<PAGE>

================================================================================

                      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

                                      OR

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



For the Quarter Ended March 23, 2001                 Commission File No. 1-14635


                         CRESTLINE CAPITAL CORPORATION
                             6600 Rockledge Drive
                           Bethesda, Maryland  20817
                                (240) 694-2000


        Maryland                                                 52-2151967
------------------------                                  ----------------------
(State of Incorporation)                                     (I.R.S. Employer
                                                          Identification Number)


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   X     No  _____
                                                               -----



                                                              Shares outstanding
      Class                                                    at April 20, 2001
-------------------                                            -----------------
Common Stock, $.01
par value per share                                                   15,413,000
                                                                      ----------

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

                CRESTLINE CAPITAL CORPORATION AND SUBSIDIARIES

                                     INDEX
                                     -----

<TABLE>
<CAPTION>
                                                                            Page No.
                                                                            --------
Part I.        FINANCIAL INFORMATION (Unaudited):
<S>             <C>                                                           <C>
    Item 1.    Financial Statements


               Condensed Consolidated Balance Sheets -                            3
                 March 23, 2001 and December 29, 2000

               Condensed Consolidated Statements of Operations -                  4
                 Twelve Weeks Ended March 23, 2001 and
                 March 24, 2000

               Condensed Consolidated Statements of Cash Flows -                  5
                 Twelve Weeks Ended March 23, 2001 and
                 March 24, 2000

               Notes to Condensed Consolidated Financial Statements               6

    Item 2.    Management's Discussion and Analysis of Results of                 8
                 Operations and Financial Condition

    Item 3.    Quantitative and Qualitative Disclosures About Market Risk        16

Part II.       OTHER INFORMATION AND SIGNATURE                                   17
</TABLE>

                                      -2-
<PAGE>

                        PART I.  FINANCIAL INFORMATION
                CRESTLINE CAPITAL CORPORATION AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                      March 23,    December 29,
                                                                        2001           2000
                                                                     ----------    ----------
                                                                     (unaudited)
                                        ASSETS
<S>                                                                   <C>         <C>
Property and equipment, net........................................  $  749,544     $ 745,476
Hotel working capital..............................................       9,333        89,650
Due from hotel managers............................................      10,968        64,611
Due from Marriott Senior Living Services...........................      11,033         6,106
Other assets.......................................................      78,569        76,030
Cash and cash equivalents..........................................     186,156        35,534
                                                                     ----------    ----------
                                                                     $1,045,603    $1,017,407
                                                                     ==========    ==========

                       LIABILITIES AND SHAREHOLDERS' EQUITY

Debt:
  Mortgage debt....................................................  $  277,018     $ 312,903
  Other debt.......................................................      25,788        26,049
                                                                     ----------    ----------
                                                                        302,806       338,952
 Hotel working capital notes payable to Host Marriott.............        9,333        89,650
                                                                     ----------    ----------
   Total debt.....................................................      312,139       428,602
Income taxes payable..............................................       88,582             -
Accounts payable and accrued expenses.............................        9,498        12,518
Lease payable.....................................................        9,251        62,005
Deferred income taxes.............................................       63,288        67,866
Other liabilities.................................................       26,332        34,328
                                                                     ----------    ----------
   Total liabilities..............................................      509,090       605,319
                                                                     ----------    ----------
Shareholders' equity:
  Common stock, 75 million shares authorized, 22.2 million and
   22.1 million shares both issued and outstanding, respectively,
   $.01 par value.................................................          222           221
 Additional paid-in capital.......................................      448,511       447,817
 Retained earnings................................................      214,686        90,956
 Treasury stock, 6.7 million shares...............................     (126,906)     (126,906)
                                                                     ----------    ----------
   Total shareholders' equity.....................................      536,513       412,088
                                                                     ----------    ----------
                                                                     $1,045,603    $1,017,407
                                                                     ==========    ==========
</TABLE>

           See Notes to Condensed Consolidated Financial Statements.


                                      -3-
<PAGE>

                CRESTLINE CAPITAL CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             Twelve Weeks Ended March 23, 2001 and March 24, 2000
               (unaudited, in thousands, except per share data)

<TABLE>
<CAPTION>
                                                          2001        2000
                                                          ----        ----
<S>                                                    <C>        <C>
REVENUES
Hotels
 Rooms...............................................  $118,567   $  606,577
 Food and beverage...................................    13,486      264,582
 Other...............................................     8,960       69,879
                                                       --------   ----------
  Total hotel revenues...............................   141,013      941,038
                                                       --------   ----------
Senior living
 Routine.............................................    57,796       54,224
 Ancillary...........................................     5,051        5,556
                                                       --------   ----------
  Total senior living revenues.......................    62,847       59,780
                                                       --------   ----------
Other revenues.......................................         -        1,433
Equity in earnings of affiliates.....................       192          219
                                                       --------   ----------
 Total revenues......................................   204,052    1,002,470
                                                       --------   ----------
OPERATING COSTS AND EXPENSES
Hotels
 Property-level operating costs and expenses
  Rooms..............................................    25,389      141,939
  Food and beverage..................................    10,284      192,955
  Other..............................................    46,385      235,892
 Other operating costs and expenses
  Management fees....................................    11,943       60,346
  Lease expense......................................    39,253      292,076
  Depreciation and amortization......................     1,571        1,008
  Other..............................................       958          164
                                                       --------   ----------
   Total hotel operating costs and expenses..........   135,783      924,380
                                                       --------   ----------
Senior living
 Property-level operating costs and expenses
  Routine............................................    36,813       34,733
  Ancillary..........................................     2,855        3,334
 Other operating costs and expenses
  Depreciation and amortization......................     5,518        5,401
  Management fees....................................     4,057        3,666
  Property taxes and other...........................     1,953        2,177
                                                       --------   ----------
   Total senior living operating costs and expenses..    51,196       49,311
                                                       --------   ----------
Other operating costs and expenses...................        96        1,021
                                                       --------   ----------
  Total operating costs and expenses.................   187,075      974,712
                                                       --------   ----------
OPERATING PROFIT.....................................    16,977       27,758
Gain on sale of full-service hotel leases............   200,313            -
Minority interest expense............................         -         (275)
Corporate expenses...................................    (3,613)      (3,861)
Interest expense.....................................    (6,986)      (7,252)
Interest income......................................     3,021          612
                                                       --------   ----------
INCOME BEFORE INCOME TAXES...........................   209,712       16,982
Provision for income taxes...........................   (85,982)      (6,963)
                                                       --------   ----------
NET INCOME...........................................  $123,730   $   10,019
                                                       ========   ==========

BASIC EARNINGS PER COMMON SHARE......................  $   8.03   $      .59
                                                       ========   ==========

DILUTED EARNINGS PER COMMON SHARE....................  $   7.67   $      .57
                                                       ========   ==========
 </TABLE>

           See Notes to Condensed Consolidated Financial Statements.

                                      -4-
<PAGE>

                CRESTLINE CAPITAL CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
             Twelve weeks ended March 23, 2001 and March 24, 2000
                           (unaudited, in thousands)

<TABLE>
<CAPTION>
                                                                   2001       2000
                                                                   ----       ----
<S>                                                             <C>        <C>
OPERATING ACTIVITIES
Net income....................................................  $123,730   $ 10,019
Adjustments to reconcile net income to cash from operations:
  Depreciation and amortization...............................     7,243      6,600
  Amortization of debt premiums and deferred financing costs..       283       (119)
  Income taxes................................................    85,473      4,477
  Other.......................................................       483          7
  Change in other operating accounts..........................    (3,159)   (19,182)
                                                                --------   --------
Cash from operations..........................................   214,053      1,802
                                                                --------   --------
INVESTING ACTIVITIES
 Acquisitions.................................................   (16,308)   (14,120)
 Hotel lease security deposits................................    (8,346)         -
 Expansions of senior living communities......................         -     (3,204)
 Other capital expenditures...................................    (1,985)    (1,903)
 Dispositions.................................................         -      6,206
 Other........................................................      (804)    (3,318)
                                                                --------   --------
Cash used in investing activities.............................   (27,443)   (16,339)
                                                                --------   --------
FINANCING ACTIVITIES
 Repayments of debt...........................................      (988)    (1,282)
 Repurchases of common stock..................................       (96)    (5,963)
 Draws on credit facility.....................................         -     15,000
 Repayments on credit facility................................   (35,000)         -
 Other........................................................        96       (388)
                                                                --------   --------
Cash provided by (used in) financing activities...............   (35,988)     7,367
                                                                --------   --------
Increase (decrease) in cash and cash equivalents..............   150,622     (7,170)
Cash and cash equivalents, beginning of period................    35,534     36,774
                                                                --------   --------
Cash and cash equivalents, end of period......................  $186,156   $ 29,604
                                                                ========   ========
 </TABLE>



           See Notes to Condensed Consolidated Financial Statements.

                                      -5-
<PAGE>

                CRESTLINE CAPITAL CORPORATION AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

1. The accompanying condensed consolidated financial statements of Crestline
   Capital Corporation and subsidiaries (the "Company") have been prepared by
   the Company 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. The
   Company believes the disclosures made are adequate to make the information
   presented not misleading. However, the condensed consolidated financial
   statements should be read in conjunction with the consolidated financial
   statements and notes thereto included in the Company's Annual Report on Form
   10-K for the fiscal year ended December 29, 2000.

   In the opinion of the Company, the accompanying unaudited condensed
   consolidated financial statements reflect all adjustments (which include only
   normal and recurring adjustments) necessary to present fairly the financial
   position of the Company as of March 23, 2001 and the results of operations
   and cash flows for the twelve weeks ended March 23, 2001 and March 24, 2000.
   Interim results are not necessarily indicative of fiscal year performance
   because of the impact of seasonal and short-term variations.

   Approximately one-fourth of the Company's leased full-service hotels have
   managers that have a different accounting calendar from the Company. For
   these hotels, which record revenues on a monthly basis versus the four week
   period for the Company, the accompanying condensed consolidated financial
   statements reflect only two months of operations. The Company recorded three
   months of operations in each of the second and third quarters and four months
   of operations in the fourth quarter. All but one of the subsidiaries owning
   the leasehold interests in the full-service hotel leases were sold in the
   first quarter of 2001 with an effective date of January 1, 2001 (see Note 4).

2. Basic earnings per common share is computed by dividing net income by the
   weighted average number of shares of common stock outstanding. Diluted
   earnings per common share is computed by dividing net income by the weighted
   average number of shares of common stock outstanding plus other potentially
   dilutive securities.

   A reconciliation of the number of shares utilized for the calculation of
   diluted earnings per common share follows:

<TABLE>
<CAPTION>
                                                                 Twelve Weeks Ended
                                                                --------------------
                                                                March 23,  March 24,
                                                                  2001       2000
                                                                 ------     ------
                                                                  (in thousands)
<S>                                                           <C>        <C>
   Weighted average number of common shares outstanding.....     15,399     16,971
   Assuming distribution of common shares granted under
    the comprehensive stock plan, less shares assumed
    purchased at average market price.......................        724        481
                                                                 ------     ------
   Shares utilized for the calculation of diluted earnings
    per share...............................................     16,123     17,452
                                                                 ======     ======
</TABLE>

3. The Company currently operates in four business segments: hotel management,
   hotel ownership, limited-service leasing and senior living community
   ownership. The Company's managed hotels are upscale limited-service and full-
   service hotels operated under the Marriott, Hilton, Hyatt, Sheraton, Crowne
   Plaza, Renaissance, Courtyard by Marriott, Residence Inn, and Holiday Inn
   brand names. The Company's owned limited-service hotels are operated under
   the Residence Inn as well as Courtyard by Marriott brand names. The Company's
   leased limited-service hotels are operated under the Courtyard by Marriott,
   Residence Inn, TownePlace Suites by Marriott and SpringHill Suites by
   Marriott brands. The Company's senior living communities are operated under
   Marriott brands.

                                      -6-
<PAGE>

   The Company evaluates the performance of its segments based primarily on
   operating profit before depreciation, corporate expenses, and interest
   expense. The Company's income taxes are included in the consolidated Federal
   income tax return of the Company and its affiliates and are allocated based
   upon the relative contribution to the Company's consolidated taxable income
   or loss and changes in temporary differences. The allocation of income taxes
   is not evaluated at the segment level and, therefore, the Company does not
   believe the information is material to the condensed consolidated financial
   statements.

<TABLE>
<CAPTION>
                                                                  Twelve Weeks Ended March 23, 2001
                                 --------------------------------------------------------------------------------------------------
                                   Full-Service    Limited-Service      Hotel       Hotel       Senior    Corporate
                                  Hotel Leasing     Hotel Leasing     Ownership   Management    Living     & Other    Consolidated
                                 ----------------  ----------------  -----------  ----------  ----------  ----------  -------------
                                                                           (in thousands)
<S>                              <C>               <C>               <C>          <C>         <C>         <C>         <C>
Revenues.......................         $ 28,745           $92,469      $10,008       $9,791    $62,847     $   192     $  204,052
Operating profit...............              254             2,350        2,473          153     11,651          96         16,977
Interest income................            2,500                 9           80           29        224         179          3,021
Interest expense...............              (23)              (87)      (1,047)           -     (5,829)          -         (6,986)
Gain on sale and other.........          200,313                 -            -            -          -      (3,613)       196,700
Income (loss) before
 income taxes..................          203,044             2,272        1,506          182      6,046      (3,338)       209,712
Depreciation and amortization..                -                 6        1,110          455      5,518         154          7,243
</TABLE>

<TABLE>
<CAPTION>
                                                                 Twelve Weeks Ended March 24, 2001
                                 --------------------------------------------------------------------------------------------------
                                   Full-Service    Limited-Service      Hotel       Hotel       Senior    Corporate
                                  Hotel Leasing     Hotel Leasing     Ownership   Management    Living     & Other    Consolidated
                                 ----------------  ----------------  -----------  ----------  ----------  ----------  -------------
                                                                           (in thousands)
<S>                              <C>               <C>               <C>          <C>         <C>         <C>         <C>
Revenues.......................         $855,366           $68,779      $ 9,004       $7,889    $59,780     $ 1,652     $1,002,470
Operating profit...............           12,109             1,730        2,549          270     10,469         631         27,758
Interest income................              317                 2           68            -        119         106            612
Interest expense...............             (980)              (94)      (1,072)           -     (5,106)          -         (7,252)
Other..........................                -                 -         (275)           -          -      (3,861)        (4,136)
Income (loss) before
 income taxes..................           11,446             1,638        1,270          270      5,482      (3,124)        16,982
Depreciation and amortization..                -                 -          858          150      5,401         191          6,600
</TABLE>

4. On November 13, 2000, the Company entered into an agreement with a subsidiary
   of Host Marriott Corporation ("Host Marriott') for the purchase and sale of
   the Company's subsidiaries owning the leasehold interests in the full-service
   hotels leased from Host Marriott. The purchase and sale transaction generally
   transferred ownership of the Company's subsidiaries owning the full-service
   hotel leasehold interests to a subsidiary of Host Marriott for a total
   consideration of $205 million in cash. On January 10, 2001, upon the receipt
   of all required consents, the purchase and sale transaction was completed for
   $201 million, which reflects the deferral of the sale of one of the leases
   for $4 million. The Company recognized a pre-tax gain on the transaction of
   $200 million in the first quarter of 2001, net of transaction costs. The
   effective date of the transaction was January 1, 2001.

5. On March 23, 2001, the Company acquired the remaining 18% limited partnership
   interest in Marriott Residence Inn USA Limited Partnership ("Residence Inn
   USA") for $11.4 million. Residence Inn USA owns ten Residence Inn hotels that
   are managed by Marriott International, Inc. ("Marriott International") under
   a long-term management agreement. The purchase price of the limited
   partnership interests approximated fair value, and accordingly, no portion of
   the purchase price has been expensed.

                                      -7-
<PAGE>

                CRESTLINE CAPITAL CORPORATION AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

FORWARD-LOOKING STATEMENTS

     Certain matters discussed herein or delivered in connection with this Form
10-Q are forward-looking statements within the meaning of the Private Litigation
Reform Act of 1995. Certain, but not necessarily all, of such statements can be
identified by the use of forward-looking terminology, such as "believes,"
"expects," "may," "will," "should," "estimates" or "anticipates" or the negative
thereof or comparable terminology. All forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
transactions, results, performance or achievements of the Company to be
materially different from any future transactions, results, performance or
achievements expressed or implied by such forward-looking statements. These may
include: (i) national and local economic and business conditions or governmental
regulations that will affect demand, prices, wages or other costs for hotels and
senior living communities; (ii) the level of rates and occupancy that can be
achieved by such properties; (iii) the Company's ability to compete effectively
in areas such as access, location, quality of properties and rate structures;
(iv) the ability to maintain the properties in a first-class manner (including
meeting capital expenditure requirements); (v) the availability and terms of
financing; and (vi) changes to the public pay systems for medical care and the
need for compliance with environmental, licensure and safety requirements.
Although the Company believes the expectations reflected in such forward-looking
statements are based upon reasonable assumptions and business opportunities, it
can give no assurance that its expectations will be attained or that any
deviations will not be material. The Company 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

Revenues

     Hotel revenues represent property-level revenues from owned and leased
hotels, as well as managed hotels operated under lease agreements and management
fees from managed hotels operated under management agreements. Senior living
revenues represent property-level revenues. Overall revenues decreased by $798
million, or 80%, to over $204 million for the first quarter of 2001 from over
$1 billion for 2000. The significant decrease in revenues is attributable
primarily to the sale of all but one of the full-service hotel leases effective
January 1, 2001.

     Revenues by segment were as follows:

<TABLE>
<CAPTION>
                                       Twelve Weeks Ended
                                      ---------------------
                                       March 23,  March 24,
                                         2001        2000
                                      ---------  ----------
                                         (in thousands)
<S>                                   <C>        <C>
     Full-service hotel leasing.....   $ 28,745  $  855,366
     Limited-service hotel leasing..     92,469      68,779
     Hotel ownership................     10,008       9,004
     Hotel management...............      9,791       7,889
     Senior living..................     62,847      59,780
     Other..........................        192       1,652
                                       --------  ----------
                                       $204,052  $1,002,470
                                       ========  ==========
 </TABLE>

     Full-Service Hotel Leasing. Full-service hotel lease revenues were $28.7
million in the first quarter

                                      -8-
<PAGE>

of 2001 compared to $855 million in 2000. The significant decrease in revenues
is due to the sale of all but one of the full-service hotel leases in 2001 with
an effective date of January 1, 2001.

     Limited-Service Hotel Leasing. Leased limited-service hotel revenues
increased by $23.7 million, or 34%, to $92.5 million in 2001. The significant
increase in revenue is due primarily to the incremental revenues from the
addition of two limited-service hotel portfolios during the second half of 2000
and first quarter of 2001. Excluding the new limited-service hotel lease
portfolios, comparable limited-service hotel lease revenues increased $2.5
million, or 3.7%. REVPAR for the Company's subleased Courtyard by Marriott hotel
properties increased 6.0% due to an increase in average room rates of 7.3%,
partially offset by a decrease in average occupancy of almost one percentage
point. REVPAR for the Company's subleased Residence Inn properties increased
1.1% due to an increase in average room rates of 5.3%, partially offset by a
decrease in average occupancy of over three percentage points. The table below
sets forth certain information for the Company's leased limited-service hotels.


<TABLE>
<CAPTION>
                                                   Twelve Weeks Ended
                                                 ----------------------
                                                 March 23,   March 24,
                                                   2001        2000
                                                 ---------   ----------
<S>                                              <C>         <C>
Subleased Courtyard (53 Properties)
Room rate......................................    $104.34     $ 97.28
Room rate increase.............................        7.3%          -
Occupancy......................................       75.2%       76.1%
REVPAR.........................................    $ 78.47     $ 74.05
REVPAR increase................................        6.0%          -

Subleased Residence Inns (18 Properties)
Room rate......................................    $107.12     $101.77
Room rate increase.............................        5.3%          -
Occupancy......................................       78.2%       81.4%
REVPAR.........................................    $ 83.73     $ 82.84
REVPAR increase................................        1.1%          -

Leased Limited-Service Hotels (29 Properties)
Room rate......................................    $102.43           -
Occupancy......................................       71.4%          -
REVPAR.........................................    $ 73.13           -
</TABLE>

     Hotel Ownership. Revenue for the Company's owned hotels increased $1.0
million, or 11%, to $10.0 million in the first quarter of 2001. Excluding the
impact of one hotel sold in February 2000 and one hotel that opened in December
2000, comparable owned hotel revenues increased by 4.4%. The table below sets
forth certain information for the Company's owned hotels.

<TABLE>
<CAPTION>
                                                      Twelve Weeks Ended
                                                   ----------------------
                                                   March 23,   March 24,
                                                     2001      2000
                                                   ---------   ----------
<S>                                              <C>         <C>
Comparable Owned Residence Inns (10 Properties)
Room rate........................................    $108.18     $101.58
Room rate increase...............................        6.5%          -
Occupancy........................................       82.6%       83.9%
REVPAR...........................................    $ 89.38     $ 85.26
REVPAR increase..................................        4.8%          -
</TABLE>

   Hotel Management. Revenue for the Company's managed hotels increased $1.9
million, or 24%, to $9.8 million in the first quarter of 2001. The Company
entered into the hotel management business in March 2000 with the acquisition of
two hotel management portfolios. The significant increase in revenues is
attributable to the incremental impact of a full quarter of revenues from the
hotels in those two hotel management portfolios, as well as the net increase in
management contracts from the prior year. The table

                                      -9-
<PAGE>

below sets forth certain information for the Company's managed hotels. The
information includes periods prior to the Company's management and includes
comparable hotels that were open for both periods.

<TABLE>
<CAPTION>
                                                       Twelve Weeks Ended
                                                     ----------------------
                                                     March 23,   March 24,
                                                        2001      2000
                                                     ---------   ----------
<S>                                                  <C>         <C>
   Full-Service Hotels
   Room rate.......................................    $120.60     $118.52
   Occupancy.......................................       71.9%       67.8%
   REVPAR..........................................    $ 86.69     $ 80.33

   Limited-Service Hotels
   Room rate.......................................    $ 79.13     $ 77.57
   Occupancy.......................................       71.6%       75.3%
   REVPAR..........................................    $ 56.69     $ 58.39
</TABLE>

     Senior Living. Senior living community revenues increased by $3.1 million,
or 5.1%, to $62.8 million in the first quarter of 2001. The increase in revenues
is primarily due to the increase in the average daily rate. The average daily
rate increased 6.2% while average occupancy increased slightly. The table below
sets forth certain information for the Company's senior living communities.

<TABLE>
<CAPTION>
                                           Twelve Weeks Ended March 23, 2001
                                        -------------------------------------
                                        Units  Average Daily Rate  Occupancy
                                        -----  ------------------  ----------
<S>                                     <C>    <C>                 <C>
Independent Living....................  3,980         $ 86.20       93.5%
Assisted Living.......................  1,623           99.09       87.6
Special Care..........................    256          127.24       91.9
Healthcare............................  1,639          136.85       89.5
                                        -----         -------       ----
  Combined............................  7,497         $101.16       91.3%
                                        =====         =======       ====
</TABLE>

<TABLE>
<CAPTION>
                                           Twelve Weeks Ended March 24, 2001
                                        -------------------------------------
                                        Units  Average Daily Rate  Occupancy
                                        -----  ------------------  ----------
<S>                                     <C>    <C>                 <C>
Independent Living....................  3,980         $ 82.31       94.6%
Assisted Living.......................  1,623           92.86       85.4
Special Care..........................    256          124.43       76.8
Healthcare............................  1,638          126.68       89.5
                                        -----         -------       ----
 Combined.............................  7,497         $ 95.21       90.9%
                                        =====         =======       ====
</TABLE>

     Other. Other revenues totaled $192,000 in the first quarter of 2001
compared to $1.7 million in the first quarter of 2000. Other revenues in the
first quarter of 2000 consisted primarily of fees earned from Host Marriott for
the Company's full-service hotel asset management group. The Company terminated
its asset management agreement in connection with the sale of the full-service
hotel leases in 2001.

Operating Profit

     The Company's total operating profit decreased $10.8 million, or 39%, to
$17.0 million for the first quarter of 2001. The significant decrease in
operating profit is due primarily to the sale of all but one of the full-service
hotel leases in 2001. Excluding the operating profit from the full-service hotel
leases, operating profit increased 6.9% over the prior year.

     Operating profit by segment was as follows:


                                      -10-
<PAGE>

<TABLE>
<CAPTION>

                                                       Twelve Weeks Ended
                                                       ---------------------
                                                          2001       2000
                                                       ---------  ----------
                                                       March 23,   March 24,
                                                          (in thousands)
<S>                                                    <C>        <C>
     Full-service hotel leasing....................    $   254    $12,109
     Limited-service hotel leasing.................      2,350      1,730
     Hotel ownership...............................      2,473      2,549
     Hotel management..............................        153        270
     Senior living.................................     11,651     10,469
     Other.........................................         96        631
                                                       -------    -------
                                                       $16,977    $27,758
                                                       =======    =======
</TABLE>

     Full-Service Hotel Leasing. Operating profit for the Company's full-service
hotel leases was $254,000 in the first quarter of 2001 compared to $12.1 million
in the prior year. The significant decrease in operating profit is due to the
sale of all but one of the full-service hotel leases in the first quarter of
2001 with an effective date of January 1, 2001.

     Limited-Service Hotel Leasing. Operating profit for the Company's limited-
service hotel leases increased by $620,000, or 36%, to $2.4 million in the first
quarter of 2001. The significant increase in operating profit is attributable to
the acquisition of two limited-service hotel lease portfolios in the second half
of 2000 and the first quarter of 2001. Excluding the impact of the two new
limited-service hotel lease portfolios, comparable operating profit increased by
13%.

     Hotel Ownership. Operating profit for the Company's owned hotels decreased
by $76,000, or 3.0%, to $2.5 million in the first quarter of 2001. Comparable
operating profit remained unchanged from the prior year.

     Hotel Management. Operating profit for the Company's managed hotels
decreased by $117,000 to $153,000 in the first quarter of 2001. The operating
results for the Company's hotel management business were impacted by the timing
of the revenue recognition of certain base and incentive management revenue and
the amortization expense of the acquisition cost of the management business. The
Company recognizes management fee revenue in accordance with Staff Accounting
Bulletin ("SAB") No. 101 which provides that contingent revenue should be
recorded in the period in which the contingency is resolved. For certain of the
Company's management contracts, certain management fees are earned after
specified thresholds for annual operating profit have been attained. The Company
recognizes management fee revenue for those contracts when those thresholds are
achieved which usually occurs in the fourth quarter. If the Company were to
accrue these contingent revenues, the Company would have recorded an additional
$266,000 and $67,000 of fee revenue in the first quarter of 2001 and 2000,
respectively. SAB No. 101 does not have an impact on the full year operating
profit. In addition, the Company recorded amortization expense of $455,000 and
$150,000 in the first quarter 2001 and 2000, respectively, representing the
amortization of the acquisition cost of the hotel management contracts and
leases.

     Senior Living. Senior living community operating profit increased $1.2
million, or 11%, to $11.7 million in the first quarter of 2001. The significant
increase in operating profit is due primarily to cost controls implemented by
the Company's operator resulting in an increase in property-level profit margins
of almost one percentage point.

     Other. Other operating profit was $96,000 in the first quarter of 2001
compared to $631,000 in the first quarter of 2000. The significant decrease from
the prior year is attributable to the full-service hotel asset management
contract with Host Marriott that was terminated in connection with the sale of
the full-service hotel leases in 2001.

Gain on Sale of Full-Service Hotel Leases

                                      -11-
<PAGE>

     On January 10, 2001, the Company completed a purchase and sale transaction
with Host Marriott whereby all but one of the Company's subsidiaries owning the
full-service hotel leasehold interests were transferred to Host Marriott for
cash consideration totaling $201 million. The effective date of the transaction
was January 1, 2001. The Company recorded a gain on the transaction of $200
million, net of transaction costs.

Minority Interest

     For the first quarter of 2001, there was no minority interest expense
compared to $275,000 in 2000. As a result of the acquisition of the remaining
minority interest in our portfolio of 10 owned Residence Inns in the first
quarter of 2001, the Company did not recognize any minority interest expense in
first quarter of 2001.

Corporate Expenses

     Corporate expenses decreased $248,000 to $3.6 million for the first quarter
of 2001.

     In the second quarter of 2001, the Company restructured its corporate
office administration as a result of the sale of the full-service hotel leases
in the first quarter of 2001. As a result, the Company recorded a corporate
restructuring charge in the second quarter of 2001 for the severance of 17
corporate employees of approximately $6.1 million, including a $3.6 million
non-cash charge for the acceleration of the vesting of stock options and stock
awards. The Company expects an annual reduction in expenses of approximately
$3 million due to the corporate restructuring.

Interest Expense

     Interest expense decreased $266,000 in the first quarter of 2001. The
decrease in interest expense is due to the repayment of the full-service hotel
working capital notes and the Company's line of credit, partially offset by
additional mortgage debt obtained in the third quarter of 2000 on certain senior
living communities. Interest expense includes $110,000 and $1.1 million in the
first quarter of 2001 and 2000, respectively, related to interest on the hotel
working capital notes payable to Host Marriott.

Interest Income

     Interest income increased $2.4 million to $3.0 million for the first
quarter of 2001. The significant increase in interest income is due primarily to
the additional interest earned on the cash proceeds from the sale of all but one
of the full-service hotel leases on January 10, 2001 for $200 million, net of
transaction costs.

Net Income

     Net income for the first quarter of 2001 was $123.7 million, or $7.67 per
diluted share, compared to $10.0 million, or $.57 per diluted share, for the
first quarter of 2000. The significant increase in diluted earnings per share in
the first quarter of 2000 was due primarily to the gain on the sale of the full-
service hotel leases discussed above, as well as a reduction of the Company's
common stock outstanding due to the stock repurchases during 2000. The diluted
earnings per common share for the first quarter of 2001 excluding the gain on
the sale of the full-service hotel leases, net of taxes, was $.34.

                                      -12-
<PAGE>

EBITDA

     The Company's earnings before interest expense, taxes, depreciation and
amortization and other non-cash items ("EBITDA") decreased $6.1 million, or 20%,
to $23.7 million in the first quarter of 2001 as compared to the first quarter
of 2000. The decrease in EBITDA from the prior year is attributable primarily
due to the decrease in full-service hotel lease EBITDA due to the sale of the
full-service hotel leases in 2001, partially offset by the incremental EBITDA
from the new limited-service hotel leases and owned hotels, growth in senior
living operating profit and interest income earned on the full-service hotel
lease sale proceeds.

     The following is an EBITDA summary by segment and a reconciliation of
EBITDA to the Company's net income:

<TABLE>
<CAPTION>
                                                               Twelve Weeks Ended
                                                             ----------------------
                                                             March 23,   March 24,
                                                                2001        2000
                                                              --------     -------
                                                                (in thousands)
     <S>                                                      <C>         <C>
     Full-service hotel leases.............................   $    230     $11,127
     Limited-service hotel leases..........................      2,269       1,636
     Hotel ownership, net of minority owned distributions..      3,551       3,056
     Hotel management......................................        682         420
     Senior living.........................................     17,184      15,870
     Corporate and other, net of interest income...........       (239)     (2,342)
                                                              --------     -------
       EBITDA..............................................   $ 23,677     $29,767
                                                              ========     =======

     Pro forma EBITDA as adjusted for the sale of the
       full-service hotel leases /(1)/.....................   $ 20,947     $18,640
                                                              ========     =======

     EBITDA................................................   $ 23,677     $29,767
     Interest expense......................................     (6,986)     (7,252)
     Hotel working capital note interest expense...........        110       1,074
     Depreciation and amortization.........................     (7,243)     (6,600)
     Income taxes..........................................    (85,982)     (6,963)
     Gain on sale of full-service hotel leases.............    200,313           -
     Other non-cash charges, net...........................       (159)         (7)
                                                              --------     -------
       Net income..........................................   $123,730     $10,019
                                                              ========     =======
</TABLE>

________________
(1) Pro forma EBITDA excludes full-service lease EBITDA for 2001 and 2000, as
    well as 2001 interest income of approximately $2,500,000 earned on the lease
    sale proceeds. Approximately $30 million of the lease sale proceeds were
    utilized to repay the Company's line of credit in the first quarter of 2001.

     The Company's interest coverage was 3.5 times for the first quarter of
2001compared to 4.7 times for the first quarter of 2000. Interest coverage is
calculated as EBITDA divided by cash interest expense, which is defined as GAAP
interest expense less amortization of deferred financing costs, amortization of
debt premiums and the interest on the hotel working capital notes. The ratio of
earnings to fixed charges was 5.8 to 1.0 for the first quarter of 2001 and 1.1
to 1.0 for the first quarter of 2000.

     EBITDA data is presented because such data is used by certain investors to
determine the Company's ability to meet debt service requirements and is used in
the Company's line of credit as part of the tests determining its ability to
incur debt and meet certain covenants. The Company considers EBITDA to be an
indicative measure of the Company's operating performance due to the
significance of the Company's long-lived assets and because EBITDA can be used
to measure the Company's ability to service debt, fund capital expenditures and
expand its business; however, such information should not be considered as an
alternative to net income, operating profit, cash flows from operations, or any
other operating or liquidity performance

                                      -13-
<PAGE>

measure prescribed by GAAP. In addition, EBITDA as calculated by the Company may
not be comparable to similarly titled measures reported by other companies. Cash
expenditures for various long-term assets, interest expense and income taxes
have been, and will be, incurred which are not reflected in the EBITDA
presentation.

CASH FLOWS AND FINANCIAL CONDITION

     The Company's principal sources of liquidity are cash on hand, cash flow
from operations and borrowings under the Company's line of credit. As of March
23, 2001, the Company had cash and cash equivalents of $186 million and
restricted cash of $10.3 million, which is included in other assets in the
accompanying condensed consolidated financial statements. The Company's
restricted cash consists of funds transferred into segregated escrow accounts
for (i) debt service, fixed asset, real estate tax and insurance reserves
pursuant to the Company's secured debt agreements for certain of the senior
living communities and owned hotels, and (ii) fixed asset reserves pursuant to
the Company's senior living and owned hotel management agreements. As of March
23, 2001, there were no amounts outstanding under the Company's $100 million
line of credit.

     Cash Flows. Cash from operations was $214 million for the first quarter of
2001 compared to $1.8 million for the first quarter of 2000. The cash from
operations consists primarily of the cash from the proceeds from the sale of all
but one of the full-service hotel leases, as well as cash flow generated by the
Company's business segments. Cash used in investing activities was $27.4 million
in the first quarter of 2001. The cash used in investing activities principally
consists of the acquisition of the remaining minority interests in a portfolio
of hotels, funding lease deposits and capital expenditures for renewals and
replacements and expansions for the Company's owned hotels and senior living
communities. Cash used in financing activities was $36.0 million for the first
quarter of 2001. The Company's cash used in financing activities consists
primarily of repayments of the Company's line of credit and debt principal
repayments.

     Operating Activities. On November 13, 2000, the Company entered into an
agreement with a subsidiary of Host Marriott for the purchase and sale of the
Company's subsidiaries owning the leasehold interests in the full-service hotels
leased from Host Marriott. The purchase and sale transaction generally
transferred ownership of the Company's subsidiaries owning the full-service
hotel leasehold interests to a subsidiary of Host Marriott for a total
consideration of $205 million in cash. On January 10, 2001, upon the receipt of
all required consents, the purchase and sale transaction was completed for $201
million, which reflects the deferral of the sale of one of the leases for $4
million. The Company recognized a pre-tax gain on the transaction of $200
million in the first quarter of 2001, net of transaction costs. The effective
date of the transaction was January 1, 2001.

     Investing Activities. On March 23, 2001, the Company acquired the remaining
18% limited partnership interest in Marriott Residence Inn USA Limited
Partnership ("Residence Inn USA") for $11.4 million. Residence Inn USA owns ten
Residence Inn hotels that are managed by Marriott International under a long-
term management agreement. The purchase price of the limited partnership
interests approximated fair value, and accordingly, no portion of the purchase
price has been expensed.

     In 2000, the Company entered into separate long-term lease agreements with
Hospitality Properties Trust to lease 19 limited-service hotels and CNL
Hospitality Corporation to lease nine limited-service hotels. All of the hotels
are managed by Marriott International under long-term management agreements with
the Company. As of December 29, 2000, six of the hotels were under construction
and opened in the first quarter of 2001. Under the terms of the lease
agreements, the Company made $8.3 million in security deposits in the first
quarter of 2001.

     In the first quarter of 2001, the Company entered into a joint venture
agreement to develop and own a Staybridge Suites by Holiday Inn in Stratford,
Connecticut. The Company's total equity contribution is

                                      -14-
<PAGE>

expected to be approximately $3 million for a 51% interest in the joint venture.
The hotel is expected to open in the fourth quarter of 2001, and the Company
will manage the hotel under a long-term management agreement.

     Also in the first quarter of 2001, the Company purchased a hotel in
downtown Birmingham, Alabama for $3.2 million. The Company will renovate the
hotel and convert it into a Courtyard by Marriott. The total cost of the project
including the initial purchase price is expected to be approximately $15.6
million. The hotel is expected to reopen in the second quarter of 2002.

     Financing Activities. During the first quarter of 2001, the Company repaid
its outstanding balance under its line of credit totaling $35 million with the
proceeds from the sale of its full-service hotel leases, as well as operating
cash flow.

                                      -15-
<PAGE>

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

     The Company does not have significant market risk with respect to foreign
currency exchanges or other market rate or price risks, and the Company does not
hold any financial instruments for trading purposes. However, the Company does
have certain debt obligations that are sensitive to changes in interest rates.
The interest rates, fair values and future maturities associated with these
financial instruments have not changed materially from the amounts reported in
the Company's annual report on Form 10-K for the fiscal year ended December 29,
2000.

                                      -16-
<PAGE>

                          PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is from time to time the subject of, or involved in, judicial
proceedings. Management believes that any liability or loss resulting from such
matters will not have a material adverse effect on the financial position or
results of operations of the Company.


Item 2.   Changes in Securities and Use of Proceeds

     None.


Item 3.   Defaults Upon Senior Securities

     None.


Item 4.  Submission of Matters to a Vote of Security Holders

     None.


Item 5.  Other Information

     None.


Item 6.  Exhibits and Reports on Form 8-K

a.   Exhibits:

     None.

b.   Reports on Form 8-K:

     None.

                                      -17-
<PAGE>

                                   SIGNATURE

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



                                           CRESTLINE CAPITAL CORPORATION

May 7, 2001                                By: /s/ Larry K. Harvey
-----------                                    -------------------------
Date                                           Larry K. Harvey
                                               Senior Vice President, Treasurer
                                               and Controller (Chief Accounting
                                               Officer)

                                      -18-