##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE
ACT OF 1934



For the quarterly period ended
September 30, 2005



Commission file number:
001-32279



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EAGLE HOSPITALITY PROPERTIES TRUST, INC.

(Exact name of registrant specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Maryland                                                       |  | 55-0862656                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)



100 E. RiverCenter
Blvd., Suite 480, Covington, KY

(Address of principal executive office)



41011

(Zip Code)



(859) 581-5900

(Registrants telephone number, including area code)



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Securities registered pursuant to Section 12(b) of the Act:



|                                                                      |  |                                   
|--------------------------------------------------------------------- |  | ----------------------------------
|Title of Each Class                                                   |  | Outstanding as of November 4, 2005
|Common stock, $.01 par value                                          |  | 17,363,605                        
|                                                                      | 
|81/4% Series A Cumulative Redeemable Preferred Shares, $.01 par value |  | 4,000,000                         



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈



Indicate by check mark whether the Registrant is an accelerated filer (as
defined in rule 12b-2 of the Securities Exchange Act).    Yes ̈No  x



Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes ̈No  x



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##### Table of Contents

EAGLE HOSPITALITY PROPERTIES TRUST, INC.



QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 2005



TABLE OF CONTENTS



|                                                                                                                      |  |     
|--------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                      |  | Page
|PART I                                                                                                                |  |     
|                                                                                                                      | 
|ITEM 1. Financial Statements                                                                                          |  |     
|                                                                                                                      | 
|Consolidated Balance Sheets as of September 30, 2005 (unaudited) and December 31, 2004                                |  | 3   
|                                                                                                                      | 
|Consolidated and Combined Statements of Operations for the Three Months Ended September 30, 2005 and 2004 (unaudited) |  | 4   
|                                                                                                                      | 
|Consolidated and Combined Statements of Operations for the Nine Months Ended September 30, 2005 and 2004 (unaudited)  |  | 5   
|                                                                                                                      | 
|Consolidated Statement of Owners Equity for the Nine Months Ended September 30, 2005 (unaudited).                    |  | 6   
|                                                                                                                      | 
|Consolidated and Combined Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004 (unaudited)  |  | 7   
|                                                                                                                      | 
|Notes to Consolidated and Combined Financial Statements                                                               |  | 8   
|                                                                                                                      | 
|ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                         |  | 16  
|                                                                                                                      | 
|ITEM 3. Quantitative and Qualitative Disclosures About Market Risk                                                    |  | 28  
|                                                                                                                      | 
|ITEM 4. Controls and Procedures                                                                                       |  | 28  
|                                                                                                                      | 
|PART II                                                                                                               |  |     
|                                                                                                                      | 
|ITEM 1. Legal Proceedings                                                                                             |  | 28  
|                                                                                                                      | 
|ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                   |  | 28  
|                                                                                                                      | 
|ITEM 3. Defaults Upon Senior Securities                                                                               |  | 28  
|                                                                                                                      | 
|ITEM 4. Submission of Matters to a Vote of Security Holders                                                           |  | 28  
|                                                                                                                      | 
|ITEM 5. Other Information                                                                                             |  | 28  
|                                                                                                                      | 
|ITEM 6. Exhibits                                                                                                      |  | 29  
|                                                                                                                      | 
|SIGNATURES                                                                                                            |  | 30  



2



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##### Table of Contents

PART I

Item 1. Financial Statements.



EAGLE HOSPITALITY PROPERTIES TRUST, INC.



CONSOLIDATED BALANCE SHEETS



AS OF SEPTEMBER
30, 2005 AND DECEMBER 31, 2004



($000s omitted)



|                                                                                                                                                                                |  |                              |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                |  | (Unaudited)September 30,2005 |         |   | December 31,2004 |  
|ASSETS                                                                                                                                                                          |  |                              |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                       |  | $                            | 13,499  |   |                  | $ | 15,661  |  
|Restricted cash - real estate escrows                                                                                                                                           |  |                              | 2,922   |   |                  |   | 1,536   |  
|Restricted replacement reserves                                                                                                                                                 |  |                              | 5,787   |   |                  |   | 8,704   |  
|Accounts receivable, net                                                                                                                                                        |  |                              | 5,843   |   |                  |   | 2,437   |  
|Inventories                                                                                                                                                                     |  |                              | 644     |   |                  |   | 454     |  
|Deferred income taxes                                                                                                                                                           |  |                              | 2,611   |   |                  |   |        |  
|Deferred franchise fees and loan fees, net                                                                                                                                      |  |                              | 2,650   |   |                  |   | 505     |  
|Prepaid expenses and other assets                                                                                                                                               |  |                              | 621     |   |                  |   | 2,848   |  
|Investment in hotel properties, net                                                                                                                                             |  |                              | 394,074 |   |                  |   | 220,239 |  
|                                                                                                                                                                                |  |                              |         |   |                  |   |         |  
|Total assets                                                                                                                                                                    |  | $                            | 428,651 |   |                  | $ | 252,384 |  
|                                                                                                                                                                                |  |                              |         |   |                  |   |         |  
|LIABILITIES AND OWNERS EQUITY                                                                                                                                                  |  |                              |         |   |                  |   |         |  
|LIABILITIES:                                                                                                                                                                    |  |                              |         |   |                  |   |         |  
|Mortgage notes payable                                                                                                                                                          |  | $                            | 210,895 |   |                  | $ | 107,316 |  
|Other long term debt                                                                                                                                                            |  |                              | 43      |   |                  |   | 58      |  
|Related party debt                                                                                                                                                              |  |                              |        |   |                  |   | 23,391  |  
|Capital lease obligations                                                                                                                                                       |  |                              | 134     |   |                  |   | 30      |  
|Accounts payable                                                                                                                                                                |  |                              | 1,986   |   |                  |   | 1,564   |  
|Due to affiliates                                                                                                                                                               |  |                              | 551     |   |                  |   | 1,088   |  
|Dividends and distributions payable                                                                                                                                             |  |                              | 4,088   |   |                  |   |        |  
|Accrued expenses                                                                                                                                                                |  |                              | 9,676   |   |                  |   | 4,269   |  
|Advance deposits                                                                                                                                                                |  |                              | 1,984   |   |                  |   | 476     |  
|                                                                                                                                                                                |  |                              |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                               |  | $                            | 229,357 |   |                  | $ | 138,192 |  
|                                                                                                                                                                                |  |                              |         |   |                  |   |         |  
|Minority interest                                                                                                                                                               |  |                              | 13,751  |   |                  |   | 17,035  |  
|                                                                                                                                                                                |  |                             
|OWNERS EQUITY                                                                                                                                                                  |  |                              |         |   |                  |   |         |  
|Preferred stock, $0.01 par value, 10,000,000 shares authorized, 8.25% Series A - 4,000,000 issued and outstanding at September 30, 2005
and none at December 31, 2004           |  | $                            | 40      |   |                  | $ |        |  
|Common stock, $0.01 par value, 100,000,000 shares authorized, 17,361,540 and 17,358,573 shares issued and outstanding at September 30,
2005 and December 31, 2004, respectively |  |                              | 174     |   |                  |   | 174     |  
|Additional paid-in capital                                                                                                                                                      |  |                              | 196,377 |   |                  |   | 100,487 |  
|Accumulated other comprehensive income                                                                                                                                          |  |                              | 15      |   |                  |   | 22      |  
|Deferred compensation                                                                                                                                                           |  |                              | (1,650  | ) |                  |   | (3,623  | )
|(Dividends in excess of accumulated earnings) retained earnings                                                                                                                 |  |                              | (9,413  | ) |                  |   | 97      |  
|                                                                                                                                                                                |  |                              |         |   |                  |   |         |  
|Total owners equity                                                                                                                                                            |  | $                            | 185,543 |   |                  | $ | 97,157  |  
|                                                                                                                                                                                |  |                              |         |   |                  |   |         |  
|Total liabilities and owners equity                                                                                                                                            |  | $                            | 428,651 |   |                  | $ | 252,384 |  
|                                                                                                                                                                                |  |                              |         |   |                  |   |         |  



See notes to
consolidated and combined financial statements



3



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##### Table of Contents

EAGLE HOSPITALITY PROPERTIES TRUST, INC. AND PREDECESSOR



CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS



FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004



(unaudited, 000s omitted, except per share amounts)



|                                                               |  |                 |        |   |                     |   |        |  
|-------------------------------------------------------------- |  | --------------- | ------ | - | ------------------- | - | ------ | -
|                                                               |  | The Company2005 |        |   | The Predecessor2004 |  
|Revenues:                                                      |  |                 |        |   |                     |   |        |  
|Rooms department                                               |  | $               | 23,015 |   |                     | $ | 16,554 |  
|Food and beverage department                                   |  |                 | 7,529  |   |                     |   | 4,646  |  
|Lease income                                                   |  |                 | 1,350  |   |                     |   |       |  
|Other operating departments                                    |  |                 | 1,312  |   |                     |   | 806    |  
|                                                               |  |                 |        |   |                     |   |        |  
|Total revenue                                                  |  |                 | 33,206 |   |                     |   | 22,006 |  
|Expenses:                                                      |  |                 |        |   |                     |   |        |  
|Rooms department                                               |  |                 | 5,598  |   |                     |   | 4,026  |  
|Food and beverage department                                   |  |                 | 5,122  |   |                     |   | 3,211  |  
|Other operating departments                                    |  |                 | 760    |   |                     |   | 467    |  
|Selling, general and administrative expense                    |  |                 | 10,710 |   |                     |   | 8,161  |  
|Depreciation and amortization                                  |  |                 | 4,414  |   |                     |   | 2,166  |  
|Corporate general and administrative                           |  |                 | 1,323  |   |                     |   |       |  
|Stock-based compensation                                       |  |                 | 678    |   |                     |   |       |  
|                                                               |  |                 |        |   |                     |   |        |  
|Total operating expenses                                       |  |                 | 28,605 |   |                     |   | 18,031 |  
|                                                               |  |                 |        |   |                     |   |        |  
|Net Operating Income                                           |  |                 | 4,601  |   |                     |   | 3,975  |  
|                                                               |  |                 |        |   |                     |   |        |  
|Interest expense                                               |  |                 | (3,151 | ) |                     |   | (2,971 | )
|Interest income                                                |  |                 | 129    |   |                     |   | 41     |  
|Other income (expense) - net                                   |  |                 | 64     |   |                     |   | (59    | )
|                                                               |  |                 |        |   |                     |   |        |  
|Income before minority interest and provision for income taxes |  |                 | 1,643  |   |                     |   | 986    |  
|                                                               |  |                 |        |   |                     |   |        |  
|Income tax benefit                                             |  |                 | 723    |   |                     |   |       |  
|Minority interest expense                                      |  |                 | (77    | ) |                     |   |       |  
|                                                               |  |                 |        |   |                     |   |        |  
|Net income                                                     |  | $               | 2,289  |   |                     | $ | 986    |  
|Distributions to preferred shareholders                        |  |                 | (2,062 | ) |                     |   |       |  
|                                                               |  |                 |        |   |                     |   |        |  
|Net income available to common shareholders                    |  | $               | 227    |   |                     | $ | 986    |  
|Unrealized gain on marketable securities                       |  |                 | 8      |   |                     |   | 79     |  
|Effect of interest rate swap                                   |  |                 |       |   |                     |   | 180    |  
|                                                               |  |                 |        |   |                     |   |        |  
|COMPREHENSIVE INCOME                                           |  | $               | 235    |   |                     | $ | 1,245  |  
|                                                               |  |                 |        |   |                     |   |        |  
|Basic income per share                                         |  | $               | 0.01   |   |                     |   |        |  
|Diluted income per share                                       |  | $               | 0.01   |   |                     |   |        |  
|Weighted average basic shares outstanding                      |  |                 | 17,170 |   |                     |   |        |  
|Weighted average diluted shares outstanding                    |  |                 | 23,167 |   |                     |   |        |  



See notes to
consolidated and combined financial statements



4



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##### Table of Contents

EAGLE HOSPITALITY PROPERTIES TRUST, INC. AND PREDECESSOR



CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS



FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004



(unaudited, 000s omitted, except per share amounts)



|                                                               |  |                 |        |   |                     |   |        |  
|-------------------------------------------------------------- |  | --------------- | ------ | - | ------------------- | - | ------ | -
|                                                               |  | The Company2005 |        |   | The Predecessor2004 |  
|Revenues:                                                      |  |                 |        |   |                     |   |        |  
|Rooms department                                               |  | $               | 59,013 |   |                     | $ | 44,336 |  
|Food and beverage department                                   |  |                 | 20,005 |   |                     |   | 14,378 |  
|Lease income                                                   |  |                 | 1,395  |   |                     |   |       |  
|Other operating departments                                    |  |                 | 3,264  |   |                     |   | 2,359  |  
|                                                               |  |                 |        |   |                     |   |        |  
|Total revenue                                                  |  |                 | 83,677 |   |                     |   | 61,073 |  
|Expenses:                                                      |  |                 |        |   |                     |   |        |  
|Rooms department                                               |  |                 | 14,479 |   |                     |   | 10,854 |  
|Food and beverage department                                   |  |                 | 12,892 |   |                     |   | 9,343  |  
|Other operating departments                                    |  |                 | 1,833  |   |                     |   | 1,345  |  
|Selling, general and administrative expense                    |  |                 | 27,576 |   |                     |   | 21,767 |  
|Depreciation and amortization                                  |  |                 | 10,166 |   |                     |   | 6,550  |  
|Corporate general and administrative                           |  |                 | 3,692  |   |                     |   |       |  
|Stock-based compensation                                       |  |                 | 2,013  |   |                     |   |       |  
|                                                               |  |                 |        |   |                     |   |        |  
|Total operating expenses                                       |  |                 | 72,651 |   |                     |   | 49,859 |  
|                                                               |  |                 |        |   |                     |   |        |  
|Net Operating Income                                           |  |                 | 11,026 |   |                     |   | 11,214 |  
|                                                               |  |                 |        |   |                     |   |        |  
|Interest expense                                               |  |                 | (7,628 | ) |                     |   | (8,753 | )
|Interest income                                                |  |                 | 393    |   |                     |   | 123    |  
|Other income (expense) - net                                   |  |                 | 22     |   |                     |   | (44    | )
|                                                               |  |                 |        |   |                     |   |        |  
|Income before minority interest and provision for income taxes |  |                 | 3,813  |   |                     |   | 2,540  |  
|                                                               |  |                 |        |   |                     |   |        |  
|Income tax benefit                                             |  |                 | 2,213  |   |                     |   |       |  
|Minority interest expense                                      |  |                 | (911   | ) |                     |   |        |  
|                                                               |  |                 |        |   |                     |   |        |  
|Net income                                                     |  | $               | 5,115  |   |                     | $ | 2,540  |  
|Distributions to preferred shareholders                        |  |                 | (2,475 | ) |                     |   |       |  
|                                                               |  |                 |        |   |                     |   |        |  
|Net income available to common shareholders                    |  | $               | 2,640  |   |                     | $ | 2,540  |  
|Unrealized loss on marketable securities                       |  |                 | (7     | ) |                     |   |       |  
|Effect of interest rate swap                                   |  |                 |       |   |                     |   | 716    |  
|                                                               |  |                 |        |   |                     |   |        |  
|COMPREHENSIVE INCOME                                           |  | $               | 2,633  |   |                     | $ | 3,256  |  
|                                                               |  |                 |        |   |                     |   |        |  
|Basic income per share                                         |  | $               | 0.15   |   |                     |   |        |  
|Diluted income per share                                       |  | $               | 0.15   |   |                     |   |        |  
|Weighted average basic shares outstanding                      |  |                 | 17,102 |   |                     |   |        |  
|Weighted average diluted shares outstanding                    |  |                 | 23,096 |   |                     |   |        |  



See notes to
consolidated and combined financial statements



5



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##### Table of Contents

EAGLE HOSPITALITY PROPERTIES TRUST, INC.



CONSOLIDATED STATEMENT OF OWNERS EQUITY



FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005



(unaudited, $000s omitted)



|                                            |  |                |    |             |   |                           |  |   |                      |   |  |                                          |        |   |                                           |   |    |       |  |   |        |   |  |   |         |  
|------------------------------------------- |  | -------------- | -- | ----------- | - | ------------------------- |  | - | -------------------- | - |  | ---------------------------------------- | ------ | - | ----------------------------------------- | - | -- | ----- |  | - | ------ | - |  | - | ------- | -
|                                            |  | PreferredStock |    | CommonStock |   | AdditionalPaid-In Capital |  |   | DeferredCompensation |   |  | AccumulatedOtherComprehensiveGain/(Loss) |        |   | Dividends in Excessof AccumulatedEarnings |   |    | Total | 
|Balance at December 31, 2004                |  | $              |   |             | $ | 174                       |  | $ | 100,487              |   |  | $                                        | (3,623 | ) |                                           | $ | 22 |       |  | $ | 97     |   |  | $ | 97,157  |  
|Issuance of preferred shares                |  |                | 40 |             |   |                          |  |   | 96,417               |   |  |                                          |       |   |                                           |   |   |       |  |   |       |   |  |   | 96,457  |  
|Common dividends paid, $0.525 per share     |  |                |   |             |   |                          |  |   |                     |   |  |                                          |       |   |                                           |   |   |       |  |   | (9,111 | ) |  |   | (9,111  | )
|Common dividends declared, $0.175 per share |  |                |    |             |   |                           |  |   |                      |   |  |                                          |        |   |                                           |   |    |       |  |   | (3,039 | ) |  |   | (3,039  | )
|Preferred dividends paid, $0.619 per share  |  |                |    |             |   |                           |  |   |                      |   |  |                                          |        |   |                                           |   |    |       |  |   | (2,475 | ) |  |   | (2,475  | )
|Issuance of restricted shares               |  |                |   |             |   |                          |  |   | 40                   |   |  |                                          | (40    | ) |                                           |   |   |       |  |   |       |   |  |   |        |  
|Amortization of deferred compensation       |  |                |   |             |   |                          |  |   |                     |   |  |                                          | 2,013  |   |                                           |   |   |       |  |   |       |   |  |   | 2,013   |  
|Adjustment to opening balance sheet         |  |                |   |             |   |                          |  |   | (567                 | ) |  |                                          |       |   |                                           |   |   |       |  |   |       |   |  |   | (567    | )
|Unrealized loss on investments              |  |                |   |             |   |                          |  |   |                     |   |  |                                          |       |   |                                           |   | (7 | )     |  |   |       |   |  |   | (7      | )
|Net income                                  |  |                |   |             |   |                          |  |   |                     |   |  |                                          |       |   |                                           |   |   |       |  |   | 5,115  |   |  |   | 5,115   |  
|                                            |  |                |    |             |   |                           |  |   |                      |   |  |                                          |        |   |                                           |   |    |       |  |   |        |   |  |   |         |  
|Balance at September 30, 2005               |  | $              | 40 |             | $ | 174                       |  | $ | 196,377              |   |  | $                                        | (1,650 | ) |                                           | $ | 15 |       |  | $ | (9,413 | ) |  | $ | 185,543 |  
|                                            |  |                |    |             |   |                           |  |   |                      |   |  |                                          |        |   |                                           |   |    |       |  |   |        |   |  |   |         |  



See notes to
consolidated and combined financial statements



6



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##### Table of Contents

EAGLE HOSPITALITY PROPERTIES TRUST, INC.



CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS



Nine months ended September 30, 2005 and 2004 (unaudited)



($000s omitted)



|                                                                                  |  |                 |          |   |                     |   |        |  
|--------------------------------------------------------------------------------- |  | --------------- | -------- | - | ------------------- | - | ------ | -
|                                                                                  |  | The Company2005 |          |   | The Predecessor2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                 |          |   |                     |   |        |  
|Net income                                                                        |  | $               | 5,115    |   |                     | $ | 2,540  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                 |          |   |                     |   |        |  
|Deferred income taxes                                                             |  |                 | (2,611   | ) |                     |   |        |  
|Depreciation                                                                      |  |                 | 9,790    |   |                     |   | 6,550  |  
|Amortization of deferred loan fees and franchise rights                           |  |                 | 354      |   |                     |   |       |  
|Amortization of unearned compensation                                             |  |                 | 2,013    |   |                     |   |       |  
|Minority interest                                                                 |  |                 | 911      |   |                     |   |       |  
|Changes in assets and liabilities:                                                |  |                 |          |   |                     |   |        |  
|Restricted cash                                                                   |  |                 | 1,524    |   |                     |   | (675   | )
|Accounts receivables                                                              |  |                 | (2,557   | ) |                     |   | (1,068 | )
|Inventory, prepaid expenses, and other assets                                     |  |                 | 656      |   |                     |   | 210    |  
|Due to affiliates                                                                 |  |                 | (537     | ) |                     |   | 136    |  
|Accounts payable, accrued expenses and advance deposits                           |  |                 | 10,513   |   |                     |   | 1,608  |  
|                                                                                  |  |                 |          |   |                     |   |        |  
|Net cash provided by operating activities                                         |  | $               | 25,171   |   |                     | $ | 9,301  |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                 |          |   |                     |   |        |  
|Acquisition of hotel properties                                                   |  | $               | (172,172 | ) |                     | $ |       |  
|Capital expenditures                                                              |  |                 | (11,427  | ) |                     |   | (4,659 | )
|Purchase of investments                                                           |  |                 |         |   |                     |   |       |  
|                                                                                  |  |                 |          |   |                     |   |        |  
|Net cash used in investing activities                                             |  | $               | (183,599 | ) |                     | $ | (4,659 | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                 |          |   |                     |   |        |  
|Proceeds from financing                                                           |  | $               | 195,200  |   |                     | $ | 3,522  |  
|Debt principal payments                                                           |  |                 | (91,636  | ) |                     |   | (2,296 | )
|Proceeds from preferred stock offering                                            |  |                 | 100,000  |   |                     |   |       |  
|Cost of preferred stock offering                                                  |  |                 | (3,543   | ) |                     |   |       |  
|Proceeds from affiliate financing                                                 |  |                 |         |   |                     |   | 791    |  
|Payment of related party loan                                                     |  |                 | (23,391  | ) |                     |   | (329   | )
|Payment on capital lease obligations                                              |  |                 | (48      | ) |                     |   | (164   | )
|Cash paid for financing fees                                                      |  |                 | (929     | ) |                     |   | (63    | )
|Payments of preferred stock dividends                                             |  |                 | (2,475   | ) |                     |   |       |  
|Payments of common stock dividends and distributions                              |  |                 | (16,345  | ) |                     |   | (2,852 | )
|Adjustments to opening balance sheet                                              |  |                 | (567     | ) |                     |   |       |  
|                                                                                  |  |                 |          |   |                     |   |        |  
|Net cash provided by (used in) financing activities                               |  | $               | 156,266  |   |                     | $ | (1,391 | )
|                                                                                  |  |                 |          |   |                     |   |        |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                              |  | $               | (2,162   | ) |                     | $ | 3,251  |  
|CASH AND CASH EQUIVALENTS, beginning of year                                      |  |                 | 15,661   |   |                     |   | 1,199  |  
|                                                                                  |  |                 |          |   |                     |   |        |  
|CASH AND CASH EQUIVALENTS, end of period                                          |  | $               | 13,499   |   |                     | $ | 4,450  |  
|                                                                                  |  |                 |          |   |                     |   |        |  



See notes to
consolidated and combined financial statements



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EAGLE HOSPITALITY PROPERTIES TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

September 30, 2005 (unaudited)



1. BACKGROUND



Eagle Hospitality Properties Trust, Inc., a Maryland corporation (together with its subsidiaries Eagle, Company, We,
Us or Our), is a self-advised real estate investment trust (REIT) formed to pursue investment opportunities in the full-service and all-suites hotel industry. As of September 30, 2005, Eagle owned a 100%
interest in eleven hotels and a 49% interest in one other hotel (Embassy Suites Hotel Cincinnati-RiverCenter).



Our operating partnership, EHP Operating Partnership, L.P. (EHP OP or the operating partnership), was organized as a limited
partnership under the laws of the state of Maryland. Eagle is the sole general partner of and currently owns approximately 74% of the limited partnership units in EHP OP. Limited partners (including certain of our officers and directors) own the
remaining operating partnership units. After one year, limited partners may generally redeem each unit for the cash value of one share of our common stock or, at our sole option, one share of common stock.



Formation and Significant Events



Eagle commenced its operations effective as of October 1, 2004 when it
completed its initial public offering (IPO) and acquired a 100% interest in eight hotels and a 49% percent interest in one other hotel (Embassy Suites Hotel CincinnatiRiverCenter), all of which were previously owned or controlled
by Corporex Companies LLC (Corporex or Predecessor). Because we have the right and obligation to acquire the remaining 51% interest in the entity that owns the Embassy Suites Hotel Cincinnati-RiverCenter from William P.
Butler, Eagles Chairman, no later than January 31, 2006 in exchange for 427,485 operating partnership units, the assets, liabilities and operations of such entity are included in our consolidated financial statements in accordance with
the provisions in Financial Interpretation Number 46(R) (FIN 46(R)).



On February 24, 2005, Eagle purchased the Embassy Suites Phoenix-Scottsdale, for $32.2 million in cash.



On June 23, 2005, Eagle purchased the Hilton Glendale in Glendale, CA, for $80.1 million in cash.



On June 28, 2005, Eagle purchased the Embassy Suites San Juan Hotel and
Casino in Isla Verde Carolina, Puerto Rico, for $59.8 million in cash.



Taxable REIT Subsidiaries



EHP TRS Holding
Co., Inc. (EHP TRS), our taxable REIT subsidiary, was incorporated as a Maryland corporation. Each of our hotel properties, except the Embassy Suites San Juan Hotel, is leased to a wholly owned subsidiary of EHP TRS, which engages
independent hotel management companies, such as Commonwealth Hotels, Inc. (Commonwealth Hotels), to manage and operate the hotels under management contracts. Lease revenue from EHP TRS and its wholly owned subsidiaries is eliminated in
consolidation. Under applicable REIT tax rules, neither we nor our operating partnership can directly undertake the daily management activities of our hotels. Therefore, our principal source of funds will be dependent on EHP TRSs ability to
generate cash flow from the operation of the hotels. EHP TRS will pay income taxes at regular corporate rates on its taxable income. The Embassy Suites San Juan is leased to an unaffiliated lessee and the only income that we recognize in relation to
this hotel is the lease income paid by the lessee.



2. BUSINESS
COMBINATIONS



On February 24, 2005, we completed
the acquisition of the 270-room Embassy Suites Phoenix-Scottsdale for $32.2 million. This acquisition was funded through a combination of cash and the proceeds from a $22.1 million three-year, full recourse loan having an interest rate of 215 basis
points over 30-day LIBOR that is collateralized by the hotel. This hotel is managed by Commonwealth Hotels. The allocation of the purchase price is preliminary as the Company is awaiting additional information to finalize the allocation. The Company
believes the final allocation of the purchase price will not be materially different from the preliminary allocation.



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On June 23, 2005, we completed the acquisition of the 351-room Hilton Glendale in Glendale
California (Hilton Glendale) for $80.1 million. This acquisition was funded through a combination of cash and the proceeds from a $53.1 million bridge loan. The bridge loan was repaid on July 7, 2005 with the proceeds from a $53.1
million seven-year, interest only loan having a fixed interest rate of 5.21%. This hotel is managed by Hilton Hotels Corporation. The allocation of the purchase price is preliminary as the Company is awaiting additional information to finalize the
allocation. The Company believes the final allocation of the purchase price will not be materially different from the preliminary allocation.



On June 28, 2005, we completed the acquisition of the 299-room Embassy Suites San Juan Hotel and Casino in Isla Verde Carolina, Puerto Rico for $59.8 million. This
acquisition was funded with existing cash. This hotel is leased to a third party tenant who pays a monthly base rent of $450,000, plus additional rent based upon hotel revenues. This hotel is managed by Hilton Hotels Corporation. The allocation of
the purchase price is preliminary as the Company is awaiting additional information to finalize the allocation. The Company believes the final allocation of the purchase price will not be materially different from the preliminary allocation.



The accompanying consolidated financial statements include the
results of the acquired hotels since the dates of acquisition. The purchase prices were the result of arms length negotiations, and Eagle did not assign any value to goodwill or other intangible assets. However, the purchase price allocation
is preliminary and subject to further internal review. Additional adjustments are unlikely to have a material impact.



The following pro forma selected financial data for Eagle and the Predecessor was derived in accordance with Statement of Financial Accounting Standards
No. 141 (FAS 141). The selected financial data, in accordance with FAS 141, assumes that the acquisitions of the Embassy Suites Hotel Phoenix-Scottsdale, Hilton Glendale and Embassy Suites San Juan occurred on January 1, 2004,
as opposed to the actual acquisition dates ($000s, except earnings per share):



|                                            |  |                 |        |   |                     |   |       
|------------------------------------------- |  | --------------- | ------ | - | ------------------- | - | ------
|Three Months Period Ending September 30     |  | The Company2005 |        |   | The Predecessor2004
|Net Revenues                                |  | $               | 33,206 |   |                     | $ | 29,877
|Net Income Available to Common Shareholders |  |                 | 227    |   |                     |   | 632   
|Earnings per share  diluted                |  | $               | 0.01   |   |                     | $ | 0.03  
|                                            |  |                
|Nine Months Period Ending September 30      |  | The Company2005 |        |   | The Predecessor2004
|Net Revenues                                |  | $               | 98,977 |   |                     | $ | 87,843
|Net Income Available to Common Shareholders |  |                 | 3,861  | * |                     |   | 3,738 
|Earnings per share  diluted                |  | $               | 0.17   |   |                     | $ | 0.16  

---

|* | The actual preferred dividends paid of $2.1 million and $2.5 million, respectively, were included for the three months and nine months ending September 30, 2005. No preferred
dividends were assumed for the Predecessor for 2004.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



The
consolidated financial statements presented herein include all of the accounts of Eagle beginning with its commencement of operations on October 1, 2004. Prior to that time, this report includes the combined financial statements of the
Predecessor. Included in this consolidation are Eagles operating entities (TRS), the limited liability companies that own the hotel properties and EHP OP. In accordance with FIN 46(R), also included in the consolidation are all
activities and balances relating to the Embassy Suites Hotel Cincinnati-RiverCenter in which Eagle owns a 49% interest. Under FIN 46(R), Eagle is deemed to be the primary beneficiary of this variable interest entity. Eagle is obligated to acquire
the remaining 51% of this hotel property for 427,485 operating units no later than January 31, 2006. For the periods prior to Eagles ownership, the statements are presented on a combined basis as a result of common ownership and control.
All significant intercompany accounts and transactions among the consolidated and combined entities have been eliminated in the consolidated and combined financial statements.



These financial statements have been prepared in accordance with U.S. generally accepted accounting principles
(GAAP) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. Eagle believes that all adjustments, consisting of



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normal recurring adjustments and accruals, considered necessary for a fair presentation have been included. In addition, Eagles operations have
historically been seasonal as certain properties experience higher occupancy rates during the different months of the year. This seasonality pattern can be expected to cause fluctuations in Eagles operating results. Consequently, operating
results for the nine months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.



Revenue Recognition Hotel revenues, including room, food, beverage and other hotel revenues, are
recognized as the related services are delivered. We generally consider accounts receivable to be fully collectible. If we determine that amounts are uncollectible, which would generally be the result of a customers bankruptcy or other
economic downturn, such amounts will be charged against operations when that determination is made. The lease income generated by the lease on the Embassy Suites San Juan is recognized as earned.



Investment in Hotel Properties  The initial nine hotel
properties are stated at the Predecessors historical cost, plus an approximate $42.5 million minority interest partial step-up recorded upon formation of Eagle on October 1, 2004, related to the acquisition of minority interest from
unaffiliated parties related to seven of the initial properties. Improvements and additions which extend the life of the property are capitalized and depreciated over the estimated useful life.



Impairment of Investment in Hotel Properties  Hotel
properties are reviewed for impairment whenever events or changes in circumstances indicate the carrying value of the hotel properties may not be recoverable (i.e., the future undiscounted cash flows for the hotel are projected to be less than the
net book value of the hotel). We test for impairment in several situations, including when current or projected cash flows are less than historical cash flows, when it becomes more likely than not that a hotel will be sold before the end of its
previously estimated useful life, and when events or changes in circumstances indicate that a hotels net book value may not be recoverable. In the evaluation of the impairment of our hotels, we make many assumptions and estimates, including
projected cash flows, holding period, expected useful life, future capital expenditures, and fair values, including consideration of capitalization rates, discount rates, and comparable selling prices. To date, no such impairment charges have been
recognized. If an asset were deemed to be impaired, we would record an impairment charge for the amount the propertys net book value exceeds its fair value.



Stock-Based Compensation  Eagle accounts for stock-based compensation using the intrinsic-value method in
accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. In connection with Eagles formation, Eagle established the 2004 Long-Term Incentive Plan (the LTIP). Upon
consummation of the IPO and subsequent exercise of the underwriters over-allotment, Eagle issued a total of 441,200 shares of unvested restricted stock to its executives, directors, and certain employees of Eagle, the Predecessor and its
affiliates, which includes 208,332 shares of common stock issued to Corporex under our strategic alliance agreement. An additional 26,715 shares of restricted stock have been issued under the LTIP in 2005. 21,683 have been canceled due to employee
resignations. Of the 446,232 shares issued, 208,731 vest over five years and 237,501 vest over one year. Such shares are charged to compensation expense on a straight-line basis over the vesting period based upon the market price at the time of
issuance. Eagle recognized compensation expense of approximately $2.0 million related to these restricted shares during the nine month period ended September 30, 2005. Under the LTIP, Eagle may issue a variety of performance-based stock awards,
including nonqualified stock options. At September 30, 2005, Eagle had approximately 550,000 remaining shares available for future issuance under the LTIP.



The LTIP was adopted by the board of directors and approved by Eagles stockholders prior to the initial public offering. The purpose of the
incentive plan is to promote Eagles success and enhance the value of Eagles common stock by linking the personal interests of participants to those of the stockholders, and by providing such persons with an incentive to achieve
outstanding performance.



The incentive plan authorizes the
governance and compensation committee and Eagles board of directors to grant awards to employees, officers, consultants (including, but not limited to, Corporex and its employees) and directors.



A table depicting the pro forma adjustments relating to the adoption of FAS
123(R) is not presented as there is no material impact expected to occur as a result of the adoption of this policy.



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Segments  Eagle presently operates in one business segment within the hotel lodging
industry: direct hotel investments. Direct hotel investments refers to owning hotels through either acquisition or new development. The Predecessor also only operated within the direct hotel investments segment.



4. PREFERRED STOCK OFFERING



On June 13, 2005, the Company closed an underwritten public offering of
4,000,000 shares of its 8.25% Series A Cumulative Redeemable Preferred Stock (Preferred Shares). The Preferred Shares have a liquidation value of $25.00 per share and will be redeemable at the option of the Company on or after
June 14, 2010. The annual distribution for the Preferred Shares will be $2.0625 per share. Dividends on the Preferred Shares will be payable quarterly in arrears on the last calendar day of March, June, September and December.



The net proceeds of the public offering of the Preferred Shares were $96.5
million, after underwriters discounts and other offering expenses. The proceeds were used in the acquisitions of the Hilton Glendale and the Embassy Suites San Juan, as well as for other general corporate and working capital purposes.



5. EARNINGS PER SHARE



Basic earnings per share is based on the weighted average number of common
shares outstanding during the period whereas diluted earnings per share adjusts the weighted average shares outstanding for the effect of all dilutive securities. For the three month and nine month periods ended September 30, 2005 the weighted
average basic and diluted common shares outstanding were as follows (000s):



|                                              |  |                                       |  |                                     
|--------------------------------------------- |  | ------------------------------------- |  | ------------------------------------
|                                              |  | Three months ended,September 30, 2005 |  | Nine months ended,September 30, 2005
|Basic weighted average shares outstanding     |  | 17,170                                |  | 17,102                              
|Dilutive effect of unvested restricted shares |  | 3                                     |  |                                    
|Operating partnership units                   |  | 5,994                                 |  | 5,994                               
|                                              |  |                                       |  |                                     
|Diluted weighted average shares outstanding   |  | 23,167                                |  | 23,096                              



6. MINORITY INTEREST



Minority interest in the operating partnership
represents the limited partners proportionate share of the equity in the operating partnership. Net income (loss) is allocated to minority interest based on the weighted average limited partnership percentage ownership throughout the period.
Upon formation of Eagle on October 1, 2004, Eagle issued 5,566,352 units of limited partnership interest to affiliates, plus another 427,485 partnership units are to be issued no later than January 31, 2006 in exchange for the
remaining 51% of the Embassy Suites Hotel CincinnatiRiverCenter. This total of 5,993,837 of partnership units represents an approximate minority interest ownership of 26%. Beginning October 1, 2005, each unit of limited partnership
interest, excluding the 427,485 unissued partnership units relating to the Embassy Suites Hotel CincinnatiRiverCenter, may be redeemed for the cash value of one share of our common stock or, at our sole option, one share of common stock.



Upon its formation, Eagle acquired the Embassy Suites Hotel
Denver International Airport pursuant to the terms and conditions of the original contribution agreement Eagle entered with the former owners of that hotel. The contribution agreement includes an earn-out provision requiring Eagle to issue an
additional 250,000 operating partnership units to the former owners if EBITDA at that hotel exceeds $2,815,459 for any 12-month trailing period prior to October 2007. During the 12-month period ended September 30, 2005, the Embassy Suites Hotel
Denver International Airport reached the earn-out threshold; therefore, the former owners of that hotel will be issued an additional 250,000 operating partnership units during the fourth quarter of 2005 in accordance with the original contribution
agreement.



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7. DEBT



Eagles mortgage notes payable as of September 30, 2005 are as follows:



|                                                                                                                       |  |         |  |              |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------- |  | ------------ | -
|Properties Collateralized                                                                                              |  | Amount  |  | InterestRate |  
|Cincinnati Landmark Marriott, Embassy Suites Hotel Cleveland/Rockside and Embassy Suites Hotel Tampa Airport/Westshore |  | 58,000  |  | 5.43         | %
|Embassy Suites Hotel Cincinnati-River Center +                                                                         |  | 14,046  |  | 8.48         | %
|Hyatt Regency Rochester                                                                                                |  | 15,815  |  | 7.28         | %
|Embassy Suites Hotel & Casino San Juan                                                                                 |  | 38,200  |  | 5.13         | %
|Hilton Glendale                                                                                                        |  | 53,100  |  | 5.21         | %
|                                                                                                                       |  |         |  |              |  
|Fixed Debt                                                                                                             |  | 179,161 |  | 5.70         | %
|                                                                                                                       |  |        
|Cincinnati Landmark Marriott, Embassy Suites Hotel Cleveland/Rockside and Embassy Suites Hotel Tampa Airport/Westshore |  | 23,800  |  | 5.70         | %
|Chicago Marriott Southwest at Burr Ridge +                                                                             |  | 7,934   |  | 8.20         | %
|                                                                                                                       |  |         |  |              |  
|Variable Debt                                                                                                          |  | 31,734  |  | 6.32         | %
|                                                                                                                       |  |         |  |              |  
|Total Debt and Wgt Avg Cost of Debt                                                                                    |  | 210,895 |  | 5.80         | %
|                                                                                                                       |  |         |  |              |  
|LIBOR 30-day rate at 9/30/05                                                                                           |  |         |  | 3.95         | %

---

|* | All variable rate debt is based upon the LIBOR 30-day rate
|- | ----------------------------------------------------------

|+ | These two loans were paid off on October 3, 2005, with the proceeds of a $26.0 million 90-day bridge loan at a variable rate of the thirty day LIBOR plus 2.25%. This bridge
loan is secured by Embassy Suites Hotel Phoenix-Scottsdale and the Embassy Suites Hotel Cincinnati-RiverCenter
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Total debt maturities, including capital lease obligations, as of September 30, 2005 were as follows ($000s):



|           |  |   |        
|---------- |  | - | -------
|2005       |  | $ | 339    
|2006       |  |   | 23,423 
|2007       |  |   | 2,148  
|2008       |  |   | 20,879 
|2009       |  |   | 5,987  
|Thereafter |  |   | 158,296
|           |  |   |        
|Total      |  | $ | 211,072
|           |  |   |        



8. RELATED PARTY TRANSACTIONS



Hotel Management Agreements - Nine of our
hotels are subject to management agreements with Commonwealth Hotels. Under these agreements, Eagle is obligated to pay monthly management fees equal to 2.50% of gross revenues in 2005, 2.75% in 2006, and 3.00% of gross revenues in 2007 and the
years thereafter. Incentive fees may also be earned upon meeting certain net operating income thresholds. These management agreements have ten-year terms, with a renewal option for one additional five-year period. If Eagle terminates a management
agreement on any of the properties prior to its expiration, due to sale of the property, Eagle may be required to pay a substantial termination fee. Eagles Chairman is the majority shareholder in Commonwealth Hotels. Management fees earned by
Commonwealth Hotels for the three months and nine months, respectively, ending September 30, 2005 were $1.0 million and $2.3 million. The management fees expensed by the Predecessor for the three months and nine months, respectively, ending
September 30, 2004 were $0.7 million and $1.8 million. At September 30, 2005 and December 31, 2004, Eagle owed Commonwealth Hotels $0.2 and $0.3 million in management fees payable, respectively.



Purchase Price Adjustment  As of September 30, 2005, Eagle
has a payable of $0.4 million to the former owners of the original eight hotels and the 49% interest in the Embassy Suites Hotel Cincinnati-RiverCenter acquired from Corporex, effective October 1, 2004. This payable relates to a contractually
required true-up for real estate taxes for the acquired hotels. Our Chairman of the Board, William P. Butler, and two members of our Board of Directors, Thomas E. Banta and Thomas E. Costello, will receive their proportionate share of
these payments relative to their interest in the selling entities.



Strategic Alliance Agreement  Eagle has entered into a Strategic Alliance Agreement (SAA) with Corporex and affiliated parties. The SAA provides Eagle with the right of first refusal for development opportunities
with Corporex and affiliates, as well as a non-compete clause for markets in which we own or have an investment. The agreement expires October 1, 2014. Corporex received 208,332 shares of common stock in conjunction with the SAA. The shares
vest October 1, 2005. In the period ending September 30, 2005, Eagle incurred approximately $1.5 million in expense as a result of the amortization of these shares.



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Related Party Debt As of December 31, 2004, Eagle had a loan from Corporex, secured by
the Embassy Suites Hotel Cleveland/Rockside, with a balance of $23.4 million (the Corporex Loan). On February 18, 2005, Eagle obtained an $81.8 million secured loan from the Prudential Insurance Company of America (the
Prudential Loan). Eagle used part of the proceeds from the Prudential Loan to retire the $23.4 million Corporex Loan. In connection with the Corporex Loan, Eagle incurred interest expense for the related party debt of $0.2 million for
the nine month period ending September 30, 2005. The Predecessor incurred interest expense for related party debt of $0.3 million and $0.7 million for the three months and nine months, respectively, ending September 30, 2004.



Transition Services From October 1, 2004 through
December 31, 2005, Eagle has agreed to make its Chief Executive Officer, Mr. Blackham, available to provide certain consulting and advisory transition services to Corporex in areas unrelated to our core business. Eagle is compensated
$10,000 per month for providing these services. In the three month and nine month periods ending September 30, 2005, Eagle earned $30,000 and $90,000, respectively, related to this agreement.



Leased Office Space - Eagles headquarters are located in an
office building that is owned by a limited partnership in which Eagles Chairman and Chief Executive Officer are limited partners. We entered into a lease for this office space subsequent to our IPO at terms approximating the fair market value.
We are obligated to pay $0.6 million in rent over a ten-year period, or on average, approximately $5,000 per month. The expense of this lease is being recognized on a straight-line basis. In addition to the rent payments, we will also be subject to
a common area maintenance fee allocation related to this office space. Eagle believes the lease payments do not exceed market value.



9. STATEMENT OF CASH FLOWS, SUPPLEMENTAL DISCLOSURES



On January 10, 2005, our Board of Directors declared a dividend of $0.175 per common share and operating partnership unit. This dividend was paid on
February 1, 2005 to holders of record as of January 18, 2005. The total amount of the dividends and distributions paid to holders of our common stock and operating partnership units was $4.1 million.



On February 18, 2005, we finalized an $81.8 million five-year,
non-recourse loan with Prudential. This loan involves both a fixed-rate and floating-rate component with $58.0 million fixed at an interest rate of 5.43% and the remainder having a variable interest rate of 175 basis points over 30-day LIBOR.
Approximately $68 million of the proceeds were used to paydown $4.0 million of the loan for the Embassy Suites Columbus/Dublin and to retire the loans for the Cincinnati Landmark Marriott, the Embassy Suites Hotel Cleveland/Rockside (related party
loan from Corporex) and the Embassy Suites Hotel Denver-International Airport. This loan is subject to certain financial covenants and is collateralized by the Cincinnati Landmark Marriott, the Embassy Suites Hotel Cleveland/Rockside, and the
Embassy Suites Hotel Tampa-Airport/Westshore.



On
March 31, 2005, Eagle declared a dividend of $0.175 per common share and operating partnership unit. This dividend was paid on April 14, 2005, to holders of record as of April 6, 2005. The total amount of the dividends paid to holders
of our common stock was $3.0 million and $1.1 million was paid to holders of operating partnership units.



On June 17, 2005, Eagle declared a dividend of $0.175 per common share and operating partnership unit. This dividend was paid on July 15, 2005,
to holders of record as of June 30, 2005. The total amount of the dividends paid to holders of our common stock was $3.0 million and $1.1 million was paid to holders of operating partnership units.



On June 17, 2005, Eagle declared a prorated quarterly dividend of
$0.103125 per 8.25% Series A Cumulative Redeemable Preferred Share for the period from June 13, 2005 to June 30, 2005 to holders of record as of June 20, 2005. The total amount of dividends paid to holders of the preferred shares was
$0.4 million and was paid on June 30, 2005.



On
September 7, 2005, Eagle closed a $38.2 million seven-year loan with Wachovia Bank. This loan has a fixed rate of 5.14% and is interest-only for the first thirty months. This loan is secured by the 299-room Embassy Suites Hotel &
Casino San Juan in San Juan, Puerto Rico. The proceeds from this loan were used to repay the loans collateralized by the Embassy Suites Hotel Columbus/Dublin and the Embassy Suites Hotel Phoenix-Scottsdale.



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On September 9, 2005, Eagle declared a dividend of $0.175 per common share and operating partnership
unit. This dividend was paid on October 17, 2005, to holders of record as of September 30, 2005. The total amount of the dividends paid to holders of our common stock was $3.0 million and $1.1 million was paid to holders of operating
partnership units. This dividend is shown as Dividends and distributions payable on the September 30, 2005 Balance Sheet. During the nine month period ended September 30, 2004, the Predecessor paid $1.0 million in partner
distributions.



On September 9, 2005, Eagle declared a
quarterly dividend of $0.515625 per 8.25% Series A Cumulative Redeemable Preferred Share for the period ended September 30, 2005 to holders of record as of September 20, 2005. The total amount of dividends paid to holders of the preferred
shares was $2.1 million and was paid on September 30, 2005.



On October 3, 2005, Eagle closed on a $26.0 million ninety-day, bridge facility with US Bank at a variable rate of 30-day LIBOR plus 2.25%. This loan is secured by the Embassy Suites Hotel Phoenix-Scottsdale and the Embassy Suites
Hotel Cincinnati-RiverCenter. $21.8 million of this bridge facility was used to pay off the loans on the Embassy Suites Hotel Cincinnati-RiverCenter and the Chicago Marriott Southwest at Burr Ridge. As of the date of this filing, we have
approximately $4.2 million of remaining availability under this facility. It is the intent of the Company to secure permanent financing to replace this bridge loan; however, we cannot assure you that we will be able to obtain such financing on
favorable terms, if at all.



Interest paid by Eagle during the
three months and nine months, respectively, ended September 30, 2005 was $2.8 million and $7.1 million. Interest paid by the Predecessor during the three months and nine months, respectively, ended September 30, 2004 was $3.0 million and
$8.8 million.



During the nine months ended September 30,
2005, Eagle granted approximately 27,000 shares of restricted stock, valued at approximately $0.3 million, under its LTIP and cancelled approximately 22,000 shares of restricted stock due to the employee resignations, valued at $0.2 million.



10. INCOME TAXES



The Company had an income tax benefit of $0.7 million for nine months ending
September 30, 2005 and income tax benefit of $2.2 million for the nine months ending September 30, 2005.



The Company intends to elect to be taxed as a REIT under the Internal Revenue Code. As long as we maintain our status as a REIT, we generally will not be
subject to federal or state income taxes on our net income to the extent we distribute our net income to our stockholders. However, we will be subject to tax at normal corporate rates on net income or capital gains not distributed to stockholders,
and we may be subject to state income and franchise taxes. However, our TRS is subject to federal and state income and franchise taxation on its taxable income.



The components of the corresponding income tax expense and benefit were as follows ($000s):



|                 |  |                                      |     |                                     |   |      
|---------------- |  | ------------------------------------ | --- | ----------------------------------- | - | -----
|                 |  | Three months endedSeptember 30, 2005 |     | Nine months endedSeptember 30, 2005
|Federal:         |  |                                      |     |                                     |   |      
|Current          |  | $                                    |    |                                     | $ |     
|Deferred Benefit |  |                                      | 904 |                                     |   | 2,611
|                 |  |                                     
|State and local: |  |                                      |     |                                     |   |      
|Current Expense  |  | $                                    | 177 |                                     | $ | 394  
|Deferred         |  |                                      |    |                                     |   |     



At December 31,
2004, the Company fully reserved the net deferred tax asset of approximately $0.4 million due to the limited operational history of the Company. However, with the acquisitions and updated tax planning forecast, the Company now believes this
valuation unnecessary with the expectation that this asset will be realizable within the next few years. Management believes that it is more likely than not that this deferred tax asset will be realized and has determined that no valuation allowance
is required.



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11. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS



In December 2004, the FASB issued SFAS No. 123 (revised 2004),
Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and amends
SFAS No. 95, Statement of Cash Flows. Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The new standard will be effective for the Company in the first annual reporting period
beginning after June 15, 2005. Adoption is not expected to have a material effect on the Company.



12. COMMITMENTS AND CONTINGENCIES



Restricted Cash  Under certain existing mortgage loan agreements, Eagle is obligated to escrow payments for insurance, real estate taxes and 4% of gross revenue of certain properties for capital
improvements.



Contingent Consideration  At the
time we acquired our initial hotels, we agreed to make earn-out payments totaling in the aggregate up to 833,333 additional operating partnership units, which may be payable to the original contributors of the Embassy Suites Hotel Columbus/Dublin,
the Embassy Suites Hotel Cleveland/Rockside and the Embassy Suites Hotel Denver-International Airport only if certain operating measurements are achieved on any trailing 12-month basis within three years from the contribution. For the 12-month
period ended September 30, 2005, the Embassy Suites Hotel Denver-International Airport exceeded the operating measurements required to receive the additional 250,000 operating partnership units pursuant to the earn-out provisions of the
original contribution agreement. These operating partnership units will be issued to the former owners of that hotel during the fourth quarter of 2005.



Franchise Fees  All of our hotels, except the Hyatt Regency Rochester, operate under franchise agreements. In conjunction with these
franchise agreements, Eagle is obligated to pay the franchisors royalty fees between 4% and 6% of gross room revenue, and under certain agreements, fees for marketing, reservations, and other related activities aggregating between 1% and 4% of gross
room revenue. In addition, the Marriott hotels are obligated to pay between 2% and 3% for food and beverage revenues. Franchise fees are included in hotel expenses in the accompanying consolidated and combined statements of operations.



Litigation  We are not involved in any material
litigation nor, to our knowledge, is any material litigation threatened against us.



Taxes  Under tax indemnification agreements with the contributors of certain initial hotels, Eagle has agreed to provide tax indemnification, which would range between $45 million and $75 million, to
the original contributors against certain tax consequences of a sale. We have agreed to pay the contributors tax liability with respect to gain allocated to the contributor under Section 704(C) of the Internal Revenue Code if we dispose
of a property contributed by the contributor in a taxable transaction during a protected period, which continues until the earlier of: a) October 1, 2014, or b) the date on which the contributor no longer owns, in the aggregate, at
least 25% of the units we issued to the contributor at the time of its contribution of property to our operating partnership.



13. COMPREHENSIVE INCOME



For the three months and nine months, respectively, ended September 30, 2005, comprehensive income was $0.2 million and $2.6 million. As of
September 30, 2005 and December 31, 2004, Eagles accumulated other comprehensive income was $15,000 and $22,000, respectively. The change in accumulated other comprehensive income was entirely due to Eagles unrealized gains on
its marketable securities.



14. SUBSEQUENT EVENTS



On October 3, 2005, Eagle closed on a $26.0 million ninety-day, bridge
facility with US Bank at a variable rate of 30-day LIBOR plus 2.25%. This loan is secured by the Embassy Suites Hotel Phoenix-Scottsdale and the Embassy Suites Hotel Cincinnati-RiverCenter. $21.8 million of this bridge facility was drawn used to pay
off the loans on the Embassy Suites Hotel Cincinnati-RiverCenter and the Chicago Marriott Southwest at Burr Ridge. As



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of the date of this filing, we have approximately $4.2 million of remaining availability under this facility. It is the intent of the Company to secure
permanent financing to replace this bridge facility; however, we cannot assure you that we will be able to obtain such financing on favorable terms, if at all.



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



Forward-Looking Statements



We make forward-looking statements throughout this Form 10-Q that are subject to risks and uncertainties. These forward-looking statements include
information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans, and objectives. Statements regarding the following subjects are forward-looking by their nature:



| |  |  | Our business and investment strategy;
| | - |  | -------------------------------------



| |  |  | Our projected operating results;
| | - |  | --------------------------------



| |  |  | Our ability to obtain future financing arrangements;
| | - |  | ----------------------------------------------------



| |  |  | Our understanding of our competition;
| | - |  | -------------------------------------



| |  |  | Market trends;
| | - |  | --------------



| |  |  | Projected capital expenditures; and
| | - |  | -----------------------------------



| |  |  | The impact of technology on our operations and business.
| | - |  | --------------------------------------------------------



The forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance taking into account all information
currently available to us. These beliefs, assumptions, and expectations can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, and results of
operations may vary materially from those expressed in our forward-looking statements. You should carefully consider this risk when you make an investment decision concerning our common stock. Additionally, the following factors could cause actual
results to vary from our forward-looking statements:



| |  |  | The factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2004, including those set forth under the sections titled Risk Factors,
Managements Discussion and Analysis of Financial Conditions and Results of Operations, Business, and Properties;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | General volatility of the capital markets and the market price of our common stock;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | Changes in our business or investment strategy;
| | - |  | -----------------------------------------------



| |  |  | Availability, terms, and deployment of capital;
| | - |  | -----------------------------------------------



| |  |  | Availability of qualified personnel;
| | - |  | ------------------------------------



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| |  |  | Changes in our industry and the market in which we operate, interest rates, or the general economy; and
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | The degree and nature of our competition.
| | - |  | -----------------------------------------



When we use the words will likely result, may, anticipate, estimate, should,
expect, believe, intend, or similar expressions, we intend to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. We are not obligated to publicly update
or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.



RESULTS OF OPERATIONS



OVERVIEW



Eagle Hospitality Properties Trust, Inc., a Maryland
corporation (together with its subsidiaries Eagle or Company), is a self-advised real estate investment trust (REIT) formed to pursue investment opportunities in the full-service and all-suites hotel industry. As
of September 30, 2005, Eagle owned a 100% interest in 11 hotels and a 49% interest in one other hotel (Embassy Suites Hotel Cincinnati-RiverCenter).



THIRD QUARTER AND YEAR TO DATE HIGHLIGHTS AND OUTLOOK FOR THE REMAINDER OF 2005



Refer to the Results of Operations section below for discussion of our three months and nine months ended
September 30, 2005 results compared to the results for the same periods of 2004.



In the hotel industry most categories of operating costs do not vary directly with the volume of sales, the exceptions being franchise, management, credit card fees and the costs of the food and beverages served.
Because of this operating leverage, changes in sales volume disproportionately impact operating results. Room revenue is the most important category of revenue and drives other revenue categories such as food and beverage and telephone. There are
three key performance indicators used in the hotel industry to measure room sales:



| |  |  | Occupancy, or the number of rooms sold, usually expressed as a percentage of total rooms available;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Average Daily Rate (ADR), which is total room revenue divided by the number of rooms sold; and
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | RevPAR (room revenue per available room), which is the product of the occupancy percentage and ADR.
| | - |  | ---------------------------------------------------------------------------------------------------



During the quarter, due to a strengthening economy and the maturation of certain of our hotels, our portfolio saw RevPAR
increase by 6.1%, from $80.29 for the third quarter of 2004 to $85.16 for the third quarter of 2005 for the nine hotels that were owned by Eagle during the third quarter of 2004. For the nine month period ending September 30, 2005, our
portfolio saw RevPAR increase by 7.1%, to $79.77 from $74.46 for the same period in 2004 for those nine hotels. This increase was the result of increases in both the occupancy percentage and room rates.



On January 10, 2005, our Board of Directors declared a dividend of
$0.175 per common share and operating partnership unit. This dividend was paid on February 1, 2005 to holders of record as of January 18, 2005. The total amount of the dividends and distributions paid to holders of our common stock and
operating partnership units was $4.1 million.



On
February 18, 2005, we finalized an $81.8 million five-year, non-recourse loan with Prudential. This loan involves both a fixed-rate and floating-rate component with $58.0 million fixed at an interest rate of 5.43% and the remainder having a
variable interest rate of 175 basis points over 30-day LIBOR. Approximately $68 million of the proceeds were used to paydown $4.0 million of the loan for the Embassy Suites Columbus/Dublin and to retire the loans for the Cincinnati Landmark
Marriott, the Embassy Suites Hotel Cleveland/Rockside (related party loan from Corporex) and the Embassy Suites Hotel Denver-International Airport. This loan is subject to certain financial covenants and is collateralized by the Cincinnati Landmark
Marriott, the Embassy Suites Hotel Cleveland/Rockside, and the Embassy Suites Hotel Tampa-Airport/Westshore.



On February 24, 2005, we completed the acquisition of the 270-room Embassy Suites Hotel Phoenix-Scottsdale for $32.2 million in cash. In connection with this acquisition, Eagle finalized a $22.1 million three
year, full recourse



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loan having an interest rate of 215 basis points over 30-day LIBOR that is collateralized by the hotel. The proceeds of
this loan were used to pay for this acquisition and the remainder of the purchase price was paid from existing cash. This hotel is managed by Commonwealth Hotels. The allocation of the purchase price is preliminary as the Company is awaiting
additional information to finalize the allocation. The Company believes the final allocation of the purchase price will not be materially different from the preliminary allocation.



On March 31, 2005, our Board of Directors declared a dividend of $0.175 per common share and operating partnership
unit. This dividend was paid on April 14, 2005 to holders of record as of April 6, 2005. The total amount of the dividends and distributions paid to holders of our common stock and operating partnership units was $4.1 million.



On June 13, 2005, the Company closed an underwritten public offering
of 4,000,000 shares of its 8.25% Series A Cumulative Redeemable Preferred Stock (Preferred Shares). The Preferred Shares have a liquidation value of $25.00 and will be redeemable at the option of the Company on or after June 14,
2010. The annual distribution for the Preferred Shares will be $2.0625 per share. Dividends on the Preferred Shares will be payable quarterly in arrears on the last calendar day of March, June, September and December.



The net proceeds of the public offering of the Preferred Shares were $96.5
million, after underwriters discounts and other offering expenses. The proceeds were used in the acquisitions of the Hilton Glendale and the Embassy Suites Hotel San Juan, as well as for other general corporate and working capital purposes.



On June 17, 2005, our Board of Directors declared a
dividend of $0.175 per common share and operating partnership unit. This dividend was paid on July 15, 2005 to holders of record as of June 30, 2005. The total amount of the dividends and distributions paid to holders of our common stock
and operating partnership units was $4.1 million.



On
June 17, 2005, Eagle declared a prorated quarterly dividend of $0.103125 per 8.25% Series A Cumulative Redeemable Preferred Share for the period from June 13, 2005 to June 30, 2005 to holders of record as of June 20, 2005. The total amount of
dividends paid to holders of the preferred shares was $0.4 million and was paid on June 30, 2005.



On June 23, 2005, we completed the acquisition of the 351-room Hilton Glendale in Glendale, California for $80.1 million. This acquisition was funded
through a combination of cash and the proceeds from a $53.1 million bridge loan. The bridge loan was repaid on July 8, 2005 with the proceeds from a $53.1 million seven-year, interest only loan having a fixed interest rate of 5.21%. This hotel
is managed by Hilton Hotels Corporation. The allocation of the purchase price is preliminary as the Company is awaiting additional information to finalize the allocation. The Company believes the final allocation of the purchase price will not be
materially different from the preliminary allocation.



On
June 27, 2005, we closed on a bridge loan secured by the Hilton Glendale. This bridge loan was repaid on July 7, 2005, with the proceeds from a $53.1 million seven-year, interest only loan having a fixed interest rate of 5.21%.



On June 28, 2005, we completed the acquisition of the 299-room Embassy Suites San
Juan Hotel and Casino in Isla Verde Carolina, Puerto Rico for $59.8 million. This acquisition was funded with existing cash. This hotel is leased to a third party tenant who pays a monthly base rent of $450,000, plus additional rent based upon hotel
revenues. This hotel is managed by Hilton Hotels Corporation. The allocation of the purchase price is preliminary as the Company is awaiting additional information to finalize the allocation. The Company believes the final allocation of the purchase
price will not be materially different from the preliminary allocation.



On July 8, 2005, Eagle closed a $53.1 million seven-year, interest only loan with KeyBank at a fixed rate of 5.21%. This loan is secured by the 351-room Hilton Glendale in Glendale, California. The proceeds from this loan were used to
repay the $53.1 million bridge loan.



On July 25, 2005,
Eagle announced that the Audit Committee of the Board of Directors had selected Ernst & Young LLP as the Companys independent registered public accounting firm, commencing with its fiscal quarter ending June 30, 2005. The Company
emphasized that the change was not the result of any disagreements or dissatisfaction with the work of its former outside audit firm, Grant Thornton LLP.



On September 7, 2005, Eagle closed a $38.2 million seven-year loan with Wachovia Bank. This loan has a fixed rate of 5.14% and is interest-only for
the first thirty months. This loan is secured by the 299-room Embassy Suites Hotel & Casino San Juan in San Juan, Puerto Rico. The proceeds from this loan were used to repay the loans collateralized by the Embassy Suites Hotel
Columbus/Dublin and the Embassy Suites Hotel Phoenix-Scottsdale.



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On September 9, 2005, Eagle declared a dividend of $0.175 per common share and operating partnership
unit. This dividend was paid on October 17, 2005, to holders of record as of September 30, 2005. The total amount of the dividends paid to holders of our common stock was $3.0 million and $1.1 million was paid to holders of operating
partnership units.



On September 9, 2005, Eagle declared a
quarterly dividend of $0.515625 per 8.25% Series A Cumulative Redeemable Preferred Share for the period ended September 30, 2005 to holders of record as of September 20, 2005. The total amount of dividends paid to holders of the preferred
shares was $2.1 million and was paid on September 30, 2005.



On October 3, 2005, Eagle closed on a $26.0 million ninety-day, bridge facility with US Bank at a variable rate of 30-day LIBOR plus 2.25%. This loan is secured by the Embassy Suites Hotel Phoenix-Scottsdale and the Embassy Suites
Hotel Cincinnati-RiverCenter. $21.8 million of this bridge facility was used to pay off the loans on the Embassy Suites Hotel Cincinnati-RiverCenter and the Chicago Marriott Southwest at Burr Ridge. As of the date of this filing, we have
approximately $4.2 million of remaining availability under this facility. It is the intent of the Company to secure permanent financing to replace this bridge loan; however, we cannot assure you that we will be able to obtain such financing on
favorable terms, if at all.



The outlook for the remainder of
2005 is uncertain; however, management is currently optimistic the fourth quarter of 2005 will show increases in revenues and net income, for the following reasons:



| |  |  | Improved market conditions.
| | - |  | ---------------------------



| |  |  | The operating revenues of the hotels acquired in 2005.
| | - |  | ------------------------------------------------------



| |  |  | The Chicago Marriott Southwest at Burr Ridge which opened in August 2004 is seeing improvement in its occupancy percentage.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



This foregoing forward-looking statement is subject to risks and
uncertainties. For more information, see the introductory paragraphs of Managements Discussion and Analysis of Financial Condition and Results of Operations located on page 15.



CRITICAL ACCOUNTING POLICIES



There were no changes to the critical accounting policies and estimates made
by management in the three months ended September 30, 2005. For a more detailed description of our critical accounting policies, see Managements Discussion and Analysis of Financial Conditions and Results of Operations in our
2004 Annual Report on Form 10-K.



FINANCIAL CONDITION



September 30, 2005 Compared to December 31, 2004



Total mortgage debt increased $80.2 million from $130.7 million (including
$23.4 million of related-party mortgage debt) to $210.9 million, or 61.4%, as a result of the $38.2 million loan for the Embassy Suites Hotel & Casino San Juan (Embassy Suites San Juan), the $81.8 million Prudential Loan and the
$53.1 million loan related to the acquisition of the Hilton Glendale. The proceeds of the Embassy Suites San Juan loan were used to payoff the mortgage debt related to the Embassy Suites Hotel Phoenix/Scottsdale and the Embassy Suites Hotel
Columbus/Dublin. The proceeds of the Prudential Loan were used to pay down approximately $71 million of existing mortgage debt (including all of the related-party mortgage debt) and to provide cash towards the completion of the acquisition of the
Embassy Suites Hotel Phoenix/Scottsdale.



Total assets
increased $176.3 million, largely the result of the hotel acquisitions.



The unrestricted cash balance decreased $2.2 million from December 31, 2004. This decrease is the result of dividends and distributions paid to the preferred and common shareholders, hotel capital expenditures, debt payoffs and hotel
acquisitions offset by net proceeds of $96.5 million from the preferred offering, proceeds from the new mortgages and cash generated from hotel operations. In total, $14.8 million in dividends and distributions paid were paid in the first nine
months of 2005. Also, $11.4 million was used to fund capital improvements at our hotels.



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RESULTS OF OPERATIONS



Quarter Ended September 30, 2005 Compared to Quarter Ended September 30, 2004



|                                            |  |                 |        |                     |   |       
|------------------------------------------- |  | --------------- | ------ | ------------------- | - | ------
|(000s)                                     |  | The Company2005 |        | The Predecessor2004
|Total Revenue                               |  | $               | 33,206 |                     | $ | 22,006
|Operating Expense                           |  |                 | 28,605 |                     |   | 18,031
|Net Operating Income                        |  |                 | 4,601  |                     |   | 3,975 
|Net Income Available to Common Shareholders |  |                 | 227    |                     |   | 986   



Revenue.Total revenues increased $11.2 million, or 50.9%, from $22.0 million in the third quarter of 2004 to $33.2 million in the third quarter of 2005. $10.1 million of the increase was related to the Chicago Marriott
Southwest at Burr Ridge, which opened in August 2004, and the hotels acquired in 2005. In addition, the Hilton Cincinnati Airport showed a revenue increase of $0.5 million in the third quarter of 2005 over the comparable period in 2004. The increase
at this hotel is largely attributable to the airline and corporate group business. While there has been significant improvement in rate, the main driver for the increase at this property has been occupancy.



For the nine hotels owned during the third quarter of 2004, RevPAR increased
from $80.29 to $85.16 for the third quarter of 2005, or 6.1%. Aside from the Chicago Marriott Southwest at Burr Ridge, which opened in August 2004, the largest RevPAR increases occurred at the Hilton Cincinnati Airport (29.6%), the Embassy Suites
Hotel Denver International Airport (9.4%) and the Hyatt Regency Rochester (8.1%).



Operating Expenses. Total operating expenses increased by $10.6 million, from $18.0 million during the third quarter of 2004, to $28.6 million in the third quarter of 2005, or 58.9%. Of this increase,
$7.6 million was related to the Chicago Marriott Southwest at Burr Ridge, which did not open until August 2004, and the other hotels acquired in 2005. $1.3 million was related to corporate expense in the third quarter of 2005 (the Predecessor did
not have a parent-type function) and $0.7 million related to the amortization of stock-based compensation. There was $0.2 million in bad debt expense incurred during the period relating to the Chapter 11 filings of Delta Airlines and Northwest
Airlines. The remainder of the increase was largely due to items that vary directly with an increase in revenues, such as franchise, management and credit card fees.



Operating Income. Net operating income increased by $0.6 million to $4.6 million in third quarter of 2005 from
$4.0 million during the third quarter of 2004. The increase of 15.0% was the result of $2.5 million of net operating income generated by the 2005 acquisitions and the Chicago Marriott Southwest at Burr Ridge. Somewhat offsetting these increases were
$1.3 million of corporate expense in the third quarter of 2005 (the Predecessor did not have a parent-type function) and $0.7 million related to the amortization of stock-based compensation.



Depreciation and Amortization Expense. Total depreciation and
amortization expense increased by $2.2 million, or 100.0%, from $2.2 million in the third quarter of 2004 to $4.4 million during the same period in 2005. Virtually all of this increase is related to the depreciation for the Chicago Marriott
Southwest at Burr Ridge and the other hotels acquired in 2005. The Company incurred $0.1 million in the accelerated amortization of deferred financing costs relating to the payoff of the mortgage loan for the Embassy Suites Hotel Phoenix/Scottsdale.
Also contributing to the increase was $0.3 million on the minority interest partial step-up.



Interest Expense. Total interest expense increased in the third quarter 2005 by approximately $0.2 million, or 6.7%, to $3.2 million from $3.0 million in 2004. The increase is the result of the debt incurred
related to the acquisitions of the Embassy Suites Hotel Phoenix/Scottsdale, Hilton Glendale and the Embassy Suites Hotel & Casino San Juan and the $0.1 million of deferred loan fees that were written off as the result of debt refinancing,
largely offset by the approximately $76 million of debt that was retired during the fourth quarter of 2004 (including $21.4 million in related-party debt).



Income Tax Benefit. A net income tax benefit of $0.7 million was booked for the three month period ending September 30, 2005. This was the
result of an income tax benefit of approximately $0.9 million recognized due to the net loss during the quarter by the TRS. Somewhat offsetting this benefit was an income tax expense of $0.2 million for various state and local income taxes. Due to
the ownership structure in place at the time, the Predecessor recorded no income tax benefit during the period ending September 30, 2004.



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As of September 30, 2005, the Company had a deferred tax asset of $2.6 million due to prior and
current year losses by the TRS. Management believes that it is more likely than not that this deferred tax asset will be realized and has determined that no valuation allowance is required.



Minority Interest. Minority interest in the operating partnership
represents the limited partners proportionate share of the equity in the operating partnership. Income is allocated to minority interest based on the weighted average percentage ownership during the quarter. For the three month period ending
September 30, 2005, the weighted average percentage of the limited partners ownership was 25.7%. As a result of this ownership percentage, the portion of the income earned during the quarter by the Company and allocated to the minority
interest was $0.1 million. Due to the ownership structure of the Predecessor, the concept of minority interest did not exist.



Distributions to Preferred Shareholders. During the three month period ended September 30, 2005, the Company made distributions in the amount
of the $2.1 million related to the Series A Preferred Shares. These shares were issued as the result of a public offering that closed on June 13, 2005. There were no Preferred Shares issued by the Predecessor, therefore, there were no similar
distributions in the prior year.



Net Income Available to
Common Shareholders. The net income available to common shareholders of approximately $0.2 million in the third quarter of 2005 represented a decrease of approximately $1.0 million, from the $1.2 million produced in the third quarter of 2004.
The decrease was due to the corporate expense, amortization of stock-based compensation, the minority interest allocation, the bad debt expense related to the Chapter 11 filings of Delta Airlines and Northwest Airlines and the preferred share
distribution. These decreases were somewhat offset by the net income produced by the acquired hotels, the reduced interest expense, the increased income generated by our existing hotels and the income tax benefit.



Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30,
2004



|                                           |  |                 |        |                     |   |       
|------------------------------------------ |  | --------------- | ------ | ------------------- | - | ------
|(000s)                                    |  | The Company2005 |        | The Predecessor2004
|Total Revenue                              |  | $               | 83,677 |                     | $ | 61,073
|Operating Expense                          |  |                 | 72,651 |                     |   | 49,859
|Net Operating Income                       |  |                 | 11,026 |                     |   | 11,214
|Net Income Available to Common Shareholder |  |                 | 2,640  |                     |   | 2,540 



Revenue.Total revenues increased $22.6 million, or 37.0%, from $61.1 million in the first nine months of 2004 to $83.7 million in the first nine months of 2005. $18.1 million of the increase was related to the Chicago
Marriott Southwest Hotel at Burr Ridge, which opened in August 2004, and the hotels acquired in 2005. Our remaining hotels all experienced revenue improvements as compared to 2004. These improvements ranged from 2.7% to 22.9%, with the largest
improvement seen at the Hilton Cincinnati Airport. The increase at this hotel is largely attributable to the airline and corporate group business. While there has been significant improvement in rate, the main driver for the increase at this
property has been occupancy.



For the nine hotels owned in
2004, RevPAR increased from $74.46 to $79.77 for the nine months of 2005, or 7.1%. Aside from the Chicago Marriott Southwest Hotel at Burr Ridge, which opened in August 2004, the largest RevPAR increases occurred at the Hilton Cincinnati Airport
(26.7%), the Embassy Suites Hotel Cleveland/Independence (9.8%) and the Hyatt Regency Rochester (9.5%). These RevPAR increases were driven by increases in both occupancy and rate.



Operating Expenses. Total operating expenses increased by $22.8 million, from $49.9 million during the first
nine months of 2004, to $72.7 million in the first nine months of 2005, or 45.7%. Of this increase, $14.3 million was related to the Chicago Marriott Southwest at Burr Ridge, which did not open until August 2004, and the hotels acquired in 2005.
Also contributing to the increase was $3.6 million and $2.0 million, respectively, for corporate expense (the Predecessor did not have a parent-type function) and amortization of stock-based compensation. Due to revised brand linens standards, there
was an increase of approximately $0.2 million incurred in linen purchases in 2005, as compared to 2004. There was $0.2 million in bad debt expense incurred during the period relating to the Chapter 11 filings of Delta Airlines and Northwest
Airlines. The remainder of the increase was largely due to items that vary directly with an increase in revenues, such as franchise, management and credit card fees.



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Operating Income. Net operating income decreased by $0.2 million to $11.0 million for the
first nine months of 2005 from $11.2 million during the third quarter of 2004. The decrease of 1.8% was the result of $3.6 million of corporate expense incurred in 2005 (the Predecessor did not have a parent-type function) and $2.0 million relating
to the amortization of stock-based compensation. There was also increased depreciation expense of $0.9 million at the existing hotels due to the $42.5 million minority interest partial step-up recorded upon formation of the Company on
October 1, 2004, related to the acquisition of minority interest from unaffiliated parties in connection with seven of the initial properties. Mostly offsetting these increased expenses was $6.6 million of operating income provided by the
Chicago Marriott Southwest at Burr Ridge, which did not open until August 2004, and the hotels acquired in 2005.



Depreciation and Amortization Expense. Total depreciation and amortization expense increased by $3.6 million, or 55%, from $6.6 million for the
first nine months of 2004 to $10.2 million during the same period in 2005. $3.2 million, or 91.4%, of the increase is related to the depreciation for the Chicago Marriott Southwest at Burr Ridge and the hotels acquired in 2005. The Company incurred
$0.1 million in the accelerated amortization of deferred financing costs relating to the payoff of the mortgage loan for the Embassy Suites Hotel Phoenix/Scottsdale. Also contributing to the increase was $0.9 million on the minority interest partial
step-up.



Interest Expense. Total interest expense
decreased in the first nine months of 2005 by approximately $1.2 million, or 13.6%, to $7.6 million from $8.8 million in 2004. During the fourth quarter of 2004, approximately $76 million of debt was retired (including $21.4 million in related-party
debt), largely resulting in the decrease. To an extent this interest expense decrease was offset by the expense incurred on the loans related to the Embassy Suites Phoenix, Hilton Glendale and the Embassy Suites Hotel & Casino San Juan and
the $0.1 million of deferred loan fees that were written off as the result of debt refinancing.



Income Tax Benefit. An income tax benefit of $2.2 million was booked during the nine month period ending September 30, 2005. $2.2 million of
this benefit was due to the net loss during the year by the TRS and $0.4 million was the result of the reversal of a prior year deferred tax asset valuation reserve. Providing a slight offset to the tax benefit was $0.4 million of state income tax
expense. Due to the ownership structure in place at the time, the Predecessor recorded no income tax benefit during the period ending September 30, 2004.



As of September 30, 2005, the Company had a deferred tax asset of $2.6 million due to prior and current years losses by the TRS. Management
believes that it is more likely than not that this deferred tax asset will be realized and has determined that no valuation allowance is required.



Minority Interest. Minority interest in the operating partnership represents the limited partners proportionate share of the equity in the
operating partnership. Income is allocated to minority interest based on the weighted average percentage ownership during the quarter. For the nine month period ending September 30, 2005, the weighted average percentage of the limited
partners ownership was 25.7%. As a result of this ownership percentage, the portion of the income earned during the quarter by the Company and allocated to the minority interest was $0.9 million. Due to the ownership structure of the
Predecessor, the concept of minority interest did not exist.



Distributions to Preferred Shareholders. During the first nine months of 2005, the Company made distributions in the amount of the $2.5 million related to the Series A Preferred Shares. These shares were issued as the result of a
public offering that closed on June 13, 2005. There were no Preferred Shares issued by the Predecessor, therefore, there were no similar distributions in the prior year.



Net Income Available to Common Shareholders. The net income available to common shareholders of approximately $2.6
million for the first nine months of 2005 represented an increase of $0.1 million, or 4.0% as compared to $2.5 million generated during the same period for 2004. The increase was due to the net income produced by the acquired hotels, the reduced
interest expense, the increased income generated by our existing hotels and the income tax benefit, substantially offset by the corporate expense, amortization of stock-based compensation, the bad debt expense related to the Chapter 11 filings of
Delta Airlines and Northwest Airlines, the minority interest allocation and the preferred share distribution.



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NON-GAAP FINANCIAL MEASURES



FUNDS FROM OPERATIONS



The White Paper on Funds From Operations (FFO) approved by the Board of Governors of the National Association of Real Estate Investment Trusts
(NAREIT) in April 2002 defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of previously depreciated operating real estate assets and extraordinary items as defined by GAAP,
plus certain items such as real estate related depreciation and amortization, and after adjustment for any minority interest deriving from unconsolidated entities and joint ventures. Historical cost accounting for real estate assets in accordance
with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered the
presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical cost
depreciation, among other items, from GAAP net income. Management believes that the use of FFO, combined with the required primary GAAP presentations, has improved the understanding of operating results of REITs among the investing public and made
comparisons of REIT operating results more meaningful. Management considers FFO to be a useful measure of adjusted earnings for reviewing comparative operating and financial performance (although FFO should be reviewed in conjunction with net income
(loss), which remains the primary measure of performance) because by excluding gains or losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization, FFO assists in
comparing the operating performance of a companys real estate between periods or as compared to different companies.



We compute FFO in accordance with our interpretation of standards established by NAREIT which may not be comparable to FFO reported by other REITs that do
not define the term in accordance with the current NAREIT definition or that interpret the NAREIT definition differently than us. FFO does not represent cash generated from operating activities as determined by GAAP and should not be considered as
an alternative to GAAP net income as an indication of our financial performance or to cash flow from operating activities as determined by GAAP as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including
our ability to make cash distributions. FFO may include funds that may not be available for the Companys discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions, and other
commitments and uncertainties.



The following is a
reconciliation between net income and FFO for the three months and nine months ended September 30, 2005 and 2004, respectively (in thousands, except share amounts):



NET INCOME TO FFO RECONCILIATION



|                                            |  |                             |            |   |                                 |   |      
|------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------------- | - | -----
|                                            |  | The Company Q3 2005         |            |   | The PredecessorQ3 2004         
|Net income before minority interest         |  | $                           | 2,366      |   |                                 | $ | 986  
|Preferred Dividends                         |  |                             | (2,062     | ) |                                 | $ |     
|Real estate related depreciation            |  |                             | 4,143      |   |                                 |   | 1,999
|                                            |  |                             |            |   |                                 |   |      
|FFO                                         |  | $                           | 4,447      |   |                                 | $ | 2,985
|                                            |  |                             |            |   |                                 |   |      
|FFO per share - diluted                     |  | $                           | 0.19       |   |                                 |   |      
|                                            |  |                             |            |   |                                 |   |      
|Weighted average common shares outstanding  |  |                             | 17,173,201 |   |                                 |   |      
|Operating partnership units                 |  |                             | 5,993,837  |   |                                 |   |      
|                                            |  |                             |            |   |                                 |   |      
|Diluted weighted average shares outstanding |  |                             | 23,167,038 |   |                                 |   |      
|                                            |  |                             |            |   |                                 |   |      
|                                            |  |                            
|NET INCOME TO FFO RECONCILIATION            |  |                             |            |   |                                 |   |      
|                                            |  |                            
|                                            |  | The CompanyNine Months 2005 |            |   | The PredecessorNine Months 2004
|Net income before minority interest         |  | $                           | 6,026      |   |                                 | $ | 2,540
|Preferred Dividends                         |  | $                           | (2,475     | ) |                                 | $ |     
|Real estate related depreciation            |  |                             | 9,771      |   |                                 |   | 6,063
|                                            |  |                             |            |   |                                 |   |      
|FFO                                         |  | $                           | 13,322     |   |                                 | $ | 8,603
|                                            |  |                             |            |   |                                 |   |      
|FFO per share - diluted                     |  | $                           | 0.57       |   |                                 |   |      
|                                            |  |                             |            |   |                                 |   |      
|Weighted average common shares outstanding  |  |                             | 17,102,359 |   |                                 |   |      
|Operating partnership units                 |  |                             | 5,993,837  |   |                                 |   |      
|                                            |  |                             |            |   |                                 |   |      
|Diluted weighted average shares outstanding |  |                             | 23,096,196 |   |                                 |   |      
|                                            |  |                             |            |   |                                 |   |      



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##### Table of Contents

EBITDA



EBITDA herein is defined as net income (loss) before interest expense, taxes, depreciation and amortization. We believe that EBITDA is helpful to
investors and management as a measure of the performance of the Company because it provides an indication of the operating performance of the properties within the portfolio and is not impacted by the capital structure of the REIT. EBITDA does not
represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to GAAP net income as an indication of our financial performance or to cash flow from operating activities as determined by GAAP
as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions. EBITDA may include funds that may not be available for the Companys discretionary use due to
functional requirements to conserve funds for capital expenditures and property acquisitions, and other commitments and uncertainties.



The following is a reconciliation between net income and EBITDA for the three months and nine months ended September 30, 2005 and 2004, respectively
(in thousands):



|                                            |  |                             |        |   |                                 |   |       
|------------------------------------------- |  | --------------------------- | ------ | - | ------------------------------- | - | ------
|NET INCOME TO EBITDA RECONCILIATION         |  |                             |        |   |                                 |   |       
|                                            |  |                            
|                                            |  | The Company Q3 2005         |        |   | The PredecessorQ3 2004         
|Net income available to common shareholders |  | $                           | 227    |   |                                 | $ | 986   
|Minority interest                           |  |                             | 77     |   |                                 |   |      
|Depreciation and amortization               |  |                             | 4,414  |   |                                 |   | 2,166 
|Interest expense                            |  |                             | 3,151  |   |                                 |   | 2,959 
|Distributions to preferred shareholders     |  |                             | 2,062  |   |                                 |   |      
|Income tax benefit                          |  |                             | (723   | ) |                                 |   |      
|                                            |  |                             |        |   |                                 |   |       
|EBITDA                                      |  | $                           | 9,208  |   |                                 | $ | 6,111 
|                                            |  |                             |        |   |                                 |   |       
|                                            | 
|NET INCOME TO EBITDA RECONCILIATION         |  |                             |        |  
|                                            |  | The CompanyNine Months 2005 |        |   | The PredecessorNine Months 2004
|Net income available to common shareholders |  | $                           | 2,640  |   |                                 | $ | 2,540 
|Minority interest                           |  |                             | 911    |   |                                 |   |      
|Depreciation and amortization               |  |                             | 10,166 |   |                                 |   | 6,550 
|Interest expense                            |  |                             | 7,628  |   |                                 |   | 8,753 
|Distributions to preferred shareholders     |  |                             | 2,475  |   |                                 |   |      
|Income tax benefit                          |  |                             | (2,213 | ) |                                 |   |      
|                                            |  |                             |        |   |                                 |   |       
|EBITDA                                      |  | $                           | 21,607 |   |                                 | $ | 17,843
|                                            |  |                             |        |   |                                 |   |       



Key Hotel Operating Statistics



The following table illustrates key operating
statistics of our portfolio for the three months and nine months ended September 30, 2005:



|                                  |  |                 |        |   |                     |   |        |  
|--------------------------------- |  | --------------- | ------ | - | ------------------- | - | ------ | -
|Three Months Ending September 30, |  | The Company2005 |        |   | The Predecessor2004 |  
|11 hotels                         |  |                 |        |   |                     |   |        |  
|Room revenues                     |  | $               | 25,140 |   |                     | $ | 23,895 |  
|RevPAR (1)                        |  | $               | 89.33  |   |                     | $ | 84.91  |  
|Occupancy                         |  |                 | 73.7   | % |                     |   | 73.1   | %
|Average daily rate (2)            |  | $               | 121.19 |   |                     | $ | 116.10 |  
|Hotel EBITDA                      |  | $               | 10,375 |   |                     | $ | 9,620  |  



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##### Table of Contents

|                                 |  |                 |        |   |                     |   |        |  
|-------------------------------- |  | --------------- | ------ | - | ------------------- | - | ------ | -
|Nine Months Ending September 30, |  | The Company2005 |        |   | The Predecessor2004 |  
|11 hotels                        |  |                 |        |   |                     |   |        |  
|Room revenues                    |  | $               | 76,027 |   |                     | $ | 70,875 |  
|RevPAR (1)                       |  | $               | 91.04  |   |                     | $ | 84.56  |  
|Occupancy                        |  |                 | 72.4   | % |                     |   | 70.9   | %
|Average daily rate (2)           |  | $               | 125.79 |   |                     | $ | 119.29 |  
|Hotel EBITDA                     |  | $               | 33,289 |   |                     | $ | 28,940 |  

---

|(1) | RevPar is defined as the product of the occupancy percentage and ADR.
|--- | ---------------------------------------------------------------------

|(2) | Average daily rate is defined as total room revenue divided by the number of rooms sold.
|--- | ----------------------------------------------------------------------------------------

|(3) | EBITDA herein is defined as net income (loss) before interest expense, taxes, depreciation, amortization, and preferred dividends.
|--- | ----------------------------------------------------------------------------------------------------------------------------------



For comparative purposes this schedule includes the Embassy Suites Hotel
Phoenix, which was acquired on February 24, 2005, the Hilton Glendale, which was acquired on June 23, 2005 and the Embassy Suites Hotel & Casino San Juan, which was acquired on June 28, 2005, for the entire three months and
nine months ending September 30, 2005 and 2004, but excludes the Chicago Marriott Southwest at Burr Ridge for all periods as this property did not open until August 2004.



LIQUIDITY AND CAPITAL RESOURCES



Our principal source of funds to meet our cash requirements, including distributions to stockholders, is our share of the operating partnerships
cash flow. The operating partnerships principal source of revenue will be the cash flow provided by the hotel operations.



Below is a comparison of the cash flows for the nine months ended September 30, 2005 and 2004, respectively. (000s):



|                                                     |  |                 |          |   |                     |   |        |  
|---------------------------------------------------- |  | --------------- | -------- | - | ------------------- | - | ------ | -
|                                                     |  | The Company2005 |          |   | The Predecessor2004 |  
|Net cash provided by operating activities            |  | $               | 25,171   |   |                     | $ | 9,301  |  
|Net cash used in investing activities                |  |                 | (183,599 | ) |                     |   | (4,659 | )
|Net cash provided by (used in) financing activities  |  |                 | 156,266  |   |                     |   | (1,391 | )
|                                                     |  |                 |          |   |                     |   |        |  
|Net (decrease) increase in cash and cash equivalents |  | $               | (2,162   | ) |                     | $ | 3,251  |  
|                                                     |  |                 |          |   |                     |   |        |  



Cash flow from hotel
operations is subject to all operating risks common to the hotel industry, including:



| |  | Competition for guests from other hotels;
|- |  | -----------------------------------------



| |  | Adverse effects of general and local economic conditions;
|- |  | ---------------------------------------------------------



| |  | Dependence on demand from business and leisure travelers, which may fluctuate and be seasonal;
|- |  | ----------------------------------------------------------------------------------------------



| |  | Increases in energy costs, airline fares, and other expenses related to travel, which may deter traveling;
|- |  | ----------------------------------------------------------------------------------------------------------



| |  | Increases in operating costs related to inflation and other factors, including wages, benefits, insurance, and energy;
|- |  | ----------------------------------------------------------------------------------------------------------------------



| |  | Overbuilding in the hotel industry, especially in particular markets; and
|- |  | -------------------------------------------------------------------------



| |  | Actual or threatened acts of terrorism and actions taken against terrorists, which often cause public concern about travel safety.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Recurring capital expenditures and debt service are the most significant short-term liquidity
requirements. During the remainder of 2005, we expect capital expenditures will be substantially funded by our replacement reserve accounts.



We expect to set aside 4% of future hotel revenues (5% with respect to the Hyatt Regency Rochester) in our replacement reserve accounts to fund capital
expenditures. Throughout the remainder of 2005 we expect to make approximately $6.1 million in capital expenditures with the majority of the expenditures occurring at the Hyatt Regency Rochester, Embassy Suites Hotel & Casino San Juan,
Hilton Glendale and the Embassy Suites Hotel Tampa Airport/Westshore. We anticipate that these expenditures will be funded from existing restricted cash reserves and operating cash.



We may seek to negotiate additional credit facilities, replacement credit facilities, or we may issue debt instruments. Any
debt incurred or issued by us may be secured or unsecured, long-term, medium-term or short-term, bear interest at a fixed or variable rate, and be subject to such other terms as the Board of Directors considers prudent. However, we cannot assure you
that we would be able to obtain such financings on favorable terms, if at all.



We have considered our short-term (defined as one-year or less) liquidity needs and the adequacy of our estimated cash flow from operations and other expected liquidity sources to meet these needs. We expect our
principal short-term liquidity needs will be to fund normal recurring expenses, debt service requirements, and any distributions on our outstanding common shares, Series A Preferred Shares and operating partnership units. We anticipate that these
needs will be met with cash flows provided by operating activities and proceeds from additional financings.



We expect to meet long-term (defined as greater than one year) liquidity requirements such as property acquisitions, scheduled debt maturities, major
renovations, development projects and other nonrecurring capital improvements utilizing cash flow from operations, additional debt financings and preferred or common equity offerings. We expect to acquire additional hotel properties as suitable
opportunities arise.



Capital Projects



During the three months and nine months ended September 30, 2005, Eagle
spent approximately $4.3 million and $11.4 million, respectively, on capital improvements.



Below is a table depicting the significant capital expenditures by hotel for the nine months ended September 30, 2005 :



|                                             |  |                           |            
|-------------------------------------------- |  | ------------------------- | -----------
|Hotel                                        |  | 2005 Capital Expenditures
|Hilton Cincinnati Airport                    |  | $                         | 3.5 million
|Embassy Suites Hotel Phoenix                 |  |                           | 1.8 million
|Embassy Suites Hotel Cincinnati-RiverCenter  |  |                           | 1.8 million
|Embassy Suites Hotel Tampa Airport/Westshore |  |                           | 1.6 million
|Hyatt Regency Rochester                      |  |                           | 1.4 million



Throughout the
remainder of 2005, we expect to make approximately $6.1 million in capital expenditures with the majority of the expenditures occurring at the Hyatt Regency Rochester, Embassy Suites Hotel & Casino San Juan, Hilton Glendale and the Embassy
Suites Hotel Tampa Airport/Westshore. We anticipate that these expenditures will be funded from existing restricted cash reserves and operating cash.



Off Balance Sheet Arrangements



We currently have no off-balance sheet arrangements. Because we have the right and obligation to acquire the remaining 51% interest in the entity that
owns the Embassy Suites Hotel Cincinnati-RiverCenter no later than January 31, 2006 in exchange for 427,485 operating partnership units, the assets, liabilities and operations of such entity are included in our consolidated financial statements
as required by FIN 46(R).



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Cash Distribution Policy



We have elected to be taxed as a REIT commencing with our taxable year ended December 31, 2004. To qualify as a REIT, we will be required to make
annual distributions to our stockholders of at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction and by excluding net capital gain and which does not necessarily equal net income as calculated
in accordance with generally accepted accounting principles). The amount, timing and frequency of distributions will be authorized by our board of directors and declared by us based upon a variety of factors deemed relevant by our directors, and no
assurance can be given that our distribution policy will not change in the future. Our ability to pay distributions to our stockholders will depend, in part, upon the management of our properties by our independent hotel managers. Distributions to
our stockholders will generally be taxable to our stockholders as ordinary income; however, because a portion of our investments will be equity ownership interests in hotels, which will result in depreciation and non-cash charges against our income,
a portion of our distributions may constitute a tax-free return of capital. To the extent not inconsistent with maintaining our REIT status, our TRS may retain any after-tax earnings.



Subsequent Events



On October 3, 2005, Eagle closed on a $26.0 million ninety-day, bridge facility with US Bank at a variable rate of 30-day LIBOR plus 2.25%. This loan
is secured by the Embassy Suites Hotel Phoenix-Scottsdale and the Embassy Suites Hotel Cincinnati-RiverCenter. $21.8 million of this bridge facility was drawn used to pay off the loans on the Embassy Suites Hotel Cincinnati-RiverCenter and the
Chicago Marriott Southwest at Burr Ridge. As of the date of this filing, we have approximately $4.2 million of remaining availability under this facility. It is the intent of the Company to secure permanent financing to replace this bridge loan;
however, we cannot assure you that we will be able to obtain such financing on favorable terms, if at all.



Inflation



We rely
entirely on the performance of our properties and the ability of the properties managers to increase revenues to keep pace with inflation. Hotel operators can generally increase room rates rather quickly, but competitive pressures may limit
their ability to raise rates faster than inflation. Our general and administrative costs, such as real estate and personal property taxes, property and casualty insurance, and utilities are also subject to inflationary pressures.



Seasonality



Virtually all of our properties operations are subject to the peaks and valleys associated with seasonal occupancy.
The seasonality pattern nevertheless can be expected to cause fluctuations in our revenue. We anticipate that our cash flow from the operation of the properties will be sufficient to enable us to make quarterly distributions to maintain our REIT
status. To the extent that cash flow from operations is insufficient during any quarter due to temporary or seasonal fluctuations in revenue, we expect to utilize other cash on hand or borrowings to make required distributions. However, we cannot
make any assurances that we will make distributions in the future.



Geographic Concentration



Three of our hotels
are located in the Northern Kentucky/Greater Cincinnati, Ohio metropolitan area. Economic and real estate conditions in this area significantly affect our revenues. Business layoffs, downsizing, industry slowdowns, demographic changes and other
similar factors may adversely affect the economic climate in this locale. Any resulting oversupply or reduced demand for hotels in the area would adversely affect revenues and net income.



Competition and Other Economic Factors



Our hotels are located in developed areas that contain other hotel properties. The future occupancy, average daily rate and RevPAR of any hotel could be
materially and adversely affected by an increase in the number of or quality of the competitive hotel properties in its market area. Competition could also affect the quality and quantity of future investment opportunities, and our ability to sell
existing properties.



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##### Table of Contents

As a portion of the lodging industrys sales are based upon business, commercial and leisure travel,
changes in general economic conditions, demographics, or changes in local business economics, could affect these and other travel segments. This may affect demand for rooms, which would affect hotel revenues.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Our primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments that bear interest at variable rates that
fluctuate with market interest rates. As a result of the Hilton Glendale refinancing on July 8, 2005 and the loan for the Embassy Suites San Juan that closed on September 7, 2005, other debt refinancing and additional financing, our
variable rate debt dropped to $31.7 million, or approximately 15%, of our mortgage debt as of September 30, 2005, versus approximately $100.2 million, or approximately 77%, at December 31, 2004. We feel this repositioning of our debt
provides an increased level of insulation from market fluctuation.



We have entered into both variable and fixed rate debt arrangements to allow us to optimize the balance of using variable rate debt versus fixed rate debt. The weighted average interest rate of our variable rate debt and total debt as of
October 3, 2005 was 5.93% and 5.57%, respectively.



We do
not believe that changes in market interest rates will have a material impact on the performance or fair value of our hotel portfolio because the value of our hotel portfolio is based primarily on the operating cash flow of the hotels, before
interest expense charges. However, a change of 1/4% in the index rate to which our variable rate debt is tied would change our annual interest expense incurred by $0.1 million, based upon the balances and loans outstanding at October 3,
2005.



ITEM 4. CONTROLS AND PROCEDURES



As of September 30, 2005, an evaluation was performed under the supervision and with the participation of the principal executive and financial officers regarding the effectiveness of our disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e)). Based upon the evaluation, they concluded that our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in this Quarterly Report was recorded,
processed, summarized and reported on a timely basis.



There
were no changes in our internal control over financial reporting during the quarter ended September 30, 2005 that materially affected or are reasonably likely to materially affect our internal control over financial reporting.



PART II



ITEM 1. LEGAL PROCEEDINGS



We are
subject to various legal proceedings and claims that arise in the ordinary course of business. In our opinion, the amount of any ultimate liability with respect to these actions will not materially affect our financial position, results of
operations or liquidity.



ITEM 2. UNREGISTERED SALES OF EQUITY 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.



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##### Table of Contents

ITEM 6. EXHIBITS



(a) Exhibits



|     |  |                                                                                                                                                                                                                                
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Loan Agreement dated as of July 7, 2005 between EHP Glendale, LLC and KeyBank National Association, incorporated herein by reference from Exhibit 10.4 to the quarterly report on Form
10-Q for the period ended June 30, 2005.
|     | 
|31.1 |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act                                                                                                                                                                
|     | 
|31.2 |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act                                                                                                                                                                
|     | 
|32.1 |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act                                                                                                                                                                
|     | 
|32.2 |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act                                                                                                                                                                



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SIGNATURES



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.



EAGLE HOSPITALITY PROPERTIES TRUST, INC.By:

/s/ J. William BlackhamJ. William BlackhamPresident and Chief Executive OfficerDATED: OCTOBER 31, 2005By:

/s/ Raymond D. MartzRaymond D. MartzChief Financial Officer, Secretary and Treasurer(Principal Accounting Officer)DATED: OCTOBER 31, 2005




30