on a paid
      basis divided by total available rooms.

      (G) Represents total room revenue divided by total number of rooms
      occupied by hotel guests on a paid basis.

      (H) Represents total room revenue divided by total available rooms.


                                       22

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

General

We are a subsidiary operating partnership of MeriStar Hospitality Corporation.
We own a portfolio of upscale, full-service hotels in the United States and
Canada. Our portfolio is diversified by franchise and brand affiliations. As of
December 31, 2001, we owned 112 hotels, with 28,653 rooms, all of which were
leased by our taxable subsidiaries and managed by MeriStar Hotels & Resorts,
Inc.

We were created on August 3, 1998, as a result of the merger between CapStar
Hotel Company and when American General Hospitality Corporation, and the
subsequent formation of MeriStar Hospitality, the merged entity. MeriStar
Hospitality, a real estate investment trust, or REIT, is the general partner and
owns a one percent interest in us as of December 31, 2001. The limited partners
are as follows:

      .     MeriStar LP, Inc., a wholly-owned subsidiary of MeriStar
            Hospitality, which owns approximately a 90 percent interest as of
            December 31, 2001; and

      .     various third parties, which owned an aggregate interest of nine
            percent at December 31, 2001.

Partners' capital includes the partnership interests of MeriStar Hospitality and
MeriStar LP, Inc. MeriStar Hospitality held 482,533 and 484,581 common OP units
as of December 31, 2001 and 2000, respectively. MeriStar LP, Inc. held
44,041,614 and 43,918,443 common OP units as of December 31, 2001 and 2000,
respectively. Due to the redemption rights of the limited partnership units held
by third parties, these units have been excluded from partner's capital and
classified as Redeemable OP units and are recorded at redemption value. At
December 31, 2001 and 2000, there were 4,508,855 and 4,448,268 redeemable units
outstanding, respectively.

Prior to January 1, 2001, in order for MeriStar Hospitality to maintain its tax
status as a REIT, we were not permitted to participate in the operations of our
hotel properties. To comply with this requirement through December 31, 2000, all
of our properties were subject to leases involving two third-party lessees,
MeriStar Hotels and Prime Hospitality Corporation.

On January 1, 2001, changes to the federal tax laws governing REITs became
effective. Those changes are commonly known as the REIT Modernization Act, or
RMA. The RMA permits REITs to create taxable subsidiaries that are subject to
taxation similar to subchapter C Corporations. We have created a number of these
taxable subsidiaries to lease our real property. The RMA prohibits our taxable
subsidiaries from engaging in the following activities:

      .     Managing the properties they lease (our taxable subsidiaries must
            enter into an "arm's length" management agreement with an
            independent third-party manager that is actively involved in the
            trade or business of hotel management and manages properties on
            behalf of other owners);

      .     Leasing a property that contains gambling operations; or

      .     Owning a brand or franchise.

We believe establishing taxable subsidiaries to lease the properties we own
provides a more efficient alignment of and ability to capture the economic
interests of property ownership. Under the prior lease structure with MeriStar
Hotels, we received lease payments based on the revenues generated by the
properties; MeriStar Hotels, however, operated the properties in order to
maximize net operating income from the properties. This inconsistency could
potentially result in the properties being operated in a way that did not
maximize revenues. With the assignment of the leases from MeriStar Hotels to our
taxable subsidiaries and the execution of the new management agreements (as
described below), we gained the economic risks and rewards usually associated
with ownership of real estate, and property revenues became the basis for
MeriStar Hotels' management fees.

Subsidiaries of MeriStar Hotels assigned the participating leases to our
wholly-owned taxable subsidiaries as of January 1, 2001. In connection with the
assignment, the taxable subsidiaries executed new management agreements with a
subsidiary of MeriStar Hotels to manage our hotels. Under these management
agreements, the taxable subsidiaries pay a management fee to MeriStar Hotels for
each property. The taxable subsidiaries in turn make rental payments to us under
the participating leases. The management agreements have been structured to
substantially mirror the economics of the former leases. The assignment of the
leases from MeriStar Hotels to our taxable subsidiaries did not result in any
cash consideration exchanged among the parties except for the transfer of hotel
operating assets and liabilities to the taxable subsidiaries. Under the new
management agreements, the base management fee is 2.5% of total hotel revenue.
MeriStar Hotels can also earn incentive management fees, based on meeting
performance thresholds, of up to 1.5% of total hotel revenue. The agreements
have an initial term of 10 years with three renewal periods of five years each
at the option of MeriStar Hotels, subject to some exceptions. Because these
leases have been

                                       23

<PAGE>

assigned to our taxable subsidiaries, we now bear the operating risk associated
with our hotels.

During 2001, we acquired the eight leases from Prime Hospitality for our hotels
that were previously leased and managed by Prime Hospitality. These hotels are
managed by MeriStar Hotels. The management agreements with MeriStar Hotels are
identical to the other management agreements between MeriStar Hotels and us
except that the term on four of the agreements is one year with additional
one-year renewal periods.

The terrorist attacks of September 11, 2001 have had a severely negative impact
on our hotel operations in the third and fourth quarter, causing
lower-than-expected performance in an already slowing economy. The events of
September 11 have caused a significant decrease in our hotels' occupancy and
average daily rate due to disruptions in business and leisure travel patterns.
Our major metropolitan area and airport hotels have been particularly affected
due to concerns about air travel safety and a significant overall decrease in
the amount of air travel.

In response to the decline in operations following the terrorist attacks, we
have worked with MeriStar Hotels to aggressively review and reduce our hotels'
cost structure. We have implemented numerous cost-cutting strategies, including
the following items:

      .     reducing overall staffing, and reducing hours for remaining hourly
            staff,

      .     instituting hiring and wage freezes for all properties,

      .     revising operating procedures to gain greater efficiencies and/or
            reduce costs,

      .     closing underutilized or duplicative facilities and outlets,

      .     creating revised minimum staffing guides for each department in our
            hotels; and

      .     reducing capital expenditures to focus primarily on life-safety
            requirements, and deferring or terminating discretionary capital
            outlays.

The September 11, 2001 terrorist attacks were unprecedented in scope, and in
their immediate, dramatic impact on travel patterns. We have not previously
experienced such events, and it is currently not possible to accurately predict
if and when travel patterns will be restored to pre-September 11 levels. While
we have had improvements in our operating levels from the period immediately
following the attacks, we believe the uncertainty associated with subsequent
incidents and the possibility of future attacks will continue to hamper business
and leisure travel patterns for the next several quarters. In addition, the
September 11, 2001 terrorist attacks have had a dramatic effect on the insurance
and reinsurance industries. Many companies are being subject to losses or
cancellations of insurance polices, or renewals of existing coverage but with
extreme price increases. At our insurance policy renewals in mid-2002, we may be
subject to restrictions as compared to our current coverages, price increases,
or a combination of both restrictions and increases.

On May 9, 2001, we and MeriStar Hospitality entered into an Agreement and Plan
of Merger with FelCor Lodging Trust Incorporated and its operating partnership.
On September 13, the SEC declared the S-4 registration statement filed by Felcor
effective. On September 21, 2001, we mutually agreed with FelCor to terminate
the merger agreement due to unfavorable market conditions. We incurred $5.8
million of costs related to this merger through December 31, 2001 and these
costs have been expensed in our statement of operations.

During the third quarter of 2001, we incurred a restructuring charge in
connection with personnel changes primarily as a result of the termination of
our merger agreement with FelCor. This restructuring is expected to reduce our
annualized corporate overhead expenditures by approximately 7.3%, or $0.8
million. The restructuring included eliminating corporate staff positions and
office space no longer needed under the new structure.

Critical Accounting Policies

Preparing financial statements in conformity with accounting principles
generally accepted in the United States of America requires us 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. On an on-going basis, we evaluate our estimates and judgments,
including those related to the impairment of long-lived assets and the recording
of certain accrued liabilities. Some of our estimates are material to the
financial statements. These estimates are therefore particularly sensitive as
future events could cause the actual results to be significantly different from
our estimates.

Our critical accounting policies are as follows:

      .     Impairment of long-lived assets;

      .     Estimating certain accrued liabilities; and

      .     Determining the impact of future interest rate changes on our
            statement of operations.


                                       24

<PAGE>

Impairment of long-lived assets

Whenever events or changes in circumstances indicate that the carrying values of
long-lived assets (including property and equipment and all intangibles) may be
impaired, we perform an analysis to determine the recoverability of the asset's
carrying value. The carrying value of the asset includes the original purchase
price (net of depreciation) plus the value of all capital improvements (net of
depreciation). If the analysis indicates that the carrying value is not
recoverable from future cash flows, we write down the asset to its estimated
fair value and recognize an impairment loss. The estimated fair value is based
on what we estimate the current sale price of the asset to be based on
comparable sales information or other estimates of the asset's value. Any
impairment losses we recognize are recorded as operating expenses. In 2001, we
recognized $43.6 million of impairment losses. We did not recognize any
impairment losses in 2000 or 1999.

We review long-lived assets for impairment when one or more of the following
events have occurred:

      a.    Current or immediate short-term (future twelve months) projected
            cash flows are significantly less than the most recent historical
            cash flows.

      b.    The unplanned departure of an executive officer or other key
            personnel which could adversely affect our ability to maintain our
            competitive position and manage future growth.

      c.    A significant adverse change in legal factors or an adverse action
            or assessment by a regulator, which could affect the value of our
            long-lived assets.

      d.    Events which could cause significant adverse changes and uncertainty
            in business and leisure travel patterns.

We make estimates of the undiscounted cash flows from the expected future
operations of the asset. In projecting the expected future operations of the
asset, we base our estimates on future budgeted earnings before interest
expense, income taxes, depreciation and amortization, or EBITDA, amounts and use
growth assumptions to project these amounts out over the expected life of the
underlying asset. Our growth assumptions are based on assumed future
improvements in the national economy and improvements in demand for lodging; if
actual conditions differ from those in our assumptions, the actual results of
each asset's actual future operations could be significantly different from the
estimated results we used in our analysis. Our operating results are also
subject to the risks set forth under "Risk Factors-Operating Risks."

Estimating certain accrued liabilities

Estimates for certain accruals such as real and personal property taxes could
have a material effect on our financial statements. Currently, we estimate real
and personal property taxes based on a combination of preliminary estimates from
state and local jurisdictions and historical information. The assessed values of
these properties could change significantly from the values or rates we use in
our estimates. Property tax assessments are subject to periodic and often
lengthy appeals. For example, in instances where a jurisdiction increases our
assessed value, we frequently appeal that assessment. Similarly, when hotel
operations decline, we may appeal an assessment as too high if it is based on
past operating results. These appeals of assessed values are subject to a
potentially wide range of outcomes. As a result of the economic slowdown and
events of September 11, 2001, we have filed a number of appeals for lower
assessments. As of December 31, 2001, we had ongoing appeals in several
jurisdictions with respect to more than 20 properties. We accrue for these
liabilities based on our judgment of the most reasonably likely outcome of the
appeals. If we were unsuccessful in all of our current appeals, we would have to
recognize approximately $2 million of additional expense. We cannot predict with
certainty the outcome of these appeals, or their effect on our accruals for such
items. Also, actual property tax expense could vary greatly from our estimates
used for the current property tax accrual based on a change in the assessed
value, a change in the tax rate, and/or a different outcome of the appeals
process than we currently expect.

Determining impact of future interest rate changes on our statement of
operations

FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
requires a company to recognize all derivatives as either assets or liabilities
in the balance sheet and record those instruments at fair value. FAS No. 137 and
No. 138 amended certain provisions of FAS No. 133. We adopted these accounting
pronouncements effective January 1, 2001.


                                       25

<PAGE>

Our interest rate risk management objective is to limit the impact of interest
rate changes on earnings and cash flows. We assess interest rate cash flow risk
by continually identifying and monitoring changes in interest rate exposures
that may adversely impact expected future cash flows and by evaluating hedging
opportunities. We do not enter into derivative instruments for any purpose other
than cash flow hedging purposes.

Our interest rate swap agreements were initially designated as hedges against
changes in future cash flows associated with specific variable rate debt
obligations. As of December 31, 2001, we had three swap agreements with notional
amounts totaling $300 million. A portion of these swap agreements ($148.6
million) provide cash flow hedges on our floating London Interbank Offered Rate
or LIBOR rate debt payments. The remaining swap agreements ($151.4 million) have
been converted to non-hedging derivatives due to our repayment of the
floating-rate borrowings they originally hedged and they are currently being
marked to market through our statement of operations. For our swap agreements
that provide hedges against future cash flows, the related change in fair value
is recorded as unrealized gains or losses in our partners' capital as a
component of accumulated other comprehensive income. For the portion of our
swaps that were redesignated to non-hedging derivatives, the related change in
fair value is recorded as realized gains or losses in our statement of
operations. We have interest rate exposure going forward as the change in fair
value of our non-hedging derivatives will have an impact on our statement of
operations. For more information regarding our interest rate hedging activities,
see "Quantitative and Qualitative Disclosures About Market Risk."

Financial Condition

December 31, 2001 compared with December 31, 2000

Our total assets decreased by $1.9 million to $3,004.6 million at December 31,
2001 from $3,006.5 million at December 31, 2000 primarily due to:

      .     the decrease of $13.3 million in due from MeriStar Hotels;

      .     the sale of two hotels and the use of the $9.7 million in proceeds
            to pay down debt; and

      .     depreciation on hotel assets; partially offset by

      .     the note receivable from MeriStar Hotels for $36 million,

      .     capital expenditures of $44.5 million at the hotels, and

      .     the increase in operating assets of $62.5 million related to the
            assignment of the hotel leases with MeriStar Hotels to our taxable
            subsidiaries.

Total liabilities increased by $117.2 million to $1,889.7 million at December
31, 2001 from $1,772.5 million at December 31, 2000 due mainly to:

      .     net borrowings of long-term debt of $61.8 million;

      .     a $16.6 million increase in accrued interest due to the issuance of
            $500 million aggregate principal amount of senior secured notes sold
            in January 2001;

      .     the adoption of FAS No. 133 and the related recording of a $12.1
            million liability for our derivative instruments; and

      .     the increase in operating liabilities of $65.7 million related to
            the assignment of the hotel leases with MeriStar Hotels to our
            taxable subsidiaries; partially offset by

      .     a decrease of $23.5 million in distributions payable due to a lower
            fourth quarter dividend in 2001 (the fourth quarter dividend was
            $0.01 per share in 2001 and $0.505 per share in 2000).

Long-term debt increased by $61.8 million to $1,700.1 million at December 31,
2001 from $1,638.3 million at December 31, 2000 due primarily to:

      .     $500 million in senior unsecured notes issued in January,

      .     $250 million in senior unsecured notes issued in December; partially
            offset by

      .     $674 million of net repayments of our revolving credit facility
            using proceeds of the senior unsecured notes borrowings and cash
            generated by operations.

Redeemable OP units at redemption value decreased $21.5 million due primarily to
the $24.1 million reduction of capital allocated to redeemable OP unitholders as
a result of decreases in MeriStar Hospitality's stock price.

Partners' capital decreased $97.7 million to $1,045.1 at December 31, 2001 from
$1,142.8 million at December 31, 2000 due primarily to:

      .     $74.9 million of distributions,

      .     $6.4 million increase in accumulated other comprehensive loss due
            mainly to the adoption of FAS No. 133, and

      .     $44.5 million of net loss for 2001; partially offset by

      .     $24.1 million increase in capital allocated from redeemable OP
            unitholders as a result of decreases in MeriStar Hospitality's
            stock price, and


                                       26

<PAGE>

      .     the issuance of additional common limited partnership units to
            MeriStar Hospitality.

Results of Operations

Year ended December 31, 2001 compared with the year ended December 31, 2000

Until January 1, 2001, MeriStar Hotels leased substantially all of our hotels
from us. Under the leases, MeriStar Hotels assumed all of the operating risks
and rewards of these hotels and paid us a percentage of each hotel's revenue
under the lease agreements. Therefore, for financial statement purposes through
December 31, 2000, MeriStar Hotels recorded all of the operating revenues and
expenses of the hotels in its statements of operations, and we recorded lease
revenue earned under the lease agreements in our statement of operations.
Effective January 1, 2001, MeriStar Hotels assigned the hotel leases to our
newly created, wholly-owned, taxable REIT subsidiaries, and our taxable REIT
subsidiaries entered into management agreements with MeriStar Hotels to manage
the hotels. As a result of this change, our wholly-owned taxable REIT
subsidiaries have assumed the operating risks and rewards of the hotels and now
pay MeriStar Hotels a management fee to manage the hotels for us. For
consolidated financial statement purposes, effective January 1, 2001, we now
record all of the revenues and expenses of the hotels in our statements of
operations, including the management fee paid to MeriStar Hotels.

Our total revenues and total operating expenses increased $684.2 million and
$832.9 million, respectively, for the year ended December 31, 2001 as compared
to the same period in 2000. As described in the preceding paragraph, the
significant increases primarily result from the fact that we now record the
hotel operating revenue and expenses in our consolidated financial statements
effective January 1, 2001, while we only recorded lease revenue in 2000. As a
result, our operating results for the year ended December 31, 2001 are not
directly comparable to the same period in 2000.

For comparative purposes, the following shows the results for the year ended
December 31, 2000 on a pro forma basis assuming the leases with MeriStar Hotels
were converted to management contracts on January 1, 2000, compared to actual
results for the year ended December 31, 2001 (in thousands):

                                                        2001            2000
                                                     ----------      ----------
Revenue                                              $1,084,888      $1,197,089
Total expenses                                        1,125,608       1,084,273
Minority interest                                           (48)             (3)
Taxes                                                    (1,044)          1,797
Net income (loss) before gain (loss) on
  sale of assets and extraordinary items                (39,628)        111,022
Net income (loss)                                       (44,485)        114,422
Recurring EBITDA                                     $  268,020      $  242,287

The following table provides our hotels' operating statistics on a same-store
basis for the years ended December 31, 2001 and 2000.

                                               2001          2000        Change
                                             -------       -------       ------
Revenue per available room                   $ 69.37       $ 77.46       (10.4)%
Average daily rate                           $105.04       $107.69        (2.5)%
Occupancy                                       66.0%         71.9%       (8.2)%

Overall, disruptions in business and leisure travel patterns and travel safety
concerns due to the terrorist attacks on September 11, 2001, coupled with the
slowing United States economy, had a major negative effect on our hotels during
the second half of 2001. The events have been marked by a sharp reduction in
business and leisure travel. This contributed to the 10.4% reduction in revenue
per available room and the 8.2% reduction in occupancy for 2001 compared to the
2000. These reductions became more pronounced during the third and fourth
quarters of 2001.

Total revenue decreased $112.2 million to $1,084.9 million in 2001 from $1,197.1
million in 2000 due primarily to:

      .     $75.9 million decrease in room revenue related to the decrease in
            occupancy,

      .     $21.4 million decrease in food and beverage revenue due to the
            decrease in occupancy, and

      .     $10.2 million decrease in lease revenue due to a smaller number of
            leased hotels compared to 2000.

Total expenses increased $41.3 million to $1,125.6 million for 2001 from
$1,084.3 million in 2000 due primarily to:

      .     $9.3 million payment to terminate $300 million on interest rate
            swaps in conjunction with the sale of $500 million of senior
            unsecured notes and the repayment of related term loans,

      .     $6.7 million charge to recognize the effect of interest rate swaps
            that were converted to non-hedging derivatives upon


                                       27

<PAGE>

            the repayment of portions of our senior secured credit facility in
            December 2001 in conjunction with the sale of $250 million of senior
            unsecured notes,

      .     $43.6 million loss on asset impairment related to the write-down of
            certain hotel assets. These write-downs resulted from the negative
            impact of changes in the economic climate on the value of our
            assets,

      .     $2.1 million charge to write-off our investment in STS Hotel Net,

      .     $5.8 million in costs related to our terminated merger with FelCor
            Lodging Trust,

      .     $1.3 million in costs to terminate leases with Prime Hospitality
            Corporation,

      .     $1.1 million charge due to a restructuring at corporate
            headquarters,

      .     $5.7 million increase in depreciation on hotel assets, and

      .     $3.3 million increase in property operating costs due primarily to a
            $2.2 million increase in energy costs; partially offset by

      .     $13.9 million decrease in room expenses due to lower occupancy, and

      .     $15.5 million decrease in food and beverage expenses due to lower
            occupancy.

In 2001, we repaid our term loans under our revolving credit agreement which
resulted in an extraordinary loss of $1.6 million (net of tax) from the
write-off of deferred financing costs related to those term loans.

In December 2001 we amended the terms of our senior credit agreement. We
incurred $4.4 million of costs related to the amended agreement of which $3.2
million represents deferred financing costs and $1.1 million (net of tax)
resulted in an extraordinary loss.

Year ended December 31, 2000 compared with the year ended December 31, 1999

Until January 1, 2001, substantially all of our hotels were leased to and
operated by MeriStar Hotels. Participating lease revenue represents lease
payments from the lessees pursuant to the participating lease agreements. Total
revenue increased by $25.9 million to $400.7 million in 2000 compared to $374.8
million in 1999. This increase was primarily attributable to an increase of
$23.7 million in participating lease revenue resulting from an increase in room
revenue at our hotels under lease. The following table provides our hotels'
operating statistics on a same-store basis for the year:

                                              2000           1999         Change
                                            -------        -------        ------
Revenue per available room                  $ 77.71        $ 73.51         5.71%
Average daily rate                          $107.60        $101.92         5.57%
Occupancy                                      72.2%          72.1%        0.14%

Operating expenses increased to $170.3 million for the year ended December 31,
2001 from $156.5 million for the same period in 1999 due primarily to:

      .     an increase in depreciation on hotel assets, and

      .     an increase in administrative costs, as we added personnel during
            2000 to address the operating changes associated with RMA, and

      .     insurance costs.

Net interest expense increased $17.1 million to $117.5 million for the year
ended December 31, 2000, from $100.4 million in 1999 due mainly to:

      .     lower capitalized interest due to a decrease in qualifying capital
            expenditures in 2000,

      .     an increase in variable interest rates during 2000 and higher
            interest rates on swap arrangements executed in 2000; partially
            offset by

      .     a lower average debt balance during 2000.

In 2000, we repurchased $18.2 million of our notes payable to MeriStar
Hospitality at a discount. This resulted in an extraordinary gain of $3.4
million (net of tax effect).

In 2000, we sold three limited-service hotels and received $24.1 million. This
resulted in a gain on sale of assets of $3.5 million ($3.4 million, net of tax).

Liquidity and Capital Resources

Sources of Cash


                                       28

<PAGE>

We generated $150.1 million of cash from operations during 2001. Our principal
sources of liquidity are cash on hand, cash generated from operations, and funds
from external borrowings and debt offerings. We expect to fund our continuing
operations through cash generated by our hotels. We also expect to finance hotel
acquisitions, hotel renovations and joint venture investments through a
combination of internally generated cash, external borrowings, and the issuance
of OP Units.

Factors that may influence our liquidity include:

      .     Factors that affect our results of operations, including general
            economic conditions, demand for business and leisure travel, public
            concerns about travel safety and other operating risks described
            under the caption, "Risk Factors--Our results of operations are
            dependent on revenues generated by our hotels, which are subject to
            a number of risks related to the lodging industry, and our current
            operating structure (which became effective as of January 1, 2001)
            has significantly increased our exposure to those risks";

      .     Factors that affect our access to bank financing and the capital
            markets, including interest rate fluctuations, operational risks and
            other risks described under the caption "Risk Factors--Financing
            Risks"; and

      .     The other factors described under the caption, "Special Note
            Regarding Forward-Looking Statements."

Additionally, MeriStar Hospitality must distribute to stockholders at least 90%
of its taxable income, excluding net capital gains to preserve the favorable tax
treatment accorded to real estate investment trusts under the Internal Revenue
Code. MeriStar Hospitality, as our general partner, must use its best efforts to
ensure our partnership distributions meet this requirement. We expect to fund
such distributions through cash generated from operations and borrowings on our
credit agreement. In light of the dramatic business declines since the September
11, 2001 terrorist attacks, we expect our taxable income to decrease
significantly in 2002. Any future distributions will be at the discretion of
MeriStar Hospitality's Board of Directors and will be determined by factors
including our operating results, capital expenditure requirements, the economic
outlook, the Internal Revenue Service dividend payout requirements for REITs and
such other factors as the Board of Directors deems relevant. We cannot provide
assurance that any such distributions will be made in the future.

Uses of Cash

We used $68.9 million of cash in investing activities during 2001 primarily for:

      .     the $36.0 million note receivable with MeriStar Hotels; and

      .     $44.5 million of capital expenditures at hotels. These items were
            partially offset by:

      .     $3.3 million of hotel operating cash received on lease conversions;
            and

      .     $9.7 million of proceeds from selling two hotels.

We used $58.4 million of cash in financing activities during 2001 primarily for:

      .     $97.5 million of payments of distributions, and

      .     $19.0 million from additional deferred financing costs related to
            issuing the $500 million and $250 million of senior unsecured notes.
            These items were partially offset by:

      .     $61.8 million of net borrowings of long-term debt.

Long-Term Debt

In January 2001, we issued $500 million aggregate principal amount of senior
unsecured notes. These senior unsecured notes are structured as:

      .     $300 million of 9.0% notes maturing in 2008, and

      .     $200 million of 9.13% notes maturing in 2011.

We used the proceeds from these notes to repay outstanding debt under our
revolving credit agreement and to make payments of $9.3 million to terminate
certain swap agreements that hedged variable rates on loans that we repaid. The
repayments of our term loans under our credit facility resulted in an
extraordinary loss of $1.2 million (net of tax) from the write-off of deferred
financing costs related to these term loans.

In December 2001, we issued $250 million aggregate principal amount of senior
unsecured notes. These notes have a 10.5% interest rate and mature in June 2009.
We used the net proceeds to repay outstanding debt under our term loans and
revolving credit agreement. The repayments of our term loans under our credit
agreement resulted in an extraordinary loss of $1.5 million (net of tax) from
the write-off of deferred financing costs related to those term loans.

In February 2002, we issued $200 million aggregate principal amount of 9.13%
senior unsecured notes due 2011. We used the


                                       29

<PAGE>

proceeds from the issuance of these notes to repay approximately $195.0 million
of the outstanding balance under our revolving credit agreement.

In February 2002, we amended our revolving credit agreement. The amendment
allows us to reduce the revolving commitments to below $300 million. In March
2002, we reduced the borrowing capacity on our revolving credit agreement from
$310 million to $150 million.

Minimum payments due under our debt obligations as of December 31
(in thousands):

2002................................................................  $   15,543
2003................................................................     232,589
2004................................................................     171,168
2005................................................................       9,265
2006................................................................      10,006
Thereafter..........................................................   1,261,563
                                                                      ----------

                                                                      $1,700,134
                                                                      ==========

As of February 15, 2002, we had $67.0 million of debt outstanding under our
senior secured credit agreement. The weighted average interest rate on
borrowings outstanding under the senior secured credit agreement as of February
15, 2002 was 5.9%.

Our senior credit agreement requires us to meet or exceed certain financial
performance ratios at the end of each quarter. Travel disruptions and safety
concerns following the terrorist attacks on September 11, 2001 and the slowdown
of the national economy resulted in a significant negative impact to the lodging
industry and our operations. This decline in operations would have caused us to
be out of compliance with certain financial covenants specified in our senior
credit agreement. On October 24, 2001, however, we finalized a temporary waiver
on all affected financial covenants with our senior bank group and engaged in
discussions to amend our senior credit agreement further. This waiver to the
credit agreement allowed these financial covenants to be waived for the period
beginning September 30, 2001 and ending February 28, 2002. In December 2001 we
amended our senior credit agreement. This amendment relaxed our financial
covenants and allows us to extend the maturity date on our credit facility from
July 2002 to July 2003. We incurred $4.4 million of costs related to the
amendment.

Capital Resources

We must make ongoing capital expenditures in order to keep our hotels
competitive in their markets. We expect a combination of internally generated
cash and external borrowings to provide capital for renovation work. Initial
renovation programs for most of our hotels are complete or nearing completion.
Once initial renovation programs for a hotel are completed, we expect to spend
approximately 4% of hotel revenues annually for ongoing capital expenditure
programs. These ongoing programs will include room and facilities
refurbishments, renovations, and furniture and equipment replacements. For the
year ended December 31, 2001, we spent $45.8 million on renovation and ongoing
property capital expenditure programs. We intend to spend approximately $40
million during 2002 for our ongoing capital expenditure programs. In response to
the decline in our operations following the September 11, 2001 terrorist
attacks, we have significantly curtailed our capital expenditure programs. We
have taken the following steps:

      .     re-prioritized all capital expenditures to focus nearly exclusively
            on life-safety requirements;

      .     deferred or canceled all discretionary capital expenditures that did
            not cause us to incur a substantial penalty; and

      .     reviewed our estimated 2002 capital requirements in light of the
            revised business levels we are currently experiencing.

We will continue to monitor our capital requirements as compared to business
levels, and will revise expenditures as necessary.

We believe cash generated by operations, together with anticipated borrowing
capacity under our senior credit agreements, will be sufficient to fund our
existing working capital requirements, ongoing capital expenditures, and debt
service requirements. We believe, however, that our future capital decisions
will also be made in response to specific acquisition and/or investment
opportunities, depending on conditions in the capital and/or other financial
markets.

Seasonality

Demand in the lodging industry is affected by recurring seasonal patterns. For
non-resort properties, demand is lower in the winter months due to decreased
travel and higher in the spring and summer months during peak travel season. For
resort properties, demand is generally higher in winter and early spring. Since
the majority of our hotels are non-resort properties, our


                                       30

<PAGE>

operations generally reflect non-resort seasonality patterns. We have lower
revenue, operating income and cash flow in the first and fourth quarters and
higher revenue, operating income and cash flow in the second and third quarters,
although the disruptions caused by the September 11, 2001 attacks and their
aftermath may cause disruptions to this pattern.


                                       31

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in interest rates on long-term debt
obligations that impact the fair value of these obligations. Our policy is to
manage interest rates through the use of a combination of fixed and variable
rate debt. Our interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flows and to lower our overall
borrowing costs. To achieve our objectives, we borrow at a combination of fixed
and variable rates, and may enter into derivative financial instruments such as
interest rate swaps, caps and treasury locks in order to mitigate our interest
rate risk on a related financial instrument. We do not enter into derivative or
interest rate transactions for speculative purposes. We have no cash flow
exposure due to general interest rate changes for our fixed long-term debt
obligations.

The table below presents, as of December 31, 2001, the principal amounts (in
thousands of dollars) for our fixed and variable rate debt instruments,
weighted-average interest rates, and fair values by year of expected maturity to
evaluate the expected cash flows and sensitivity to interest rate changes.

                                 Long-term Debt
                                 --------------

                                          Average       Variable      Average
Expected Maturity        Fixed Rate    Interest Rate      Rate     Interest Rate
-----------------        ----------    -------------      ----     -------------
2002                        $15,543         8.6%        $     --        N/A
2003                          8,589         8.2%         224,000        6.5%
2004                        171,168         5.1%              --        N/A
2005                          9,265         8.1%              --        N/A
2006                         10,006         8.1%              --        N/A
Thereafter                1,261,563         9.0%              --        N/A
                         ----------         ----        --------        ---

Total                    $1,476,134         8.5%        $224,000        6.5%
                         ==========         ====        ========        ===

Fair Value at 12/31/01   $1,401,073                     $224,000
                         ==========                     ========

Upon the issuance of our $250 million aggregate principal amount of senior
unsecured notes in December 2001, we reduced the term loans and our revolver
under our senior secured credit agreement by an aggregate amount of $245
million. At that time, we converted three swap agreements to non-hedging
derivatives. These swap agreements had notional principal amounts of
approximately $151.4 million and were originally designated to hedge variable
rate borrowings under our senior secured credit facility that were repaid. We
recognized a $6.7 million loss related to this swap conversion.

Upon the issuance of our $500 million aggregate principal amount of senior
unsecured notes in January 2001, we reduced the term loans under our senior
secured credit agreement by $300 million. At that time, we terminated three swap
agreements with a notional amount of $300 million. These swap agreements were
originally designated to hedge variable rate term loans that were repaid. We
made net payments totaling $9.3 million to our counter parties to terminate
these swap agreements, and recognized a $9.3 million loss related to those
terminated swaps.

As of December 31, 2001, we had three swap agreements with notional principal
amounts totaling $300 million. A portion of these swap agreements ($148.6
million) provide hedges against the impact future interest rates have on our
floating London Interbank Offered Rate, or LIBOR rate, debt instruments. The
remaining portion of the swap agreements ($151.4 million) has been converted to
non-hedging derivatives. The swap agreements effectively fix the 30-day LIBOR
between 4.77% and 6.38%. The swap agreements expire between December 2002 and
July 2003. For the years ended December 31, 2001 and 2000, we have
(made)/received net payments of approximately $(6,285) and $3,081, respectively.

In anticipation of the August 1999 completion of our mortgage-backed secured
facility, we entered into two separate hedge transactions during July 1999. Upon
completion of the secured facility, we terminated the underlying treasury lock
agreements, resulting in a net payment to us of $5.1 million. This amount was
deferred and is being recognized as a reduction to interest expense over the
life of the underlying debt. As a result, the effective interest rate on the
secured facility is 7.76%.

As of December 31, 2001, after consideration of the hedge agreements described
above, 95.6% of our debt was fixed and our overall weighted average interest
rate was 8.49%.

Although we conduct business in Canada, the Canadian operations were not
material to our consolidated financial position, results of operations or cash
flows during the years ended December 31, 2001, 2000 and 1999. Additionally,
foreign currency transaction gains and losses were not material to our results
of operations for the years ended December 31, 2001, 2000 and 1999. Accordingly,
we were not subject to material foreign currency exchange rate risk from the
effects that exchange rate movements


                                       32

<PAGE>

of foreign currencies would have on our future costs or on future cash flows we
would receive from our foreign subsidiaries. To date, we have not entered into
any significant foreign currency forward exchange contracts or other derivative
financial instruments to hedge the effects of adverse fluctuations in foreign
currency exchange rates.


                                       33

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Explanatory Note:

This annual report of Form 10-K is being filed jointly by MeriStar Hospitality
Operating Partnership, L.P., or MHOP, and by MeriStar Hospitality Finance Corp,
or MeriStar Finance. No separate financial or other information of MeriStar
Finance is material to holders of the securities of MHOP or MeriStar Finance,
since as of December 31, 2001, MeriStar Finance had no operations, no employees,
only nominal assets and no liabilities other than its obligations under the
indenture governing its senior unsecured notes issued in January 2001 and for
related financing costs.

The following Consolidated Financial Statements, Supplementary Data and
Financial Statement Schedules are filed as part of this Annual Report on Form
10-K:

                MeriStar Hospitality Operating Partnership, L.P.

<TABLE>
<S>                                                                                                             <C>
Independent Auditors' Report..................................................................................  35
Consolidated Balance Sheets as of December 31, 2001 and 2000..................................................  36
Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999....................  37
Consolidated Statements of Partners' Capital for the years ended December 31, 2001, 2000 and 1999.............  39
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999....................  40
Notes to the Consolidated Financial Statements................................................................  41
Schedule III - Real Estate and Accumulated Depreciation.......................................................  60
</TABLE>

All other schedules are omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or the Notes
thereto.

The consolidated Financial Statements and Supplementary Data of MeriStar
Hospitality Corporation are incorporated herein by reference to Exhibit 13
filed herewith.
                                       34

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Partners
MeriStar Hospitality Operating Partnership, L.P.:

We have audited the accompanying consolidated balance sheets of MeriStar
Hospitality Operating Partnership, L.P. and subsidiaries (the Partnership) as of
December 31, 2001 and 2000 and the related consolidated statements of
operations, partners' capital, and cash flows for each of the years in the
three-year period ended December 31, 2001. In connection with our audits of the
consolidated financial statements, we have also audited the financial statement
schedule of real estate and accumulated depreciation. These consolidated
financial statements and financial statement schedule are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these consolidated financial statements and the financial statement schedule
based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MeriStar Hospitality
Operating Partnership and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.


                                                    KPMG LLP

Washington, D.C.
March 20, 2002


                                       35

<PAGE>

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
(in thousands, except per unit amounts)

<TABLE>
<CAPTION>
                                                                                    2001              2000
                                                                                    ----              ----
<S>                                                                             <C>               <C>
ASSETS
Investments in hotel properties                                                 $ 3,183,677       $ 3,193,730
Accumulated depreciation                                                           (397,380)         (287,229)
                                                                                -----------       -----------
                                                                                  2,786,297         2,906,501
Cash and cash equivalents                                                            23,441               242
Accounts receivable, net of allowance for doubtful accounts of $973 and $0           47,178             2,833
Prepaid expenses and other                                                           18,306             2,767
Note receivable from MeriStar Hotels                                                 36,000                --
Due from MeriStar Hotels                                                              8,877            22,221
Investments in and advances to affiliates                                            41,714            42,196
Restricted cash                                                                      21,304            19,918
Intangible assets, net of accumulated amortization of 5,832 and $5,575               21,469             9,822
                                                                                -----------       -----------

                                                                                $ 3,004,586       $ 3,006,500
                                                                                ===========       ===========

LIABILITIES AND PARTNERS' CAPITAL
Accounts payable, accrued expenses and other liabilities                        $   123,972       $    72,197
Accrued interest                                                                     45,009            28,365
Income taxes payable                                                                    310               921
Distributions payable                                                                 1,090            24,581
Deferred income taxes                                                                 7,130             8,113
Interest rate swaps                                                                  12,100                --
Notes payable to MeriStar Hospitality                                               357,117           356,729
Mortgages and notes payable                                                       1,343,017         1,281,590
                                                                                -----------       -----------
Total liabilities                                                                 1,889,745         1,772,496
                                                                                -----------       -----------

Minority interests                                                                    2,639             2,687
Redeemable OP units at redemption value                                              67,012            88,545
   Partners' capital - Common OP units, 44,524,147 and 44,403,034 issued
     and outstanding                                                              1,045,190         1,142,772
                                                                                -----------       -----------

                                                                                $ 3,004,586       $ 3,006,500
                                                                                ===========       ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       36

<PAGE>

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(in thousands, except per unit amounts)

<TABLE>
<CAPTION>
                                                                                      2001            2000            1999
                                                                                      ----            ----            ----
<S>                                                                               <C>             <C>             <C>
Revenue:
   Participating lease revenue                                                    $    17,295     $   391,729     $   368,012
   Hotel operations:
      Rooms                                                                           706,381              --              --
      Food and beverage                                                               269,382              --              --
      Other operating departments                                                      81,971              --              --
   Office rental, parking and other revenue                                             9,859           8,956           6,808
                                                                                  -----------     -----------     -----------

Total revenue                                                                       1,084,888         400,685         374,820
                                                                                  -----------     -----------     -----------

Hotel operating expenses by department:
      Rooms                                                                           170,925              --              --
      Food and beverage                                                               194,495              --              --
      Other operating departments                                                      43,558              --              --
Office rental, parking and other operating expenses                                     3,057           2,731           1,964
Undistributed operating expenses:
      Administrative and general                                                      169,279           9,445           5,735
      Property operating costs                                                        160,041              --              --
      Property taxes, insurance and other                                              75,513          47,481          47,027
      Depreciation and amortization                                                   116,495         110,688         101,795
      Write down of investment in STS Hotel Net                                         2,112              --              --
      Loss on asset impairment                                                         43,582              --              --
      Swap termination costs                                                            9,297              --              --
      Loss on fair value of non-hedging derivatives                                     6,666              --              --
      FelCor merger costs                                                               5,817              --              --
      Costs to terminate leases with Prime Hospitality Corporation                      1,315              --              --
      Restructuring charge                                                              1,080              --              --
                                                                                  -----------     -----------     -----------

Total operating expenses                                                            1,003,232         170,345         156,521
                                                                                  -----------     -----------     -----------

Net operating income                                                                   81,656         230,340         218,299
Interest expense, net                                                                 122,376         117,524         100,387
                                                                                  -----------     -----------     -----------

Income (loss) before minority interests, income taxes, gain (loss) on
   sale of assets and extraordinary gain (loss)                                       (40,720)        112,816         117,912
Minority interests                                                                        (48)             (3)             24
                                                                                  -----------     -----------     -----------

Income (loss) before income taxes, gain (loss) on sale of assets and
   extraordinary gain (loss)                                                          (40,672)        112,819         117,888
Income tax expense (benefit)                                                           (1,044)          1,622           1,681
                                                                                  -----------     -----------     -----------

Income (loss) before gain (loss) on sale of assets and extraordinary
   gain (loss)                                                                        (39,628)        111,197         116,207
Gain (loss) on sale of assets, net of tax effect of $(39) in 2001 and
   $56 in 2000                                                                         (2,137)          3,439              --
Extraordinary gain (loss) on extinguishment of debt, net of tax
   effect of $(50) in 2001, $50 in 2000, ($74) in 1999                                 (2,720)          3,400          (4,551)
                                                                                  -----------     -----------     -----------

Net income (loss)                                                                 $   (44,485)    $   118,036     $   111,656
                                                                                  ===========     ===========     ===========
Preferred distributions                                                           $      (565)    $      (565)    $      (565)
                                                                                  -----------     -----------     -----------
Net income (loss) applicable to common unitholders                                $   (45,050)    $   117,471     $   111,091
                                                                                  ===========     ===========     ===========
Net income (loss) applicable to general partner common unitholders                $   (41,147)    $   107,638     $   101,345
                                                                                  ===========     ===========     ===========
Net income (loss) applicable to third party limited partner common unitholders    $    (3,903)    $     9,833     $     9,746
                                                                                  ===========     ===========     ===========
</TABLE>


                                       37

<PAGE>

<TABLE>
<CAPTION>
                                                          2001       2000      1999
                                                          ----       ----      ----
<S>                                                      <C>        <C>       <C>
Earnings per unit:
       Basic:
       Income (loss) before extraordinary gain (loss)    $(0.89)    $ 2.25    $ 2.22
       Extraordinary gain (loss)                          (0.06)      0.07     (0.09)
                                                         ------     ------    ------

           Net income (loss)                             $(0.95)    $ 2.32    $ 2.13
                                                         ======     ======    ======

       Diluted:
       Income (loss) before extraordinary gain (loss)    $(0.89)    $ 2.18    $ 2.15
       Extraordinary gain (loss)                          (0.06)      0.06     (0.08)
                                                         ------     ------    ------

           Net income (loss)                             $(0.95)    $ 2.24    $ 2.07
                                                         ======     ======    ======
</TABLE>

See accompanying notes to consolidated financial statements.


                                       38

<PAGE>

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
IN THOUSANDS

Balance at January 1, 1999                                          $ 1,170,220
Net income                                                              111,656
Foreign currency translation adjustment                                   1,240
                                                                    -----------
Comprehensive income                                                    112,896
                                                                    -----------
Contributions                                                             1,991
Repurchase of units                                                      (6,252)
Conversion of OP units to common stock                                   29,412
Allocations from redeemable OP units                                     13,136
Distributions                                                          (117,885)
                                                                    -----------
Balance at December 31, 1999                                          1,203,518

Net income                                                              118,036
Foreign currency translation adjustment                                    (834)
                                                                    -----------
Comprehensive income                                                    117,202
                                                                    -----------
Contributions                                                             1,832
Contribution from general partner related to amortization
   of unearned stock-based compensation                                   3,070
Repurchase of units                                                     (73,638)
Conversion of OP units to common stock                                       24
Allocations to redeemable OP units                                       (7,506)
Distributions                                                          (101,730)
                                                                    -----------
Balance at December 31, 2000                                          1,142,772

Net loss                                                                (44,485)
Derivative instruments transition adjustment                             (2,842)
Foreign currency translation adjustment                                  (1,176)
Change in fair value of cash flow hedges                                 (2,404)
                                                                    -----------
Comprehensive income (loss)                                             (50,907)
                                                                    -----------
Contributions                                                               847
Contribution from general partner related to amortization
   of unearned stock-based compensation                                   2,263
Repurchase of units                                                      (4,514)
Conversion of OP units to common stock                                    5,428
Allocations from redeemable OP units                                     24,066
Distributions                                                           (74,900)
                                                                    -----------
Balance at December 31, 2001                                        $ 1,045,055
                                                                    ===========

See accompanying notes to the consolidated financial statements.


                                       39

<PAGE>

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(in thousands)

<TABLE>
<CAPTION>
                                                                             2001          2000          1999
                                                                             ----          ----          ----
<S>                                                                       <C>           <C>           <C>
Operating activities:
    Net income (loss)                                                     $ (44,485)    $ 118,036     $ 111,656
    Adjustments to reconcile net income (loss) to net cash provided by
      operating activities:
        Depreciation and amortization                                       116,495       110,688       101,795
        (Gain) loss on assets sold, before tax effect                         2,176        (3,495)           --
        Extraordinary (gain) loss on early extinguishment of debt,
        before tax effect                                                     2,770        (3,450)        4,625
        Loss on asset impairment                                             43,582            --            --
        Loss on fair value of non-hedging derivatives                         6,666            --            --
        Write down of investment in STS Hotel Net                             2,112            --            --
        Minority interests                                                      (48)           (3)           24
        Amortization of unearned stock-based compensation                     2,263         3,070            --
        Deferred income taxes                                                (1,454)          636           715
        Changes in operating assets and liabilities:
            Accounts receivable, net                                          2,855        (1,505)        1,716
            Prepaid expenses and other                                       (2,039)        6,370        (5,262)
            Due from MeriStar Hotels                                         13,344       (10,745)       (4,039)
            Accounts payable, accrued expenses, accrued interest and
              other liabilities                                               6,509         4,295        16,098
            Income taxes payable                                               (611)          191         1,001
                                                                          ---------     ---------     ---------

Net cash provided by operating activities                                   150,135       224,088       228,329
                                                                          ---------     ---------     ---------

Investing activities:
    Investment in hotel properties, net                                     (44,476)      (90,703)     (170,063)
    Proceeds from disposition of assets                                       9,715        24,148         8,900
    Investments in and advances to affiliates, net                               --        (2,111)      (31,298)
    Hotel operating cash received in lease conversions                        3,257            --            --
    Purchases of minority interests                                              --            --           (72)
    Notes receivable from MeriStar Hotels                                   (36,000)       57,110         9,890
    Change in restricted cash                                                (1,386)       (2,730)       (5,309)
                                                                          ---------     ---------     ---------

Net cash used in investing activities                                       (68,890)      (14,286)     (187,952)
                                                                          ---------     ---------     ---------

Financing activities:
    Deferred financing costs                                                (18,927)       (1,615)       (6,005)
    Proceeds from mortgages and notes payable                               933,250       179,388       429,636
    Principal payments on mortgages and notes payable                      (871,467)     (200,028)     (407,432)
    Borrowings from MeriStar Hospitality                                         --            --        55,000
    Repayments to MeriStar Hospitality on borrowing                              --       (14,362)       (2,785)
    Repurchase of units                                                      (4,514)      (73,638)       (6,252)
    Contributions from partners                                                 847         1,356         2,249
    Distributions paid to partners                                          (97,539)     (103,274)     (106,359)
                                                                          ---------     ---------     ---------

Net cash used in financing activities                                       (58,350)     (212,173)      (41,948)
                                                                          ---------     ---------     ---------

Effect of exchange rate changes on cash and cash equivalents                    304            64           (53)
Net increase (decrease) in cash and cash equivalents                         23,199        (2,307)       (1,624)
Cash and cash equivalents, beginning of year                                    242         2,549         4,173
                                                                          ---------     ---------     ---------

Cash and cash equivalents, end of year                                    $  23,441     $     242     $   2,549
                                                                          =========     =========     =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       40

<PAGE>

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
(dollars in thousands, except per share amounts)

1. Organization

We are a subsidiary operating partnership of MeriStar Hospitality Corporation.
We own a portfolio of upscale, full-service hotels in the United States and
Canada. Our portfolio is diversified by franchise and brand affiliations. As of
December 31, 2001, we owned 112 hotels, with 28,653 rooms, all of which were
leased by our taxable subsidiaries and managed by MeriStar Hotels & Resorts,
Inc.

We were created on August 3, 1998, as a result of the merger between CapStar
Hotel Company and American General Hospitality Corporation, and the subsequent
formation of MeriStar Hospitality, the merged entity. MeriStar Hospitality, a
real estate investment trust, or REIT, is our general partner and owns a one
percent interest in us as of December 31, 2001. The limited partners are as
follows:

      .     MeriStar LP, Inc., a wholly-owned subsidiary of MeriStar
            Hospitality, which owns approximately a 90 percent interest as of
            December 31, 2001; and

      .     various third parties, which owned an aggregate interest of nine
            percent at December 31, 2001.

Partners' capital includes the partnership interests of MeriStar Hospitality and
MeriStar LP, Inc. MeriStar Hospitality held 482,533 common OP units as of
December 31, 2001. MeriStar LP, Inc. held 44,041,614 common OP units as of
December 31, 2001. Due to the redemption rights of the limited partnership units
held by third parties, these units have been excluded from partner's capital and
classified as Redeemable OP units and are recorded at redemption value. At
December 31, 2001, there were 4,121,355 redeemable units outstanding.

Prior to January 1, 2001, in order for MeriStar Hospitality to maintain its tax
status as a REIT, we were not permitted to participate in the operations of our
hotel properties. To comply with this requirement through December 31, 2000, all
of our properties were subject to leases involving two third-party lessees,
MeriStar Hotels and Prime Hospitality Corporation.

On January 1, 2001, changes to the federal tax laws governing REITs became
effective. Those changes are commonly known as the REIT Modernization Act, or
RMA. The RMA permits real estate investment trusts to create taxable
subsidiaries that are subject to taxation similar to subchapter C Corporations.
We have created a number of these taxable subsidiaries to lease our real
property. The RMA prohibits our taxable subsidiaries from engaging in the
following activities:

      .     Managing the properties they lease (our taxable subsidiaries must
            enter into an "arm's length" management agreement with an
            independent third-party manager that is actively involved in the
            trade or business of hotel management and manages properties on
            behalf of other owners);

      .     Leasing a property that contains gambling operations; and

      .     Owning a brand or franchise.

We believe establishing taxable subsidiaries to lease the properties we own
provides a more efficient alignment of and ability to capture the economic
interests of property ownership. Under the prior lease structure with MeriStar
Hotels, we received lease payments based on the revenues generated by the
properties; MeriStar Hotels, however, operated the properties in order to
maximize net operating income from the properties. This inconsistency could
potentially result in the properties being operated in a way that did not
maximize revenues. With the assignment of the leases from MeriStar Hotels to our
taxable subsidiaries and the execution of the new management agreements (as
described below), we gained the economic risks and rewards usually associated
with ownership of real estate, and property revenues became the basis for
MeriStar Hotels' management fees.

Subsidiaries of MeriStar Hotels assigned the participating leases to our
wholly-owned taxable subsidiaries as of January 1, 2001. In connection with the
assignment, the taxable subsidiaries executed new management agreements with a
subsidiary of MeriStar Hotels to manage our hotels. Under these management
agreements, the taxable subsidiaries pay a management fee to MeriStar Hotels for
each property. The taxable subsidiaries in turn make rental payments to us under
the participating leases. The management agreements have been structured to
substantially mirror the economics of the former leases. The assignment of the
leases from MeriStar Hotels to our taxable subsidiaries did not result in any
cash consideration exchanged among the parties except for the transfer of hotel
operating assets and liabilities to the taxable subsidiaries. Under the new
management agreements, the base management fee is 2.5% of total hotel revenue.
MeriStar Hotels can also earn incentive management fees, based on


                                       41

<PAGE>

meeting performance thresholds, of up to 1.5% of total hotel revenue. The
agreements have an initial term of 10 years with three renewal periods of five
years each at the option of MeriStar Hotels, subject to some exceptions. Because
these leases have been assigned to our taxable subsidiaries, we now bear the
operating risk associated with our hotels.

On May 9, 2001, we and MeriStar Hospitality entered into an Agreement and Plan
of Merger with FelCor Lodging Trust Incorporated and its operating partnership.
On September 13, 2001 the Securities and Exchange Commission declared the S-4
registration statement filed by FelCor effective. On September 21, 2001, we
mutually agreed with FelCor to terminate the merger agreement due to unfavorable
market conditions. We have incurred $5,817 of costs related to this merger
through December 31, 2001 and these costs have been expensed in our statement of
operations.

2. Summary of Significant Accounting Policies

Principles of Consolidation - Our consolidated financial statements include the
accounts of all of our majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.

We use the equity method to account for investments in unconsolidated joint
ventures and affiliated companies in which we hold a voting interest of 50% or
less and exercise significant influence. We use the cost method to account for
our investment in entities in which we do not have the ability to exercise
significant influence.

Cash Equivalents and Restricted Cash - We consider all highly liquid investments
with an original maturity of three months or less to be cash equivalents.
Restricted cash represents amounts required to be maintained in escrow under
certain of our credit facilities.

Investments in Hotel Properties - We record investments in hotel properties at
cost (the allocated purchase price for hotel acquisitions) or at fair value at
the time of contribution (for contributed property). We depreciate property and
equipment balances using the straight-line method over lives ranging from five
to 40 years. For the years ended December 31, 2001, 2000 and 1999, we
capitalized interest of $6,098, $8,613, and $12,540, respectively. We carry
properties held for sale at the lower of their carrying values or estimated fair
values less costs to sell. We discontinue depreciation of these properties when
a property is classified as held for sale. Our properties held for sale are not
material and, therefore, are included in investments in hotel properties.

Intangible Assets - Intangible assets consist primarily of deferred financing
fees. We amortize these deferred fees on a straight-line basis over the lives of
the related borrowings.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of -
Whenever events or changes in circumstances indicate that the carrying values of
long-lived assets (including property and equipment and all intangibles) may be
impaired, we perform an analysis to determine the recoverability of the asset's
carrying value. The carrying value of the asset includes the original purchase
price (net of depreciation) plus the value of all capital improvements (net of
depreciation). If the analysis indicates that the carrying value is not
recoverable from future cash flows, we write down the asset to its estimated
fair value and recognize an impairment loss. The estimated fair value is based
on what we estimate the current sale price of the asset to be based on
comparable sales information or other estimates of the asset's value. Any
impairment losses we recognize are recorded as operating expenses. In 2001, we
recognized $43,582 of impairment losses. We did not recognize any impairment
losses in 2000 or 1999.

We review long-lived assets for impairment when one or more of the following
events have occurred:

      a.    Current or immediate short-term (future twelve months) projected
            cash flows are significantly less than the most recent historical
            cash flows.

      b.    The unplanned departure of an executive officer or other key
            personnel which could adversely affect our ability to maintain our
            competitive position and manage future growth.

      c.    A significant adverse change in legal factors or an adverse action
            or assessment by a regulator, which could affect the value of our
            long-lived assets.

      d.    Events which could cause significant adverse changes and uncertainty
            in business and leisure travel patterns.


                                       42

<PAGE>

We make estimates of the undiscounted cash flows from the expected future
operations of the asset. In projecting the expected future operations of the
asset, we base our estimates on future budgeted earnings before interest
expense, income taxes, depreciation and amortization, or EBITDA, amounts and use
growth assumptions to project these amounts out over the expected life of the
underlying asset. Our growth assumptions are based on assumed future
improvements in the national economy and improvements in demand for lodging.

Income Taxes - We account for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards or SFAS No. 109, "Accounting for
Income Taxes." Deferred income taxes reflect the tax consequences on future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts.

When the RMA became effective on January 1, 2001, we created taxable
subsidiaries that are subject to taxation similar to subchapter C-corporations.
Because of the RMA, we have created a number of these taxable subsidiaries as
the lessees of our real property. The income of these taxable subsidiaries is
subject to federal income tax.

Foreign Currency Translation - We maintain results of operations for our
Canadian hotels in Canadian dollars and translate those results using the
average exchange rates during the period. We translate assets and liabilities to
U.S. dollars using the exchange rate in effect at the balance sheet date. We
reflect resulting translation adjustments in accumulated other comprehensive
income (loss).

Revenue Recognition - Prior to January 1, 2001, we earned participating lease
revenue from the leasing of all of our hotel operating properties. We earned
participating lease revenue from only eight hotels in 2001. Participating lease
revenue represented lease payments from lessees pursuant to participating lease
agreements. Effective January 1, 2001, in conjunction with RMA, we began to earn
rooms, food and beverage, and other revenue through the operations of our
hospitality properties. We recognize those revenues as hotel services are
delivered. Office, retail and parking rental is generally recognized on a
straight-line basis over the terms of the respective leases.

Participating Lease Agreement - Changes to the federal tax laws governing REITs
became effective on January 1, 2000. Under those changes, we have created a
number of taxable subsidiaries to lease our real property. Our taxable
subsidiaries are wholly-owned and are similar to a subchapter C corporation. As
a result, on January 1, 2001, MeriStar Hotels assigned their participating
leases to our taxable subsidiaries and the taxable subsidiaries entered into
management agreements with MeriStar Hotels to manage our properties. Under these
management agreements, the taxable subsidiaries pay MeriStar Hotels a management
fee. The taxable subsidiaries in turn make rental payments to us under the
participating leases. The management agreements have been structured to
substantially mirror the economics and terms of the former leases.

Use of Estimates - Preparing financial statements in conformity with accounting
principles generally accepted in the United States of America 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.

Segment Information - SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," requires public entities to report selected
information about operating segments in financial reports issued to
shareholders. Based on the guidance provided in the standard, we have determined
that our business is conducted in one reportable segment. The standard also
establishes requirements for related disclosures about products and services,
geographic areas and major customers.

The following table summarizes geographic information required to be disclosed
under SFAS No. 131:

                                           2001            2000           1999
                                           ----            ----           ----
Revenue:
U.S.                                    $1,061,621      $  394,164      $367,809
Foreign                                     23,267           6,521         7,011
                                        ----------      ----------      --------

                                        $1,084,888      $  400,685      $374,820
                                        ==========      ==========      ========

Investments in hotel
properties, net:
U.S.                                    $2,734,028      $2,850,348
Foreign                                     52,269          56,153
                                        ----------      ----------

                                        $2,786,297      $2,906,501
                                        ==========      ==========


                                       43

<PAGE>

Comprehensive Income - SFAS No. 130, "Reporting Comprehensive Income," requires
an enterprise to display comprehensive income and its components in a financial
statement to be included in an enterprise's full set of annual financial
statements or in the notes to financial statements. Comprehensive income
represents a measure of all changes in equity of an enterprise that result from
recognized transactions and other economic events for the period other than
transactions with owners in their capacity as owners. Our comprehensive income
includes net income and other comprehensive income from foreign currency items
and derivative instruments.

Derivative Instruments and Hedging Activity - SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," requires an entity to recognize
all derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. SFAS No. 137 and No. 138 amended certain
provisions of SFAS No. 133. We adopted these accounting pronouncements effective
January 1, 2001.

New Accounting Pronouncements - In June 2001, the Financial Accounting Standards
Board issued SFAS No. 141, "Business Combinations," SFAS No. 142, "Goodwill and
Other Intangible Assets," and SFAS No. 143 "Accounting for Asset Retirement
Obligations." In August 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment of Disposal of Long-Lived Assets," which supersedes SFAS No. 121. We
are currently in the process of evaluating the effect these new standards will
have on our financial statements.

Reclassifications - We have reclassed certain 2000 and 1999 amounts to be
consistent with the 2001 classifications.

3. Investments in Hotel Properties

Investments in hotel properties consist of the following:

                                                            December 31,
                                                            ------------
                                                       2001              2000
                                                       ----              ----
Land                                                $  310,921        $  317,072
Buildings                                            2,473,651         2,461,089
Furniture, fixtures and equipment                      354,392           338,350
Construction-in-progress                                44,713            77,219
                                                    ----------        ----------

Total                                               $3,183,677        $3,193,730
                                                    ==========        ==========

4. Investments in and Advances to Affiliates

We have ownership interests in certain unconsolidated joint ventures and
affiliated companies.

In conjunction with the lease assignments from MeriStar Hotels on January 1,
2001, we acquired the ownership interest in Ballston Parking Associates of
$1,629. We account for this investment using the cost method.

In 1999, we invested $40,000 in MeriStar Investment Partners, LP, or MIP, a
joint venture established to acquire upscale, full-service hotels. Our
investment is in the form of a preferred partnership interest. We receive a 16%
preferred return on our investment. We account for this investment using the
cost method.

5. Long-Term Debt

Long-term debt consists of the following:

                                                          December 31,
                                                          ------------
                                                    2001                2000
                                                    ----                ----
Senior unsecured notes .....................    $   750,000         $        --
Credit facility ............................        224,000             898,000
Secured facility ...........................        330,000             330,000
Mortgage debt and other ....................         52,335              59,036
                                                -----------         -----------
Mortgages and notes payable ................      1,356,335           1,287,036
Notes payable to MeriStar Hospitality ......        359,300             359,300
Unamortized issue discount .................        (15,501)             (8,017)
                                                -----------         -----------
                                                $ 1,700,134         $ 1,638,319
                                                ===========         ===========


                                       44

<PAGE>

Future Maturities - Aggregate future maturities of the above obligations are as
follows:

2002 ..............................................................   $   15,543
2003 ..............................................................      232,589
2004 ..............................................................      171,168
2005 ..............................................................        9,265
2006 ..............................................................       10,006
Thereafter ........................................................    1,261,563
                                                                      ----------

                                                                      $1,700,134
                                                                      ==========

Senior Unsecured Notes - In December 2001, we issued $250,000 aggregate
principal amount of 10.5% senior notes due June 2009. The notes are unsecured
obligations of certain subsidiaries of ours and we guarantee payment of
principal and interest on the notes. The net proceeds from the sale of $248,420
were used to repay amounts outstanding under the credit facility. The repayments
of term loans under the credit facility resulted in an extraordinary loss of
$1,527 ($1,494, net of tax) from the write-off of deferred financing costs.

In January 2001, we issued $300,000 aggregate principal amount of 9.0% senior
notes due 2008 and $200,000 of 9.13% senior notes due 2011. The notes are
unsecured obligations of certain subsidiaries of ours and we guarantee payment
of principal and interest on the notes. The net proceeds from the sale of
$492,000 were used to repay amounts outstanding under the credit facility and to
make payments to terminate certain swap agreements that hedged variable rate
loans that were repaid. The repayments of term loans under the credit facility
resulted in an extraordinary loss of $1,243 ($1,226, net of tax) from the
write-off of deferred financing costs.

Credit Facility - In conjunction with the merger, we entered into a $1,000,000
senior secured credit facility. The credit facility was structured as a
$300,000, five-year term loan facility; a $200,000, five-and-a-half year term
loan facility; and a $500,000, three-year revolving credit facility with two,
one-year optional extensions. We used the proceeds from the sales of senior
unsecured notes in 2001 to repay amounts outstanding under the two term loans.
The credit facility is secured by MeriStar Hospitality's common stock and the
general partnership, limited partnership and limited liability ownership
interests in our subsidiaries. The interest rate on the term loans and revolving
facility ranges from 100 to 200 basis points over the 30-day LIBOR, depending on
certain financial performance covenants and long-term senior unsecured debt
ratings. The weighted average interest rate on borrowings outstanding under our
credit facility as of December 31, 2001 and 2000 was 8.3%. As of December 31,
2001, we had $76,000 available to borrow under the credit facility.

Our senior credit facility requires us to meet or exceed certain financial
performance ratios at the end of each quarter. Travel disruptions and safety
concerns following the terrorist attacks on September 11, 2001 and the slowdown
of the national economy resulted in a significant negative impact to the lodging
industry and our operations. This decline in operations would have caused us to
be out of compliance with certain financial covenants specified in our senior
credit agreement. On October 24, 2001, however, we finalized a temporary waiver
on all affected financial covenants with our senior bank group and engaged in
discussions to amend our senior credit agreement further. This waiver to the
credit agreement allowed these financial covenants to be waived for the period
beginning September 30, 2001 and ending February 28, 2002. In December 2001, we
amended the terms of our senior credit facility. This permanently relaxed the
financial covenants required under the loan and allows us to extend the maturity
date of the credit facility from July 2002 until July 2003. We incurred $4,382
of costs related to the amended agreement.

Secured Facility - In 1999 we completed a $330,000, 10-year non-recourse
financing secured by a portfolio of 19 hotels. The loan bears a fixed interest
rate of 8.01% and matures in 2009. We used most of the net proceeds to repay
amounts outstanding under our prior credit facilities.

Mortgage Debt - In connection with the merger, we assumed mortgage debt secured
by seven hotels. The mortgage debt matures between 2001 and 2012, and the
interest rates on the mortgages range from 7.5% to 10.5%.

Notes payable to MeriStar - In 1997, MeriStar Hospitality completed the offering
of $150,000 aggregate principal amount (issue price of $149,799, net of
discount) of its 8.75% senior subordinated notes due 2007. In conjunction with
this transaction, we borrowed $150,000 from MeriStar Hospitality under terms
matching those of the subordinated notes; however, the interest rate on our note
to MeriStar Hospitality is 8.69%, the effective rate on the subordinated notes.
The indenture pursuant to which the subordinated notes were issued contains
certain covenants, including maintenance of certain financial ratios, reporting
requirements, and other customary restrictions. The note provides for
semi-annual payments of interest on February 15 and August 15, commencing on
February 15, 1998.


                                       45

<PAGE>

In 1999, under terms matching those of the subordinated notes, MeriStar
Hospitality completed an "add-on" offering of $55,000 of subordinated notes. In
conjunction with the "add-on" sale of subordinated notes, we borrowed $55,000
from MeriStar Hospitality under the terms matching those of the subordinated
notes; however, the interest rate on our note to MeriStar Hospitality is 8.69%,
the effective rate on the subordinated notes. We used the net proceeds to repay
indebtedness under our credit facility and to invest in MIP. These notes are
unsecured obligations of ours and provide for semi-annual payments of interest
on February 15 and August 15, commencing on August 15, 1999. The outstanding
balance on these notes payable to MeriStar Hospitality is $202,817 and 202,429
at December 31, 2001 and 2000, respectively.

In 1997, MeriStar Hospitality completed the offering of $172,500 aggregate
principal amount of 4.75% convertible subordinated notes due 2004. In
conjunction with this transaction, we borrowed $172,500 from MeriStar
Hospitality under terms matching those of the convertible notes. The proceeds
were used to repay amounts outstanding under our prior credit facility and to
finance certain hotel acquisitions. The notes payable to MeriStar Hospitality
are unsecured obligations and provide for semi-annual payments of interest on
April 15 and October 15, commencing on April 15, 1998. During 2000, we
repurchased $18,200 of our notes payable at a discount. This resulted in an
extraordinary gain of $3,450 ($3,400, net of tax effect). The outstanding
balance on this note payable to MeriStar Hospitality is $154,300 at December 31,
2001 and 2000.

Hedge Agreements and Other Derivatives - Our interest rate risk management
objective is to limit the impact of interest rate changes on earnings and cash
flows. We assess interest rate cash flow risk by continually identifying and
monitoring changes in interest rate exposures that may adversely impact expected
future cash flows, and by evaluating hedging opportunities. We do not enter into
derivative instruments for any purpose other than cash flow hedging purposes.

We recognized a transition adjustment of $2,842 as the fair value of our
derivative instruments at January 1, 2001. We recorded a liability and
corresponding charge to other comprehensive loss for this amount. As of December
31, 2001, the fair value of the derivative instruments represents a liability of
$12,100.

Upon the sale of our $250,000 senior unsecured notes in December 2001, we
reduced the term loans and our revolver under our senior secured credit facility
by an aggregate amount of $248,400. At that time, we converted three swap
agreements to non-hedging derivatives. These swap agreements had notional
principal amounts of approximately $151,400 and were originally designated to
hedge interest rates on borrowings under our senior secured credit facility that
were repaid. We recognized a $6,666 loss when this amount was transferred out of
accumulated other comprehensive income because the debt being hedged was repaid.

Upon the sale of our $500,000 senior unsecured notes in January 2001, we
reduced the term loans under our senior secured credit facility by $300,000. At
that time, we terminated three swap agreements with a notional amount of
$300,000. These swap agreements were originally designated as cash flow hedges
of interest rates on the variable rate term loans that were repaid. We made net
payments totaling $9,297 to our counter parties to terminate these swap
agreements, and recognized a $9,297 loss related to those terminated swaps.

As of December 31, 2001, we had three swap agreements with notional amounts
totaling $300,000. A portion of these swap agreements ($148,600) provide hedges
against the impact future interest rates have on our floating LIBOR debt
instruments. The remaining portion of the swap agreements ($151,400) have been
converted to non-hedging derivatives. The swap agreements effectively fix the
30-day LIBOR between 4.77% and 6.4%. The swap agreements expire between December
2002 and July 2003. For the year ended December 31, 2001 and 2000, we have
(made) received net payments of approximately $(6,285) and $3,081, respectively.

The fair value of swap agreements designated as cash flow hedges is $5,246 at
December 31, 2001 and recorded in accumulated other comprehensive income within
partners' capital. The estimated amount recorded in accumulated other
comprehensive income expected to be reclassified to the statement of operations
during 2002 is $4,735.

In anticipation of the August 1999 completion of our mortgage-backed secured
facility, we entered into two separate hedge transactions during July 1999. Upon
completion of the secured facility, we terminated the underlying treasury lock
agreements, resulting in a net payment to us of $5,100. This amount was deferred
and is being recognized as a reduction to interest expense over the life of the
underlying debt. As a result, the effective interest rate on the secured
facility is 7.76%.

As of December 31, 2001, after consideration of the hedge agreements described
above, 95.6% of our debt was fixed and our overall weighted average interest
rate was 8.49%.

We have determined the fair value of our outstanding balance of long-term debt
approximates $1,625,000 at December 31, 2001.


                                       46

<PAGE>

6. Income Taxes

When the RMA became effective on January 1, 2001, we created taxable
subsidiaries to lease certain of our properties. These subsidiaries are subject
to taxation similar to C corporations. The income of these taxable subsidiaries
is subject to federal income tax.

Our income taxes were allocated as follows:

                                                         2001     2000    1999
                                                         ----     ----    ----
Taxes on income (loss) before gain (loss) on sale of
assets and extraordinary gain (loss) ................  $(1,044)  $1,622  $1,681
Taxes on gain (loss) on sale of assets ..............      (39)      56      --
Tax expense (benefit) on extraordinary gain (loss)...      (50)      50     (74)
                                                       -------   ------  ------

  Total income tax expense (benefit) ................  $(1,133)  $1,728  $1,607
                                                       =======   ======  ======


Our income (loss) before taxes (including the gain (loss) on sale of assets and
extraordinary items, and net of minority interests) was $(45,529), $119,658, and
$113,337 in 2001, 2000 and 1999, respectively. Our total income tax expense
(benefit) was $(1,133), $1,728 and $1,607, respectively. Therefore, our
effective income tax rates were 2.5%, 1.4% and 1.4%, respectively.

Our effective income tax rate differs from the federal statutory income tax rate
as follows:

                                                         2001     2000     1999
                                                         ----     ----     ----

State and local taxes                                     1.5      1.1      1.1
Difference in effective rate on foreign subsidiaries
   and taxable subsidiaries                               1.0      0.3      0.3
                                                         ----     ----     ----

                                                          2.5%     1.4%     1.4%
                                                         ====     ====     ====

The components of income tax expense (benefit) related to income (loss) before
gain (loss) on sale of assets and extraordinary gain (loss) are as follows:

                                            2001            2000           1999
                                            ----            ----           ----
Current:
      Federal                             $    --         $    --        $    --
      State                                   320             640            815
      Foreign                                  90             346            151
                                          -------         -------        -------

                                              410             986            966
Deferred:
      Federal                                (337)             --             --
      State                                (1,029)            548            675
      Foreign                                 (88)             88             40
                                          -------         -------        -------

                                           (1,454)            636            715
                                          -------         -------        -------

                                          $(1,044)        $ 1,622        $ 1,681
                                          =======         =======        =======

The tax effects of the principal temporary differences that give rise to our net
deferred tax liability are as follows:

                                                             December 31,
                                                             ------------
                                                         2001             2000
                                                         ----             ----

Accelerated depreciation/basis difference              $ 1,704          $ 2,089
Fair value of hotel assets acquired                      5,440            5,440
Allowance for doubtful accounts                             66              (24)
Accrued vacation                                           (12)             (12)
Accrued expenses                                           386              386
Net operating loss                                        (449)              --
Other                                                       (5)             234
                                                       -------          -------

Net deferred tax liability                             $ 7,130          $ 8,113
                                                       =======          =======


                                       47

<PAGE>

Our taxable subsidiaries had a net operating loss in 2001. We have not recorded
a valuation allowance against the deferred tax assets this loss creates as of
December 31, 2001 as we believe it is more likely than not we will realize these
deferred tax assets.

In conjunction with the merger and related transactions, we established a new
accounting basis for American General's assets and liabilities based on their
fair values. In accordance with generally accepted accounting principles, we
have provided a deferred income tax liability for the estimated future tax
effect of differences between the accounting and tax bases of assets acquired
from American General. This deferred income tax liability, related to future
state and local income taxes, is estimated as $5,440, based on information
available at the date of the merger and subsequently.

7. Partnership Units

Third Parties hold outstanding units of limited partnership interest in us.
These units are redeemable at the option of the holder for a like number of
shares of common stock of MeriStar Hospitality, or cash, or a combination
thereof, at the election of MeriStar Hospitality. Due to these redemption
rights, these limited partnership units have been excluded from partners'
capital and are included in redeemable OP units and measured at redemption value
as of the end of the periods presented. At December 31, 2001 and 2000 there were
4,116,698 and 4,056,111 redeemable units outstanding, respectively. The value of
these redeemable units is based on the closing market price of MeriStar
Hospitality's common stock at the balance sheet date, which at December 31, 2001
and 2000 was $14.20 and $19.70, respectively. In addition, there were 392,157
Class D Preferred OP Units outstanding at December 31, 2001 and 2000 with a
redemption value of $22.16 per unit.

Our partnership agreement provides for five classes of partnership interests:
Common units, Class B units, Class C units, Class D units and Profits-Only
units. Holders of Common units and Class B units receive distributions per unit
equivalent to the dividend paid on each of MeriStar Hospitality's common shares.
Holders of Class C units receive a non-cumulative, quarterly distribution equal
to $0.5575 per Class C unit so long as the common units and Class B units
receive a distribution for such quarter and the dividend rate on our common
stock does not exceed $0.5575. The Class C units automatically convert into
Common units when that dividend rate is exceeded. Holders of Class D units
receive a 6.5% cumulative annual preferred return based on an assumed price per
common share of $22.16; the return is compounded quarterly to the extent not
paid on a current basis, and holders are entitled to a liquidation preference of
$22.16 per Class D unit. All net income earned and capital proceeds received by
the operating partnership (after payment of the annual preferred return and, if
applicable, the liquidation preference) will be shared by the holders of the
Common units in proportion to the number of Common units in the relevant
operating partnership owned by each such holder. As of December 31, 2001 and
2000, outstanding units were 49,033,002 and 48,459,145, respectively.

In 2000, we granted 462,500 Profits-Only OP Units, or POPs, to some of our
employees pursuant to our POPs Plan. As of December 31, 2001, 387,500 of these
POPs are outstanding. In 2001, we granted 350,000 POPs to some of our employees
pursuant to our POPs Plan.

During 1999, we issued 65,875 Common units to partially finance the purchase of
a hotel, and we issued 974,588 Common units as a conditional component of a
purchase agreement for a hotel we purchased in 1998.

On March 21, 2001, June 28, 2001, September 18, 2001 and December 17, 2001,
we declared our first, second, third and fourth quarter distributions,
respectively, equivalent to an annual rate of $1.525 per Common unit and $2.23
per Class C unit. The amount of the distribution for each quarter was $0.505 per
Common unit and $0.5575 per Class C unit for the first, second and third
quarters and $0.01 per Common unit and $0.5575 per Class C unit for the fourth
quarter. These distributions were paid on April 30, 2001, July 31, 2001, October
12, 2001 and January 31, 2002.

On March 21, 2000, June 21, 2000, September 25, 2000 and December 20, 2000, we
declared our first, second, third and fourth quarter distribution, respectively,
equivalent to an annual rate of $2.02 per Common unit and $2.23 per Class C
unit. The amount of the distribution for each quarter was $0.505 per Common unit
and $.05575 per Class C unit. These distributions were paid on April 28, 2000,
July 31, 2000, October 31, 2000 and January 31, 2001.

On March 17, 1999, June 21, 1999, September 15, 1999 and December 6, 1999,
we declared our first, second, third and fourth quarter distribution,
respectively, equivalent to an annual rate of $2.02 per common unit and $2.23
per Class C unit. The amount of the distribution for each quarter was $0.505
per Common unit and $0.5575 per Class C unit. These distributions were paid on
April 30, 1999, July 30, 1999, October 29, 1999 and January 31, 2000.


                                       48

<PAGE>

8. Earnings Per Unit

The following table presents the computation of basic and diluted earnings per
OP unit:

<TABLE>
<CAPTION>
                                                                                         Year Ended December 31,
                                                                                         -----------------------
                                                                                    2001          2000          1999
                                                                                    ----          ----          ----
<S>                                                                               <C>          <C>           <C>
Basic Earnings Per OP Unit Computation:
          Net income (loss) before extraordinary gain (loss)                      $(41,765)    $ 114,636     $ 116,207
          Distributions paid on unvested MeriStar Hospitality restricted stock        (505)       (1,168)           --
          Preferred distributions                                                     (565)         (565)         (565)
                                                                                  --------     ---------     ---------

          Income (loss) applicable to common unitholders                           (42,835)      112,903       115,642
          Weighted average number of OP units outstanding                           48,364        50,122        52,153
                                                                                  --------     ---------     ---------

          Basic earnings per OP unit before extraordinary gain (loss)             $  (0.89)    $    2.25     $    2.22
                                                                                  ========     =========     =========

Diluted Earnings Per OP Unit Computation:

          Income (loss) applicable to common unitholders                          $(42,835)    $ 112,903     $ 115,642
          Preferred distributions                                                       --           565           565
          Interest on MeriStar Hospitality convertible debt                             --         7,338         8,137
          Distributions paid on MeriStar Hospitality restricted stock                   --           254            --
                                                                                  --------     ---------     ---------

          Adjusted net income (loss)                                              $(42,835)    $ 121,060     $ 124,344
                                                                                  --------     ---------     ---------

          Weighted average number of OP units outstanding                           48,364        50,122        52,153
          OP unit equivalents:
               MeriStar Hospitality stock options                                       --           208           102
               Class D Preferred OP units                                               --           392           392
               MeriStar Hospitality convertible debt                                    --         4,612         5,066
               MeriStar Hospitality restricted stock                                    --           126            --
                                                                                  --------     ---------     ---------

          Total weighted average number of diluted OP units outstanding             48,364        55,460        57,713
                                                                                  --------     ---------     ---------

          Diluted earnings per OP unit before extraordinary gain (loss)           $  (0.89)    $    2.18     $    2.15
                                                                                  ========     =========     =========
</TABLE>

9. Related-Party Transactions

Pursuant to an intercompany agreement, we and MeriStar Hotels provide each other
with, among other things, reciprocal rights to participate in certain
transactions entered into by each party. In particular, MeriStar Hotels has a
right of first refusal to become the manager of any real property we acquire. We
also may provide each other with certain services. These may include
administrative, renovation supervision, corporate, accounting, finance, risk
management, legal, tax, information technology, human resources, acquisition
identification and due diligence, and operational services, for which MeriStar
Hotels is compensated in an amount that we would be charged by a third party for
comparable services. During the years ended December 31, 2001, 2000 and 1999, we
paid MeriStar Hotels a net amount of $151, $1,165 and $1,600 respectively, for
such services.

MeriStar Hotels has a revolving credit facility with us. On March 1, 2000,
MeriStar Hotels repaid the remaining balance of $57,100 on its revolving credit
agreement with us upon closing its bank revolving credit facility. At that time,
the revolving credit facility was amended to reduce the maximum borrowing limit
from $75,000 to $50,000 and to increase the interest rate on the facility from
LIBOR plus 350 basis points to LIBOR plus 650 basis points. During 2001, 2000
and 1999, we earned interest of $5,005, $955, and $4,907, respectively, from
this facility. As of December 31, 2001, MeriStar Hotels had $36,000 of
borrowings outstanding under this facility.

Certain members of our management and our respective affiliates owned equity
interests relating to a hotel that we acquired in


                                       49

<PAGE>

January 1999. These persons and affiliates received an aggregate of $1,488 of
our OP Units in exchange for their interests in the hotel.

Of the $300,000 aggregate principal amount of 9.0% senior unsecured notes due in
2008 we sold in January 2001, $30,000 principal amount was sold at a price of
99.688% to an affiliate of Oak Hill Capital Partners. The notes purchased were
identical to those purchased by third parties.

Of the $200,000 aggregate principal amount of 9.13% senior unsecured notes due
in 2011 we sold in January 2001, $20,000 principal amount was sold at a price of
99.603% to an affiliate of Oak Hill Capital Partners. The notes purchased were
identical to those purchased by third parties.

Of the $250,000 aggregate principal amount of 10.5% senior unsecured notes due
in 2009 we sold in December 2001, $23,000 principal amount was sold at a price
of 99.368% to an affiliate of Oak Hill Capital Partners. The notes purchased are
identical to those purchased by third parties.

10. Stock-Based Compensation

Stock Options

MeriStar Hospitality sponsors a restricted stock plan and a stock option plan
(the "Plan") in which Partnership employees participate. Upon issuance of any
stock, MeriStar Hospitality is obligated to contribute the proceeds to the
Company in exchange for an equal number of OP units.

In connection with the merger, MeriStar Hospitality adopted a new equity
incentive plan. This plan authorizes Meristar Hospitality to award up to
5,565,518 options on shares of common stock. Meristar Hospitality may grant
awards to officers or other of our key employees or an affiliate. These options
are exercisable in three annual installments and expire 10 years from the grant
date.

Stock option activity for 2001, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                Equity Incentive Plan
                                                ---------------------
                                              Number of       Average
                                                Shares     Option Price
                                                ------     ------------
<S>                                           <C>             <C>
Balance, January 1, 1999                      3,703,379       $24.80
Granted                                       1,015,750        19.37
Exercised                                       (94,012)       15.64
Canceled                                       (264,064)       27.87
                                             ----------       ------
Balance, December 31, 1999                    4,361,053        23.56
Granted                                         584,875        16.13
Exercised                                       (47,153)       17.26
Canceled                                       (113,441)       28.62
                                             ----------       ------
Balance, December 31, 2000                    4,785,334        22.68
Granted                                          88,500        13.33
Exercised                                       (41,839)       16.12
Canceled                                     (2,194,165)       26.87
                                             ----------       ------
Balance, December 31, 2001                    2,637,830       $19.47
                                             ==========       ======
Shares exercisable at December 31, 1999       2,577,620       $24.53
                                             ==========       ======
Shares exercisable at December 31, 2000       3,482,816       $23.99
                                             ==========       ======
Shares exercisable at December 31, 2001       2,020,759       $20.09
                                             ==========       ======
</TABLE>


                                       50

<PAGE>

The following table summarizes information about stock options outstanding at
December 31, 2001:

<TABLE>
<CAPTION>
                                    Options Outstanding                       Options Exercisable
                                    -------------------                       -------------------
                                         Weighted                                           Weighted
                                          Average          Weighted                          Average
Range of exercise         Number         Remaining          Average           Number        Exercise
     prices             outstanding   Contractual Life   Exercise Price     exercisable       Price
     ------             -----------   ----------------   --------------     -----------       -----
<S>                      <C>                <C>              <C>             <C>              <C>
$13.33 to $15.64         1,021,598          6.46             $15.13            791,434        $15.36
$16.25 to $19.00            37,750          7.89              15.98             27,502         16.18
$19.19 to 19.19            925,000          7.10              19.19            616,667         19.19
$19.75 to $29.44           506,907          6.62              25.88            438,581         26.58
$29.55 to $31.61           146,575          5.87              30.93            146,575         30.93
                         ---------        ------             ------          ---------        ------

$13.33 to $31.61         2,637,830          6.71             $19.61          2,020,759        $20.15
                         =========        ======             ======          =========        ======
</TABLE>

We have adopted the disclosure-only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation." Accordingly, we apply Accounting Principles Board
Opinion No. 25 in accounting for the Equity Incentive Plan and, therefore, no
compensation cost has been recognized for the Equity Incentive Plan.

Pro forma information regarding net income and diluted earnings per share is
required by SFAS No. 123, and has been determined as if we have accounted for
our employee stock options under the fair value method. We estimated the fair
value for these options at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions for 2001, 2000 and
1999:

                                        2001            2000            1999
                                        ----            ----            ----
Risk-free interest rate                     3.6%           6.71%           6.70%
Dividend rate                            $1.525           $2.02           $2.02
Volatility factor                          0.57            0.27            0.31
Weighted average expected life       3.10 years      3.06 years      3.07 years

Our pro forma net income (loss) and diluted earnings (loss) per unit as if the
fair value method had been applied were $(46,938) and $(1.00) for 2001, $110,391
and $2.19 for 2000, $110,965 and $2.06 for 1999. The effects of applying SFAS
No. 123 for disclosing compensation costs may not be representative of the
effects on reported net income and diluted earnings per share for future years.

Other Stock-Based Compensation

As of December 31, 2001, MeriStar Hospitality has granted 479,000 shares of
restricted stock to employees. This restricted stock vests ratably over
three-year or five-year periods. The issuance of restricted stock has resulted
in $5,287 of unearned stock-based compensation recorded as a reduction to
partners' capital on our balance sheet as of December 31, 2001.

In 2000, we granted 462,500 Profits-Only OP Units, or POPs, to some of our
employees pursuant to our POPs Plan. As of December 31, 2001, 387,500 of these
POPs are outstanding. These POPs were originally eligible for vesting based on
us achieving certain financial performance criteria. During 2001, we converted
these POPs to fixed awards and extended the vesting period to 2004. In 2001, we
granted 350,000 POPs to some of our employees pursuant to our POPs Plan. These
POPs are fixed awards and vest ratably over three years.


                                       51

<PAGE>

11. Restructuring Charges

During 2001, we incurred a restructuring charge of $1,080 in connection with
operational changes at our corporate headquarters. The restructuring included
eliminating seven corporate staff positions and office space no longer needed
under the new structure.

The restructuring charge consists of:

Severance                                                                 $  168
Noncancelable lease cost                                                     912
                                                                          ------

Total                                                                     $1,080
                                                                          ======

During 2001, we applied $168 and $520 in severance and lease termination costs,
respectively, against the restructuring reserve. Approximately $392 of the
restructuring accrual remains at December 31, 2001.

12. Commitments and Contingencies

We lease land at certain hotels from third parties. Certain leases contain
contingent rent features based on gross revenues at the respective property.
Future minimum lease payments required under these operating leases as of
December 31, 2001 were as follows:

2002                                                                     $ 1,446
2003                                                                       1,446
2004                                                                       1,446
2005                                                                       1,449
2006                                                                       1,449
Thereafter                                                                52,315
                                                                         -------

                                                                         $59,551
                                                                         =======

We lease certain office, retail and parking space to outside parties under
non-cancelable operating leases with initial or remaining terms in excess of one
year. Future minimum rentals under these leases as of December 31, 2001 were as
follows:

2002                                                                     $ 4,969
2003                                                                       4,190
2004                                                                       3,915
2005                                                                       2,398
2006                                                                       1,217
Thereafter                                                                 1,896
                                                                         -------

                                                                         $18,585
                                                                         =======

In the course of our normal business activities, various lawsuits, claims and
proceedings have been or may be instituted or asserted against us. Based on
currently available facts, we believe that the disposition of matters that are
pending or asserted will not have a material adverse effect on our consolidated
financial position, results of operations or liquidity.

13. Acquisitions and Dispositions

During 2001, we sold two hotels and received proceeds of $9,715. The sales
resulted in a loss of $2,176 ($2,137, net of tax).

During 2001, we terminated the leases of eight of our hotels from affiliates of
Prime Hospitality for a total cost of $1,315. Concurrently, we signed long-term
management agreements with MeriStar Hotels for four of these properties. The
term on the remaining four management agreements is one year with additional
one-year renewal periods.

During 2000, we sold three limited-service hotels and received proceeds of
$24,148. This resulted in a gain on sale of assets of $3,495 ($3,439, net of
tax). We also purchased a full-service hotel for $19,400. Of the purchase
amount, we paid $11,400 in cash and we will pay $8,000 from the hotel's future
cash flow within the next five years. We funded the acquisition using existing
cash and borrowings under our revolving credit facility.


                                       52

<PAGE>

During 1999, we acquired one hotel for a purchase price of $10,642 of cash and
$1,488 of OP Units. We funded the acquisition using existing cash and borrowings
on our credit facility. We also sold two hotels during 1999 for a total price of
$8,900. The resulting gain on the sales was immaterial.

14. Consolidating Financial Information

Certain of our subsidiaries and MeriStar Hospitality are guarantors of our
senior unsecured notes. Our guarantor subsidiaries also guarantee the unsecured
subordinated notes of MeriStar Hospitality. All guarantees are full and
unconditional, and joint and several. Exhibit 99 to this Annual Report on Form
10-K presents supplementary consolidating information for us, our non-guarantor
subsidiaries, and each of our guarantor subsidiaries. The supplementary
consolidating information in Exhibit 99 presents our consolidating balance
sheets as of December 31, 2001 and 2000, and consolidating statements of
operations and cash flows for each of the years in the three-year period ended
December 31, 2001.

<PAGE>

15. Quarterly Financial Information (Unaudited)

      The following is a summary of our quarterly results of operations:

<TABLE>
<CAPTION>
                                                         2001                                               2000
                                                         ----                                               ----
                                      First      Second       Third       Fourth        First       Second       Third      Fourth
                                     Quarter     Quarter     Quarter      Quarter      Quarter      Quarter     Quarter     Quarter
                                     -------     -------     -------      -------      -------      -------     -------     -------
<S>                                 <C>         <C>         <C>          <C>          <C>          <C>         <C>         <C>
Total revenue ..................    $302,684    $307,167    $247,538     $227,499     $ 67,080     $ 81,515    $117,607    $134,483
Total operating expenses .......     256,432     249,220     233,715      263,865       41,339       43,331      42,206      43,469
Net operating income
    (loss) .....................      46,252      57,947      13,823      (36,366)      25,741       38,184      75,401      91,014
Income (loss) before
    extraordinary gain (loss) ..      14,497      27,131     (18,050)     (65,343)      (2,986)      11,851      45,633      60,138
Net income (loss) ..............      13,271      27,131     (18,050)     (66,837)         414       11,851      45,633      60,138
Diluted earnings (loss)
    per OP unit ................    $   0.29    $   0.52    $  (0.38)    $  (1.39)    $  (0.06)    $   0.23    $   0.85    $   1.15
</TABLE>

16. Supplemental Cash Flow Information

<TABLE>
<CAPTION>
                                                                              2001        2000        1999
                                                                              ----        ----        ----
<S>                                                                         <C>         <C>         <C>
Cash paid for interest and income taxes:

Interest, net of capitalized interest of $6,098, $8,613, and $12,540,
respectively                                                                $105,732    $120,539    $93,491
Income taxes                                                                     618         699      1,009

Non-cash investing and financing activities:
OP Units issued in purchase of property and equipment                             --          --      1,488
Redemption of redeemable OP Units                                              5,428          24     29,412
Deferred purchase price of hotel                                                  --       8,000         --

Operating assets received and liabilities assumed from lease conversion:
   Accounts receivable                                                        47,200          --         --
   Prepaid expenses and other                                                 13,500          --         --
   Furniture and fixtures, net                                                   152          --         --
   Investment in affiliates, net                                               1,629          --         --
                                                                            --------    --------    -------

         Total operating assets received                                      62,481          --         --
                                                                            ========    ========    =======

   Accounts payable and accrued expenses                                      65,706          --         --
   Long-term debt                                                                 32          --         --
                                                                            --------    --------    -------

         Total liabilities acquired                                           65,738          --         --
                                                                            ========    ========    =======
</TABLE>

17. Subsequent Event

On February 7, 2002, we sold $200,000 of senior unsecured notes. These notes
have an interest rate of 9.13% and mature in January 2011. We used the proceeds
to pay down our revolving credit facility. As a result of this financing, we
redesignated some swap agreements as non-hedging derivatives. We recognized a
$4,700 loss when this amount was transferred out of partners' capital because
the debt being hedged was repaid.


                                       54

<PAGE>

                MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
             SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 2001
                             (dollars in thousands)


<TABLE>
<CAPTION>
                                                           Costs subsequent   Gross amount
                            Initial cost to Company        to acquisition     at end of year
                            -----------------------        --------------     --------------
                                               Building           Building            Building   Accum-
                                                  and                and                 and     ulated    Year of
                            Encum-             Improve-           Improve-            Improve-  Deprecia-  Construc-    Date
Description                 brances    Land      ments     Land     ments     Land      ments     tion       tion     Acquired  Life
-----------                 -------    ----      -----     ----     -----     ----      -----     ----       ----     --------  ----
<S>                         <C>     <C>       <C>        <C>      <C>      <C>      <C>         <C>          <C>     <C>         <C>
Hotel Assets:
Salt Lake Airport Hilton,
UT                         $    --  $    770 $   12,828 $    --  $  4,185  $    770 $   17,013  $  2,579     1980      3/3/1995  40
Radisson Hotel, Schaumburg,
IL                              --     1,080      5,131    (230)      938       850      6,069     1,107     1979     6/30/1995  40
Sheraton Hotel, Colorado
Springs, CO                     (1)    1,071     14,592       1     4,526     1,072     19,118     2,848     1974     6/30/1995  40
Hilton Hotel, Bellevue, WA      48     5,211      6,766    (441)    3,686     4,770     10,452     1,358     1979      8/4/1995  40
Marriott Hotel, Somerset,
NJ                              (1)    1,978     23,001      --     4,811     1,978     27,812     4,092     1978     10/3/1995  40
Westin Atlanta Airport,
Atlanta, GA                     --     2,650     15,926    (300)    9,517     2,350     25,443     3,734     1982    11/15/1995  40
Sheraton Hotel, Charlotte,
NC                              (1)    4,700     11,057      --     4,032     4,700     15,089     2,123     1985      2/2/1996  40
Radisson Hotel Southwest,
Cleveland, OH                   --     1,330      6,353      --     5,537     1,330     11,890     1,479     1978     2/16/1996  40
Orange County Airport
Hilton, Irvine, CA              (1)    9,990      7,993      --     3,723     9,990     11,716     1,544     1976     2/22/1996  40
The Latham Hotel,
Washington, DC                  --     6,500      5,320      --     4,233     6,500      9,553     1,169     1981      3/8/1996  40
Hilton Hotel, Arlington, TX     (1)    1,836     14,689      79     3,766     1,915     18,455     2,479     1983     4/17/1996  40
Hilton Hotel, Arlington, VA     --     4,000     15,069      --       851     4,000     15,920     2,117     1990     8/23/1996  40

Southwest Hilton, Houston,
TX                              --     2,300     15,665    (613)   (2,871)    1,687     12,794     2,168     1979    10/31/1996  40
Embassy Suites, Englewood,
CO                              (1)    2,500     20,700      --     3,537     2,500     24,237     2,973     1986    12/12/1996  40
Holiday Inn, Colorado
Springs, CO                     --     1,600      4,232    (426)     (257)    1,174      3,975       619     1974    12/17/1996  40
Embassy Row Hilton,
Washington, DC                  --     2,200     13,247      --     3,276     2,200     16,523     1,888     1969    12/17/1996  40
Hilton Hotel & Towers,
Lafayette, LA                   (1)    1,700     16,062      --     2,169     1,700     18,231     2,164     1981    12/17/1996  40
Hilton Hotel, Sacramento,
CA                              (1)    4,000     16,013      --     2,686     4,000     18,699     2,236     1983    12/17/1996  40
Santa Barbara Inn, Santa
Barbara, CA                     --     2,600      5,141      --     1,497     2,600      6,638       770     1959    12/17/1996  40
San Pedro Hilton, San
Pedro, CA                       --       640      6,047      --     2,517       640      8,564       975     1989     1/28/1997  40
Doubletree Hotel,
Albuquerque, NM                 (1)    2,700     15,075      --     2,376     2,700     17,451     1,957     1975     1/31/1997  40
Westchase Hilton & Towers,
Houston, TX                     (1)    3,000     23,991      --     1,578     3,000     25,569     3,113     1980     1/31/1997  40
Sheraton Great Valley Inn,
Frazer, PA                      --     2,150     11,653      11     3,610     2,161     15,263     1,576     1971     3/27/1997  40
Holiday Inn Calgary
Airport, Calgary, Alberta,
Canada                          --       751      5,011     (77)    1,675       674      6,686       666     1981      4/1/1997  40
Sheraton Hotel Dallas,
Dallas, TX                      --     1,300     17,268    (569)   (5,551)      731     11,717     2,389     1974      4/1/1997  40
Radisson Hotel Dallas,
Dallas, TX                      --     1,800     17,580    (868)   (7,542)      932     10,038     2,236     1972      4/1/1997  40
Sheraton Hotel Guildford,
Surrey, BC, Canada              --     2,366     24,008    (244)   (1,335)    2,122     22,673     2,650     1992      4/1/1997  40
Doubletree Guest Suites,
Indianapolis, IN                --     1,000      8,242      --       999     1,000      9,241     1,057     1987      4/1/1997  40
Ramada Vancouver Centre,
Vancouver, BC, Canada           --     4,400      7,840    (451)    1,877     3,949      9,717     1,057     1968      4/1/1997  40
Holiday Inn Sports Complex,
Kansas City, MO                 --       420      4,742      --     2,129       420      6,871       715     1975     4/30/1997  40
Hilton Crystal City,
Arlington, VA                   --     5,800     29,879      --     1,674     5,800     31,553     3,464     1974      7/1/1997  40
Doral Palm Springs,
Cathedral City, CA              --     1,604     16,141      --     3,022     1,604     19,163     2,045     1985      7/1/1997  40
Radisson Hotel & Suites,
Chicago, IL                     --     4,870     39,175      --     3,619     4,870     42,794     4,586     1971     7/15/1997  40
Georgetown Inn, Washington,
DC                              --     6,100      7,103      --     1,824     6,100      8,927       884     1962     7/15/1997  40
Embassy Suites Center City,
Philadelphia, PA                (1)    5,500     26,763      --     3,529     5,500     30,292     3,085     1963     8/12/1997  40
Doubletree Hotel Austin,
Austin, TX                      (1)    2,975     25,678      --     3,288     2,975     28,966     3,003     1984     8/14/1997  40
Radisson Plaza Hotel,
Lexington, KY                   --     1,100     30,375      --     6,315     1,100     36,690     3,780     1982     8/14/1997  40
Jekyll Inn, Jekyll Island,
GA                              --        --      7,803      --     3,548        --     11,351     1,148     1971     8/20/1997  40
</TABLE>


                                       60

<PAGE>

<TABLE>
<S>                         <C>     <C>       <C>        <C>      <C>      <C>      <C>         <C>          <C>     <C>         <C>
Holiday Inn Metrotown,
Burnaby, BC, Canada             --     1,115      5,303    (114)      796     1,001      6,099       620     1989     8/22/1997  40
Embassy Suites
International Airport,
Tucson, AZ                      --     1,640     10,444      --     2,392     1,640     12,836     1,230     1982  1  0/23/1997  40
Westin Morristown, NJ           --     2,500     19,128     100     3,835     2,600     22,963     2,195     1962  1  1/20/1997  40
Doubletree Hotel Bradley
International Airport,
Windsor Locks, CT               --     1,013     10,228      87     1,861     1,100     12,089     1,142     1985  1  1/24/1997  40
Sheraton Hotel, Mesa, AZ        --     1,850     16,938      --     2,650     1,850     19,588     2,140     1985     12/5/1997  40
Metro Airport Hilton &
Suites, Detroit, MI             --     1,750     12,639      --     1,371     1,750     14,010     1,355     1989  1  2/16/1997  40
Marriott Hotel, Los
Angeles, CA                     --     5,900     48,250      --     7,615     5,900     55,865     5,362     1983  1  2/18/1997  40
Austin Hilton & Towers, TX      --     2,700     15,852      --     2,876     2,700     18,728     1,758     1974      1/6/1998  40

Dallas Renaissance North,
TX                              --     3,400     20,813      --     3,826     3,400     24,639     2,320     1979      1/6/1998  40
Houston Sheraton
Brookhollow Hotel, TX           --     2,500     17,609      --     2,562     2,500     20,171     1,959     1980      1/6/1998  40

Seelbach Hilton,
Louisville, KY                  --     1,400     38,462      --     7,265     1,400     45,727     4,117     1905      1/6/1998  40

Midland Hilton & Towers, TX     --       150      8,487      --     1,814       150     10,301       968     1976      1/6/1998  40

Westin Oklahoma, OK             --     3,500     27,588      --     2,745     3,500     30,333     2,908     1977      1/6/1998  40

Sheraton Hotel, Columbia,
MD                              --     3,600     21,393      --     3,871     3,600     25,264     2,141     1972     3/27/1998  40
Radisson Cross Keys,
Baltimore, MD                   --     1,500      5,615      --     1,566     1,500      7,181       598     1973     3/27/1998  40
Sheraton Fisherman's Wharf,
San Francisco, CA               (1)   19,708     61,751      --     4,984    19,708     66,735     5,983     1975      4/2/1998  40
Hartford Hilton, CT             --     4,073     24,458      --     3,051     4,073     27,509     2,158     1975     5/21/1998  40
Holiday Inn Dallas DFW
Airport South,TX            12,211     3,388     28,847      --       274     3,388     29,121     2,499     1974      8/3/1998  40
Courtyard by Marriott
Meadowlands, NJ                 --        --      9,649      --       144        --      9,793       829     1993      8/3/1998  40
Hotel Maison de Ville, New
Orleans, LA                     --       292      3,015      --        58       292      3,073       261     1778      8/3/1998  40
Hilton Hotel Toledo, OH         --        --     11,708      --        90        --     11,798     1,017     1987      8/3/1998  40
Holiday Inn Select Dallas
DFW Airport West, TX            --       947      8,346    (270)   (2,083)      677      6,263       828     1974      8/3/1998  40
Holiday Inn Select New
Orleans International
Airport LA                      (1)    3,040     25,616      --     2,786     3,040     28,402     2,317     1973      8/3/1998  40
Crowne Plaza Madison, WI        (1)    2,629     21,634      --       441     2,629     22,075     1,875     1987      8/3/1998  40
Wyndham Albuquerque Airport
Hotel, NM                       --        --     18,889      --       241        --     19,130     1,628     1972      8/3/1998  40
Wyndham San Jose Airport
Hotel, TX                       --        --     35,743      --     1,296        --     37,039     3,120     1974      8/3/1998  40
Holiday Inn Select Mission
Valley, CA                      --     2,410     20,998      --       302     2,410     21,300     1,822     1970      8/3/1998  40
Sheraton Safari Resort,
Lake Buena Vista, FL            --     4,103     35,263      --     9,058     4,103     44,321     3,528     1985      8/3/1998  40
Hilton Monterey, CA             --     2,141     17,666      --     5,252     2,141     22,918     1,799     1971      8/3/1998  40
Hilton Hotel Durham, NC         --     1,586     15,577      --     3,052     1,586     18,629     1,438     1987      8/3/1998  40
Wyndham Garden Hotel
Marietta, GA                    --     1,900     17,077      --       694     1,900     17,771     1,486     1985      8/3/1998  40
Westin Resort Key Largo, FL     --     3,167     29,190      --       675     3,167     29,865     2,542     1985      8/3/1998  40
Doubletree Guest Suites
Atlanta, GA                  8,393     2,236     18,514      --     3,900     2,236     22,414     1,831     1985      8/3/1998  40
Radisson Hotel Arlington
Heights, IL                     --     1,540     12,645      --     8,291     1,540     20,936     1,443     1981      8/3/1998  40
Holiday Inn Select Bucks
County, PA                      --     2,610     21,744      --     3,161     2,610     24,905     1,943     1987      8/3/1998  40
Hilton Hotel Cocoa Beach,
FL                              --     2,783     23,076      --     1,925     2,783     25,001     2,123     1986      8/3/1998  40

Radisson Universal Orlando,
FL                              --     9,555     73,486      --     8,484     9,555     81,970     6,747     1972      8/3/1998  40
Crowne Plaza Phoenix, AZ        --     1,852     15,957      --     3,485     1,852     19,442     1,632     1981      8/3/1998  40
Hilton Airport Hotel Grand
Rapids, MI                      (1)    2,049     16,657      --     1,116     2,049     17,773     1,481     1979      8/3/1998  40
Marriott West Loop Houston,
TX                              (1)    2,943     23,934      --     4,409     2,943     28,343     2,229     1976      8/3/1998  40
Courtyard by Marriott
Durham, NC                      --     1,406     11,001      --        76     1,406     11,077       946     1996      8/3/1998  40
Courtyard by Marriott,
Marina Del Rey, CA              --     3,450     24,534      --     2,659     3,450     27,193     2,148     1976      8/3/1998  40
Courtyard by Marriott,
Century City, CA                --     2,165     16,465      --     1,142     2,165     17,607     1,424     1986      8/3/1998  40
Courtyard by Marriott,
Orlando, FL                     --        --     41,267      --     2,593        --     43,860     3,653     1972      8/3/1998  40
Crowne Plaza, San Jose, CA      (1)    2,130     23,404     (24)    1,676     2,106     25,080     2,128     1975      8/3/1998  40
Doubletree Hotel Westshore,
Tampa, FL                       --     2,904     23,476      --     9,689     2,904     33,165     2,361     1972      8/3/1998  40
Howard Johnson Resort Key
</TABLE>


                                       61

<PAGE>

<TABLE>
<S>                         <C>     <C>       <C>        <C>      <C>      <C>      <C>         <C>          <C>     <C>         <C>
Largo, FL                       --     1,784     12,419      --     1,195     1,784     13,614     1,101     1971      8/3/1998  40
Radisson Annapolis, MD          --     1,711     13,671      --     2,012     1,711     15,683     1,228     1975      8/3/1998  40
Holiday Inn Fort
Lauderdale, FL                  --     2,381     19,419      --     2,192     2,381     21,611     1,763     1969      8/3/1998  40

Holiday Inn Madeira Beach,
FL                              --     1,781     13,349      --       123     1,781     13,472     1,159     1972      8/3/1998  40

Holiday Inn Chicago O'Hare,
IL                          18,038     4,290     72,631      --    15,883     4,290     88,514     6,777     1975      8/3/1998  40
Holiday Inn & Suites
Alexandria, VA                  --     1,769     14,064      --     1,639     1,769     15,703     1,242     1985      8/3/1998  40
Hilton Clearwater, FL           --        --     69,285      --     4,318        --     73,603     6,126     1980      8/3/1998  40
Radisson Rochester, NY          --        --      6,499      --     2,934        --      9,433       675     1971      8/3/1998  40
Radisson Old Towne
Alexandria, VA                  --     2,241     17,796      --     3,824     2,241     21,620     1,632     1975      8/3/1998  40
Ramada Inn Clearwater, FL       --     1,270     13,453      --       160     1,270     13,613     1,616     1969      8/3/1998  40
Crowne Plaza Las Vegas, NV      --     3,006     24,011      --      (206)    3,006     23,805     2,059     1989      8/3/1998  40
Crowne Plaza Portland, OR    4,754     2,950     23,254      --       211     2,950     23,465     2,047     1988      8/3/1998  40
Four Points Hotel, Mt
Arlington, NJ                3,932     6,553      6,058      --    (1,562)    6,553      4,496       537     1984      8/3/1998  40
Ramada Inn Mahwah, NJ           --     1,117      8,994    (312)   (2,385)      805      6,609       801     1972      8/3/1998  40
Ramada Plaza Meriden, CT        --     1,247     10,057      --       (53)    1,247     10,004       864     1985      8/3/1998  40
Ramada Plaza Shelton, CT     4,416     2,040     16,235      --        41     2,040     16,276     1,395     1989      8/3/1998  40
Sheraton Crossroads Mahwah,
NJ                              --     3,258     26,185      --       309     3,258     26,494     2,320     1986      8/3/1998  40
St. Tropez, Las Vegas, NV       --     3,027     24,429      --        42     3,027     24,471     2,096     1986      8/3/1998  40
Doral Forrestal, Princeton,
NJ                              --     9,578     57,555      --     8,551     9,578     66,106     5,364     1981     8/11/1998  40

South Seas Resort, Captiva,
FL                             543     3,084     83,573      --     8,623     3,084     92,196     7,187     1975     10/1/1998  40
Radisson Suites Beach
Resort, Marco Island, FL        --     7,120     35,300      --     2,253     7,120     37,553     2,983     1983     10/1/1998  40

Best Western Sanibel
Island, FL                      --     3,868      3,984      17       338     3,885      4,322       260     1967     10/1/1998  40
The Dunes Golf & Tennis
Club, Sanibel Island, FL        --     7,705      3,043       9        31     7,714      3,074       252     1964     10/1/1998  40

Sanibel Inn, Sanibel
Island, FL                      --     8,482     12,045      --       167     8,482     12,212       979     1964     10/1/1998  40

Seaside Inn, Sanibel
Island, FL                      --     1,702      6,416      22        80     1,724      6,496       525     1964     10/1/1998  40
Song of the Sea, Sanibel
Island, FL                      --       339      3,223      19        70       358      3,293       266     1964     10/1/1998  40
Sundial Beach Resort,
Sanibel Island, FL              --       320     12,009      --     1,974       320     13,983     1,043     1975     10/1/1998  40
Holiday Inn Madison, WI         --     4,143      6,692      --       526     4,143      7,218       516     1965     1/11/1999  40
Safety Harbor Resort and
Spa, Safety Harbor, FL          --       732     19,618      --     1,639       732     21,257       934     1926     5/31/2000  40
                                    -------- ---------- -------  --------  -------- ----------  --------
                                    $315,515 $2,199,762 $(4,594) $273,889  $310,921 $2,473,651  $233,612
                                    ======== ========== =======  ========  ======== ==========  ========
</TABLE>

(1)   These properties secure the Secured Facility which, as of December 31,
      2001, had an outstanding balance of $319,788.

The components of our hotel property and equipment are as follows:

                                                 Property and        Accumulated
                                                   Equipment        Depreciation
                                                   ---------        ------------
Land                                              $  310,921         $       --
Building and Improvements                          2,473,651            233,612
Furniture and equipment                              354,392            163,768
Construction in progress                              44,713                 --
                                                  ----------         ----------

Total property and equipment                      $3,183,677         $  397,380
                                                  ==========         ==========


                                       62

<PAGE>

A reconciliation of our investment in hotel property and equipment and related
accumulated depreciation is as follows:

<TABLE>
<CAPTION>
                                                        2001             2000             1999
                                                        ----             ----             ----
<S>                                                 <C>              <C>              <C>
Hotel property and equipment
   Balance, beginning of period                     $ 3,193,730      $ 3,118,723      $ 2,957,543
     Acquisitions during period                              --           19,618           12,081
     Improvements and construction
       -in-progress                                      47,467           78,911          160,294
     Loss on asset impairment                           (43,582)
     Cost of real estate sold                           (13,938)         (23,522)         (11,195)
                                                    -----------      -----------      -----------

   Balance, end of period                             3,183,677        3,193,730        3,118,723
                                                    -----------      -----------      -----------

Accumulated depreciation
   Balance, beginning of period                         287,229          182,430           83,797
     Additions-depreciation expense                     112,465          107,363           99,297
     Cost of real estate sold                            (2,314)          (2,564)            (664)
                                                    -----------      -----------      -----------

   Balance, end of period                               397,380          287,229          182,430
                                                    -----------      -----------      -----------

Net hotel property and equipment, end of period     $ 2,786,297      $ 2,906,501      $ 2,936,293
                                                    ===========      ===========      ===========
</TABLE>


                                       63

<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

   None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   There are no directors of the Company, which is a Delaware limited
partnership. The General Partner of the Company is MeriStar Hospitality
Corporation which is a publicly traded real estate investment trust and trades
on the New York Stock Exchange under the symbol MHX. Additional information
regarding MeriStar Hospitality Corporation is on file with the Securities and
Exchange Commission.


                             THE EXECUTIVE OFFICERS

   The only executive officers of the Company as of the date of this Annual
Report on Form 10-K/A are Messrs. Whetsell, Emery and Wiles. Their position and
office, business experience, term of office and age are described below.

     Name, Principal
       Occupation                Served as
 and Business Experience       Director Since      Age
 -----------------------       --------------      ---

 PAUL W. WHETSELL                   1998            51

   Paul W. Whetsell has been Chairman of the Board of Directors and Chief
Executive Officer of the Company since August 1998. Mr. Whetsell has also been
the Chairman of the Board of Directors and Chief Executive Officer of MeriStar
Hospitality Corporation and MeriStar Hotels & Resorts, Inc. since August 1998.
Prior to August 1998, Mr. Whetsell had been Chairman of the Board of Directors
of CapStar Hotel Company since 1996 and had served as President and Chief
Executive Officer of CapStar Hotel Company since its founding in 1987.


 JOHN EMERY                         2000            38

   John Emery has been a director of the Company since May 2000. Mr. Emery has
served as President of the Company since September 2001 and Chief Operating
Officer of the Company since April 2000. He currently also serves as President
and Chief Operating Officer of MeriStar Hotels & Resorts, Inc. From August 1998
to April 2000, Mr. Emery was Chief Financial Officer of the Company. From June
1997 until August 1998, Mr. Emery served as Chief Financial Officer and
Secretary of CapStar Hotel Company, a predecessor of the Company. From March
1996 to June 1997, Mr. Emery served as Treasurer of CapStar Hotel Company. Prior
to that, from January 1987 to September 1995, he worked for Deloitte & Touche
LLP in various capacities, culminating in Senior Manager for the hotel and real
estate industries. Mr. Emery is also a director of MeriStar Hotels & Resorts,
Inc.

 BRUCE G. WILES                     1998            50

   Bruce G. Wiles has been a director and Chief Investment Officer of the
Company since August 1998. Mr. Wiles was also President of the Company from
August 1998 until September 2001. Mr. Wiles has also been a director and Chief
Investment Officer of MeriStar Hospitality Corporation since August 1998, and
was President of MeriStar Hospitality from August 1998 until September 2001.
Since September 2001, Mr. Wiles has also been Chief Investment Officer of
MeriStar Hotels & Resorts, Inc., the manager of all of the Company's hotels.
Mr. Wiles was Executive Vice President of American General Hospitality
Corporation, a predecessor of the Company, from April 1996 until August 1998.
From 1989 to August 1998, Mr. Wiles served as Executive Vice President of
American General Hospitality, Inc., where he was responsible for acquisition and
development activities.

                                       64

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

                             EXECUTIVE COMPENSATION

   The following table sets forth all compensation paid by the Company during
1999, 2000 and 2001 with respect to the Chief Executive Officer and the two
other executive officers (the "Named Executive Officers").

<TABLE>
<CAPTION>

                                          Annual Compensation                Long- Term Compensation
                                    -------------------------------- ----------------------------------------
                                                                        Restricted    Securities
                                                        Other Annual      Stock       Underlying  All Other
 Name And Principal Position   Year  Salary    Bonus    Compensation      Awards       Options   Compensation
 ---------------------------   ---- -------- ---------- ------------ ---------------- ---------- ------------
<S>                            <C>  <C>      <C>        <C>          <C>              <C>        <C>

Paul W. Whetsell(6)..........  2001 $285,000        --  $621,522(5)  $1,250,000(2)          --           (4)
 Chief Executive Officer and   2000  285,000 $  220,100  471,780(5)   1,089,844(2)          --         --
 Chairman of the Board         1999  285,000    250,900    3,313      1,133,656(1)(2)    375,000       --

John Emery(6)................  2001  230,000        --   328,082(5)         --              --           (4)
 President, Chief Operating    2000  234,039    211,000  315,970(5)     697,500(2)          --         --
 Officer and Director          1999  275,000    222,800    2,688      1,116,131(1)(2)    250,000         (3)

Bruce G. Wiles(6)............  2001  300,800        --   249,703(5)         --              --         --
 Chief Investment Officer and  2000  300,000    190,300  220,500(5)     261,563(2)          --         --
 Director                      1999  300,000    219,000    8,400      1,116,131(1)(2)    250,000         (3)
</TABLE>

--------
(1)  On February 4, 1999, pursuant to the MeriStar Incentive Plan (i) Mr.
     Whetsell received 25,000 restricted shares of the Company, which vest over
     five years, and (ii) Messrs. Emery and Wiles each received 15,000
     restricted shares of the Common Stock, which vest over five years.
(2)  In December 1999, the Compensation Committee approved the grant of Common
     Stock and other equity compensation to Messrs. Whetsell, Wiles and Emery
     (the "Restricted Equity Award"). In January 2000, the Compensation
     Committee determined that it would satisfy the Restricted Equity Award by
     issuing a combination of Common Stock, which is subject to a three-year
     vesting period beginning March 31, 2000 (the "Restricted Stock"), and a new
     class of OP Units, which is subject to the satisfaction of certain
     performance criteria ("POPs"). The stock portion of the Restricted Equity
     Award is valued based on the closing price per share of the Common Stock on
     the date of grant. Pursuant to the Restricted Equity Award, Mr. Whetsell
     received 350,000 shares of Common Stock and other equity compensation
     granted as follows (i) 37,500 shares of Restricted Stock on December 31,
     1999, (ii) 137,500 shares of Restricted Stock on March 31, 2000 (of which
     62,500 were issued on March 31, 2001 and 12,500 were issued on March 31,
     2002), and (iii) 175,000 POPs on March 29, 2000. Pursuant to the Restricted
     Equity Award, Mr. Emery received 175,000 shares of Common Stock and other
     equity compensation granted as follows (i) 47,500 shares of Restricted
     Stock on December 31, 1999, (ii) 40,000 shares of Restricted Stock on
     March 31, 2000, and (iii) 87,500 POPs on March 29, 2000. Pursuant to the
     Restricted Equity Award, Mr. Wiles received 125,000 shares of common stock
     and other equity compensation granted as follows (i) 47,500 shares of
     Restricted Stock on December 31, 1999, (ii) 15,000 shares of Restricted
     Stock on March 31, 2000, and (iii) 62,500 POPs on March 29, 2000.
(3)  In December 1999, prior to Messrs. Emery and Wiles becoming officers of
     MeriStar Hotels & Resorts, Inc., the Compensation Committee approved the
     grant by MeriStar Hotels & Resorts to (i) Mr. Wiles of options to purchase
     50,000 shares of MeriStar Hotels & Resorts at $3.06 per share and
     (ii) Mr. Emery of options to purchase 100,000 shares of MeriStar Hotels &
     Resorts at $3.06 per share.
(4)  In April 2001, the Compensation Committee approved the grant of 200,000
     POPs to Mr. Whetsell and 150,000 POPs to Mr. Emery. These POPs vest equally
     over three years.
(5)  Represents dividends received on unvested restricted stock and
     distributions on POPs.
(6)  Messrs. Whetsell, Emery and Wiles are also officers of MeriStar Hotels &
     Resorts, Inc. and are eligible to participate in the MeriStar Hotels &
     Resorts, Inc. Incentive Plan. In addition, Messrs. Whetsell and Emery have
     employment agreements with MeriStar Hotels & Resorts.

Stock Option Grants

   Messrs. Whetsell, Wiles and Emery were not granted options in fiscal year
2001.

                                       3

<PAGE>



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                             PRINCIPAL STOCKHOLDERS

   The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of April 1, 2002 by (i) all persons known by the
Company to own beneficially more than 5% of the Common Stock, (ii) each director
who is a Stockholder, (iii) each of the Named Executive Officers, and (iv) all
directors and executive officers as a group.

                                                     Shares Beneficially Owned
                                                     -------------------------
Name & Address of Beneficial Owner                      Number      Percentage
----------------------------------                    ---------     ----------
MeriStar Hospitality Corporation..................   44,654,578        90.8%
John Emery(1).....................................      310,838           *
Paul W. Whetsell(2)...............................      755,153         1.5%
Bruce G. Wiles(3).................................      382,132           *
Executive officers as a group (3 persons).........    1,448,123         2.9%

--------
 *   Represents less than 1% of the class.
(1)  Includes (i) 235,731 shares of Common Stock that have vested under options
     granted and (ii) 35,168 shares of unvested restricted Common Stock that
     constitute stock awards. On October 1, 2001, Mr. Emery terminated 205,936
     options with exercise prices ranging from $21.38 to $29.44 per share.
(2)  Includes (i) 483,333 shares of Common Stock that have vested under options
     granted and (ii) 68,000 shares of unvested restricted Common Stock that
     constitute stock awards. On October 1, 2001, Mr. Whetsell terminated
     453,743 options with exercise prices ranging from $21.38 to $29.44 per
     share.
(3)  Includes (i) 216,667 shares of Common Stock that have vested under options
     granted, (ii) 26,834 shares of unvested restricted Common Stock that
     constitute stock awards and (iii) 5,758 operating partnership units. On
     October 1, 2001, Mr. Wiles terminated 265,095 options with exercise prices
     ranging from $20.94 to $31.42 per share.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Relationships among Officers and Directors

   Messrs Whetsell and Emery are executive officers, directors and stockholders
of MeriStar Hotels & Resorts, Inc., manager of all of the Company's hotels. Mr.
Jorns is a director and stockholder of MeriStar Hotels & Resorts. Mr. Wiles is
an executive of MeriStar Hotels & Resorts and a holder of limited partnership
interests in the operating partnership of MeriStar Hotels & Resorts. In fiscal
2001, the Company paid an aggregate of $26.3 million in management fees to
MeriStar Hotels & Resorts. MeriStar Hotels & Resorts has a revolving credit
agreement with the Company under which the Company may lend MeriStar Hotels &
Resorts up to $50 million for general corporate purposes. As of January 1, 2002,
MeriStar Hotels and Resorts also owes the Company $13.1 million pursuant to a
Term Note.

                                        4

<PAGE>


                               COMPENSATION PLANS

THE INCENTIVE PLAN

   The purpose of the Company's Incentive Plan (the "Incentive Plan") is to: (i)
attract and retain employees and other service providers with ability and
initiative, (ii) provide incentives to individuals whose efforts contribute to
the performance and success of the Company, and (iii) align the interests of
these individuals with the interests of the Company and its stockholders through
opportunities for increased stock ownership.

Administration

   The Incentive Plan is administered by the Compensation Committee. The
Compensation Committee may delegate its authority to administer the Incentive
Plan. The Compensation Committee may not, however, delegate its authority with
respect to grants and awards to individuals subject to Section 16 of the
Exchange Act. As used in this summary, the term "Administrator" means the
Compensation Committee or its delegate, as appropriate.

Eligibility

   Each employee of the Company or of an affiliate of the Company or any other
person whose efforts contribute to the Company's performance is eligible to
participate in the Incentive Plan ("Participants"). The Administrator may from
time to time grant stock options, stock awards, incentive awards or performance
shares to Participants. As of December 31, 2001, the class of Participants
consisted of approximately 116 persons.

Options

   Options granted under the Incentive Plan may be incentive stock options
("ISOs") or nonqualified stock options. An option entitles a Participant to
purchase shares of Common Stock from MeriStar Hospitality Compensation
at the option price. The option price may be paid in cash, with shares of Common
Stock, or with a combination of cash and Common Stock. The option price will be
fixed by the Administrator at the time the option is granted, but the price
cannot be less than 100% for existing employees (85% in connection with the
hiring of new employees) of the shares' fair market value on the date of grant;
provided, however, no more than 10% of the shares under the Incentive Plan may
be granted at less than 100% of fair market value. The exercise price of an ISO
may not be less than 100% of the shares' fair market value on the date of grant
(110% of the fair market value in the case of an ISO granted to a 10%
Stockholder of the Company). Options may be exercised at such times and subject
to such conditions as may be prescribed by the Administrator but the maximum
term of an option is ten years in the case of an ISO or five years in the case
of an ISO granted to a 10% stockholder.

   ISOs may only be granted to employees; however, no employee may be granted
ISOs (under the Incentive Plan or any other plan of the Company) that are first
exercisable in a calendar year for Common Stock having an aggregate fair market
value (determined as of the date the option is granted) exceeding $100,000. In
addition, no Participant may be granted options in any calendar year for more
than 750,000 shares of Common Stock.

Stock Awards

   Participants also may be awarded shares of Common Stock pursuant to a stock
award. A Participant's rights in a stock award will be nontransferable or
forfeitable or both unless certain conditions prescribed by the Administrator
are satisfied. These conditions may include, for example, a requirement that the
Participant continue employment with the Company for a specified period or that
the Company or the Participant achieve stated, performance-related objectives.
The objectives may be stated with reference to the fair market value of the
Common Stock or the Company's, a subsidiary's, or an operating unit's return on
equity, earnings per share, total earnings, earnings growth, return on capital,
funds from operations or return on assets or other acceptable performance
criteria. A stock award, no portion of which is immediately vested and
nonforfeitable, will be

                                       5

<PAGE>

restricted, in whole or in part, for a period of at least three years; provided,
however, that the period will be at least one year in the case of a stock award
that is subject to objectives based on one or more of the foregoing performance
criteria. The maximum number of stock awards that may be granted to an
individual in any calendar year cannot exceed 50,000 shares of Common Stock.

Incentive Awards

   Incentive awards also may be granted under the Incentive Plan. An incentive
award is an opportunity to earn a bonus, payable in cash, upon attainment of
stated performance objectives. The objectives may be stated with reference to
the fair market value of the Common Stock or on the Company's, a subsidiary's,
or an operating unit's return on equity, earnings per share, total earnings,
earnings growth, return on capital, funds from operations or return on assets or
other acceptable performance criteria. The period in which performance will be
measured will be at least one year. No Participant may receive an incentive
award payment in any calendar year that exceeds the lesser of (i) 100% of the
Participant's base salary (prior to any salary reduction or deferral election)
as of the date of grant of the incentive award or (ii) $250,000.

Performance Share Awards

   The Incentive Plan also provides for the award of performance shares. A
performance share award entitles the Participant to receive a payment equal to
the fair market value of a specified number of shares of Common Stock if certain
standards are met. The Administrator will prescribe the requirements that must
be satisfied before a performance share award is earned. These conditions may
include, for example, a requirement that the Participant continue employment
with the Company for a specified period or that the Company or the Participant
achieve stated, performance-related objectives. The objectives may be stated
with reference to the fair market value of the Common Stock or on the Company's,
a subsidiary's or an operating unit's return on equity, earnings per share,
total earnings, earnings growth, return on capital, funds from operations or
return on assets or other acceptable performance criteria. To the extent that
performance shares are earned, the obligation may be settled in cash, in Common
Stock, or by a combination of the two. No Participant may be granted performance
shares for more than 12,500 shares of Common Stock in any calendar year.

Transferability

   Awards granted under the Incentive Plan are generally nontransferable. The
Company may, however, grant awards, other than ISOs, which are transferable to
certain Permitted Family Members (as defined in the Incentive Plan).

Share Authorization

   At any given time, the maximum number of shares of Common Stock that may be
issued pursuant to awards granted under the Incentive Plan will be the total of
(i) 12.5% of the number of shares of Common Stock that were outstanding as of
the end of the immediately preceding calendar year (rounded downward if
necessary to eliminate fractional shares), minus (ii) the number of shares
subject to awards that were granted under the Incentive Plan through the last
day of the immediately preceding calendar year, plus (iii) as of the last day of
the immediately preceding calendar year, the number of shares with respect to
which previously granted awards have expired. All awards made under the
Incentive Plan will be evidenced by written agreements between the Company and
the Participant. The share limitation and the terms of outstanding awards will
be adjusted, as the Compensation Committee deems appropriate, in the event of a
stock dividend, stock split, combination, reclassification, recapitalization or
other similar event. As of April 11, 2002, the closing price of a share of
Common Stock on the New York Stock Exchange was $18.30.

Certain Federal Income Tax Consequences

   In general, a Participant will not recognize taxable income upon the grant or
exercise of an ISO. However, upon the exercise of an ISO, the excess of the fair
market value of the shares received on the date of exercise

                                       6

<PAGE>


over the exercise price of the shares will be treated as an adjustment to
alternative minimum taxable income. When a Participant disposes of shares
acquired by exercise of an ISO, the Participant's gain (the difference between
the sale proceeds and the price paid by the Participant for the shares) upon the
disposition will be taxed as capital gain provided the Participant does not
dispose of the shares within two years after the date of grant nor within one
year after the date of exercise, and exercises the option while an employee of
the Company or of a subsidiary of the Company or within three months after
termination of employment for reasons other than death or disability, or within
one year in the case of death or disability. If the first condition is not met,
the Participant generally will realize ordinary income in the year of the
disqualifying disposition. If the second condition is not met, the Participant
generally will recognize ordinary income upon exercise of the ISO.

   In general, a Participant who receives a nonqualified stock option will
recognize no income at the time of the grant of the option. Upon exercise of a
nonqualified stock option, a Participant will recognize ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price of the option. Special timing rules may apply
to a Participant who is subject to Section 16(a) of the Securities Exchange Act
of 1940, as amended (the "Exchange Act").

   A Participant will recognize income on account of the settlement of a
performance share award or incentive award. A Participant will recognize income
equal to any cash that is paid and with respect to performance share awards,
which are settled in shares, will recognize the fair market value of Common
Stock (on the date that the shares are first transferable or not subject to a
substantial risk of forfeiture) that is received in settlement of the award.

   The employer (either the Company or its affiliate) will be entitled to claim
a federal income tax deduction on account of the exercise of a nonqualified
option, the vesting of a restricted share award, payment under an incentive
award and the settlement of a performance share award. The amount of the
deduction will be equal to the ordinary income recognized by the Participant.
The employer will not be entitled to a federal income tax deduction on account
of the grant or the exercise of an ISO. The employer may claim a federal income
tax deduction on account of certain disqualifying dispositions of Common Stock
acquired upon the exercise of an ISO.

   The transfer of a nonqualified stock option to a Permitted Family Member will
have no immediate tax consequences to the Company, the Participant or the
Permitted Family Member. Upon the subsequent exercise of the transferred option
by the Permitted Family Member, the Participant will realize ordinary income in
an amount measured by the difference between the option exercise price and the
fair market value of the shares on the date of exercise, and the employer will
be entitled to a deduction in the same amount. Any difference between such fair
market value and the price at which the Permitted Family Member may subsequently
sell such shares will be treated as capital gain or loss to the Permitted Family
Member, long- or short-term depending on the length of time the shares have been
held by the Permitted Family Member. If transfers of other awards are permitted,
Participants will be directed to consult their own tax advisors.

   Section 162(m) of the Internal Revenue Code of 1986, as amended, places a
limitation of $1,000,000 on the amount of compensation payable to each of the
named executive officers in the table under "Executive Compensation" that the
Company may deduct for federal income tax purposes. The limit does not apply to
certain performance-based compensation paid under a plan that meets the
requirements of the Code and regulations promulgated thereunder. While the
Incentive Plan generally complies with the requirements for performance-based
compensation, options granted at less than 100% of fair market value and stock
awards granted under the Incentive Plan will not satisfy those requirements.

Termination and Amendment

   No option or stock award may be granted and no performance shares may be
awarded under the Incentive Plan after July 11, 2006. The Board of Directors may
amend or terminate the Incentive Plan at any time, but an

                                       7

<PAGE>

amendment will not become effective without Stockholder approval if the
amendment materially (i) increases the number of shares of Common Stock that may
be issued under the Incentive Plan (other than an adjustment as described
above), (ii) changes the eligibility requirements, or (iii) increases the
benefits that may be provided under the Incentive Plan.

          THE PROFITS-ONLY OPERATING PARTNERSHIP UNITS ("POPS") PLAN

   As of March 29, 2000, the Board of Directors approved the MeriStar
Hospitality Corporation Profits-Only Operating Partnership Units Plan (the "POPs
Plan"). The purpose of the POPs Plan is to (i) attract and retain officers,
directors, employees and consultants of the Company and its participating
affiliates and (ii) enable such individuals to acquire an equity interest in and
participate in the long-term growth and financial success of MeriStar
Hospitality Operating Partnership, L.P. (the "Operating Company").

Profits-Only Operating Partnership units

   Pursuant to the POPs Plan, officers, directors, employees and consultants of
the Company are eligible to receive restricted Profits-Only OP Units ("POPs") of
the Operating Company. A holder of POPs normally will be entitled to receive
special allocations of gain on specified dispositions of operating partnership
property (including gain on revaluations of partnership property) until such
time as the partnership capital account attributable to each unit is equivalent
to the value of a regular OP unit at the time the POPs were issued; thereafter,
the holder will receive allocations of gain and loss on specified dispositions
and upon partnership revaluations based on the holder's percentage interest in
the operating partnership attributable to the units. A holder of POPs will be
entitled to regular distributions, in the discretion of the Company as general
partner of the operating partnership and subject to the distribution priorities
for other classes of partnership interests, equal to the holder's percentage
interest of the proceeds from the sale of partnership property with respect to
which allocations are made to such holder. POPs are subject to the transfer
restrictions contained in the operating partnership agreement as well as to
those additional transfer restrictions described below that are imposed by the
POPs Plan and the agreement pursuant to which the POPs are granted. Holders of
POPs will be entitled to exchange the POPs held by them for cash or, at the
option of the Company, for shares of the Company's Common Stock, based upon an
exchange formula and the satisfaction of other conditions contained in an
exchange rights agreement entered into by such holders and the Company.

Administration

   The POPs Plan is administered by the Compensation Committee. The
Compensation Committee may delegate to one or more officers or managers of the
Company or an affiliate of the Company, or to a committee of such officers or
managers, its authority to administer the POPs Plan. As used in this summary,
the term "Administrator" means the Compensation Committee or its delegate, as
appropriate.

Eligibility

   Each officer, director, employee or consultant of the Company or a
participating affiliate of the Company is eligible to participate in the POPs
Plan ("Participants"). The Administrator may from time to time grant restricted
units to Participants. As of April 11, 2002, the class of Participants consisted
of approximately 30 persons.

Restricted Units

   A Participant's rights in a POPs award will be nontransferable or forfeitable
or both unless certain conditions prescribed by the Administrator are satisfied.
These conditions may include, for example, a requirement that the Participant
continue employment with the Company for a specified period or that the Company
or the Participant achieve stated, performance-related objectives. Generally, if
any conditions remain unfilled with respect to any units awarded to a
Participant at the time that Participant's employment with the Company and its
participating affiliates is terminated, those units will be forfeited. The
Compensation Committee may, however, provide for complete or partial exceptions
to this forfeiture provision.


                                       8

<PAGE>


Transferability

   Awards granted under the POPs Plan are generally nontransferable. The
Administrator may, however, permit transfers to a Participant's immediate family
and certain other permitted transferees.

Unit Authorization

   At any given time, the maximum number of POPs that may be granted under the
POPs Plan is 1,000,000. This limitation and the terms of outstanding awards will
be adjusted, as the Administrator deems appropriate, in the event of a dividend
or other distribution by the Operating Company or recapitalization, merger,
consolidation, issuance or exchange of POPs or other ownership interests of the
Operating Company or other similar event.

Termination and Amendment

   The Administrator may amend, alter, suspend, discontinue or terminate the
POPs Plan at any time provided that no such action which would materially
adversely effect the rights of any Participant shall be effective without the
written consent of the affected Participant.

                              EMPLOYMENT AGREEMENTS

   The Company entered into employment agreements with Mr. Whetsell as of
October 1, 2002, Mr. Emery as of April 1, 2000 (as amended October 1, 2001), and
Mr. Wiles as of August 3, 1998. With respect to Mr. Whetsell, the agreement has
an initial term of three and one-half years with automatic renewal on a
year-to-year basis thereafter unless terminated in accordance with its terms.
Mr. Emery's agreement provides for an initial term of three years with automatic
renewals on a year-to-year basis thereafter, unless terminated in accordance
with its terms. Mr. Wiles' agreement provides for an initial term of one year
and automatically extends on a day-to-day basis so that there is a rolling
one-year term; however, in no event will the term of Mr. Wiles' employment
agreement extend beyond December 31, 2003 or until terminated in accordance with
its terms. Certain material terms of these agreements are as follows:

Base Salary

   Mr. Whetsell receives a base salary of $285,000 per year. Mr. Whetsell will
also receive a base salary of $190,000 per year as an employee of MeriStar
Hotels & Resorts, Inc. Mr. Emery receives a base salary of $230,000 per year.
Mr. Emery will also receive a base salary of $230,000 per year as an employee
of MeriStar Hotels & Resorts, Inc. Mr. Wiles receives a base salary of $300,800
per year. Each base salary will be subject to review annually.

Annual Incentive Bonus

   Each executive is eligible to receive an annual incentive bonus at the
following targeted amounts of base salary:


                                                                     Maximum
                                             Threshold                Bonus
                                              Target      Target     Amount
                                             ---------    ------     -------
Paul W. Whetsell ..........................    25.0%      165.0%     200.0%
John Emery ................................    25.0%      112.5%     137.5%
Bruce G. Wiles ............................    25.0%      100.0%     125.0%

   The amount of the annual bonus is based on the achievement of predefined
operating or performance goals and other criteria to be established by the
Compensation Committee of the Board of Directors.

                                       9

<PAGE>

Restricted Stock/POPs

   In the case of Mr. Whetsell, at the discretion of the Compensation Committee,
he will be granted a minimum of 125,000 and a maximum of 200,000 POPs, awarded
on May 1, 2002, 2003 and 2004, vesting over three years. Future grants will be
at the Board's discretion. Mr. Whetsell will also receive an amount, paid
quarterly, for each POP that has been granted to him equal to the dividend rate
that the Company pays to its shareholders for the corresponding quarter.

Long-Term Incentives

   Each executive is eligible to participate in the Incentive Plan. Awards are
made at the discretion of the Compensation Committee. As officers of MeriStar
Hotels & Resorts, Inc., Messrs. Whetsell, Emery and Wiles also are eligible to
participate in the MeriStar Hotels & Resorts, Inc. Incentive Plan.

Certain Severance Benefits

   If at any time during the term of their respective employment agreements or
any automatic renewal period, the employment of Messrs. Whetsell, Wiles or Emery
is terminated, he shall be entitled to receive the benefits described below.

   Termination by the Company Without Cause or by the Executive for Good Reason.
If Mr. Whetsell is terminated without cause or voluntarily terminates for "good
reason," he is entitled to a lump-sum payment equal to the product of (x) the
sum of (A) his then annual base salary and (B) the amount of his bonus for the
preceding year multiplied by (y) the greater of (A) two and one half (2 1/2) or
(B) a fraction, the numerator of which is the number of days remaining in the
term of the employment agreement, without further extension, and the denominator
of which is 365. In addition, all of his unvested options and restricted stock
will immediately vest and become exercisable for a period of one year
thereafter, and shares of restricted stock previously granted to him will become
free from all contractual restrictions, effective as of the termination date. In
addition, the Company will continue in effect certain benefits under the
employment agreement, including, but not limited to, health insurance plans or
their equivalent for a period equal to the greater of two and one-half (2 1/2)
years or the remaining term of the employment agreement, without further
extension, or the date on which he obtains health insurance from a substitute
employer. All ungranted POPs that were to be granted on May 1, 2002, 2003 or
2004 (assuming 165,000 POPs were to be granted each year) will be immediately
granted and vested, all unvested POPs will immediately vest, and all POPs of the
Company held by Mr. Whetsell at termination will be converted to Common OP Units
of the Partnership or Common Stock and shall become free from all contractual
obligations.

   If Mr. Emery is terminated without cause or voluntarily terminates with "good
reason," he is entitled to a lump-sum payment equal to the product of (x) the
sum of (A) his then annual base salary and (B) the amount of his bonus for the
preceding year multiplied by (y) the greater of (A) two (2) or (B) a fraction,
the numerator of which is the number of days remaining in the term of the
employment agreement, without further extension, and the denominator of which is
365. In addition, all of his unvested options and restricted stock will
immediately vest and become exercisable for a period of one year thereafter and
shares of restricted stock previously granted to him will become free from all
contractual restrictions, effective as of the termination date. In addition, the
Company will continue in effect certain benefits under the employment agreement,
including, but not limited to, health insurance plans or their equivalent for a
period equal to the greater of two (2) years or the remaining term of the
employment agreement, without further extension, or the date he obtains heath
insurance coverage from a subsequent employer.

   If Mr. Wiles is terminated without cause or voluntarily terminates with "good
reason," he will be entitled to receive (i) a lump-sum payment equal to one time
his annual base salary, (ii) the amount of his bonus for the preceding year,
(iii) immediate vesting and exercisability of all unvested stock options and
certain restricted stock awards and (iv) the continuance of health insurance
benefits under his employment agreement, but only until the earlier of (x) one
year from the end of the term of his employment agreement or (y) the date on
which he obtains health insurance coverage from a subsequent employer.

                                       10

<PAGE>


   Termination Due to Death or Disability.  Upon termination due to death or
disability, each executive or his estate will receive a lump-sum payment equal
to the executive's base salary, plus the pro rata portion of his bonus for the
fiscal year in question, in addition to payment for one year of any other
compensation due the executive pursuant to his employment contract. Any unvested
portion of such executive's stock options and restricted stock will vest
immediately and become exercisable for a period of one year thereafter, and the
shares of restricted stock previously granted to the executive will become free
from all contractual restrictions. In the case of Mr. Whetsell, all ungranted
POPs that were to be granted to him on May 1, 2002, 2003 or 2004 (assuming
165,000 POPs were to be granted each year) will be immediately granted and
vested, all unvested POPs will immediately vest, and all POPs of the Company
held by Mr. Whetsell at termination will be converted to Common OP Units of the
Partnership or Common Stock and shall become free from all contractual
restrictions.

   Voluntary Termination or Termination for Cause.  Upon voluntary termination
or termination for "cause" by the Company, each executive will receive the
accrued and unpaid amount of his base salary through the termination date. Any
unvested options will terminate immediately, and any vested options held by the
executive will expire ninety (90) days after the termination date. In the case
of Mr. Whetsell's voluntary termination, all POPs granted through the date of
termination shall immediately vest and convert into Common OP Units of the
Partnership or Common Stock.

   Termination Following a Change in Control.  If (1) Mr. Whetsell or Mr. Emery
is terminated without cause within 24 months following a "Change in Control,"
(2) if Mr. Whetsell or Mr. Emery voluntarily terminates with "good reason"
(within 24 months in the case of Mr. Emery or within 6 months in the case of
Mr. Whetsell) following a Change of Control, (3) if Mr. Whetsell's title or
responsibilities change during the 2-year period following the Change of Control
and Mr. Whetsell within 6 months following such change terminates the agreement,
or (4) if Mr. Whetsell's employment by MeriStar Hotels & Resorts, Inc. is
terminated and the Company does not agree to pay Mr. Whetsell the equivalent of
his then-current salary with MeriStar Hotel & Resorts, Inc. Mr. Whetsell or
Mr. Emery will receive the following benefits: (i) a lump-sum payment equal to
the product of (x) the sum of (A) his then annual base salary or (B) the amount
of his bonus for the preceding year, or if the term of the employment agreement
is terminated in its initial year his target bonus for such year, multiplied by
(y) the greater of (A) three and one-half (3 1/2) in the case of Mr. Whetsell,
or three (3) in the case of Mr. Emery and (B) a fraction, the numerator of which
is the number of days remaining in the term of the employment agreement, without
further extension, and the denominator of which is 365; (ii) all unvested stock
options and shares of restricted stock held by him will immediately vest and be
exercisable for a period of one year thereafter and shares of restricted stock
previously granted to him will become free from contractual restrictions; and
(iii) the continuance of certain benefits under the employment agreement,
including, but not limited to, health insurance plans or their equivalent for a
period equal to the greater of two (2) years in the case of Mr. Emery and two
and one-half (2 1/2) years in the case of Mr. Whetsell, or the remaining term of
the employment agreement, without further extension, or if he obtains health
insurance from a subsequent employer. In the case of Mr. Wiles, he would be
entitled to the same type of benefits provided the termination occurred within
18 months of the Change in Control, except his lump-sum payment will be two
times the sum of his then-annual base salary plus bonus.

   Change in Control Payments.  In the case of Mr. Whetsell, Mr. Emery or
Mr. Wiles, in the event that any accelerated vesting of his rights with respect
to stock options, restricted stock or any other payment, benefit or compensation
results in the imposition of an excise tax payable by the executive under
section 4999 of the Internal Revenue Code, or any successor or other provision
with respect to "excess parachute payments" within the meaning of section
280G(b) of the Internal Revenue Code, MeriStar will make a cash payment to him
in the amount of such excise tax (the "Excise Tax Payment") and shall also make
a cash payment to him in an amount equal to the total of federal, state and
local income and excise taxes for which he may be liable on account of such
Excise Tax Payment.

   No set-off requirements.  In the case of Mr. Whetsell, Mr. Emery or
Mr. Wiles, in the event of termination of his employment, he will not be
required to seek alternative employment and, in the event he does secure other

                                       11

<PAGE>

employment, no compensation or other benefits received in respect of such
employment shall be set-off or in any other way limit or reduce the obligations
of the Company under the employment agreements.

   Non-solicitation.  Mr. Whetsell may not, during his employment and for a
period of twenty-four months thereafter, solicit, raid, entice or induce any
person that then is or at any time during the twelve-month period prior to the
end of Mr. Whetsell's agreement, who was an employee of a Company Affiliate
(other than a person whose employment whose employment has been terminated) to
become employed by any person, firm or corporation.











                                       12

<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

      (a). Index to Financial Statements and Financial Statement Schedules

      1. Financial Statements

      The Financial Statements included in the Annual Report on Form 10-K are
      listed in Item 8.

      2. Reports on Form 8-K

      Current report on Form 8-K dated and filed on August 16, 2001, regarding
      the first amendment to the merger agreement with FelCor Lodging Trust
      Incorporated.

      Current report on Form 8-K dated and filed on September 21, 2001,
      regarding the termination of the merger agreement with FelCor Lodging
      Trust Incorporated.

      (b). Financial Statement Schedules

      The Financial Statement Schedules included in the Annual Report on Form
      10-K are listed in Item 8.


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<PAGE>

3. Exhibits

      All Exhibits listed below are filed with this Annual Report on Form 10-K
      unless specifically stated to be incorporated by reference to other
      documents previously filed with the Commission.

Exhibit No.                      Description of Document
-----------                      -----------------------

3.1         Second Articles of Amendment and Restatement of Incorporation of the
            Registrant (incorporated by reference to Exhibit 3.4 to MeriStar
            Hospitality's Registration Statement No. 333-4568).

3.1.1       Articles of Amendment of Second Articles of Amendment and
            Restatement of Incorporation dated August 11, 2000 (incorporated by
            reference to Exhibit 3.1.1 in MeriStar Hospitality's Form 10-K for
            the year ended December 31, 2001, filed with the Securities and
            Exchange Commission on March 6, 2002).

3.1.2       Articles of Amendment of Second Articles of Amendment and
            Restatement of Incorporation dated June 30, 2001 (incorporated by
            reference to Exhibit 3.1.2 in MeriStar Hospitality's Form 10-K for
            the year ended December 31, 2001, filed with the Securities and
            Exchange Commission on March 6, 2002).

3.2         Amended and Restated By-laws of the Registrant (incorporated by
            reference to Exhibit 3.2 on MeriStar Hospitality's Form S-3
            (Registration Statement No. 333-66229) filed with the Securities and
            Exchange Commission on October 28, 1998).

4.1         Form of Share Certificate (incorporated by reference to Exhibit 4.1
            on MeriStar Hospitality's Registration Statement No. 333-4568).

4.2         Indenture, dated as of August 19, 1997 (the "August 1997
            Indenture"), between CapStar Hotel Company and IBJ Schroder Bank &
            Trust Company, as Trustee (incorporated by reference to Exhibit 4.4
            to MeriStar Hospitality's Form 10-K for the year ended December 31,
            1999 filed with the Securities and Exchange Commission on March 15,
            2000).

4.2.1       Specimen Subordinated Note to August 1997 Indenture (incorporated by
            reference to Exhibit 4.2 to MeriStar Hospitality's Form 10-K for the
            year ended December 31, 1999 filed with the Securities and Exchange
            Commission on March 15, 2000).

4.2.2       First Supplemental Indenture to the August 1997 Indenture
            (incorporated by reference to Exhibit 4.2.2 in MeriStar
            Hospitality's Form 10-K for the year ended December 31, 2001, filed
            with the Securities and Exchange Commission on March 6, 2002).

4.2.3       Second Supplemental Indenture to the August 1997 Indenture
            (incorporated by reference to Exhibit 4.5 to MeriStar Hospitality's
            Form 10-K for the year ended December 31, 1999 filed with the
            Securities and Exchange Commission on March 15, 2000).

4.2.4       Third Supplemental Indenture to the August 1997 Indenture
            (incorporated by reference to Exhibit 4.15 to MeriStar Hospitality's
            Form 10-K for the year ended December 31, 2000 filed with the
            Securities and Exchange Commission on March 6, 2001).

4.2.5       Fourth Supplemental Indenture to the August 1997 Indenture
            (incorporated by reference to Exhibit 4.2.5 MeriStar Hospitality's
            Form 10-K for the year ended December 31, 2001, filed with the
            Securities and Exchange Commission on March 6, 2002).

4.2.6       Fifth Supplemental Indenture to the August 1997 Indenture
            (incorporated by reference to Exhibit 4.2.6 in MeriStar
            Hospitality's Form 10-K for the year ended December 31, 2001, filed
            with the Securities and Exchange Commission on March 6, 2002).

4.3         Indenture (the "Convertible Notes Indenture"), dated as of October
            16, 1997, between CapStar Hotel Company and First Trust, National
            Association, as Trustee (incorporated by reference to Exhibit 4.6 to
            MeriStar Hospitality's Form 10-K filed with the Securities and
            Exchange Commission on March 15, 2000).

4.3.1       Specimen Convertible Note to the Convertible Notes Indenture
            (incorporated by reference to Exhibit 4.7 to MeriStar Hospitality's
            Form 10-K for the year ended December 31, 1999 filed with the
            Securities and Exchange Commission on March 15, 2000).

4.3.2       First Supplemental Indenture to the Convertible Notes Indenture
            (incorporated by reference to Exhibit 4.8 to MeriStar Hospitality's
            Form 10-K for the year ended December 31, 1999 filed with the
            Securities and Exchange Commission on March 15, 2000)

4.4         Indenture (the "March 1999 Indenture"), dated as of March 18, 1999,
            between MeriStar Hospitality Corporation and IBJ Whitehall Bank &
            Trust Company, as Trustee (incorporated by reference to Exhibit B to
            MeriStar Hospitality's Form S-4 (Registration Statement No.
            333-78163) filed with the Securities and Exchange Commission on May
            10, 1999).

4.4.1       Specimen Subordinated Note to March 1999 Indenture (incorporated by
            reference to Exhibit A to


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<PAGE>

            MeriStar Hospitality's Form S-4 (Registration Statement No.
            333-78163) filed with the Securities and Exchange Commission on May
            10, 1999).

4.4.1       First Supplemental Indenture to the March 1999 Indenture
            (incorporated by reference to Exhibit 4.13 to MeriStar Hospitality's
            Form 10-K for the year ended December 31, 2000 filed with the
            Securities and Exchange Commission on March 6, 2001).

4.4.2       Second Supplemental Indenture to the March 1999 Indenture
            (incorporated by reference to Exhibit 4.4.2 in MeriStar
            Hospitality's Form 10-K for the year ended December 31, 2001, filed
            with the Securities and Exchange Commission on March 6, 2002).

4.4.3       Third Supplemental Indenture to the March 1999 Indenture Second
            Supplemental Indenture to the March 1999 Indenture (incorporated by
            reference to Exhibit 4.4.3 in MeriStar Hospitality's Form 10-K for
            the year ended December 31, 2001, filed with the Securities and
            Exchange Commission on March 6, 2002).

4.5         Indenture (the "January 2001 Indenture"), dated January 26, 2001,
            between MeriStar Hospitality Operating Partnership, L.P., MeriStar
            Hospitality Finance Corp., MeriStar Hospitality Corporation, and
            U.S. Bank Trust National Association (incorporated by reference to
            Exhibit 4.14 to MeriStar Hospitality's Form 10-K for the year ended
            December 31, 2000 filed with the Securities and Exchange Commission
            on March 6, 2001).

4.5.1       Specimen Senior Note to the January 2001 Indenture (incorporated by
            reference to Exhibit 4.5.1 in MeriStar Hospitality's Form 10-K for
            the year ended December 31, 2001, filed with the Securities and
            Exchange Commission on March 6, 2002).

4.5.2       First Supplemental Indenture to the January 2001 Indenture
            (incorporated by reference to Exhibit 4.5.2 in MeriStar
            Hospitality's Form 10-K for the year ended December 31, 2001, filed
            with the Securities and Exchange Commission on March 6, 2002).

4.5.3       Second Supplemental Indenture to the January 2001 Indenture
            (incorporated by reference to Exhibit 4.5.3 in MeriStar
            Hospitality's Form 10-K for the year ended December 31, 2001, filed
            with the Securities and Exchange Commission on March 6, 2002).

4.6         Indenture (the "December 2001 Indenture"), dated December 19, 2001,
            between MeriStar Hospitality Operating Partnership, L.P., MeriStar
            Hospitality Finance Corp., MeriStar Hospitality Corporation, and
            U.S. Bank Trust National Association (incorporated by reference to
            Exhibit 4.6 in MeriStar Hospitality's Form 10-K for the year ended
            December 31, 2001, filed with the Securities and Exchange Commission
            on March 6, 2002).

4.6.1       Specimen Senior Note to the December 2001 Indenture (incorporated by
            reference to Exhibit 4.6.1 in MeriStar Hospitality's Form 10-K for
            the year ended December 31, 2001, filed with the Securities and
            Exchange Commission on March 6, 2002).

4.6.2       Registration Rights Agreement, dated December 19, 2001,between
            MeriStar Hospitality Operating Partnership, L.P., MeriStar
            Hospitality Finance Corp. II, MeriStar Hospitality Corporation, and
            certain subsidiaries of MeriStar Hospitality Operating Partnership,
            L.P. and Lehman Brothers Inc., SG Cowen Securities Corporation and
            certain other parties (incorporated by reference to Exhibit 4.6.2 in
            MeriStar Hospitality's Form 10-K for the year ended December 31,
            2001, filed with the Securities and Exchange Commission on March 6,
            2002).

4.6.3       First Supplemental Indenture to the December 2001 Indenture
            (incorporated by reference to Exhibit 4.6.3 in MeriStar
            Hospitality's Form 10-K for the year ended December 31, 2001, filed
            with the Securities and Exchange Commission on March 6, 2002).

4.7         Indenture (the "February 2002 Indenture"), dated February 7, 2002,
            between MeriStar Hospitality Operating Partnership, L.P., MeriStar
            Hospitality Finance Corp., MeriStar Hospitality Corporation, and
            U.S. Bank Trust National Association (incorporated by reference to
            Exhibit 4.7 in MeriStar Hospitality's Form 10-K for the year ended
            December 31, 2001, filed with the Securities and Exchange Commission
            on March 6, 2002).

4.7.1       Specimen Senior Note to the February 2002 Indenture (incorporated by
            reference to Exhibit 4.7.1 in MeriStar Hospitality's Form 10-K for
            the year ended December 31, 2001, filed with the Securities and
            Exchange Commission on March 6, 2002).

4.7.2       Registration Rights Agreement, dated February 7, 2002, between
            MeriStar Hospitality Operating Partnership, L.P., MeriStar
            Hospitality Finance Corp. II, MeriStar Hospitality Corporation, and
            certain subsidiaries of MeriStar Hospitality Operating Partnership,
            L.P. and Lehman Brothers Inc., SG Cowen Securities Corporation and
            certain other parties (incorporated by reference to Exhibit 4.7.2 in
            MeriStar Hospitality's Form 10-K for the year ended December 31,
            2001, filed with the Securities and Exchange Commission on March 6,
            2002).

10.1        Second Amended and Restated Agreement of Limited Partnership of
            MeriStar Hospitality Operating Partnership, L.P. dated as of August
            3, 1998 (incorporated by reference to Exhibit 10.3 to MeriStar
            Hospitality's Form 10-K for the year ended December 31, 1998 filed
            with the Securities


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<PAGE>

            and Exchange Commission filed on March 2, 1999).

10.2        Second Amended and Restated Senior Secured Credit Agreement dated as
            of August 3, 1998 (the "Senior Credit Agreement" (incorporated by
            reference to Exhibit 10.4 to MeriStar Hospitality's Form 10-K filed
            with the Securities and Exchange Commission filed on March 2, 1999).

10.2.1      First Amendment to the Second Amended and Restated Senior Secured
            Credit Agreement (incorporated by reference to Exhibit 10.2.1 in
            MeriStar Hospitality's Form 10-K for the year ended December 31,
            2001, filed with the Securities and Exchange Commission on March 6,
            2002).

10.2.2      Second Amendment to the Second Amended and Restated Senior Secured
            Credit Agreement (incorporated by reference to Exhibit 10.2.2 in
            MeriStar Hospitality's Form 10-K for the year ended December 31,
            2001, filed with the Securities and Exchange Commission on March 6,
            2002).

10.2.3      Third Amendment to the Second Amended and Restated Senior Secured
            Credit Agreement (incorporated by reference to Exhibit 10.2.3 in
            MeriStar Hospitality's Form 10-K for the year ended December 31,
            2001, filed with the Securities and Exchange Commission on March 6,
            2002).

10.2.4      Fourth Amendment to the Second Amended and Restated Senior Secured
            Credit Agreement (incorporated by reference to Exhibit 10.2.4 in
            MeriStar Hospitality's Form 10-K for the year ended December 31,
            2001, filed with the Securities and Exchange Commission on March 6,
            2002).

10.2.5      Fifth Amendment to the Second Amended and Restated Senior Secured
            Credit Agreement (incorporated by reference to Exhibit 10.2.4 in
            MeriStar Hospitality's Form 10-K for the year ended December 31,
            2001, filed with the Securities and Exchange Commission on March 6,
            2002).

10.3        Loan Agreement, dated as of August 12, 1999, between MeriStar
            Hospitality Operating Partnership, L.P. and Lehman Brothers Holdings
            Inc. D/B/A Lehman Capital, a division of Lehman Brothers Holdings
            Inc. (incorporated by reference to Exhibit 10.13 to MeriStar
            Hospitality's Form 10-K for the year ended December 31, 1999 filed
            with the Securities and Exchange Commission on March 15, 2000).

10.4        Intercompany Agreement between MeriStar Hospitality Corporation,
            MeriStar Hospitality Operating Partnership, L.P., MeriStar Hotels &
            Resorts, Inc. and MeriStar H&R Operating Company L.P. ("Intercompany
            Agreement") (incorporated by reference to Exhibit 10.4 in MeriStar
            Hospitality's Form 10-K for the year ended December 31, 2001, filed
            with the Securities and Exchange Commission on March 6, 2002).

10.4.1      Amendment to the Intercompany Agreement (incorporated by reference
            to Exhibit 10.15 to MeriStar Hospitality's Form 10-K for the year
            ended December 31, 2000 filed with the Securities and Exchange
            Commission on March 6, 2001).

10.5        Revolving Credit Agreement (the "MeriStar Hotels Revolving Credit
            Agreement"), dated as of August 3, 1998, by and between MeriStar H&R
            Operating Company, L.P. and MeriStar Hospitality Operating
            Partnership, L.P. (incorporated by reference to Exhibit 10.5 in
            MeriStar Hospitality's Form 10-K for the year ended December 31,
            2001, filed with the Securities and Exchange Commission on March 6,
            2002).

10.5.1      Amendment to MeriStar Hotels Revolving Credit Agreement
            (incorporated by reference to Exhibit 10.5.1 in MeriStar
            Hospitality's Form 10-K for the year ended December 31, 2001, filed
            with the Securities and Exchange Commission on March 6, 2002).

10.5.2      Second Amendment to MeriStar Hotels Revolving Credit Agreement
            (incorporated by reference to Exhibit 10.5.2 in MeriStar
            Hospitality's Form 10-K for the year ended December 31, 2001, filed
            with the Securities and Exchange Commission on March 6, 2002).

10.6        Term Note by MeriStar H&R Operating Company, L.P. to MeriStar
            Hospitality Operating Partnership, L.P. (incorporated by reference
            to Exhibit 10.6 in MeriStar Hospitality's Form 10-K for the year
            ended December 31, 2001, filed with the Securities and Exchange
            Commission on March 6, 2002).

10.7        MeriStar Hospitality Corporation Incentive Plan (the "Incentive
            Plan") (incorporated by reference to Exhibit 10.1 to MeriStar
            Hospitality's Form S-4/A (Registration Statement No. 333-49611)
            filed with the Securities and Exchange Commission on June 22, 1998).

10.7.1      Amendment to the Incentive Plan (incorporated by reference to
            Exhibit 10.7.1 in MeriStar Hospitality's Form 10-K for the year
            ended December 31, 2001, filed with the Securities and Exchange
            Commission on March 6, 2002).

10.8        MeriStar Hospitality Corporation Non-Employee Directors' Incentive
            Plan (the "Directors' Plan") (incorporated by reference to Exhibit
            10.2 to MeriStar Hospitality's Form S-4/A (Registration Statement
            No. 333-49611) filed with the Securities and Exchange Commission on
            June 22, 1998).

10.8.1      Amendment to the Directors' Plan (incorporated by reference to
            Exhibit 10.8.1 in MeriStar Hospitality's Form 10-K for the year
            ended December 31, 2001, filed with the Securities and Exchange
            Commission on March 6, 2002).


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<PAGE>

10.9        Profits-Only Operating Partnership Units Plan (incorporated by
            reference to Exhibit 10.14 to MeriStar Hospitality's Form 10-Q for
            the quarter ended March 31, 2000 filed with the Securities and
            Exchange Commission on May 12, 2000).

10.10       MeriStar Hospitality Corporation Employee Stock Purchase Plan
            (incorporated by reference to Exhibit 10.10 in MeriStar
            Hospitality's Form 10-K for the year ended December 31, 2001, filed
            with the Securities and Exchange Commission on March 6, 2002).

10.11       Employment Agreement between MeriStar Hospitality Corporation and
            Paul W. Whetsell (incorporated by reference to Exhibit 10.6 to
            MeriStar Hospitality's Form 10-Q for the quarter ended September 30,
            2000 filed with the Securities and Exchange Commission on November
            13, 2000).

10.12       Employment Agreement between MeriStar Hospitality Corporation and
            Steven D. Jorns (incorporated by reference to Exhibit 10.4 to
            MeriStar Hospitality's Form S-4/A (Registration Statement No.
            333-49611) filed with the Securities and Exchange Commission on June
            22, 1998).

10.13       Employment Agreement between MeriStar Hospitality Corporation and
            Bruce G. Wiles (incorporated by reference to Exhibit 10.10 to
            MeriStar Hospitality's Form 10-K for the year ended December 31,
            1998 filed with the Securities and Exchange Commission on March 2,
            1999) .

10.14       Employment Agreement between MeriStar Hospitality Corporation and
            John Emery (incorporated by reference to Exhibit 10.9 to MeriStar
            Hospitality's Form 10-Q for the quarter ended September 30, 2000
            filed with the Securities and Exchange Commission on November 13,
            2000).

12          Schedule Regarding the Computation of Ratios. Incorporated by
            reference to Exhibit 12 to our 10-K for the year ended December 31,
            2001 filed with the Securities and Exchange Commission on March 26,
            2002.

13          MeriStar Hospitality Corporation Financial Statements and
            Supplementary Data as of December 31, 2001 and 2000 and for each of
            the years in the three-year period ended December 31, 2001.

21          Subsidiaries of the Company.

24          Power of Attorney (see signature page).

99          Consolidating Financial Information

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<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, MeriStar Hospitality Operating Partnership, L.P. has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                               MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.


                               BY:  /s/ Paul W. Whetsell
                                   ------------------------------------
                                   Paul W. Whetsell
                                   Chairman Chief Executive Officer and

Dated: May 7, 2002

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Paul W. Whetsell, Bruce G. Wiles and John Emery, such
person's true and lawful attorneys-in-fact and agents, with full power of
substitution and revocation, for such person and in such person's name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this report filed pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, and to file the same
with all exhibits thereto, and the other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and things requisite and necessary to be done, as fully to all intents
and purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
and the foregoing Power of Attorney have been signed by the following persons in
the capacities and on the dates indicated.

    Signature                          Title                          Date
    ---------                          -----                          ----


  /s/ Paul W. Whetsell        Chief Executive Officer             May 7, 2002
-----------------------       and Chairman
    Paul W. Whetsell


  /s/ Steven D. Jorns         Vice Chairman                       May 7, 2002
-----------------------
  Steven D. Jorns


     /s/ John Emery           Chief Operating Officer             May 7, 2002
-----------------------       and Director
      John Emery


  /s/ James A. Calder         Chief Accounting Officer            May 7, 2002
-----------------------
    James A. Calder


/s/ J. Taylor Crandall        Director                            May 7, 2002
-----------------------
  J. Taylor Crandall


/s/ James F. Dannhauser       Director                            May 7, 2002
-----------------------
  James F. Dannhauser


/s/  William S. Janes         Director                            May 7, 2002
-----------------------
    William S. Janes


                              Director                            May __, 2002
-----------------------
  H. Cabot Lodge III


  /s/ Bruce G. Wiles          Director                            May 7, 2002
-----------------------
    Bruce G. Wiles


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<PAGE>


/s/ James R. Worms      Director                                  May 7, 2002
-------------------
   James R. Worms

/s/ D. Ellen Shuman
-------------------     Director                                  May 7, 2002
  D. Ellen Shuman


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