##### 



Exhibit 13

| |  | 
| |  | 

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

|                                                                                     |                                                          |                                                                              |           |               |           |                   |           |           |           |  
|------------------------------------------------------------------------------------ | -------------------------------------------------------- | ---------------------------------------------------------------------------- | --------- | ------------- | --------- | ----------------- | --------- | --------- | --------- | -
|                                                                                     |                                                          |                                                                              |           | June 30, 2002 |           | December 31, 2001
|                                                                                     |                                                          |                                                                              |           |               |           |                  
|                                                                                     |                                                          |                                                                              |           | (unaudited)   |           |                   |           |          
|Assets                                                                               |                                                          |                                                                              |           |               |           |                   |           |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     |                                                          | Investments in hotel properties                                              |           | $             | 3,208,468 |                   |           | $         | 3,183,677 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     |                                                          | Accumulated depreciation                                                     |           |               | (455,714  | )                 |           |           | (397,380  | )
|                                                                                     |                                                          |                                                                              |           |               |           |                   |           |          
|                                                                                     |                                                          |                                                                              | 2,752,754 |               |           |                   | 2,786,297 |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     |                                                          | Cash and cash equivalents                                                    |           |               | 27,405    |                   |           |           | 23,441    |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     |                                                          | Accounts receivable, net of allowance for doubtful
accounts of $735 and $973 |           |               | 51,995    |                   |           |           | 47,178    |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     |                                                          | Prepaid expenses and other                                                   |           |               | 15,208    |                   |           |           | 18,306    |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     |                                                          | Notes receivable from Interstate Hotels & Resorts, Inc.                      |           |               | 59,069    |                   |           |           | 36,000    |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     |                                                          | Due from Interstate Hotels & Resorts                                         |           |               |          |                   |           |           | 8,877     |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     |                                                          | Investments in affiliates                                                    |           |               | 41,714    |                   |           |           | 41,714    |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     |                                                          | Restricted cash                                                              |           |               | 16,920    |                   |           |           | 21,304    |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     |                                                          | Intangible assets, net of accumulated amortization
of $7,814 and $5,289      |           |               | 20,232    |                   |           |           | 21,469    |  
|                                                                                     |                                                          |                                                                              |           |               |           |                   |           |          
|                                                                                     |                                                          | $                                                                            | 2,985,297 |               |           | $                 | 3,004,586 |          
|                                                                                     |                                                          |                                                                              |           |               |           |                   |           |          
|Liabilities, Minority Interests and Partners Equity                                 |                                                          |                                                                              |           |               |           |                   |           |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Accounts payable, accrued expenses and other liabilities |                                                                              | $         | 121,582       |           |                   | $         | 123,972   |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Accrued interest                                         |                                                                              |           | 53,217        |           |                   |           | 45,009    |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Due to Interstate Hotels & Resorts                       |                                                                              |           | 9,092         |           |                   |           |          |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Income taxes payable                                     |                                                                              |           | 41            |           |                   |           | 310       |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Distributions payable                                    |                                                                              |           | 449           |           |                   |           | 1,090     |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Deferred income taxes                                    |                                                                              |           | 6,798         |           |                   |           | 7,130     |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Interest rate swaps                                      |                                                                              |           | 8,684         |           |                   |           | 12,100    |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Notes payable to MeriStar Hospitality                    |                                                                              |           | 357,311       |           |                   |           | 357,117   |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Long-term debt                                           |                                                                              |           | 1,311,824     |           |                   |           | 1,343,017 |          
|                                                                                     |                                                          |                                                                              |           |               |           |                   |           |          
|Total liabilities                                                                    |                                                          |                                                                              | 1,868,998 |               |           |                   | 1,889,745 |          
|                                                                                     |                                                          |                                                                              |           |               |           |                   |           |          
|Minority interests                                                                   |                                                          |                                                                              | 2,646     |               |           |                   | 2,639     |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Redeemable OP units at redemption value                                              |                                                          |                                                                              | 67,722    |               |           |                   | 67,012    |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Partners capital  common OP units 45,045,390 and
44,524,147 issued and outstanding |                                                          |                                                                              | 1,045,931 |               |           |                   | 1,045,190 |          
|                                                                                     |                                                          |                                                                              |           |               |           |                   |           |          
|                                                                                     |                                                          | $                                                                            | 2,985,297 |               |           | $                 | 3,004,586 |          
|                                                                                     |                                                          |                                                                              |           |               |           |                   |           |          

See accompanying notes to condensed consolidated financial statements.

1



---



##### 



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

|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |         |  | 
|-------------------------------------------------------------------------------------------------------------------- | --------------------------- | ----------------------------------------------------------- | ------- | - | ------------------ | - | ---------------- | ----- | ------- | - | ------- | - | ------- | - | ------- | ----- | ------- |  | 
|                                                                                                                     |                             |                                                             |         |   | Three months ended |   | Six months ended
|                                                                                                                     |                             |                                                             |         |   | June 30,           |   | June 30,        
|                                                                                                                     |                             |                                                             |         |   |                    |   |                 
|                                                                                                                     |                             |                                                             |         |   | 2002               |   | 2001             |       | 2002    |   | 2001   
|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |        
|Revenue:                                                                                                             |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |      
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Hotel operations:           |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |        
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Rooms                                                       |         | $ | 183,422            |   |                  | $     | 202,380 |   |         | $ | 353,970 |   |         | $     | 402,760 | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Food and beverage                                           |         |   | 71,905             |   |                  |       | 74,092  |   |         |   | 133,970 |   |         |       | 145,383 | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Other operating departments                                 |         |   | 20,608             |   |                  |       | 23,534  |   |         |   | 39,716  |   |         |       | 46,005  | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     | Participating lease revenue |                                                             |         |  |                    |   |                  | 3,752 |         |   |         |  |         |   |         | 7,536 |        
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Office rental and other revenues                                                                                     |                             |                                                             | 5,320   |   |                    |   | 3,409            |       |         |   | 10,263  |   |         |   | 8,167   |      
|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |         | 
|Total revenue                                                                                                        |                             |                                                             | 281,255 |   |                    |   | 307,167          |       |         |   | 537,919 |   |         |   | 609,851 |      
|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |         | 
|Hotel operating expenses by department:                                                                              |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |      
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Rooms                                                       |         |   | 43,443             |   |                  |       | 46,565  |   |         |   | 82,378  |   |         |       | 92,287  | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Food and beverage                                           |         |   | 50,445             |   |                  |       | 52,486  |   |         |   | 94,850  |   |         |       | 103,890 | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Other operating departments                                 |         |   | 11,651             |   |                  |       | 12,046  |   |         |   | 22,345  |   |         |       | 23,616  | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Office rental, parking and other operating expenses                                                                  |                             |                                                             | 790     |   |                    |   | 688              |       |         |   | 1,604   |   |         |   | 1,625   |      
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Undistributed operating expenses:                                                                                    |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |      
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Administrative and general                                  |         |   | 44,727             |   |                  |       | 43,138  |   |         |   | 88,198  |   |         |       | 88,055  | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Property operating costs                                    |         |   | 41,453             |   |                  |       | 42,278  |   |         |   | 78,835  |   |         |       | 84,977  | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Property taxes, insurance and other                         |         |   | 16,864             |   |                  |       | 18,515  |   |         |   | 36,945  |   |         |       | 36,902  | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Depreciation and amortization                               |         |   | 31,139             |   |                  |       | 28,400  |   |         |   | 61,731  |   |         |       | 57,787  | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Expense
for non-hedging derivatives                         |         |   | 3,090              |   |                  |       |        |   |         |   | 3,079   |   |         |       |        | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | 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                                         |         |   |                   |   |                  |       | 3,789   |   |         |   |        |   |         |       | 3,789   | 
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                     |                             | Cost to terminate leases with Prime Hospitality
Corporation |         |   |                   |   |                  |       | 1,315   |   |         |   |        |   |         |       | 1,315   | 
|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |         | 
|Total operating expenses                                                                                             |                             |                                                             | 243,602 |   |                    |   | 249,220          |       |         |   | 476,229 |   |         |   | 505,652 |      
|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |         | 
|Net operating income                                                                                                 |                             |                                                             | 37,653  |   |                    |   | 57,947           |       |         |   | 61,690  |   |         |   | 104,199 |      
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Interest expense, net                                                                                                |                             |                                                             | 34,063  |   |                    |   | 30,032           |       |         |   | 68,662  |   |         |   | 60,261  |      
|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |         | 
|Income (loss) before minority interests, income tax
expense (benefit), loss on sale of assets and
extraordinary loss |                             |                                                             | 3,590   |   |                    |   | 27,915           |       |         |   | (6,972  | ) |         |   | 43,938  |      
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Minority interests                                                                                                   |                             |                                                             | (3      | ) |                    |   | (5               | )     |         |   | 8       |   |         |   | 6       |      
|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |         | 
|Income (loss) before income tax expense (benefit), loss
on sale of assets and extraordinary loss                     |                             |                                                             | 3,593   |   |                    |   | 27,920           |       |         |   | (6,980  | ) |         |   | 43,932  |      
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Income tax expense (benefit)                                                                                         |                             |                                                             | 90      |   |                    |   | 789              |       |         |   | (159    | ) |         |   | 1,242   |      
|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |         | 
|Income (loss) before loss on sale of assets and
extraordinary loss                                                   |                             |                                                             | 3,503   |   |                    |   | 27,131           |       |         |   | (6,821  | ) |         |   | 42,690  |      
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Loss on sale of assets, net of tax effect of ($19)                                                                   |                             |                                                             |        |   |                    |   |                 |       |         |   |        |   |         |   | (1,062  | )    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Extraordinary loss on early extinguishments of debt,
net of tax effect of ($17)                                      |                             |                                                             |        |   |                    |   |                 |       |         |   |        |   |         |   | (1,226  | )    
|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |         | 
|Net income (loss)                                                                                                    |                             |                                                             | 3,503   |   |                    |   | 27,131           |       |         |   | (6,821  | ) |         |   | 40,402  |      
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|                                                                                                                    
|Preferred distributions                                                                                              |                             |                                                             | (141    | ) |                    |   | (141             | )     |         |   | (282    | ) |         |   | (282    | )    
|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |         | 
|Net income (loss) applicable to common unitholders                                                                   |                             | $                                                           | 3,362   |   |                    | $ | 26,990           |       |         | $ | (7,103  | ) |         | $ | 40,120  |      
|                                                                                                                     |                             |                                                             |         |   |                    |   |                  |       |         |   |         |   |         |   |         |       |         | 

See accompanying notes to condensed consolidated financial statements.

2



---



##### 



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

|                                                                               |  |   |                                         |  |                    |      |                  |  |      |      |        |   |   |       |        |  |   |       |  
|------------------------------------------------------------------------------ |  | - | --------------------------------------- |  | ------------------ | ---- | ---------------- |  | ---- | ---- | ------ | - | - | ----- | ------ |  | - | ----- | -
|                                                                               |  |   |                                         |  | Three months ended |      | Six months ended
|                                                                               |  |   |                                         |  | June 30,           |      | June 30,        
|                                                                               |  |   |                                         |  |                    |      |                 
|                                                                               |  |   |                                         |  | 2002               |      | 2001             |  | 2002 |      | 2001  
|                                                                               |  |   |                                         |  |                    |      |                  |  |      |      |       
|Net income (loss) applicable to common unitholders                             |  | $ | 3,362                                   |  |                    | $    | 26,990           |  |      | $    | (7,103 | ) |   | $     | 40,120 | 
|                                                                               |  |   |                                         |  |                    |      |                  |  |      |      |        |   |   |       |        |  |   |      
|Net income (loss) applicable to general
partner common unitholder              |  | $ | 3,095                                   |  |                    | $    | 24,842           |  |      | $    | (6,525 | ) |   | $     | 36,887 | 
|                                                                               |  |   |                                         |  |                    |      |                  |  |      |      |        |   |   |       |        |  |   |      
|Net income (loss) applicable to third party
limited partner common unitholders |  | $ | 267                                     |  |                    | $    | 2,148            |  |      | $    | (578   | ) |   | $     | 3,233  | 
|                                                                               |  |   |                                         |  |                    |      |                  |  |      |      |        |   |   |       |        |  |   |      
|Earnings per unit:                                                             |  |   |                                         |  |                    |      |                  |  |      |      |        |   |   |       |        | 
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               |  |   | Basic:                                  |  |                    |      |                  |  |      |      |        |   |   |       |        |  |   |       |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               |  |   | Income (loss) before extraordinary loss |  | $                  | 0.07 |                  |  | $    | 0.55 |        |   | $ | (0.15 | )      |  | $ | 0.85  |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               |  |   | Extraordinary loss                      |  |                    |     |                  |  |      |     |        |   |   |      |        |  |   | (0.03 | )
|                                                                               |  |   |                                         |  |                    |      |                  |  |      |      |        |   |   |       |        |  |   |      
|                                                                               |  |   | Net income (loss)                       |  | $                  | 0.07 |                  |  | $    | 0.55 |        |   | $ | (0.15 | )      |  | $ | 0.82  |  
|                                                                               |  |   |                                         |  |                    |      |                  |  |      |      |        |   |   |       |        |  |   |      
|                                                                               |  |   | Diluted:                                |  |                    |      |                  |  |      |      |        |   |   |       |        |  |   |       |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               |  |   | Income (loss) before extraordinary loss |  | $                  | 0.07 |                  |  | $    | 0.54 |        |   | $ | (0.15 | )      |  | $ | 0.83  |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               |  |   | Extraordinary loss                      |  |                    |     |                  |  |      |     |        |   |   |      |        |  |   | (0.02 | )
|                                                                               |  |   |                                         |  |                    |      |                  |  |      |      |        |   |   |       |        |  |   |      
|                                                                               |  |   | Net income (loss)                       |  | $                  | 0.07 |                  |  | $    | 0.54 |        |   | $ | (0.15 | )      |  | $ | 0.81  |  
|                                                                               |  |   |                                         |  |                    |      |                  |  |      |      |        |   |   |       |        |  |   |      

See accompanying notes to condensed consolidated financial statements.

3



---



##### 



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

|                                                                                               |                             |                          |           |                           |           |      |           |        |           | 
|---------------------------------------------------------------------------------------------- | --------------------------- | ------------------------ | --------- | ------------------------- | --------- | ---- | --------- | ------ | --------- | 
|                                                                                               |                             |                          |           | Six months ended June 30,
|                                                                                               |                             |                          |           |                          
|                                                                                               |                             |                          |           | 2002                      |           | 2001
|                                                                                               |                             |                          |           |                           |           |     
|Balance at beginning of year                                                                   |                             | $                        | 1,045,190 |                           |           | $    | 1,142,772 |       
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Net income (loss)                                                                              |                             |                          | (6,821    | )                         |           |      | 40,402    |       
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Foreign currency translation adjustment                                                        |                             |                          | 829       |                           |           |      | (159      | )     
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Transition adjustment                                                                          |                             |                          |          |                           |           |      | (2,842    | )     
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Change in fair value of cash flow hedges                                                       |                             |                          | 511       |                           |           |      | (4,268    | )     
|                                                                                               |                             |                          |           |                           |           |      |           |       
|                                                                                               | Comprehensive income (loss) |                          |           | (5,481                    | )         |      |           | 33,133 |          
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Reclassification of non-hedging derivatives                                                    |                             |                          | 4,735     |                           |           |      |          |       
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Contributions                                                                                  |                             |                          | 3,156     |                           |           |      | 705       |       
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Contribution from general partner related to amortization
of unearned stock-based compensation |                             |                          | 1,920     |                           |           |      | 1,842     |       
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Repurchase of units                                                                            |                             |                          | (1,193    | )                         |           |      | (3,280    | )     
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Allocations from (to) redeemable OP units                                                      |                             |                          | (1,501    | )                         |           |      | (9,851    | )     
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Distributions                                                                                  |                             |                          | (895      | )                         |           |      | (48,387   | )     
|                                                                                               |                             |                          |           |                           |           |      |           |       
|                                                                                               |                             | Balance at end of period |           | $                         | 1,045,931 |      |           | $      | 1,116,934 | 
|                                                                                               |                             |                          |           |                           |           |      |           |       

4



---



##### 



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

|                                                             |                                                                       |                                                          |         |                  |        |      |         |          |        |  
|------------------------------------------------------------ | --------------------------------------------------------------------- | -------------------------------------------------------- | ------- | ---------------- | ------ | ---- | ------- | -------- | ------ | -
|                                                             |                                                                       |                                                          |         | Six months ended
|                                                             |                                                                       |                                                          |         | June 30,        
|                                                             |                                                                       |                                                          |         |                 
|                                                             |                                                                       |                                                          |         | 2002             |        | 2001
|                                                             |                                                                       |                                                          |         |                  |        |     
|Operating activities:                                        |                                                                       |                                                          |         |                  |        |      |         |         
|                                                            
|                                                            
|                                                            
|                                                            
|Net income (loss)                                            |                                                                       | $                                                        | (6,821  | )                |        | $    | 40,402  |         
|                                                            
|                                                            
|                                                            
|                                                            
|Adjustments to reconcile net income (loss) to net            |                                                                       |                                                          |         |                  |        |      |         |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | cash provided by operating activities:                                |                                                          |         |                  |        |      |         |          |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Depreciation and amortization                                         |                                                          |         | 61,731           |        |      |         | 57,787   |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | 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                             |                                                          |         |                 |        |      |         | 1,081    |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Write down of investment in STS Hotel Net                             |                                                          |         |                 |        |      |         | 2,112    |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Extraordinary loss on early extinguishment of debt,
before tax effect |                                                          |         |                 |        |      |         | 1,243    |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Minority interests                                                    |                                                          |         | 8                |        |      |         | 6        |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Amortization of unearned stock based compensation                     |                                                          |         | 1,920            |        |      |         | 1,842    |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Interest rate swaps marked to fair value                              |                                                          |         | (2,905           | )      |      |         | -        |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Deferred income taxes                                                 |                                                          |         | (332             | )      |      |         | 296      |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Changes in operating assets and liabilities:                          |                                                          |         |                  |        |      |         |          |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                       | Accounts receivable, net                                 |         |                  | (4,817 | )    |         |          | (7,007 | )
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                       | Prepaid expenses and other                               |         |                  | 3,098  |      |         |          | 502    |  
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                       | Due to/from Interstate Hotels & Resorts                  |         |                  | 4,900  |      |         |          | 11,328 |  
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                       | Accounts payable, accrued expenses and other liabilities |         |                  | (2,862 | )    |         |          | (9,052 | )
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                       | Accrued interest                                         |         |                  | 8,208  |      |         |          | 15,987 |  
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                       | Income taxes payable                                     |         |                  | (269   | )    |         |          | 499    |  
|                                                             |                                                                       |                                                          |         |                  |        |      |         |         
|Net cash provided by operating activities                    |                                                                       |                                                          | 68,123  |                  |        |      | 117,026 |         
|                                                             |                                                                       |                                                          |         |                  |        |      |         |         
|Investing activities:                                        |                                                                       |                                                          |         |                  |        |      |         |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Investment in hotel properties                                        |                                                          |         | (24,696          | )      |      |         | (23,782  | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Proceeds from disposition of assets                                   |                                                          |         |                 |        |      |         | 7,274    |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Hotel operating cash received in lease conversions                    |                                                          |         |                 |        |      |         | 3,257    |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Notes receivable from Interstate Hotels & Resorts                     |                                                          |         | (10,000          | )      |      |         | (36,000  | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Change in restricted cash                                             |                                                          |         | 4,384            |        |      |         | (283     | )     
|                                                             |                                                                       |                                                          |         |                  |        |      |         |         
|Net cash used in investing activities                        |                                                                       |                                                          | (30,312 | )                |        |      | (49,534 | )       
|                                                             |                                                                       |                                                          |         |                  |        |      |         |         
|Financing activities:                                        |                                                                       |                                                          |         |                  |        |      |         |         
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Deferred financing costs                                              |                                                          |         | (3,571           | )      |      |         | (9,906   | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Proceeds from issuance of long-term debt                              |                                                          |         | 234,841          |        |      |         | 599,529  |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Principal payments on long-term debt                                  |                                                          |         | (265,840         | )      |      |         | (584,830 | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Contributions from partners                                           |                                                          |         | 3,156            |        |      |         | 705      |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Repurchase of units                                                   |                                                          |         | (1,193           | )      |      |         | (3,280   | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Distributions to partners                                             |                                                          |         | (1,212           | )      |      |         | (49,685  | )     
|                                                             |                                                                       |                                                          |         |                  |        |      |         |         
|Net cash used in financing activities                        |                                                                       |                                                          | (33,819 | )                |        |      | (47,467 | )       
|                                                             |                                                                       |                                                          |         |                  |        |      |         |         
|Effect of exchange rate changes on cash and cash equivalents |                                                                       |                                                          | (28     | )                |        |      | 283     |         
|                                                             |                                                                       |                                                          |         |                  |        |      |         |         
|Net increase in cash and cash equivalents                    |                                                                       |                                                          | 3,964   |                  |        |      | 20,308  |         
|                                                            
|                                                            
|                                                            
|                                                            
|Cash and cash equivalents, beginning of period               |                                                                       |                                                          | 23,441  |                  |        |      | 242     |         
|                                                             |                                                                       |                                                          |         |                  |        |      |         |         
|Cash and cash equivalents, end of period                     |                                                                       | $                                                        | 27,405  |                  |        | $    | 20,550  |         
|                                                             |                                                                       |                                                          |         |                  |        |      |         |         

See accompanying notes to condensed consolidated financial statements.

5



---



##### 



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

1.     ORGANIZATION

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 June 30, 2002, we owned 112 hotels, with 28,653 rooms, all of which are
leased by our taxable subsidiaries and managed by Interstate Hotels & Resorts, Inc, which was created on July 31, 2002 through the merger of MeriStar Hotels & Resorts, Inc. and
Interstate Hotels Corporation, with MeriStar Hotels & Resorts, Inc. surviving the merger and
changing its name to Interstate Hotels & Resorts, Inc.

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 June 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 June 30, 2002; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | various third parties, which owned an aggregate interest of nine percent
at June 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
June 30, 2002. MeriStar LP, Inc. held 44,561,645 common OP units as of June
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
June 30, 2002, there were 3,721,307 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.

In connection with the proposed merger of MeriStar Hotels
with Interstate Hotels Corporation, our Board of Directors established a Special
Committee consisting solely of directors not affiliated with MeriStar Hotels. The
Special Committee, with the assistance of its outside counsel, reviewed the terms of
the merger and the effect of the merger on us and recommended to the full Board
that we (i) consent to the proposed merger, (ii) waive any of our rights to terminate the Intercompany Agreement or any
of the management agreements on our hotels between MeriStar Hotels and us as a result of the merger, and (iii)
amend our revolving credit and term loan agreements with MeriStar Hotels subject to
documentation and various conditions including the payment to us of $3.0 million to
reduce MeriStar Hotels borrowings under our credit agreement with them. At
a meeting of the full Board of Directors on April 30, 2002, the Board approved
the recommendations of the Special Committee subject to final documentation and
satisfaction of the conditions, all of which occurred prior to the
merger becoming effective on July 31, 2002.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

6



---



##### 



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 $5,882 and $6,061 for the three months ended June 30, 2002
and 2001, respectively. Revenues for Canadian operations totaled $10,407 and
$11,583 for the six months ended June 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 June 30, 2002, we had three swap agreements with notional
amounts totaling $300 million. 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 June 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. We did not have any asset sales
or impairments in the first six months of 2002; therefore, SFAS No. 144 has no
effect on our financial statements for the three and six months ended June 30,
2002.

3.     NOTE RECEIVABLE FROM MANAGEMENT COMPANY

Under a revolving credit agreement with Interstate Hotels, we lent, from time to time, Interstate
Hotels up to $50,000 for general

7



---



##### 



corporate purposes. The interest rate on
this credit agreement was 650 basis points over the 30-day London Interbank
Offered Rate. As of June 30, 2002, $46,000 was outstanding under this
revolving credit agreement.

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 repayment of the credit agreement and term note were subordinate to MeriStar
Hotel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.

4.     LONG-TERM DEBT

Long-term debt consisted of the following:

|                                      |  |               |           |                   |  |   |           |  
|------------------------------------- |  | ------------- | --------- | ----------------- |  | - | --------- | -
|                                      |  | June 30, 2002 |           | December 31, 2001
|                                      |  |               |           |                  
|Senior unsecured notes                |  | $             | 950,000   |                   |  | $ | 750,000   |  
|                                     
|                                     
|                                     
|                                     
|Credit facility                       |  |               |          |                   |  |   | 224,000   |  
|                                     
|                                     
|                                     
|                                     
|Secured facility                      |  |               | 317,258   |                   |  |   | 319,788   |  
|                                     
|                                     
|                                     
|                                     
|Mortgage debt and other               |  |               | 51,025    |                   |  |   | 52,335    |  
|                                      |  |               |           |                   |  |   |           |  
|                                      |  |               | 1,318,283 |                   |  |   | 1,346,123 |  
|                                     
|                                     
|                                     
|                                     
|Notes payable to MeriStar Hospitality |  |               | 359,300   |                   |  |   | 359,300   |  
|                                     
|                                     
|                                     
|                                     
|Unamortized issue discount            |  |               | (8,448    | )                 |  |   | (5,289    | )
|                                      |  |               |           |                   |  |   |           |  
|                                      |  | $             | 1,669,135 |                   |  | $ | 1,700,134 |  
|                                      |  |               |           |                   |  |   |           |  

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

|           |  |   |           | 
|---------- |  | - | --------- | 
|2002       |  | $ | 12,155    | 
|          
|          
|          
|          
|2003       |  |   | 8,584     | 
|          
|          
|          
|          
|2004       |  |   | 171,164   | 
|          
|          
|          
|          
|2005       |  |   | 9,259     | 
|          
|          
|          
|          
|2006       |  |   | 10,001    | 
|          
|          
|          
|          
|Thereafter |  |   | 1,457,972 | 
|           |  |   |           | 
|           |  | $ | 1,669,135 | 
|           |  |   |           | 

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 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
allows 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.

5.     DISTRIBUTIONS PAYABLE

On June 26, 2002, we declared a dividend for
the three months ended June 30, 2002
of $0.01 per unit of limited partnership interest. We paid the dividend on
July 31, 2002.

8



---



##### 



6.     EARNINGS PER UNIT

The following table presents the computation of basic and diluted earnings per
unit:

|                                                              |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |     |       | 
|------------------------------------------------------------- | ------------------------- | ---------------------------- | ------ | ------------------ | - | ---------------- | ------ | ---- | ----- | ---- | ------ | - | - | - | ------ | --- | ----- | 
|                                                              |                           |                              |        | Three months ended |   | Six months ended
|                                                              |                           |                              |        |                    |   |                 
|                                                              |                           |                              |        | June 30,           |   | June 30,        
|                                                              |                           |                              |        |                    |   |                 
|                                                              |                           |                              |        | 2002               |   | 2001             |        | 2002 |       | 2001
|                                                              |                           |                              |        |                    |   |                  |        |      |       |     
|BASIC EARNINGS (LOSS) PER UNIT
COMPUTAION:                    |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |    
|                                                             
|                                                             
|                                                             
|                                                             
|Income (loss) before extraordinary
loss                       |                           | $                            | 3,503  |                    |   | $                | 27,131 |      |       | $    | (6,821 | ) |   | $ | 41,628 |    
|                                                             
|                                                             
|                                                             
|                                                             
|Dividends paid on unvested restricted
stock                   |                           |                              | (141   | )                  |   |                  | (141   | )    |       |      | (3     | ) |   |   | (403   | )  
|                                                             
|                                                             
|                                                             
|                                                             
|Preferred distributions                                       |                           |                              | (2     | )                  |   |                  | (202   | )    |       |      | (282   | ) |   |   | (282   | )  
|                                                              |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |    
|Income (loss) applicable to common
unitholders                |                           | $                            | 3,360  |                    |   | $                | 26,788 |      |       | $    | (7,106 | ) |   | $ | 40,943 |    
|                                                              |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |    
|                                                             
|                                                             
|                                                             
|                                                             
|Weighted average number of OP units
outstanding               |                           |                              | 48,770 |                    |   |                  | 48,343 |      |       |      | 48,770 |   |   |   | 48,383 |    
|                                                              |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |    
|Basic earnings (loss) per unit before
extraordinary loss      |                           | $                            | 0.07   |                    |   | $                | 0.55   |      |       | $    | (0.15  | ) |   | $ | 0.85   |    
|                                                              |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |    
|DILUTED EARNINGS (LOSS) PER UNIT
COMPUTATION:                 |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |    
|                                                             
|                                                             
|                                                             
|                                                             
|Income (loss) applicable to common
unitholders                |                           | $                            | 3,360  |                    |   | $                | 26,788 |      |       | $    | (7,106 | ) |   | $ | 40,943 |    
|                                                             
|                                                             
|                                                             
|                                                             
|Preferred distributions                                       |                           |                              |       |                    |   |                  | 141    |      |       |      |       |   |   |   | 282    |    
|                                                             
|                                                             
|                                                             
|                                                             
|Interest on convertible debt of
MeriStar                      |                           |                              |       |                    |   |                  | 1,796  |      |       |      |       |   |   |   | 3,591  |    
|                                                             
|                                                             
|                                                             
|                                                             
|Restricted stock                                              |                           |                              |       |                    |   |                  | 8      |      |       |      |       |   |   |   |       |    
|                                                              |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |    
|Adjusted net income (loss)                                    |                           | $                            | 3,360  |                    |   | $                | 28,733 |      |       | $    | (7,106 | ) |   | $ | 44,816 |    
|                                                              |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |    
|Weighted average number of OP units
outstanding               |                           |                              | 48,770 |                    |   |                  | 48,343 |      |       |      | 48,770 |   |   |   | 48,383 |    
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Stock options of MeriStar |                              |        | 75                 |   |                  |        | 403  |       |      |        |  |   |   |        | 359 |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                           | Class D Preferred OP units   |        |                    |  |                  |        |      | 392   |      |        |   |  |   |        |     | 392   | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                           | Convertible debt of MeriStar |        |                    |  |                  |        |      | 4,538 |      |        |   |  |   |        |     | 4,538 | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              |                           | Restricted stock             |        |                    |  |                  |        |      | 16    |      |        |   |  |   |        |     |      | 
|                                                              |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |    
|Total weighted average number of
diluted OP units outstanding |                           |                              | 48,845 |                    |   |                  | 53,692 |      |       |      | 48,770 |   |   |   | 53,672 |    
|                                                              |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |    
|Diluted earnings (loss) per unit before
extraordinary loss    |                           | $                            | 0.07   |                    |   | $                | 0.54   |      |       | $    | (0.15  | ) |   | $ | 0.83   |    
|                                                              |                           |                              |        |                    |   |                  |        |      |       |      |        |   |   |   |        |    

Stock options, Class D Preferred OP units, convertible debt of MeriStar and
restricted stock are not included in the computation of diluted earnings (loss)
per share when their effect is antidilutive.

9



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##### 



7.     SUPPLEMENTAL CASH FLOW INFORMATION

|                                                                         |                                                                         |                                       |                                 |        |                           |   |      |        |        |        | 
|------------------------------------------------------------------------ | ----------------------------------------------------------------------- | ------------------------------------- | ------------------------------- | ------ | ------------------------- | - | ---- | ------ | ------ | ------ | 
|                                                                         |                                                                         |                                       |                                 |        | Six months ended June 30,
|                                                                         |                                                                         |                                       |                                 |        |                          
|                                                                         |                                                                         |                                       |                                 |        | 2002                      |   | 2001
|                                                                         |                                                                         |                                       |                                 |        |                           |   |     
|                                                                         | Cash paid for interest and income taxes:                                |                                       |                                 |        |                           |   |      |        |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Interest, net of capitalized interest of
$1,947 and $3,822 respectively |                                       | $                               | 60,454 |                           |   | $    | 44,274 |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Income taxes                                                            |                                       |                                 | 536    |                           |   |      | 511    |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Non-cash investing and financing activities:                            |                                       |                                 |        |                           |   |      |        |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Issuance of POPs                                                        |                                       |                                 | 2,894  |                           |   |      |       |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Redemption of redeemable OP units                                       |                                       |                                 | 6,146  |                           |   |      | 2,845  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|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 June 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 June 30, 2002, we have granted 900,000 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 the third quarter of 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 $104 of
lease costs against the restructuring reserve. Approximately $288 of the
restructuring accrual remains at June 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 presents our
consolidating balance sheets as of June 30, 2002 and December 31, 2001,
consolidating statements of operations for each of the three and six months
ended June 30, 2002 and 2001, and consolidating cash flows for the six months
ended June 30, 2002 and 2001.

11.     SUBSEQUENT EVENT

On August 1, 2002 we sold three hotels for $25,150. The aggregate carrying
amounts of the hotel properties was approximately $24,000. As of June 30, 2002, the sale of these assets
was not probable and therefore we did not meet the criteria according to SFAS No. 144 to
classify these hotels as held for sale on our Balance Sheet and to reclassify
the operations of these hotels to discontinued operations on our Statement of
Operations.

10