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                                                                    EXHIBIT 99.1

RISKS RELATING TO OUR BUSINESS

OUR ABILITY TO MAKE DISTRIBUTIONS TO OUR SHAREHOLDERS DEPENDS UPON THE ABILITY
OF OUR HOTEL MANAGERS TO OPERATE OUR HOTELS EFFECTIVELY.

         In order to qualify as a REIT, we cannot operate any hotel, or directly
participate in the decisions affecting the daily operations of any hotel. Our
third-party managers under management agreements have direct control of the
daily operations of our hotels. Under the REIT Modernization Act of 1999 (the
"RMA"), which became effective January 1, 2001, REITs are permitted to lease
their hotels to wholly owned taxable REIT subsidiaries of the REITs ("TRS
Lessees"). Even under the RMA, TRS Lessees may not operate the leased hotels and
must enter into management agreements with eligible independent contractors that
will manage the hotels. We do not have the authority to directly control any
particular aspect of the daily operations of any hotel (e.g., setting room
rates). Thus, even if we believe our hotels are being operated in an inefficient
or sub-optimal manner, we may not be able to require a change to the method of
operation. Our only alternative for changing the operation of our hotels may be
to replace the third party manager of one or more hotels in situations where the
applicable management agreement permits us to terminate the existing manager.

         As a result of the Company's acquisition (through its TRS Lessee) of
the leasehold interests for 47 of its hotels, effective July 1, 2002, and for
two of its hotels, effective July 1, 2003, the operating income (loss) of these
hotels are included in the Company's consolidated financial statements. Our
income primarily depends upon the net operating income of our hotels. Our
ability to make distributions to our shareholders depends on the ability of our
hotel managers to generate sufficient revenues from our hotels in excess of
operating expenses. Our managers will be affected by factors beyond their
control, such as changes in the level of demand for rooms and related services
of our hotels, their ability to maintain and increase gross revenues and
operating margins at our hotels, and other factors. As of December 31, 2003, 41
of our hotels were managed by Alliance. Therefore, any operating difficulties or
other factors specifically affecting Alliance's ability to maintain and increase
gross revenues and operating margins at our hotels could significantly adversely
affect our financial condition and results of operations.

         In addition, our growth strategy contemplates additional hotel
acquisitions that meet our investment criteria and selective development of
hotels as market conditions warrant. Our ability to grow depends, in part, upon
the ability of our third-party managers to manage our current and future hotels
effectively. If the third-party managers are not able to operate additional
hotels at current staffing levels and office locations, they may need to hire
additional personnel, engage additional third party managers and/or operate in
new geographic locations. If the third-party managers fail to operate the hotels
effectively, our ability to generate income from the hotels would be adversely
affected.

THE EVENTS OF SEPTEMBER 11, 2001, AS WELL AS THE WEAK U.S. ECONOMIC RECOVERY,
HAVE ADVERSELY IMPACTED THE HOTEL INDUSTRY GENERALLY, AND WE HAVE EXPERIENCED AN
ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.

         Prior to September 11, 2001, our hotels had begun experiencing
declining revenue per available room, or "RevPAR," as a result of the slowing
U.S. economy. The terrorist attacks of September 11, 2001 and more recent
concerns about possible additional terrorist attacks, combined with the effects
of the resulting recession and weak economic recovery, have led to a substantial
reduction in business and leisure travel throughout the United States, and
industry RevPAR generally, and RevPAR at our hotels specifically, has declined
substantially since September 11. While RevPAR at our hotels has improved from
the depressed levels in the weeks immediately following the events of September
11, RevPAR at our hotels remains below pre-September 11 levels and may remain at
such depressed levels. We cannot predict the extent to which the events of
September 11, subsequent concerns about possible additional terrorist attacks,
and the weak economic recovery will continue to directly or indirectly impact
the hotel industry or our operating results in the future. Continued depressed
RevPAR at our hotels which we expect in the near term could have an adverse
effect on our results of operations and financial condition, including our
ability to remain in compliance with the covenants contained in our debt
instruments, our ability to fund capital improvements and renovations at our
hotels and our ability to make dividend payments necessary to maintain our REIT
tax status. Additional terrorist attacks could have further material adverse
effects on the hotel industry and our operations.

WE MAY NOT HAVE ACCESS TO FINANCING FOR ACQUIRING OR DEVELOPING ADDITIONAL
HOTELS, OR FOR PROVIDING HOTEL LOANS.

         Our ability to pursue our growth strategy depends, in part, on our
ability to finance additional hotel acquisitions and development and additional
hotel loans We may not be able to fund growth solely from cash provided from
operating activities because we must distribute at least 90% of our taxable
income each year to maintain our tax status as a REIT and normally distribute
100% in order to avoid paying corporate income tax and excise tax on
undistributed income. Consequently, we rely upon the availability of debt or
equity capital to fund hotel acquisitions and improvements and hotel loans. We
cannot assure you that we will be successful in attracting sufficient debt or
equity financing at an acceptable cost to fund future growth. We are subject to
restrictions that may limit


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our ability to take advantage of expansion opportunities that we believe are
attractive. Our existing $125 million line of credit (the "Line") limits our
borrowing availability to a percentage of the value of the hotels provided as
collateral, with the value determined in part by the cash flow generated by
those hotels. As a result, as of December 31, 2003, we had the entire $125
million available for borrowing under our line of credit, of which $29.2 million
was outstanding. If the value of the hotels provided as collateral declines, and
our availability under the Line is less than $125 million, we must provide
additional collateral, which may not be available, to increase our borrowing
availability to the total amount of debt we need, up to a maximum amount $125
million. As of December 31, 2003, all 44 wholly owned hotels had been pledged as
collateral for our debt facilities, 30 against the line of credit and 14 against
the GE Capital CMBS loan. In addition, our articles of incorporation limit our
debt to 60% of the cost of our investment in hotel properties, or approximately
$284 million as of December 31, 2003.

         Our existing $125 million line of credit matures December 31, 2004. We
may not be able to renew the Line, and if we are successful in renewing the
Line, the new covenants, pricing, valuation and availability terms may not be as
favorable as those of the current Line. If this occurs, we will pay higher
interest rates and have access to less capital.

         Our ability to raise additional equity capital will depend on market
conditions. We cannot assure you that we will be able to raise funds through a
public or private offering at a time when we need access to funds. We may seek
alternative methods of funding expansion, such as joint venture development;
however, we cannot assure you that such opportunities will be available when we
need them or on acceptable terms.

WE HAVE A SIGNIFICANT LEVEL OF DEBT THAT MAY LIMIT OUR ABILITY TO TAKE CERTAIN
ACTIONS.

         We currently have a significant amount of debt. As of December 31,
2003, we had $29.2 million outstanding under our line of credit and $65 million
outstanding under a fixed-rate loan. As of December 31, 2003, the total
liabilities of our consolidated joint ventures were $27.7 million ($26.3 million
of which represented long-term debt). As of December 31, 2003, the total
liabilities of our unconsolidated joint ventures were $15.3 million ($14 million
of which represented long-term debt). Our proportionate share of the
unconsolidated joint ventures total liabilities and long-term debt equated to $2
million and $1.8 million, respectively. Our level of debt could have important
consequences to you. For example, it could:

-        impair our ability to obtain additional financing, if needed, for
working capital, capital expenditures, acquisitions or other purposes in the
future;

-        require us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, thereby reducing our funds available for
operations, future business opportunities and other purposes;

-        place us at a disadvantage compared to competitors that have less debt;

-        restrict our ability to adjust rapidly to changing market conditions;
and

-        increase our vulnerability to adverse economic, industry and business
conditions.

         If we do not have sufficient funds to repay our debt at maturity, it
may be necessary for us to refinance our debt through additional debt financing,
private or public offerings of debt securities or additional equity offerings.
If, at the time of any refinancing, prevailing interest rates or other factors
result in higher interest rates on refinancings, increases in interest expense
could adversely affect our cash flow and, consequently, cash available for
distribution to shareholders. If we are unable to refinance our debt on
acceptable terms, we may be forced to dispose of hotels or other assets on
disadvantageous terms, potentially resulting in losses and adverse effects on
cash flow from operating activities. If we are unable to make required payments
of principal and interest on debt secured by our hotels, one or more of those
properties could be foreclosed upon by the lender with a consequent loss of
revenue and asset value.


THE COVENANTS GOVERNING OUR DEBT IMPOSE SIGNIFICANT RESTRICTIONS ON US.

         The terms of our line of credit impose significant operating and
financial restrictions on us and require us to meet certain financial tests,
including leverage ratios, maximum unsecured and secured debt ratios, interest
and fixed charge coverage ratios and minimum tangible net worth requirements.
These restrictions may also have a negative impact on our business, financial
condition and results of operations by significantly limiting or prohibiting us
from engaging in certain transactions, including:

-        incurring or guaranteeing additional indebtedness;

-        paying dividends in excess of 85% of our funds from operations over the
most recent four quarters;


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-        making capital expenditures and other investments;

-        creating liens on our assets; and

-        engaging in mergers, consolidations or the sale of all or a substantial
portion of our assets.

         The failure to comply with any of these covenants would cause a default
under our line of credit. Furthermore, our line of credit provides that any
default under, or acceleration of, any of our other debt, any debt of WINN
Limited Partnership or any debt of our subsidiaries, including our fixed-rate
loan or otherwise, will constitute a default under the line of credit. Any of
these defaults, if not waived, could result in the acceleration of the
indebtedness under our line of credit. If this occurs, we may not be able to
repay our debt or borrow sufficient funds to refinance it, in which case we
would not be able to make distributions to our shareholders. Even if new
financing were available, it may not be on terms that are acceptable to us.

IF OUR CASH FLOW DECREASES, WE MAY BE REQUIRED TO PROVIDE ADDITIONAL COLLATERAL
UNDER OUR LINE OF CREDIT OR TAKE OTHER ACTIONS THAT WOULD ADVERSELY AFFECT OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

         As of December 31, 2003, we had pledged 30 hotel properties as
collateral to secure the line of credit and 14 hotel properties to secure the
fixed-rate loan, which accounts for all of the Company's 44 wholly owned hotels.
Both loan agreements prohibit pledging any hotel pledged as collateral under
that facility to secure other debt. Our line of credit limits our borrowing
availability to a percentage of value of the hotels provided as collateral, with
the value determined in part by the cash flow generated by those hotels. Our
current cash flow from the hotels securing the line of credit determines our
borrowing availability under the line of credit, which as of December 31, 2003,
was $125 million. If the value of the hotels provided as collateral declines,
and our availability under the Line is less than $125 million, we must provide
additional collateral to increase our borrowing availability to the total amount
of debt we need, but not to exceed $125 million. If our cash flow decreases to
such a level that our borrowing availability is less than the amount outstanding
under the line of credit, we must either (1) repay the excess of the amounts
outstanding over our borrowing availability or (2) with the unanimous consent of
the lenders, provide additional collateral to increase our borrowing
availability. If we were unable to repay the excess debt over our borrowing
availability or provide additional collateral, the resulting payment default
would entitle our lenders to exercise one or more remedies, including
foreclosing on one or more of the properties pledged as collateral.

RISING INTEREST RATES COULD ADVERSELY AFFECT OUR CASH FLOW.

         Our borrowings under our line of credit bear interest at a variable
rate. Our line of credit requires that we maintain at least 50% of our total
debt at a fixed rate of interest. Although we have entered into agreements that
limit our interest rate exposure on a portion of the outstanding debt under our
line of credit, outstanding debt of up to $29.2 million under our line of credit
remains subject to variable interest rates. We may incur debt in the future that
bears interest at a variable rate or we may be required to refinance our
existing debt at higher interest rates. Accordingly, increases in interest rates
could increase our interest expense and adversely affect our cash flow.

WE MAY NOT BE ABLE TO COMPLETE DEVELOPMENT OF NEW HOTELS ON TIME OR WITHIN
BUDGET.

         We intend to develop additional hotel properties as suitable
opportunities arise. New project development is subject to a number of risks
that could cause increased costs or delays in our ability to generate revenue
from any development hotel, reducing our cash available for distribution to
shareholders. These risks include:

-        construction delays or cost overruns that may increase project costs;

-        competition for suitable development sites;

-        receipt of zoning, land use, building, construction, occupancy and
other required governmental permits and authorizations; and

-        substantial development costs in connection with projects that are not
completed.

         We may not be able to complete the development of any projects we begin
and, if completed, our development and construction activities may not be
completed in a timely manner or within budget.

         We also intend to rehabilitate hotels that we believe are
underperforming. These rehabilitation projects will be subject to the same risks
as development projects.

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HOTELS THAT WE DEVELOP HAVE NO OPERATING HISTORY AND MAY NOT ACHIEVE LEVELS OF
OCCUPANCY THAT RESULT IN LEVELS OF OPERATING INCOME THAT PROVIDE US WITH AN
ATTRACTIVE RETURN ON OUR INVESTMENT.

         The new hotels that we develop have no operating history. These hotels,
both during the start-up period and after they have stabilized, may not achieve
anticipated levels of occupancy, average daily room rates, or gross operating
margins, and could result in operating losses.

PROPERTY OWNERSHIP THROUGH JOINT VENTURES AND PARTNERSHIPS COULD LIMIT OUR
CONTROL OF THOSE INVESTMENTS.

         Joint ventures or partnerships (other than WINN Limited Partnership)
involve risks not otherwise present for investments we make on our own. It is
possible that our co-venturers or partners may have different interests or goals
than we do at any time and that they may take actions contrary to our requests,
policies or objectives, including our policy with respect to maintaining our
qualification as a REIT. Other risks of joint venture investment include
impasses on decisions, because no single co-venturer or partner has full control
over the joint venture or partnership. Each of our venture partners for our
existing joint venture properties has the right, after the first twelve months
of the hotel's operation, to sell the hotel developed by the joint venture to
us, or, if we elect not to purchase, to sell such hotel to a third party. In
addition, future joint ventures may include other restrictions on us, including
requirements that we provide the joint venture with the right of first offer or
right of first refusal to acquire any new property we consider acquiring
directly.

OUR BUSINESS COULD BE DISRUPTED IF WE NEED TO FIND A NEW MANAGER UPON
TERMINATION OF AN EXISTING MANAGEMENT AGREEMENT.

         If our managers fail to materially comply with the terms of their
management agreements, we have the right to terminate such management
agreements. Upon termination, we would have to find another manager to manage
the property. We cannot operate the hotels directly due to federal income tax
restrictions. We cannot assure you that we would be able to find another manager
or that, if another manager were found, we would be able to enter into new
management agreements favorable to us. There would be disruption during any
change of hotel management that could adversely affect our operating results.

IF WE DECIDE TO SELL HOTELS, WE MAY NOT BE ABLE TO SELL THOSE HOTELS ON
FAVORABLE TERMS AND MAY BE REQUIRED TO PAY TERMINATION FEES TO THE LESSEE OF
THOSE HOTELS.

         We have sold five hotels during the past three years, one in 2001 and
four in 2002. Although none of our other hotels is currently under contract to
sell, we may decide to sell additional hotels in the future. We may not be able
to sell such hotels on favorable terms, and such hotels may be sold at a loss.
As with acquisitions, we face competition for buyers of our hotel properties.
Other sellers of hotels may have the financial resources to dispose of their
hotels on unfavorable terms that we would be unable to accept. If we cannot find
buyers for any properties that are designated for sale, we will not be able to
implement our divestiture strategy. In the event that we cannot fully execute
our divestiture strategy or realize the benefits therefrom, we will not be able
to fully execute our growth strategy.

WE MAY FACE CONFLICTS OF INTEREST RELATING TO SALES OF HOTELS ACQUIRED FROM
AFFILIATES.

         We have acquired 14 hotels in the past from related parties of our
affiliates, which include Robert Winston, our Chief Executive Officer, and
Charles Winston, our Chairman of the Board. The limited partners of WINN Limited
Partnership, including Robert Winston and Charles Winston, may have unrealized
gain associated with their interests in these hotels. Our sale of any of those
hotels may cause adverse tax consequences to the limited partners. Therefore,
our interests could conflict with the interests of the limited partners in
connection with the disposition of one or more of those 14 hotels, including
limited partners who may be board members or otherwise in a position to exert
influence over other board members who will determine whether we sell these
hotels.

WE DEPEND ON KEY PERSONNEL.

         We depend on the efforts and expertise of our Chief Executive Officer,
President and Chief Financial Officer, Chief Accounting Officer and Chief
Operating Officer to drive our day-to-day operations and strategic business
direction. The loss of any of their services could have an adverse effect on our
operations. Our ability to replace key individuals may be difficult because of
the limited number of individuals with the breadth of skills and experience
needed to excel in the hotel industry. There can be no assurance that we would
be able to hire, train, retain or motivate such individuals.

OUR BORROWERS MAY FAIL TO REPAY ALL OR A PORTION OF THE LOANS OWED TO US.

         We face special risks in connection with our loans to borrowers for the
purpose of building and owning hotels. We are subject to risks of borrower
defaults, bankruptcies, fraud and losses and special hazard losses that are not
covered by standard hazard insurance. We expect that each mezzanine loan will be
made to a single purpose entity whose sole asset would be a hotel being built or
renovated. Our present mezzanine loans are not, and we do not expect that any of
our future mezzanine loans will be, collateralized by


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the hotel being built by the single purpose entity. Mezzanine loans will be
subordinate to any debt collateralized by the hotel being built and maybe any
other debt of the single purpose entity. Mezzanine loans involve a higher degree
of risk than long-term senior mortgage lending that is secured by income-
producing real property for a variety of reasons including, among other things,
dependency on the success of a project which a third party controls and that a
foreclosure by the holder of the senior loan could result in a mezzanine loan
becoming uncollectible. Additionally, mezzanine loans normally have higher loan
to value ratios than conventional term loans. The borrowers may not be able to
repay their obligations under their senior loans or our mezzanine loans, in
which case we could suffer a total or partial loss on our mezzanine loans. In
2002, we wrote off as uncollectible our $250 participation interest in a $5,478
mezzanine loan to the owner of a 769-room resort hotel in Orlando, FL, and other
existing or future borrowers may become in default on our mezzanine loans.

         Although we currently have issued four loans totaling $7.4 million, all
mezzanine loans, we expect to originate other loans in the future, including
bridge loans, the first loss piece of collateralized mortgage backed securities
("CMBS"), which typically contain multiple hotel properties, or possibly issuing
whole loans and then potentially selling the senior portion of the loan.

MEZZANINE LENDING RISKS.

         A mezzanine lender has some of the same risks as a traditional real
estate lender, such as lender liability for improperly exercising control over
the borrower and environmental risks as a potentially responsible party liable
for environmental damage in connection with the property owned by the borrower.
A mezzanine lender may enhance these risks by pursuing remedies on default that
afford greater control over the operations of the borrower, especially if the
mezzanine lender exercises its authority as a managing or co-managing member.
Courts have discretion to decline to enforce loan features which purport to
limit or modify a mortgagor's right to redeem real estate after a mortgage
default and before foreclosure by paying off the loan, and thus some remedies
specified in our mezzanine loans may be unavailable to us. In addition a
borrower may allege that being in the position to control the borrowing entity
creates duties by the lender to the borrower, including fiduciary-like duties
that may conflict with the lender's actions to exercise its remedies. Finally,
to be able to protect its mezzanine loan, a mezzanine lender may have to advance
additional funds to cure defaults on senior loans.

IF THIRD PARTIES FOR WHOM WE DEVELOP HOTELS DEFAULT ON THEIR LOANS, WE MAY BE
REQUIRED TO COMPLETE THE DEVELOPMENT OF THOSE HOTELS AT OUR OWN EXPENSE.

         In certain cases where we are offering third party hotel development
services in exchange for fees, we may elect to provide the hotel owner/developer
with a construction completion guaranty on the particular hotel under
development. In those cases, if the owner/developer were in default under the
terms and conditions of its senior loans, its senior lenders might seek to
compel us to complete the development of the particular hotel with our own
funds, which could materially adversely affect our business, financial condition
and results of operations.

                         RISKS RELATING TO OUR INDUSTRY

OUR PERFORMANCE AND THE VALUE OF OUR STOCK ARE SUBJECT TO RISKS ASSOCIATED WITH
THE HOTEL INDUSTRY.

Our hotels are subject to operating risks of the hotel industry that could
reduce our revenue, gross operating margins, and ability to make distributions
to shareholders.

         Our hotels are subject to all operating risks common to the hotel
industry. These factors could adversely affect the ability of our hotels to
generate operating income and therefore affect our ability to make distributions
to our shareholders. These risks include, but are not limited to:

-        competition for guests from other hotels, many of which have
         substantial marketing and financial resources;

-        faster growth in room supply than in room demand growth in our markets;

-        increases in operating costs due to inflation and other factors which
         may not be offset in the future by increased room rates;

-        seasonality, with higher hotel revenues occurring in the second and
         third calendar quarters;

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

-        terrorist incidents, which may also deter traveling;

-        adverse effects of general and local economic conditions;


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-        a general inability to control costs, thereby resulting in lower gross
         operating profit; and

-        risks generally associated with the ownership of hotels and real
         estate, as discussed below.

Our entire business is concentrated in particular segments of a single industry.

         Our entire business is hotel-related. Our investment strategy is to
acquire additional hotels, or ownership interests in hotels, with strong
national franchise affiliations in the "mid-scale without food and beverage",
"upscale", and "upper upscale" market segments, or hotel properties with the
potential to obtain such franchise affiliations. Therefore, a downturn in the
hotel industry, in general, and the segments in which we operate, in particular,
will have a material adverse effect on our income and the amounts available for
distribution to our equity holders.

Large-scale military deployments may adversely impact the occupancy rates and
revenues from our two hotels located in communities that have a large military
population.

         Currently, we own two hotels located in communities with a large
military presence; one near Fort Bragg in Fayetteville, North Carolina and one
near Camp Lejeune in Jacksonville, North Carolina. During the Persian Gulf War
in the early 1990's, a large number of military personnel deployed to the
Persian Gulf and, additionally, their respective families departed those
communities for the duration of the military member's deployment. The two local
communities suffered economic loss as a result. If a large number of military
personnel were deployed away from their permanent duty stations for an extended
period, we expect that occupancy rates and RevPAR at those two hotels would be
adversely affected.

We may incur higher costs as a result of the proximity of our hotels to the
coast.

         Several of our hotels are located near the Atlantic Ocean and are
exposed to more severe weather than hotels located inland. These hotels are also
exposed to salt water and humidity, which can increase or accelerate wear on the
hotels' weatherproofing and mechanical, electrical and other systems. As a
result, we may incur additional expenditures for capital improvements.

Our hotel concentration in the Southeastern United States subjects us to
operating risks.

         At December 31, 2003, 31 out of our 44 wholly-owned hotels were located
in the five eastern seaboard states ranging from Virginia to Florida, including
17 hotels located in North Carolina. Adverse events in these areas, such as
economic recessions, hurricanes or other natural disasters, could cause a loss
of revenues from these hotels, which could have a greater adverse effect on us
as a result of our concentration of assets in this area. Our geographic
concentration also exposes us to risks of oversupply and competition in our
principal markets. Each of our hotels competes with other hotels in its market
area. A number of additional hotel rooms will continue to be built in the
markets in which our hotels are located, which could result in too many hotel
rooms in those regions. Significant increases in the supply of hotel rooms
without corresponding increases in demand can have a severe adverse effect on
our business, financial condition and results of operations.

Conditions of franchise agreements could adversely affect us.

         All of our hotels are operated pursuant to franchise agreements with
nationally-recognized hotel brands. In addition, hotels in which we subsequently
invest may be operated pursuant to franchise agreements. A hotel's failure to
adhere to the terms and conditions of the franchise agreement could result in
the loss or cancellation of its franchise license. We rely on our managers and a
third party lessee to conform to such franchisor standards. The franchise
agreements generally contain specific standards for, and restrictions and
limitations on, the operation and maintenance of a hotel in order to maintain
uniformity within the franchisor's system. These standards are subject to change
over time, in some cases at the discretion of the franchisor, and may restrict
our ability to make improvements or modifications to a hotel without the consent
of the franchisor. In addition, compliance with these standards could require us
to incur significant expenses or capital expenditures. Our cash available for
distribution could be adversely affected if we or our lessee must incur
substantial costs to maintain a franchise license.

         If a franchise license terminates due to our failure, or our lessee's
failure to make required improvements or to otherwise comply with its terms, we
may be liable to the franchisor for a termination payment. These termination
payments would vary by franchise agreement and by hotel. The loss of a number of
franchise licenses and the related termination payments could have a material
adverse effect on our business, financial condition and results of operations.

         As of December 31, 2003, of the 50 hotels' franchise licenses,
including six joint venture hotels, eight expire in the next five years, two in
2006, two in 2007, and four in 2008. In connection with termination of a
franchise license or changing the franchise affiliation of a hotel, we may have
to incur significant expenses or capital expenditures. Moreover, the loss of a
franchise license, in the event


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that it could not be renewed or is otherwise lost, could have a material adverse
effect on the operations and/or the underlying value of the hotel covered by the
franchise because of the loss of association, name recognition, marketing
support and centralized reservation system provided by the franchisor. Any of
these events could have a negative effect on our ability to make distributions
to shareholders. The franchise agreements covering the hotels expire or
terminate, without special renewal rights, at various times and have different
remaining terms.

Operating costs and capital expenditures could adversely affect our cash flow.

         Hotels have an ongoing need for renovations and other capital
improvements, particularly in older structures, including periodic replacement
of furniture, fixtures and equipment. We are obligated to pay the cost of
certain capital expenditures at the hotels and to pay for furniture, fixtures
and equipment. Franchisors also may require periodic capital improvements to our
hotels as a condition of retaining the franchise licenses. In addition, we
intend to invest selectively in hotels that require significant renovation.
Renovation of hotels involves certain risks, including:

-        the possibility of environmental problems;

-        construction cost overruns and delays;

-        uncertainties as to market demand or deterioration in market demand
         after commencement of renovation; and

-        the emergence of unanticipated competition from other hotels; and

-        displacement of room revenues due to rooms being out of order.

If any of these costs exceed our estimates, the additional costs could have an
adverse effect on our cash available for distribution.

WE MUST COMPETE WITH LARGER ENTITIES FOR ACQUISITION AND FRANCHISING
OPPORTUNITIES.

         We compete for acquisition opportunities with entities that have
substantially greater financial resources than we do. These entities generally
may be able to accept more risk than we can prudently manage, including risks
with respect to the creditworthiness of a hotel operator or the geographic
proximity of its investments, and may have better relations with franchisors.
Competition may reduce the number of suitable investment opportunities available
to us and increase the bargaining power of sellers. In addition, other potential
buyers who do not need to use a lessee or a third party operator to operate the
hotel may be able to offer a higher price for a property than we are able to
pay.

OUR PERFORMANCE AND VALUE ARE SUBJECT TO THE CONDITION OF THE REAL ESTATE
INDUSTRY.

We may not be able to sell hotels when appropriate.

         Real estate investments generally cannot be sold quickly. We may not be
able to vary our portfolio promptly in response to changes in economic and other
conditions. Because we are a REIT, federal income tax laws limit our ability to
sell properties in some situations when it may be economically advantageous to
do so. As a result, returns to our shareholders could be adversely affected. In
addition, we cannot assure you that the market value of any of our hotels will
not decrease in the future, and therefore we may not be able to sell our hotels
on favorable terms.

Liability for environmental matters could adversely affect our financial
condition.

         Under various federal, state and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real property may be
liable for the costs of investigation and removal or remediation of hazardous or
toxic substances on, under, originating at or in the property, including
fixtures, structures and other improvements located on the property. These laws
often impose liability whether or not the owner or operator knew of (or should
have known of), or caused, the presence of contaminants. Although Phase I
environmental site assessments ("ESAs") were obtained on all of the hotels, the
Phase I ESAs did not include invasive procedures, such as soil sampling or
ground water analysis. While the Phase I ESA reports have not revealed any
environmental condition, liability or compliance concern that the Company
believes would have a material adverse effect on the Company's business, assets
or results of operations, it is possible that these reports do not reveal all
environmental conditions, liabilities or compliance concerns or that there are
material environmental conditions, liabilities or compliance concerns that arose
at a hotel after the related Phase I ESA report was completed of which the
Company is unaware. The costs to clean up a contaminated property, to defend
against a claim, or to comply with environmental laws could be material and
could affect the funds available for distributions to equity holders. Clean-up
costs and the owner's or operator's liability generally are not limited under
these laws and could exceed the value of the property and/or the aggregate
assets of the owner or operator. In addition, the presence of, or failure to


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properly remediate, contaminants may adversely affect the owner's ability to
sell or rent the property or borrow using the real property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the clean-up costs of the substances at the
disposal or treatment facility, whether or not the facility is or ever was owned
or operated by that person.

         Environmental, health and safety laws and common law principles also
govern the presence, effects, maintenance and removal of hazardous substances,
including asbestos-containing materials, or ACMs. Asbestos has been found in two
of our hotels and asbestos or other hazardous substances may be found in other
hotels we own or acquire in the future. Many such laws permit third parties,
including employees and independent contractors, to seek recovery from owners or
operators of real properties for personal injury or property damage associated
with exposure to released hazardous substances, including ACMs. In connection
with the ownership of the hotels, we may be considered an owner or operator and
therefore may be potentially liable for any such costs, which could adversely
affect our financial condition.

Black mold claims could adversely affect our financial condition.

         Recent publicity regarding families abandoning their homes because of
the presence of stachyhotrys chartarum ("black mold") has raised public
consciousness regarding black mold. Black mold is a greenish-black fungus found
worldwide that grows in such places as dry wall, carpet, wall paper,
fiber-board, ceiling tiles, and thermal insulation when the relative humidity is
above 55%. While the scientific community lacks consensus on the health threat,
if any, posed by exposure to black mold, if black mold is detected in any of our
hotels, we may be subject to adverse publicity, which could adversely affect our
operations and financial results from that hotel. Such claims could require us
to spend significant time and money in litigation or pay significant damages. In
addition, we may be required to close all or portions of the affected hotel
during mold remediation operations, generally consisting of a thorough cleaning
with chlorine bleach and water. Under certain conditions, black mold may be
difficult to eradicate and require us to remove and replace moldy materials in
the hotel. In extreme cases, it may be necessary to perform extensive facility
repairs. The presence of black mold in any hotel also could adversely impact the
fair market value of that hotel.

         During 2002, the Company invested in the Beachwood, OH Courtyard by
Marriott hotel, which is currently owned by WCC Project Company LLC. The
Company's current indirect ownership interest in this hotel is 13.05%. Prior to
making its initial investment, the Company knew that black mold existed at the
hotel and engaged consultants with expertise in black mold remediation and
performed extensive research to satisfy itself that the black mold condition
could be eradicated through renovation and repair procedures. Following the
completion of such remediation procedures, the Company believes that all of the
black mold has been removed from this hotel. The hotel opened in April 2003.
Because black mold is a naturally occurring fungus, the spores of which can be
transported by outside air currents, there can be no assurances that black mold
will not again enter and grow in this hotel or that it will not be found in the
Company's other hotel properties.

Liability for uninsured and underinsured losses could adversely affect our
financial condition and results of operations.

         In the event of a substantial loss, our insurance coverage may not be
sufficient to pay the full current market value or current replacement cost of
our lost investment. Certain types of losses, such as mold, terrorist acts,
earthquakes, floods, hurricanes, and other acts of God, may be uninsurable or
not economically insurable. In addition, we may not be able to use insurance
proceeds to replace a damaged or destroyed property as a result of changes in
building codes and ordinances, environmental considerations or other factors. In
these circumstances, any insurance proceeds we receive might not be adequate to
restore our economic position with respect to the damaged or destroyed property
and we would be required to seek separate financing for repair and replacement
costs, which may not be available on acceptable terms or at all, or face a loss
on our investment.

The cost of compliance with the Americans with Disabilities Act and other
changes in governmental rules and regulations could adversely affect our cash
flow.

         Under the Americans with Disabilities Act of 1990, or the ADA, all
public accommodations are required to meet certain federal requirements related
to access and use by disabled persons. A determination that we are not in
compliance with the ADA could result in imposition of fines or an award of
damages to private litigants. In addition, other governmental rules and
regulations or enforcement policies affecting the use and operation of the
hotels could change, including changes to building codes and fire and life
safety codes. If we are required to spend money to comply with the ADA or other
changes in governmental rules and regulations, our ability to make distributions
to shareholders could be adversely affected.

Increases in property taxes could adversely affect our cash flow.

         Real and personal property taxes on our current and future hotel
properties may increase as property tax rates change and as the properties are
assessed or reassessed by taxing authorities. An increase in property taxes
could have an adverse effect on our ability to make distributions to
shareholders.


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                         RISKS RELATING TO CAPITAL STOCK

THE PRICE OF OUR SECURITIES MAY BE AFFECTED BY CHANGES IN MARKET INTEREST RATES.

         One of the factors that may influence the price of our common stock or
preferred stock in public trading markets is the annual yield from distributions
on our common stock or preferred stock as compared to yields on other financial
instruments. Thus, an increase in market interest rates will result in higher
yields on other financial instruments, which could adversely affect the market
price of our common stock or preferred stock.

SHAREHOLDER APPROVAL IS REQUIRED TO CHANGE CERTAIN POLICIES, LIMITING THE
ABILITY OF OUR BOARD OF DIRECTORS TO TAKE CERTAIN ACTIONS IN RESPONSE TO
CHANGING CONDITIONS.

         We cannot change our policy of limiting consolidated debt to 60% of the
cost of our investment in hotel properties without shareholder approval.

THE ABILITY OF OUR SHAREHOLDERS TO EFFECT A CHANGE IN CONTROL IS LIMITED.

Stock ownership limitations could inhibit changes in control.

         Our articles of incorporation provide that no shareholder may own,
directly or indirectly, more than 9.9% of any class of our outstanding stock
without the approval of our Board of Directors. This limitation may have the
effect of precluding an acquisition of control by a third party without the
approval of our board of directors even if a change in control were in your best
interest.

Our ability to issue preferred stock could inhibit changes in control.

         Our articles of incorporation authorize the board of directors to issue
up to 10,000,000 shares of preferred stock and to establish the preferences and
rights of any shares of preferred stock issued. Currently, there are 3,680,000
shares of preferred stock outstanding. Issuing additional preferred stock could
have the effect of delaying or preventing a change in control even if a change
in control were in our shareholders' interest.


                          RISKS RELATING TO REIT STATUS


WE ARE SUBJECT TO TAX RISKS AS A RESULT OF OUR REIT STATUS.

         We have operated and intend to continue to operate so as to qualify as
a REIT for federal income tax purposes. Our continued qualification as a REIT
will depend on our continuing ability to meet various requirements concerning
the ownership of our outstanding stock, the nature of our assets, the sources of
our income, and the amount of distributions to our shareholders. In order to
qualify as a REIT, we generally are required each year to distribute to our
shareholders at least 90% of our taxable income, other than any net capital gain
and any taxable income of our TRS Lessees. To the extent that we meet the 90%
distribution requirement, but distribute less than 100% of our taxable income,
we will be required to pay income tax on our undistributed income. In addition,
we will be subject to a 4% nondeductible excise tax if the actual amount we pay
out to our shareholders in a calendar year is less than a minimum amount
specified under the federal tax laws. Any taxable income of our TRS Lessees will
incur corporate income tax, but will not be subject to any distribution
requirement. The requirement to distribute a substantial portion of our net
taxable income could cause us to distribute amounts that otherwise would be
spent on future acquisitions, unanticipated capital expenditures or repayment of
debt, which would require us to borrow funds or to sell assets to fund the costs
of such items.

         We have made, and intend to continue to make, distributions to our
shareholders to comply with the current 90% distribution requirement and to
avoid corporate income tax and the nondeductible excise tax. Our income consists
of our share of the income of WINN Limited Partnership, and our cash available
for distribution consists of our share of cash distributions from WINN Limited
Partnership, less capital expenditures and principal debt payments. Differences
in timing between the recognition of taxable income and the receipt of cash
available for distribution due to the seasonality of the hotel industry could
require us to borrow funds on a short-term basis to meet the 90% distribution
requirement and to avoid income tax and the nondeductible excise tax.

         If we were to fail to qualify as a REIT for any taxable year, we would
not be allowed to deduct our distributions to our shareholders in computing our
taxable income. Furthermore, we would be subject to federal income tax,
including any applicable alternative minimum tax, on our taxable income at
regular corporate rates. Unless we are entitled to relief under the federal
income tax laws, we also would be disqualified from treatment as a REIT for the
four taxable years following the year during which we lost our qualification. As
a result, our cash available for distribution would be reduced for each of the
years involved. Although we currently


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operate and intend to continue to operate in a manner designed to qualify as a
REIT, it is possible that future economic, market, legal, tax or other
considerations may cause our board of directors, with the consent of
shareholders holding at least two-thirds of the common stock entitled to vote,
to revoke the REIT election.

         At any time, the federal income tax laws governing REITs or the
administrative interpretations of those laws may be amended. Any of those new
laws or interpretations thereof may take effect retroactively and could
adversely affect the Company or its shareholders. For example, the Jobs and
Growth Tax Relief Reconciliation Act of 2003, which was enacted into law on May
28, 2003, among other things, generally reduces to 15% the maximum marginal rate
of tax payable by domestic noncorporate taxpayers on dividends received from a
regular C corporation. This reduced tax rate, however, will not apply to
dividends paid to domestic noncorporate taxpayers by a REIT on its stock, except
for certain limited amounts. Although the earnings of a REIT that are
distributed to its shareholders still generally will be subject to less federal
income taxation than earnings of a non-REIT C corporation that are distributed
to its shareholders net of corporate-level income tax, this legislation could
cause domestic noncorporate investors to view the stock of regular C
corporations as more attractive relative to the stock of a REIT than was the
case prior to the enactment of the legislation, because the dividends from
regular C corporations will generally be taxed at a lower rate while dividends
from REITs will generally be taxed at the same rate as the individual's other
ordinary income. We cannot predict what effect, if any, the enactment of this
legislation may have on the value of the stock of REITs in general or on our
common shares in particular, either in terms of price or relative to other
investments.


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