Exhibit 13



PART I. FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED BALANCE SHEETS

(Dollars and units in thousands)



|                                                                              |  |                           |           |   |                  |   |           |  
|----------------------------------------------------------------------------- |  | ------------------------- | --------- | - | ---------------- | - | --------- | -
|                                                                              |  | March 31, 2005(Unaudited) |           |   | December 31,2004 |  
|ASSETS                                                                        |  |                           |           |   |                  |   |           |  
|Property and equipment                                                        |  | $                         | 2,637,362 |   |                  | $ | 2,581,720 |  
|Accumulated depreciation                                                      |  |                           | (530,049  | ) |                  |   | (506,632  | )
|                                                                              |  |                           |           |   |                  |   |           |  
|                                                                              |  |                           | 2,107,313 |   |                  |   | 2,075,088 |  
|                                                                              |  |                          
|Investments in and advances to unconsolidated affiliates                      |  |                           | 70,451    |   |                  |   | 84,796    |  
|Prepaid expenses and other assets                                             |  |                           | 34,045    |   |                  |   | 34,230    |  
|Insurance claim receivable                                                    |  |                           | 60,896    |   |                  |   | 76,056    |  
|Accounts receivable, net of allowance for doubtful accounts of $358 and $691  |  |                           | 40,506    |   |                  |   | 32,979    |  
|Restricted cash                                                               |  |                           | 62,946    |   |                  |   | 58,413    |  
|Cash and cash equivalents                                                     |  |                           | 53,863    |   |                  |   | 60,533    |  
|                                                                              |  |                           |           |   |                  |   |           |  
|                                                                              |  | $                         | 2,430,020 |   |                  | $ | 2,422,095 |  
|                                                                              |  |                           |           |   |                  |   |           |  
|LIABILITIES AND PARTNERS CAPITAL                                             |  |                           |           |   |                  |   |           |  
|Long-term debt                                                                |  | $                         | 1,397,649 |   |                  | $ | 1,369,299 |  
|Notes payable to MeriStar Hospitality Corporation                             |  |                           | 202,528   |   |                  |   | 203,977   |  
|Accounts payable and accrued expenses                                         |  |                           | 66,144    |   |                  |   | 71,781    |  
|Accrued interest                                                              |  |                           | 35,812    |   |                  |   | 41,165    |  
|Due to Interstate Hotels & Resorts                                            |  |                           | 18,045    |   |                  |   | 21,799    |  
|Other liabilities                                                             |  |                           | 20,246    |   |                  |   | 11,553    |  
|                                                                              |  |                           |           |   |                  |   |           |  
|Total liabilities                                                             |  |                           | 1,740,424 |   |                  |   | 1,719,574 |  
|                                                                              |  |                           |           |   |                  |   |           |  
|Minority interests                                                            |  |                           | 2,422     |   |                  |   | 2,418     |  
|Redeemable OP units at redemption value, 2,298 and 2,298 outstanding          |  |                           | 16,085    |   |                  |   | 19,187    |  
|Partners capital  Common OP units, 87,439 and 87,367 issued and outstanding |  |                           | 671,089   |   |                  |   | 680,916   |  
|                                                                              |  |                           |           |   |                  |   |           |  
|                                                                              |  | $                         | 2,430,020 |   |                  | $ | 2,422,095 |  
|                                                                              |  |                           |           |   |                  |   |           |  



The accompanying notes
are an integral part of these consolidated financial statements.



1



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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(Dollars in thousands, except per unit amounts)



|                                                                            |  |                             |         |   |      |   |         |  
|--------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                            |  | Three Months EndedMarch 31, |        
|                                                                            |  | 2005                        |         |   | 2004 |  
|Revenue:                                                                    |  |                             |         |   |      |   |         |  
|Hotel operations:                                                           |  |                             |         |   |      |   |         |  
|Rooms                                                                       |  | $                           | 125,995 |   |      | $ | 129,992 |  
|Food and beverage                                                           |  |                             | 51,858  |   |      |   | 49,110  |  
|Other hotel operations                                                      |  |                             | 11,384  |   |      |   | 15,340  |  
|Office rental, parking and other revenue                                    |  |                             | 1,858   |   |      |   | 1,368   |  
|                                                                            |  |                             |         |   |      |   |         |  
|Total revenue                                                               |  |                             | 191,095 |   |      |   | 195,810 |  
|                                                                            |  |                             |         |   |      |   |         |  
|Hotel operating expenses:                                                   |  |                             |         |   |      |   |         |  
|Rooms                                                                       |  |                             | 31,359  |   |      |   | 31,686  |  
|Food and beverage                                                           |  |                             | 37,509  |   |      |   | 36,907  |  
|Other hotel operating expenses                                              |  |                             | 7,116   |   |      |   | 9,475   |  
|Office rental, parking and other expenses                                   |  |                             | 824     |   |      |   | 585     |  
|Other operating expenses:                                                   |  |                             |         |   |      |   |         |  
|General and administrative, hotel                                           |  |                             | 32,105  |   |      |   | 32,264  |  
|General and administrative, corporate                                       |  |                             | 3,533   |   |      |   | 3,882   |  
|Property operating costs                                                    |  |                             | 29,682  |   |      |   | 29,735  |  
|Depreciation and amortization                                               |  |                             | 24,853  |   |      |   | 25,059  |  
|Property taxes, insurance and other                                         |  |                             | 10,989  |   |      |   | 16,334  |  
|Loss on asset impairments                                                   |  |                             |        |   |      |   | 184     |  
|                                                                            |  |                             |         |   |      |   |         |  
|Operating expenses                                                          |  |                             | 177,970 |   |      |   | 186,111 |  
|                                                                            |  |                             |         |   |      |   |         |  
|Equity in income/loss of and interest earned from unconsolidated affiliates |  |                             | 1,634   |   |      |   | 1,600   |  
|Hurricane business interruption income                                      |  |                             | 2,281   |   |      |   |        |  
|                                                                            |  |                             |         |   |      |   |         |  
|Operating income                                                            |  |                             | 17,040  |   |      |   | 11,299  |  
|                                                                            |  |                            
|Minority interest (expense) income                                          |  |                             | (5      | ) |      |   | 4       |  
|Interest expense, net                                                       |  |                             | (30,714 | ) |      |   | (34,502 | )
|Loss on early extinguishments of debt                                       |  |                             | (60     | ) |      |   | (5,923  | )
|                                                                            |  |                             |         |   |      |   |         |  
|Loss before income taxes and discontinued operations                        |  |                             | (13,739 | ) |      |   | (29,122 | )
|                                                                            |  |                            
|Income tax (expense) benefit                                                |  |                             | (10     | ) |      |   | 390     |  
|                                                                            |  |                             |         |   |      |   |         |  
|Loss from continuing operations                                             |  |                             | (13,749 | ) |      |   | (28,732 | )
|                                                                            |  |                             |         |   |      |   |         |  
|Discontinued operations:                                                    |  |                             |         |   |      |   |         |  
|Loss from discontinued operations before income tax                         |  |                             |        |   |      |   | (12,220 | )
|Income tax benefit                                                          |  |                             |        |   |      |   | 65      |  
|                                                                            |  |                             |         |   |      |   |         |  
|Loss from discontinued operations                                           |  |                             |        |   |      |   | (12,155 | )
|                                                                            |  |                             |         |   |      |   |         |  
|Net loss                                                                    |  | $                           | (13,749 | ) |      | $ | (40,887 | )
|                                                                            |  |                             |         |   |      |   |         |  
|Preferred distributions                                                     |  |                             |        |   |      |   | (141    | )
|                                                                            |  |                             |         |   |      |   |         |  
|Net loss applicable to common unitholders                                   |  | $                           | (13,749 | ) |      | $ | (41,028 | )
|                                                                            |  |                             |         |   |      |   |         |  
|Net loss applicable to general partner unitholders                          |  | $                           | (13,397 | ) |      | $ | (39,250 | )
|                                                                            |  |                             |         |   |      |   |         |  
|Net loss applicable to limited partner unitholders                          |  | $                           | (352    | ) |      | $ | (1,778  | )
|                                                                            |  |                             |         |   |      |   |         |  
|Basic and diluted loss per unit:                                            |  |                             |         |   |      |   |         |  
|Loss from continuing operations                                             |  | $                           | (0.15   | ) |      | $ | (0.40   | )
|Loss from discontinued operations                                           |  |                             |        |   |      |   | (0.17   | )
|                                                                            |  |                             |         |   |      |   |         |  
|Net loss per basic and diluted unit                                         |  | $                           | (0.15   | ) |      | $ | (0.57   | )
|                                                                            |  |                             |         |   |      |   |         |  



The accompanying notes
are an integral part of these consolidated financial statements.



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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(Dollars in thousands)



|                                                                                          |  |                             |         |   |      |   |         |  
|----------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                          |  | Three Months EndedMarch 31, |        
|                                                                                          |  | 2005                        |         |   | 2004 |  
|Operating activities:                                                                     |  |                             |         |   |      |   |         |  
|Net loss                                                                                  |  | $                           | (13,749 | ) |      | $ | (40,887 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                             |         |   |      |   |         |  
|Depreciation and amortization                                                             |  |                             | 24,824  |   |      |   | 26,702  |  
|Loss on asset impairments                                                                 |  |                             |        |   |      |   | 5,011   |  
|Loss on sale of assets, before tax effect                                                 |  |                             |        |   |      |   | 6,946   |  
|Loss on early extinguishments of debt                                                     |  |                             | 60      |   |      |   | 5,923   |  
|Minority interests                                                                        |  |                             | 5       |   |      |   | (4      | )
|Equity in loss of unconsolidated affiliate                                                |  |                             | 1,370   |   |      |   |        |  
|Amortization of unearned stock-based compensation                                         |  |                             | 277     |   |      |   | 587     |  
|Deferred income taxes                                                                     |  |                             |        |   |      |   | (358    | )
|Changes in operating assets and liabilities:                                              |  |                             |         |   |      |   |         |  
|Accounts receivable                                                                       |  |                             | 7,633   |   |      |   | (2,767  | )
|Prepaid expenses and other assets                                                         |  |                             | (112    | ) |      |   | 4,920   |  
|Receivables from unconsolidated affiliates                                                |  |                             | 13,004  |   |      |   | (1,600  | )
|Due from/to Interstate Hotels & Resorts                                                   |  |                             | (3,754  | ) |      |   | (5,461  | )
|Accounts payable, accrued expenses, accrued interest and other liabilities                |  |                             | (8,024  | ) |      |   | (1,648  | )
|                                                                                          |  |                             |         |   |      |   |         |  
|Net cash provided by (used in) operating activities                                       |  |                             | 21,534  |   |      |   | (2,636  | )
|                                                                                          |  |                             |         |   |      |   |         |  
|Investing activities:                                                                     |  |                             |         |   |      |   |         |  
|Capital expenditures for property and equipment                                           |  |                             | (55,642 | ) |      |   | (23,737 | )
|Proceeds from sales of assets                                                             |  |                             |        |   |      |   | 74,075  |  
|Increase in restricted cash                                                               |  |                             | (4,533  | ) |      |   | (2,133  | )
|Costs associated with disposition program and other, net                                  |  |                             |        |   |      |   | (3,304  | )
|                                                                                          |  |                             |         |   |      |   |         |  
|Net cash (used in) provided by investing activities                                       |  |                             | (60,175 | ) |      |   | 44,901  |  
|                                                                                          |  |                             |         |   |      |   |         |  
|Financing activities:                                                                     |  |                             |         |   |      |   |         |  
|Prepayments on long-term debt                                                             |  |                             | (1,531  | ) |      |   | (75,497 | )
|Scheduled payments on long-term debt                                                      |  |                             | (2,731  | ) |      |   | (2,307  | )
|Proceeds from mortgage loan, net of financing costs                                       |  |                             | 36,714  |   |      |   |        |  
|Distributions to minority investors                                                       |  |                             |        |   |      |   | (141    | )
|Repurchase of limited partnership units                                                   |  |                             | (507    | ) |      |   |        |  
|Other                                                                                     |  |                             | 26      |   |      |   | (77     | )
|                                                                                          |  |                             |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                                       |  |                             | 31,971  |   |      |   | (78,022 | )
|                                                                                          |  |                             |         |   |      |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                              |  |                             |        |   |      |   | (150    | )
|                                                                                          |  |                             |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                                 |  |                             | (6,670  | ) |      |   | (35,907 | )
|Cash and cash equivalents, beginning of period                                            |  |                             | 60,533  |   |      |   | 230,876 |  
|                                                                                          |  |                             |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                                  |  | $                           | 53,863  |   |      | $ | 194,969 |  
|                                                                                          |  |                             |         |   |      |   |         |  
|Supplemental Cash Flow Information                                                        |  |                             |         |   |      |   |         |  
|Cash paid for interest and income taxes:                                                  |  |                             |         |   |      |   |         |  
|Interest, net of capitalized interest                                                     |  | $                           | 36,393  |   |      | $ | 43,755  |  
|Income tax payments, net of (refunds)                                                     |  | $                           | 10      |   |      | $ | (969    | )
|                                                                                          |  |                            
|Non-cash investing and financing activities:                                              |  |                             |         |   |      |   |         |  
|Notes payable to MeriStar Hospitality redeemed in exchange for Common OP Units            |  | $                           |        |   |      | $ | 38,000  |  
|Redemption of OP units                                                                    |  | $                           |        |   |      | $ | 20      |  
|Change of fair value of interest rate swap                                                |  | $                           | 6,750   |   |      | $ |        |  



The accompanying notes
are an integral part of these consolidated financial statements.



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MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005



1. Organization



MeriStar Hospitality Operating Partnership, L.P. is the subsidiary operating partnership of MeriStar Hospitality Corporation Commission file number 1-11903, (MeriStar Hospitality, which is a real estate investment trust, or
REIT). We own a portfolio of primarily upper upscale, full-service hotels and resorts in the United States. Our portfolio is diversified geographically as well as by franchise and brand affiliations. As of March 31, 2005, we owned 73 hotels with
20,319 rooms, all of which were leased by our taxable subsidiaries. 71 of these hotels were managed by Interstate Hotels & Resorts (Interstate), one hotel was managed by The Ritz-Carlton Hotel Company, LLC (Ritz-Carlton),
a subsidiary of Marriott International, Inc., and one hotel was managed by another subsidiary (Marriott) of Marriott International, Inc. (collectively with Interstate and Ritz-Carlton, the Managers).



The Managers operate the 73 hotels we owned as of March 31, 2005 pursuant to
management agreements with our taxable subsidiaries. Under these management agreements, each taxable subsidiary pays a management fee for each property to the Manager of its hotels. The taxable subsidiaries in turn make rental payments to our
subsidiary operating partnership under the participating leases.



Under the Interstate management agreements, the base management fee is 2.5% of total hotel revenue, plus incentive payments based on meeting performance thresholds that could total up to an additional 1.5% of total hotel revenue. The
agreements have initial terms expiring on January 1, 2011 with three renewal periods of five years each at the option of Interstate, subject to some exceptions. Additionally, our franchise fees generally range from 2.0% to 7.4% of hotel room
revenues.



Under the Ritz-Carlton and Marriott management
agreements, the base management fee is 3.0% and 2.5% of total hotel revenue, respectively, through 2005 and 3.0% under both thereafter, plus incentive payments based on meeting performance thresholds that could total up to an additional 2.0% of
total revenue and 20% of available cash flow (as defined in the relevant management agreement), respectively. The agreements have initial terms expiring in 2015 and 2024, respectively, with four and three renewal periods of 10 and five years each,
respectively, at the option of Ritz-Carlton and Marriott. The Ritz-Carlton and Marriott management agreements include certain limited performance guarantees by the relevant manager which are designed primarily to provide downside performance
protection and run through 2005 and up to 2008, respectively. Management, based upon budgets and operating trends, expects payments under these guarantees for 2005 and in the future to be minimal.



2. Summary of Significant Accounting Policies



Interim Financial Statements. We have prepared these unaudited
interim financial statements according to the rules and regulations of the United States 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. 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 for the year ended December 31, 2004.



In our
opinion, the accompanying unaudited 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 results of operations for the interim periods are not necessarily indicative of the results for the entire year.



Basis of Presentation and Principles of Consolidation. The accompanying consolidated financial statements include the accounts of the Company, its
subsidiaries and its controlled affiliates. We consolidate entities (in the absence of other factors when determining control) when we own over 50% of the voting shares of another company or, in the case of partnership investments, when we own a
majority of the general partnership interest. Additionally, if we determine that we are an owner in a variable interest entity within the



4



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meaning of the Financial Accounting Standards Board, or FASB, revision to Interpretation No. 46, Consolidation of
Variable Interest Entities and that our variable interest will absorb a majority of the entitys expected losses if they occur, receive a majority of the entitys expected residual returns if they occur, or both, then we will
consolidate the entity. All material intercompany transactions and balances have been eliminated in consolidation. One of our properties reports results over 13 four week periods each year. We include 12 weeks of results in each of quarters one
through three and 16 weeks of results in quarter four.



Use
of Estimates.Preparing financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from these estimates.



Property and Equipment.We record our property and equipment at cost,
or at fair value at the time of contribution for contributed property. We use the straight-line method for depreciation. We depreciate the majority of our buildings and improvements over an estimated useful life of 20 to 40 years, or the remaining
terms of a ground lease, if shorter. We depreciate furniture, fixtures and equipment over lives ranging from five to seven years, and computers over three to five years. During the three months ended March 31, 2005 and 2004, we recognized
depreciation expense of $23.4 million and $24.5 million, respectively. For the three months ended March 31, 2005 and 2004, we capitalized interest of $2.7 million and $0.7 million, respectively.



Held for Sale Properties.Held-for-sale classification requires that
the sale be probable and that the transfer of the asset is expected to be completed within one year, among other criteria. Assessing the probability of the sale requires significant judgment due to the uncertainty surrounding completing the
transaction, and as a result, we have developed the following policy to aid in the assessment of probability. We classify the properties we are actively marketing as held for sale once all of the following conditions are met:



| |  |  | Our board has approved the sale,
| | - |  | --------------------------------



| |  |  | We have a fully executed agreement with a qualified buyer which provides for no significant outstanding or continuing obligations with the property after sale, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have a significant non-refundable deposit.
| | - |  | ---------------------------------------------



We carry properties held for sale at the lower of their carrying values or estimated fair values less costs to sell. We cease depreciation at the time the
asset is classified as held for sale. If material to our total portfolio, we segregate the assets and liabilities relating to our held for sale properties on our consolidated balance sheet.



Cash Equivalents and Restricted Cash.We classify investments with
original maturities of three months or less as cash equivalents. Our cash equivalents include investments in debt securities, including commercial paper, overnight repurchase agreements and money market funds. Restricted cash represents amounts held
in escrow in accordance with the requirements of certain of our credit facilities.



Impairment or Disposal of Long-Lived Assets.We record as discontinued operations the current and prior period operating results of any asset that has been classified as held for sale or has been disposed of
and where we have no continuing involvement. Any gains or losses on final disposition are also included in discontinued operations.



Whenever events or changes in circumstances indicate that the carrying value of a long-lived asset may be impaired, an analysis is performed to determine
the recoverability of the assets carrying value. When we conclude that we expect to sell or otherwise dispose of an asset significantly before the end of its previously estimated useful life, we perform an impairment analysis on that asset (as
is the case for assets we are considering for disposition). We make estimates of the undiscounted cash flows from the expected future operations or potential sale of the asset. If the analysis indicates that the carrying value is not recoverable
from these estimates of cash flows, we write down the asset to estimated fair value and recognize an impairment loss. Any impairment losses we recognize on assets held for use are recorded as operating expenses. We record any impairment losses on
assets held for sale as a component of discontinued operations.



Accounting for Costs Associated with Exit or Disposal Activities.We recognize a liability for a cost associated with an exit or disposal activity only when the liability is incurred, and measure that liability initially at



5



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fair value. Hotels of which we dispose may be managed under agreements that require payments as a result of termination.
Any such liability will be recognized at the time the asset disposition is complete and a termination notice is provided. At that time, the recognition of the termination obligation will be included in the calculation of the final gain or loss on
sale. To date, we have not incurred any management agreement termination obligations other than in connection with sales of hotels.



Stock-Based Compensation. We apply the provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148,
for new stock options issued under our compensation programs sponsored by MeriStar Hospitality. As permitted by SFAS No. 148, we elected to apply the provisions prospectively, which includes recognizing compensation expense for only those stock
options issued in 2003 and after. We grant options with an exercise price equal to the price of our common stock on grant date. Compensation costs related to stock options are included in general and administrative expenses on the accompanying
consolidated statement of operations. We apply the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for our stock options issued by MeriStar Hospitality under our
compensation programs prior to January 1, 2003. As MeriStar Hospitality granted these stock options at fair market value, no compensation cost has been recognized. For our other equity-based compensation plans, we recognize compensation expense over
the vesting period based on the fair market value of the award at the date of grant for fixed plan awards, while variable plan awards are re-measured based upon the intrinsic value of the award at each balance sheet date.



Had compensation cost been determined based on fair value at the grant date
for awards granted prior to our adoption of the fair value method, our net loss and per unit amounts would have been adjusted to the pro forma amounts indicated as follows (in thousands, except per unit amounts):



|                                                                                                                                           |  |                             |         |   |      |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                                                           |  | Three Months EndedMarch 31, |        
|                                                                                                                                           |  | 2005                        |         |   | 2004 |  
|Net loss, as reported                                                                                                                      |  | $                           | (13,749 | ) |      | $ | (40,887 | )
|Add: Stock-based employee compensation expense included in reported net loss, net of related tax effect                                    |  |                             | 605     |   |      |   | 587     |  
|Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax
effect |  |                             | (611    | ) |      |   | (651    | )
|                                                                                                                                           |  |                             |         |   |      |   |         |  
|Net loss, pro forma                                                                                                                        |  | $                           | (13,755 | ) |      | $ | (40,951 | )
|                                                                                                                                           |  |                             |         |   |      |   |         |  
|Loss per unit:                                                                                                                             |  |                             |         |   |      |   |         |  
|Basic and Diluted                                                                                                                          |  | $                           | (0.15   | ) |      | $ | (0.57   | )
|                                                                                                                                           |  |                            
|Weighted average fair value of options granted                                                                                             |  |                             | N/A     | * |      | $ | 0.34    |  
|                                                                                                                                           |  |                            
|Loss per unit, pro forma:                                                                                                                  |  |                             |         |   |      |   |         |  
|Basic and Diluted                                                                                                                          |  | $                           | (0.15   | ) |      | $ | (0.57   | )

---

|* | No options were granted during the three months ended March 31, 2005.
|- | ---------------------------------------------------------------------



These pro forma compensation costs may not be representative of the actual effects on reported net loss and loss per unit in future years.



Derivative Instruments and Hedging Activities.Our interest rate risk
management objective is to manage the effect of interest rate changes on earnings and cash flows. We look to manage interest rates through the use of a combination of fixed and variable rate debt. We only enter into derivative or interest rate
transactions for hedging purposes. We recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. Changes in the fair value of derivatives are recorded each period in current earnings
or other comprehensive income based on the derivatives effectiveness and whether the derivative has been designated as a cash flow or fair value hedge.



6



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Acquisition of Hotels. Our hotel acquisitions consist almost exclusively of land, building,
furniture, fixtures and equipment. We allocate the purchase price among these asset classes and any acquired intangible assets based upon their respective fair values as required by SFAS No. 141, Business Combinations.



Investments in Unconsolidated Affiliates. We have non-controlling
interests in entities which we account for under the cost method or equity method of accounting. Our investment in MeriStar Investment Partners, L.P. (MIP) is a limited partner interest with no participation rights in the management,
affairs or operations of the entity, and is accounted for using the cost method. We recognize our preferred return on this investment quarterly as it becomes due to us; this investment is reflected in a separate line item on our Consolidated Balance
Sheets. Our investment in Radisson Lexington Avenue Hotel is accounted for using the equity method, since we are presumed to exert significant influence on this entity due to our ownership percentage of 49.99%. Accordingly, we recognize 49.99% of
the profit and loss of the investee. This investment is also reflected in a separate line item on our Consolidated Balance Sheets. Our investments in unconsolidated affiliates are periodically reviewed for other than temporary declines in market
value. An impairment is recorded as a reduction to the carrying value of the investment for any declines which are determined to be other than temporary.



Accounting for the Impact of the Hurricane Damage to Florida Properties.In August and September 2004, hurricanes caused substantial damage to a
number of our hotels located in Florida. The hurricane damage and local evacuation orders also caused significant business interruption at many of our Florida properties, including the complete closure of certain hotels. As a result, seven of our
hotels were closed for an extended period of time, and five others were affected in varying degrees.



We have comprehensive insurance coverage for both property damage and business interruption. Some properties are requiring substantial repair and
reconstruction and have remained closed while such repairs are completed. Our recovery effort is extensive and includes replacing portions of buildings, landscaping and furniture, as well as upgrading to comply with changes in building and
electrical codes. As of March 31, 2005, the net book value of the property damage is estimated to be at least $65.5 million; however, we are still assessing the impact of the hurricanes on our properties, and final net book value write-offs could
vary from this estimate. Changes to this estimate will be recorded in the periods in which they are determined. We have recorded a corresponding insurance claim receivable for this $65.5 million net book value amount because we believe that it is
probable that the insurance recovery, net of deductibles, will exceed the net book value of the damaged portion of these assets. The recovery is based on replacement cost, and we have submitted claims substantially in excess of $65.5 million.



While we expect the insurance proceeds will be sufficient to
cover most of the replacement cost of the restoration of these hotels, certain deductibles (primarily windstorm) and limitations will apply. Moreover, while we are receiving and expect to continue to receive interim insurance payments, no
determination has been made as to the total amount or timing of those insurance payments, and those insurance payments may not be sufficient to cover the costs of all the restoration of the hotels. To the extent that insurance proceeds, which are
calculated on a replacement cost basis, ultimately exceed the net book value of the damaged property, a gain will be recorded in the period when all contingencies related to the insurance claim have been resolved and the relevant payments have been
received.



As of March 31, 2005, seven of our Florida
properties remained substantially closed due to hurricane damage. As of May 2, 2005, six of these properties remained substantially closed. Additionally, as of March 31, 2005, two properties that suffered varying amounts of hurricane damage had
certain rooms and conference facilities out of service. Where possible and in order to mitigate loss of revenues, some permanent repairs to damaged properties have been deferred during the Florida high season, which generally lasts from
late December through early April, in order to have facilities available to meet demand. These damaged facilities will be removed from service for permanent repairs at a later date. We have hired consultants to assess our business interruption
claims and are currently negotiating with our insurance carriers regarding the amount of loss for these income losses sustained. To the extent that we are entitled to a recovery under the insurance policies, we will recognize a receivable when it
can be demonstrated that it is probable that such insurance recovery will be realized, and such receivable will then be reflected as a component of operating income. Any gain resulting from business interruption insurance for lost income will not be
recognized until all contingencies related to the insurance recoveries are resolved and collection of the relevant payments is probable. These income recognition criteria will likely often result in business interruption insurance recoveries being
recorded in a period subsequent to the period that we experience lost income from the affected properties, resulting in fluctuations in our net income that may reduce the comparability of reported quarterly results for some periods into the future.





7



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Under these income recognition criteria, as of March 31, 2005, we have recorded a business interruption
recovery gain of $2.3 million due to receiving recognition of a minimal level of business interruption profit that the insurance companies are willing to recognize without any contingencies at this time for certain of our hurricane-affected
properties. Our business interruption claims substantially exceed the amount of this minimal recognition to date. We ultimately expect to recognize additional business interruption insurance profit as we proceed further through the claims process.



Through March 31, 2005, we have incurred recoverable costs
related to both property damage and business interruption recoveries totaling $56.4 million. In addition, we recorded a receivable of $65.5 million related to the write-off of the net book value of the damaged portion of our assets. We collected
$63.3 million in insurance advances through March 31, 2005, of which $61.0 million reduced our receivable balance, and $2.3 million represented income on our business interruption recoveries. We have collected an additional $7.2 million in advances
from April 1 through May 2, 2005. The cost recoveries are recorded on the expense line item to which they relate; therefore there is no net impact to any line item or our results.



The following is a summary of hurricane-related activity recorded (in millions):



Hurricane Receivable



March 31, 2005



|                                       |  |   |       |  
|-------------------------------------- |  | - | ----- | -
|Fixed assets net book value write down |  | $ | 65.5  |  
|Recoverable costs incurred             |  |   | 56.4  |  
|Business interruption income           |  |   | 2.3   |  
|Payments received                      |  |   | (63.3 | )
|                                       |  |   |       |  
|                                       |  | $ | 60.9  |  
|                                       |  |   |       |  



New Accounting
Pronouncements.In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment, which requires companies to recognize compensation cost relating to share-based payment transactions, and measure that cost based on
the fair value of the equity or liability instruments issued. We are required to comply with the provisions of this statement beginning with the first quarter of 2006. We do not expect the adoption of this revised standard to have a material effect
on our accounting treatment for share-based payments, as we adopted the transition provisions of SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure on January 1, 2003 and elected to recognize
compensation expense for options granted subsequent to December 31, 2002 under the fair-value-based method.



The FASB issued Statement No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions in December 2004. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have
commercial substance. We are required to comply with the provisions of this statement for the third quarter of 2005. We have not entered into or modified any transactions within the scope of this standard, nor do we have any existing transactions
that fall within the scope of SFAS No. 153.



Reclassifications.Certain prior period information has been reclassified to conform to the current period presentation. These reclassifications have no impact on consolidated net loss.



3. Comprehensive Loss



Comprehensive loss equaled net loss for the three months ended March 31, 2005, as we no longer have foreign operations.
Comprehensive loss was $41.2 million for the three months ended March 31, 2004, which consisted of net loss ($40.9 million) and foreign currency translation adjustments.



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4. Acquisitions



On May 10, 2004 and June 25, 2004, we acquired the 366-room Ritz-Carlton, Pentagon City in Arlington, Virginia and the 485-room Marriott Irvine in Orange
County, California, respectively, for a total purchase price of $185.5 million, plus net acquisition costs and adjustments of $0.9 million.



The acquisitions were accounted for under the purchase method of accounting, and the assets and liabilities and results of operations of the hotels have
been consolidated in our financial statements since the date of purchase. On an unaudited pro forma basis, revenues, net income and basic and diluted loss per unit for the three months ended March 31, 2005 and 2004 would have been reported as
follows if the acquisitions had occurred at the beginning of each of the respective periods (in thousands, except per unit amounts):



|                   |  |                             |         |   |      |   |         |  
|------------------ |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                   |  | Three Months EndedMarch 31, |        
|                   |  | 2005                        |         |   | 2004 |  
|Total revenue      |  | $                           | 191,095 |   |      | $ | 207,221 |  
|Net loss           |  |                             | (13,749 | ) |      |   | (40,064 | )
|Net loss per unit: |  |                             |         |   |      |   |         |  
|Basic and Diluted  |  | $                           | (0.15   | ) |      | $ | (0.56   | )



5. Property and Equipment



Property and equipment consisted of the following (in
thousands):



|                                  |  |               |           |                  |   |          
|--------------------------------- |  | ------------- | --------- | ---------------- | - | ---------
|                                  |  | March 31,2005 |           | December 31,2004
|Land                              |  | $             | 244,088   |                  | $ | 244,088  
|Buildings and improvements        |  |               | 1,940,443 |                  |   | 1,926,813
|Furniture, fixtures and equipment |  |               | 307,070   |                  |   | 295,562  
|Construction-in-progress          |  |               | 145,761   |                  |   | 115,257  
|                                  |  |               |           |                  |   |          
|                                  |  | $             | 2,637,362 |                  | $ | 2,581,720
|                                  |  |               |           |                  |   |          



For the three months
ended March 31, 2005 and 2004, we capitalized interest of $2.7 million and $0.7 million, respectively.



We incurred no impairment losses during the first quarter of 2005. During the first quarter of 2004, we recognized impairment losses of $5.0 million, of
which $4.8 million is recorded in discontinued operations as of March 31, 2005 (see Note 11).



The impairment charges recorded during the first quarter of 2004 were triggered by an expectation that a property would be sold significantly before the end of its estimated useful life. The impairment charges were
based on our estimates of the fair value of the properties we were actively marketing based on available market data. These estimates required us to make assumptions about the sales prices that we expected to realize for each property as well as the
timing of a potential sale. In making these estimates, we considered the operating results of the assets, the market for comparable properties, and quotes from brokers, among other information. In nearly all cases, our estimates reflected the
results of an extensive marketing effort and negotiations with prospective buyers. Actual results could differ materially from these estimates.



6. Investments in Unconsolidated Affiliates



Investment in Radisson Lexington Avenue Hotel.On October 1, 2004, we acquired a 49.99% interest in the 705-room Radisson Lexington Avenue Hotel in
Midtown Manhattan. We made a total investment of $50 million, which includes a $40 million mezzanine loan that matures on October 1, 2014 and yields $5.8 million of cumulative annual interest, and a $10 million equity interest in the hotel. The
mezzanine loan is secured by a pledge of the equity interests held by the borrower in an indirect parent of the owner of the hotel, and has a 10-year term. The loan is subordinate to $150 million in senior notes, but has priority over all equity
interests.



9



---

Our equity investment is accounted for under the equity method of accounting, in accordance with our
accounting policies as described in Note 2 to the Consolidated Financial Statements. The interest income from the loan, as well as the income related to the 49.99% share in profits and losses, is recorded in a separate line item equity in
income/loss of and interest earned from unconsolidated affiliates within operating activities as the operations of this investment are integral to our operations. As of March 31, 2005, we recognized interest income of $1.4 million on the
mezzanine loan, which is recognized as earned. Our outstanding loan balance of $40.4 million includes $0.4 million unamortized origination costs associated with the loan. Our initial equity investment balance of $10.1 million includes $0.1 million
of external costs incurred. During the three months ended March 31, 2005, we recognized $1.3 million of equity in losses on our equity investment.



Investment in MIP. In 1999, we invested $40 million in MeriStar Investment Partners, L.P. (MIP), a joint venture established to acquire
upscale, full-service hotels. Our cost-basis investment is in the form of a limited partnership interest, in which we earned (through December 9, 2004) a 16% cumulative preferred return with outstanding balances compounded quarterly. In accordance
with MIPs December 2004 amended and restated partnership agreement, the return on our investment and on our remaining unpaid accrued preferred return was reduced to a 12% annual cumulative return rate, and subordinate only to the MIP debt; and
$12.5 million of our $40 million investment was upgraded to receive preference in liquidation over all other investments.



During the fourth quarter of 2003, we recognized a $25.0 million impairment loss on this investment since, at that time, the decline in the underlying
value of our investment was deemed other than temporary. As of March 31, 2005, the book value of the original investment is $15.0 million.



In February 2005, MIP completed a $175 million commercial mortgage-backed securities financing, secured by its portfolio of eight hotels. Upon the
completion of the financing in February 2005, we received a distribution of $15.5 million, which was applied to reduce our outstanding accrued preferred returns receivable to approximately $4 million.



As of March 31, 2005, our total MIP carrying value was $20.7 million,
consisting of the $15.0 million adjusted investment balance and $5.7 million of accrued preferred returns receivable.



We recognize our preferred return quarterly as it becomes due to us. The income, net of related expense, if any, is recorded in the Equity in
income/loss of and interest earned from unconsolidated affiliates line within operating activities as the operations of this investment are integral to our operations. For the three months ended March 31, 2005 and 2004, we recognized a
preferred return of $1.6 million and $1.6 million, respectively, from this investment. As of March 31, 2005 and December 31, 2004, cumulative preferred returns of $5.7 million and $19.7 million, respectively, were due from MIP. We expect that any
cumulative unpaid preferred returns will be paid in the future from excess cash flow above our current return and from potential partnership hotel disposition proceeds in excess of debt allocated to individual assets. We evaluate the collectibility
of our preferred return based on our preference to distributions and the underlying value of the hotel properties.



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7. Long-Term Debt and Notes Payable to MeriStar Hospitality



Long-term debt and notes payable to MeriStar Hospitality consisted of the
following (in thousands):



|                                                               |  |               |           |   |                  |   |           |  
|-------------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | -
|                                                               |  | March 31,2005 |           |   | December 31,2004 |  
|Senior unsecured notes due 2011  9.125%                       |  | $             | 355,665   |   |                  | $ | 355,665   |  
|Senior unsecured notes due 2008  9.0%                         |  |               | 270,500   |   |                  |   | 270,500   |  
|Senior unsecured notes due 2009  10.5%                        |  |               | 224,187   |   |                  |   | 224,187   |  
|Secured facility, due 2009                                     |  |               | 301,388   |   |                  |   | 302,979   |  
|Secured facility, due 2013                                     |  |               | 98,880    |   |                  |   | 99,293    |  
|Mortgage and other debt                                        |  |               | 161,972   |   |                  |   | 125,051   |  
|Unamortized issue discount                                     |  |               | (3,519    | ) |                  |   | (3,702    | )
|                                                               |  |               |           |   |                  |   |           |  
|                                                               |  | $             | 1,409,073 |   |                  | $ | 1,373,973 |  
|Fair value adjustment for interest rate swap                   |  |               | (11,424   | ) |                  |   | (4,674    | )
|                                                               |  |               |           |   |                  |   |           |  
|Long-term debt                                                 |  | $             | 1,397,649 |   |                  | $ | 1,369,299 |  
|                                                               |  |               |           |   |                  |   |           |  
|Notes payable to MeriStar Hospitality                          |  | $             | 202,740   |   |                  | $ | 204,225   |  
|Unamortized issue discount                                     |  |               | (212      | ) |                  |   | (248      | )
|                                                               |  |               |           |   |                  |   |           |  
|Notes payable to MeriStar Hospitality                          |  | $             | 202,528   |   |                  | $ | 203,977   |  
|                                                               |  |               |           |   |                  |   |           |  
|Total long-term debt and notes payable to MeriStar Hospitality |  | $             | 1,600,177 |   |                  | $ | 1,573,276 |  
|                                                               |  |               |           |   |                  |   |           |  



Aggregate future
maturities as of March 31, 2005 were as follows (in thousands):



|                                             |  |   |           |  
|-------------------------------------------- |  | - | --------- | -
|2005 (nine months)                           |  | $ | 8,414     |  
|2006                                         |  |   | 12,031    |  
|2007                                         |  |   | 45,523    |  
|2008                                         |  |   | 284,741   |  
|2009                                         |  |   | 503,526   |  
|Thereafter                                   |  |   | 757,366   |  
|                                             |  |   |           |  
|                                             |  | $ | 1,611,601 |  
|Fair value adjustment for interest rate swap |  |   | (11,424   | )
|                                             |  |   |           |  
|                                             |  | $ | 1,600,177 |  
|                                             |  |   |           |  



Notes payable to
MeriStar Hospitality.During the three months ended March 31, 2005, we repurchased, using available cash, $1.49 million of our notes payable to MeriStar Hospitality (plus $0.06 million of accrued interest). We recorded a loss on early
extinguishment of debt of $0.06 related to this activity.



Mortgage and other debt.On January 26, 2005, we entered into a $37.7 million mortgage loan on our Hilton Crystal City hotel that bears interest at a fixed rate of 5.84%. The mortgage requires interest only payments for the first
three years and then monthly payments of interest and principal over the remaining portion of the ten year term of the loan, with the majority of the principal balance paid at the end of the ten year term. Our net proceeds of $34.7 million are net
of a $3 million escrow reserve for future capital expenditures. We incurred financing costs of $0.8 million related to this mortgage.



Derivatives. As of March 31, 2005 and December 31, 2004, the fair value of our interest rate swap was approximately an $11.4 million liability and
$4.7 million liability, respectively. This amount is recorded on our consolidated balance sheet in the other liabilities line item with a corresponding debit recorded to long-term debt. During the three months ended March 31, 2005, we earned net
cash payments of $0.9 million under the swap, which were recorded as a reduction in interest expense. In conjunction with the interest rate swap, we have posted collateral of $18.9 million and $12.0 million as of March 31, 2005 and December 31,
2004, respectively, which is recorded as restricted cash. The required collateral amount fluctuates based on the changes in the swap rate and the amount of time left to maturity. During the three months ended March 31, 2005, our posted collateral
ranged from $10.9 million to $18.9 million. However, due to the terms of the swap agreement, our posted collateral must be a minimum amount calculated per the agreement, which was $6.3 million as of March 31, 2005. We will receive all remaining
collateral upon maturity of the swap.



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8. Partners Capital



OP Units.Our operating partnership agreement provides for five classes of partnership interests: Common OP Units,
Class B OP Units, Class C OP Units, Class D OP Units and Profits-Only OP Units, or POPs.



During the three months ended March 31, 2005, MeriStar Hospitality awarded 133,937 shares of common stock to employees, with a value of $1.0 million, related to our annual incentive plan for 2004. Of these shares,
63,935 were repurchased as treasury stock to satisfy the minimum statutory tax withholding requirements, and 70,002 shares were issued. In conjunction with this award, we issued 70,002 OP Units to MeriStar Hospitality. During the three months ended
March 31, 2005, we issued 3,430 OP Units to MeriStar Hospitality in conjunction with their issuance shares of common stock with a value of $0.03 million, related to shares issued under the employee stock purchase plan.



No Common OP Units were converted into common stock during the three months
ended March 31, 2005. Common OP Unit holders converted 3,686 of their OP Units, with a value of $0.02 million into common stock during the three months ended March 31, 2004. A POPs unit holder converted 15,000 POPs for cash during the three months
ended March 31, 2004.



9. Loss Per Unit



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



|                                                           |  |                             |         |   |      |   |         |  
|---------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                           |  | Three Months EndedMarch 31, |        
|                                                           |  | 2005                        |         |   | 2004 |  
|Basic and Diluted Loss Per Unit:                           |  |                             |         |   |      |   |         |  
|                                                           |  |                            
|Loss from continuing operations                            |  | $                           | (13,749 | ) |      | $ | (28,732 | )
|Preferred distributions                                    |  |                             |        |   |      |   | (141    | )
|                                                           |  |                             |         |   |      |   |         |  
|Loss available to common unitholders                       |  | $                           | (13,749 | ) |      | $ | (28,873 | )
|                                                           |  |                             |         |   |      |   |         |  
|Weighted average number of OP units outstanding            |  |                             | 89,690  |   |      |   | 71,750  |  
|                                                           |  |                             |         |   |      |   |         |  
|Basic and diluted loss per unit from continuing operations |  | $                           | (0.15   | ) |      | $ | (0.40   | )
|                                                           |  |                             |         |   |      |   |         |  



10. Commitments and Contingencies



In the course of document review with respect to the MIP
restructuring, MeriStar Hospitality discovered a potential technical REIT qualification issue relating to a wholly-owned subsidiary of MIP, of which we are deemed to own a de minimis proportionate share. In order to eliminate any uncertainty
regarding this issue, MeriStar Hospitality is currently negotiating a closing agreement with the Internal Revenue Service to resolve all REIT qualification matters with respect to this potential issue. As a partnership for federal income tax
purposes, we are not directly affected by the outcome of the discussions by MeriStar Hospitality with the Internal Revenue Service.



As part of our asset renovation program, we have entered into contractual obligations with vendors to acquire capital assets and perform renovations
totaling approximately $46.1 million to be expended over the next 12 months. Additionally, we have entered into contractual obligations related to capital expenditures as a result of hurricanes in the amount of $25.8 million to be expended over the
next 12 months, most of which we expect to reimbursed by our insurance carriers.



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11. Dispositions



No hotels were disposed of in the three months ended March 31, 2005. We disposed of 11 hotels in the three months ended March 31, 2004. As of March 31,
2005 and December 31, 2004, none of our hotels met our criteria for held-for-sale classification. Operating results for the sold hotels, and where applicable, the gain or loss on final disposition, are included in discontinued operations.



Summary financial information included in discontinued
operations for these hotels were as follows (in thousands):



|                            |  |                             |   |      |   |         |  
|--------------------------- |  | --------------------------- | - | ---- | - | ------- | -
|                            |  | Three Months EndedMarch 31, |  
|                            |  | 2005                        |   | 2004 |  
|Revenue                     |  | $                           |  |      | $ | 22,369  |  
|                            |  |                             |   |      |   |         |  
|Loss on asset impairments   |  | $                           |  |      | $ | (4,827  | )
|Pretax loss from operations |  |                             |  |      |   | (447    | )
|Loss on disposal            |  |                             |  |      |   | (6,946  | )
|                            |  |                             |   |      |   |         |  
|                            |  | $                           |  |      | $ | (12,220 | )
|                            |  |                             |   |      |   |         |  



Loss on disposal
resulted primarily from the recognition of termination fees payable to Interstate with respect to these hotels management contracts.



12. Consolidating Financial Statements



Certain of our subsidiaries and MeriStar Hospitality are guarantors of senior unsecured notes. Certain of our subsidiaries are guarantors of MeriStar
Hospitalitys unsecured subordinated notes. All guarantees are full and unconditional, and joint and several. Exhibit 99.1 to this Quarterly Report on Form 10-Q presents our supplementary consolidating financial statements, including each of
the guarantor subsidiaries. This exhibit presents our consolidating balance sheets as of March 31, 2005 and December 31, 2004, consolidating statements of operations for the three months ended March 31, 2005 and 2004, and consolidating statements of
cash flows for the three months ended March 31, 2005 and 2004.



13