SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q


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

                    FOR THE QUARTER ENDED SEPTEMBER 11, 1998

                                       OR

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


                           Commission File No. 0-15736

                    COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)

               Delaware                           52-1468081
 -------------------------------       ----------------------------------
       (State of Organization)         (I.R.S. Employer Identification Number)


10400 Fernwood Road, Bethesda, MD                  20817-1109
---------------------------------      ----------------------------------
(Address of principal executive offices)           (Zip Code)

       Registrant's telephone number, including area code: (301) 380-2070
   Securities registered pursuant to Section 12(b) of the Act: Not Applicable
          Securities registered pursuant to Section 12(g) of the Act:
                      Units of Limited Partnership Interest
                                (Title of Class)

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 and (2) has been subject to such filing requirements for
the past 90 days.  Yes ____ No ____ (Not  Applicable).  On August 25, 1992,  the
Registrant  filed an application  for relief from the reporting  requirements of
the Securities  Exchange Act of 1934 pursuant to Section 12(h) thereof.  Because
of the pendency of such application, the Registrant was not required to, and did
not make,  any filings  pursuant  to the  Securities  Exchange  Act of 1934 from
October 23, 1989 until the application was voluntarily  withdrawn on January 27,
1998.

================================================================================
<PAGE>


===============================================================================
                    Courtyard By Marriott Limited Partnership
===============================================================================


                                TABLE OF CONTENTS

                                                                              
                         PART I - FINANCIAL INFORMATION


Item 1.    Financial Statements

Condensed Statement of Operations
Twelve and Thirty-Six Weeks Ended September 11, 1998 (Unaudited)
and September 12, 1997 (Unaudited).............................................1

Condensed Balance Sheet
September 11, 1998 (Unaudited) and December 31, 1997...........................2

Condensed Statement of Cash Flows
Thirty-Six Weeks ended September 11, 1998 (Unaudited)
and September 12, 1997 (Unaudited).............................................3

Notes to Condensed Financial Statements (Unaudited)............................4

Item 2.    Management's Discussion and Analysis of Financial
            Condition and Results of Operations................................6


                           PART II - OTHER INFORMATION

Item 1.    Legal Proceedings...................................................9

Item 6.    Exhibits and Reports on Form 8-K...................................10

<PAGE>


                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                    COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
                        CONDENSED STATEMENT OF OPERATIONS
                                   (Unaudited)
                     (In thousands except per Unit amounts)
<TABLE>

                                                             Twelve Weeks Ended                 Thirty-Six Weeks Ended
                                                       September 11,    September 12,       September 11,     September 12,
                                                           1998             1997                1998              1997
                                                     ----------------  ---------------    ----------------  ---------------
<S>                                                  <C>               <C>                <C>               <C>       

REVENUES (Note 3)....................................$         24,017  $        22,771    $         74,065  $        68,961
                                                     ----------------  ---------------    ----------------  ---------------

OPERATING COSTS AND EXPENSES
   Depreciation......................................           4,058            5,292              12,145           13,332
   Base and Courtyard management fees................           2,865            2,713               8,606            8,105
   Incentive management fees.........................           2,278            2,083               7,078            6,595
   Ground rent, taxes and other......................           3,656            3,914              11,286           10,167
                                                     ----------------  ---------------    ----------------  ---------------

         Total Operating Costs and Expenses..........          12,857           14,002              39,115           38,199
                                                     ----------------  ---------------    ----------------  ---------------

OPERATING PROFIT.....................................          11,160            8,769              34,950           30,762
   Interest expense..................................          (6,046)          (6,121)            (18,374)         (17,814)
   Interest income...................................             215              112                 585              472
                                                     ----------------  ---------------    ----------------  ---------------

NET INCOME BEFORE
   EXTRAORDINARY ITEMS...............................           5,329            2,760              17,161           13,420

EXTRAORDINARY ITEMS
   Gain on forgiveness of deferred fees..............              --               --                  --           14,896
   Loss on extinguishment of debt....................              --               --                  --           (2,423)
                                                     ----------------  ---------------    ----------------  ---------------
                                                                   --               --                  --           12,473
                                                     ----------------  ---------------    ----------------  ---------------

NET INCOME...........................................$          5,329  $         2,760    $         17,161  $        25,893
                                                     ================  ===============    ================  ===============

ALLOCATION OF NET INCOME
   General Partner...................................$            267  $           138    $            858  $         1,295
   Limited Partner...................................           5,062            2,622              16,303           24,598
                                                     ----------------  ---------------    ----------------  ---------------
                                                     $          5,329  $         2,760    $         17,161  $        25,893
                                                     ================  ===============    ================  ===============

NET INCOME BEFORE EXTRAORDINARY ITEMS
   PER LIMITED PARTNER UNIT
   (1,150 Units).....................................$          4,403  $         2,280    $         14,177  $        11,086
                                                     ================  ===============    ================  ===============

NET INCOME PER LIMITED PARTNER UNIT
   (1,150 Units).....................................$          4,403  $         2,280    $         14,177  $        21,390
                                                     ================  ===============    ================  ===============



                  See Notes to Condensed Financial Statements.

</TABLE>

<PAGE>


                    COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
                             CONDENSED BALANCE SHEET
                                 (in thousands)


<TABLE>

                                                                                         September 11,      December 31,
                                                                                              1998                1997
                                                                                           (unaudited)

                                                          ASSETS
   <S>                                                                                     <C>                 <C>    

   Property and equipment, net..........................................................$        303,420    $       305,156
   Deferred financing costs, net........................................................           5,990              6,295
   Property improvement fund............................................................           5,880              1,628
   Restricted cash......................................................................           5,279              7,964
   Due from Courtyard Management Corporation............................................           4,314              4,913
   Cash and cash equivalents............................................................           7,234              5,450
                                                                                        ----------------    ---------------

                                                                                        $        332,117    $       331,406
                                                                                        ================    ===============


                                        LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

LIABILITIES
   Mortgage debt........................................................................$        314,945    $       320,407
   Due to Marriott International, Inc. and affiliates...................................          19,455             19,616
   Due to Host Marriott Corporation.....................................................          14,028             13,594
   Incentive management fees due to Courtyard Management Corporation....................           4,659              6,476
   Accounts payable and accrued liabilities.............................................           3,134              2,898
                                                                                        ----------------    ---------------

       Total Liabilities................................................................         356,221            362,991
                                                                                        ----------------    ---------------

PARTNERS' CAPITAL (DEFICIT)
  General Partner.......................................................................             120               (254)
  Limited Partners......................................................................         (24,224)           (31,331)
                                                                                        ----------------    ---------------

       Total Partners' Capital (Deficit)................................................         (24,104)           (31,585)
                                                                                        ----------------    ---------------

                                                                                        $        332,117    $       331,406
                                                                                        ================    ===============







                  See Notes to Condensed Financial Statements.

</TABLE>

<PAGE>


                    COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
                        CONDENSED STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)


<TABLE>

                                                                                               Thirty-Six Weeks Ended
                                                                                          September 11,       September 12,
                                                                                              1998                1997          
                                                                                        ----------------    ----------
<S>                                                                                     <C>                 <C>    
OPERATING ACTIVITIES
     Net income.........................................................................$         17,161    $        25,893
     Extraordinary items................................................................              --            (12,473)
                                                                                        ----------------    ---------------

     Net income before extraordinary items..............................................          17,161             13,420
     Noncash items......................................................................          12,886             14,264
     Changes in operating accounts......................................................           1,565             (7,253)
                                                                                        ----------------    ---------------

         Cash provided by operating activities..........................................          31,612             20,431
                                                                                        ----------------    ---------------

INVESTING ACTIVITIES
     Additions to property and equipment, net...........................................         (10,409)           (14,978)
     Change in property improvement fund................................................          (4,252)             1,160
                                                                                        ----------------    ---------------

         Cash used in investing activities..............................................         (14,661)           (13,818)
                                                                                        ----------------    ---------------

FINANCING ACTIVITIES
     Capital distributions..............................................................          (9,680)           (37,647)
     Repayments of mortgage debt .......................................................          (5,462)          (291,817)
     Change in restricted debt service reserve..........................................             (23)                --
     Payment of financing costs.........................................................              (2)            (5,980)
     Proceeds from mortgage debt .......................................................              --            325,000
                                                                                        ----------------    ---------------

         Cash used in financing activities..............................................         (15,167)           (10,444)
                                                                                        ----------------    ---------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................................           1,784             (3,831)

CASH AND CASH EQUIVALENTS at beginning of period........................................           5,450             12,709
                                                                                        ----------------    ---------------

CASH AND CASH EQUIVALENTS at end of period..............................................$          7,234    $         8,878
                                                                                        ================    ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid for mortgage interest....................................................$         19,036    $        18,450
                                                                                        ================    ===============




                  See Notes to Condensed Financial Statements.

</TABLE>

<PAGE>


                    COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   The accompanying  condensed financial  statements have been prepared by the
     Courtyard  By Marriott  Limited  Partnership  (the  "Partnership")  without
     audit.  Certain information and footnote  disclosures  normally included in
     financial  statements  presented  in  accordance  with  generally  accepted
     accounting  principles have been condensed or omitted from the accompanying
     statements.  The Partnership  believes the disclosures made are adequate to
     make the  information  presented  not  misleading.  However,  the condensed
     financial  statements  should be read in conjunction with the Partnership's
     financial  statements and notes thereto included in the Partnership's  10-K
     for the fiscal year ended December 31, 1997.

     In the opinion of the  Partnership,  the accompanying  unaudited  condensed
     financial  statements  reflect all  adjustments  (which include only normal
     recurring  adjustments)  necessary to present fairly the financial position
     of the  Partnership as of September 11, 1998, the results of operations for
     the twelve and thirty-six  weeks ended September 11, 1998 and September 12,
     1997 and the cash flows for the thirty-six  weeks ended  September 11, 1998
     and September 12, 1997.  Interim results are not necessarily  indicative of
     fiscal year performance because of seasonal and short-term variations.

     For financial  reporting  purposes,  the net income of the  Partnership  is
     allocated  95% to the  Limited  Partners  and  5% to the  General  Partner.
     Significant   differences  exist  between  the  net  income  for  financial
     reporting  purposes  and the net income  reported  for  Federal  income tax
     purposes.  These  differences  are due primarily to the use, for income tax
     purposes, of accelerated  depreciation  methods,  shorter depreciable lives
     for the assets, difference in the timing of recognition of certain fees and
     straight-line rent adjustments.

2.   Certain  reclassifications  were  made  to  the  prior  year  financial
     statements to conform to the 1998 presentation.

3.   Revenues  represent  house  profit  of the  Partnership  hotels  since  the
     Partnership  has delegated  substantially  all of the  operating  decisions
     related  to the  generation  of house  profit of the  hotels  to  Courtyard
     Management  Corporation  (the  "Manager").   House  profit  reflects  hotel
     operating  results  which flow to the  Partnership  as  property  owner and
     represents  total  combined  hotel  sales  less  property-level   expenses,
     excluding  depreciation,  base,  Courtyard and incentive  management  fees,
     property taxes, equipment rent and certain other costs, which are disclosed
     separately in the accompanying condensed statement of operations.

     On November  20,  1997,  the  Emerging  Issues  Task Force  ("EITF") of the
     Financial  Accounting  Standards  Board  reached a  consensus  on EITF 97-2
     "Application  of FASB  Statement No. 94 and APB Opinion No. 16 to Physician
     Practice  Management  Entities and Certain Other Entities with  Contractual
     Management  Arrangements." EITF 97-2 addresses the circumstances in which a
     management entity may include the revenues and expenses of a managed entity
     in its financial statements.

     The  Partnership  has considered the impact of EITF 97-2 and concluded that
     it should be applied to its hotels. Accordingly, upon adoption, hotel sales
     and  property-level   expenses  will  be  reflected  on  the  statement  of
     operations.  This  change in  accounting  principle  will be adopted in the
     financial  statements  during the fourth  quarter of 1998 as of and for the
     year ended  December 31, 1998 with  retroactive  effect in prior periods to
     conform to the new  presentation.  Application  of EITF 97-2 will  increase
     both revenues and  operating  expenses by  approximately  $23.7 million and
     $22.4  million for the twelve weeks ended  September 11, 1998 and September
     12,  1997,  respectively,  and  $69.4  million  and $66.1  million  for the
     thirty-six   weeks  ended  September  11,  1998  and  September  12,  1997,
     respectively, and will have no impact on operating profit or net income.
<PAGE>

     Revenues consist of the following hotel operating results (in thousands):
<TABLE>

                                                   Twelve Weeks Ended                     Thirty-Six Weeks Ended
                                            September 11,       September 12,         September 11,     September 12,
                                                1998                1997                  1998               1997
                                          ----------------    ---------------       ---------------     ---------------
     <S>                                  <C>                 <C>                   <C>                 <C>    
     HOTEL SALES
       Rooms..............................$         43,486    $        40,878       $       129,961     $       121,572
       Food and beverage..................           2,982              2,808                 9,135               8,886
       Other..............................           1,293              1,524                 4,346               4,624
                                          ----------------    ---------------       ---------------     ---------------
                                                    47,761             45,210               143,442             135,082
                                          ----------------    ---------------       ---------------     ---------------
     HOTEL EXPENSES
       Departmental direct costs
         Rooms............................           9,507              8,875                27,556              25,833
         Food and beverage................           2,688              2,542                 7,813               7,656
         Other............................          11,549             11,022                34,008              32,632
                                          ----------------    ---------------       ---------------     ---------------
                                                    23,744             22,439                69,377              66,121
                                          ----------------    ---------------       ---------------     ---------------

     REVENUES.............................$         24,017    $        22,771       $        74,065     $        68,961
                                          ================    ===============       ===============     ===============
</TABLE>


4.   Host  Marriott  Corporation,  on behalf  of the  General  Partner,  CBM One
     Corporation, filed a preliminary Prospectus/Consent  Solicitation Statement
     with the  Securities  and  Exchange  Commission  in  December  1997,  which
     proposed the consolidation  ("Consolidation")  of this Partnership and five
     other limited  partnerships  into a publicly traded real estate  investment
     trust ("REIT").  Subsequently,  the General Partner  reported that existing
     REIT's  active in the moderate  price and  extended-stay  hotel segment had
     expressed  an interest  in  acquiring  some of the hotels  owned by the six
     partnerships.  The General  Partner  retained  Merrill  Lynch to advise the
     partnerships with respect to these alternatives.

     The original  Consolidation plan included an initial public offering of the
     REIT's common shares. The General Partner has been advised that it would be
     difficult  to raise the  appropriate  level of outside  equity and that the
     perceived  benefits of the  Consolidation  are not achievable at this time.
     Therefore, the General Partner is not pursuing the plan to form a new REIT.
     





<PAGE>


ITEM 2.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                AND RESULTS OF OPERATIONS


FORWARD-LOOKING STATEMENTS

Certain   matters  discussed  in  this   Form  10-Q  include  forward-looking
statements and as such may involve known and unknown risks,  uncertainties,  and
other factors which may cause the actual transactions,  results,  performance or
achievements to be materially different from any future  transactions,  results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  The  cautionary  statements  set forth in reports  filed  under the
Securities  Act  of  1934  contain   important  factors  with  respect  to  such
forward-looking  statements,  including:  (i)  national  and local  economic and
business conditions that will, among other things,  affect demand for hotels and
other properties,  the level of rates and occupancy that can be achieved by such
properties  and the  availability  and terms of  financing;  (ii) the ability to
compete  effectively;  (iii)  changes in travel  patterns,  taxes and government
regulations;  (iv) governmental approvals,  actions and initiatives; and (v) the
effects  of tax  legislative  action.  Although  the  Partnership  believes  the
expectations  reflected  in  such  forward-looking  statements  are  based  upon
reasonable assumptions,  it can give no assurance that it's expectations will
be  attained  or that any  deviations  will  not be  material.  The  Partnership
undertakes  no  obligation  to publicly  release the result of any  revisions to
these  forward-looking  statements that may be made to reflect any future events
or circumstances.

RESULTS OF OPERATIONS

First Three Quarters of 1998 Compared to the First Three Quarters of 1997

Revenues.  Revenues (hotel sales less direct hotel operating costs and expenses)
for the first three quarters of 1998 increased $5.1 million to $74.1 million,  a
7% increase when compared to the first three quarters of 1997. The Partnership's
revenues and operating  profit were impacted by improved  lodging  results.  The
increase  was  driven   primarily  by  growth  in  revenue  per  available  room
("REVPAR"). REVPAR is a commonly used indicator of market performance for hotels
which  represents  the  combination  of average  daily room rate charged and the
average  daily  occupancy  achieved  (although  it is not a GAAP,  or  generally
accepted  accounting  principles,  measure of revenue).  REVPAR does not include
food and beverage or other ancillary revenues generated by the property.

REVPAR increased 8% to $71 for the first three quarters of 1998 when compared to
the first three  quarters  of 1997,  primarily  due to the  increase in combined
average room rate of $7, or 8%, to $88 offset by a one percentage point decrease
in average occupancy to approximately 81%. As a result, room sales for the first
three  quarters of 1998  increased  $8.4 million to $130 million,  a 7% increase
compared to the first three quarters of 1997.

Operating  Costs  and  Expenses.  The  Partnership's  operating  costs  and
expenses  increased  $916,000,  or 2%,  from $38.2  million  for the first three
quarters of 1997 to $39.1 million for the first three quarters of 1998 primarily
due to an increase in base,  Courtyard and incentive management fees, as well as
ground rent, taxes and other expenses.

Operating  Profit.  As a result of changes in revenues and operating  costs
and expenses discussed above,  operating profit increased $4.2 million,  or 14%,
from $30.8  million for the first three  quarters of 1997 to $35 million for the
first three  quarters of 1998.  As a percentage  of revenues,  operating  profit
increased  from 45% of revenues  for the first three  quarters of 1997 to 47% of
revenues for the first three quarters of 1998.

Interest  Expense.  Interest expense increased 3% to $18.4 million for the first
three  quarters of 1998 due to the 1997  refinancing  of the mortgage  debt at a
higher  fixed rate as compared to the variable  rates  charged on the prior debt
and an increase in the loan balance from $280.8 million to $325 million.


<PAGE>


Net Income before  Extraordinary  Items.  Net income  before  extraordinary
items  increased by $3.7  million,  or 28%, to $17.2 million for the first three
quarters of 1998 when  compared to the first three  quarters of 1997,  primarily
due to the $4.2 million  increase in operating  profit offset by the increase in
interest expense discussed above.

Extraordinary Items. The Partnership  recognized a net extraordinary gain in the
first three quarters of 1997 of $12.5 million  representing  the  forgiveness of
deferred management fees by Courtyard Management Corporation partially offset by
an extraordinary loss on the early extinguishment of debt.

Net Income.  Net income for the first  three  quarters  of 1998  decreased  $8.7
million to $17.2  million,  or 23% of revenues, when compared to the first three
quarters of 1997 as a result of the items discussed above.

Third Quarter 1998 Compared to Third Quarter 1997

Revenues. Revenues increased $1.2 million to $24 million for third quarter 1998,
a 5% increase when compared to third quarter 1997, due to the increase in REVPAR
as described below.

REVPAR for third quarter 1998 increased 7% to $72 when compared to third quarter
1997  primarily  due to the increase in combined  average room rate of $6 to $87
for third  quarter  1998.  The combined  average  occupancy  remained  stable at
approximately 83%.

Operating  Costs and Expenses.  The  Partnership's  operating costs and expenses
decreased 8% to $12.9  million for third  quarter 1998 when compared to the same
period in 1997  primarily due to a decrease in  depreciation  expense and ground
rent, taxes and other.

Operating  Profit.  As a result of changes in revenues and  operating  costs and
expenses  discussed above,  operating profit increased for third quarter 1998 by
$2.4  million,  or 27%, to $11.2  million,  when  compared to the same period in
1997.

Net  Income.  Net  income  increased  $2.6  million in third  quarter  1998 when
compared to the same period in 1997. This results  primarily from an increase in
operating profit as discussed above, partially offset by an increase in interest
expense.

CAPITAL RESOURCES AND LIQUIDITY

The  Partnership's  financing needs have  historically  been funded through loan
agreements with various lenders and Host Marriott Corporation ("Host Marriott").
The General Partner believes that the Partnership  will have sufficient  capital
resources  and  liquidity  to continue to conduct its  business in the  ordinary
course.

Principal Sources and Uses of Cash

Cash  provided by operating  activities  was $31.6 million and $20.4 million for
the first three quarters 1998 and the first three  quarters 1997,  respectively.
Cash  provided by operations  was higher in third quarter 1998  primarily due to
improved  lodging results  combined with the payment of $4.2 million of deferred
management fees in connection with the refinancing in 1997, as discussed above.

Cash used in investing  activities  was $14.7  million and $13.8 million for the
first three quarters 1998 and the first three quarters 1997,  respectively.  The
Partnership's  investing  activities  consist  primarily of contributions to the
property  improvement fund and capital  expenditures for improvements to hotels.
Contributions  to the  property  improvement  fund  were $7.6  million  and $6.6
million  for the first  three  quarters  of 1998 and 1997,  respectively,  while
capital  expenditures  from the property  improvement  fund and owner funds were
$10.4  million  and  $15.0  million  for  the  same  period  in 1998  and  1997,
respectively.  The General Partner  believes that the property  improvement fund
will  provide  adequate  funds in the short  and long  term to meet the  Hotel's
capital needs.

As part of the debt refinancing,  contributions to the property improvement fund
will remain at 5% of gross  hotel sales  through  1998 and may be  increased  by
Courtyard Management Corporation to 6% in 1999 and 2000 and 7% thereafter if the
current  contribution  of 5% of gross  hotel sales is  insufficient  to make the
replacements, renewals and repairs to maintain the hotels in accordance with the
Manager's standards for Courtyard by Marriott hotels.

Cash used in financing  activities  was $15.2  million and $10.4 million for the
first three quarters 1998 and the first three quarters 1997,  respectively.  The
Partnership's financing activities consist primarily of capital distributions to
its partners and repayment of debt. During the first three quarters of 1998, the
Partnership distributed $7.3 million or $6,000 per limited partnership unit from
first and second quarter 1998  operations and $2.4 million or $2,000 per limited
partnership  unit  from  1997  operations.   In  the  first  quarter  1997,  the
Partnership  received  refinancing  proceeds  in  excess  of  repayments  of the
mortgage  debt.  This  provided  cash to the  Partnership  which was used to pay
refinancing   costs  and  provided   funds  for  a  partial  return  of  capital
distribution to the partners. This distribution was paid in second quarter 1997.
The  Partnership  plans  to  distribute  $2.4  million  or  $2,000  per  limited
partnership  unit from third  quarter 1998  operating  results in November  1998
bringing  total  1998  distributions  to $8,000 per  limited  partner  unit.  We
anticipate  total  cash  distributions  for 1998 of  approximately  $10,000  per
limited  partner  unit.  However,  actual  distributions  may be higher or lower
depending on actual Hotel  operating  results for the  remainder of the year. We
expect to make a final distribution for 1998 operations in April 1999.

YEAR 2000 ISSUES

The "Year 2000 Issue" has arisen  because many  existing  computer  programs and
chip-based  embedded technology systems use only the last two digits to refer to
a year,  and  therefore do not  properly  recognize a year that begins with "20"
instead of the familiar "19." If not corrected, many computer applications could
fail or create erroneous results.  The following disclosure provides information
regarding the current status of the Partnership's Year 2000 compliance program.

The Partnership  processes its records on computer hardware and software systems
maintained by Host Marriott Corporation ("Host Marriott"), the parent company of
the General Partner of the  Partnership.  Host Marriott has adopted a compliance
program  because it  recognizes  the  importance  of  minimizing  the number and
seriousness  of any  disruptions  that may  occur as a result  of the Year  2000
Issue.  Host  Marriott's  compliance  program  includes  an  assessment  of Host
Marriott's  hardware and software computer systems and embedded systems, as well
as an  assessment  of the Year 2000 issues  relating to third parties with which
the Partnership has a material relationship or whose systems are material to the
operations of the Partnership's  Hotel.  Host Marriott's  efforts to ensure that
its  computer  systems are Year 2000  compliant  have been  segregated  into two
separate phases: in-house systems and third-party systems.

In-House  Systems.   Host  Marriott  has  invested  in  the  implementation  and
maintenance of accounting and reporting  systems and equipment that are intended
to  enable  the  Partnership  to  provide  adequately  for its  information  and
reporting  needs and which are also Year 2000  compliant.  Substantially  all of
Host  Marriott's  in-house  systems  have  already  been  certified as Year 2000
compliant through testing and other mechanisms and Host Marriott has not delayed
any systems projects due to the Year 2000 Issue. Host Marriott is in the process
of  engaging a third  party to review its Year 2000  in-house  compliance.  Host
Marriott  believes  that future costs  associated  with Year 2000 Issues for its
in-house  systems  will be  insignificant  and will  therefore  not  impact  the
Partnership's  business,  financial  condition and results of  operations.  Host
Marriott has not developed, and does not plan to develop, a separate contingency
plan  for its  in-house  systems  due to their  current  Year  2000  compliance.
However,  Host Marriott does have  detailed  contingency  plans for its in-house
systems  covering a variety of possible  events,  including  natural  disasters,
interruption of utility service and similar events.

Third-Party  Systems.  The  Partnership  relies upon  operational and accounting
systems  provided  by third  parties,  primarily  the  Manager  of its Hotels to
provide  the  appropriate   property-specific   operating   systems   (including
reservation,  phone, elevator,  security, HVAC and other systems) and to provide
it with financial information.  Based on discussions with the third parties that
are critical to the Partnership's business, including the Manager of its Hotels,
Host Marriott  believes that these parties are in the process of studying  their
systems and the systems of their respective  vendors and service  providers and,
in many cases,  have begun to  implement  changes,  to ensure that they are Year
2000 compliant.  To the extent these changes impact property-level  systems, the
Partnership may be required to fund capital  expenditures for upgraded equipment
and software. Host Marriott does not expect these charges to be material, but is
committed to making  these  investments  as  required.  To the extent that these
changes relate to the Manager's  centralized  systems  (including  reservations,
accounting,   purchasing,   inventory,   personnel  and  other   systems),   the
Partnership's  management  agreement  generally  provides  for these costs to be
charged to the Partnership's Hotels. Host Marriott expects that the Manager will
incur Year 2000 costs for its  centralized  systems in lieu of costs  related to
system  projects  that  otherwise  would have been  pursued and  therefore,  its
overall level of centralized charges allocated to the Hotels will not materially
increase as a result of the Year 2000 compliance effort.  Host Marriott believes
that this deferral of certain system projects will not have a material impact on
its future  results of  operations,  although it may delay certain  productivity
enhancements at the Partnership's Hotels. Host Marriott will continue to monitor
the efforts of these third  parties to become Year 2000  compliant and will take
appropriate steps to address any non-compliance issues. The Partnership believes
that in the event of material Year 2000 non-compliance caused by a breach of the
Manager's  duties,  the Partnership will have the right to seek recourse against
the Manager under its third party management agreement. The management agreement
generally  does  not  specifically  address  the  Year  2000  compliance  issue.
Therefore the amount of any recovery in the event of Year 2000 non-compliance at
a property, if any, is not determinable at this time.

Host  Marriott  will work  with the third  parties  to ensure  that  appropriate
contingency  plans will be developed to address the most reasonably likely worst
case  Year  2000  scenarios,  which  may not  have  been  identified  fully.  In
particular,  Host Marriott has had extensive discussions regarding the Year 2000
Issue  with  Marriott  International,  the  Manager  of the  Hotels.  Due to the
significance of Marriott International to the Partnership's business, a detailed
description of Marriott International's state of readiness follows.

Marriott  International  has  adopted an  eight-step  process  toward  Year 2000
readiness,  consisting of the following: (i) Awareness:  fostering understanding
of, and  commitment  to, the problem and its potential  risks;  (ii)  Inventory:
identifying and locating systems and technology components that may be affected;
(iii)  Assessment:  reviewing  these  components for Year 2000  compliance,  and
assessing the scope of Year 2000 issues;  (iv) Planning:  defining the technical
solutions and labor and work plans  necessary for each  particular  system;  (v)
Remediation/Replacement:  completing the  programming to renovate or replace the
problem software or hardware; (vi) Testing and Compliance Validation: conducting
testing,  followed by independent validation by a separate internal verification
team; (vii)  Implementation:  placing the corrected  systems and technology back
into the  business  environment;  and  (viii)  Quality  Assurance:  utilizing  a
dedicated  audit team to review and test  significant  projects for adherence to
quality standards and program methodology.

Marriott  International  has  grouped  its  systems  and  technology  into three
categories  for  purposes  of Year 2000  compliance:  (i)  information  resource
applications  and  technology  (IT  Applications)  --  enterprise-wide   systems
supported  by  Marriott   International's   centralized  information  technology
organization ("IR"); (ii) Business-initiated Systems ("BIS") - systems that have
been  initiated by an individual  business  unit,  and that are not supported by
Marriott  International's  IR organization;  and (iii) Building Systems - non-IT
equipment at properties  that use embedded  computer  chips,  such as elevators,
automated  room  key  systems  and HVAC  equipment.  Marriott  International  is
prioritizing its efforts based on how severe an effect  noncompliance would have
on customer service, core business processes or revenues,  and whether there are
viable, non-automated fallback procedures (System Criticality).

Marriott International measures the completion of each phase based on documented
and quantified results,  weighted for System  Criticality.  As of the end of the
1998 third  quarter,  the awareness  and  inventory  phases were complete for IT
Applications  and  nearly  complete  for  BIS  and  Building  Systems.   For  IT
Applications,  the Assessment,  Planning and Remediation/Replacement phases were
each over 80 percent  complete,  and Testing and Compliance  Validation had been
completed for a number of key systems,  with most of the  remaining  work in its
final stage. For BIS and Building  Systems,  Assessment and Planning were in the
mid- to upper-range of completion, with a substantial amount of work in process,
while the progress level for  Remediation/Replacement and Testing and Compliance
Validation had not yet been documented and quantified. Quality Assurance is also
in progress for IT  Applications  and is scheduled to begin for BIS and Business
Systems in the near future.  Marriott  International's  goal is to substantially
complete the  Remediation/Replacement and Testing phases for its System Critical
IT   Applications  by  the  end  of  1998,  with  1999  reserved  for  unplanned
contingencies and for Compliance  Validation and Quality  Assurance.  For System
Critical BIS and Building Systems,  the same level of completion is targeted for
June 1999 and September 1999, respectively.

Marriott  International has initiated Year 2000 compliance  communications  with
its significant third party suppliers,  vendors and business partners, including
its franchisees.  Marriott International is focusing its efforts on the business
interfaces most critical to its customer  service and revenues,  including those
third parties that support the most critical  enterprise-wide  IT  Applications,
franchisees  generating  the most  revenues,  suppliers  of the most widely used
Building  Systems and BIS, the top 100 suppliers,  by dollar  volume,  of non-IT
products,  and  financial  institutions  providing  the  most  critical  payment
processing functions.  Responses have been received from a majority of the firms
in this group.

Marriott  International  is also  establishing a common approach for testing and
addressing  Year  2000   compliance   issues  for  its  managed  and  franchised
properties.  This includes a guidance  protocol for operated  properties,  and a
Year 2000 "Toolkit" for  franchisees  containing  relevant Year 2000  compliance
information. Marriott International is also utilizing a Year 2000 best-practices
sharing system.

Risks.  There can be no assurance that Year 2000  remediation by the Partnership
or third  parties  will be properly and timely  completed,  and failure to do so
could have a material  adverse effect on the  Partnership,  its business and its
financial condition.  The Partnership cannot predict the actual effects to it of
the Year 2000  Issue,  which  depends  on  numerous  uncertainties  such as: (i)
whether  significant  third  parties  properly and timely  address the Year 2000
Issue;  and (ii) whether  broad-based or systemic  economic  failures may occur.
Host  Marriott is also unable to predict the  severity  and duration of any such
failures,  which  could  include  disruptions  in  passenger  transportation  or
transportation  systems  generally,  loss of utility  and/or  telecommunications
services,  the loss or  distortion of hotel  reservations  made on a centralized
reservation  system and errors or failures in financial  transactions or payment
processing systems such as credit cards. Due to the general uncertainty inherent
in the Year 2000 Issue and the  Partnership's  dependence on third parties,  the
Partnership is unable to determine at this time whether the consequences of Year
2000 failures will have a material  impact on the  Partnership.  Host Marriott's
Year 2000 compliance  program is expected to  significantly  reduce the level of
uncertainty  about  the Year  2000  Issue and Host  Marriott  believes  that the
possibility of significant interruptions of normal operations should be reduced.

<PAGE>


                           PART II. OTHER INFORMATION


ITEM 1.         LEGAL PROCEEDINGS

Marvin Schick and Jack Hirsch,  the  plaintiffs in a class action lawsuit styled
Marvin  Schick,  et al. v. Host Marriott  Corporation,  et al., Civil Action No.
15991,  filed their  complaint  on October 16, 1997 in Delaware  Chancery  Court
against  the  General  Partner,  the  Manager  and  certain of their  respective
affiliates,  officers  and  directors.  The  plaintiffs'  claim that the General
Partner  agreed  to  decrease  the  owner's  priority  under  the  terms  of the
Management  Agreement  for the  benefit of the  Manager  without  obtaining  the
consent of the  limited  partners.  The lawsuit  includes  claims  against  Host
Marriott and the General  Partner for breach of contract and breach of fiduciary
duty, and against Marriott International,  Inc. and the Manager for interference
with  contract and aiding and abetting in the breach of  fiduciary  duties.  The
General  Partner  believes that the change in the  Management  Agreement did not
require limited partner approval, because, among other things, it did not result
in an increase in compensation to the Manager. The defendants filed an answer to
the  plaintiffs'  complaint  and asserted a number of defenses.  The parties to
this lawsuit have reached a tentative  agreement to settle the matter and are in
the process of negotiating the details of the settlement.

On February 11, 1998, four individual limited partners in partnerships sponsored
by Host Marriott,  filed a class action  lawsuit,  styled Ruben,  et al. v. Host
Marriott Corporation, et al., Civil Action No. 16186, in Delaware State Chancery
Court  against Host  Marriott and the general  partners of Courtyard by Marriott
Limited  Partnership,  Courtyard  by Marriott II Limited  Partnership,  Marriott
Residence   Inn  Limited   Partnership,   Marriott   Residence  Inn  II  Limited
Partnership,  and Fairfield Inn by Marriott Limited  Partnership  (collectively,
the "Five Partnerships").  The plaintiffs allege that the proposed merger of the
Five  Partnerships  (the  "Merger")  into an  umbrella  partnership  real estate
investment  trust  proposed  by  CRF  Lodging  Company,  L.P.  in a  preliminary
registration statement filed with the Securities and Exchange Commission,  dated
December  22, 1997,  constitutes  a breach of the  fiduciary  duties owed to the
limited  partners  of the Five  Partnerships  by Host  Marriott  and the general
partners of the Five Partnerships.  In addition,  the plaintiffs allege that the
Merger  breaches  various  agreements  relating  to the Five  Partnerships.  The
plaintiffs are seeking,  among other things,  the following:  certification of a
class;  injunctive  relief  to  block  consummation  of the  Merger  or,  in the
alternative,  rescission  of the Merger;  and  damages.  Host  Marriott  and the
general  partners of the five  Partnerships  believe that these  allegations are
totally  devoid of merit and they intend to vigorously  defend against them. The
defendants, in light of current market conditions, have decided to abandon their
efforts to complete the initial Merger at this time. Accordingly, they intend to
continue their efforts to dismiss the lawsuit.

On March 16, 1998,  limited partners in several  partnerships  sponsored by Host
Marriott,  filed a lawsuit,  styled Robert M. Haas, Sr. and Irwin Randolph Joint
Tenants, et al. v. Marriott  International,  Inc., et al., Case No. 98-CI-04092,
in the 57th  Judicial  District  Court of Bexar County,  Texas against  Marriott
International, Inc. ("Marriott International"),  Host Marriott, various of their
subsidiaries,  J.W. Marriott,  Jr., Stephen Rushmore,  and Hospitality Valuation
Services,  Inc.  (collectively,  the  "Defendants").  The lawsuit relates to the
following  limited  partnerships:  Courtyard  by Marriott  Limited  Partnership,
Courtyard by Marriott II Limited  Partnership,  Marriott  Residence  Inn Limited
Partnership,  Marriott  Residence Inn II Limited  Partnership,  Fairfield Inn by
Marriott Limited Partnership,  Desert Springs Marriott Limited Partnership,  and
Atlanta  Marriott  Marquis  Limited   Partnership   (collectively,   the  "Seven
Partnerships").  The  plaintiffs  allege that the  Defendants  conspired to sell
hotels to the Seven  Partnerships  for inflated prices and that they charged the
Seven Partnerships  excessive management fees to operate the Seven Partnerships'
hotels. The plaintiffs further allege,  among other things,  that the Defendants
committed  fraud,  breached  fiduciary  duties,  and violated the  provisions of
various  contracts.   The  plaintiffs  are  seeking  unspecified   damages.  The
Defendants,  which do not include the Seven Partnerships,  believe that there is
no truth to the  plaintiffs'  allegations and that the lawsuit is totally devoid
of merit. The Defendants intend to vigorously defend against the claims asserted
in the  lawsuit.  They  have  filed an answer to the  plaintiffs'  petition  and
asserted a number of  defenses.  Although the Seven  Partnerships  have not been
named as Defendants in the lawsuit,  the partnership  agreements relating to the
Seven  Partnerships  include an  indemnity  provision  which  requires the Seven
Partnerships,  under certain  circumstances,  to indemnify the general  partners
against losses, expenses and fees.

The  Partnership  and  the  Hotels  are  involved  in  routine   litigation  and
administrative  proceedings arising in the ordinary course of business,  some of
which are expected to be covered by liability  insurance and which  collectively
are not expected to have a material  adverse  effect on the business,  financial
condition or results of operations of the Partnership.
<PAGE>


ITEM 6.         EXHIBITS AND REPORTS ON FORM 8-K

a.       Exhibits:

         None.

b. Reports on Form 8-K:

         1.    A Form 8-K was filed with the Securities and Exchange  Commission
               on  October  9,  1998.  This  filing,  Item  5--Other  Events
               discloses that the General Partner sent a letter dated October 1,
               1998  to  inform  the   limited   partners   that  the   proposed
               Consolidation  to form a new  REIT  focused  on  limited  service
               hotels  is no longer  being  pursued.  In  addition,  the  letter
               informs the limited  partners  that, to date,  there have been no
               acceptable   offers   from   third   parties  to   purchase   the
               Partnership's  hotels.  A copy of the letter was  included  as an
               Item 7--Exhibit in this Form 8-K filing.







<PAGE>




                                    SIGNATURE


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this Form  10-Q to be signed on its  behalf by the
undersigned, thereunto duly authorized.


                              COURTYARD BY MARRIOTT
                              LIMITED PARTNERSHIP

                              By:    CBM ONE CORPORATION
                                     General Partner



October 27, 1998              By:    /s/ Earla L. Stowe
                                       ------------------
                                     Earla L. Stowe
                                     Vice President and Chief Accounting Officer