##### 



Exhibit 13

MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

|                                                              |                                                          |                                                                              |                    |             |                   |   |           |           |          |  
|------------------------------------------------------------- | -------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------ | ----------- | ----------------- | - | --------- | --------- | -------- | -
|                                                              |                                                          |                                                                              | September 30, 2002 |             | December 31, 2001 |  
|                                                              |                                                          |                                                                              |                    |             |                   |  
|                                                              |                                                          |                                                                              |                    | (unaudited) |                   |   |           |          
|Assets                                                        |                                                          |                                                                              |                    |             |                   |   |           |          
|Investments in hotel properties                               |                                                          | $                                                                            | 3,181,539          |             |                   | $ | 3,183,677 |          
|                                                              |                                                          | Accumulated depreciation                                                     |                    |             | (477,625          | ) |           |           | (397,380 | )
|                                                              |                                                          |                                                                              |                    |             |                   |   |           |          
|                                                              |                                                          |                                                                              | 2,703,914          |             |                   |   | 2,786,297 |          
|                                                              |                                                          | Cash and cash equivalents                                                    |                    |             | 24,728            |   |           |           | 23,441   |  
|                                                              |                                                          | Accounts receivable, net of allowance for doubtful
accounts of $650 and $973 |                    |             | 52,791            |   |           |           | 47,178   |  
|                                                              |                                                          | Prepaid expenses and other                                                   |                    |             | 23,357            |   |           |           | 18,306   |  
|                                                              |                                                          | Income tax receivable                                                        |                    |             | 319               |   |           |           |         |  
|                                                              |                                                          | Notes receivable from Interstate Hotels & Resorts                            |                    |             | 56,069            |   |           |           | 36,000   |  
|                                                              |                                                          | Due from Interstate Hotels & Resorts                                         |                    |             |                  |   |           |           | 8,877    |  
|                                                              |                                                          | Investments in affiliates                                                    |                    |             | 41,714            |   |           |           | 41,714   |  
|                                                              |                                                          | Restricted cash                                                              |                    |             | 16,443            |   |           |           | 21,304   |  
|                                                              |                                                          | Intangible assets, net of accumulated amortization
of $9,067 and $5,289      |                    |             | 18,825            |   |           |           | 21,469   |  
|                                                              |                                                          |                                                                              |                    |             |                   |   |           |          
|                                                              |                                                          | $                                                                            | 2,938,160          |             |                   | $ | 3,004,586 |          
|                                                              |                                                          |                                                                              |                    |             |                   |   |           |          
|Liabilities, Minority Interests and Partners Capital         |                                                          |                                                                              |                    |             |                   |   |           |          
|                                                              | Accounts payable, accrued expenses and other liabilities |                                                                              | $                  | 117,998     |                   |   | $         | 123,972   |         
|                                                              | Accrued interest                                         |                                                                              |                    | 41,144      |                   |   |           | 45,009    |         
|                                                              | Due to Interstate Hotels & Resorts                       |                                                                              |                    | 9,954       |                   |   |           |          |         
|                                                              | Income taxes payable                                     |                                                                              |                    |            |                   |   |           | 310       |         
|                                                              | Dividends and distributions payable                      |                                                                              |                    | 449         |                   |   |           | 1,090     |         
|                                                              | Deferred income taxes                                    |                                                                              |                    | 6,358       |                   |   |           | 7,130     |         
|                                                              | Interest rate swaps                                      |                                                                              |                    | 6,802       |                   |   |           | 12,100    |         
|                                                              | Notes payable to MeriStar Hospitality                    |                                                                              |                    | 357,408     |                   |   |           | 357,117   |         
|                                                              | Long-term debt                                           |                                                                              |                    | 1,312,246   |                   |   |           | 1,343,017 |         
|                                                              |                                                          |                                                                              |                    |             |                   |   |           |          
|Total liabilities                                             |                                                          |                                                                              | 1,852,359          |             |                   |   | 1,889,745 |          
|                                                              |                                                          |                                                                              |                    |             |                   |   |           |          
|Minority interests                                            |                                                          |                                                                              | 2,629              |             |                   |   | 2,639     |          
|Redeemable OP units at redemption value                       |                                                          |                                                                              | 45,996             |             |                   |   | 67,012    |          
|Partners capital  common OP units 45,045,410 and
44,524,147 |                                                          |                                                                              |                    |             |                   |   |           |          
|                                                              | issued and outstanding                                   |                                                                              |                    | 1,037,176   |                   |   |           | 1,045,190 |         
|                                                              |                                                          |                                                                              |                    |             |                   |   |           |          
|                                                              |                                                          | $                                                                            | 2,938,160          |             |                   | $ | 3,004,586 |          
|                                                              |                                                          |                                                                              |                    |             |                   |   |           |          

See accompanying notes to condensed consolidated financial statements.

3



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##### 



MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
UNAUDITED (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------- | ------------------------------------------------------------------------------------------- | ------- | ------------------ | ------- | ----------------- | ------- | ----- | ------- | ---- | ------- | ------ | ------- | - | ------- | ----- | ------- | 
|                                                                                                                                                                         |                                          |                                                                                             |         | Three months ended |         | Nine months ended
|                                                                                                                                                                         |                                          |                                                                                             |         | September 30,      |         | September 30,    
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                  
|                                                                                                                                                                         |                                          |                                                                                             |         | 2002               |         | 2001              |         | 2002  |         | 2001
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |     
|Revenue:                                                                                                                                                                 |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         | Hotel operations:                        |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |        
|                                                                                                                                                                         |                                          | Rooms                                                                                       |         | $                  | 156,935 |                   |         | $     | 163,568 |      |         | $      | 506,054 |   |         | $     | 562,497 | 
|                                                                                                                                                                         |                                          | Food and beverage                                                                           |         |                    | 56,548  |                   |         |       | 55,886  |      |         |        | 189,423 |   |         |       | 200,273 | 
|                                                                                                                                                                         |                                          | Other operating departments                                                                 |         |                    | 18,306  |                   |         |       | 18,721  |      |         |        | 57,715  |   |         |       | 64,511  | 
|                                                                                                                                                                         | Participating lease revenue              |                                                                                             |         |                   |         |                   |         | 1,841 |         |      |         |       |         |   |         | 8,146 |        
|Office rental and other revenues                                                                                                                                         |                                          |                                                                                             | 4,017   |                    |         |                   | 4,016   |       |         |      | 14,282  |        |         |   | 12,183  |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Total revenue                                                                                                                                                            |                                          |                                                                                             | 235,806 |                    |         |                   | 244,032 |       |         |      | 767,474 |        |         |   | 847,610 |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Hotel operating expenses by department:                                                                                                                                  |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          | Rooms                                                                                       |         |                    | 40,895  |                   |         |       | 42,715  |      |         |        | 122,194 |   |         |       | 134,225 | 
|                                                                                                                                                                         |                                          | Food and beverage                                                                           |         |                    | 44,187  |                   |         |       | 44,122  |      |         |        | 138,234 |   |         |       | 147,320 | 
|                                                                                                                                                                         |                                          | Other operating departments                                                                 |         |                    | 10,967  |                   |         |       | 10,353  |      |         |        | 33,159  |   |         |       | 33,845  | 
|Office rental, parking and other operating expenses                                                                                                                      |                                          |                                                                                             | 767     |                    |         |                   | 819     |       |         |      | 2,372   |        |         |   | 2,444   |      
|Undistributed operating expenses:                                                                                                                                        |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          | Administrative and general                                                                  |         |                    | 42,136  |                   |         |       | 39,610  |      |         |        | 129,098 |   |         |       | 126,774 | 
|                                                                                                                                                                         |                                          | Property operating costs                                                                    |         |                    | 40,166  |                   |         |       | 40,716  |      |         |        | 117,842 |   |         |       | 124,812 | 
|                                                                                                                                                                         |                                          | Property taxes, insurance and other                                                         |         |                    | 16,511  |                   |         |       | 20,811  |      |         |        | 52,999  |   |         |       | 57,158  | 
|                                                                                                                                                                         |                                          | Depreciation and amortization                                                               |         |                    | 30,039  |                   |         |       | 28,500  |      |         |        | 91,242  |   |         |       | 85,594  | 
|                                                                                                                                                                         |                                          | Expense for non-hedging derivatives                                                         |         |                    | 1,132   |                   |         |       |        |      |         |        | 4,211   |   |         |       |        | 
|                                                                                                                                                                         |                                          | Write-off of deferred financing costs                                                       |         |                    |        |                   |         |       |         |      |         |        | 1,529   |   |         |       |        | 
|                                                                                                                                                                         |                                          | Loss on fair value of non-hedging derivatives                                               |         |                    |        |                   |         |       |        |      |         |        | 4,735   |   |         |       |        | 
|                                                                                                                                                                         |                                          | Write down of investment in STS Hotel Net                                                   |         |                    |        |                   |         |       |        |      |         |        |        |   |         |       | 2,112   | 
|                                                                                                                                                                         |                                          | Swap termination costs                                                                      |         |                    |        |                   |         |       |        |      |         |        |        |   |         |       | 9,297   | 
|                                                                                                                                                                         |                                          | FelCor merger costs                                                                         |         |                    |        |                   |         |       | 2,028   |      |         |        |        |   |         |       | 5,817   | 
|                                                                                                                                                                         |                                          | Cost to terminate leases with Prime Hospitality Corporation                                 |         |                    |        |                   |         |       |        |      |         |        |        |   |         |       | 1,315   | 
|                                                                                                                                                                         |                                          | Restructuring charge                                                                        |         |                    |        |                   |         |       | 1,080   |      |         |        |        |   |         |       | 1,080   | 
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Total operating expenses                                                                                                                                                 |                                          |                                                                                             | 226,800 |                    |         |                   | 230,754 |       |         |      | 697,615 |        |         |   | 731,793 |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Net operating income                                                                                                                                                     |                                          |                                                                                             | 9,006   |                    |         |                   | 13,278  |       |         |      | 69,859  |        |         |   | 115,817 |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Interest expense, net                                                                                                                                                    |                                          |                                                                                             | 33,846  |                    |         |                   | 31,354  |       |         |      | 102,543 |        |         |   | 91,661  |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|Income (loss) from continuing operations before minority
interests, income tax expense (benefit), discontinued
operations, loss on sale of assets and extraordinary loss |                                          |                                                                                             | (24,840 | )                  |         |                   | (18,076 | )     |         |      | (32,684 | )      |         |   | 24,156  |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Minority interests                                                                                                                                                       |                                          |                                                                                             | (18     | )                  |         |                   | (22     | )     |         |      | (10     | )      |         |   | (16     | )    
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Income (loss) from continuing operations before income tax
expense (benefit), discontinued operations, loss on sale of
assets and extraordinary loss                     |                                          |                                                                                             | (24,822 | )                  |         |                   | (18,054 | )     |         |      | (32,674 | )      |         |   | 24,172  |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Income tax expense (benefit)                                                                                                                                             |                                          |                                                                                             | (595    | )                  |         |                   | (521    | )     |         |      | (754    | )      |         |   | 721     |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Income (loss) from continuing operations before discontinued
operations, loss on sale of assets and extraordinary loss                                                   |                                          |                                                                                             | (24,227 | )                  |         |                   | (17,533 | )     |         |      | (31,920 | )      |         |   | 23,451  |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Discontinued operations:                                                                                                                                                 |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          | Income (loss) from operations of assets sold (including
loss on disposal of $6,403 in 2002) |         |                    | (6,640  | )                 |         |       | 558     |      |         |        | (5,768  | ) |         |       | 2,264   | 
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|                                                                                                                                                                         | Income tax benefit                       |                                                                                             |         | 128                |         |                   |         |      |         |      |         | 128    |         |   |         |      |        
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|                                                                                                                                                                         | Income (loss) on discontinued operations |                                                                                             |         | (6,512             | )       |                   |         | 558   |         |      |         | (5,640 | )       |   |         | 2,264 |        
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Loss on sale of assets, net of tax effect of ($20) and ($39)                                                                                                             |                                          |                                                                                             |        |                    |         |                   | (1,075  | )     |         |      |        |        |         |   | (2,137  | )    
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Extraordinary loss on early extinguishments of debt, net of tax
effect of ($17)                                                                                          |                                          |                                                                                             |        |                    |         |                   |        |       |         |      |        |        |         |   | (1,226  | )    
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Net income (loss)                                                                                                                                                        |                                          | $                                                                                           | (30,739 | )                  |         | $                 | (18,050 | )     |         | $    | (37,560 | )      |         | $ | 22,352  |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Preferred distributions                                                                                                                                                  |                                          |                                                                                             | (141    | )                  |         |                   | (141    | )     |         |      | (423    | )      |         |   | (423    | )    
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |       |         | 
|Net income (loss) applicable to common unitholders                                                                                                                       |                                          | $                                                                                           | (30,880 | )                  |         | $                 | (18,191 | )     |         | $    | (37,983 | )      |         | $ | 21,929  |      
|                                                                                                                                                                         |                                          |                                                                                             |         |                    |         |                   |         |       |         |      |         |        |         |   |         |      

See accompanying notes to condensed consolidated financial statements.

4



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##### 



MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED (IN THOUSANDS,
EXCEPT PER UNIT AMOUNTS)

|                                                                               |                                                                                |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |        |  
|------------------------------------------------------------------------------ | ------------------------------------------------------------------------------ | - | ------------------ | ------- | ----------------- | - | ------ | ------- | ---- | - | ------ | ------- | - | - | ----- | ------ | -
|                                                                               |                                                                                |   | Three months ended |         | Nine months ended
|                                                                               |                                                                                |   | September 30,      |         | September 30,    
|                                                                               |                                                                                |   |                    |         |                  
|                                                                               |                                                                                |   | 2002               |         | 2001              |   | 2002   |         | 2001
|                                                                               |                                                                                |   |                    |         |                   |   |        |         |     
|                                                                               | Net income (loss) applicable to common
unitholders                             |   | $                  | (30,880 | )                 |   | $      | (18,191 | )    |   | $      | (37,983 | ) |   | $     | 21,929 |  
|                                                                               |                                                                                |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |       
|                                                                               | Net income (loss) applicable to general
partner common unitholders             |   | $                  | (28,437 | )                 |   | $      | (16,803 | )    |   | $      | (34,921 | ) |   | $     | 20,178 |  
|                                                                               |                                                                                |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |       
|Net income (loss) applicable to third party
limited partner common unitholders |                                                                                | $ | (2,443             | )       |                   | $ | (1,388 | )       |      | $ | (3,062 | )       |   | $ | 1,751 |       
|                                                                               |                                                                                |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |       
|                                                                               |                                                                                |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |        |  
|                                                                               |                                                                                |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |        |  
|Earnings per unit:                                                             |                                                                                |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |       
|                                                                               | Basic:                                                                         |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |        |  
|                                                                               | Continuing income (loss) before discontinued
operations and extraordinary loss |   | $                  | (0.50   | )                 |   | $      | (0.39   | )    |   | $      | (0.66   | ) |   | $     | 0.42   |  
|                                                                               | Discontinued operations                                                        |   |                    | (0.13   | )                 |   |        | 0.01    |      |   |        | (0.12   | ) |   |       | 0.05   |  
|                                                                               | Extraordinary loss                                                             |   |                    |        |                   |   |        |        |      |   |        |        |   |   |       | (0.03  | )
|                                                                               |                                                                                |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |       
|                                                                               | Net income (loss)                                                              |   | $                  | (0.63   | )                 |   | $      | (0.38   | )    |   | $      | (0.78   | ) |   | $     | 0.44   |  
|                                                                               |                                                                                |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |       
|                                                                               | Diluted:                                                                       |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |        |  
|                                                                               | Continuing income (loss) before discontinued
operations and extraordinary loss |   | $                  | (0.50   | )                 |   | $      | (0.39   | )    |   | $      | (0.66   | ) |   | $     | 0.42   |  
|                                                                               | Discontinued operations                                                        |   |                    | (0.13   | )                 |   |        | 0.01    |      |   |        | (0.12   | ) |   |       | 0.05   |  
|                                                                               | Extraordinary loss                                                             |   |                    |        |                   |   |        |        |      |   |        |        |   |   |       | (0.03  | )
|                                                                               |                                                                                |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |       
|                                                                               | Net income (loss)                                                              |   | $                  | (0.63   | )                 |   | $      | (0.38   | )    |   | $      | (0.78   | ) |   | $     | 0.44   |  
|                                                                               |                                                                                |   |                    |         |                   |   |        |         |      |   |        |         |   |   |       |       

See accompanying notes to condensed consolidated financial statements.

5



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##### 



MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL
UNAUDITED
(IN THOUSANDS)

|                                                                                               |                             |                          |           |               |           |      |           |       |           | 
|---------------------------------------------------------------------------------------------- | --------------------------- | ------------------------ | --------- | ------------- | --------- | ---- | --------- | ----- | --------- | 
|                                                                                               |                             |                          |           | September 30,
|                                                                                               |                             |                          |           | 2002          |           | 2001
|                                                                                               |                             |                          |           |               |           |     
|                                                                                               |                             |                          |           |               |           |      |           |       |           | 
|Balance at beginning of year                                                                   |                             | $                        | 1,045,190 |               |           | $    | 1,142,772 |      
|Net income (loss)                                                                              |                             |                          | (37,560   | )             |           |      | 22,352    |      
|Foreign currency translation adjustment                                                        |                             |                          | 112       |               |           |      | (1,001    | )    
|Transition adjustment                                                                          |                             |                          |          |               |           |      | (2,842    | )    
|Change in fair value of cash flow hedges                                                       |                             |                          | 511       |               |           |      | (9,678    | )    
|                                                                                               |                             |                          |           |               |           |      |           |      
|                                                                                               | Comprehensive income (loss) |                          |           | (36,937       | )         |      |           | 8,831 |          
|Reclassification of non-hedging derivatives                                                    |                             |                          | 4,735     |               |           |      |          |      
|Contributions                                                                                  |                             |                          | 3,156     |               |           |      | 844       |      
|Contribution from general partner related to amortization
of unearned stock-based compensation |                             |                          | 3,041     |               |           |      | 2,628     |      
|Repurchase of units                                                                            |                             |                          | (1,193    | )             |           |      | (4,028    | )    
|Allocations from redeemable OP units                                                           |                             |                          | 20,528    |               |           |      | 41,266    |      
|Distributions                                                                                  |                             |                          | (1,344    | )             |           |      | (73,568   | )    
|                                                                                               |                             |                          |           |               |           |      |           |      
|                                                                                               |                             |                          |           |               |           |      |           |       |           | 
|                                                                                               |                             | Balance at end of period |           | $             | 1,037,176 |      |           | $     | 1,118,745 | 
|                                                                                               |                             |                          |           |               |           |      |           |      

See accompanying notes to condensed consolidated financial statements.

6



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##### 



MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED (IN THOUSANDS)

|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |          |         |  
|---------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | -------------------------------------------------------- | ------- | ----------------- | ------ | ---- | ------- | -------- | ------- | -
|                                                                                         |                                                                       |                                                          |         | Nine months ended
|                                                                                         |                                                                       |                                                          |         | September 30,    
|                                                                                         |                                                                       |                                                          |         |                  
|                                                                                         |                                                                       |                                                          |         | 2002              |        | 2001
|                                                                                         |                                                                       |                                                          |         |                   |        |     
|Operating activities:                                                                    |                                                                       |                                                          |         |                   |        |      |         |         
|Net income (loss)                                                                        |                                                                       | $                                                        | (37,560 | )                 |        | $    | 22,352  |         
|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |          |         |  
|Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |                                                                       |                                                          |         |                   |        |      |         |         
|                                                                                         | Depreciation and amortization                                         |                                                          |         | 91,770            |        |      |         | 86,639   |        
|                                                                                         | Loss on fair value of non-hedging derivatives                         |                                                          |         | 4,735             |        |      |         |         |        
|                                                                                         | Write-off of deferred financing costs                                 |                                                          |         | 1,529             |        |      |         |         |        
|                                                                                         | Loss on sale of assets, before tax effect                             |                                                          |         | 6,403             |        |      |         | 2,176    |        
|                                                                                         | Write down of investment in STS Hotel Net                             |                                                          |         |                  |        |      |         | 2,112    |        
|                                                                                         | Extraordinary loss on early extinguishment of debt, before tax effect |                                                          |         |                  |        |      |         | 1,243    |        
|                                                                                         | Minority interests                                                    |                                                          |         | (10               | )      |      |         | (16      | )      
|                                                                                         | Amortization of unearned stock based compensation                     |                                                          |         | 3,041             |        |      |         | 2,628    |        
|                                                                                         | Interest rate swaps marked to fair value                              |                                                          |         | (4,787            | )      |      |         |         |        
|                                                                                         | Deferred income taxes                                                 |                                                          |         | (772              | )      |      |         | (359     | )      
|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |          |         |  
|                                                                                         | Changes in operating assets and liabilities:                          |                                                          |         |                   |        |      |         |          |        
|                                                                                         |                                                                       | Accounts receivable, net                                 |         |                   | (5,613 | )    |         |          | 11,256  |  
|                                                                                         |                                                                       | Prepaid expenses and other                               |         |                   | (5,051 | )    |         |          | (6,135  | )
|                                                                                         |                                                                       | Due to/from Interstate Hotels & Resorts                  |         |                   | 5,762  |      |         |          | 9,152   |  
|                                                                                         |                                                                       | Accounts payable, accrued expenses and other liabilities |         |                   | (6,444 | )    |         |          | (18,035 | )
|                                                                                         |                                                                       | Accrued interest                                         |         |                   | (3,865 | )    |         |          | 3,080   |  
|                                                                                         |                                                                       | Income taxes payable                                     |         |                   | (629   | )    |         |          | 233     |  
|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |         
|Net cash provided by operating activities                                                |                                                                       |                                                          | 48,509  |                   |        |      | 116,326 |         
|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |         
|Investing activities:                                                                    |                                                                       |                                                          |         |                   |        |      |         |         
|                                                                                         | Investment in hotel properties, net                                   |                                                          |         | (35,824           | )      |      |         | (31,066  | )      
|                                                                                         | Proceeds from disposition of assets                                   |                                                          |         | 25,150            |        |      |         | 9,715    |        
|                                                                                         | Hotel operating cash received in lease conversions                    |                                                          |         |                  |        |      |         | 3,257    |        
|                                                                                         | Repayments of notes receivable                                        |                                                          |         | (7,000            | )      |      |         | (36,000  | )      
|                                                                                         | Change in restricted cash                                             |                                                          |         | 4,861             |        |      |         | (2,741   | )      
|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |         
|Net cash used in investing activities                                                    |                                                                       |                                                          | (12,813 | )                 |        |      | (56,835 | )       
|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |         
|Financing activities:                                                                    |                                                                       |                                                          |         |                   |        |      |         |         
|                                                                                         | Deferred financing costs                                              |                                                          |         | (3,416            | )      |      |         | (11,072  | )      
|                                                                                         | Proceeds from issuance of mortgages and notes payable                 |                                                          |         | 283,138           |        |      |         | 684,710  |        
|                                                                                         | Principal payments on mortgages and notes payable                     |                                                          |         | (313,618          | )      |      |         | (608,149 | )      
|                                                                                         | Contributions from partners                                           |                                                          |         | 3,156             |        |      |         | 2,157    |        
|                                                                                         | Repurchase of units                                                   |                                                          |         | (1,193            | )      |      |         | (4,028   | )      
|                                                                                         | Distributions paid to partners                                        |                                                          |         | (2,467            | )      |      |         | (75,950  | )      
|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |         
|Net cash used in financing activities                                                    |                                                                       |                                                          | (34,400 | )                 |        |      | (12,332 | )       
|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |         
|Effect of exchange rate changes on cash and cash equivalents                             |                                                                       |                                                          | (9      | )                 |        |      | 245     |         
|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |         
|Net increase in cash and cash equivalents                                                |                                                                       |                                                          | 1,287   |                   |        |      | 47,404  |         
|Cash and cash equivalents, beginning of period                                           |                                                                       |                                                          | 23,441  |                   |        |      | 242     |         
|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |         
|Cash and cash equivalents, end of period                                                 |                                                                       | $                                                        | 24,728  |                   |        | $    | 47,646  |         
|                                                                                         |                                                                       |                                                          |         |                   |        |      |         |         

See accompanying notes to condensed consolidated financial statements.

7



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##### 



MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
UNAUDITED (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. ORGANIZATION

General

We are a subsidiary operating partnership of MeriStar Hospitality Corporation.
We own a portfolio of upscale, full-service hotels in the United States and
Canada. Our portfolio is diversified by franchise and brand affiliations. As of
September 30, 2002, we owned 109 hotels, with 28,099 rooms, all of which are
leased by our taxable subsidiaries and managed by Interstate Hotels & Resorts,
Inc. Interstate Hotels was created on July 31, 2002 through the merger of
MeriStar Hotels & Resorts, Inc. and Interstate Hotels Corporation.

We were created on August 3, 1998, as a result of the merger between CapStar
Hotel Company and American General Hospitality Corporation, and the subsequent
formation of MeriStar Hospitality, the merged entity. MeriStar Hospitality, a
real estate investment trust, or REIT, is our general partner and owns a one
percent interest in us as of September 30, 2002. The limited partners are as
follows:



| |  |  | MeriStar LP, Inc., a wholly-owned subsidiary of MeriStar Hospitality,
which owns approximately a 90 percent interest as of September 30, 2002;
and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | various third parties, which owned an aggregate interest of nine percent
at September 30, 2002.                                                   

Partners capital includes the partnership interests of MeriStar Hospitality
and MeriStar LP, Inc. MeriStar Hospitality held 483,745 common OP units as of
September 30, 2002. MeriStar LP, Inc. held 44,561,665 common OP units as of
September 30, 2002. Due to the redemption rights of the limited partnership
units held by third parties, these units have been excluded from partners
capital and classified as Redeemable OP units and are recorded at redemption
value. At September 30, 2002, there were 4,296,307 redeemable units
outstanding.

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



| |  |  | managing the properties they lease (our taxable subsidiaries must
enter into an arms length management agreement with an independent
third-party manager that is actively involved in the trade or business
of hotel management and manages properties on behalf of other owners),
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | leasing a property that contains gambling operations; and                                                                                                                                                                                                                           
| |  |  | owning a brand or franchise.                                                                                                                                                                                                                                                        

We believe establishing taxable subsidiaries to lease the properties we own
provides an efficient alignment of and ability to capture the economic
interests of property ownership. Our taxable subsidiaries are parties to
management agreements with a subsidiary of Interstate Hotels to manage our
hotels. Under these management agreements, the taxable subsidiaries pay a
management fee to Interstate Hotels for each property. The taxable subsidiaries
in turn make rental payments to us under the participating leases. Under the
management agreements, the base management fee is 2.5% of total hotel revenue
plus incentives payments, based on meeting performance thresholds, that could
total up to 1.5% of total hotel revenue. All of the agreements, except for four
agreements with terms that renew annually, have an initial term of 10 years
with three renewal periods of five years each at the option of Interstate
Hotels, subject to some exceptions.

8



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##### 



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

We have prepared these unaudited interim financial statements according to the
rules and regulations of the Securities and Exchange Commission. We have
omitted certain information and footnote disclosures that are normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America. These interim financial
statements should be read in conjunction with the financial statements,
accompanying notes and other information included in our Annual Report on Form
10-K, as amended, for the year ended December 31, 2001. Certain 2001 amounts
have been reclassified to conform to the 2002 presentation.

In our opinion, the accompanying unaudited condensed consolidated interim
financial statements reflect all adjustments, which are of a normal and
recurring nature, necessary for a fair presentation of the financial condition
and results of operations and cash flows for the periods presented. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires us to make
estimates and assumptions. Such estimates and assumptions affect the reported
amounts of assets and liabilities, as well as the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Our actual results
could differ from those estimates. The results of operations for the interim
periods are not necessarily indicative of the results for the entire year.

Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information requires a public entity to
report selected information about operating segments in financial reports
issued to shareholders. Based on the guidance provided in the standard, we
have determined that our business is conducted in one reportable segment. The
standard also establishes requirements for related disclosures about products
and services, geographic areas and major customers. Revenues for Canadian
operations totaled $6,166 and $6,716 for the three months ended September 30,
2002 and 2001, respectively. Revenues for Canadian operations totaled $16,573
and $18,299 for the nine months ended September 30, 2002 and 2001,
respectively.

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

Our interest rate swap agreements were initially designated as hedges against
changes in future cash flows associated with specific variable rate debt
obligations.As of September 30, 2002, we had three swap agreements with
notional amounts totaling $300,000. All of these swap agreements have been
converted to non-hedging derivatives due to our repayment of the floating-rate
borrowings they originally hedged and they are currently being marked to market
through our statement of operations. We have interest rate exposure going
forward as the change in fair value of our non-hedging derivatives will have an
impact on our statement of operations. The interest rate swap agreements are
reflected at fair value in our consolidated balance sheet as of September 30,
2002. For more information regarding our interest rate hedging activities, see
Quantitative and Qualitative Disclosures about Market Risk.

New Accounting Pronouncements

In July 2002, the Financial Accounting Standards Board issued SFAS No. 146
Accounting for Costs Associated with Exit or Disposal Activities. If we
enter into these transactions in the future, we will have to evaluate the
effects this new standard will have on our financial statements. The
provisions of this statement are to be applied prospectively to exit or
disposal activities initiated after December 31, 2002.

In April 2002, the Financial Accounting Standards Board issued SFAS No. 145
Rescission of FASB Statements No. 4, 44 and 64, Amendment of SFAS No. 13,
Technical Corrections. We plan to adopt this statement on January 1, 2003.

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144
Accounting for the Impairment of Disposal of Long-Lived Assets, which
supersedes SFAS No. 121. The provisions of SFAS No. 144 were effective on
January 1, 2002 for our financial statements. SFAS No. 144 requires the
current and prior period operating results of any asset that has been disposed
of, on or after January 1, 2002, including any gain or loss recognized, to be
recorded as

9



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##### 



discontinued operations. In August 2002, we sold three hotels. All operating
results, including the loss on disposal, have been recorded as discontinued
operations. We have reclassified prior periods to reflect operations of the
three hotels as discontinued operations.

3. AMOUNTS DUE TO/FROM INTERSTATE HOTELS

Due to/from Interstate Hotel and Resorts

In the normal course of managing our hotel properties, Interstate Hotels incurs
day to day operating costs which are reimbursed by us. The balance of $9,954 at
September 30, 2002, includes management fees due, and reimbursements due for insurance, employee benefits,
sales and marketing expenses, and other miscellaneous operating expenses.
These amounts are normally paid within 30 days.

Pursuant to an intercompany agreement, we and Interstate Hotels provide each other with among other things, reciprocal rights to
participate in certain transactions entered into by each party. In particular, Interstate Hotels has a right of first refusal to become the manager
of any real property we acquire. We also may provide each other with certain services. These may include administrative, renovation supervision,
corporate, accounting, finance, risk management, legal, tax, information technology, human resources, acquisition identification and due diligence, and
operational services, for which Interstate Hotels is compensated in an amount that we would be charged by a third
party for comparable services. As of December 31, 2001, Interstate
owed us $8,877 for working capital deficits at the RMA lease conversion date and these services.

Note Receivable From Interstate Hotels and Resorts

Under a revolving credit agreement with Interstate Hotels through July 31,
2002, we had the ability to lend Interstate Hotels up to $50,000 for general
corporate purposes. The interest rate on this credit agreement was 650 basis
points over the 30-day London Interbank Offered Rate.

Interstate Hotels also issued us a term note effective January 1, 2002. This
$13,069 term note refinanced outstanding accounts payable Interstate Hotels
owed to us. The term loan bore interest at 650 basis points over the 30-day
LIBOR. The maturity date was the same as that of the revolving credit
agreement. The repayments of the credit agreement and term note were
subordinate to Interstates bank debt.

In connection with the merger that created Interstate Hotels on July 31, 2002,
Interstate Hotels paid $3,000 to reduce its borrowings outstanding on the
credit agreement. Also, the credit agreement and term note were amended and
combined into a term loan agreement with a principal balance of $56,069 and a
maturity date of July 31, 2007. The interest rate remained at 650 basis points
over the 30-day LIBOR. This term loan is subordinate to Interstates new
credit agreement, and the term loan does not allow for any additional amount of
further borrowings by Interstate Hotels.

4.     LONG-TERM DEBT

Long-term debt consisted of the following:

|                                      |  |                    |           |                   |  |   |           |  
|------------------------------------- |  | ------------------ | --------- | ----------------- |  | - | --------- | -
|                                      |  | September 30, 2002 |           | December 31, 2001
|                                      |  |                    |           |                  
|Senior unsecured notes                |  | $                  | 950,000   |                   |  | $ | 750,000   |  
|Credit facility                       |  |                    | 14,000    |                   |  |   | 224,000   |  
|Secured facility                      |  |                    | 315,955   |                   |  |   | 319,788   |  
|Mortgage debt and other               |  |                    | 38,550    |                   |  |   | 52,335    |  
|                                      |  |                    |           |                   |  |   |           |  
|                                      |  |                    | 1,318,505 |                   |  |   | 1,346,123 |  
|Notes payable to MeriStar Hospitality |  |                    | 359,300   |                   |  |   | 359,300   |  
|Unamortized issue discount            |  |                    | (8,151    | )                 |  |   | (5,289    | )
|                                      |  |                    |           |                   |  |   |           |  
|                                      |  | $                  | 1,669,654 |                   |  | $ | 1,700,134 |  
|                                      |  |                    |           |                   |  |   |           |  

As of September 30, 2002 aggregate future maturities of the above obligations
are as follows:

|           |  |   |           | 
|---------- |  | - | --------- | 
|2002       |  | $ | 1,914     | 
|2003       |  |   | 22,188    | 
|2004       |  |   | 170,669   | 
|2005       |  |   | 8,665     | 
|2006       |  |   | 9,407     | 
|Thereafter |  |   | 1,456,811 | 
|           |  |   |           | 
|           |  | $ | 1,669,654 | 
|           |  |   |           | 

In February 2002, we issued an additional $200,000 ($196,250, net of discount)
aggregate principal amount of 9.13% senior unsecured notes due 2011. We used
the proceeds from the issuance of these notes to repay approximately $195,000
of the outstanding balance under our revolving credit agreement. As a result
of this financing, we redesignated

10



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##### 



some swap agreements as non-hedging derivatives. We recognized a $4,735 loss
when this amount was transferred out of accumulated other comprehensive income
because the debt being hedged was repaid.

In February 2002, we amended our revolving credit agreement. The amendment
allowed us to reduce the revolving commitments to below $300,000. In March
2002, we reduced the borrowing capacity on our revolving credit agreement from
$310,000 to $150,000. We recognized a $1,529 loss due to the write-off of
deferred financing costs related to reducing the borrowing capacity of our
revolving credit agreement.

On October 29, 2002, we entered into a new three-year, $100,000 senior
unsecured revolving credit facility. The initial interest rate is 30-day LIBOR plus 388 basis points. We repaid the
outstanding
balance of $14,000 on our previous credit facility in conjunction with closing
this facility.

5.     DIVIDENDS AND DISTRIBUTIONS PAYABLE

On September 25, 2002, we declared a dividend for the three months ended
September 30, 2002 of $0.01 per limited partnership unit. We paid the dividend
on October 31, 2002.

6.     EARNINGS PER UNIT

The following table presents the computation of basic and diluted earnings per
unit (unit amounts in thousands):

|                                                                                      |                           |   |                    |   |                   |   |         |   |      |   |         |   |  |   |        |     | 
|------------------------------------------------------------------------------------- | ------------------------- | - | ------------------ | - | ----------------- | - | ------- | - | ---- | - | ------- | - |  | - | ------ | --- | 
|                                                                                      |                           |   | Three months ended |   | Nine months ended
|                                                                                      |                           |   | September 30,      |   | September 30,    
|                                                                                      |                           |   |                    |   |                  
|                                                                                      |                           |   | 2002               |   | 2001              |   | 2002    |   | 2001
|                                                                                      |                           |   |                    |   |                   |   |         |   |     
|BASIC EARNINGS (LOSS) PER
UNIT COMPUTATION:                                           |                           |   |                    |   |                   |   |         |   |      |   |         |   |  |   |        |    
|Income (loss) from continuing
operations before extraordinary loss                    |                           | $ | (24,227            | ) |                   | $ | (18,608 | ) |      | $ | (31,920 | ) |  | $ | 21,314 |    
|Dividends paid on unvested restricted
stock                                           |                           |   | (2                 | ) |                   |   | (198    | ) |      |   | (5      | ) |  |   | (593   | )  
|Preferred distributions                                                               |                           |   | (141               | ) |                   |   | (141    | ) |      |   | (423    | ) |  |   | (423   | )  
|                                                                                      |                           |   |                    |   |                   |   |         |   |      |   |         |   |  |   |        |    
|Income (loss) applicable to common
unitholders                                        |                           | $ | (24,370            | ) |                   | $ | (18,947 | ) |      | $ | (32,348 | ) |  | $ | 20,298 |    
|                                                                                      |                           |   |                    |   |                   |   |         |   |      |   |         |   |  |   |        |    
|Weighted average number of OP units
outstanding                                       |                           |   | 48,950             |   |                   |   | 48,312  |   |      |   | 48,830  |   |  |   | 48,359 |    
|                                                                                      |                           |   |                    |   |                   |   |         |   |      |   |         |   |  |   |        |    
|Basic earnings (loss) per unit from
continuing operations before
extraordinary loss   |                           | $ | (0.50              | ) |                   | $ | (0.39   | ) |      | $ | (0.66   | ) |  | $ | 0.42   |    
|                                                                                      |                           |   |                    |   |                   |   |         |   |      |   |         |   |  |   |        |    
|DILUTED EARNINGS (LOSS) PER
UNIT COMPUTATION:                                         |                           |   |                    |   |                   |   |         |   |      |   |         |   |  |   |        |    
|Adjusted income (loss) applicable to
common unitholders                               |                           | $ | (24,370            | ) |                   | $ | (18,947 | ) |      | $ | (32,348 | ) |  | $ | 20,298 |    
|                                                                                      |                           |   |                    |   |                   |   |         |   |      |   |         |   |  |   |        |    
|Weighted average number of OP units
outstanding                                       |                           |   | 48,950             |   |                   |   | 48,312  |   |      |   | 48,830  |   |  |   | 48,359 |    
|                                                                                      | Stock options of MeriStar |   |                    |  |                   |   |         |  |      |   |         |  |  |   |        | 324 | 
|                                                                                      |                           |   |                    |   |                   |   |         |   |      |   |         |   |  |   |        |    
|Total weighted average number of
diluted OP units outstanding                         |                           |   | 48,950             |   |                   |   | 48,312  |   |      |   | 48,830  |   |  |   | 48,683 |    
|                                                                                      |                           |   |                    |   |                   |   |         |   |      |   |         |   |  |   |        |    
|Diluted earnings (loss) per unit from
continuing operations before
extraordinary loss |                           | $ | (0.50              | ) |                   | $ | (0.39   | ) |      | $ | (0.66   | ) |  | $ | 0.42   |    
|                                                                                      |                           |   |                    |   |                   |   |         |   |      |   |         |   |  |   |        |    

Stock options are not included in the computation of diluted earnings (loss)
per unit when their effect is antidilutive.

11



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##### 



7.     SUPPLEMENTAL CASH FLOW INFORMATION

|                                                                         |                                                                         |                                       |                                 |         |                                 |   |      |        |        |        | 
|------------------------------------------------------------------------ | ----------------------------------------------------------------------- | ------------------------------------- | ------------------------------- | ------- | ------------------------------- | - | ---- | ------ | ------ | ------ | 
|                                                                         |                                                                         |                                       |                                 |         | Nine months ended September 30,
|                                                                         |                                                                         |                                       |                                 |         |                                
|                                                                         |                                                                         |                                       |                                 |         | 2002                            |   | 2001
|                                                                         |                                                                         |                                       |                                 |         |                                 |   |     
|                                                                         | Cash paid for interest and income taxes:                                |                                       |                                 |         |                                 |   |      |        |       
|                                                                         | Interest, net of capitalized interest of
$3,093 and $5,435 respectively |                                       | $                               | 110,619 |                                 |   | $    | 88,522 |       
|                                                                         | Income taxes                                                            |                                       |                                 | 643     |                                 |   |      | 558    |       
|                                                                         |                                                                         |                                       |                                 |         |                                 |   |      |        |        |        | 
|                                                                         | Non-cash investing and financing activities:                            |                                       |                                 |         |                                 |   |      |        |       
|                                                                         | Issuance of POPs                                                        |                                       |                                 | 3,339   |                                 |   |      |       |       
|                                                                         | Redemption of redeemable OP units                                       |                                       |                                 | 6,146   |                                 |   |      | 4,504  |       
|                                                                         |                                                                         |                                       |                                 |         |                                 |   |      |        |        |        | 
|Operating assets received and liabilities assumed from lease conversion: |                                                                         |                                       |                                 |         |                                 |   |      |       
|                                                                         |                                                                         | Accounts receivable                   |                                 | $       |                                |   |      | $      | 47,200 |       
|                                                                         |                                                                         | Prepaid expenses and other            |                                 |         |                                |   |      |        | 13,500 |       
|                                                                         |                                                                         | Furniture and fixtures, net           |                                 |         |                                |   |      |        | 152    |       
|                                                                         |                                                                         | Investment in affiliates, net         |                                 |         |                                |   |      |        | 1,629  |       
|                                                                         |                                                                         |                                       |                                 |         |                                 |   |      |       
|                                                                         |                                                                         |                                       | Total operating assets received |         | $                               |  |      |        | $      | 62,481 | 
|                                                                         |                                                                         |                                       |                                 |         |                                 |   |      |       
|                                                                         |                                                                         | Accounts payable and accrued expenses |                                 | $       |                                |   |      | $      | 65,706 |       
|                                                                         |                                                                         | Long-term debt                        |                                 |         |                                |   |      |        | 32     |       
|                                                                         |                                                                         |                                       |                                 |         |                                 |   |      |       
|                                                                         |                                                                         | Total liabilities acquired            |                                 | $       |                                |   |      | $      | 65,738 |       
|                                                                         |                                                                         |                                       |                                 |         |                                 |   |      |       

8.     STOCK-BASED COMPENSATION

As of September 30, 2002, MeriStar Hospitality has granted 481,500 shares of
restricted stock to employees. This restricted stock vests ratably over
three-year or five-year periods.

As of September 30, 2002, MeriStar Hospitality has granted 925,000 Profits-Only
OP Units, or POPs, to some of our employees pursuant to our POPs Plan. These
POPs are fixed awards and vest over three-year or four-year periods.

9.     RESTRUCTURING EXPENSES

During 2001, we incurred a restructuring charge of $1,080 in connection with
operational changes at our corporate headquarters. The restructuring included
eliminating seven corporate staff positions and office space no longer needed
under the new structure. During 2002, we applied $156 of lease termination
costs against the restructuring reserve. Approximately $236 of the
restructuring accrual remains at September 30, 2002.

10.     CONSOLIDATING FINANCIAL INFORMATION

Certain of our subsidiaries and MeriStar Hospitality are guarantors of senior
unsecured notes. Our guarantor subsidiaries also guarantee the unsecured
subordinated notes of MeriStar Hospitality. All guarantees are full and
unconditional, and joint and several. Exhibit 99.1 to this Quarterly Report on
Form 10-Q presents supplementary consolidating information for us, our
non-guarantor subsidiaries, and each of our guarantor subsidiaries. The
supplementary consolidating information in Exhibit 99.1 presents our
consolidating balance sheets as of September 30, 2002 and December 31, 2001,
consolidating statements of operations for each of the three and nine months
ended September 30, 2002 and 2001, and consolidating cash flows for the nine
months ended September 30, 2002 and 2001.

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##### 



11.     DISPOSITIONS

On August 1, 2002 we sold three hotels for $25,150, which resulted in a loss on
sale of assets of $6,403 ($6,275, net of tax). Revenue and pre-tax income
included in discontinued operations for these three hotels were:

|                      |  |                    |      |                   |  |      |       |      |  |   |       |  |  |   |       | 
|--------------------- |  | ------------------ | ---- | ----------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                      |  | Three months ended |      | Nine months ended
|                      |  | September 30       |      | September 30,    
|                      |  | 2002               |      | 2001              |  | 2002 |       | 2001
|                      |  |                    |      |                   |  |      |       |     
|Revenue               |  | $                  | 981  |                   |  | $    | 3,506 |      |  | $ | 7,233 |  |  | $ | 9,779 | 
|                      |  |                    |      |                   |  |      |       |      |  |   |       |  |  |   |       | 
|Pre-tax income (loss) |  | $                  | (237 | )                 |  | $    | 558   |      |  | $ | 635   |  |  | $ | 2,264 | 
|                      |  |                    |      |                   |  |      |       |      |  |   |       |  |  |   |       | 

12.     SUBSEQUENT EVENTS

On October 29, 2002, we entered into a new three-year $100,000 senior
unsecured revolving credit facility. The initial interest rate 30-day LIBOR plus 388
basis points. We repaid the outstanding
balance of $14,000 on our previous credit facility in conjunction with closing
this facility.

On November 6, 2002, we sold one hotel for
$12,500. The book carrying value of this hotel at the date of sale was
approximately $26,000. In the fourth quarter, we will record a loss on sale from
the disposition of this hotel of approximately $13,500.

SFAS No. 144 requires companies to classify
long-lived assets as held for sale (as opposed to held for use) as of a balance
sheet date if several criteria are met. One of those criteria is that the sale
of the asset must be considered probable (that is, likely to occur) as of the
balance sheet date. As of September 30, 2002, we did not consider the sale of
this asset to be probable and therefore we did not meet the criteria according to
SFAS No. 144 to classify this hotel as held for sale on our balance sheet and to reclassify the operations of the hotel to discontinued operations
on our statement of operations. We did not consider this sale probable as of September 30, 2002 for
the following reasons:



| |  |  | although we had listed this property to be sold
with an independent broker prior to September 30, 2002, we believed the
probability of a sale within one year was low. Based on our history of listing
assets for possible sale, we expected the listing, bidding, and negotiation
process for a possible sale, if any, to be extended;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | the offer to purchase this property was received
after the balance sheet date, in mid-October 2002;                                                                                                                                                                                                                                    
| |  |  | the offer was received from a new prospective
buyer with whom we had no previous dealings and therefore it was difficult to
assess the potential buyers ability or willingness to close a transaction
on a timely basis;                                                                                                              
| |  |  | the buyer was not willing to put up a
nonrefundable deposit; and                                                                                                                                                                                                                                                                       
| |  |  | we did not have an executed sales contract until
November 4, 2002.                                                                                                                                                                                                                                                                     

Based on the reasons above, we did not consider
this property as held for sale as of the balance sheet date.

In addition, as of September 30, 2002, we did not
consider this property impaired in accordance with the provisions of SFAS No. 144.
In situations when the criteria of SFAS No. 144 are met to classify an asset as
held for sale after the balance sheet date but before issuance of the financial
statements, SFAS No. 144 requires that the asset continue to be classified as
held and used in those financial statements when issued. We tested the asset for
recoverability on a held and used basis as of the balance sheet date. The
estimates of future cash flows used in this test considered the likelihood of
possible outcomes that existed at the balance sheet date, including the assessment of
the likelihood of the future sale of the asset. We performed the recoverability analysis using a
probability-weighted cash flows test to assess the asset for possible impairment.
Based on the results of the probability-weighted cash flows test for impairment,
the carrying value of this asset would be recoverable as of September 30, 2002;
therefore the asset was not considered impaired as of that date.

We sold this asset in light of the severe downturn in
the overall economy that has had a negative effect on our operating results, and
decreased the amount of cash generated by our operations. We believe we have
sufficient free cash flow currently, and project to have adequate cash flow in
future periods. Our current and future liquidity is, however, greatly dependent
upon our operating results, which are driven largely by overall economic
conditions. If the general economic conditions continue to be depressed for an
extended period, this would negatively impact our projections of
available cash flow and liquidity. In order to maintain our current operating
flexibility and establish a further cushion against the slowed economy and
future economic and other uncertainties, we are taking several steps to further
improve our liquidity. One of these steps is the marketing of non-core assets. We elected to
sell this asset principally because of the rapid closing offered by the seller.
This allowed us to improve our short-term liquidity and provide an additional
cushion against future operating results.

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