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                                                                     EXHIBIT 4.1

Loan No.: 26-5950580                                           Boulder, Colorado
                                                                 Homewood Suites


                                PROMISSORY NOTE
                                ---------------

$10,700,000.00                                                      June 1, 2001


     FOR VALUE RECEIVED, the undersigned, APPLE SUITES SPE III, INC., a Virginia
corporation, ("Maker"), having an address at 9 North Third Street, Richmond,
               -----
Virginia 23219, promises to pay to the order of FIRST UNION NATIONAL BANK, a
national banking association ("Payee"), at the office of Payee at One First
                               -----
Union Center, 301 South College Street, Mailcode NC0166, Charlotte, North
Carolina 28288, or at such other place as Payee may designate to Maker in
writing from time to time, the principal sum of Ten Million Seven Hundred
Thousand and No/100 Dollars ($10,700,000.00), together with interest on so much
thereof as is from time to time outstanding and unpaid, from the date of the
advance of the principal evidenced hereby, at the rate of eight and fifteen one-
hundredths percent (8.15%) per annum (the "Note Rate"), together with all other
                                           ---------
amounts due hereunder or under the other Loan Documents (as defined in the
Security Instrument), in lawful money of the United States of America, which
shall at the time of payment be legal tender in payment of all debts and dues,
public and private.

                       ARTICLE I. - TERMS AND CONDITIONS
                       ---------------------------------

     1.1. Computation of Interest.  Interest shall be computed hereunder based
          -----------------------
on a 360-day year and based on the actual number of days elapsed for any month
in which interest is being calculated. Interest shall accrue from the date on
which funds are advanced hereunder (regardless of the time of day) through and
including the day on which funds are credited pursuant to Section 1.2 hereof.

     1.2. Payment of Principal and Interest.  Payments in federal funds
          ---------------------------------
immediately available at the place designated for payment received by Payee
prior to 2:00 p.m. local time at said place of payment on a business day shall
be credited prior to close of business, while other payments, at the option of
Payee, may not be credited until immediately available to Payee in federal funds
at the place designated for payment prior to 2:00 p.m. local time at said place
of payment on a business day. The term "business day" when used herein shall
mean a weekday, Monday through Friday, except a legal holiday or a day on which
banking institutions in New York, New York are authorized by law to be closed.
Such principal and interest shall be payable in equal consecutive monthly
installments of $83,650.38 each, beginning on the first day of the second full
calendar month following the date of this Note (or on the first day of the first
full calendar month following the date hereof, in the event the advance of the
principal amount evidenced by this Note is the first day of a calendar month)
(the "First Payment Date"), and continuing on the first day of each and every
      ------------------
calendar month thereafter through and including May 1, 2011 (each, a "Payment
                                                                      -------
Date").  On June 1, 2011 (the "Maturity Date"), the entire
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outstanding principal balance hereof, together with all accrued but unpaid
interest thereon, shall be due and payable in full.

     1.3.  Application of Payments.  So long as no Event of Default (as
           -----------------------
hereinafter defined) exists hereunder or under any other Loan Document, each
such monthly installment shall be applied first, to any amounts hereafter
advanced by Payee hereunder or under any other Loan Document, second, to any
late fees and other amounts payable to Payee, third, to the payment of accrued
interest and last to reduction of principal.

     1.4.  Payment of "Short Interest".  If the advance of the principal amount
           ---------------------------
evidenced by this Note is made on a date other than the first day of a calendar
month, Maker shall pay to Payee contemporaneously with the execution hereof
interest at the Note Rate for a period from the date hereof through and
including the last day of this calendar month.

     1.5.  Prepayment;  Defeasance.
           -----------------------

           (a) This Note may not be prepaid, in whole or in part (except as
otherwise specifically provided herein), at any time. In the event that Maker
wishes to have the Security Property (as hereinafter defined) released from the
lien of the Security Instrument (as hereinafter defined), Maker's sole option
shall be a Defeasance (as hereinafter defined) upon satisfaction of the terms
and conditions set forth in Section 1.5(d) hereof. This Note may be prepaid in
whole but not in part without premium or penalty on either of the last two (2)
Payment Dates occurring immediately prior to the Maturity Date provided (i)
written notice of such prepayment is received by Payee not more than ninety (90)
days and not less than thirty (30) days prior to the date of such prepayment,
and (ii) such prepayment is accompanied by all interest accrued hereunder
through and including the date of such prepayment and all other sums due
hereunder or under the other Loan Documents. If, upon any such permitted
prepayment on either of the last two (2) Payment Dates occurring immediately
prior to the Maturity Date, the aforesaid prior written notice has not been
timely received by Payee, there shall be due a prepayment fee equal to, an
amount equal to the lesser of (i) thirty (30) days' interest computed at the
Note Rate on the outstanding principal balance of this Note so prepaid and (ii)
interest computed at the Note Rate on the outstanding principal balance of this
Note so prepaid that would have been payable for the period from, and including,
the date of prepayment through the Maturity Date of this Note as though such
prepayment had not occurred.

          (b)  If, prior to the date which is two (2) years after the "startup
day," within the meaning of Section 860G(a) (9) of the Internal Revenue Code of
1986, as amended from time to time or any successor statute (the "Code"), of a
                                                                  ----
"real estate mortgage investment conduit" (a "REMIC"), within the meaning of
                                              -----
Section 860D of the Code, that holds this Note (the "Lockout Expiration Date"),
                                                     -----------------------
the indebtedness evidenced by this Note shall have been declared due and payable
by Payee pursuant to Article II hereof or the provisions of any other Loan
Document due to the existence of an Event of Default (as defined in the Security
Instrument) by Maker, then, in addition to the indebtedness evidenced by this
Note being immediately due and payable, there shall also then be immediately due
and payable a sum equal to the interest which would have accrued on the
principal balance of this Note at the Note Rate from the date of such
acceleration to the Lock-out Expiration Date, together with a prepayment

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fee in an amount equal to the Yield Maintenance Premium (as hereinafter defined)
based on the entire indebtedness on the date of such acceleration. If such
acceleration is on or following the Lock-out Expiration Date, the Yield
Maintenance Premium shall also then be immediately due and payable as though
Maker were prepaying the entire indebtedness on the date of such acceleration.
In addition to the amounts described in the two preceding sentences, in the
event of any such acceleration or tender of payment of such indebtedness occurs
or is made on or prior to the first (1st) anniversary of the date of this Note,
there shall also then be immediately due and payable an additional prepayment
fee of three percent (3%) of the principal balance of this Note. The term "Yield
                                                                           -----
Maintenance Premium" shall mean an amount equal to the greater of (A) two
-------------------
percent (2.0%) of the principal amount being prepaid, and (B) the present value
of a series of payments each equal to the Payment Differential (as hereinafter
defined) and payable on each Payment Date over the remaining original term of
this Note and on the Maturity Date, discounted at the Reinvestment Yield (as
hereinafter defined) for the number of months remaining as of the date of such
prepayment to each such Payment Date and the Maturity Date.  The term "Payment
                                                                       -------
Differential" shall mean an amount equal to (i) the Note Rate less the
------------
Reinvestment Yield, divided by (ii) twelve (12) and multiplied by (iii) the
principal sum outstanding under this Note after application of the constant
monthly payment due under this Note on the date of such prepayment, provided
that the Payment Differential shall in no event be less than zero. The term
"Reinvestment Yield" shall mean an amount equal to the lesser of (i) the yield
-------------------
on the U.S. Treasury issue (primary issue) with a maturity date closest to the
Maturity Date, or (ii) the yield on the U.S. Treasury issue (primary issue) with
a term equal to the remaining average life of the indebtedness evidenced by this
Note, with each such yield being based on the bid price for such issue as
published in the Wall Street Journal on the date that is fourteen (14) days
prior to the date of such prepayment set forth in the notice of prepayment (or,
if such bid price is not published on that date, the next preceding date on
which such bid price is so published) and converted to a monthly compounded
nominal yield.  In the event that any prepayment fee is due hereunder, Payee
shall deliver to Maker a statement setting forth the amount and determination of
the prepayment fee, and, provided that Payee shall have in good faith applied
the formula described above, Maker shall not have the right to challenge the
calculation or the method of calculation set forth in any such statement in the
absence of manifest error, which calculation may be made by Payee on any day
during the fifteen (15) day period preceding the date of such prepayment.  Payee
shall not be obligated or required to have actually reinvested the prepaid
principal balance at the Reinvestment Yield or otherwise as a condition to
receiving the prepayment fee.

          (c)  Partial prepayments of this Note shall not be permitted, except
for partial prepayments resulting from Payee's election to apply insurance or
condemnation proceeds to reduce the outstanding principal balance of this Note
as provided in the Security Instrument, in which event no prepayment fee or
premium shall be due unless, at the time of either Payee's receipt of such
proceeds or the application of such proceeds to the outstanding principal
balance of this Note, an Event of Default, or an event which, with notice or the
passage of time, or both, would constitute an Event of Default, shall have
occurred, which default or Event of Default is unrelated to the applicable
casualty or condemnation, in which event the applicable prepayment fee or
premium shall be due and payable based upon the amount of the prepayment. No
notice of prepayment shall be required under the circumstances specified in the
preceding sentence. No principal amount repaid may be reborrowed. Any such
partial prepayments of principal shall be

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applied to the unpaid principal balance evidenced hereby but such application
shall not reduce the amount of the fixed monthly installments required to be
paid pursuant to Section 1.2 above until all principal is paid in full. Except
as otherwise expressly provided in this Section 1.5(c) and in Section 1.5(b)
above, the prepayment fees provided above shall be due, to the extent permitted
by applicable law, under any and all circumstances where all or any portion of
this Note is paid prior to the Maturity Date, whether such prepayment is
voluntary or involuntary, including, without limitation, if such prepayment
results from Payee's exercise of its rights upon the occurrence and continuances
of an Event of Default by Maker and acceleration of the Maturity Date of this
Note (irrespective of whether foreclosure proceedings have been commenced), and
shall be in addition to any other sums due hereunder or under any of the other
Loan Documents. No tender of a prepayment of this Note with respect to which a
prepayment fee is due shall be effective unless such prepayment is accompanied
by the applicable prepayment fee.

          (d)  (i)  At any time after the Lockout Expiration Date, and provided
no Event of Default has occurred and is continuing hereunder or under any of the
other Loan Documents, at Maker's option, Payee shall cause the release of the
Security Property from the lien of the Security Instrument and the other Loan
Documents (a "Defeasance") upon the satisfaction of the following conditions:
              ----------

               (A)  Maker shall give not more than ninety (90) days' or less
          than sixty (60) days' prior written notice to Payee specifying the
          date Maker intends for the Defeasance to be consummated (the "Release
                                                                        -------
          Date"), which date shall be a Payment Date.

               (B)  All accrued and unpaid interest and all other sums due under
          this Note and under the other Loan Documents specifically related to
          this Note up to and including the Release Date shall be paid in full
          on or prior to the Release Date.

               (C)  Maker shall deliver to Payee on or prior to the Release
                    Date:

               (1)  a sum of money in immediately available funds (the
                    "Defeasance Deposit") equal to the outstanding principal
                    -------------------
                    balance of this Note plus an amount, if any, which together
                    with the outstanding principal balance of this Note, shall
                    be sufficient to enable Payee to purchase, through means and
                    sources customarily employed and available to Payee, for the
                    account of Maker, direct, non-callable obligations of the
                    United States of America that provide for payments prior,
                    but as close as possible, to all successive monthly Payment
                    Dates occurring after the Release Date and to the Maturity
                    Date, with each such payment being equal to or greater than
                    the amount of the corresponding installment of principal
                    and/or interest required to be paid under this Note
                    (including, but not limited to, all amounts due on the
                    Maturity Date) for the balance of the term hereof (the
                    "Defeasance Collateral"), each of which shall
                    ----------------------

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<PAGE>

                    be duly endorsed by the holder thereof as directed by Payee
                    or accompanied by a written instrument of transfer in form
                    and substance satisfactory to Payee in its sole discretion
                    (including, without limitation, such instruments as may be
                    required by the depository institution holding such
                    securities or the issuer thereof, as the case may be, to
                    effectuate book-entry transfers and pledges through the
                    book-entry facilities of such institution) in order to
                    perfect upon the delivery of the Defeasance Security
                    Agreement (as hereinafter defined) the first priority
                    security interest in the Defeasance Collateral in favor of
                    Payee in conformity with all applicable state and federal
                    laws governing granting of such security interests.

               (2)  A pledge and security agreement, in form and substance
                    satisfactory to Payee in its sole discretion, creating a
                    first priority security interest in favor of Payee in the
                    Defeasance Collateral (the "Defeasance Security Agreement"),
                                                -----------------------------
                    which shall provide, among other things, that any excess
                    received by Payee from the Defeasance Collateral over the
                    amounts payable by Maker hereunder shall be refunded to
                    Maker promptly after each monthly Payment Date.

               (3)  A certificate of Maker certifying that all of the
                    requirements of Maker set forth in this subsection 1.5(d)(i)
                    have been satisfied.

               (4)  An opinion of counsel for Maker in form and substance and
                    delivered by counsel satisfactory to Payee in its sole
                    discretion stating, among other things, that (w) Payee has a
                    perfected first priority security interest in the Defeasance
                    Collateral, (x) the Defeasance Security Agreement is
                    enforceable against Maker in accordance with its terms, (y)
                    the contemplated defeasance will not result in any deemed
                    exchange of the Note pursuant to Section 1001 of the Code
                    and will not adversely affect the Note's status as
                    indebtedness for Federal income tax purposes and (z) any
                    trust formed as a REMIC in connection with a Secondary
                    Market Transaction will not fail to maintain its status as
                    REMIC as a result of such defeasance or be subject to a tax
                    on a prohibited transaction under Section 860(f)(a) of the
                    Code.

               (5)  Maker and any guarantor or indemnitor of Maker's obligations
                    under the Loan Documents for which Maker has recourse
                    liability executes and delivers to Payee such documents and
                    agreements as Payee shall reasonably require to evidence and
                    effectuate the ratification of such recourse liability and
                    guaranty or indemnity, respectively; provided that Maker and
                    each such guarantor or indemnitor shall be released and
                    relieved from any of its

                                       5
<PAGE>

                    obligations under this Note and the other Loan Documents and
                    under any guaranty or indemnity agreement executed in
                    connection with the loan evidenced by this Note for any acts
                    or events occurring or obligations arising after a
                    Defeasance which are not caused by or arising out of an any
                    acts or events occurring or obligations arising prior to or
                    simultaneously with a Defeasance.

               (6)  Evidence from any Rating Agency (as defined in the Security
                    Instrument) confirming that such Defeasance and release of
                    the Security Property from the lien of the Security
                    Instrument shall not result in a requalification, reduction,
                    downgrade, or withdrawal of any rating initially assigned or
                    to be assigned in a Secondary Market Transaction, or if no
                    such rating has been issued, in Payee's good faith judgment,
                    such Defeasance shall not have an adverse affect on the
                    level of rating obtainable in connection with the loan
                    evidenced hereby.

               (7)  Such other certificates, documents or instruments as Payee
                    may reasonably require.

               (8)  Payment of all reasonable fees, costs, expenses and charges
                    incurred by Payee in connection with the Defeasance of the
                    Security Property and the purchase of the Defeasance
                    Collateral, including, without limitation, all reasonable
                    legal fees and costs and expenses incurred by Payee or its
                    agents in connection with release of the Security Property,
                    review of the proposed Defeasance Collateral and preparation
                    of the Defeasance Security Agreement and related
                    documentation, any revenue, documentary, stamp, intangible
                    or other taxes, charges or fees due in connection with
                    substitution of the Defeasance Collateral for the Security
                    Property shall be paid on or before the Release Date.
                    Without limiting Maker's obligations with respect thereto,
                    Payee shall be entitled to deduct all such fees, costs,
                    expenses and charges from the Defeasance Deposit to the
                    extent of any portion of the Defeasance Deposit which
                    exceeds the amount necessary to purchase the Defeasance
                    Collateral.

               (D)  In connection with the Defeasance Deposit, Maker hereby
          authorizes and directs Payee using the means and sources customarily
          employed and available to Payee to use the Defeasance Deposit to
          purchase for the account of Maker the Defeasance Collateral.
          Furthermore, the Defeasance Collateral shall be arranged such that
          payments received from such Defeasance Collateral shall be paid
          directly to Payee to be applied on account of the indebtedness of this
          Note. Any part of the Defeasance Deposit in excess of the amount
          necessary to purchase the Defeasance Collateral and to pay the other
          and related costs Maker is obligated to pay under this Section 1.5
          shall be refunded to Maker.

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<PAGE>

          (ii)  Upon compliance with the requirements of subsection 1.5(d)(i),
     the Security Property shall be released from the lien of the Security
     Instrument and the other Loan Documents, and the Defeasance Collateral
     shall constitute collateral which shall secure this Note and all other
     obligations under the Loan Documents. Payee will, at Maker's reasonable
     expense, execute and deliver any agreements reasonably requested by Maker
     to release the lien of the Security Instrument from the Security Property.

          (iii) Upon the release of the Security Property in accordance with
     this Section 1.5(d), Maker shall assign all its obligations and rights
     under this Note, together with the pledged Defeasance Collateral, to a
     newly created successor entity which complies with the terms of Section
     1.33 of the Security Instrument designated by Maker and approved by Payee
     in its sole discretion. Such successor entity shall execute an assumption
     agreement in form and substance satisfactory to Payee in its sole
     discretion pursuant to which it shall assume Maker's obligations under this
     Note and the Defeasance Security Agreement. As conditions to such
     assignment and assumption, Maker shall (x) deliver to Payee an opinion of
     counsel in form and substance and delivered by counsel satisfactory to
     Payee in its sole discretion stating, among other things, that such
     assumption agreement is enforceable against Maker and such successor entity
     in accordance with its terms and that this Note and the Defeasance Security
     Agreement as so assumed, are enforceable against such successor entity in
     accordance with their respective terms, and (y) pay all costs and expenses
     (including, but not limited to, reasonable legal fees) incurred by Payee or
     its agents in connection with such assignment and assumption (including,
     without limitation, the review of the proposed transferee and the
     preparation of the assumption agreement and related documentation). Upon
     such assumption, Maker shall be relieved of its obligations hereunder,
     under the other Loan Documents other than as specified in Section
     1.5(d)(C)(5) above and under the Defeasance Security Agreement.

     1.6. Security.  The indebtedness evidenced by this Note and the obligations
          --------
created hereby are secured by, among other things, that certain mortgage, deed
of trust or deed to secure debt and security agreement (the "Security
                                                             --------
Instrument") from Maker for the benefit of Payee, dated of even date herewith,
----------
covering property located in Boulder County, Colorado. Some of the Loan
Documents are to be filed for record on or about the date hereof in the
appropriate public records.

                             ARTICLE II. - DEFAULT
                             ---------------------

     2.1. Events of Default.  It is hereby expressly agreed that should any
          -----------------
default occur in the payment of principal or interest as stipulated above and
such payment is not made within seven (7) days of the date such payment is due
(provided that no grace period is provided for the payment of principal and
interest due on the Maturity Date), or should any other Event of Default occur
and be continuing, the indebtedness evidenced hereby, including all sums
advanced or accrued hereunder or under any other Loan Document, and all unpaid
interest accrued thereon, shall, at the option of Payee and without notice to
Maker, at once become due and payable and may be collected forthwith, whether or
not there has been a prior demand for payment and regardless of the stipulated
date of maturity.

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     2.2.  Late Charges.  In the event that any payment is not received by Payee
           ------------
within seven (7) days of the date when due, then, in addition to any default
interest payments due hereunder, Maker shall also pay to Payee a late charge in
an amount equal to five percent (5%) of the amount of such overdue payment.

     2.3.  Default Interest Rate.  So long as any Event of Default exists
           ---------------------
hereunder, regardless of whether or not there has been an acceleration of the
indebtedness evidenced hereby, and at all times after maturity of the
indebtedness evidenced hereby (whether by acceleration or otherwise), interest
shall accrue on the outstanding principal balance of this Note, from the date
due until the date credited, at a rate per annum equal to four percent (4%) in
excess of the Note Rate, or, if such increased rate of interest may not be
collected under applicable law, then at the maximum rate of interest, if any,
which may be collected from Maker under applicable law (the "Default Interest
                                                             ----------------
Rate"), and such default interest shall be immediately due and payable.
----

     2.4.  Maker's Agreements.  Maker acknowledges that it would be extremely
           ------------------
difficult or impracticable to determine Payee's actual damages resulting from
any late payment or default, and such late charges and default interest are
reasonable estimates of those damages and do not constitute a penalty. The
remedies of Payee in this Note or in the Loan Documents, or at law or in equity,
shall be cumulative and concurrent, and may be pursued singly, successively or
together, in Payee's discretion.

     2.5.  Maker to Pay Costs.  In the event that this Note, or any part hereof,
           ------------------
is collected by or through an attorney-at-law, Maker agrees to pay all costs of
collection, including, but not limited to, reasonable attorneys' fees.

     2.6.  Exculpation.  Notwithstanding anything in this Note or the Loan
           -----------
Documents to the contrary, but subject to the qualifications hereinbelow set
forth, Payee agrees that:

           (a)      Maker shall be liable upon the indebtedness evidenced hereby
and for the other obligations arising under the Loan Documents to the full
extent (but only to the extent) of the security provided for in the Loan
Documents, the same being all properties (whether real or personal), rights,
estates and interests now or at any time hereafter securing the payment of this
Note and/or the other obligations of Maker under the Loan Documents pursuant to
the terms thereof (collectively, the "Security Property");
                                      -----------------

           (b)      if a default occurs in the timely and proper payment of all
or any part of such indebtedness evidenced hereby or in the timely and proper
performance of the other obligations of Maker under the Loan Documents, any
judicial proceedings brought by Payee against Maker shall be limited to the
preservation, enforcement and foreclosure, or any thereof, of the liens,
security titles, estates, assignments, rights and security interests now or at
any time hereafter securing the payment of this Note and/or the other
obligations of Maker under the Loan Documents pursuant to the terms thereof, and
no attachment, execution or other writ of process shall be sought, issued or
levied upon any assets, properties or funds of Maker other than the Security
Property, except with respect to the liability described below in this section;
and

                                       8
<PAGE>

          (c)  in the event of a foreclosure of such liens, security titles,
estates, assignments, rights or security interests with respect to the Security
Property securing the payment of this Note and/or the other obligations of Maker
under the Loan Documents, no judgment for any deficiency upon the indebtedness
evidenced hereby shall be sought or obtained by Payee against Maker, except with
respect to the liability described below in this section; provided, however,
that, notwithstanding the foregoing provisions of this section, Maker shall be
fully and personally liable and subject to legal action (i) for misapplication
or misappropriation by Maker of proceeds paid under any insurance policies (or
paid to Maker as a result of any other claim or cause of action against any
person or entity) by reason of damage, loss or destruction to all or any portion
of the Security Property, to the full extent of such proceeds not previously
delivered to Payee, but which, under the terms of the Loan Documents, should
have been delivered to Payee, (ii) for misapplication or misappropriation by
Maker of proceeds or awards resulting from the condemnation or other taking in
lieu of condemnation of all or any portion of the Security Property, to the full
extent of such proceeds or awards not previously delivered to Payee, but which,
under the terms of the Loan Documents, should have been delivered to Payee,
(iii) for misapplication or misappropriation by Maker of all tenant security
deposits or other refundable deposits paid to or held by Maker or any other
person or entity under the control or direction of Maker, if any, in connection
with leases of all or any portion of the Security Property which are not applied
in accordance with the terms of the applicable lease or other agreement, (iv)
for misapplication or misappropriation of rent and other payments received from
tenants under leases of all or any portion of the Security Property paid more
than one (1) month in advance, except as otherwise expressly provided or
permitted in the Percentage Lease (as defined in the Security Instrument), (v)
for misapplication or misappropriation by Maker of rents, issues, profits and
revenues of all or any portion of the Security Property received by Maker or any
other person or entity under the control or direction of Maker that are
applicable to a period after the occurrence and continuance of any Event of
Default or any event which, with notice or the passage of time, or both, would
constitute an Event of Default, hereunder or under the Loan Documents which are
not either applied to the ordinary and necessary expenses or capital
expenditures in connection with owning and operating the Security Property or
paid to Payee or otherwise as contemplated or permitted by the Loan Documents,
(vi) for waste committed on the Security Property, damage to the Security
Property as a result of the intentional misconduct or gross negligence of Maker
or any of its officers, general partners or members, as the case may be,
Indemnitor (as defined in the Indemnity Agreement (as hereinafter defined)), or
any agent or employee of any such persons, or any removal of any portion of the
Security Property not repaired as required by the Loan Documents (except as
otherwise provided in the Percentage Lease), in violation of the terms of the
Loan Documents, to the full extent of the losses or damages actually incurred by
Payee on account of such occurrence, (vii) for failure by Maker to pay any valid
taxes, assessments, mechanic's liens, materialmen's liens or other liens which
could create liens on any portion of the Security Property which would be
superior to the lien or security title of the Security Instrument or the other
Loan Documents except, with respect to any such taxes or assessments, to the
extent that funds have been deposited with Payee pursuant to the terms of the
Security Instrument specifically for the applicable taxes or assessments and not
applied by Payee to pay such taxes and assessments, (viii) for all obligations
and indemnities of Maker under Section 1.31 of the Security Instrument and the
Environmental Indemnity Agreement (as hereinafter defined) relating to hazardous
or toxic substances or radon or compliance with environmental laws and
regulations, and (ix) for fraud, material

                                       9
<PAGE>

misrepresentation or failure to disclose a material fact by Maker or any of its
officers, general partners or members, as the case may be, Indemnitor or any
agent, employee or other person authorized to make statements, representations
or disclosures on behalf of Maker, any officer, general partner or member, as
the case may be, of Maker orIndemnitor, to the full extent of any losses,
damages and expenses actually incurred by Payee on account thereof. Nothing
contained in this section shall (1) be deemed to be a release or impairment of
the indebtedness evidenced by this Note or the other oblig ations of Maker under
the Loan Documents or the lien of the Loan Documents upon the Security Property,
or (2) preclude Payee from foreclosing the Loan Documents in case of any Event
of Default or from enforcing any of the other rights of Payee except as stated
in this section, or (3) limit or impair in any way whatsoever (A) the Indemnity
and Guaranty Agreement (the "Indemnity Agreement") or (B) the Environmental
                            --------------------
Indemnity Agreement (the "Environmental Indemnity Agreement"), each of even date
                          ---------------------------------
herewith executed and delivered in connection with the indebtedness evidenced by
this Note or release, relieve, reduce, waive or impair in any way whatsoever,
any obligation of any party to the Indemnity Agreement or the Environmental
Indemnity Agreement.

     Notwithstanding anything to the contrary in this Note, the Security
Instrument or any of the other Loan Documents, Payee shall not be deemed to have
waived any right which Payee may have under Section 506(a), 506(b), 1111(b) or
any other provisions of the U.S. Bankruptcy Code to file a claim for the full
amount of the indebtedness evidenced hereby or secured by the Security
Instrument or any of the other Loan Documents or to require that all collateral
shall continue to secure all of the indebtedness owing to Payee in accordance
with this Note, the Security Instrument and the other Loan Documents.

                       ARTICLE III. - GENERAL CONDITIONS
                       ---------------------------------

     3.1. No Waiver; Amendment.  No failure to accelerate the indebtedness
          --------------------
evidenced hereby by reason of default hereunder, acceptance of a partial or past
due payment, or indulgences granted from time to time shall be construed (i) as
a novation of this Note or as a reinstatement of the indebtedness evidenced
hereby or as a waiver of such right of acceleration or of the right of Payee
thereafter to insist upon strict compliance with the terms of this Note, or (ii)
to prevent the exercise of such right of acceleration or any other right granted
hereunder or by any applicable laws; and Maker hereby expressly waives the
benefit of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the foregoing. No extension of the time for the payment of this Note or
any installment due hereunder made by agreement with any person now or hereafter
liable for the payment of this Note shall operate to release, discharge, modify,
change or affect the original liability of Maker under this Note, either in
whole or in part, unless Payee agrees otherwise in writing. This Note may not
be changed orally, but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought.

     3.2. Waivers.  Presentment for payment, demand, protest and notice of
          -------
demand, protest and nonpayment and all other notices are hereby waived by Maker.
Maker hereby further waives and renounces, to the fullest extent permitted by
law, all rights to the benefits of any moratorium, reinstatement, marshaling,
forbearance, valuation, stay, extension, redemption, appraisement, exemption and
homestead now or hereafter provided by the Constitution and laws

                                       10
<PAGE>

of the United States of America and of each state thereof, both as to itself and
in and to all of its property, real and personal, against the enforcement and
collection of the obligations evidenced by this Note or the other Loan
Documents.

     3.3. Limit of Validity.  The provisions of this Note and of all agreements
          -----------------
between Maker and Payee, whether now  existing or hereafter arising and whether
written or oral, including, but not limited to, the Loan Documents, are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of demand or acceleration of the maturity of this Note or otherwise,
shall the amount contracted for, charged, taken, reserved, paid or agreed to be
paid  to Payee for the use, forbearance or detention of the money loaned under
this Note ("Interest") exceed the maximum amount permissible under applicable
            --------
law.  If, from any circumstance whatsoever, performance or fulfillment of any
provision hereof or of any agreement between Maker and Payee shall, at the time
performance or fulfillment of such provision shall be due, exceed the limit for
Interest prescribed by law or otherwise transcend the limit of validity
prescribed by applicable law, then, ipso facto, the obligation to be performed
                                    ---- -----
or fulfilled shall be reduced to such limit, and if, from any circumstance
whatsoever, Payee shall ever receive anything of value deemed Interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excessive Interest shall be applied to the reduction of the principal balance
owing under this Note in the inverse order of its maturity (whether or not then
due) or, at the option of Payee, be paid over to Maker, and not to the payment
of Interest. All Interest (including any amounts or payments judicially or
otherwise under the law deemed to be Interest) contracted for, charged, taken,
reserved, paid or agreed to be paid to Payee shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of this Note, including any extensions and renewals hereof until payment in
full of the principal balance of this Note so that the Interest thereon for such
full term will not exceed at any time the maximum amount permitted by applicable
law.  Additionally, to the extent permitted by applicable law now or hereafter
in effect, Payee may, at its option and from time to time, implement any other
method of computing the maximum lawful rate under the law of the State in which
the Security Property is located or under other applicable law by giving notice,
if required, to Maker as provided by applicable law now or hereafter in effect.
This Section 3.3 will control all agreements between Maker and Payee.
     -----------

     3.4. Use of Funds.  Maker hereby warrants, represents and covenants that
          ------------
the funds disbursed hereunder shall be used for business purposes.

     3.5. Unconditional Payment.  Maker is and shall be obligated to pay
          ---------------------
principal, interest and any and all other amounts which become payable hereunder
or under the other Loan Documents absolutely and unconditionally and without any
abatement, postponement, diminution or deduction and without any reduction for
counterclaim or setoff. In the event that at any time any payment received by
Payee hereunder shall be deemed by a court of competent jurisdiction to have
been a voidable preference or fraudulent conveyance under any bankruptcy,
insolvency or other debtor relief law, then the obligation to make such payment
shall survive any cancellation or satisfaction of this Note or return thereof to
Maker and shall not be discharged or satisfied with any prior payment thereof or
cancellation of this Note, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand.

                                       11
<PAGE>

     3.6. Governing Law.  THIS NOTE SHALL BE INTERPRETED, CONSTRUED AND ENFORCED
          -------------
ACCORDING TO THE LAWS OF THE STATE IN WHICH THE SECURITY PROPERTY IS LOCATED.

     3.7. Waiver of Jury Trial.  MAKER, TO THE FULL EXTENT PERMITTED BY LAW,
          --------------------
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO THE DEBT EVIDENCED BY THIS NOTE OR ANY CONDUCT, ACT OR OMISSION OF
PAYEE OR MAKER, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, PARTNERS,
MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH
PAYEE OR MAKER, IN EACH OR THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE.

     3.8. Secondary Market.  Payee may sell, transfer and deliver the Loan
          ----------------
Documents to one or more investors in the secondary mortgage market.  In
connection with such sale, Payee may retain or assign responsibility for
servicing the loan evidenced by this Note or may delegate some or all of such
responsibility and/or obligations to a servicer, including, but not limited to,
any subservicer or master servicer, on behalf of the investors.

     3.9. Dissemination of Information.  If Payee determines at any time to
          ----------------------------
sell, transfer or assign this Note, the Security Instrument and the other Loan
Documents, and any or all servicing rights with respect thereto, or to grant
participations therein (the "Participations") or issue mortgage pass-through
                             --------------
certificates or other securities evidencing a beneficial interest in a rated or
unrated public offering or private placement (the "Securities"), Payee may
                                                   ----------
forward to each purchaser, transferee, assignee, servicer, participant,
investor, or their respective successors in such Participations and/or
Securities (collectively, the "Investor") or any Rating Agency (as defined in
                               --------
the Security Instrument) rating such Securities, each prospective Investor and
each of the foregoing's respective counsel, all documents and information which
Payee now has or may hereafter acquire relating to the debt evidenced by this
Note and to Maker, Indemnitor and the Security Property, which shall have been
furnished by Maker or Indemnitor as Payee determines necessary or desirable.

                    ARTICLE IV. - MISCELLANEOUS PROVISIONS
                    --------------------------------------

     4.1. The terms and provisions hereof shall be binding upon and inure to the
benefit of Maker and Payee and their respective heirs, executors, legal
representatives, successors, successors-in-title and assigns, whether by
voluntary action of the parties or by operation of law. All personal pronouns
used herein, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural and vice versa.
Titles of articles and sections are for convenience only and in no way define,
limit, amplify or describe the scope or intent of any provisions hereof.  Time
is of the essence with respect to all provisions of this Note.  This Note and
the other Loan Documents contain the entire agreements between the

                                       12
<PAGE>

parties hereto relating to the subject matter hereof and thereof and all prior
agreements relative hereto and thereto which are not contained herein or therein
are terminated.

     4.2. Maker's Tax Identification Number is 54-2037743.

        [THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
     IN WITNESS WHEREOF, Maker has executed this Note as of the date first
written above.


                              MAKER:
                              -----

                              APPLE SUITES SPE III, INC.,
                              a Virginia corporation


                              By: /s/ Glade M. Knight
                                 --------------------
                                 Name:  Glade M. Knight
                                 Title:  President

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