##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
  þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 31, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number 1-14331
  Interstate
    Hotels & Resorts, Inc.
  Delaware(State or other jurisdiction
    of
    incorporation or organization)

52-2101815(I.R.S. Employer
    Identification No.)4501 North Fairfax Drive, Ste 500
    Arlington, VA(Address of Principal
    Executive Offices)

22203(Zip
    Code)   www.ihrco.com
 Form 10-Q
  (703) 387-3100
 (Registrants telephone number, including area code)
  þ o
  Regulation S-T o o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  INDEX
   
 PagePART I. FINANCIAL INFORMATIONItem 1:

Financial Statements (Unaudited):Consolidated Balance Sheets 
    March 31, 2009 and December 31, 2008


2Consolidated Statements of Operations 
    Three months ended March 31, 2009 and 2008


3Consolidated Statements of Cash Flows 
    Three months ended March 31, 2009 and 2008


4Notes to Consolidated Financial Statements


5Item 2:

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


19Item 3:

Quantitative and Qualitative Disclosures About
    Market Risk


26Item 4:

Controls and Procedures


26PART II. OTHER INFORMATIONItem 1:

Legal Proceedings


27Item 6:

Exhibits


27Exhibit 31.1Exhibit 31.2Exhibit 32   1




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION  Item 1:
    Financial
    Statements  INTERSTATE
    HOTELS & RESORTS, INC.
  CONSOLIDATED
    BALANCE SHEETS
 (In
    thousands, except share amounts)
  March 31,


December 31,2009


2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
12,990


$
22,924Restricted cash


6,276



7,174Accounts receivable, net of allowance for doubtful accounts of
    $1,676 and $1,432, respectively


25,767



27,775Due from related parties, net of allowance for doubtful accounts
    of $1,139 and $1,465, respectively


2,487



3,688Deferred income taxes


1,547



2,990Prepaid expenses and other current assets


4,200



3,514Total current assets


53,267



68,065Marketable securities


1,562



1,676Property and equipment, net


283,661



282,050Investments in unconsolidated entities


41,463



41,625Notes receivable, net of allowance of $1,105 and $2,856,
    respectively


4,382



4,254Deferred income taxes


2,348



9,750Goodwill


66,046



66,046Intangible assets, net


16,657



16,353Total assets

$
469,386


$
489,819LIABILITIES AND EQUITYCurrent liabilities:Accounts payable

$
3,238


$
2,491Salaries and employee related benefits


23,848



28,326Other accrued expenses


36,737



41,166Current portion of long-term debt


161,470



161,758Total current liabilities


225,293



233,741Deferred compensation


1,546



1,649Long-term debt


82,525



82,525Total liabilities


309,364



317,915Commitments and contingencies (see Note 10)Equity:Interstate stockholders equity:Preferred stock, $.01 par value; 5,000,000 shares
    authorized, no shares issued






Common stock, $.01 par value; 250,000,000 shares
    authorized; 32,089,659 and 32,072,859 shares issued and
    outstanding, respectively, at March 31, 2009; 31,859,986
    and 31,843,186 shares issued and outstanding, respectively,
    at December 31, 2008


321



319Treasury stock


(69
)


(69
)Paid-in capital


197,786



197,300Accumulated other comprehensive loss


(1,406
)


(1,521
)Accumulated deficit


(36,884
)


(24,407
)Total Interstate stockholders equity


159,748



171,622Noncontrolling interest (redemption value of $23 and $36 at
    March 31, 2009 and December 31, 2008, respectively)


274



282Total equity


160,022



171,904Total liabilities and equity

$
469,386


$
489,819    2




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 (Unaudited,
    in thousands, except per share amounts)
  Three Months EndedMarch 31,2009


2008Revenue:Lodging

$
19,036


$
23,918Management fees


6,995



8,523Management fees-related parties


1,356



1,386Termination fees


1,246



3,010Other


1,514



1,575Other-related parties


370



52430,517



38,936Other revenue from managed properties


132,089



151,014Total revenue


162,606



189,950Expenses:Lodging


14,582



17,025Administrative and general


11,238



15,829Depreciation and amortization


3,841



4,274Restructuring costs


831



Asset impairments and write-offs






1,11230,492



38,240Other expenses from managed properties


132,089



151,014Total operating expenses


162,581



189,254OPERATING INCOME


25



696Interest income


100



319Interest expense


(2,907
)


(3,815
)Equity in (losses) earnings of unconsolidated entities


(798
)


2,361Gain on sale of investments


13



LOSS BEFORE INCOME TAXES


(3,567
)


(439
)Income tax (expense) benefit


(8,916
)


151NET LOSS


(12,483
)


(288
)Add: Net loss attributable to noncontrolling interest


6



2NET LOSS ATTRIBUTABLE TO INTERSTATE STOCKHOLDERS

$
(12,477
)

$
(286
)BASIC AND DILUTED LOSS PER SHARE:Basic and diluted loss per share attributable to Interstate
    stockholders

$
(0.39
)

$
(0.01
)Weighted-average shares outstanding, basic and diluted


31,925



31,714    3




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (Unaudited,
    in thousands)
  Three Months EndedMarch 31,2009


2008OPERATING ACTIVITIES:Net loss

$
(12,483
)

$
(288
)Adjustments to reconcile net loss to cash used in operating
    activities:Depreciation and amortization


3,841



4,274Amortization of deferred financing fees


459



306Amortization of key money management contracts


421



189Stock compensation expense


498



372Discount on notes receivable


(74
)


(68
)Bad debt expense


43



722Asset impairments and write-offs






1,112Equity in losses (earnings) from unconsolidated entities


798



(2,361
)Operating distributions from unconsolidated entities


38



145Gain on sale of investments


(13
)


Deferred income taxes


8,768



(1,257
)Excess tax benefits from share-based payment arrangements






23Changes in assets and liabilities:Accounts receivable and due from related parties


2,719



939Prepaid expenses and other current assets


(686
)


(275
)Notes receivable related to termination fees


234



(1,257
)Accounts payable and accrued expenses


(7,611
)


(5,746
)Other changes in asset and liability accounts


(76
)


475Cash used in operating activities


(3,124
)


(2,695
)INVESTING ACTIVITIES:Purchases of property and equipment


(5,005
)


(7,102
)Additions to intangible assets


(429
)


(498
)Contributions to unconsolidated entities


(784
)


(13,517
)Distributions from unconsolidated entities


110



1,830Proceeds from sale of discontinued operations






959Proceeds from sale of investments


13



Change in restricted cash


898



(36
)Change in notes receivable


(100
)


(149
)Cash used in investing activities


(5,297
)


(18,513
)FINANCING ACTIVITIES:Proceeds from borrowings






22,000Repayment of borrowings


(288
)


(288
)Excess tax benefits from share-based payments






(23
)Proceeds from issuance of common stock






1Financing fees paid


(1,262
)


Cash (used in) provided by financing activities


(1,550
)


21,690Effect of exchange rate on cash


37



(11
)Net (decrease) increase in cash and cash equivalents


(9,934
)


471CASH AND CASH EQUIVALENTS, beginning of period


22,924



9,775CASH AND CASH EQUIVALENTS, end of period

$
12,990


$
10,246SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest and income taxes:Interest

$
2,483


$
3,499Income taxes


613



434    4




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    BUSINESS
    SUMMARY          2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  General
  Form 10-K,
   5




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Going
    Concern
    Earnings
    Per Share
    Related
    Parties
      Recently
    Adopted Accounting Pronouncements
  Non-controlling Interests in Consolidated Financial
    Statements
 6




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Disclosures about Derivative Instruments and Hedging
    Activities Accounting for
    Derivative Instruments and Hedging Activities
  FAS 157-2, Effective date of FASB Statement No. 157 (FSP 157-2). FSP 157-2 Fair Value Measurements
  Business Combinations Business Combinations
  Recently
    Issued Accounting Pronouncements Not Yet Adopted
  FAS 157-4 FAS 115-2 FAS 124-2 other-than-temporary FAS 107-1 28-1 Disclosures about Fair Value of Financial
    Instruments, FAS 157-4, FAS 115-2 FAS 124-2 FAS 107-1 28-1
  Accounting for
    Contingencies, Reasonable Estimation of the Amount of a
    Loss  an interpretation of FASB Statement
    No. 5.
 7




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  3.
    COMPREHENSIVE
    LOSS    Three Months Ended March 31,2009


2008Net loss

$
(12,483
)

$
(288
)Other comprehensive loss, net of tax:Foreign currency translation (loss) gain


(65
)


11Unrealized (loss) gain on cash flow hedge instrument


(145
)


(451
)Unrealized (loss) gain on investments


(8
)


1Comprehensive loss


(12,701
)


(727
)Less: Comprehensive loss attributable to noncontrolling interest


6



2Comprehensive loss attributable to stockholders

$
(12,695
)

$
(725
)   4.
    INVESTMENTS
    IN UNCONSOLIDATED ENTITIES    Number of


Our Equity


March 31,


December 31,Hotels


Participation


2009


2008Equity method investmentsAmitel Holdings joint venture


6



15.0
%

$
4,369


$
4,291Budget Portfolio Properties, LLC


22



10.0
%


1,186



1,370Cameron S-Sixteen Broadway, LLC


1



15.7
%


812



844Cameron S-Sixteen Hospitality, LLC


1



10.9
%


162



188CNL/IHC Partners, L.P.


3



15.0
%


3,180



3,047Harte IHR joint venture


4



20.0
%


10,528



10,933IHR Greenbuck joint venture


2



15.0
%


2,015



2,170IHR Invest Hospitality Holdings, LLC


2



15.0
%


3,447



3,647IHR/Steadfast Hospitality Management, LLC(1)






50.0
%


795



719MPVF IHR Lexington, LLC


1



5.0
%


974



992Steadfast Mexico, LLC


3



10.3
%


1,592



1,676Other equity method investments


3



various



34



59Total equity method investments


48







29,094



29,936Cost method investmentsDuet Fund(2)










6,251



6,251JHM Interstate Hotels India Ltd(1)










800



500RQB Resort/Development Investors, LLC(3)


1



10.0
%


2,765



2,512Other cost method investments










2,553



2,426Total cost method investments










12,369



11,689Total investments in unconsolidated entities


49






$
41,463


$
41,625  8




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (1)
    
    Hotel number is not listed as this joint venture owns a
    management company.(2)
    
    Hotel number is not listed as this fund is in the process of
    developing hotels.(3)
    
    We hold a preferred return interest in this joint venture.          Three Months Ended March 31,2009


2008Revenue

$
43,955


$
39,350Operating expenses


33,144



28,050Net loss


(9,614
)


(3,010
)  9




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    PROPERTY
    AND EQUIPMENT    March 31,


December 31,2009


2008Land

$
29,712


$
29,712Furniture and fixtures


33,371



32,919Building and improvements


239,411



235,543Leasehold improvements


6,112



6,109Computer equipment


3,825



3,228Software


2,520



2,475Total


314,951


$
309,986Less accumulated depreciation


(31,290
)


(27,936
)Property and equipment, net

$
283,661


$
282,050   6.
    INTANGIBLE
    ASSETS AND GOODWILL    March 31,


December 31,2009


2008Management contracts

$
22,252


$
21,955Franchise fees


1,925



1,925Deferred financing fees


5,555



4,295Total cost


29,732



28,175Less accumulated amortization


(13,075
)


(11,822
)Intangible assets, net

$
16,657


$
16,353        10




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          7.
    FAIR
    VALUE OF FINANCIAL AND DERIVATIVE INSTRUMENTS    Fair Value at March 31, 2009Total


Level 1


Level 2


Level 3Assets:Interest rate caps (included within intangible assets, net)

$
48


$



$
48


$
Marketable securities

$
1,562


$
1,562


$



$
Total:

$
1,610


$
1,562


$
48


$
Liabilities:Interest rate collar (included within other accrued expenses)

$
1,619


$



$
1,619


$
Deferred compensation

$
1,546


$
1,546


$



$
Total:

$
3,165


$
1,546


$
1,619


$
   Disclosures about Fair Value of Financial
    Instruments,
 11




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    8.
    LONG-TERM
    DEBT    March 31,


December 31,2009


2008Senior credit facility  term loan

$
112,700


$
112,988Senior credit facility  revolver loan


48,770



48,770Mortgage debt


82,525



82,525Total long-term debt


243,995



244,283Less current portion


(161,470
)


(161,758
)Long-term debt, net of current portion

$
82,525


$
82,525   Credit
    Facility
  30-day
  30-day
     12




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Mortgage
    Debt
    Principal


Maturity

Spread Over


Interest Rate as ofAmount


Date

LIBOR(1)


March 31, 2009Hilton Arlington

$
24.7 million


November 2009


135 bps



2.04
%Hilton Houston Westchase

$
32.8 million


February 2010


135 bps



2.04
%Sheraton Columbia

$
25.0 million


April 2013


200 bps



3.17
%     (1)
    
    The interest rate for the Hilton Arlington and Hilton Houston
    Westchase mortgage debt is based on a
    30-day
    LIBOR, whereas, the interest rate for the Sheraton Columbia
    mortgage is based on a
    90-day LIBOR.  25-year
  Interest
    Rate Caps and Collar
  Accounting for
    Derivative Instruments and Hedging Activities.
  Maturity

30-Day LIBORAmount


Date

Cap RateOctober 2006 (Hilton Arlington mortgage loan)

$
24.7 million


November 2009


7.25
%February 2007 (Hilton Westchase mortgage loan)

$
32.8 million


February 2010


7.25
%April 2008 (Sheraton Columbia mortgage loan)

$
25.0 million


May 2013


6.00
%  13




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  30-day 30-day 30-day
    9.
    SEGMENT
    INFORMATION            14




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Hotel


HotelOwnership


Management


Corporate


ConsolidatedThree months ended March 31, 2009Revenue

$
19,036


$
11,481


$



$
30,517Depreciation and amortization


2,887



858



96



3,841Operating expense


15,146



9,755



1,750



26,651Operating income (loss)


1,003



868



(1,846
)


25Interest income


20



80







100Interest expense


(2,907
)










(2,907
)Gain on sale of investments










13



13Equity in earnings of unconsolidated entities


(798
)










(798
)Income (loss) before income taxes

$
(2,682
)

$
948


$
(1,833
)

$
(3,567
)Total assets

$
329,551


$
120,192


$
19,643


$
469,386Capital expenditures

$
4,355


$
520


$
130


$
5,005Three months ended March 31, 2008Revenue

$
23,918


$
15,018


$



$
38,936Depreciation and amortization


3,184



975



115



4,274Operating expense


17,441



15,233



1,292



33,966Operating income (loss)


3,293



(1,190
)


(1,407
)


696Interest income


203



116







319Interest expense


(3,815
)










(3,815
)Equity in earnings of unconsolidated entities


2,361











2,361Income (loss) before income taxes

$
2,042


$
(1,074
)

$
(1,407
)

$
(439
)Total assets

$
327,704


$
120,295


$
38,076


$
486,075Capital expenditures

$
6,760


$
298


$
44


$
7,102     Three Months EndedMarch 31,2009


2008Russia

$
247


$
178Other

$
104


$
97     (1)
    
    Management fee revenues from our managed properties in Mexico
    are recorded through our joint venture, IHR/Steadfast
    Hospitality Management, LLC, and as such, are included in equity
    in earnings of unconsolidated entities in our consolidated
    statement of operations for the three months ended
    March 31, 2009 and 2008.    10.
    COMMITMENTS
    AND CONTINGENCIES  Insurance
    Matters
   15




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Insurance
    Receivables and Reserves
    Commitments
    Related to Management Agreements and Hotel
    Ownership
        Guarantees
   16




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Letters
    of Credit
    Contingent
    Liabilities Related to Partnership Interests
      Litigation
   17




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##### Table of Contents



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    11.
    STOCK-BASED
    COMPENSATION  Share Based Payment
      12.
    INCOME
    TAXES  and/or
 18




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##### Table of Contents



Item 2:
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K
  Forward-Looking
    Statements
  Form 10-Q Form 10-K
  Form 10-Q, Form 10-K,
  Overview
    and Outlook
  Our Business 
  Industry Overview 
   19




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##### Table of Contents



Cost-Savings Program 
    Turnover of Management Contracts 
    Number of


Number ofProperties


RoomsAs of December 31, 2008


226



46,448New contracts


1



24Lost contracts


(3
)


(859
)As of March 31, 2009


224



45,613     Critical
    Accounting Policies and Estimates
   20




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##### Table of Contents



Form 10-K
  Results
    of Operations
  Operating
    Statistics
    As of March 31,


Percent Change2009


2008


09 vs. 08Hotel OwnershipNumber of properties


7



7



Number of rooms


2,052



2,045



0.3
%Hotel Management(1)Properties managed


224



217



3.2
%Number of rooms


45,613



45,252



0.8
%     (1)
    
    Statistics related to hotels in which we hold a partial
    ownership interest through a joint venture or wholly-owned have
    been included in hotel management.    
    We signed 7 new management contracts with Equity Inns, Inc.
    We obtained 4 additional management contracts FFC Capital
    Corporation.
    We signed management contracts for 2 newly built aloft branded
    hotels developed by our joint venture, IHR Greenbuck Hotel
    Venture.
    We secured 9 additional management contracts, including one
    internationally, with various other owners. These additional
    contracts were offset by the loss of 15 management contracts
    from various owners during the period.    Three Months EndedMarch 31,


Percent Change2009


2008


09 vs. 08Hotel OwnershipRevPAR

$
66.29


$
78.90



(16.0
)%ADR

$
112.08


$
121.96



(8.1
)%Occupancy


59.1
%


64.7
%


(8.7
)%     (2)
    
    Operating statistics for our wholly-owned hotels includes our
    entire portfolio of 7 hotels, including the Sheraton Columbia
    and the Westin Atlanta Airport, both of which underwent
    comprehensive renovation programs throughout 2008. 21




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##### Table of Contents



Three Months EndedMarch 31,


Percent Change2009


2008


09 vs. 08Hotel ManagementRevPAR

$
74.25


$
91.83



(19.1
)%ADR

$
123.01


$
136.37



(9.8
)%Occupancy


60.4
%


67.3
%


(10.3
)%     (3)
    
    We present these operating statistics for the periods included
    in this report on a same-store basis. We define our same-store
    hotels as those which (i) are managed or owned by us for
    the entirety of the reporting periods being compared or have
    been managed by us for part of the reporting periods compared
    and we have been able to obtain operating statistics for the
    period of time in which we did not manage the hotel, and
    (ii) have not sustained substantial property damage,
    business interruption or undergone large-scale capital projects
    during the current period being reported. In addition, the
    operating results of hotels for which we no longer managed as of
    March 31, 2009 are not included in same-store hotel results
    for the periods presented herein. Of the 224 properties that we
    managed as of March 31, 2009, 192 properties have been
    classified as same-store hotels.  Revenue
    Three Months EndedMarch 31,


Percent Change2009


2008


09 vs. 08Lodging

$
19,036


$
23,918



(20.4
)%Management fees


8,351



9,909



(15.7
)%Termination fees


1,246



3,010



(58.6
)%Other


1,884



2,099



(10.2
)%Other revenue from managed properties


132,089



151,014



(12.5
)%Total revenue

$
162,606


$
189,950



(14.4
)%   Lodging
    Management
    fees and termination fees
     22




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##### Table of Contents



Other
    revenue from managed properties
    Operating
    Expenses
    Three Months EndedMarch 31,


Percent Change2009


2008


09 vs. 08Lodging

$
14,582


$
17,025



(14.3
)%Administrative and general


11,238



15,829



(29.0
)%Depreciation and amortization


3,841



4,274



(10.1
)%Restructuring costs


831







100.0
%Asset impairments and write-offs






1,112



(100.0
)%Other expenses from managed properties


132,089



151,014



(12.5
)%Total operating expenses

$
162,581


$
189,254



(14.1
)%   Lodging
    Administrative
    and general
    Depreciation
    and amortization
    Restructuring
    costs
    Asset
    impairments and write-offs
   23




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##### Table of Contents



Other
    Income and Expense
    Three Months EndedMarch 31,


Percent Change2009


2008


09 vs. 08Interest expense, net

$
2,807


$
3,496



(19.7
)%Equity in (losses) earnings of unconsolidated entities


(798
)


2,361



>(100
)%Gain on sale of investments


13







100
%Income tax (expense) benefit


(8,916
)


151



>(100
)%   Interest
    expense, net
    Equity in
    (losses) earnings of unconsolidated entities
    Income
    tax (expense) benefit
    Liquidity,
    Capital Resources and Financial Position
    Three Months EndedMarch 31,


Percent Change2009


2008


09 vs. 08Cash used in operating activities

$
3,124


$
2,695



15.9
%Cash used in investing activities


5,297



18,513



(71.4
)%Cash used in (provided by) financing activities


1,550



(21,690
)


>100
%Working capital deficit


(172,026
)


(3,994
)


>(100
)%Cash interest expense


2,483



3,499



(29.0
)%Debt balance


243,995



233,375



4.6
%   Operating
    Activities
   24




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##### Table of Contents



Investing
    Activities
    
    In the first quarter of 2009, we invested a total of
    $0.8 million in various existing joint ventures while
    receiving distributions totaling $0.1 million from two
    joint ventures. In the first quarter of 2008, we made
    contributions of $13.5 million in joint venture
    investments, of which $11.1 million was for investments in
    three new joint ventures and $1.6 million for investment in
    the Duet Fund. In 2008, we also received a distribution of
    $1.8 million related to the sale of the Doral Tesoro
    Hotel & Golf Club by one of our joint ventures.
    Distributions which are a return of our investment in the joint
    venture are recorded as investing cash flows, while
    distributions which are a return on our investment are recorded
    as operating cash flows.
    We spent $2.1 million less on property and equipment in the
    first quarter of 2009 compared to the same period in 2008 as the
    comprehensive renovation program at the Westin Atlanta was
    completed in 2008.
    In the first quarter of 2008, we received additional proceeds of
    $1.0 million from the sale of BridgeStreet Corporate
    Housing Worldwide, Inc. and its affiliated subsidiaries in
    January 2007.  Financing
    Activities
      Liquidity
  Liquidity Requirements 
    30-day
 25




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##### Table of Contents



30-day and/or
    Contractual
    Obligations and Off-Balance Sheet Arrangements
  Form 10-K.
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Form 10-K
  Item 4.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
  Rules 13a-15(e) 15-d-15(e)).
   26




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##### Table of Contents



Changes
    in Internal Control over Financial Reporting
   PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Item 6.
    Exhibits  ExhibitNo.

Description of Document10
.1

Second waiver and Third Amendment to the Senior Secured Credit
    Facility, dated March 30, 2009, among Interstate Operating
    Company, L.P., Lehman Brothers Inc. and various other lenders
    (incorporated by reference to Exhibit 10.12.4 to the
    Companys
    Form 10-K
    filed with the Securities and Exchange Commission on
    March 31, 2009).31
.1*

Sarbanes-Oxley Act Section 302 Certifications of the Chief
    Executive Officer.31
.2*

Sarbanes-Oxley Act Section 302 Certifications of the Chief
    Financial Officer.32
*

Sarbanes-Oxley Act Section 906 Certifications of Chief
    Executive Officer and Chief Financial Officer.     *
    
    Filed herewith 27