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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-K þ
    
    Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
  For the fiscal year ended December 31, 2004
    
    
    
    Commission File Number 01-12073
 EQUITY INNS, INC. 
  Tennessee
    
    62-1550848(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification Number)Incorporation or Organization)
 7700 Wolf River Boulevard, Germantown, Tennessee 38138 
  (901) 754-7774 
  Securities registered pursuant to Section 12(b) of the Act:
8.75% Series B Cumulative Preferred Stock, $.01 par value 
  Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 par value 
  Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90 days. þ o
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in the
definitive proxy statement or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes þ No o. Aggregate market value of voting stock and non-voting common stock held by nonaffiliates of the
registrant as of June 30, 2004: $407,381,615. Number of shares of Common Stock, $.01 par value, outstanding as of March 9, 2005: 53,966,935 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrants proxy statement for its 2005 Annual Meeting of Shareholders to be held
May 12, 2005 (the Proxy Statement) are incorporated by reference into Part III of this Report. Exhibit Index beginning on Page 81.




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EQUITY INNS, INC
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2004 TABLE OF CONTENTS PagePART IItem 1.
    
    Business
    
    
    3Item 2.
    
    Properties
    
    
    12Item 3.
    
    Legal Proceedings
    
    
    12Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    12PART IIItem 5.
    
    Market for the
Registrant's Common Equity and Related Stockholder Matters
    
    
    13Item 6.
    
    Selected Financial Data
    
    
    14Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 8.
    
    Financial Statements and Supplementary Data
    
    
    29Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    71Item 9A.
    
    Controls and Procedures
    
    
    71Item 9B.
    
    Other Information
    
    
    72Part IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    73Item 11.
    
    Executive Compensation
    
    
    73Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    73Item 13.
    
    Certain Relationships and Related Transactions
    
    
    74Item 14.
    
    Principal Accounting Fees and Services
    
    
    74PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    74EX-10.10.C SECURED REVOLVING CREDIT AGREEMENTEX-10.29 CHANGE IN CONTROL AND TERMINATION AGREEMENTEX-10.31 FORM OF MANAGEMENT AGREEMENTEX-10.32 FORM OF MANAGEMENT AGREEMENTEx-10.33  Executive Officer and Independent Director CompensationEX-21.1 LIST OF SUBSIDIARIES OF EQUITY INNS INC.EX-23.1 CONSENT OF PRICEWATERHOUSECOOPERS L.L.P.EX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2  SECTION 906 CERTIFICATION OF THE CFO
  2




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PART I Throughout this Form 10-K, the words Company, Equity Inns, we, our, and us refer to
Equity Inns, Inc., a Tennessee corporation, and its consolidated subsidiaries, unless otherwise
stated or the context requires otherwise. CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS This report contains or incorporates by reference forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including, without limitation, statements containing the words, may,
believes, estimates, projects, plans, intends, will, anticipates, expects and words
of similar import. Such forward-looking statements relate to future events, the future financial
performance of our Company, and involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company or industry results
to be materially different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such risks and uncertainties include, but are not
limited to, the following: the ability of the Company to cope with domestic economic and political
disruption and Federal and state governmental regulations or war, terrorism, states of emergency or
similar activities; risks associated with debt financing; risks associated with the hotel and
hospitality industry; the ability of the Company to successfully implement our operating strategy;
availability of capital; changes in economic cycles; competition from other hospitality companies;
and changes in the laws and government regulations applicable to us. Readers should specifically
consider the various factors identified, or incorporated by reference in this report including, but
not limited to those discussed in our Current Report on Form 8-K
filed March 16, 2005, and in any
other documents filed by us with the Securities and Exchange Commission that could cause actual
results to differ from those implied by the forward-looking statements. We undertake no obligation
and do not intend to publicly update or revise any forward-looking statements contained herein to
reflect future events or developments, whether as a result of new information, future events or
otherwise. 
 ITEM 1. BUSINESS (a) General Development of Business Equity Inns is a Memphis-based, self-advised hotel real estate investment trust (REIT) primarily
focused on the upscale extended stay, all-suite, midscale limited service and full service segments
of the hotel industry. The Company, through its wholly-owned subsidiary, Equity Inns Trust (the
Trust), is the sole general partner of Equity Inns Partnership, L.P. (the Partnership) and at
December 31, 2004 owned an approximate 97.3% interest in the Partnership. The Partnership and its
affiliates lease all of our hotels to wholly-owned taxable REIT subsidiaries of the Company (the
TRS Lessees). (b) Narrative Description of Business We commenced operations on March 1, 1994 upon completion of our initial public offering and the
simultaneous acquisition of eight Hampton Inn hotels with 995 rooms. Since then, we have grown with
a focus on both geographic and brand diversity. We believe that diversity in our asset portfolio
reduces operational variance from year-to-year and results in less volatility as compared to the
overall hotel industry. At December 31, 2004, we owned 110 hotel properties with a total of 13,508 rooms located in
34 states. In order to qualify as a REIT, we cannot operate hotels. Therefore, our hotels are
leased to our TRS Lessees and are managed by unrelated third parties. By maintaining these leases 3




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through our TRS Lessees, we realize the economic benefits and risks of operating these hotels and report
all hotel revenues and expenses in our accompanying consolidated statements of operations. We maintain management agreements with unrelated third parties for our hotels that range in
remaining terms from one to four years. The majority of our management contracts renew annually.
The management fees consist of a base fee ranging from 1.5% to 3.0% of hotel revenues and an
incentive fee consisting of a percentage of gross operating profits in excess of budget, as defined
by the management agreements. These fees are recorded by us as a component of direct hotel
expenses in our accompanying consolidated statements of operations. The diversity of our portfolio is such that, at December 31, 2004, no individual hotel exceeded
1.9% of the total rooms in the portfolio. Our geographical distribution and franchise diversity is
illustrated by the following charts. Brand Diversity Number of
    
    Number ofBrand Affiliation
    
    Hotel Properties
    
    Rooms/SuitesMidscale Limited Service Hotels:Hampton Inn (1)
    
    
    49
    
    
    
    6,112Comfort Inn (4)
    
    
    1
    
    
    
    104Sub-total
    
    
    50
    
    
    
    6,216All-Suite Hotels:AmeriSuites (3)
    
    
    18
    
    
    
    2,291Hampton Inn & Suites (1)
    
    
    1
    
    
    
    161SpringHill Suites (2)
    
    
    1
    
    
    
    88Sub-total
    
    
    20
    
    
    
    2,540Upscale Extended Stay Hotels:Residence Inn (2)
    
    
    17
    
    
    
    1,829Homewood Suites (1)
    
    
    9
    
    
    
    1,295Sub-total
    
    
    26
    
    
    
    3,124Full Service Hotels:Courtyard (2)
    
    
    8
    
    
    
    782Hilton Garden Inn (1)
    
    
    1
    
    
    
    112Comfort Inn (4)
    
    
    1
    
    
    
    177Holiday Inn (5)
    
    
    4
    
    
    
    557Sub-total
    
    
    14
    
    
    
    1,628Total
    
    
    110
    
    
    
    13,508
 Franchise Affiliation  (1)
    Hilton Hotels Corporation(2)
    Marriott International, Inc.(3)
    Hyatt Corporation, which purchased the AmeriSuites brand from the Blackstone Group in
January 2005, which purchased the brand from Prime Hospitality Corporation in October 2004(4)
    Choice Hotels International, Inc.(5)
    Intercontinental Hotels Group, PLC 4




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Geographical Diversity Number of

    
    Number of
    
    Percentage ofState
    
    Hotels

    
    Suites/Rooms
    
    Suites/RoomsAlabama
    
    
    4
    
    
    
    460
    
    
    
    3.4
    %Arizona
    
    
    4
    
    
    
    495
    
    
    
    3.7
    %Arkansas
    
    
    1
    
    
    
    123
    
    
    
    0.9
    %Colorado
    
    
    3
    
    
    
    356
    
    
    
    2.6
    %Connecticut
    
    
    3
    
    
    
    405
    
    
    
    3.0
    %Florida
    
    
    14
    
    
    
    1,689
    
    
    
    12.5
    %Georgia
    
    
    7
    
    
    
    656
    
    
    
    4.9
    %Idaho
    
    
    1
    
    
    
    104
    
    
    
    0.8
    %Illinois
    
    
    3
    
    
    
    499
    
    
    
    3.7
    %Indiana
    
    
    2
    
    
    
    255
    
    
    
    1.9
    %Kansas
    
    
    2
    
    
    
    260
    
    
    
    1.9
    %Kentucky
    
    
    2
    
    
    
    231
    
    
    
    1.7
    %Louisiana
    
    
    1
    
    
    
    128
    
    
    
    0.9
    %Maryland
    
    
    2
    
    
    
    244
    
    
    
    1.8
    %Michigan
    
    
    3
    
    
    
    399
    
    
    
    3.0
    %Minnesota
    
    
    2
    
    
    
    248
    
    
    
    1.8
    %Missouri
    
    
    2
    
    
    
    242
    
    
    
    1.8
    %Nebraska
    
    
    1
    
    
    
    80
    
    
    
    0.6
    %Nevada
    
    
    1
    
    
    
    202
    
    
    
    1.5
    %New Jersey
    
    
    3
    
    
    
    424
    
    
    
    3.1
    %New Mexico
    
    
    1
    
    
    
    128
    
    
    
    0.9
    %New York
    
    
    1
    
    
    
    154
    
    
    
    1.1
    %North Carolina
    
    
    6
    
    
    
    679
    
    
    
    5.0
    %Ohio
    
    
    6
    
    
    
    736
    
    
    
    5.5
    %Oklahoma
    
    
    1
    
    
    
    135
    
    
    
    1.0
    %Oregon
    
    
    1
    
    
    
    168
    
    
    
    1.2
    %Pennsylvania
    
    
    2
    
    
    
    249
    
    
    
    1.8
    %South Carolina
    
    
    3
    
    
    
    404
    
    
    
    3.0
    %Tennessee
    
    
    12
    
    

    
    1,279
    
    
    
    9.5
    %Texas
    
    
    7
    
    
    
    1,015
    
    
    
    7.5
    %Vermont
    
    
    2
    
    
    
    200
    
    
    
    1.6
    %Virginia
    
    
    2
    
    
    
    245
    
    
    
    1.8
    %Washington
    
    
    1
    
    
    
    161
    
    
    
    1.2
    %West Virginia
    
    
    4
    
    
    
    455
    
    
    
    3.4
    %Totals
    
    
    110
    
    
    
    13,508
    
    
    
    100.0
    %
 We believe that geographic diversity helps to limit our exposure to any one market. At December
31, 2004, we owned a geographically diverse portfolio of 110 hotels with 13,508 rooms located in 34
states. Additionally, our property mix is spread between suburban and urban locations, helping to
insulate us from various economic climates, including a depressed business travel climate. Our hotel portfolio includes midscale limited service hotels, all-suite hotels, upscale extended
stay hotels and full service hotels. This array of product offering allows us to diversify the
asset portfolio in an effort to reduce risk in various economic environments. 5




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Approximately 95% of our hotel portfolio is comprised of the following leading franchise brands:
Homewood Suites, Hilton Garden Inn, Hampton Inn & Suites and Hampton Inn by Hilton, Residence Inn,
Courtyard and SpringHill Suites by Marriott and AmeriSuites by Hyatt Corporation. We believe that
multiple brands at the midscale, upscale extended stay and all-suite levels help to insulate our
asset portfolio against the volatility of individual brand results relative to industry revenue per
available room (RevPAR) performance. Descriptions of each of our significant brands are as
follows: Homewood Suites by Hilton: A premier upscale extended stay hotel, focusing on extended stay, corporate transient and
family travelers. Rated the #1 extended stay hotel brand by Business Travel News in 2005. Hampton Inn by Hilton: A premier midscale without food and beverage hotel chain with over 1,000 locations. Rated the
#1 midprice without food and beverage by Business Travel News in 2005. Residence Inn by Marriott: A premier upscale extended stay hotel, focusing on extended stay, corporate transient and
family travelers. Rated the #2 extended stay hotel brand by Business Travel News in 2005. Courtyard by Marriott: An upscale full service hotel designated as the hotel designed by business travelers for
business travelers. Rated the #1 midprice with food and beverage by Business Travel News in
2005. AmeriSuites by Hyatt Corporation: An upscale all-suite hotel, billed as Americas most affordable all-suite hotel. Approximately 80% of our hotels are branded by Hilton and Marriott, which both provide national
marketing support and frequent stay programs that continue to drive additional revenue. We believe
that better brands generate RevPAR premiums over their peers and focusing on these premium brands
is another factor in our strategy to limit risk in the volatility of our hotel portfolio. In order to qualify as a REIT, we cannot operate hotels and, consequently, we outsource the
management of our hotels to leading independent management companies. By utilizing third-party
managers with relatively short-term contracts that provide for strong operating incentive
management fees, we believe that we have better control over the operating results of our hotels.
At December 31, 2004, our hotel managers are as follows: Number of HotelsInterstate Hotels & Resorts, Inc.
    
    
    48Hilton Hotels Corporation
    
    
    17Hyatt Corporation
    
    
    18McKibbon Hotel Group
    
    
    13Other (4)
    
    
    14110
 6




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GROWTH STRATEGY The Companys business objectives are to increase funds from operations and dividends, while
enhancing shareholder value primarily through (i) aggressive asset management and the strategic
investment of capital in its diversified hotel portfolio, primarily with mid-scale and upscale
properties in strategic urban and suburban areas, (ii) selectively acquiring hotels that have been
underperforming due to the lack of sufficient capital improvements, poor management or franchise
affiliation, and (iii) selectively disposing of hotels that have reached their earnings potential
or may, in managements judgment, suffer adverse changes in their local market, or require large
capital outlays. This process is ongoing, and activity could potentially increase given a more
fluid marketplace. EMPLOYEES At March 9, 2005, we employed, through a wholly-owned subsidiary, 19 employees. COMPETITION The hotel industry is highly competitive with various participants competing on the basis of price,
level of service and geographic location. Each of our hotels is located in a developed area that
includes other hotel properties. The number of competitive hotel properties in a particular area
could have a material adverse effect on the occupancy, average daily rate (ADR) and RevPAR of
our hotels or at hotel properties acquired in the future. We believe that brand recognition,
location, the quality of the hotel, consistency of services provided, supply of rooms in the market
and price are the principal competitive factors affecting our hotels. FRANCHISE AGREEMENTS A part of our asset management program is the licensing of all of our hotels under nationally
franchised brands. We believe that the publics perception of quality associated with a franchisor
is an important feature in the operation of a hotel. We also believe that franchised properties
generally have higher levels of RevPAR than unfranchised properties due to access to national
reservation systems and advertising and marketing programs provided by franchisors. Our franchise
agreements generally have initial terms ranging from 10 to 25 years and expire beginning in 2005
through 2028. Franchise renewal procedures are currently underway for several of our hotels. We are also committed to franchisors to make certain capital improvements to our hotel properties,
which will be funded primarily through our operating cash flows. We made capital improvements of
approximately $25.3 million to our hotels in 2004. In 2005, we expect to fund approximately $25.0
million of capital improvements to our hotels, with approximately $13.0 million representing major
refurbishment projects to six hotels. SEASONALITY Our operations historically have been seasonal in nature, generally reflecting higher RevPAR during
the second and third quarters. This seasonality can be expected to cause fluctuations in our
quarterly operating results. To the extent that cash flows from our hotel operations are
insufficient to fund our operating or investing requirements or dividend distributions, we may fund
seasonal-related shortfalls with borrowings under our Line of Credit. 7




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INFLATION Operators of hotels in general have the ability to adjust room rates quickly. However, competitive
pressures may limit our ability to raise room rates in the face of inflation. TAX STATUS We intend to operate so as to be taxed as a REIT under Sections 856-860 of the Internal Revenue
Code of 1986, as amended. As long as we qualify for taxation as a REIT, with certain exceptions,
we will not be taxed at the corporate level on our taxable income that is distributed to our
shareholders. A REIT is subject to a number of organizational and operational requirements,
including a requirement that it must distribute annually at least 90% of its taxable income in the
form of dividends to its shareholders. Failure to qualify as a REIT will render us subject to tax
(including
any applicable alternative minimum tax) on our taxable income at regular corporate rates and
distributions to the shareholders in any such year will not be deductible by us. Even if we
qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income
and property. In connection with our election to be taxed as a REIT, our Company charter imposes
certain restrictions on the transfer of shares of our common stock and preferred stock. We have
adopted the calendar year as our taxable year. The REIT Modernization Act (RMA), which generally took effect on January 1, 2001, includes
several REIT provisions which revised extensively the tax rules applicable to our TRS Lessees.
Under the RMA provisions, we are allowed to own all of the stock in our TRS Lessees. In addition,
our TRS Lessees are allowed to perform non-customary services for hotel guests and are permitted
to enter into many new businesses. However, our TRS Lessees are not allowed to manage hotels.
Instead, our TRS Lessees are required to enter into management contracts for our hotels with
independent management companies. The use of TRS Lessees, however, is subject to certain
restrictions, including the following:  
    no more than 20% of the REITs assets may consist of securities of its TRS Lessees;
    the tax deductibility of interest paid or accrued by TRS Lessees to their affiliated
REIT is limited; and
    a 100% excise tax is imposed on non-arms length transactions between TRS Lessees and
their affiliated REIT or the REITs tenants. ENVIRONMENTAL MATTERS In connection with most of our acquisitions, Phase I environmental site assessments were obtained
for our hotels. These assessments included historical reviews of the hotels, reviews of certain
public records, preliminary investigations of the sites and surrounding properties, screenings for
hazardous and toxic substances and underground storage tanks, and the preparation and issuance of a
written report. These assessments did not include invasive procedures to detect contaminants from
former operations of our hotels or migrating from neighbors or caused by third parties. These
assessments have not revealed any environmental liability that we believe would have a material
adverse effect on our business, assets, results of operations or liquidity, nor are we aware of any
such liability or material environmental issues. 8




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EXECUTIVE OFFICERS OF THE COMPANY The Companys executive officers, listed below, serve in their respective capacities for
approximate one year terms and are subject to re-election annually by the Board of Directors,
normally in May of each year. NAME
    
    POSITIONPhillip H. McNeill, Sr.*
    
    Chairman of the Board, Former Chief Executive Officer and DirectorHoward A. Silver*
    
    Chief Executive Officer, President and DirectorJ. Mitchell Collins
    
    Executive Vice President, Chief Financial Officer, Treasurer and SecretaryPhillip H. McNeill, Jr.
    
    Executive Vice President of DevelopmentRichard F. Mitchell
    
    Senior Vice President of Asset ManagementEdwin F. Ansbro**
    
    Senior Vice President of Real EstateJ. Ronald Cooper
    
    Vice President, Controller, Assistant Secretary, and Assistant Treasurer
   *
    
    Mr. McNeill, Sr. served as our Chief Executive Officer until January 15, 2005. He became
non-executive Chairman on January 15, 2005. Mr. Silver assumed the role of Chief Executive Officer
on January 15, 2005.**
    
    Mr. Ansbro was elected by our Board to be Senior Vice President of Real Estate effective January
1, 2005. Phillip H. McNeill, Sr. (age 66) has served as our Chairman of the Board of Directors and Chief
Executive Officer since our Company was founded in 1993. In January 2005, Mr. McNeill, Sr. became
non-executive Chairman and Mr. Silver assumed the role of Chief Executive Officer. Mr. McNeill,
Sr. has been Chairman and President of McNeill Investment Company, Inc. since 1977. From 1963 to
1977, he served in various capacities, including President and Chief Executive Officer with
Schumacher Mortgage Company, Inc., a mortgage banking firm and subsidiary of Time, Inc. Mr.
McNeill, Sr. has served as President and Director of the Memphis Mortgage Bankers Association and
the Tennessee State Mortgage Bankers Association. He has been a past director of National
Commerce Financial Corporation and Interstate Hotels Corporation, a member of the Board of Trustees
of Rhodes College, a trustee of Wetlands America Trust, Inc., a member of the Board of Visitors of
the University of Memphis and a board member of the Society of Entrepreneurs and Youth Villages,
Inc. Mr. McNeill, Sr. is the father of Phillip H. McNeill, Jr., our Executive Vice President of
Development. Howard A. Silver (age 50) is our President and Chief Executive Officer, positions he has
held since January 2005. From June 1998 until December 2004, Mr. Silver served as our President
and Chief Operating Officer. Mr. Silver joined our Company in May 1994 and has served in various
capacities, including Executive Vice President of Finance, Secretary, Treasurer and Chief Financial
Officer of our Company until June 1998. From 1992 until joining our Company, Mr. Silver served 9




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as
Chief Financial Officer of Alabaster Originals, L.P., Memphis, Tennessee, a fashion jewelry
wholesaler. From 1978 to 1985, Mr. Silver was a certified public accountant with the national
accounting firm of Coopers & Lybrand L.L.P., from 1985 to 1987, Mr. Silver served as Vice President
of Finance of Fogelman Properties, Inc., Memphis, Tennessee, an apartment management company, and
from 1987 to 1992, Mr. Silver was employed as a certified public accountant with the national
accounting firm of Ernst & Young. He has been a certified public accountant since 1980. Mr.
Silver has been a director of our Company since December 1998. Mr. Silver is a director of Capital
Lease Funding, Inc. (NYSE: LSE) (Audit Committee (Chairman), Corporate Governance and Nomination
Committee, Investment Committee) and Great Wolf Resorts, Inc. (NASDAQ: WOLF) (Audit Committee,
Compensation Committee (Chairman)). Mr. Silver serves as the financial expert for the Audit
Committee of Capital Lease Funding, Inc. Mr. Silver is also on the Board of Managers of GHII, LLC,
a private furniture and equipment contractor in which we own a 45%
interest. Mr. Silver is also Treasurer of the Ridgeway Country Club. J. Mitchell Collins (age 36) is our Executive Vice President, Chief Financial Officer, Treasurer
and Secretary, positions he has held since January 2004. From 2000 until 2003, he served as
Executive Vice President and Chief Financial Officer of ResortQuest International, Inc., a public
company that performed rental property management in resort areas. ResortQuest was purchased by
Gaylord Entertainment, Inc. in late 2003. From 1990 until 2000, Mr. Collins worked with Arthur
Andersen LLP, where he represented the firm as part of its National Hospitality practice and also
was a Team Leader for Andersens Real Estate and Hospitality practice in its Mid-South region. Mr.
Collins currently serves on the Board of Trustees of the Dixon Gallery and Gardens, serves as a
member of the Zoological Council of the Memphis Zoo, and also serves on the Accountancy Alumni
Board of the University of Mississippi (Ole Miss). Mr. Collins is also a member of the American
Institute of Certified Public Accountants. Phillip H. McNeill, Jr. (age 43) is Executive Vice President of Development of the Company, a
position he has held since 1996. From 1994 to 1996, he served as President of Trust Leasing, Inc.,
formerly McNeill Hotel Co., Inc., the Companys former lessee, and from 1984 to 1996 served as Vice
President of Trust Management, Inc., formerly McNeill Hospitality Corporation, which was an
affiliate of McNeill Hotel Company. Mr. McNeill, Jr. is on the Board of Managers of GHII, LLC. Mr.
McNeill, Jr. is the son of Phillip H. McNeill, Sr., our non-executive Chairman. Richard F. Mitchell (age 59) is Senior Vice President of Asset Management of the Company, a
position that he has held since 1997. From 1995 to 1996, he was Vice President of Operations for
Trust Leasing and joined Trust Leasing in 1994 as an Area Manager. From 1989 to 1994, Mr. Mitchell
held various positions with North American Hospitality, Inc., including Director of Training and
Development. Prior to 1989, Mr. Mitchell has held management positions in a number of hotels
including Sheraton, Hampton Inn, Residence Inn and Best Western. Mr. Mitchell is a member of the
Homewood Suites Franchise Advisory Council, a member of the Hampton Inn Brand Operations Council
and is President of the AmeriSuites Franchise Advisory Council. Edwin F. Ansbro (age 47) is Senior Vice President of Real Estate. Mr. Ansbro joined our Company in
January 2005 after serving as an in-house consultant for approximately six months. From 2002 to
February 2004, he served as Senior Vice President of New Business Development for Storage USA, a
wholly-owned unit of GE Real Estate. From 1998 to 2002, Mr. Ansbro served as Senior Vice President
and Chief Development Officer for Storage USA Franchise Corporation, a wholly-owned subsidiary of
Storage USA prior to its acquisition by GE Real Estate. From 1994 to 1998, he served as Vice
President of Development for Promus Hotel Corporation. 10




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##### Table of Contents



J. Ronald Cooper (age 56) is Vice President, Controller, Assistant Secretary and Assistant
Treasurer of the Company, positions he has held since 1996. From October 1994 to 1996, he was
Controller and Director of Financial Reporting for McNeill Hotel Company. Mr. Cooper has been a
certified public accountant since 1972. From 1978 until joining McNeill Hotel Company, Mr. Cooper
was employed as Secretary, Treasurer and Controller of Wall Street Deli, Inc., a publicly-owned
delicatessen company. Prior to that, Mr. Cooper was a certified public accountant with the
national accounting firm of Coopers & Lybrand L.L.P. from 1970 to 1976. AVAILABLE INFORMATION Our Internet website address is: www.equityinns.com. We also make available free of charge through
our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities and Exchange Act of 1934, as amended, as soon as reasonably practicable after such
documents are electronically filed with, or furnished to, the Securities and Exchange Commission
(SEC). We have also made available our Corporate Governance Guidelines and the charters of the Audit
Committee, Compensation Committee and Corporate Governance and Nomination Committee on our website
under Corporate Governance. We have also adopted a Code
of Ethics that applies to our president and chief executive officer, our chief financial officer, our controller, and all other
employees and have posted this Code of Ethics, along with our Whistleblower policy, on our website.
We intend to satisfy the disclosure requirements under Item 10 of Form 8-K relating to amendments
to or waivers from any provision of the Code of Ethics by posting such information on our website.
Our corporate governance documents are also available in print upon written shareholder request to
our Secretary, J. Mitchell Collins, at 7700 Wolf River Boulevard, Germantown, Tennessee 38138, or
by filling out an information request on our website under Information Requests. The information on our website is not, and shall not be deemed to be, a part of this report or
incorporated into any other filings that we make with the SEC. 11




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##### Table of Contents



ITEM 2. PROPERTIES Our principal executive offices are located at 7700 Wolf River Boulevard, Germantown, Tennessee
38138. We carry out all aspects of our business at this location. We
lease approximately 8,000
square feet at our headquarters building. We believe that our present facilities are adequate for
our current and presently projected needs. The following table sets forth certain information for two years ended December 31, 2004 with
respect to our hotels: Year Ended December 31, 2004 (1)
    
    
    Year Ended December 31, 2003 (1)Revenue
    
    
    
    
    
    
    
    
    
    
    RevenueNumber
    
    
    Number
    
    
    
    
    
    
    Average
    
    
    Per
    
    
    
    
    
    
    Average
    
    
    Perof
    
    
    of
    
    
    
    
    
    
    Daily
    
    
    Available
    
    
    
    
    
    
    Daily
    
    
    AvailableBrand
    
    Hotels
    
    
    Rooms
    
    
    Occupancy
    
    
    Rate
    
    
    Room (2)
    
    
    Occupancy
    
    
    Rate
    
    
    Room (2)Hampton Inn
    
    
    49
    
    
    
    6,112
    
    
    
    64.9
    %
    
    $
    75.27
    
    
    $
    48.85
    
    
    
    63.5
    %
    
    $
    72.37
    
    
    $
    45.96AmeriSuites
    
    
    18
    
    
    
    2,291
    
    
    
    67.8
    %
    
    $
    72.55
    
    
    $
    49.19
    
    
    
    68.7
    %
    
    $
    69.51
    
    
    $
    47.75Residence Inn
    
    
    17
    
    
    
    1,829
    
    
    
    78.6
    %
    
    $
    91.90
    
    
    $
    72.23
    
    
    
    78.2
    %
    
    $
    89.40
    
    
    $
    69.91Homewood Suites
    
    
    9
    
    
    
    1,295
    
    
    
    77.4
    %
    
    $
    102.37
    
    
    $
    79.23
    
    
    
    75.1
    %
    
    $
    99.49
    
    
    $
    74.72Courtyard
    
    
    8
    
    
    
    782
    
    
    
    76.9
    %
    
    $
    91.73
    
    
    $
    70.54
    
    
    
    74.7
    %
    
    $
    88.89
    
    
    $
    66.40Holiday Inn
    
    
    4
    
    
    
    557
    
    
    
    59.7
    %
    
    $
    65.64
    
    
    $
    39.19
    
    
    
    55.0
    %
    
    $
    67.07
    
    
    $
    36.89Comfort Inn
    
    
    2
    
    
    
    281
    
    
    
    65.8
    %
    
    $
    86.71
    
    
    $
    57.06
    
    
    
    70.5
    %
    
    $
    86.07
    
    
    $
    60.68Hampton Inn & Suites
    
    
    1
    
    
    
    161
    
    
    
    82.4
    %
    
    $
    106.74
    
    
    $
    87.95
    
    
    
    72.7
    %
    
    $
    92.90
    
    
    $
    67.54SpringHill Suites
    
    
    1
    
    
    
    88
    
    
    
    78.8
    %
    
    $
    80.46
    
    
    $
    63.40
    
    
    
    75.2
    %
    
    $
    78.96
    
    
    $
    59.38Hilton Garden Inn
    
    
    1
    
    
    
    112
    
    
    
    67.4
    %
    
    $
    85.21
    
    
    $
    57.43
    
    
    
    66.2
    %
    
    $
    82.65
    
    
    $
    54.71110
    
    
    
    13,508
    
    
    
    69.3
    %
    
    $
    81.79
    
    
    $
    56.68
    
    
    
    68.2
    %
    
    $
    78.95
    
    
    $
    53.84
   Notes
  (1)
    Represents all comparable statistics for hotels owned by us at year end as if we had owned
the hotels for both periods presented.(2)
    Determined by multiplying occupancy times the average daily rate. 
 ITEM 3. LEGAL PROCEEDINGS We are involved in various legal actions arising in the ordinary course of business. Management
does not believe that any of the pending actions will have a material adverse effect on our
business, financial condition or results of operations. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of our shareholders during the fourth quarter of 2004, through
the solicitation of proxies or otherwise.   12




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##### Table of Contents



ITEM 5.
    MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) Market Information The Companys common stock, $.01 par value, is traded on the NYSE under the symbol ENN. The
following table sets forth for the indicated periods the high and low closing prices for the common
stock as traded through the facilities of the NYSE and the cash distributions declared per share: DistributionsPrice Range
    
    
    Declared
    
    
    RecordHigh
    
    
    Low
    
    
    Per Share
    
    
    DateYear Ended December 31, 2004:First Quarter
    
    $
    9.90
    
    
    $
    8.54
    
    
    $
    0.13
    
    
    March 31, 2004Second Quarter
    
    $
    9.39
    
    
    $
    8.20
    
    
    $
    0.13
    
    
    June 30, 2004Third Quarter
    
    $
    9.97
    
    
    $
    8.45
    
    
    $
    0.13
    
    
    September 30, 2004Fourth Quarter
    
    $
    11.84
    
    
    $
    9.50
    
    
    $
    0.13
    
    
    December 31, 2004Year Ended December 31, 2003:First Quarter
    
    $
    6.13
    
    
    $
    5.28
    
    
    $
    0.13
    
    
    March 31, 2003Second Quarter
    
    $
    7.37
    
    
    $
    5.90
    
    
    $
    0.13
    
    
    June 30, 2003Third Quarter
    
    $
    7.75
    
    
    $
    6.42
    
    
    $
    0.13
    
    
    September 30, 2003Fourth Quarter
    
    $
    9.34
    
    
    $
    7.72
    
    
    $
    0.13
    
    
    December 31, 2003
 (b) Shareholder Information On March 9, 2005, there were 660 record holders of the Companys common stock, including shares
held in street name by nominees who are record holders, and approximately 20,400 beneficial
owners. (c) Distributions We have adopted a policy of paying regular quarterly distributions on our common stock, and cash
distributions were paid on our common stock each quarter since our initial public offering in March
1994, except for the fourth quarter of 2001. Earnings and profits determine whether distributions
to our shareholders are taxable as ordinary income or are a non-taxable return of capital.
Earnings and profits for federal income tax purposes will differ from net income reported for
financial purposes primarily due to the difference for federal tax purposes in the estimated lives
used to compute depreciation on our hotels. We expect to make future quarterly distributions to our shareholders. The amount of our future
distributions will be based upon quarterly operating results, economic conditions, capital
requirements, the Internal Revenue Codes annual distribution requirements, leverage restrictions
imposed by our Line of Credit and other factors which our Board of Directors deems relevant. A portion of the distribution to our shareholders is expected to represent a return of capital for
federal income tax purposes. Our distributions made in 2004, 2003 and 2002 are considered to be
approximately 15%, 1% and 3% return of capital, respectively, for federal income tax purposes. 13




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##### Table of Contents



(d) Equity Compensation Plan Information Number ofNumber of securities
    
    
    Weighted average
    
    
    securities remainingto be issued upon
    
    
    exercise price of
    
    
    available for futureexercise of outstanding
    
    
    outstanding options,
    
    
    issuance under equityoptions, warrants and rights
    
    
    warrants and rights
    
    
    compensation plansEquity compensation plans
approved by security holders
    
    
    36,000
    
    
    
    $10.61
    
    
    
    3,255,058
 We do not have any equity
compensation plans not approved by security holders. (e) Recent Sales of Unregistered Securities For 2004, we issued approximately 36,000 shares of common stock in transactions exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, upon the
redemption of units of limited partnership interest in our Partnership. We did not purchase any of our registered equity securities in 2004. 
 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected historical financial data for the Company that has been
derived from the financial statements of the Company and the notes thereto. Such data should be
read in conjunction with Managements Discussion and Analysis of Financial Condition and Results
of Operations and all of the financial statements and notes thereto. 14




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##### Table of Contents



EQUITY INNS, INC.
SELECTED FINANCIAL DATA
(in thousands, except per share data) Years Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Operating Data:Revenue (1)
    
    $
    256,909
    
    
    $
    228,415
    
    
    $
    227,783
    
    
    $
    213,819
    
    
    $
    110,910Income (loss) from continuing operations (1)
    
    
    5,783
    
    
    
    (10,314
    )
    
    
    5,662
    
    
    
    9,613
    
    
    
    18,935Income (loss) from discontinued operations (1)
    
    
    (1,700
    )
    
    
    (3,375
    )
    
    
    802
    
    
    
    551
    
    
    
    (2,595
    )Net income (loss) (1)
    
    
    4,083
    
    
    
    (13,689
    )
    
    
    6,464
    
    
    
    10,164
    
    
    
    16,340Preferred stock dividends
    
    
    (7,547
    )
    
    
    (6,823
    )
    
    
    (6,531
    )
    
    
    (6,531
    )
    
    
    (6,531
    )Net income (loss) applicable to
common shareholders
    
    
    (3,464
    )
    
    
    (22,920
    )
    
    
    (67
    )
    
    
    3,633
    
    
    
    9,809Net income (loss) from continuing
operations per common share,
basic and diluted
    
    
    (.04
    )
    
    
    (.48
    )
    
    
    (.02
    )
    
    
    .09
    
    
    
    .34Net income (loss) per common
share, basic and diluted
    
    
    (.08
    )
    
    
    (.56
    )
    
    
    .00
    
    
    
    .10
    
    
    
    .27Distributions declared per
common share and unit
    
    
    .52
    
    
    
    .52
    
    
    
    .51
    
    
    
    .75
    
    
    
    1.06Weighted average number of
common shares outstanding-diluted
    
    
    45,800
    
    
    
    40,999
    
    
    
    39,628
    
    
    
    36,834
    
    
    
    36,698Balance Sheet Data:Investments in hotel properties, net
    
    $
    852,755
    
    
    $
    681,478
    
    
    $
    740,146
    
    
    $
    751,891
    
    
    $
    772,411Total assets
    
    
    893,254
    
    
    
    724,281
    
    
    
    774,452
    
    
    
    778,079
    
    
    
    801,743Long-term debt
    
    
    439,183
    
    
    
    329,774
    
    
    
    362,881
    
    
    
    384,166
    
    
    
    383,403Minority interests in Partnership
    
    
    9,064
    
    
    
    7,338
    
    
    
    8,782
    
    
    
    9,512
    
    
    
    10,370Preferred stock
    
    
    83,524
    
    
    
    83,524
    
    
    
    68,750
    
    
    
    68,750
    
    
    
    68,750Total shareholders equity
    
    
    406,432
    
    
    
    356,386
    
    
    
    366,267
    
    
    
    358,164
    
    
    
    383,786Cash Flow Data:Cash flows provided by operating activities
    
    $
    47,608
    
    
    $
    33,947
    
    
    $
    44,400
    
    
    $
    68,568
    
    
    $
    58,010Cash flows provided by (used in)
investing activities
    
    
    (146,536
    )
    
    
    1,928
    
    
    
    (25,923
    )
    
    
    (20,925
    )
    
    
    (2,201
    )Cash flows provided by (used in)
financing activities
    
    
    97,718
    
    
    
    (33,590
    )
    
    
    (16,920
    )
    
    
    (44,077
    )
    
    
    (55,377
    )Other Data:Funds From Operations (2)
    
    $
    37,569
    
    
    $
    14,707
    
    
    $
    40,887
    
    
    $
    44,646
    
    
    $
    53,729
   (1)
    
    Beginning in 2001, our consolidated results of operations reflect (i) hotel-level revenues
and operating costs and expenses for hotels previously leased to subsidiaries of Interstate
and (ii) percentage lease revenue from subsidiaries of Hyatt. Prior to 2001, our revenues
consisted principally of lease revenue from its third party lessees and did not reflect
hotel-level revenues and operating costs and expenses. Beginning in 2002, our consolidated
results of operations reflect hotel-level revenues and operating expenses for all the hotels
owned during the year.(2)
    
    See Item 7, Managements Discussion and Analysis of Financial Condition and Results of
Operations, appearing on pages 21 and 22, for a detailed discussion and reconciliation of net
income to funds from operations. 15




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS Results of Operations For the Years Ended December 31,(in thousands)
    
    2004
    
    
    %
    
    
    2003
    
    
    %
    
    
    2002
    
    
    %Hotel revenues
    
    $
    256,480
    
    
    
    99.8
    
    
    $
    227,792
    
    
    
    99.7
    
    
    $
    226,831
    
    
    
    99.6Other revenue
    
    
    429
    
    
    
    .2
    
    
    
    623
    
    
    
    .3
    
    
    
    952
    
    
    
    .4Total revenues
    
    
    256,909
    
    
    
    100.0
    
    
    
    228,415
    
    
    
    100.0
    
    
    
    227,783
    
    
    
    100.0Hotel expenses
    
    
    154,643
    
    
    
    60.2
    
    
    
    136,822
    
    
    
    59.9
    
    
    
    135,189
    
    
    
    59.4Depreciation
    
    
    40,809
    
    
    
    15.9
    
    
    
    38,105
    
    
    
    16.7
    
    
    
    38,246
    
    
    
    16.8Property taxes, rental expense
and insurance
    
    
    17,965
    
    
    
    7.0
    
    
    
    17,723
    
    
    
    7.8
    
    
    
    17,666
    
    
    
    7.8General and
administrative
    
    
    8,265
    
    
    
    3.2
    
    
    
    7,204
    
    
    
    3.1
    
    
    
    6,396
    
    
    
    2.7Operating income
    
    $
    35,227
    
    
    
    13.7
    
    
    $
    28,561
    
    
    
    12.5
    
    
    $
    30,286
    
    
    
    13.3
 Comparison of the Companys operating results for the years ended December 31, 2004 and 2003. Revenues Hotel revenues of approximately $256.5 million in 2004 increased approximately $28.7 million, or
12.6%, as compared to approximately $227.8 million in 2003. After eliminating revenues of
approximately $20.1 million related to our hotel acquisitions for 2004, our same-store hotel
revenues increased by approximately $8.6 million in 2004 as compared to 2003. This increase was
primarily due to a same-store RevPAR increase of 3.7%, driven by an increase in our ADR from $76.82
to $78.94, and an increase of 58 basis points in occupancy to 67.6%. Other revenue of $429,000 in 2004 decreased $194,000, or 31.1%, as compared to $623,000 in 2003,
primarily due to a decrease in income related to our joint venture, GHII, LLC of approximately
$44,000 and a decrease of approximately $90,000 in travel agent refunds and rebates. Operating Expenses Hotel expenses of approximately $154.6 million in 2004 increased approximately $17.8 million, or
13.0%, as compared to approximately $136.8 million in 2003. After eliminating expenses of
approximately $10.5 million related to our hotel acquisitions for 2004, our same-store hotel
expenses increased by approximately $7.3 million in 2004 as compared to 2003. This increase was
primarily due to an increase in payroll and related benefits of approximately $3.2 million, an
increase in franchise fees, management fees and loyalty programs of approximately $1.0 million, an
increase in enhanced complimentary hot breakfasts of approximately $925,000, an increase in travel
agent commissions and credit card fees of approximately $670,000, an increase in maintenance costs
of approximately $220,000, an increase in utility costs of approximately $565,000, an increase in
bad debt expense of approximately $235,000 and an increase in professional and legal costs of
approximately $230,000. Hotel expenses as a percentage of hotel revenues were 60.3% in 2004 and
60.1% in 2003. Depreciation expense of approximately $40.8 million in 2004 increased approximately $2.7 million,
or 7.1%, as compared to approximately $38.1 million in 2003, primarily due to an increase in
depreciation expense related to our hotel acquisitions. 16




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##### Table of Contents



Property taxes, rental expense and insurance of approximately $18.0 million in 2004 increased
approximately $300,000, or 1.7%, as compared to approximately $17.7 million in 2003, primarily due
to an increase in property taxes, rental expense and insurance of approximately $1.0 million
related to our hotel acquisitions, partially offset by a net decrease in same-store property taxes,
rental expense and insurance of approximately $750,000, primarily due to a decrease in a real
estate tax reserve related to one of our hotels. General and administrative expenses of approximately $8.3 million in 2004 increased approximately
$1.1 million, or 15.3%, as compared to $7.2 million in 2003, primarily due to an increase of
approximately $295,000 in non-cash stock-based compensation, a net increase of approximately
$160,000 in professional fees primarily related to Sarbanes Oxley costs, an increase of
approximately $160,000 related to payroll and related benefits, an increase of approximately
$155,000 in severance and relocation costs, an increase of approximately $95,000 related to
public-company expenses, an increase of approximately $60,000 related to franchise fees and an
increase of approximately $60,000 related to the write-off of obsolete equipment. Operating Income For 2004, we recorded operating income of approximately $35.2 million as compared to operating
income of approximately $28.6 million in 2003. The principal components of the change in operating
income for 2004 as compared to 2003 was an increase in same-store revenues of approximately $8.6
million, an increase in operating income related to our hotel acquisitions of approximately $5.6
million, a decrease in same-store property taxes, rental expense and insurance of approximately
$750,000, partially offset by an increase in same-store hotel expenses of approximately $7.3
million and an increase in general and administrative expenses of approximately $1.1 million. Comparison of the Companys operating results for the years ended December 31, 2003 and 2002. Revenues Hotel revenues of approximately $227.8 million in 2003 were relatively flat as compared to 2002.
After eliminating net revenues of approximately $4.8 million related to one hotel acquisition for
both periods, our same-store hotel revenues decreased by approximately $3.8 million in 2003 as
compared to 2002, primarily due to a RevPAR decline of 1.6%, driven primarily by a decline in our
ADR from $77.59 to $75.99. Other revenue of $623,000 in 2003 decreased $329,000, or 34.6%, as compared to $952,000 in 2002
primarily due to a reduction in income related to our joint venture, GHII, LLC. Operating Expenses Hotel expenses of approximately $136.8 million in 2003 were relatively flat as compared to 2002.
After eliminating net expenses of approximately $3.0 million related to one hotel acquisition for
both periods, our same-store hotel expenses decreased by approximately $1.3 million in 2003 as
compared to 2002, primarily due to an increase in Hyatts minimum net operating income guarantee to
us under our management agreements of approximately $1.1 million (which was recorded as a reduction
in base management fees), a decrease in maintenance costs of approximately $630,000 and a net
reduction in payroll and related benefits of approximately $410,000, partially offset by an
increase in utility and insurance expenses of approximately $865,000. Hotel expenses as a
percentage of hotel revenues were 60.1% in 2003 and 59.6% in 2002. 17




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Depreciation expense of approximately $38.1 million in 2003 was relatively flat as compared to
2002. Property taxes, rental expense and insurance of approximately $17.7 million in 2003 was relatively
flat as compared to 2002. Property taxes and insurance expenses increased approximately $450,000
primarily due to our one hotel acquisition that was mostly offset by a reduction in our land lease
expense. General and administrative expenses of approximately $7.2 million for 2003 increased approximately
$800,000, or 12.5%, as compared to approximately $6.4 million in 2002. This increase was
primarily due to an increase in insurance of approximately $100,000, an increase in franchise taxes
of approximately $400,000, an increase in payroll and related benefits of approximately $500,000,
partially offset by a decrease in our non-cash stock-based compensation of approximately $160,000. Operating Income For 2003, we recorded operating income of approximately $28.6 million as compared to operating
income of approximately $30.3 million for 2002. The principal component of the change in operating
income for 2003 as compared to 2002 was an increase in operating income of approximately $1.8
million related to one hotel acquisition, a decrease in same-store hotel revenues of approximately
$3.8 million, a decrease in other revenue of $329,000, an increase in general and administrative
expenses of approximately $800,000, and a decrease in same-store hotel expenses of approximately
$1.3 million. LIQUIDITY AND CAPITAL RESOURCES Equity Inns principal source of cash to meet our operating requirements, including distributions
to our shareholders and repayments of indebtedness, is from our hotels results of operations. For
2004, net cash flows provided by our operating activities were approximately $47.6 million. We
currently expect that our operating cash flows will be sufficient to fund our continuing
operations, including our required debt service obligations and distributions to shareholders
required to maintain our REIT status. We expect to fund any short-term liquidity requirements
above our operating cash flows through short-term borrowings under our Line of Credit. In 2003, we
entered into our collateralized Line of Credit for $110.0 million, subject to certain restrictions.
Borrowings under the Line of Credit bear interest at LIBOR plus 2.25% to 3.0% per annum as
determined by our quarterly leverage, and this facility matures in June 2006 but may be extended at
our option for an additional year. The Line of Credit maintains certain restrictions regarding
capital expenditures and other quarterly financial covenants, including a test for cash available
for dividend payouts, a fixed charge test and a leverage test, among other covenants. At December
31, 2004, we were in compliance with all covenants required by our Line of Credit. At December 31,
2004, we had the ability to borrow an additional $37.1 million under our Line of Credit. At
December 31, 2004, we had approximately $7.0 million of cash and cash equivalents. We may make additional investments in hotel properties and may incur indebtedness to make such
investments or to meet distribution requirements imposed on a REIT under the Internal Revenue Code
of 1986 to the extent that working capital and cash flows from our investments are insufficient to
make such distributions. Our Board has adopted a policy limiting aggregate indebtedness to 45% of
our investment in hotel properties, at cost, after giving effect to our use of proceeds from any
indebtedness. This policy may be amended at any time by the Board without shareholder vote. Our
consolidated indebtedness was 39.2% of our investment in hotels, at original cost, at December 31,
2004. 18




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On January 21, 2004 and March 26, 2004, we amended our Line of Credit to provide for more
flexibility regarding our financial covenants through June 2006, including the redefining of our
cash available for dividend payouts to exclude certain non-cash operating items, including the
deferred income tax benefit that we will no longer record due to losses from our TRS Lessees. We
incurred total amendment fees of approximately $120,000. The following details our debt outstanding at December 31, 2004 and 2003 (dollars in thousands): Collateral
    
    
    Net BookPrincipal Balance
    
    
    Interest
    
    
    
    
    
    # of
    
    
    Value at12/31/04
    
    
    12/31/03
    
    
    Rate
    
    Maturity
    
    
    Hotels
    
    
    12/31/04Commercial Mortgage
BondsClass A
    
    $
    
    
    
    $
    4,061
    
    
    
    6.83
    %
    
    Fixed
    
    Nov 2006Class B
    
    
    45,802
    
    
    
    50,600
    
    
    
    7.37
    %
    
    Fixed
    
    Dec 2015Class C
    
    
    10,000
    
    
    
    10,000
    
    
    
    7.58
    %
    
    Fixed
    
    Feb 201755,802
    
    
    
    64,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    $
    98,167Line of Credit
    
    
    72,000
    
    
    
    50,000
    
    
    LIBOR plus
    
    Variable
    
    June 2006Percentage
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    218,863Mortgage
    
    
    89,318
    
    
    
    91,009
    
    
    
    8.37
    %
    
    Fixed
    
    July 2009
    
    
    19
    
    
    
    151,967Mortgage
    
    
    65,823
    
    
    
    66,891
    
    
    
    8.25
    %
    
    Fixed
    
    Nov 2010
    
    
    16
    
    
    
    101,659Mortgage
    
    
    34,089
    
    
    
    34,612
    
    
    
    8.25
    %
    
    Fixed
    
    Nov 2010
    
    
    8
    
    
    
    53,625Mortgage
    
    
    10,652
    
    
    
    10,750
    
    
    LIBOR plus285 pts.
    
    Variable
    
    Aug 2008
    
    
    1
    
    
    
    14,656Mortgage
    
    
    2,811
    
    
    
    2,912
    
    
    
    6.00
    %
    
    Fixed
    
    May 2008
    
    
    1
    
    
    
    6,625Mortgage
    
    
    
    
    
    
    5,431
    
    
    
    10.00
    %
    
    Fixed
    
    Sept 2005
    
    
    
    
    
    
    Mortgage
    
    
    3,320
    
    
    
    3,508
    
    
    
    6.37
    %
    
    Fixed
    
    Nov 2016
    
    
    1
    
    
    
    7,783Mortgage
    
    
    6,276
    
    
    
    
    
    
    
    8.70
    %
    
    Fixed
    
    Nov 2010
    
    
    1
    
    
    
    10,607Mortgage
    
    
    4,268
    
    
    
    
    
    
    
    7.97
    %
    
    Fixed
    
    Oct 2007
    
    
    1
    
    
    
    7,180Mortgage
    
    
    5,258
    
    
    
    
    
    
    
    7.97
    %
    
    Fixed
    
    Oct 2007
    
    
    1
    
    
    
    8,002Mortgage
    
    
    4,457
    
    
    
    
    
    
    
    7.10
    %
    
    Fixed
    
    Sept 2008
    
    
    1
    
    
    
    9,020Mortgage
    
    
    3,787
    
    
    
    
    
    
    
    8.04
    %
    
    Fixed
    
    Nov 2007
    
    
    1
    
    
    
    6,802Mortgage
    
    
    5,276
    
    
    
    
    
    
    
    8.04
    %
    
    Fixed
    
    Nov 2007
    
    
    1
    
    
    
    7,861Mortgage
    
    
    3,160
    
    
    
    
    
    
    
    9.375
    %
    
    Fixed
    
    April 2007
    
    
    1
    
    
    
    6,396Mortgage
    
    
    3,381
    
    
    
    
    
    
    
    9.375
    %
    
    Fixed
    
    April 2007
    
    
    1
    
    
    
    6,599Mortgage
    
    
    5,145
    
    
    
    
    
    
    
    8.04
    %
    
    Fixed
    
    Nov 2007
    
    
    1
    
    
    
    6,529Mortgage
    
    
    3,938
    
    
    
    
    
    
    
    9.375
    %
    
    Fixed
    
    April 2007
    
    
    1
    
    
    
    7,338Mortgage
    
    
    3,854
    
    
    
    
    
    
    
    9.05
    %
    
    Fixed
    
    May 2007
    
    
    1
    
    
    
    9,364Mortgage
    
    
    5,958
    
    
    
    
    
    
    
    5.83
    %
    
    Fixed
    
    July 2014
    
    
    1
    
    
    
    9,502Mortgage
    
    
    40,508
    
    
    
    
    
    
    
    5.64
    %
    
    Fixed
    
    Nov 2014
    
    
    5
    
    
    
    73,805Mortgage
    
    
    5,700
    
    
    
    
    
    
    
    5.39
    %
    
    Fixed
    
    Dec 2014
    
    
    1
    
    
    
    10,763434,781
    
    
    
    329,774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107
    
    
    $
    833,113Unamortized Mortgage
Note Premium
    
    
    4,402
    
    
    
    $
    439,183
    
    
    $
    329,774Interest Expense,
Net
    
    $
    29,535
    
    
    $
    29,593
 Interest expense, net of approximately $29.5 million in 2004 was relatively flat as compared
to 2003. Interest expense increased approximately $2.5 million related to our hotel acquisitions
that was mostly offset by a decrease in same-store interest expense due to savings of approximately
$1.9 million due to the replacement of an expired interest rate swap in November 2003. At December
31, 2004, our debt maturities have an average life of 4.6 years and a weighted average interest
rate of 7.0%. Interest expense, net of approximately $29.6 million in 2003 decreased approximately $800,000, or
2.6%, as compared to approximately $30.4 million in 2002. This decrease was primarily due to a
reduction in average borrowings from $361.1 million to $355.4 million and a reduction in the
weighted average interest rate from 8.03% to 7.92%. At December 31, 2003, our debt maturities had
an average life of 5 years and a weighted average interest rate of 7.80%. 19




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##### Table of Contents



During 2004, we purchased 20 hotels for approximately $192.9 million related to previously
announced acquisitions. The hotels were purchased from three hotel developers. These hotels
represent a combined 1,871 rooms and have an average age of approximately five years. Of the 20
hotels purchased, 13 hotels are managed by McKibbon Hotel Management, Inc., five hotels are managed
by Hospitality Group, Inc. and two hotels are managed by Gateway Lodging Company, Inc. We funded
these acquisitions primarily through $74.6 million in net cash proceeds from April 2004 and October
2004 issuances of our common stock, the issuance of approximately 325,000 Partnership units valued
at approximately $3.2 million, the assumption of approximately $54.1 million in secured long-term
debt, the issuance of approximately $40.6 million in secured long-term debt and approximately $20.4
million in borrowings under our Line of Credit. Included in our debt assumption is a mortgage note
premium of approximately $4.9 million to record the debt at its estimated fair value. This premium
is being amortized using the interest method over the remaining lives of the assumed debt as a
reduction of interest expense. During 2004, we invested approximately $25.3 million to fund capital improvements in our hotels,
including replacement of carpets, drapes, furniture and equipment, renovation of common areas and
improvements of hotel exteriors. We expect to fund an aggregate of approximately $25.0 million
throughout 2005 for capital improvements, with approximately $13.0 million representing major
refurbishment projects to six hotels. We intend to fund such improvements out of our cash flows
from operations, current cash balances and borrowings under our Line of Credit. Under our
franchise agreements, we are periodically required to make capital improvements in order to
maintain our brand standards. Additionally, under certain of our loan covenants, we are generally
obligated to fund 4% of total hotel revenues per quarter on a cumulative basis, to a separate room
renovation account for replacement of furniture, fixtures and equipment, maintenance, and capital
improvements for our hotels. For 2004, the amounts expended exceeded, in the aggregate, the
amounts required under our loan covenants. If, for any reason, we do not meet the renovation
requirements at the individual hotel level, we could be required to fund such shortfalls into cash
escrow accounts. We currently have one lender that could require us to deposit approximately $1.0
million into an escrow account, but the lender has thus far decided not to trigger the escrow
funding based on our future capital improvement plans for the individual hotels. During 2004, we sold three hotels for approximately $10.9 million, including approximately $9.1
million in cash (after selling costs of approximately $980,000) and an increase to an existing note
receivable of $800,000. We utilized the net proceeds to pay down existing long-term debt. During 2004, we completed a refinancing of an existing mortgage related to our San Antonio Hampton
Inn. We refinanced $5.3 million of senior debt at a fixed rate of 10.00% per annum with $5.7
million of 10-year senior debt at a fixed rate of 5.39%. In conjunction with this refinancing, the
Company incurred a prepayment penalty of approximately $300,000, and this prepayment penalty is
included as a component of interest expense, net in the accompanying consolidated statement of
operations. During 2004, we completed a $6.0 million, 10-year secured loan related to our Courtyard by Marriott
in Tallahassee, Florida. The loan has a fixed rate of 5.83% per annum. During 2004, we experienced significant hurricane damage at one of our hotels located in
Jacksonville Beach, Florida. This hotel was subsequently repaired and became operational in late
January 2005. The total cost of the hurricane loss is estimated to be approximately $3.8 million,
and we are currently working with our insurance carrier in processing this claim. Based on the
total estimated project cost, the estimated net insurance proceeds and the estimated net book value
of the assets destroyed, we expect to record a net gain on insurance proceeds upon the conclusion
of the processed claim. This gain will be recorded upon receipt of the net insurance proceeds and
closure of the insurance claim. 20




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##### Table of Contents



In 2003, we entered into an interest rate swap agreement with a financial institution on a notional
amount of $25.0 million. The agreement expires in November 2008. The agreement effectively fixes
the interest rate on the first $25.0 million of floating rate debt outstanding under our Line of
Credit at a rate of 3.875% per annum plus the interest rate spread on our Line of Credit, or 6.63%
at December 31, 2004, thus reducing our exposure to interest rate fluctuations. The notional
amount does not represent amounts exchanged by the parties, and thus is not a measure of exposure
to us. The differences to be paid or received by us under the interest rate swap agreement are
recognized as an adjustment to interest expense. The agreement is with a major financial
institution, which is expected to fully perform under the terms of the agreement. In 2003, we entered into an additional interest rate swap agreement with a financial institution on
a notional amount of $25.0 million. The agreement expires in November 2006. The agreement
effectively fixes the interest rate on the second $25.0 million of floating rate debt outstanding
under our Line of Credit at a rate of 3.22% per annum plus the interest rate spread on our Line of
Credit, or 5.97% at December 31, 2004, thus reducing our exposure to interest rate fluctuations.
The notional amount does not represent amounts exchanged by the parties, and thus is not a measure
of exposure to us. The differences to be paid or received by us under the interest rate swap
agreement are recognized as an adjustment to interest expense. The agreement is with a major
financial institution, which is expected to fully perform under the terms of the agreement. REITs are subject to a number of organizational and operational requirements. For example, for
federal income tax purposes, a REIT, and therefore the Company, is required to pay distributions of
at least 90% of its taxable income to our shareholders. We intend to pay these distributions from
operating cash flows. During 2004, our Partnership distributed an aggregate of approximately $24.7
million to its limited partners, or $.13 per unit per quarter (including approximately $24.1
million of distributions to the Company to fund distributions to our shareholders of $.13 per share
per quarter). We expect to make future quarterly distributions to our shareholders. The amount of
our future distributions will be based upon quarterly operating results, economic conditions,
capital requirements, the Internal Revenue Codes annual distribution requirements, leverage
restrictions imposed by our Line of Credit and other factors which our Board deems relevant. We expect to meet our long-term liquidity requirements, such as scheduled debt maturities and
property acquisitions, through long-term secured and unsecured borrowings, the issuance of
additional debt and equity securities of the Company or, in connection with acquisitions of hotel
properties, the issuance of Partnership units. Under our Partnerships limited partnership
agreement, subject to certain holding period requirements, holders of units in our Partnership have
the right to require the Partnership to redeem their units. During 2004, approximately 36,000
units were tendered for redemption. Under the Partnership agreement, we have the option to redeem
units tendered for redemption on a one-for-one basis for shares of common stock or for an
equivalent amount of cash. FUNDS FROM OPERATIONS The National Association of Real Estate Investment Trusts, or NAREIT, defines Funds From
Operations, or FFO, as net income (loss) applicable to common shareholders excluding gains (or
losses) from sales of real estate, the cumulative effect of changes in accounting principles, real
estate-related depreciation and amortization, and after adjustments for unconsolidated partnerships
and joint ventures. FFO does not include the cost of capital improvements or any related
capitalized interest. FFO is presented on a per share basis, including the assumed conversion of
all Partnership units, and after making adjustments for the effects of dilutive securities. We use
FFO per share as a measure of performance to adjust for certain non-cash expenses such as
depreciation and amortization because historical cost accounting for real estate assets implicitly
assumes that the value of real estate assets diminishes predictably over time. 21




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##### Table of Contents



Because real estate values have historically risen or fallen with market conditions, many industry
investors have considered presentation of operating results for real estate companies that use
historical cost accounting to be less informative. NAREIT adopted the definition of FFO in order
to promote an industry-wide standard measure of REIT operating performance. Accordingly, as a
member of NAREIT, Equity Inns adopted FFO as a measure to evaluate performance and facilitate
comparisons between the Company and other REITs, although our FFO and FFO per share may not be
comparable to FFO measures reported by other companies. The following reconciliation of net income to FFO, applicable to common shareholders, illustrates
the difference in these measures of operating performance (in thousands): For the Years Ended December 31,2004
    
    
    2003
    
    
    2002Net income (loss) applicable to common
shareholders
    
    $
    (3,464
    )
    
    $
    (22,920
    )
    
    $
    (67
    )Add (subtract):(Gain) loss on sale of hotel properties
    
    
    (47
    )
    
    
    (1,248
    )
    
    
    Minority interests income
    
    
    (91
    )
    
    
    (495
    )
    
    
    (2
    )Depreciation
    
    
    40,809
    
    
    
    38,105
    
    
    
    38,246Depreciation from discontinued operations
    
    
    362
    
    
    
    1,265
    
    
    
    2,710Funds From Operations (FFO) (1)
    
    $
    37,569
    
    
    $
    14,707
    
    
    $
    40,887Weighted average number of diluted common
shares and Partnership units outstanding
    
    
    47,005
    
    
    
    42,151
    
    
    
    40,825
   (1)
    
    For 2004, FFO includes a non-cash loss on impairment of a hotel held for sale of
approximately $1.9 million and a debt prepayment penalty of approximately $300,000, included as a
component of interest expense, net in the accompanying consolidated statement of operations, in
conjunction with the Company refinancing $5.3 million of senior debt at a fixed rate of 10.00% per
annum with $5.7 million of 10-year senior debt at a fixed rate of 5.39% per annum. For 2003, FFO
includes a net non-cash deferred income tax expense of approximately $9.8 million, a non-cash loss
on impairment of hotels held for sale of approximately $4.6 million and a loss on redemption of
Series A preferred stock of approximately $2.4 million. For 2002, FFO includes a non-cash deferred
income tax benefit of approximately $6.4 million. We have obligations and commitments to make future payments under debt, construction and
operating lease contracts. The following schedule details these obligations at December 31, 2004
(in thousands): Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    

1 year
    
    

1-3 years
    
    

4-5 years
    
    

5 yearsLong-term debt-principal
    
    $
    434,781
    
    
    $
    9,534
    
    
    $
    128,564
    
    
    $
    115,573
    
    
    $
    181,110Interest expense (1)
    
    
    156,743
    
    
    
    31,473
    
    
    
    54,043
    
    
    
    40,075
    
    
    
    31,152Hotel capital
improvements
    
    
    7,305
    
    
    
    7,305
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    12,838
    
    
    
    995
    
    
    
    1,706
    
    
    
    1,310
    
    
    
    8,827Total contractual
obligations
    
    $
    611,667
    
    
    $
    49,307
    
    
    $
    184,313
    
    
    $
    156,958
    
    
    $
    221,089
   (1)
    
    Interest expense is estimated using current scheduled payments for all amortizing debt
and the 2004 year-end interest rate and balance for our Line of Credit. 22




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##### Table of Contents



We also maintain certain contractual agreements with property managers and franchisors that
require us to pay fees in conjunction with operating our hotels. Generally, the amounts payable
under these agreements are dependent upon the operating results of our hotels. The following
schedule details these fees for the years ended December 31 (in thousands): 2004
    
    
    2003
    
    
    2002Management fees
    
    $
    5,581
    
    
    $
    4,625
    
    
    $
    4,603Franchisor related fees
    
    
    15,096
    
    
    
    12,641
    
    
    
    10,266Total fees
    
    $
    20,677
    
    
    $
    17,266
    
    
    $
    14,869
 RECENT ACCOUNTING PRONOUNCEMENTS Note 14 of the Notes to Consolidated Financial Statements discusses the expected impact of
accounting policies recently issued or proposed but not yet required to be adopted. To the extent
the adoption of new accounting standards affects our financial condition, results of operations or
liquidity, the impacts are discussed in the applicable section(s) of the Managements Discussion
and Analysis and the Notes to Consolidated Financial Statements. MANAGEMENT CONTRACTS Our management agreements with Hyatt, which purchased the AmeriSuites brand in January 2005 from
the Blackstone Group, which purchased the brand from Prime Hospitality Corporation in October 2004,
are structured to provide the TRS Lessees minimum net operating income at each of our 18
AmeriSuites hotels. In addition, the management agreements specify a net operating income
threshold for each of our 18 AmeriSuites hotels. As the manager, Hyatts subsidiaries can earn an
incentive management fee of 25% of hotel net operating income above the threshold, as defined, to a
maximum of 6.5% of gross hotel revenues. If the management fee calculation exceeds 6.5% of gross
hotel revenue, Hyatts subsidiaries may earn an additional fee of 10% on any additional net
operating income. If a hotel fails to generate net operating income sufficient to reach the
threshold, Hyatts subsidiaries are required to contribute the greater of a predetermined minimum
return or the net operating income plus 25% of the shortfall between the threshold amount and the
net operating income of the hotel. We record all shortfall contributions as a reduction of base
management fees, which are included as a component of direct hotel expenses in our accompanying
consolidated statements of operations, when all contingencies related to such amounts have been
resolved. In May 2003, we updated our current franchise contracts and management agreements with
Hyatts subsidiaries for all of our AmeriSuites hotels. The minimum net operating income guarantee
agreements were not extended beyond their original terms and are set to expire in 2007 and 2008.
Under the new agreements, we extended the existing franchise agreements to 2028 and the management
agreements to 2010, as long as Hyatt continues to be in compliance with the minimum net operating
income guarantees in the original agreements. For 2004, 2003 and 2002, we recorded approximately
$4.8 million, $4.7 million and $3.6 million, respectively, in minimum income guarantees from Hyatt
as a reduction of our base management fee expense in the accompanying consolidated statements of
operations. The management contracts for our remaining hotels have terms ranging from one to four
years and generally provide for payment of management fees ranging from 1.5% to 3.0% of hotel
revenues and an incentive fee consisting of a percentage of gross operating profits in excess of
budget, as defined by the management agreements. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Companys discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared in accordance with 23




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##### Table of Contents



accounting principles generally accepted in the United States of America. The preparation of these
financial statements requires us to make estimates and judgments that affect the reported amount of
assets, liabilities, revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, all estimates are evaluated by our management, including those related to bad
debts, carrying value of investments in hotel properties, income taxes, contingencies and
litigation. All estimates are based upon historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or
conditions. We believe the following critical accounting policies affect our more significant judgments and
estimates used in the preparation of our consolidated financial statements: Allowance for Doubtful Accounts We maintain allowances for doubtful accounts for estimated losses resulting from the inability
of our customers and other borrowers to make required payments. The allowance for doubtful
accounts is maintained at a level believed adequate by us to absorb estimated probable
receivable losses. Our periodic evaluation of the adequacy of the allowance is primarily based
on past receivable loss experience, known and inherent credit risks, current economic
conditions, and other relevant factors. This evaluation is inherently subjective as it requires
estimates including the amounts and timing of future collections. If the financial condition of
our customers or other borrowers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required. Investment in Hotel Properties We record an impairment charge when we believe an investment in a hotel has been impaired such
that future undiscounted cash flows would not recover the book basis of the hotel property, or
the hotel is being held for sale. Future adverse changes in market conditions or poor operating
results of underlying investments could result in losses or an inability to recover the carrying
value of the investments that may not be reflected in an investments carrying value, thereby
possibly requiring an impairment charge in the future. We classify certain assets as held for sale based on management having the authority and intent
of entering into commitments for sale transactions expected to close in the next twelve months.
When the Company identifies an asset held for sale, we estimate the net realizable value of such
asset. If the net realizable value of the asset is less than the carrying amount of the asset,
we record an impairment charge for the estimated loss. We no longer record depreciation expense
once we identify an asset as held for sale. Net realizable value is estimated as the amount at
which we believe the asset could be bought or sold (fair value) less costs to sell. We estimate
the fair value by determining prevailing market conditions, appraisals or current estimated net
sales proceeds from pending offers, if appropriate. We record operations for hotels designated
as held for sale and hotels which have been sold as part of discontinued operations for all
periods presented. We also allocate to discontinued operations the estimated interest on debt
that is to be assumed by the buyer and interest on debt that is required to be repaid as a
result of the disposal transaction. For 2004, we recorded a loss on impairment of a hotel held
for sale of approximately $1.9 million. For 2003, we recorded losses on impairments of hotels
held for sale of approximately $4.6 million. These impairments are reflected as a component of
discontinued operations for the respective periods in the accompanying statements of operation. 24




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##### Table of Contents



Income Taxes We record a valuation allowance to reduce our deferred income tax asset to the amount that is
more likely than not to be realized. We have considered future taxable income and ongoing
prudent and feasible tax planning strategies in assessing the need for a valuation allowance.
At year-end 2003, we determined, it was more likely than not, that we would not be able to
realize our $16.8 million deferred income tax asset, and we recorded a full valuation allowance
for this asset. Our TRS Lessees continue to accumulate net operating losses primarily due to
the lease payments that our TRS Lessees pay to their respective lessors, in conjunction with our
assumption of the operating leases from several of our independent management companies in 2001.
As a result of these continued losses, we continue to record a valuation allowance for the full
amount of our deferred income tax asset. Additionally, we will not record a deferred income tax
benefit until it is more likely than not that such benefit will be realized. OTHER DEVELOPMENTS Acquisitions During 2004, we purchased 20 hotels for approximately $192.9 million related to previously
announced acquisitions. The hotels were purchased from three hotel developers. These hotels
represent a combined 1,871 rooms and have an average age of approximately five years. Of the 20
hotels purchased, 13 hotels are managed by McKibbon Hotel Management, Inc., five hotels are managed
by Hospitality Group, Inc. and two hotels are managed by Gateway Lodging Company, Inc. We funded
these acquisitions primarily through $74.6 million in net cash proceeds from April 2004 and October
2004 issuances of our common stock, the issuance of approximately 325,000 Partnership units valued
at approximately $3.2 million, the assumption of approximately $54.1 million in secured long-term
debt, the issuance of approximately $40.6 million in secured long-term debt and approximately $20.4
million in borrowings under our Line of Credit. Included in our debt assumption is a mortgage note
premium of approximately $4.9 million to record the debt at its estimated fair value. This premium
is being amortized using the interest method over the remaining lives of the assumed debt as a
reduction of interest expense. 25




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##### Table of Contents



The acquisitions that we completed in 2004 are as follows: Hotel
    
    Location
    
    Rooms
    
    
    Date AcquiredCourtyard by Marriott
    
    Tallahassee, Florida
    
    
    93
    
    
    January 26, 2004Residence Inn by Marriott
    
    Tampa, Florida
    
    
    102
    
    
    March 25, 2004Courtyard by Marriott
    
    Gainesville, Florida
    
    
    81
    
    
    April 29, 2004Residence Inn by Marriott
    
    Tallahassee, Florida
    
    
    78
    
    
    April 29, 2004Residence Inn by Marriott
    
    Knoxville, Tennessee
    
    
    78
    
    
    May 10, 2004Courtyard by Marriott
    
    Asheville, North Carolina
    
    
    78
    
    
    May 28, 2004Residence Inn by Marriott
    
    Chattanooga, Tennessee
    
    
    76
    
    
    May 28, 2004Courtyard by Marriott
    
    Athens, Georgia
    
    
    105
    
    
    June 16, 2004Residence Inn by Marriott
    
    Savannah, Georgia
    
    
    66
    
    
    June 29, 2004Hampton Inn by Hilton
    
    Boca Raton, Florida
    
    
    94
    
    
    October 22, 2004Hampton Inn by Hilton
    
    Deerfield Beach, Florida
    
    
    106
    
    
    October 22, 2004Hampton Inn by Hilton
    
    Palm Beach Gardens, Florida
    
    
    116
    
    
    October 22, 2004Hampton Inn by Hilton
    
    West Palm Beach, Florida
    
    
    110
    
    
    October 22, 2004Hampton Inn & Suites
by Hilton
    
    Boynton Beach, Florida
    
    
    161
    
    
    October 22, 2004Courtyard by Marriott
    
    Dalton, Georgia
    
    
    93
    
    
    November 1, 2004Hilton Garden Inn
    
    Louisville, Kentucky
    
    
    112
    
    
    November 1, 2004Residence Inn by Marriott
    
    Macon, Georgia
    
    
    78
    
    
    December 16, 2004SpringHill Suites by
Marriott
    
    Asheville, North Carolina
    
    
    88
    
    
    December 16, 2004Courtyard by Marriott
    
    Knoxville, Tennessee
    
    
    78
    
    
    December 21, 2004Courtyard by Marriott
    
    Mobile, Alabama
    
    
    78
    
    
    December 21, 2004
 See "Management's Report on
Internal Control over Financial Reporting" beginning on page 31 of
this Annual Report on Form 10-K for a discussion of the scope of our evaluation of
the effectiveness of internal control over financial reporting with respect to 18 of these hotels. Common Stock Offerings In April 2004, we completed an offering of 2.4 million shares of common stock for net proceeds of
approximately $21.4 million. The proceeds were used to fund our hotel acquisitions discussed
above. In October 2004, we completed an offering of 5.7 million shares of common stock, including
approximately 415,000 shares issued upon the exercise of the underwriters over-allotment option,
for net proceeds of approximately $53.2 million. The proceeds were used to fund our hotel
acquisitions discussed above. Additional Long-Term Debt During 2004, we completed a refinancing of an existing mortgage related to our San Antonio Hampton
Inn. We refinanced $5.3 million of senior debt at a fixed rate of 10.00% per annum with $5.7
million of 10-year senior debt at a fixed rate of 5.39%. In conjunction with this refinancing, the
Company incurred a prepayment penalty of approximately $300,000, and this prepayment penalty is
included as a component of interest expense, net in the accompanying consolidated statement of
operations. During 2004, we completed a $6.0 million, 10-year secured loan related to our Courtyard by Marriott
in Tallahassee, Florida. The loan as a fixed rate of 5.83% per annum. Hotel Development We may develop a 200-room, full service Marriott hotel in Sandy, Utah, a suburb of Salt Lake
City, Utah. We estimate that the development cost of this hotel will be approximately $24.0
million, 26




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including approximately $2.2 million in land previously purchased by us. If we decide to develop
this hotel, we plan to obtain additional financing sources to complete the construction of this
hotel. Long-Lived Asset Impairments and Hotel Sales During 2004, we recorded a charge for impairment of approximately $1.9 million in accordance with
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting For Impairment or
Disposal of Long-Lived Assets, based on the estimated net realizable value of a hotel held for
sale. This hotel was subsequently sold in January 2005 for its approximate carrying value of $3.8
million. During 2003, we recorded charges for impairments of approximately $4.6 million as a
result of our strategic decision to market four properties for sale. For the hotels related to
both impairment charges, we have accounted for the operations of such properties as discontinued
operations for the respective periods in the accompanying statements of operations. During 2004, we sold three hotels previously classified as held for sale for approximately $10.9
million, including approximately $9.1 million in cash (after selling costs of approximately
$980,000) and an increase to an existing note receivable, as discussed below, of $800,000. The
hotels sold were a 97-room Hampton Inn located in Sarasota, Florida, a 122-room Hampton Inn
located in Jacksonville, Florida, and a 141-room Comfort Inn located in Arlington, Texas. The
average age of these hotels was approximately 17 years. We utilized the net proceeds from these
dispositions to pay down existing long-term debt. In conjunction with these sales, we recorded a
loss of approximately $320,000 as part of discontinued operations in the accompanying consolidated
statement of operations. Additionally, in 2003 we sold a hotel and had initially deferred a gain
of approximately $420,000 in conjunction with accepting the note receivable discussed below. In
November 2004, this note was collected in full, less a $50,000 discount, and we recognized a net
gain of approximately $370,000 as part of discontinued operations in the accompanying consolidated
statement of operations. In 2003, we sold four hotels (Hampton Inn in Ft. Worth, Texas; Hampton Inn & Suites in Bartlett,
Tennessee; Holiday Inn Express in Wilkesboro, North Carolina; and AmeriSuites in Jacksonville,
Florida) for an aggregate price of $20.1 million, resulting in a gain on the sales of approximately
$1.6 million, net of impairment charges previously recorded. The sales prices were paid in cash,
except for the Jacksonville hotel, $4.0 million of which was in the form of a 15-month note bearing
interest at 7.75% per annum. The proceeds were utilized to pay down our existing long-term debt. Subsequent Events On January 26, 2005, we completed the sale of a hotel that was previously classified as held for
sale. We sold a 123-room Hampton Inn hotel located near Birmingham, Alabama, for approximately
$3.8 million in cash, which approximated its carrying value in the accompanying consolidated
balance sheet. This hotel was approximately 19 years old. On March 1, 2005, we completed our acquisition of a 126-room Hilton Garden Inn located in Fort
Myers, Florida. The total purchase price for the hotel was approximately $14.5 million, which we
funded through borrowings under our Line of Credit. On March 4, 2005, we completed an offering of approximately 2.7 million shares of common stock for
net proceeds of approximately $28.5 million. The net proceeds will be used for identified
acquisitions and to repay indebtedness under our Line of Credit. On March 9, 2005, we completed our acquisition of a 78-room Residence Inn located in Jacksonville,
Florida. The total purchase price for the hotel was approximately $6.1 million, which we funded
through borrowings under our Line of Credit. 27




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS We are exposed to certain financial market risks, the most predominant of which is the fluctuation
in interest rates. At December 31, 2004, our exposure to market risk for a change in interest
rates is related to our debt outstanding under the Line of Credit and certain hotel secured debt.
Total debt outstanding under these two debentures totaled approximately $82.7 million at December
31, 2004. As discussed below, we do maintain two interest rate swap agreements for a combined
notional amount of $50.0 million. Our Line of Credit bears interest at a variable rate of LIBOR plus 2.25% to 3.0% per annum as
determined by our quarterly leverage. At December 31, 2004, our interest rate on our Line of
Credit was LIBOR (2.42% at December 31, 2004) plus 2.75%. Our interest rate risk objective is to
limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall
borrowing costs. To achieve this objective, we manage our exposure to fluctuations in market
interest rates for borrowings under our Line of Credit through the use of interest rate swaps, in
order to effectively lock the interest rate on a portion of our variable rate debt. We do not
enter into derivative or interest rate transactions for speculative purposes. We also regularly
review interest rate exposure on our outstanding borrowings in an effort to minimize the risk of
interest rate fluctuation. In 2003, we entered into an interest rate swap agreement with a financial institution on a notional
amount of $25.0 million. The agreement expires in November 2008. The agreement effectively fixes
the interest rate on the first $25.0 million of floating rate debt outstanding under our Line of
Credit at a rate of 3.875% per annum plus the interest rate spread on our Line of Credit, thus
reducing our exposure to interest rate fluctuations. The notional amount does not represent
amounts exchanged by the parties, and thus is not a measure of exposure to us. The differences to
be paid or received by us under the interest rate swap agreement are recognized as an adjustment to
interest expense. The agreement is with a major financial institution, which is expected to fully
perform under the terms of the agreement. In 2003, we entered into an interest rate swap agreement with a financial institution on a notional
amount of $25.0 million. The agreement expires in November 2006. The agreement effectively fixes
the interest rate on the second $25.0 million of floating rate debt outstanding under our Line of
Credit at a rate of 3.22% per annum plus the interest rate spread on our Line of Credit, thus
reducing our exposure to interest rate fluctuations. The notional amount does not represent
amounts exchanged by the parties, and thus is not a measure of exposure to us. The differences to
be paid or received by us under the interest rate swap agreement are recognized as an adjustment to
interest expense. The agreement is with a major financial institution, which is expected to fully
perform under the terms of the agreement. Our Line of Credit matures in June 2006. As discussed above, our Line of Credit bears interest at
variable rates, and therefore, cost approximates market value. At December 31, 2004, the fair
value of our interest rate swaps was a liability of approximately $119,000. Our operating results are affected by changes in interest rates, primarily as a result of our
borrowings under the Line of Credit. If interest rates increased by 25 basis points, our interest
expense would have increased by approximately $54,000, based on balances outstanding during the
twelve months ended December 31, 2004. 28




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA  (a)
    Financial Statements: The following financial statements are located in this report on the pages indicated. Equity Inns, Inc.
    
    PageManagements Report on Internal Control over Financial Reporting
    
    
    31Report of Independent Registered Public Accounting Firm
    
    
    32Consolidated Balance Sheets as of December 31, 2004 and
2003
    
    
    34Consolidated Statements of Operations for the years ended
December 31, 2004, 2003 and 2002
    
    
    35Consolidated Statements of Comprehensive Income for the
years ended December 31, 2004, 2003 and 2002
    
    
    36Consolidated Statements of Shareholders Equity for the
years ended December 31, 2004, 2003, and 2002
    
    
    37Consolidated Statements of Cash Flows for the years ended
December 31, 2004, 2003, and 2002
    
    
    39Notes to Consolidated Financial Statements
    
    
    40Schedule II  Valuation and Qualifying Accounts for the years
ended December 31, 2004, 2003 and 2002
    
    
    66Schedule III  Real Estate and Accumulated Depreciation
as of December 31, 2004
    
    
    67
 29




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(b)
    Supplementary Data: Quarterly Financial Information Unaudited quarterly results for 2004 and 2003 are summarized as follows: First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(in thousands, except per share data)2004Revenue
    
    $
    54,163
    
    
    $
    65,765
    
    
    $
    70,689
    
    
    $
    66,292Net income (loss) applicable
to common shareholders
    
    
    (4,085
    )
    
    
    2,382
    
    
    
    2,521
    
    
    
    (4,282
    )Net income (loss) per common
share, basic and diluted
    
    
    (0.10
    )
    
    
    0.05
    
    
    
    0.06
    
    
    
    (0.09
    )2003Revenue
    
    $
    51,878
    
    
    $
    61,284
    
    
    $
    62,828
    
    
    $
    52,425Net income (loss) applicable
to common shareholders
    
    
    (1,674
    )
    
    
    (1,804
    )
    
    
    256
    
    
    
    (19,698
    )Net income (loss) per common
share, basic and diluted
    
    
    (.04
    )
    
    
    (.04
    )
    
    
    .01
    
    
    
    (.46
    )
 Earnings per share amounts for each quarter are required to be computed independently and may not
equal the amount computed for the total year. In the fourth quarter of 2004, we recorded a charge

for impairment of approximately $1.9 million, in accordance with SFAS No. 144, due to one hotel
being designated as held for sale. In the fourth quarter of 2003, we recorded a tax valuation
allowance of approximately $16.8 million in accordance with SFAS No. 109. In the second and fourth
quarters of 2003, we also recorded charges for impairments of approximately $3.6 million and $1.0
million, respectively, due to the designation of four properties as held for sale. We have
accounted for the operations of such properties as discontinued operations in each of the 2004 and
2003 quarters presented above. Reclassification of revenues to discontinued operations for each of
the quarters presented above are as follows (in thousands): First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter2004
    
    $
    416
    
    
    $
    558
    
    
    $
    544
    
    
    $
    2003
    
    
    2,721
    
    
    
    912
    
    
    
    865
    
    
    
    397
 30




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Managements Report on
Internal Control over Financial Reporting Management of Equity Inns, Inc. (the Company) is responsible for establishing and maintaining
adequate internal control over financial reporting and for the assessment of the effectiveness of
internal control over financial reporting. As defined by the Securities and Exchange Commission,
internal control over financial reporting is a process designed by, or under the supervision of the
Companys principal executive and principal financial officers and effected by the Companys Board
of Directors, management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the consolidated financial statements in
accordance with accounting principles generally accepted in the United States of America. The Companys internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the Companys transactions and dispositions of the Companys assets; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of the consolidated
financial statements in accordance with accounting principles generally accepted in the United
States of America, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of the Companys management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Companys assets that could have a material effect on the consolidated financial
statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. Management evaluated the effectiveness of the Companys internal control over financial reporting
as of December 31, 2004, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO
Framework). Managements assessment included an evaluation of the design of the Companys internal
control over financial reporting and testing of the operational effectiveness of those controls. Based on this assessment, management has concluded that as of December 31, 2004, the Companys
internal control over financial reporting was effective to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the United States of
America. We have excluded thirteen hotels managed by McKibbon Hotel Management, Inc. and five
hotels managed by Hospitality Group, Inc. from our evaluation of the effectiveness of internal
control over financial reporting as of December 31, 2004, because the hotels were acquired by us
during 2004. The total assets and total revenues of the aforementioned hotels represent 0.3% and
7.6%, respectively, of the related consolidated financial statement amounts as of and for the year
ended December 31, 2004. PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the
Companys consolidated financial statements included in this report, have issued an attestation
report on managements assessment of internal control over financial reporting as of December 31,
2004, a copy of which appears on the next page of this annual report. 31




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Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Equity Inns, Inc.: We have completed an integrated audit of Equity Inns, Inc.s 2004 consolidated financial statements
and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003
and 2002 consolidated financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Our opinions, based on our audits, are presented
below: Consolidated financial statements and financial statement schedules In our opinion, the consolidated financial statements listed in the accompanying index present
fairly, in all material respects, the financial position of Equity Inns, Inc. and its subsidiaries
at December 31, 2004 and 2003, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2004 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion, the financial
statement schedules listed in the accompanying index present fairly, in all material respects, the
information set forth therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedules are the responsibility of
the Companys management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit of
financial statements includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. Internal control over financial reporting Also, in our opinion, managements assessment, included in Managements Report on Internal Control
Over Financial Reporting, appearing on page 31, that the Company maintained effective internal
control over financial reporting as of December 31, 2004 based on criteria established in Internal
Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), is fairly stated, in all material respects, based on those criteria.
Furthermore, in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2004, based on Internal Control-Integrated
Frameworkissued by the COSO. The Companys management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express opinions on managements
assessment and on the effectiveness of the Companys internal control over financial reporting
based on our audit. We conducted our audit of internal control over financial reporting in
accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material
respects. An audit of internal control over financial reporting includes obtaining an
understanding of internal control over financial reporting, evaluating managements assessment,
testing and evaluating the design and operating effectiveness of internal control, and performing
such other procedures as we consider necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinions. A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes
in accordance with generally accepted accounting principles. A companys internal control over 32




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financial reporting includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. As described in
Managements Report on Internal Control over Financial
Reporting, appearing on page
31, management has excluded thirteen hotels managed by McKibbon Hotel Management, Inc. and five
hotels managed by Hospitality Group, Inc. from its assessment of internal control over financial
reporting as of December 31, 2004 because the hotels were acquired during 2004. The
total assets and total revenues of the aforementioned hotels represent 0.3% and 7.6%, respectively,
of the related consolidated financial statement amounts as of and for the year ended December 31,
2004. PricewaterhouseCoopers LLP
Memphis, Tennessee
March 16, 2005 33




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EQUITY INNS, INC. 
 CONSOLIDATED BALANCE SHEETS
  December 31,
    
    
    December 31,2004
    
    
    2003Assets:Investment in hotel properties, net
    
    $
    852,755
    
    
    $
    681,478Assets held for sale
    
    
    3,849
    
    
    
    10,242Cash and cash equivalents
    
    
    6,991
    
    
    
    8,201Accounts receivable, net of doubtful
accounts of $225 and $200, respectively
    
    
    7,543
    
    
    
    5,069Notes receivable, net
    
    
    
    
    
    
    4,917Deferred expenses, net
    
    
    8,679
    
    
    
    8,291Deposits and other assets, net
    
    
    13,437
    
    
    
    6,083Total Assets
    
    $
    893,254
    
    
    $
    724,281Liabilities and Shareholders Equity:Long-term debt
    
    $
    439,183
    
    
    $
    329,774Accounts payable and accrued expenses
    
    
    30,366
    
    
    
    22,913Distributions payable
    
    
    8,090
    
    
    
    6,939Interest rate swaps
    
    
    119
    
    
    
    931Minority interests in Partnership
    
    
    9,064
    
    
    
    7,338Total Liabilities
    
    
    486,822
    
    
    
    367,895Commitments and contingenciesShareholders Equity:Preferred stock (Series B), 8.75%,$.01 par value,
10,000,000 shares authorized, 3,450,000
shares
issued and outstanding
    
    
    83,524
    
    
    
    83,524Common stock, $.01 par value, 100,000,000
shares authorized, 51,872,460 and
43,305,827 shares issued and outstanding
    
    
    519
    
    
    
    433Additional paid-in capital
    
    
    542,397
    
    
    
    463,691Treasury stock, at cost, 747,600 shares
    
    
    (5,173
    )
    
    
    (5,173
    )Unearned directors and officers
compensation
    
    
    (2,211
    )
    
    
    (123
    )Distributions in excess of net earnings
    
    
    (212,505
    )
    
    
    (185,035
    )Unrealized loss on interest rate swaps
    
    
    (119
    )
    
    
    (931
    )Total Shareholders Equity
    
    
    406,432
    
    
    
    356,386Total Liabilities and Shareholders Equity
    
    $
    893,254
    
    
    $
    724,281
 The accompanying notes are an integral part of these consolidated financial statements. 34




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EQUITY INNS, INC. 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  Years Ended December 31,2004
    
    
    2003
    
    
    2002Revenue:Room revenue
    
    $
    244,215
    
    
    $
    216,735
    
    
    $
    216,255Other hotel revenue
    
    
    12,265
    
    
    
    11,057
    
    
    
    10,576Other revenue
    
    
    429
    
    
    
    623
    
    
    
    952Total revenue
    
    
    256,909
    
    
    
    228,415
    
    
    
    227,783Operating expenses:Direct hotel expenses
    
    
    145,474
    
    
    
    128,592
    
    
    
    127,812Other hotel expenses
    
    
    9,169
    
    
    
    8,230
    
    
    
    7,377Depreciation
    
    
    40,809
    
    
    
    38,105
    
    
    
    38,246Property taxes, rental expense and insurance
    
    
    17,965
    
    
    
    17,723
    
    
    
    17,666General and administrative expenses:Non-cash stock-based compensation
    
    
    844
    
    
    
    551
    
    
    
    680Other general and administrative expenses
    
    
    7,421
    
    
    
    6,653
    
    
    
    5,716Total operating expenses
    
    
    221,682
    
    
    
    199,854
    
    
    
    197,497Operating income
    
    
    35,227
    
    
    
    28,561
    
    
    
    30,286Interest expense, net
    
    
    29,535
    
    
    
    29,593
    
    
    
    30,389Income (loss) from continuing operations before
minority interests and income taxes
    
    
    5,692
    
    
    
    (1,032
    )
    
    
    (103
    )Minority interests income
    
    
    91
    
    
    
    495
    
    
    
    2Deferred income tax benefit (expense)
    
    
    
    
    
    
    (9,777
    )
    
    
    5,763Income (loss) from continuing operations
    
    
    5,783
    
    
    
    (10,314
    )
    
    
    5,662Discontinued operations:Gain (loss) on sale of hotel properties
    
    
    47
    
    
    
    1,248
    
    
    
    Loss on impairment of hotels held for sale
    
    
    (1,883
    )
    
    
    (4,605
    )
    
    
    Income (loss) from operations of discontinued
operations
    
    
    136
    
    
    
    (18
    )
    
    
    802Income (loss) from discontinued operations
    
    
    (1,700
    )
    
    
    (3,375
    )
    
    
    802Net income (loss)
    
    
    4,083
    
    
    
    (13,689
    )
    
    
    6,464Loss on redemption of Series A Preferred Stock
    
    
    
    
    
    
    (2,408
    )
    
    
    Preferred stock dividends
    
    
    (7,547
    )
    
    
    (6,823
    )
    
    
    (6,531
    )Net loss applicable to common
shareholders
    
    $
    (3,464
    )
    
    $
    (22,920
    )
    
    $
    (67
    )Net loss per share data:Basic and diluted income (loss) per share:Continuing operations
    
    $
    (.04
    )
    
    $
    (0.48
    )
    
    $
    (.02
    )Discontinued operations
    
    
    (.04
    )
    
    
    (.08
    )
    
    
    .02Net loss per common share
    
    $
    (0.08
    )
    
    $
    (.56
    )
    
    $
    0.00Weighted average number of common
shares outstanding, basic and diluted
    
    
    45,800
    
    
    
    40,999
    
    
    
    39,628
 The accompanying notes are an integral part of these consolidated financial statements. 35




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EQUITY INNS, INC. 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
  Years Ended December 31,2004
    
    
    2003
    
    
    2002Net income (loss)
    
    $
    4,083
    
    
    $
    (13,689
    )
    
    $
    6,464Unrealized gain (loss) on interest
rate swaps
    
    
    812
    
    
    
    1,268
    
    
    
    724Comprehensive income (loss)
    
    $
    4,895
    
    
    $
    (12,421
    )
    
    $
    7,188
 The accompanying notes are an integral part of these consolidated financial statements. 36




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EQUITY INNS, INC. 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
  Unearned
    
    
    
    
    
    
    UnrealizedAdditional
    
    
    
    
    
    
    
    
    
    
    Directors
    
    
    Distributions
    
    
    Loss onPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Treasury Stock
    
    
    and Officers
    
    
    In Excess of
    
    
    InterestShares
    
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    Capital
    
    
    Shares
    
    
    Dollars
    
    
    Compensation
    
    
    Net Earnings
    
    
    Rate Swap
    
    
    TotalBalance at December 31, 2001
    
    
    2,750
    
    
    $
    68,750
    
    
    
    37,592
    
    
    $
    376
    
    
    $
    418,351
    
    
    
    748
    
    
    $
    (5,173
    )
    
    $
    (1,153
    )
    
    $
    (120,064
    )
    
    $
    (2,923
    )
    
    $
    358,164Issuance of common shares, net of
offering expenses
    
    
    
    
    
    
    
    
    
    
    3,565
    
    
    
    36
    
    
    
    26,909
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,945Issuance of common shares to
officers in lieu of cash bonus
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    342
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    342Issuance of common shares to
directors in lieu of cash
compensation
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88Forfeiting of unvested shares by
an officer upon resignation
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    Amortization of unearned officers
and directors compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    592
    
    
    
    
    
    
    
    
    
    
    
    592Issuance of common shares upon
redemption of Partnership units
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20Net loss applicable to common
shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67
    )
    
    
    
    
    
    
    (67
    )Distributions ($.51 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,639
    )
    
    
    
    
    
    
    (20,639
    )Unrealized gain on interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    724
    
    
    
    724Adjustments to minority interests from
issuance of common shares and
Partnership units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98Balance at December 31, 2002
    
    
    2,750
    
    
    
    68,750
    
    
    
    41,221
    
    
    
    412
    
    
    
    445,793
    
    
    
    748
    
    
    
    (5,173
    )
    
    
    (546
    )
    
    
    (140,770
    )
    
    
    (2,199
    )
    
    
    366,267Issuance of common shares, net of
offering expenses
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    20
    
    
    
    15,060
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,080Redemption of Series A Preferred Stock
    
    
    (2,750
    )
    
    
    (68,750
    )
    
    
    
    
    
    
    
    
    
    
    2,408
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66,342
    )Issuance of Series B Preferred Stock,
net of offering expenses
    
    
    3,450
    
    
    
    83,524
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,524Issuance of common shares to
officers in lieu of cash bonus
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112Issuance of common shares to
directors in lieu of cash
compensation
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97Amortization of unearned officers
and directors compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    423
    
    
    
    
    
    
    
    
    
    
    
    423
 37




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##### Table of Contents



EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(in thousands, except per share data) Unearned
    
    
    
    
    
    
    UnrealizedAdditional
    
    
    
    
    
    
    
    
    
    
    Directors'
    
    
    Distributions
    
    
    Loss onPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Treasury Stock
    
    
    and Officers'
    
    
    In Excess of
    
    
    InterestShares
    
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    Capital
    
    
    Shares
    
    
    Dollars
    
    
    Compensation
    
    
    Net Earnings
    
    
    Rate Swap
    
    
    TotalIssuance of common shares upon
redemption of Partnership units
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    1
    
    
    
    370
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    371Net loss applicable to common
shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,920
    )
    
    
    
    
    
    
    (22,920
    )Distributions ($.52 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,345
    )
    
    
    
    
    
    
    (21,345
    )Unrealized gain on interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,268
    
    
    
    1,268Adjustments to minority interests from
issuance of common stock, preferred
stock and Partnership units
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    
    
    
    
    (149
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (149
    )Balance at December 31, 2003
    
    
    3,450
    
    
    
    83,524
    
    
    
    43,306
    
    
    
    433
    
    
    
    463,691
    
    
    
    748
    
    
    
    (5,173
    )
    
    
    (123
    )
    
    
    (185,035
    )
    
    
    (931
    )
    
    
    356,386Issuance of common shares, net of
offering expenses
    
    
    
    
    
    
    
    
    
    
    8,066
    
    
    
    81
    
    
    
    74,524
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,605Issuance of common shares to
officers in lieu of cash bonus
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    1
    
    
    
    439
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    440Issuance of restricted common shares
to officers
    
    
    
    
    
    
    
    
    
    
    405
    
    
    
    4
    
    
    
    2,868
    
    
    
    
    
    
    
    
    
    
    
    (2,872
    )
    
    
    
    
    
    
    
    
    
    
    Forfeitures of restricted common
shares by officers
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common shares to
directors in lieu of cash
compensation
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161Amortization of unearned officers
and directors compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    747
    
    
    
    
    
    
    
    
    
    
    
    747Issuance of common shares upon
redemption of Partnership units
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    228Net loss applicable to common
shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,464
    )
    
    
    
    
    
    
    (3,464
    )Distributions ($.52 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,006
    )
    
    
    
    
    
    
    (24,006
    )Unrealized gain on interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    812
    
    
    
    812Adjustments to minority interests from
issuance of common stock, preferred
stock and Partnership units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    523
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    523Balance at December 31, 2004
    
    
    3,450
    
    
    $
    83,524
    
    
    
    51,872
    
    
    $
    519
    
    
    $
    542,397
    
    
    
    748
    
    
    $
    (5,173
    )
    
    $
    (2,211
    )
    
    $
    (212,505
    )
    
    $
    (119
    )
    
    $
    406,432
 The accompanying notes are an integral part of these consolidated financial statements. 38




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##### Table of Contents



EQUITY INNS, INC. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Years Ended December 31,2004
    
    
    2003
    
    
    2002Cash flows from operating activities:Net income (loss)
    
    $
    4,083
    
    
    $
    (13,689
    )
    
    $
    6,464Adjustments to reconcile net income to net cash
provided by operating activities:(Gain) loss on sale of hotel properties
    
    
    (47
    )
    
    
    (1,248
    )
    
    
    Loss on impairment of hotels held for sale
    
    
    1,883
    
    
    
    4,605
    
    
    
    Depreciation
    
    
    40,809
    
    
    
    38,105
    
    
    
    38,246Depreciation of discontinued operations
    
    
    362
    
    
    
    1,265
    
    
    
    2,710Amortization of loan costs and franchise fees
    
    
    1,971
    
    
    
    2,462
    
    
    
    2,390Amortization of mortgage note premium
    
    
    (454
    )
    
    
    
    
    
    
    Non-cash stock-based compensation
    
    
    844
    
    
    
    551
    
    
    
    680Deferred income tax expense (benefit)
    
    
    
    
    
    
    9,777
    
    
    
    (5,763
    )Minority interests income
    
    
    (91
    )
    
    
    (495
    )
    
    
    (2
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,474
    )
    
    
    (976
    )
    
    
    (1,634
    )Distributions payable
    
    
    1,151
    
    
    
    433
    
    
    
    5,417Deposits and other assets
    
    
    (7,354
    )
    
    
    (1,692
    )
    
    
    (269
    )Accounts payable and accrued expenses
    
    
    6,742
    
    
    
    (5,190
    )
    
    
    (3,481
    )Other
    
    
    183
    
    
    
    39
    
    
    
    (358
    )Net cash provided by operating activities
    
    
    47,608
    
    
    
    33,947
    
    
    
    44,400Cash flows from investing activities:Improvements and additions to hotel properties
    
    
    (25,345
    )
    
    
    (13,343
    )
    
    
    (8,890
    )Acquisition of hotel properties
    
    
    (135,604
    )
    
    
    
    
    
    
    (16,320
    )Payments for franchise applications
    
    
    (812
    )
    
    
    (200
    )
    
    
    (117
    )Notes receivable
    
    
    5,285
    
    
    
    
    
    
    
    (596
    )Net proceeds from sale of hotel properties
    
    
    9,940
    
    
    
    15,471
    
    
    
    Net cash provided by (used in)
investing activities
    
    
    (146,536
    )
    
    
    1,928
    
    
    
    (25,923
    )Cash flows from financing activities:Gross proceeds from public offering of common stock
    
    
    76,963
    
    
    
    15,100
    
    
    
    28,520Gross proceeds from issuance of Series B Preferred Stock
    
    
    
    
    
    
    86,250
    
    
    
    Payment of offering expenses
    
    
    (2,396
    )
    
    
    (2,746
    )
    
    
    (1,576
    )Redemption of Series A Preferred Stock
    
    
    
    
    
    
    (68,750
    )
    
    
    Distributions paid
    
    
    (31,085
    )
    
    
    (28,332
    )
    
    
    (22,364
    )Payments for loan costs
    
    
    (1,574
    )
    
    
    (2,005
    )
    
    
    (215
    )Proceeds from borrowings
    
    
    180,462
    
    
    
    47,375
    
    
    
    47,375Payments on long-term debt
    
    
    (124,652
    )
    
    
    (80,482
    )
    
    
    (68,660
    )Net cash provided by (used in) financing activities
    
    
    97,718
    
    
    
    (33,590
    )
    
    
    (16,920
    )Net increase (decrease) in cash
    
    
    (1,210
    )
    
    
    2,285
    
    
    
    1,557Cash and cash equivalents at beginning of period
    
    
    8,201
    
    
    
    5,916
    
    
    
    4,359Cash and cash equivalents at end of period
    
    $
    6,991
    
    
    $
    8,201
    
    
    $
    5,916Supplemental cash flow information:Cash paid for interest
    
    $
    27,236
    
    
    $
    28,327
    
    
    $
    29,140
 The accompanying notes are an integral part of these consolidated financial statements. 39




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##### Table of Contents



EQUITY INNS, INC. 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 In these footnotes, the words Company, Equity Inns, we, our, and us refer to Equity Inns,
Inc., a Tennessee corporation, and its consolidated subsidiaries, unless otherwise stated or the
context requires otherwise. 1. Organization Equity Inns is a hotel real estate investment trust (REIT) for federal income tax purposes. The
Company, through its wholly-owned subsidiary, Equity Inns Trust (the Trust), is the sole general
partner of Equity Inns Partnership, L.P. (the Partnership) and at December 31, 2004 owned an
approximate 97.3% interest in the Partnership. Our hotel properties are leased to our wholly-owned taxable REIT subsidiaries (the TRS Lessees).
Our hotel properties are managed by independent third parties. At December 31, 2004, the
independent managers of our hotels are as follows: Number of HotelsInterstate Hotels & Resorts, Inc.
    
    
    48Hilton Hotels Corporation
    
    
    17Hyatt Corporation
    
    
    18McKibbon Hotel Group
    
    
    13Other (4)
    
    
    14110
 Our management agreements with Hyatt, which purchased the AmeriSuites brand in January 2005 from
the Blackstone Group, which purchased the brand from Prime Hospitality Corporation in October 2004,
are structured to provide the TRS Lessees minimum net operating income at each of our 18
AmeriSuites hotels. In addition, the management agreements specify a net operating income
threshold for each of our 18 AmeriSuites hotels. As the manager, Hyatts subsidiaries can earn an
incentive management fee of 25% of hotel net operating income above the threshold, as defined, to a
maximum of 6.5% of gross hotel revenues. If the management fee calculation exceeds 6.5% of gross
hotel revenue, Hyatts subsidiaries may earn an additional fee of 10% on any additional net
operating income. If a hotel fails to generate net operating income sufficient to reach the
threshold, Hyatts subsidiaries are required to contribute the greater of a predetermined minimum
return or the net operating income plus 25% of the shortfall between the threshold amount and the
net operating income of the hotel. We record all shortfall contributions as a reduction of base
management fees, which are included as a component of direct hotel expenses in our accompanying
consolidated statements of operations, when all contingencies related to such amounts have been
resolved. In May 2003, we updated our current franchise contracts and management agreements with
Hyatts
subsidiaries for all of our AmeriSuites hotels. The minimum net operating income guarantee
agreements were not extended beyond their original terms and are set to expire in 2007 and 2008.
Under the new agreements, we extended the existing franchise agreements to 2028 and the management
agreements to 2010, as long as Hyatt continues to be in compliance with the minimum net operating
income guarantees in the original agreements. For 2004, 2003 and 2002, we recorded approximately
$4.8 million, $4.7 million and $3.6 million, respectively, in minimum income guarantees from Hyatt
as a reduction of our base management fee expense in the accompanying consolidated statements of
operations. The management contracts for our remaining hotels have terms ranging from one to four
years and generally provide for payment of management fees ranging from 1.5% to 3.0% of hotel
revenues and an incentive fee consisting of a percentage of gross operating profits in excess of
budget, as defined by the management agreements. 40




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##### Table of Contents



EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its consolidated
subsidiaries. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current year presentation. Use of Estimates 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 that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investment in Hotel Properties Our hotel properties are recorded at cost. We compute depreciation using the straight-line method
over the estimated useful lives of the assets which range from 5 to 40 years for buildings and
components and 5 to 7 years for furniture and equipment. We record maintenance and repairs expense as incurred, and major renewals and improvements are
capitalized. Upon disposition, both the asset and accumulated depreciation accounts are relieved,
and the related gain or loss is credited or charged to the statement of operations. We record an impairment charge when we believe an investment in a hotel has been impaired such that
future undiscounted cash flows would not recover the book basis of the hotel property, or the hotel
is being held for sale. Future adverse changes in market conditions or poor operating results of
underlying investments could result in losses or an inability to recover the carrying value of the
investments that may not be reflected in an investments carrying value, thereby possibly requiring
an impairment charge in the future. We classify certain assets as held for sale based on management having the authority and intent of
entering into commitments for sale transactions expected to close in the next twelve months. When
the Company identifies an asset held for sale, we estimate the net realizable value of such asset.
If the net realizable value of the asset is less than the carrying amount of the asset, we record
an impairment charge for the estimated loss. We no longer record depreciation expense once we
identify an asset as held for sale. Net realizable value is estimated as the amount at which we
believe the asset could be bought or sold (fair value) less costs to sell. We estimate the fair
value by determining prevailing market conditions, appraisals or current estimated net sales
proceeds from pending offers, if appropriate. We record operations for hotels designated as held
for sale and hotels which have been sold as part of discontinued operations for all periods
presented. We also allocate to discontinued operations the estimated interest on debt that is to
be assumed by the buyer and interest on debt that is required to be repaid as a result of the
disposal transaction. For 2004, we recorded a loss on impairment of a hotel held for sale of
approximately $1.9 million. For 2003, we recorded losses on impairments of hotels held for sale of
approximately 41




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##### Table of Contents



EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of Significant Accounting Policies, Continued $4.6 million. These impairments are reflected as a component of discontinued operations for the
respective periods in the accompanying statements of operations. Cash and Cash Equivalents We consider highly liquid investments with maturities of three months or less when purchased to be
cash equivalents. Allowance for Doubtful Accounts We maintain allowances for doubtful accounts for estimated losses resulting from the inability of
our customers and other borrowers to make required payments. The allowance for doubtful accounts
is maintained at a level believed adequate by us to absorb estimated probable receivable losses.
Our periodic evaluation of the adequacy of the allowance is primarily based on past receivable loss
experience, known and inherent credit risks, current economic conditions, and other relevant
factors. This evaluation is inherently subjective as it requires estimates including the amounts
and timing of future collections. If the financial condition of our customers or other borrowers
were to deteriorate, resulting in an impairment of their ability to make payments, additional
allowances may be required. Deferred Expenses We record deferred expenses at cost and those expenses principally consist of initial fees paid to
franchisors and loan fees and other costs incurred in issuing debt. Amortization of franchise fees
is computed using the straight-line method over the lives of the franchise agreements which range
up to 20 years. We record amortization of loan fees and other costs incurred in issuing debt by using the
straight-line method, which approximates the interest method, over the term of the related debt.
Accumulated amortization of deferred expenses totaled approximately
$8.3 and $6.4 million at December 31,
2004 and 2003, respectively. Deposits and Other Assets Deposits include escrow deposits relating to our mortgage debt, deferred compensation assets held
for our officers, amounts due from an insurance carrier relating to hurricane losses and other
hotel assets. Inventories Inventories consist primarily of linens and food and beverage items that are recorded at the lower
of cost or market as a component of deposits and other assets in the accompanying balance sheets. Distributions We pay regular quarterly cash distributions to shareholders. These distributions are determined
quarterly by our Board based on our operating results, economic conditions, capital expenditure 42




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of Significant Accounting Policies, Continued requirements, the Internal Revenue Codes REIT annual distribution requirements, leverage covenants
imposed by our Line of Credit and other debt documents, and any other matters that our Board deems
relevant. Revenue Recognition Approximately 99.8% of our revenue is comprised of hotel operating revenues, principally driven by
room revenue and revenue from other hotel operating departments (such as telephone, parking and
business centers). These revenues are recorded net of any sales or occupancy taxes collected from
our guests. All rebates or discounts are recorded, when allowed, as a reduction in revenue, and
there are no material contingent obligations with respect to rebates or discounts offered by us.
All revenues are recorded on an accrual basis, as earned. Appropriate allowances are made for
doubtful accounts and are recorded as a bad debt expense. The remaining 0.2% of our revenue is
from a joint venture with one of our furniture and equipment contractors and other sources. We do not have any time-share arrangements and do not sponsor any frequent guest programs for which
we would have any contingent liability. We participate in frequent guest programs sponsored by the
brand owners of our hotels and we expense the charges associated with those programs (typically
consisting of a percentage of the total room revenue charged to guests), as incurred. When a guest
redeems accumulated frequent guest points at one of our hotels, the hotel bills the sponsor for the
services provided in redemption of such points and records revenue in the amount of the charges
billed to the sponsor. Associated with the frequent guest programs, we have no loss contingencies
or ongoing obligation beyond what is paid to the brand owner at the time of the guests stay. Operating Costs and Expenses Direct hotel expenses include expenses related to housekeeping, maintenance, reservations,
marketing and advertising, management fees and other costs associated with hotel operations. Direct hotel expenses also include the operating expenses for food and beverage operations. Other hotel operating expenses include expenses related to cost of telephone service, movie rental
and other guest-related costs. Advertising and Marketing In accordance with the AICPAs Statement of Position (SOP) No. 93-7, Reporting on Advertising
Costs, we expense advertising and marketing costs as incurred or as the advertising takes place.
We recorded approximately $12.9 million, $12.7 million and
$13.6 million in 2004, 2003 and 2002,
respectively, in advertising and marketing costs. Minority Interests Minority interests in our Partnership represent the limited partners proportionate share of the
equity of the Partnership. Income is allocated to minority interests based on weighted average
percentage ownership each fiscal quarter. 43




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Summary of Significant Accounting Policies, Continued Income Taxes We have elected to be treated as a REIT under the Internal Revenue Code. Under this status, income
from the REIT is not subject to federal income taxes, provided that certain circumstances are
satisfied, the most restrictive being that at least 90% of our taxable income is paid out as
distributions to our shareholders. We do, however, maintain TRS Lessees that are subject to
federal and state income taxes. The TRS Lessees maintain leases with subsidiaries of Equity Inns,
as parent, that provide for certain rents to be paid to us. As the TRS Lessees are subject to
income taxes, we account for income taxes in accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under SFAS No. 109,
we use the asset and liability method under which deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases within
the TRS Lessees. Earnings and profits, which will determine the taxability of distributions to shareholders, will
differ from net income reported for financial reporting purposes primarily due to the differences
for federal
income tax purposes in the estimated useful lives and methods used to compute depreciation. Distributions made to shareholders in 2004, 2003 and 2002 are considered to be approximately 15%,
1% and 3% return of capital, respectively, for federal income tax purposes. In the fourth quarter of 2003, we recorded a valuation allowance of $16.8 million against our
deferred income tax asset, in accordance with SFAS No. 109, as realization of such asset in future
years was uncertain. Additionally, we will not record a deferred income tax benefit until it is
more likely than not that such benefit will be realized. Net Income Per Common Share We compute basic earnings per common share from continuing operations by dividing income (loss)
from continuing operations as adjusted for gains or losses on the sale of hotel properties not
included in discontinued operations, for losses on redemptions of preferred stock, and for
dividends on preferred stock by the weighted average number of shares of common stock outstanding.
We compute diluted earnings per common share from continuing operations by dividing income (loss)
from continuing operations as adjusted for gains or losses on the sale of hotel properties not
included in discontinued operations and for dividends on preferred stock by the weighted average
number of shares of common stock outstanding plus other potentially dilutive securities. Potential dilutive securities included in our calculation of diluted earnings per share include
shares issuable upon exercise of stock options. The majority of the options to purchase shares of
our common stock that were outstanding during 2004, 2003 and 2002 were not included in the
computation of diluted EPS because their effect would have been anti-dilutive. 44




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 2. Summary of Significant Accounting Policies, Continued Stock-Based Compensation At December 31, 2004, we have two stock-based employee and director compensation plans, which are
described more fully in Note 12. Prior to January 1, 2003, we accounted for these plans under the
recognition and measurement provisions of APB No. 25, Accounting for Stock Issued to Employees,
and related interpretations. In December of 2002, the Financial Accounting Standards Board
(FASB) issued SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. We elected to adopt the recognition provisions
of SFAS No. 123 under the prospective method as defined in SFAS No. 148 on January 1, 2003. Under
the prospective method, we will apply the fair value based method of accounting for stock-based
employee compensation prospectively to all awards granted, modified or settled beginning January 1,
2003. There were no material grants, modifications or settlements of options to purchase shares of
our common stock made during 2004 or 2003. No stock-based employee compensation cost is reflected
in net income related to stock options as all options granted prior to December 31, 2002 had an
exercise price equal to the market value of the underlying common stock on the date of grant. If
we had applied the fair value recognition provisions of SFAS No. 123 related to our stock options
during 2002, our net income for 2002 would have been decreased by $17,000 with no impact on our
earnings per share. Segment Reporting We consider each of our hotels to be an operating segment, none of which meets the threshold for a
reportable segment as prescribed by SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information. We allocate resources and assess operating performance based on each
individual hotel. Additionally, we aggregate these individually immaterial operating segments into
one segment using the criteria established by SFAS No. 131, including the similarities of our
product offering, types of customers and method of providing service. Derivative Instruments and Hedging Activities SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and
interpreted, established accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging activities. As
required by SFAS No. 133, we record all derivatives on our balance sheets at fair value. Our interest rate swap contracts have been designated as cash flow hedges. For derivatives
designated as cash flow hedges, the effective portion of changes in the fair value of the
derivative is initially reported in other comprehensive income (outside of earnings) and
subsequently reclassified to earnings when the hedged transaction affects earnings, and the
ineffective portion of changes in the fair value of the derivative is recognized directly in
earnings. We assess the effectiveness of each hedging relationship by comparing the changes in
fair value or cash flows of the derivative hedging instrument with the changes in fair value or
cash flows of the designated hedged item or transaction. 45




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 2. Summary of Significant Accounting Policies, Continued Our objective in using derivatives is to add stability to interest expense and to manage our
exposure to interest rate movements or other identified risks. We do not use derivatives for
trading or speculative purposes and currently do not have any derivatives that are not designated
as hedges. To accomplish this objective, we primarily use interest rate swaps as part of our cash
flow hedging strategy. Interest rate swaps designated as cash flow hedges involve the receipt of
variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without
exchange of the underlying principal amount. Historically, we have used derivatives to hedge the variable cash
flows associated with our existing variable rate debt. No hedge ineffectiveness on cash flow hedges was recognized during 2004, 2003 or 2002. Amounts reported in accumulated other comprehensive income related to derivatives will be
reclassified to interest expense as interest payments are made on our variable-rate debt. During 2005, we estimate that an insignificant amount of the change in unrealized gains/ losses
from accumulated other comprehensive income will be reclassified to interest expense. Concentration of Credit Risk We own 4,573 hotel rooms or approximately 34% of our total hotel rooms in the South Atlantic region
of the United States. Additionally, we own 1,689 hotel rooms or approximately 12.5% of our total
hotel rooms in the state of Florida. Fair Value of Financial Instruments The Companys financial instruments include cash and cash equivalents, commercial mortgage bonds,
line of credit borrowings, mortgage borrowings and interest rate swap contracts. The carrying
values of our commercial mortgage bonds and mortgage borrowings were estimated using discounted
cash flow analysis, based on our incremental borrowing rate at December 31, 2004 and 2003, for
similar types of borrowing arrangements and the carrying value of such instruments are estimated to
be below fair value by approximately $33.3 million and $16.4 million, respectively. Our Line of
Credit borrowings bear interest at variable rates and therefore cost approximates market value.
Our interest rate swap contracts are carried at fair value in the financial statements. The fair
value of our interest rate swaps is estimated using quotes from the market makers of these
instruments and represents the estimated amount that we would expect to pay to terminate the
agreements. 46




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 3. Investment in Hotel Properties Our hotel properties consist of the following at December 31 (in thousands): 2004
    
    
    2003Land
    
    $
    116,065
    
    
    $
    99,938Buildings and improvements
    
    
    857,840
    
    
    
    695,581Furniture and equipment
    
    
    130,954
    
    
    
    114,328Construction in progress
    
    
    6,160
    
    
    
    3,9981,111,019
    
    
    
    913,845Less accumulated depreciation
    
    
    (258,264
    )
    
    
    (232,367
    )$
    852,755
    
    
    $
    681,478
 During 2004, we purchased 20 hotels for approximately $192.9 million related to previously
announced acquisitions. The hotels were purchased from three hotel developers. These hotels
represent a combined 1,871 rooms and have an average age of approximately five years. Of the 20
hotels purchased, 13 hotels are managed by McKibbon Hotel Management, Inc., five hotels are managed
by Hospitality Group, Inc. and two hotels are management by Gateway Lodging Company, Inc. We
funded these acquisitions primarily through $74.6 million in net cash proceeds from April 2004 and
October 2004 issuances of our common stock, the issuance of approximately 325,000 Partnership units
valued at approximately $3.2 million, the assumption of approximately $54.1 million in secured
long-term debt, the issuance of approximately $40.6 million in secured long-term debt and
approximately $20.4 million in borrowings under our Line of Credit. Included in our debt
assumption is a mortgage note premium of approximately $4.9 million to record the debt at its
estimated fair value. This premium is being amortized using the interest method over the remaining
lives of the assumed debt as a reduction of interest expense. 47




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Investment in Hotel Properties, Continued The acquisitions that we completed in 2004 are as follows: Hotel
    
    Location
    
    Rooms
    
    Date AcquiredCourtyard by Marriott
    
    Tallahassee, Florida
    
    
    93
    
    
    January 26, 2004Residence Inn by Marriott
    
    Tampa, Florida
    
    
    102
    
    
    March 25, 2004Courtyard by Marriott
    
    Gainesville, Florida
    
    
    81
    
    
    April 29, 2004Residence Inn by Marriott
    
    Tallahassee, Florida
    
    
    78
    
    
    April 29, 2004Residence Inn by Marriott
    
    Knoxville, Tennessee
    
    
    78
    
    
    May 10, 2004Courtyard by Marriott
    
    Asheville, North Carolina
    
    
    78
    
    
    May 28, 2004Residence Inn by Marriott
    
    Chattanooga, Tennessee
    
    
    76
    
    
    May 28, 2004Courtyard by Marriott
    
    Athens, Georgia
    
    
    105
    
    
    June 16, 2004Residence Inn by Marriott
    
    Savannah, Georgia
    
    
    66
    
    
    June 29, 2004Hampton Inn by Hilton
    
    Boca Raton, Florida
    
    
    94
    
    
    October 22, 2004Hampton Inn by Hilton
    
    Deerfield Beach, Florida
    
    
    106
    
    
    October 22, 2004Hampton Inn by Hilton
    
    Palm Beach Gardens, Florida
    
    
    116
    
    
    October 22, 2004Hampton Inn by Hilton
    
    West Palm Beach, Florida
    
    
    110
    
    
    October 22, 2004Hampton Inn & Suites
by Hilton
    
    Boynton Beach, Florida
    
    
    161
    
    
    October 22, 2004Courtyard by Marriott
    
    Dalton, Georgia
    
    
    93
    
    
    November 1, 2004Hilton Garden Inn
    
    Louisville, Kentucky
    
    
    112
    
    
    November 1, 2004Residence Inn by Marriott
    
    Macon, Georgia
    
    
    78
    
    
    December 16, 2004SpringHill Suites byMarriott
    
    Asheville, North Carolina
    
    
    88
    
    
    December 16, 2004Courtyard by Marriott
    
    Knoxville, Tennessee
    
    
    78
    
    
    December 21, 2004Courtyard by Marriott
    
    Mobile, Alabama
    
    
    78
    
    
    December 21, 2004
 Based on our estimate of fair value, we allocated the purchase price of these hotels as follows (in
thousands): AmountLand
    
    $
    17,202Buildings and improvements
    
    
    156,644Furniture and equipment
    
    
    19,037$
    192,883
 48




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 3. Investment in Hotel Properties, Continued The following unaudited pro forma results are presented as if these acquisitions had occurred on
January 1, 2003 (in thousands, except per share data): Years Ended December 31,2004
    
    
    2003RevenuesEquity Inns, as reported
    
    $
    256,909
    
    
    $
    228,415Acquisitions
    
    
    34,524
    
    
    
    48,573Pro forma combined revenues
    
    $
    291,433
    
    
    $
    276,988Net income (loss) applicable to
common shareholders
Equity Inns, as reported
    
    $
    (3,464
    )
    
    $
    (22,920
    )Acquisitions
    
    
    3,622
    
    
    
    3,433Pro forma combined net income (loss)
    
    $
    158
    
    
    $
    (19,487
    )Pro forma basic and diluted income (loss)
per share
    
    $
    0.00
    
    
    $
    (0.40
    )Pro forma weighted average number of
common shares outstanding  basic and
diluted
    
    
    51,076
    
    
    
    49,065
 Note: These unaudited pro forma results are presented for comparative purposes only. The pro
forma results are not necessarily indicative of what our actual results would have been had
these acquisitions been completed on January 1, 2003, or of future results. During 2004, we invested approximately $25.3 million to fund capital improvements in our hotels,
including replacement of carpets, drapes, furniture and equipment, renovation of common areas and
improvements of hotel exteriors. We expect to fund an aggregate of approximately $25.0 million
throughout 2005 for capital improvements. We intend to fund such improvements out of our cash
flows from operations, current cash balances and borrowings under our Line of Credit. During 2004, we recorded a charge for impairment of approximately $1.9 million in accordance with
SFAS No. 144, Accounting For Impairment or Disposal of Long-Lived Assets, based on the estimated
net realizable value of a hotel held for sale. This hotel was subsequently sold in January 2005
for its approximate carrying value of $3.8 million. During 2003, we recorded charges for
impairments of approximately $4.6 million as a result of our strategic decision to market four
properties for sale. For the hotels related to both impairment charges, we have accounted for the
operations of such properties as discontinued operations for the respective periods in the
accompanying statements of operations. 49




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 3. Investment in Hotel Properties, Continued During 2004, we sold three hotels previously classified as held for sale for approximately $10.9
million, including approximately $9.1 million in cash (after selling costs of approximately
$980,000) and an increase to an existing note receivable, as discussed below, of $800,000. The
hotels sold were a 97-room Hampton Inn located in Sarasota, Florida, a 122-room Hampton Inn
located in Jacksonville, Florida, and a 141-room Comfort Inn located in Arlington, Texas. The
average age of these hotels was approximately 17 years. We utilized the net proceeds from these
dispositions to pay down existing long-term debt. In conjunction with these sales, we recorded a
loss of approximately $320,000 as part of discontinued operations in the accompanying consolidated
statement of operations. Additionally, in 2003 we sold a hotel and had initially deferred a gain
of approximately $420,000 in conjunction with accepting the note receivable discussed below. In
November 2004, this note was collected in full, less a $50,000 discount, and we recognized a net
gain of approximately $370,000 as part of discontinued operations in the accompanying consolidated
statement of operations. During 2004, we experienced significant hurricane damage at one of our hotels located in
Jacksonville Beach, Florida. This hotel was subsequently repaired and became operational in late
January 2005. The total cost of the hurricane loss is estimated to be approximately $3.8 million,
and we are currently working with our insurance carrier in processing this claim. Based on the
total estimated project cost, the estimated net insurance proceeds and the estimated net book value
of the assets destroyed, we expect to record a net gain on insurance proceeds upon the conclusion
of the processed claim. This gain will be recorded upon receipt of the net insurance proceeds and
closure of the insurance claim. In 2003, we sold four hotels (Hampton Inn in Ft. Worth, Texas; Hampton Inn & Suites in Bartlett,
Tennessee; Holiday Inn Express in Wilkesboro, North Carolina; and AmeriSuites in Jacksonville,
Florida) for an aggregate price of $20.1 million, resulting in a gain on the sales of approximately
$1.6 million, net of impairment charges previously recorded. The sales prices were paid in cash,
except for the Jacksonville hotel, $4.0 million of which was in the form of a 15-month note bearing
interest at 7.75% per annum. The proceeds were utilized to pay down
our existing long-term debt. We classify certain assets as held for sale based on management having the authority and intent of
entering into commitments for sale transactions expected to close in the next twelve months. When
we identify an asset held for sale, we estimate the net realizable value of such asset. If the net
realizable value of the asset is less than the carrying amount of the asset, we record an
impairment charge for the estimated loss. Depreciation is no longer recorded once we have
identified an asset as held for sale. Net realizable value is estimated as the amount at which the
asset could be bought or sold (fair value) less costs to sell. We have determined fair value by
using prevailing market conditions, appraisals or current estimated net sales proceeds from pending
offers, as appropriate. We only allocate to discontinued operations interest on debt that is to be
assumed by the buyer and interest on debt that is required to be repaid as a result of the disposal
transaction. For 2004, we recorded a loss on impairment of a hotel held for sale of approximately
$1.9 million. For 2003, we recorded losses on impairments of hotels held for sale of approximately
$4.6 million. These impairments are reflected as a component of
discontinued operations for the respective periods in the accompanying statements of operations. 50




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 4. Notes Receivable Notes receivable consist of the following at December 31, 2004 and 2003 (in thousands): 2004
    
    
    2003HM-NM, Inc.
    
    $
    
    
    
    $
    3,582Officers of the Company
    
    
    
    
    
    
    1,335$
    
    
    
    $
    4,917
 In November 2003, we sold our AmeriSuites hotel in Jacksonville, Florida to HM-NM, Inc. for a
purchase price of approximately $6.0 million, $4.0 million of which was in the form of a 15-month
note receivable bearing interest at 7.75% per annum. Additionally, in January 2004 we sold a
Hampton Inn hotel located in Jacksonville, Florida to HM-NM, Inc. for a purchase price of
approximately $5.0 million, including an additional $800,000 increase to the note receivable
discussed above. The entire note was secured by the land, building and furniture and fixtures of
the AmeriSuites hotel located at 8277 Western Way Circle, Jacksonville, Florida. We initially
deferred a gain on sale of approximately $420,000 based on the minimum investment requirements as
prescribed by SFAS No. 66, Accounting for Sales of Real Estate. In December 2004, we collected
this note in full, less a $50,000 discount. Accordingly, we recognized a net gain of approximately
$370,000 during 2004 as part of discontinued operations in our accompanying statement of
operations. At various times from January 1998 to July 2002, we advanced loans to our executive officers for
income taxes relating to annual bonuses taken in shares of our common stock and income taxes
related to the taxable value of vested restricted stock. All notes were paid in full in July 2004
in accordance with their stated terms. We no longer provide loans to officers. 51




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 5. Long-Term Debt The following details our debt outstanding at December 31, 2004 and 2003 (dollars in thousands): Collateral
    
    
    Net BookPrincipal Balance
    
    
    Interest
    
    
    
    
    
    
    # of
    
    
    Value at12/31/04
    
    
    12/31/03
    
    
    Rate
    
    
    Maturity
    
    
    Hotels
    
    
    12/31/04Commercial Mortgage
BondsClass A
    
    $
    
    
    
    $
    4,061
    
    
    
    6.83
    %
    
    Fixed
    
    Nov 2006Class B
    
    
    45,802
    
    
    
    50,600
    
    
    
    7.37
    %
    
    Fixed
    
    Dec 2015Class C
    
    
    10,000
    
    
    
    10,000
    
    
    
    7.58
    %
    
    Fixed
    
    Feb 201755,802
    
    
    
    64,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    $
    98,167LIBOR plusLine of Credit
    
    
    72,000
    
    
    
    50,000
    
    
    Percentage
    
    Variable
    
    June 2006
    
    
    25
    
    
    
    218,863Mortgage
    
    
    89,318
    
    
    
    91,009
    
    
    
    8.37
    %
    
    Fixed
    
    July 2009
    
    
    19
    
    
    
    151,967Mortgage
    
    
    65,823
    
    
    
    66,891
    
    
    
    8.25
    %
    
    Fixed
    
    Nov 2010
    
    
    16
    
    
    
    101,659Mortgage
    
    
    34,089
    
    
    
    34,612
    
    
    
    8.25
    %
    
    Fixed
    
    Nov 2010
    
    
    8
    
    
    
    53,625LIBOR plusMortgage
    
    
    10,652
    
    
    
    10,750
    
    
    285 pts.
    
    Variable
    
    Aug 2008
    
    
    1
    
    
    
    14,656Mortgage
    
    
    2,811
    
    
    
    2,912
    
    
    
    6.00
    %
    
    Fixed
    
    May 2008
    
    
    1
    
    
    
    6,625Mortgage
    
    
    
    
    
    
    5,431
    
    
    
    10.00
    %
    
    Fixed
    
    Sept 2005
    
    
    
    
    
    
    Mortgage
    
    
    3,320
    
    
    
    3,508
    
    
    
    6.37
    %
    
    Fixed
    
    Nov 2016
    
    
    1
    
    
    
    7,783Mortgage
    
    
    6,276
    
    
    
    
    
    
    
    8.70
    %
    
    Fixed
    
    Nov 2010
    
    
    1
    
    
    
    10,607Mortgage
    
    
    4,268
    
    
    
    
    
    
    
    7.97
    %
    
    Fixed
    
    Oct 2007
    
    
    1
    
    
    
    7,180Mortgage
    
    
    5,258
    
    
    
    
    
    
    
    7.97
    %
    
    Fixed
    
    Oct 2007
    
    
    1
    
    
    
    8,002Mortgage
    
    
    4,457
    
    
    
    
    
    
    
    7.10
    %
    
    Fixed
    
    Sept 2008
    
    
    1
    
    
    
    9,020Mortgage
    
    
    3,787
    
    
    
    
    
    
    
    8.04
    %
    
    Fixed
    
    Nov 2007
    
    
    1
    
    
    
    6,802Mortgage
    
    
    5,276
    
    
    
    
    
    
    
    8.04
    %
    
    Fixed
    
    Nov 2007
    
    
    1
    
    
    
    7,861Mortgage
    
    
    3,160
    
    
    
    
    
    
    
    9.375
    %
    
    Fixed
    
    April 2007
    
    
    1
    
    
    
    6,396Mortgage
    
    
    3,381
    
    
    
    
    
    
    
    9.375
    %
    
    Fixed
    
    April 2007
    
    
    1
    
    
    
    6,599Mortgage
    
    
    5,145
    
    
    
    
    
    
    
    8.04
    %
    
    Fixed
    
    Nov 2007
    
    
    1
    
    
    
    6,529Mortgage
    
    
    3,938
    
    
    
    
    
    
    
    9.375
    %
    
    Fixed
    
    April 2007
    
    
    1
    
    
    
    7,338Mortgage
    
    
    3,854
    
    
    
    
    
    
    
    9.05
    %
    
    Fixed
    
    May 2007
    
    
    1
    
    
    
    9,364Mortgage
    
    
    5,958
    
    
    
    
    
    
    
    5.83
    %
    
    Fixed
    
    July 2014
    
    
    1
    
    
    
    9,502Mortgage
    
    
    40,508
    
    
    
    
    
    
    
    5.64
    %
    
    Fixed
    
    Nov 2014
    
    
    5
    
    
    
    73,805Mortgage
    
    
    5,700
    
    
    
    
    
    
    
    5.39
    %
    
    Fixed
    
    Dec 2014
    
    
    1
    
    
    
    10,763434,781
    
    
    
    329,774
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107
    
    
    $
    833,113Unamortized Mortgage
Note Premium
    
    
    4,402
    
    
    
    $
    439,183
    
    
    $
    329,774
 Related to our hotel acquisitions completed during 2004, we assumed approximately $54.1
million of long-term debt with various interest rates and maturities. In accounting for this
assumed debt at estimated fair value, we recorded approximately $4.9 million of a mortgage note
premium in the accompanying consolidated balance sheet. This premium is being amortized using the
interest method over the remaining lives of the assumed debt as a
reduction of interest expense. For 2004, we recorded approximately
$455,000 of mortgage note premium amortization. During 2004, we completed a $40.6 million secured loan related to the acquisition of five hotels in
southern Florida. The loan bears interest at a fixed rate of 5.64% per annum. Under terms of the
loan, the promissory note matures on November 1, 2024, although the lender has a call option on
November 1, 2014 and November 1, 2019, at which time all outstanding principal and accrued interest
would be due in full. 52




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 5. Long-Term Debt, Continued During 2004, we completed a refinancing of an existing mortgage related to our San Antonio Hampton
Inn. We refinanced $5.3 million of senior debt at a fixed rate of 10.00% per annum with $5.7
million of 10-year senior debt at a fixed rate of 5.39%. In conjunction with this refinancing, the
Company incurred a prepayment penalty of approximately $300,000, and this prepayment penalty is
included as a component of interest expense, net in the accompanying consolidated statement of
operations. During 2004, we completed a $6.0 million, 10-year secured loan related to our Courtyard by Marriott
in Tallahassee, Florida. The loan has a fixed rate of 5.83% per annum. We entered into a collateralized Line of Credit in June 2003 for $110.0 million, subject to certain
restrictions. The Line of Credit bears interest at LIBOR plus 2.25% to 3.0% per annum as
determined by our quarterly leverage and the facility matures in June 2006 but may be extended at
our option for an additional year. At December 31, 2004, the interest rate on our Line of Credit
was LIBOR (2.42% at December 31, 2004) plus 2.75%. Fees ranging from .45% to .60% per annum, as
determined by our ratio of total indebtedness to EBITDA, are paid quarterly on the unused portion
of our Line of Credit. The Line of Credit maintains certain restrictions regarding capital
expenditures and other quarterly financial covenants, including a test for cash available for
dividend payouts, a fixed charge test and a leverage test, among other covenants. At December 31,
2004, we were in compliance with all covenants required by our Line of Credit. All of our debt is secured by first mortgages on our hotels. Our debt has maturity dates that
range from June 2006 to February 2017 with certain debt requiring annual principal payments and
certain debt representing term maturities. The terms of our debt generally require prepayment
penalties if repaid prior to maturity. Certain of our loan agreements require quarterly deposits into separate room renovation accounts
for the amount by which 4% of revenues at our hotels exceeds the amount expended by us during the
year for replacement of furniture and equipment, maintenance, and capital improvements for our
hotels. For 2004, amounts expended exceeded, in the aggregate, the amounts required under the loan
covenants. If, for any reason, we do not meet the renovation requirements at the individual hotel
level, we could be required to fund such shortfalls into cash escrow accounts. Our Line of Credit has a stated borrowing capacity of $110.0 million. This capacity is further
limited to a stated percentage of the appraised value of the assets pledged as collateral.
Additionally, since the completion of our Line of Credit, we have sold certain of our hotels that
served as collateral under this facility. Accordingly, at December 31, 2004, we had an additional
borrowing capacity of approximately $37.1 million under our Line of Credit. 53




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 5. Long-Term Debt, Continued Future scheduled principal payments of debt obligations at December 31, 2004 are as follows (in
thousands): Year
    
    Amount2005
    
    $
    9,5342006
    
    
    82,2672007
    
    
    46,2972008
    
    
    26,3932009
    
    
    89,180Thereafter
    
    
    181,110Total debt
    
    $
    434,781
 6. Interest Rate Swap Contracts In 2003, we entered into an interest rate swap agreement with a financial institution on a notional
amount of $25.0 million. The agreement expires in November 2008. The agreement effectively fixes
the interest rate on the first $25.0 million of floating rate debt outstanding under the Line of
Credit at a rate of 3.875% per annum plus the interest rate spread on the Line of Credit, thus
reducing our exposure to interest rate fluctuations. The notional amount does not represent
amounts exchanged by the parties, and thus is not a measure of exposure to us. The differences to
be paid or received by us under the interest rate swap agreement are recognized as an adjustment to
interest expense. The agreement is with a major financial institution, which is expected to fully
perform under the terms of the agreement. In 2003, we entered into an additional interest rate swap agreement with a financial institution on
a notional amount of $25.0 million. The agreement expires in November 2006. The agreement
effectively fixes the interest rate on the second $25.0 million of floating rate debt outstanding
under
the Line of Credit at a rate of 3.22% per annum plus the interest rate spread on the Line of
Credit, thus reducing our exposure to interest rate fluctuations. The notional amount does not
represent amounts exchanged by the parties, and thus is not a measure of exposure to us. The
differences to be paid or received by us under the interest rate swap agreement are recognized as
an adjustment to interest expense. The agreement is with a major financial institution, which is
expected to fully perform under the terms of the agreement. 7. Income Taxes In years ending before January 1, 2001, we were not subject to federal and state income tax because
of our REIT status. Under the provisions of the Tax Relief Extension Act of 1999 that became
effective January 1, 2001, we began leasing hotels to our TRS Lessees which are subject to federal
and state income taxes. The use of TRS Lessees, however, is subject to certain restrictions, including the following:  
    no more than 20% of the REITs assets may consist of securities of its TRS Lessees;
    the tax deductibility of interest paid or accrued by a TRS Lessee to its affiliated REIT is
limited; and 54




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 7. Income Taxes, Continued  
    a 100% excise tax is imposed on non-arms length transactions between a TRS Lessee
and its affiliated REIT or the REITs tenants. In order to qualify for REIT status under the Internal Revenue Code, the Company must meet several
requirements. One of these requirements is that the Company must distribute at least 90% of its
taxable income in the form of a dividend to its shareholders. Generally, a REIT is not subject to
federal taxes on the income it distributes currently to its shareholders. If we fail to meet the
REIT qualification tests, we will be subject to federal (including any alternative minimum tax) and
state income tax and may not qualify as a REIT for subsequent taxable years. We intend to continue
to meet all of our REIT requirements. The components of our income tax benefit (expense) are as follows (in thousands): 2004
    
    
    2003
    
    
    2002Deferred:Federal
    
    $
    3,807
    
    
    $
    6,458
    
    
    $
    5,825State
    
    
    327
    
    
    
    554
    
    
    
    500Less amount included in
discontinued operations
    
    
    
    
    
    
    
    
    
    
    (562
    )Valuation allowance
    
    
    (4,134
    )
    
    
    (16,789
    )
    
    
    Deferred income tax benefit
(expense), net
    
    $
    
    
    
    $
    (9,777
    )
    
    $
    5,763
 The deferred income tax expense (benefit) and related deferred tax asset was historically
calculated using a statutory tax rate of 38% applied to the losses of our TRS Lessees. At year-end
2003, we determined that a valuation allowance was necessary for the entire deferred income tax
asset due to the continued softness in the lodging industry and the uncertainty associated with its
future recovery. Accordingly, we recorded an approximate $16.8 million valuation allowance ($16.2
million after minority interests consideration) associated with our deferred income tax asset.
Additionally, we discontinued recording a deferred income tax benefit for 2004. At December 31,
2004, we have a valuation allowance for a deferred income tax asset of approximately $20.9 million
that is comprised of the tax effect of net operating loss carryforwards that will expire in years
beginning after 2021. A reconciliation of our statutory income tax rate to our effective income tax rate is as follows: 2004
    
    
    2003
    
    
    2002Statutory U.S. federal income tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %State income tax rate (net of federal benefit)
    
    
    3
    
    
    
    3
    
    
    
    3Non-taxable REIT income
    
    
    (140
    )
    
    
    (217
    )
    
    
    (4,588
    )Valuation allowance
    
    
    102
    
    
    
    429
    
    
    
    Effective income tax rate
    
    
    
    %
    
    
    250
    %
    
    
    (4,550
    %)
 55




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 7. Income Taxes, Continued The following table reconciles GAAP net income and REIT taxable income for the years ended December
31, 2004, 2003 and 2002 (in thousands): 2004
    
    
    2003
    
    
    2002GAAP net income
    
    $
    4,083
    
    
    $
    (13,689
    )
    
    $
    6,464Plus GAAP net loss on taxable subsidiaries
included above
    
    
    10,599
    
    
    
    27,459
    
    
    
    10,020GAAP net income from REIT operations
    
    
    14,682
    
    
    
    13,770
    
    
    
    16,484Book/tax differences on depreciation and
amortization
    
    
    15,521
    
    
    
    10,535
    
    
    
    10,212Book/tax differences on gains/losses from
capital transactions and hotel impairments,
net
    
    
    (2,647
    )
    
    
    4,607
    
    
    
    208Write-off of notes receivable
    
    
    
    
    
    
    (1,898
    )
    
    
    (630
    )Other book/tax differences, net
    
    
    455
    
    
    
    983
    
    
    
    314Taxable income subject to distribution
requirement
    
    $
    28,011
    
    
    $
    27,997
    
    
    $
    26,588
 The tax effect of the temporary difference that gives rise to our deferred income tax asset at
December 31, 2004 and 2003 is as follows (in thousands): 2004
    
    
    2003Net
operating loss carryforwards  TRS
Lessees
    
    $
    20,923
    
    
    $
    16,789Less valuation allowance
    
    
    (20,923
    )
    
    
    (16,789
    )Deferred income tax asset, net
    
    $
    
    
    
    $
    
 8. Discontinued Operations In 2002, we adopted the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 established criteria beyond that previously specified in SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, to determine when a long-lived asset is classified as held for sale, and it provides a single
accounting model for the disposal of long-lived assets. Due to the adoption of SFAS No. 144, we
now report as discontinued operations any assets held for sale (as defined by SFAS No. 144), and
assets sold during the periods presented. We identify and assess discontinued operations at the
individual hotel operating level because we can identify cash flows at this level. All results of
these discontinued operations, less applicable income taxes, are included as a separate component
of income in our accompanying consolidated statements of operations. This change has resulted in
certain reclassifications of the previously reported statements of operations for 2003 and 2002. 56




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 8. Discontinued Operations, Continued We classify certain assets as held for sale based on management having the authority and intent of
entering into commitments for sale transactions expected to close in the next twelve months. When
we identify an asset held for sale, we estimate the net realizable value of such asset. If the net
realizable value of the asset is less than the carrying amount of the asset, we record an
impairment charge for the estimated loss. Depreciation is no longer recorded once we have
identified an asset as held for sale. Net realizable value is estimated as the amount at which the
asset could be bought or sold (fair value) less costs to sell. We have determined fair value by
using prevailing market conditions, appraisals or current estimated net sales proceeds from pending
offers, as appropriate. We only allocate to discontinued operations interest on debt that is to be
assumed by the buyer and interest on debt that is required to be repaid as a result of the disposal
transaction. During 2004, we recorded a charge for impairment of approximately $1.9 million based on the
estimated net realizable value of a hotel held for sale. This hotel was subsequently sold in
January 2005 for its approximate carrying value of $3.8 million. During 2004, we sold three hotels previously classified as held for sale for approximately $10.9
million, including approximately $9.1 million in cash (after selling costs of approximately
$980,000) and an increase to an existing note receivable, as discussed below, of $800,000. The
hotels sold were a 97-room Hampton Inn located in Sarasota, Florida, a 122-room Hampton Inn
located in Jacksonville, Florida, and a 141-room Comfort Inn located in Arlington, Texas. The
average age of these hotels was approximately 17 years. We utilized the net proceeds from these
dispositions to pay down existing long-term debt. In conjunction with these sales, we recorded a
loss of approximately $320,000 as part of discontinued operations in the accompanying consolidated
statement of operations. Additionally, in 2003 we sold a hotel and had initially deferred a gain
of approximately $420,000 in conjunction with accepting the note receivable discussed below. In
November 2004, this note was collected in full, less a $50,000 discount, and we recognized a net
gain of approximately $370,000 as part of discontinued operations in the accompanying consolidated
statement of operations. In 2003, we sold four hotels (Hampton Inn in Ft. Worth, Texas; Hampton Inn & Suites in Bartlett,
Tennessee; Holiday Inn Express in Wilkesboro, North Carolina; and AmeriSuites in Jacksonville,
Florida) for an aggregate price of $20.1 million, resulting in a gain on the sales of approximately
$1.6 million, net of impairment charges previously recorded. The sales prices were paid in cash,
except for the Jacksonville hotel, $4.0 million of which was in the form of a 15-month note bearing
interest at 7.75% per annum. The proceeds were utilized to pay down
our existing long-term debt. For all periods presented, the operations of all of our hotels classified as held for sale are
included in the accompanying consolidated statements of operations under the heading Income (loss)
from 57




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 8. Discontinued Operations, Continued discontinued operations. The components of income (loss) from discontinued operations for the
years ended December 31 are shown below (in thousands): 2004
    
    
    2003
    
    
    2002Revenue:Room revenue
    
    $
    2,310
    
    
    $
    8,697
    
    
    $
    12,866Other hotel revenue
    
    
    74
    
    
    
    319
    
    
    
    525Operating costs:Direct hotel expenses
    
    
    1,631
    
    
    
    6,093
    
    
    
    8,096Other hotel expenses
    
    
    71
    
    
    
    306
    
    
    
    651Depreciation
    
    
    362
    
    
    
    1,265
    
    
    
    2,710Property taxes, rental expense
and insurance
    
    
    152
    
    
    
    644
    
    
    
    969Amortization of franchise fees
    
    
    13
    
    
    
    20
    
    
    
    19Interest expense
    
    
    19
    
    
    
    706
    
    
    
    706Deferred income tax benefit
    
    
    
    
    
    
    
    
    
    
    (562
    )Income (loss) from operations of
discontinued operations
    
    
    136
    
    
    
    (18
    )
    
    
    802Gain (loss) on sale of hotel properties
    
    
    47
    
    
    
    1,248
    
    
    
    Loss on impairment of hotels held for sale
    
    
    (1,883
    )
    
    
    (4,605
    )
    
    
    Income (loss) from discontinued
operations
    
    $
    (1,700
    )
    
    $
    (3,375
    )
    
    $
    802
 9. Commitments and Contingencies All of our hotels are operated under franchise agreements and are licensed as Hampton Inn (49),
AmeriSuites (18), Residence Inn (17), Homewood Suites (9), Courtyard by Marriott (8), Holiday Inn
(4), Comfort Inn (2), Hampton Inn & Suites (1), SpringHill Suites (1) and Hilton Garden Inn (1).
The TRS Lessees hold the franchise licenses for our hotels. The franchise agreements generally
require the payment of fees based on a percentage of hotel room revenue. Under our franchise agreements, we are periodically required to make capital improvements in order
to maintain our brand standards. Additionally, under certain of our loan covenants, we are
generally obligated to fund 4% of total hotel revenues per quarter on a cumulative basis, to a
separate room renovation account for the ongoing replacement or refurbishment of furniture,
fixtures and equipment at our hotels. For 2004, the amounts expended exceeded, in the aggregate,
the amounts required under the loan covenants. If, for any reason, we do not meet the renovation
requirements at the individual hotel level, we could be required to fund such shortfalls into cash
escrow accounts. We currently have one lender that could require us to deposit approximately $1.0
million into an escrow account, but the lender has thus far decided not to trigger the escrow
funding based on our future capital improvement plans for the individual hotels. 58




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 9. Commitments and Contingencies, Continued Our management agreements range in remaining terms from one to four years. The management fees
consist of a base fee ranging from 1.5% to 3.0% of hotel revenues and an incentive fee consisting
of a percentage of gross operating profits in excess of budget, as defined by the management
agreements. Base management fees of approximately $4.3 million, $3.7 million and $4.0 million in
2004, 2003 and 2002, respectively, and incentive management fees of approximately $1.3 million,
$830,000 and $640,000 in 2004, 2003 and 2002, respectively, were earned by the management companies
and are included in our hotel operating expenses in the accompanying consolidated statements of
operations. As a part of the minimum net operating income guarantee provided by Hyatts
subsidiaries for our AmeriSuites hotels, we received approximately $4.8 million in 2004, $4.7
million in 2003 and $3.6 million in 2002, which is recorded as a reduction in base management fees. Our Partnership is obligated to pay the costs of real estate and personal property taxes and to
maintain underground utilities and structural elements of our hotels. In addition, the Partnership
is obligated to fund the cost of periodic repair and the replacement and refurbishment of
furniture, fixtures and equipment in our hotels. We also may be required by our franchisors to
fund certain capital improvements to our hotels, which we fund from borrowings under our Line of
Credit, operating cash flows, or the room renovation accounts. Capital improvements of
approximately $25.3 million, $13.3 million and $8.9 million in 2004, 2003, and 2002, respectively,
were made to our hotels. We maintain agreements with certain senior officers that provide for severance payments in the
event of a change in control of Equity Inns. At December 31, 2004, the maximum amount of cash
compensation that would be payable, under all agreements if a change of control occurred, would be
approximately $7.3 million. Additionally, vesting of certain restricted stock held by our senior
officers would accelerate under a change of control. We are also involved in various legal actions arising in the ordinary course of business. We do
not believe that any of the pending actions will have a material adverse effect on our business,
financial condition or results of operations. We have commitments under operating land leases through December 31, 2062, at ten hotel properties
for approximate payments as follows: 2005  $835,000; 2006  $755,000; 2007  $630,000; 2008 
$607,000; 2009  $540,000; thereafter  $8.8 million. We recognize rental expense on a
straight-line basis in rental agreements where the payments, either through abatement or escalation
clauses, are made on a non-straight-line basis. Rental expense under these leases was
approximately $945,000, $945,000 and $1.3 million in 2004, 2003 and 2002, respectively, and is
included in property taxes, rental expense and insurance in the accompanying consolidated
statements of operations. 10. Related Party Transactions Effective January 1, 2002, we formed a joint venture with one of our furniture and equipment
contractors for the purpose of engaging in the sale of furniture and equipment to independent
third parties. We have a 45% interest, and two of our executive officers, collectively, have a 5%
interest in the joint venture. We account for the joint venture under the equity method of
accounting. We provided certain management services to the joint venture for an annual fee of
$240,000 in 2004 and 2003, and $550,000 in 2002. We acquired furniture and equipment and related
services from 59




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 10. Related Party Transactions, Continued our joint venture partner for 2004, 2003, and 2002 of approximately $16.6 million, $10.0 million
and $5.8 million, respectively. We have commitments under a lease with an affiliate of Phillip H. McNeill, Sr., our Chairman of the
Board, for our corporate office space through December 2008, at monthly payments of approximately
$13,200. We periodically use an airplane that is majority owned by McNeill & Associates, Ltd. Phillip H.
McNeill, Sr., our Chairman of the Board, owns 100% of McNeill & Associates, Ltd. We paid McNeill &
Associates, Ltd. approximately $70,000, $42,000, and $33,000 for 2004, 2003 and 2002, respectively,
in conjunction with the use of this airplane. 11. Capital Stock In April 2004, we completed an offering of approximately 2.4 million shares of common stock for net
proceeds of approximately $21.4 million. The proceeds were used to fund our hotel acquisitions
discussed in Note 3. In October 2004, we completed an offering of approximately 5.7 million shares of common stock,
including 415,000 shares issued upon the exercise of the underwriters over-allotment option, for
net proceeds of approximately $53.2 million. The proceeds were used to fund our hotel acquisitions
discussed in Note 3. Our Board is authorized to provide for the issuance of up to 10.0 million shares of preferred stock
in one or more series, to establish the number of shares in each series and to fix the designation,
powers, preferences, and rights of each such series and the qualifications, limitations or
restriction thereof. In August 2003, we redeemed all of our outstanding 9.5% Series A Cumulative Preferred Stock at a
redemption price of $25, plus accrued dividends. The cost of the redemption of the 9.5% Series A
Cumulative Preferred Stock was approximately $68.8 million. In August 2003, we completed our offering of 8.75% Series B Cumulative Preferred Stock, selling
3,162,500 shares, including 162,500 shares issued upon exercise of the underwriters over-allotment
option. The offering price was $25.00 per share, resulting in gross proceeds to us of
approximately $79.1 million. We received approximately $76.4 million after the underwriters
discount and offering expenses were paid. In October 2003, we sold 287,500 shares of Series B
preferred stock to institutional investors. The offering price was $25.00 per share, resulting in
gross proceeds to us of approximately $7.2 million. The Series B preferred stock may be redeemed
for $25.00 per share at any time after August 11, 2008 at our election. In October 2003, we sold 2.0 million shares of common stock, $.01 par value to institutional
investors. The net offering price to us was $7.55 per share, resulting in gross proceeds of
approximately $15.1 million. 60




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 11. Capital Stock, Continued Our Partnership units are redeemable at the option of the holder for a like number of shares of
common stock, or at the option of the Company, the cash equivalent thereof. Our total Partnership
units outstanding at December 31, 2004 and 2003 were approximately 1.4 million and 1.1 million,
respectively. 12. Stock-Based Compensation Plans The Company is authorized, under our 1994 Stock Incentive Plan (the 1994 Plan) and the Directors
Compensation Plan (the Directors Plan), to issue a total of 4.1 million shares of common stock to
directors, officers and key employees in the form of stock options, restricted stock, or
performance stock. Under our 1994 Plan, the total shares available for grant is 4.0 million, of
which not more than 2.0 million shares may be grants of restricted stock. At December 31, 2004, we
have approximately 3.3 million shares available for grant. Under our Directors Plan, the total shares available
for grants of options is 100,000. Our directors may also elect to receive their meeting and
retainer fees in the form of common stock. Stock Options All options to officers, directors and key employees have eight to ten year contractual terms and
generally vest ratably over five years. A summary of our stock option grants at December 31, 2004,
2003 and 2002 and the changes during the years are presented below: 2004
    
    
    2003
    
    
    2002Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted# of Shares
    
    
    Average
    
    
    # of Shares
    
    
    Average
    
    
    # of Shares
    
    
    Averageof Underlying
    
    
    Exercise
    
    
    of Underlying
    
    
    Exercise
    
    
    of Underlying
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding at beginning
of year
    
    
    153,000
    
    
    $
    12.53
    
    
    
    153,000
    
    
    $
    12.53
    
    
    
    590,000
    
    
    $
    12.54Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    $
    7.77Expirations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (441,000
    )
    
    $
    12.50Exercised
    
    
    (4,000
    )
    
    $
    8.35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (113,000
    )
    
    $
    13.28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of year
    
    
    36,000
    
    
    $
    10.61
    
    
    
    153,000
    
    
    $
    12.53
    
    
    
    153,000
    
    
    $
    12.53Exercisable at end of year
    
    
    36,000
    
    
    $
    10.61
    
    
    
    152,000
    
    
    $
    12.55
    
    
    
    148,000
    
    
    $
    12.60
 Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average# Outstanding
    
    
    Remaining
    
    
    Exercise
    
    
    # Exercisable
    
    
    Remaining
    
    
    ExerciseRange of Exercise Prices
    
    at 12/31/04
    
    
    Life
    
    
    Price
    
    
    at 12/31/04
    
    
    Life
    
    
    Price$6.88  $13.50
    
    
    36,000
    
    
    
    4.00
    
    
    $
    10.61
    
    
    
    36,000
    
    
    
    4.00
    
    
    $
    10.61
 Prior to January 1, 2003, we accounted for these plans under the recognition and
measurement provisions of ABP No. 25, Accounting for Stock Issues to Employees, and related
interpretations. 61




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 12. Stock-Based Compensation Plans, Continued In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. We elected to adopt the
recognition provisions of SFAS No. 123 under the prospective method as defined in SFAS No. 148 on
January 1, 2003. Under the prospective method, we now will apply the fair value based method of
accounting for stock-based employee compensation prospectively to all stock option awards granted,
modified or settled beginning January 1, 2003. There were no material grants, modifications or
settlements of stock options made during 2004 or 2003. No stock-based employee compensation cost
is reflected in net income related to stock options as all options granted prior to December 31,
2002 had an exercise price equal to the market value of the underlying common stock on the date of
grant. For the purposes of disclosures required by SFAS No. 123, the fair value of each option granted
during 2002 is estimated on the date of grant using the Black-Scholes option-pricing model with the
following assumptions: (1) dividend of $0.53 per share; (2) expected volatility of 25.0%; (3) a
risk-free interest rate of 4.5%; and (4) expected life of six years. Assuming that compensation cost for our 2002 stock option grants had been determined consistent
with SFAS No. 123, our pro forma net income, and net income per common share for 2004, 2003 and
2002 would have decreased less than 1%. Restricted Stock A summary of our restricted stock grants at December 31, 2004, 2003 and 2002 and the changes during
the years are presented below: 2004
    
    
    2003
    
    
    2002Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageFair Market
    
    
    
    
    
    
    Fair Market
    
    
    
    
    
    
    Fair MarketValue at
    
    
    
    
    
    
    Value at
    
    
    
    
    
    
    Value at# of Shares
    
    
    Grant
    
    
    # of Shares
    
    
    Grant
    
    
    # of Shares
    
    
    GrantOutstanding at beginning of year
    
    
    414,520
    
    
    $
    10.43
    
    
    
    414,250
    
    
    $
    10.43
    
    
    
    418,120
    
    
    $
    10.40Granted:With 5 year pro rata vesting
    
    
    293,122
    
    
    $
    9.45
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    With 4 year pro rata vesting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    With 3 year pro rata vesting
    
    
    112,111
    
    
    $
    9.45
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total granted
    
    
    405,233
    
    
    $
    9.45
    
    
    
    
    
    
    
    
    
    
    
    Former employeePreviously vested
    
    
    (61,800
    )
    
    $
    10.16
    
    
    
    
    
    
    
    
    
    
    
    (1,440
    )
    
    $
    6.75Forfeited
    
    
    (5,800
    )
    
    $
    6.48
    
    
    
    
    
    
    
    
    
    
    
    (2,160
    )
    
    $
    6.75Outstanding at end of year
    
    
    752,153
    
    
    $
    9.95
    
    
    
    414,520
    
    
    $
    10.43
    
    
    
    414,520
    
    
    $
    10.43Vested at end of year
    
    
    334,672
    
    
    $
    10.69
    
    
    
    361,814
    
    
    $
    10.85
    
    
    
    302,489
    
    
    $
    11.11
 62




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 12. Stock-Based Compensation Plans, Continued In January 2004, we issued approximately 405,000 shares of restricted common stock to certain key
executives of our Company. These grants vest between three and five years after the date of
issuance, if certain performance measures have been achieved by the Company. The vesting of the
restricted stock is based on cumulative adjusted funds from operations and total shareholder return
targets as determined by our Board. The executives will be entitled to vote these restricted stock
shares and will also receive dividends on the common shares over the vesting period. Based on
managements estimated fair value of these restricted stock grants, we record compensation expense
ratably over the respective vesting periods. At December 31, 2004, the total estimated fair value
of these restricted stock grants was $2.9 million. For 2004, we recorded compensation expense of
approximately $680,000 related to these restricted stock grants. 13. Supplemental Disclosure of Non-cash Operating, Investing and Financing Activities Supplemental disclosure of non-cash investing and financing activities: For all stock issuances below, we value the stock award based on the shares of common stock times
the closing price of our common stock on the date earned. 2004 We issued to certain key officers 47,535 shares of common stock at $9.26 per share under the 1994
Stock Incentive Plan in lieu of cash as a performance bonus. We issued to several key officers 405,233 shares of restricted common stock at $9.45 per share
under the 1994 Stock Incentive Plan as part of managements long-term incentive compensation. We issued 36,113 shares of common stock upon redemption of Partnership units. We issued 13,652 shares of common stock at prices ranging from $8.73 to $11.13 per share to our
independent directors in lieu of cash as compensation. We completed the purchase of 20 hotels and assumed approximately $54.1 million in secured long-term
debt, including approximately $4.9 million of a mortgage note premium. We also issued
approximately $3.2 million in Partnership units in conjunction with these acquisitions. We sold one hotel in Jacksonville, Florida for $5.0 million, including the assumption of a non-cash
note receivable for $800,000. 2003 We issued to one key officer 19,081 shares of common stock at $5.88 per share under the 1994 Stock
Incentive Plan in lieu of cash as a performance bonus. We issued 51,521 shares of common stock upon redemption of Partnership units. 63




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 13. Supplemental Disclosure of Non-cash Operating, Investing and Financing Activities, Continued We issued 14,586 shares of common stock at prices ranging from $5.82 to $9.25 per share to our
independent directors in lieu of cash as compensation. We sold our AmeriSuites hotel in Jacksonville, Florida to HM-NM, Inc. for a purchase price of
approximately $6.0 million, $4.0 million of which was in the form of a 15-month note. The $4.0
million note and the related reduction of investment in hotel properties, net have been
appropriately excluded from the accompanying consolidated statement of cash flows. 2002 We issued to certain key officers 51,704 shares of common stock at $6.62 per share under the 1994
Stock Incentive Plan in lieu of cash as a performance bonus. We issued 2,566 shares of common stock upon redemption of Partnership units. We issued 11,907 shares of common stock at prices ranging from $5.30 to $8.19 per share to our
independent directors in lieu of cash as compensation. We accrued a $4.0 million addition to the purchase price of one of its hotel properties in
accordance with the provisions of the purchase agreement. These funds were paid to the seller in
2003. We transferred approximately $712,000 of deferred gain related to a transaction with Hudson Hotels
Properties Corporation to our provision for doubtful accounts for a certain note receivable from
Hudson. 14. Recent Accounting Pronouncements In December 2004, the FASB issued SFAS No. 123R, Share-based Payment. SFAS No. 123R amends SFAS
No. 123, Accounting for Stock-Based Compensation, to require that share-based payments (e.g.,
stock options and stock grants) be recorded at fair value upon issuance. Under the revised
pronouncement, companies will now be required to estimate the fair value of all share-based grants
and recognize this value as compensation expense ratably over the service (i.e., vesting) periods
of respective employees. The adoption of SFAS No. 123R is effective July 1, 2005. Given that the
Company already accounts for share-based payments at estimated fair value, we do not believe that
the adoption of SFAS No. 123R will have a material adverse impact on our consolidated financial
statements or financial condition. In November 2004, the EITF issued statement 03-13, Applying the Conditions in Paragraph 42 of FASB
Statement No. 144 in Determining Whether to Report Discontinued Operations. Under EITF 03-13,
more guidance was given surrounding how companies apply the provisions of SFAS No. 144, Accounting
for Impairment or Disposal of Long-Lived Assets, in determining whether to report discontinued
operations. EITF 03-13 requires a determination to be made using certain direct versus indirect
cash flows to be received from the ongoing entity and whether the selling entity will have
significant continuing involvement, as defined. The adoption of EITF 03-13 is effective March 64




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EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 14. Recent Accounting Pronouncements 31, 2005. We do not believe that the adoption of EITF 03-13 will have a material adverse impact on
our consolidated financial statements or financial condition. 15. Subsequent Events On January 26, 2005, we completed the sale of a hotel that was previously classified as held for
sale. We sold a 123-room Hampton Inn hotel located near Birmingham, Alabama, for approximately
$3.8 million in cash, which approximated its carrying value in the accompanying consolidated
balance sheet. This hotel was approximately 19 years old. On March 1, 2005, we completed our acquisition of a 126-room Hilton Garden Inn located in Fort
Myers, Florida. The total purchase price for the hotel was approximately $14.5 million, which we
funded through borrowings under our Line of Credit. On March 4, 2005, we completed an offering of approximately 2.7 million shares of common stock for
net proceeds of approximately $28.5 million. The net proceeds will be used for identified
acquisitions and to repay indebtedness under our Line of Credit. On March 9, 2005, we completed our acquisition of a 78-room Residence Inn located in Jacksonville,
Florida. The total purchase price for the hotel was approximately $6.1 million, which we funded
through borrowings under our Line of Credit. 65




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##### Table of Contents



EQUITY INNS, INC. 
    ValuationAllowance
    
    
    Allowance forfor Doubtful
    
    
    Deferred IncomeAccounts (1)
    
    
    Tax AssetBalance at December 31, 2001
    
    $
    3,429
    
    
    $
    Charged to costs and expenses
    
    
    25
    
    
    
    Charges to other accounts
    
    
    
    
    
    
    Deductions
    
    
    (650
    )
    
    
    Balance at December 31, 2002
    
    
    2,804
    
    
    
    Charged to costs and expenses
    
    
    50
    
    
    
    16,789Deductions
    
    
    (2,654
    )
    
    
    Balance at December 31, 2003
    
    
    200
    
    
    
    16,789Charged to costs and expenses
    
    
    25
    
    
    
    4,134Deductions
    
    
    
    
    
    
    Balance at December 31, 2004
    
    $
    225
    
    
    $
    20,923
   (1)
    
    Allowance for doubtful accounts includes combined allowances for both accounts receivable and
notes receivable. 66




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EQUITY INNS, INC. 
    ASSETS HELD FOR USE Cost CapitalizedSubsequent
    
    
    Gross Amount at Which
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Life UponInitial Cost
    
    
    to Acquisition
    
    
    Carried at Close of Period
    
    
    Accumulated
    
    
    Net Book
    
    
    

    
    
    
    
    
    
    
    WhichBuildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    Depreciation
    
    
    Value
    
    
    
    
    
    
    
    
    
    
    Depreciationand
    
    
    
    
    
    
    and
    
    
    
    
    
    
    and
    
    
    
    
    
    
    Buildings and
    
    
    Buildings and
    
    
    Date of
    
    
    Date of
    
    
    In StatementDescription of Property
    
    Footnote
    
    
    Land
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Improvements
    
    
    Improvements
    
    
    Construction
    
    
    Acquisition
    
    
    Is ComputedHampton Inn- Albany, New York
    
    
    4
    
    
    $
    953
    
    
    $
    10,699
    
    
    
    
    
    
    $
    3,084
    
    
    $
    953
    
    
    $
    13,783
    
    
    $
    14,736
    
    
    $
    4,587
    
    
    $
    10,149
    
    
    
    1986
    
    
    
    3/2/94
    
    
    5-40yrs.Hampton Inn-Cleveland, Ohio
    
    
    1
    
    
    
    820
    
    
    
    4,645
    
    
    
    
    
    
    
    1,408
    
    
    
    820
    
    
    
    6,053
    
    
    
    6,873
    
    
    
    2,316
    
    
    
    4,557
    
    
    
    1987
    
    
    
    3/2/94
    
    
    5-40yrs.Hampton Inn-College Station, Texas
    
    
    1
    
    
    
    656
    
    
    
    5,326
    
    
    
    
    
    
    
    1,654
    
    
    
    656
    
    
    
    6,980
    
    
    
    7,636
    
    
    
    2,459
    
    
    
    5,177
    
    
    
    1986
    
    
    
    3/2/94
    
    
    5-40yrs.Hampton Inn-Columbus, Georgia
    
    
    1
    
    
    
    603
    
    
    
    3,378
    
    
    
    
    
    
    
    1,592
    
    
    
    603
    
    
    
    4,970
    
    
    
    5,573
    
    
    
    2,044
    
    
    
    3,529
    
    
    
    1986
    
    
    
    3/2/94
    
    
    5-40yrs.Hampton Inn-Louisville, Kentucky
    
    
    1
    
    
    
    395
    
    
    
    3,325
    
    
    
    
    
    
    
    918
    
    
    
    395
    
    
    
    4,243
    
    
    
    4,638
    
    
    
    2,484
    
    
    
    2,154
    
    
    
    1986
    
    
    
    3/2/94
    
    
    5-40yrs.Hampton Inn-Ann Arbor, Michigan
    
    
    1
    
    
    
    565
    
    
    
    5,005
    
    
    
    
    
    
    
    1,241
    
    
    
    565
    
    
    
    6,246
    
    
    
    6,811
    
    
    
    2,291
    
    
    
    4,520
    
    
    
    1986
    
    
    
    4/21/94
    
    
    5-31yrs.Hampton Inn-Gurnee, Illinois
    
    
    1
    
    
    
    630
    
    
    
    3,674
    
    
    
    
    
    
    
    2,279
    
    
    
    630
    
    
    
    5,953
    
    
    
    6,583
    
    
    
    2,278
    
    
    
    4,305
    
    
    
    1988
    
    
    
    6/7/94
    
    
    5-31yrs.Residence Inn-Eagan, Minnesota
    
    
    3
    
    
    
    540
    
    
    
    8,782
    
    
    
    
    
    
    
    2,459
    
    
    
    540
    
    
    
    11,241
    
    
    
    11,781
    
    
    
    4,505
    
    
    
    7,276
    
    
    
    1988
    
    
    
    9/12/94
    
    
    5-31yrs.Residence Inn-Tinton Falls, New Jersey
    
    
    3
    
    

    
    
    
    
    
    8,130
    
    
    
    
    
    
    
    1,687
    
    
    
    
    
    
    
    9,817
    
    
    
    9,817
    
    
    
    3,868
    
    
    
    5,949
    
    
    
    1988
    
    
    
    9/12/94
    
    
    5-31yrs.Hampton Inn-Milford, Connecticut
    
    
    1
    
    
    
    759
    
    
    
    6,156
    
    
    
    
    
    
    
    2,557
    
    
    
    759
    
    
    
    8,713
    
    
    
    9,472
    
    
    
    2,795
    
    
    
    6,677
    
    
    
    1986
    
    
    
    9/20/94
    
    
    5-31yrs.Hampton Inn-Meriden, Connecticut
    
    
    1
    
    
    
    648
    
    
    
    3,661
    
    
    
    
    
    
    
    2,164
    
    
    
    648
    
    
    
    5,825
    
    
    
    6,473
    
    
    
    2,238
    
    
    
    4,235
    
    
    
    1988
    
    
    
    9/20/94
    
    
    5-31yrs.Hampton Inn-Beckley, West Virginia
    
    
    4
    
    
    
    1,876
    
    
    
    5,959
    
    
    
    
    
    
    
    1,182
    
    
    
    1,876
    
    
    
    7,141
    
    
    
    9,017
    
    
    
    2,436
    
    
    
    6,581
    
    
    
    1992
    
    
    
    11/28/94
    
    
    5-31yrs.Holiday Inn-Bluefield, West Virginia
    
    
    2
    
    
    
    1,661
    
    
    
    6,483
    
    
    
    
    
    
    
    3,217
    
    
    
    1,661
    
    
    
    9,700
    
    
    
    11,361
    
    
    
    3,561
    
    
    
    7,800
    
    
    
    1980
    
    
    
    11/282/94
    
    
    5-31yrs.Hampton Inn-Gastonia, North Carolina
    
    
    1
    
    
    
    1,651
    
    
    
    5,099
    
    
    
    
    
    
    
    1,084
    
    
    
    1,651
    
    
    
    6,183
    
    
    
    7,834
    
    
    
    2,421
    
    
    
    5,413
    
    
    
    1989
    
    
    
    11/28/94
    
    
    5-31yrs.Hampton Inn-Morgantown, West Virginia
    
    
    3
    
    
    
    1,573
    
    
    
    4,635
    
    
    $
    4
    
    
    
    1,097
    
    
    
    1,577
    
    
    
    5,732
    
    
    
    7,309
    
    
    
    2,179
    
    
    
    5,130
    
    
    
    1991
    
    
    
    11/28/94
    
    
    5-31yrs.Holiday Inn-Oak Hill, West Virginia
    
    
    2
    
    
    
    269
    
    
    
    3,812
    
    
    
    
    
    
    
    3,721
    
    
    
    269
    
    
    
    7,533
    
    
    
    7,802
    
    
    
    2,790
    
    
    
    5,012
    
    
    
    1983
    
    
    
    11/28/94
    
    
    5-31yrs.Hampton Inn-Naperville, Illinois
    
    
    1
    
    
    
    678
    
    
    
    6,851
    
    
    
    
    
    
    
    1,586
    
    
    
    678
    
    
    
    8,437
    
    
    
    9,115
    
    
    
    2,986
    
    
    
    6,129
    
    
    
    1987
    
    
    
    12/6/94
    
    
    5-31yrs.Hampton Inn-State College, Pennsylvania
    
    
    4
    
    
    
    718
    
    
    
    7,835
    
    
    
    
    
    
    
    1,077
    
    
    
    718
    
    
    
    8,912
    
    
    
    9,630
    
    
    
    3,216
    
    
    
    6,414
    
    
    
    1987
    
    
    
    1/3/95
    
    
    5-31yrs.Comfort Inn-Rutland, Vermont
    
    
    4
    
    
    
    359
    
    
    
    4,037
    
    
    
    
    
    
    
    1,140
    
    
    
    359
    
    
    
    5,177
    
    
    
    5,536
    
    
    
    1,965
    
    
    
    3,571
    
    
    
    1985
    
    
    
    6/15/95
    
    
    5-31yrs.Hampton Inn-Scranton, Pennsylvania
    
    
    4
    
    
    
    403
    
    
    
    7,737
    
    
    
    
    
    
    
    766
    
    
    
    403
    
    
    
    8,503
    
    
    
    8,906
    
    
    
    3,212
    
    
    
    5,694
    
    
    
    1994
    
    
    
    9/20/95
    
    
    5-31yrs.Residence Inn-Omaha, Nebraska
    
    
    1
    
    
    
    953
    
    
    
    2,812
    
    
    
    6
    
    
    
    2,557
    
    
    
    959
    
    
    
    5,369
    
    
    
    6,328
    
    
    
    1,891
    
    
    
    4,437
    
    
    
    1985
    
    
    
    12/15/95
    
    
    5-31yrs.Hampton Inn-Fayetteville, North Carolina
    
    
    1
    
    
    
    403
    
    
    
    5,191
    
    
    
    17
    
    
    
    1,972
    
    
    
    420
    
    
    
    7,163
    
    
    
    7,583
    
    
    
    2,670
    
    
    
    4,913
    
    
    
    1986
    
    
    
    9/22/95
    
    
    5-31yrs.Hampton Inn-Indianapolis, Indiana
    
    
    1
    
    
    
    1,207
    
    
    
    6,639
    
    
    
    
    
    
    
    1,875
    
    
    
    1,207
    
    
    
    8,514
    
    
    
    9,721
    
    
    
    2,908
    
    
    
    6,813
    
    
    
    1987
    
    
    
    9/22/95
    
    
    5-31yrs.Holiday Inn-Mt. Pleasant, South Carolina
    
    
    1
    
    
    
    888
    
    
    
    8,121
    
    
    
    
    
    
    
    4,376
    
    
    
    888
    
    
    
    12,497
    
    
    
    13,385
    
    
    
    4,176
    
    
    
    9,209
    
    
    
    1988
    
    
    
    9/22/95
    
    
    5-31yrs.Comfort Inn-Jacksonville Beach, Florida
    
    
    1
    
    
    
    849
    
    
    
    7,678
    
    
    
    2
    
    
    
    3,388
    
    
    
    851
    
    
    
    11,066
    
    
    
    11,917
    
    
    
    3,858
    
    
    
    8,059
    
    
    
    1990
    
    
    
    11/21/95
    
    
    5-31yrs.Hampton Inn-Austin, Texas
    
    
    1
    
    
    
    500
    
    
    
    7,034
    
    
    
    6
    
    
    
    2,058
    
    
    
    506
    
    
    
    9,092
    
    
    
    9,598
    
    
    
    3,106
    
    
    
    6,492
    
    
    
    1987
    
    
    
    12/27/95
    
    
    5-31yrs.Hampton Inn-Knoxville, Tennessee
    
    
    1
    
    
    
    617
    
    
    
    4,103
    
    
    
    
    
    
    
    1,940
    
    
    
    617
    
    
    
    6,043
    
    
    
    6,660
    
    
    
    2,004
    
    
    
    4,656
    
    
    
    1988
    
    
    
    2/21/96
    
    
    5-31yrs.Hampton Inn-Glen Burnie, Maryland
    
    
    4
    
    
    
    
    
    
    
    5,397
    
    
    
    
    
    
    
    1,541
    
    
    
    
    
    
    
    6,938
    
    
    
    6,938
    
    
    
    2,376
    
    
    
    4,562
    
    
    
    1989
    
    
    
    3/14/96
    
    
    5-31yrs.Hampton Inn-Detroit, Michigan
    
    
    3
    
    
    
    1,207
    
    
    
    6,311
    
    
    
    
    
    
    
    1,404
    
    
    
    1,207
    
    
    
    7,715
    
    
    
    8,922
    
    
    
    2,720
    
    
    
    6,202
    
    
    
    1989
    
    
    
    5/31/96
    
    
    5-31yrs.Homewood Suites-Hartford, Connecticut
    
    
    4
    
    
    
    2,866
    
    
    
    8,575
    
    
    
    
    
    
    
    1,822
    
    
    
    2,866
    
    
    
    10,397
    
    
    
    13,263
    
    
    
    3,468
    
    
    
    9,795
    
    
    
    1990
    
    
    
    5/31/96
    
    
    5-31yrs.Holiday Inn-Winston-Salem, North Carolina
    
    
    1
    
    
    
    1,350
    
    
    
    3,763
    
    
    
    
    
    
    
    4,953
    
    
    
    1,350
    
    
    
    8,716
    
    
    
    10,066
    
    
    
    3,176
    
    
    
    6,890
    
    
    
    1969
    
    
    
    6/28/96
    
    
    5-31yrs.Hampton Inn-Scottsdale, Arizona
    
    
    2
    
    
    
    2,227
    
    
    
    7,289
    
    
    
    
    
    
    
    770
    
    
    
    2,227
    
    
    
    8,059
    
    
    
    10,286
    
    
    
    2,710
    
    
    
    7,576
    
    
    
    1996
    
    
    
    7/16/96
    
    
    5-31yrs.Hampton Inn-Chattanooga, Tennessee
    
    
    4
    
    
    
    1,475
    
    
    
    7,576
    
    
    
    
    
    
    
    2,591
    
    
    
    1,475
    
    
    
    10,167
    
    
    
    11,642
    
    
    
    2,889
    
    
    
    8,753
    
    
    
    1988
    
    
    
    7/22/96
    
    
    5-31yrs.Homewood Suites-San Antonio, Texas
    
    
    3
    
    
    
    907
    
    
    
    7,690
    
    
    
    
    
    
    
    507
    
    
    
    907
    
    
    
    8,197
    
    
    
    9,104
    
    
    
    2,751
    
    
    
    6,353
    
    
    
    1996
    
    
    
    9/27/96
    
    
    5-31yrs.Residence Inn-Burlington, Vermont
    
    
    2
    
    
    
    678
    
    
    
    7,019
    
    
    
    
    
    
    
    3,297
    
    
    
    678
    
    
    
    10,316
    
    
    
    10,994
    
    
    
    3,217
    
    
    
    7,777
    
    
    
    1988
    
    
    
    10/1/96
    
    
    5-31yrs.Homewood Suites-Phoenix, Arizona
    
    
    3
    
    
    
    
    
    
    
    7,988
    
    
    
    
    
    
    
    2,246
    
    
    
    
    
    
    
    10,234
    
    
    
    10,234
    
    
    
    3,390
    
    
    
    6,844
    
    
    
    1996
    
    
    
    11/15/96
    
    
    5-31yrs.Residence Inn-Colorado Springs, Colorado
    
    
    2
    
    
    
    1,350
    
    
    
    8,378
    
    
    
    
    
    
    
    1,986
    
    
    
    1,350
    
    
    
    10,364
    
    
    
    11,714
    
    
    
    3,185
    
    
    
    8,529
    
    
    
    1984
    
    
    
    1/10/97
    
    
    5-31yrs.Residence Inn-Oklahoma City, Oklahoma
    
    
    4
    
    
    
    1,450
    
    
    
    9,771
    
    
    
    
    
    
    
    2,818
    
    
    
    1,450
    
    
    
    12,589
    
    
    
    14,039
    
    
    
    3,798
    
    
    
    10,241
    
    
    
    1982
    
    
    
    1/10/97
    
    
    5-31yrs.Residence Inn-Tucson, Arizona
    
    
    3
    
    
    
    832
    
    
    
    7,783
    
    
    
    
    
    
    
    2,175
    
    
    
    832
    
    
    
    9,958
    
    
    
    10,790
    
    
    
    3,479
    
    
    
    7,311
    
    
    
    1985
    
    
    
    1/10/97
    
    
    5-31yrs.Hampton Inn-Norfolk, Virginia
    
    
    4
    
    
    
    
    
    
    
    5,612
    
    
    
    
    
    
    
    1,726
    
    
    
    
    
    
    
    7,338
    
    
    
    7,338
    
    
    
    2,300
    
    
    
    5,038
    
    
    
    1990
    
    
    
    3/5/97
    
    
    5-31yrs.Hampton Inn-Pickwick, Tennessee
    
    
    2
    
    
    
    370
    
    
    
    1,747
    
    
    
    
    
    
    
    587
    
    
    
    370
    
    
    
    2,334
    
    
    
    2,704
    
    
    
    756
    
    
    
    1,948
    
    
    
    1994
    
    
    
    3/11/97
    
    
    5-31yrs.Hampton Inn-Overland Park, Kansas
    
    
    3
    
    
    
    906
    
    
    
    6,261
    
    
    
    
    
    
    
    1,783
    
    
    
    906
    
    
    
    8,044
    
    
    
    8,950
    
    
    
    2,575
    
    
    
    6,375
    
    
    
    1991
    
    
    
    4/23/97
    
    
    5-31yrs.Hampton Inn-Addison, Texas
    
    
    2
    
    
    
    2,981
    
    
    
    7,146
    
    
    
    
    
    
    
    1,734
    
    
    
    2,981
    
    
    
    8,880
    
    
    
    11,861
    
    
    
    2,844
    
    
    
    9,017
    
    
    
    1985
    
    
    
    6/2497
    
    
    5-31yrs.Hampton Inn-Atlanta-Northlake, Georgia
    
    
    2
    
    
    
    
    
    
    
    7,505
    
    
    
    
    
    
    
    1,365
    
    
    
    
    
    
    
    8,870
    
    
    
    8,870
    
    
    
    2,718
    
    
    
    6,152
    
    
    
    1988
    
    
    
    6/24/97
    
    
    5-31yrs.Hampton Inn-Birmingham (Mountain Brook),
Alabama
    
    
    4
    
    
    
    
    
    
    
    8,675
    
    
    
    
    
    
    
    1,490
    
    
    
    
    
    
    
    10,165
    
    
    
    10,165
    
    
    
    2,766
    
    
    
    7,399
    
    
    
    1987
    
    
    
    8/1/97
    
    
    5-31yrs.Hampton Inn-Chapel Hill, North Carolina
    
    
    2
    
    
    
    1,834
    
    
    
    7,229
    
    
    
    
    
    
    
    1,229
    
    
    
    1,834
    
    
    
    8,458
    
    
    
    10,292
    
    
    
    2,404
    
    
    
    7,888
    
    
    
    1986
    
    
    
    6/2497
    
    
    5-31yrs.Hampton Inn-Charleston, South Carolina
    
    
    4
    
    
    
    712
    
    
    
    5,735
    
    
    
    
    
    
    
    1,233
    
    
    
    712
    
    
    
    6,968
    
    
    
    7,680
    
    
    
    2,177
    
    
    
    5,503
    
    
    
    1985
    
    
    
    6/2497
    
    
    5-31yrs.Hampton Inn-Colorado Springs, Colorado
    
    
    2
    
    
    
    803
    
    
    
    4,336
    
    
    
    
    
    
    
    1,300
    
    
    
    803
    
    
    
    5,636
    
    
    
    6,439
    
    
    
    1,942
    
    
    
    4,497
    
    
    
    1985
    
    
    
    6/24/97
    
    
    5-31yrs.Hampton Inn-Columbia, South Carolina
    
    
    2
    
    
    
    650
    
    
    
    7,200
    
    
    
    
    
    
    
    1,114
    
    
    
    650
    
    
    
    8,314
    
    
    
    8,964
    
    
    
    2,421
    
    
    
    6,543
    
    
    
    1985
    
    
    
    6/24/97
    
    
    5-31yrs.Hampton Inn-Aurora, Colorado
    
    
    4
    
    
    
    784
    
    
    
    3,703
    
    
    
    
    
    
    
    1,299
    
    
    
    784
    
    
    
    5,002
    
    
    
    5,786
    
    
    
    1,749
    
    
    
    4,037
    
    
    
    1985
    
    
    
    6/24/97
    
    
    5-31yrs.
 67




---



##### Table of Contents



EQUITY INNS, INC.
SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
AS OF DECEMBER 31, 2004
(in thousands) Cost CapitalizedSubsequent
    
    
    Gross Amount at Which
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Life UponInitial Cost
    
    
    to Acquisition
    
    
    Carried at Close of Period
    
    
    Accumulated
    
    
    Net Book
    
    
    
    
    
    
    
    
    
    
    WhichBuildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    Depreciation
    
    
    Value
    
    
    
    
    
    
    
    
    
    
    Depreciationand
    
    
    
    
    
    
    and
    
    
    
    
    
    
    and
    
    
    
    
    
    
    Buildings and
    
    
    Buildings and
    
    
    Date of
    
    
    Date of
    
    
    In StatementDescription of Property
    
    Footnote
    
    
    Land
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Land
    
    

    Improvements
    
    
    Total
    
    
    Improvements
    
    
    Improvements
    
    
    Construction
    
    
    Acquisition
    
    
    Is ComputedHampton Inn-Detroit (Madison Heights),
Michigan
    
    
    4
    
    
    
    881
    
    
    
    4,755
    
    
    
    
    
    
    
    1,141
    
    
    
    881
    
    
    
    5,896
    
    
    
    6,777
    
    
    
    1,892
    
    
    
    4,885
    
    
    
    1987
    
    
    
    6/24/97
    
    
    5-31yrs.Hampton Inn-Dublin, Ohio
    
    
    4
    
    
    
    944
    
    
    
    4,095
    
    
    
    
    
    
    
    1,360
    
    
    
    944
    
    
    
    5,455
    
    
    
    6,399
    
    
    
    1,917
    
    
    
    4,482
    
    
    
    1988
    
    
    
    6/24/97
    
    
    5-31yrs.Hampton Inn-Kansas City, Kansas
    
    
    3
    
    
    
    585
    
    
    
    4,719
    
    
    
    
    
    
    
    1,474
    
    
    
    585
    
    
    
    6,193
    
    
    
    6,778
    
    
    
    1,684
    
    
    
    5,094
    
    
    
    1987
    
    
    
    6/24/97
    
    
    5-31yrs.Hampton Inn-Little Rock, Arkansas
    
    
    2
    
    
    
    898
    
    
    
    6,078
    
    
    
    
    
    
    
    1,431
    
    
    
    898
    
    
    
    7,509
    
    
    
    8,407
    
    
    
    2,373
    
    
    
    6,034
    
    
    
    1985
    
    
    
    6/24/97
    
    
    5-31yrs.Hampton Inn-Memphis (Poplar), Tennessee
    
    
    3
    
    
    
    1,955
    
    
    
    7,286
    
    
    
    
    
    
    
    1,469
    
    
    
    1,955
    
    
    
    8,755
    
    
    
    10,710
    
    
    
    2,746
    
    
    
    7,964
    
    
    
    1985
    
    
    
    6/24/97
    
    
    5-31yrs.Hampton Inn-Memphis (Sycamore), Tennessee
    
    
    2
    
    
    
    
    
    
    
    2,990
    
    
    
    
    
    
    
    2,002
    
    
    
    
    
    
    
    4,992
    
    
    
    4,992
    
    
    
    1,506
    
    
    
    3,486
    
    
    
    1984
    
    
    
    6/24/97
    
    
    5-31yrs.Hampton Inn-Nashville (Briley), Tennessee
    
    
    6
    
    
    
    
    
    
    
    7,119
    
    
    
    
    
    
    
    2,109
    
    
    
    
    
    
    
    9,228
    
    
    
    9,228
    
    
    
    2,604
    
    
    
    6,624

    
    
    
    1987
    
    
    
    6/24/97
    
    
    5-31yrs.Hampton Inn-Richardson, Texas
    
    
    3
    
    
    
    1,750
    
    
    
    5,861
    
    
    
    
    
    
    
    1,482
    
    
    
    1,750
    
    
    
    7,343
    
    
    
    9,093
    
    
    
    2,333
    
    
    
    6,760
    
    
    
    1987
    
    
    
    6/24/97
    
    
    5-31yrs.Hampton Inn-St. Louis, Missouri
    
    
    4
    
    
    
    665
    
    
    
    4,161
    
    
    
    
    
    
    
    1,741
    
    
    
    665
    
    
    
    5,902
    
    
    
    6,567
    
    
    
    2,010
    
    
    
    4,557
    
    
    
    1987
    
    
    
    6/24/97
    
    
    5-31yrs.Homewood Suites-Germantown, Tennessee
    
    
    5
    
    
    
    1,011
    
    
    
    6,771
    
    
    
    
    
    
    
    753
    
    
    
    1,011
    
    
    
    7,524
    
    
    
    8,535
    
    
    
    2,415
    
    
    
    6,120
    
    
    
    1986
    
    
    
    6/26/97
    
    
    5-31yrs.Homewood Suites-Augusta, Georgia
    
    
    2
    
    
    
    330
    
    
    
    4,680
    
    
    
    
    
    
    
    497
    
    
    
    330
    
    
    
    5,177
    
    
    
    5,507
    
    
    
    1,678
    
    
    
    3,829
    
    
    
    1997
    
    
    
    7/10/97
    
    
    5-31yrs.Residence Inn-Princeton, New Jersey
    
    
    3
    
    
    
    1,920
    
    
    
    17,375
    
    
    
    
    
    
    
    2,436
    
    
    
    1,920
    
    
    
    19,811
    
    
    
    21,731
    
    
    
    6,027
    
    
    
    15,704
    
    
    
    1988
    
    
    
    9/18/97
    
    
    5-31yrs.AmeriSuites-Cincinnati (Blue Ash), Ohio
    
    
    2
    
    
    
    900
    
    
    
    6,707
    
    
    
    
    
    
    
    750
    
    
    
    900
    
    
    
    7,457
    
    
    
    8,357
    
    
    
    2,209
    
    
    
    6,148
    
    
    
    1990
    
    
    
    12/10/97
    
    
    5-31yrs.AmeriSuites-Cincinnati (Forest Park), Ohio
    
    
    5
    
    
    
    800
    
    
    
    6,185
    
    
    
    
    
    
    
    790
    
    
    
    800
    
    
    
    6,975
    
    
    
    7,775
    
    
    
    2,272
    
    
    
    5,503
    
    
    
    1992
    
    
    
    12/10/97
    
    
    5-31yrs.AmeriSuites-Columbus, Ohio
    
    
    3
    
    
    
    903
    
    
    
    7,630
    
    
    
    
    
    
    
    882
    
    
    
    903
    
    
    
    8,512
    
    
    
    9,415
    
    
    
    2,669
    
    
    
    6,746
    
    
    
    1994
    
    
    
    12/10/97
    
    
    5-31yrs.AmeriSuites-Flagstaff, Arizona
    
    
    5
    
    
    
    600
    
    
    
    4,569
    
    
    
    
    
    
    
    720
    
    
    
    600
    
    
    
    5,289
    
    
    
    5,889
    
    
    
    1,830
    
    
    
    4,059
    
    
    
    1993
    
    
    
    12/10/97
    
    
    5-31yrs.AmeriSuites-Indianapolis, Indiana
    
    
    3
    
    
    
    700
    
    
    
    5,575
    
    
    
    468
    
    
    
    1,644
    
    
    
    1,168
    
    
    
    7,219
    
    
    
    8,387
    
    
    
    2,208
    
    
    
    6,179
    
    
    
    1992
    
    
    
    12/10/97
    
    
    5-31yrs.AmeriSuites-Miami, Florida
    
    
    2
    
    
    
    1,500
    
    
    
    10,287
    
    
    
    
    
    
    
    1,070
    
    
    
    1,500
    
    
    
    11,357
    
    
    
    12,857
    
    
    
    3,279
    
    
    
    9,578
    
    
    
    1996
    
    
    
    12/10/97
    
    
    5-31yrs.AmeriSuites-Overland Park, Kansas
    
    
    3
    
    
    
    1,300
    
    
    
    7,930
    
    
    
    
    
    
    
    966
    
    
    
    1,300
    
    
    
    8,896
    
    
    
    10,196
    
    
    
    2,901
    
    
    
    7,295
    
    
    
    1994
    
    
    
    12/10/97
    
    
    5-31yrs.AmeriSuites-Richmond, Virginia
    
    
    3
    
    
    
    1,772
    
    
    
    10,561
    
    
    
    
    
    
    
    976
    
    
    
    1,772
    
    
    
    11,537
    
    
    
    13,309
    
    
    
    3,415
    
    
    
    9,894
    
    
    
    1992
    
    
    
    12/3/97
    
    
    5-31yrs.AmeriSuites-Tampa, Florida
    
    
    5
    
    
    
    1,400
    
    
    
    10,309
    
    
    
    
    
    
    
    631
    
    
    
    1,400
    
    
    
    10,940
    
    
    
    12,340
    
    
    
    2,930
    
    
    
    9,410
    
    
    
    1994
    
    
    
    12/3/97
    
    
    5-31yrs.Hampton Inn-San Antonio, Texas
    
    
    6
    
    
    
    3,749
    
    
    
    8,856
    
    
    
    
    
    
    
    1,054
    
    
    
    3,749
    
    
    
    9,910
    
    
    
    13,659
    
    
    
    2,895
    
    
    
    10,764
    
    
    
    1995
    
    
    
    4/14/98
    
    
    5-31yrs.Homewood Suites-Sharonville, Ohio
    
    
    3
    
    
    
    863
    
    
    
    6,940
    
    
    
    
    
    
    
    1,856
    
    
    
    863
    
    
    
    8,796
    
    
    
    9,659
    
    
    
    2,857
    
    
    
    6,802
    
    
    
    1990
    
    
    
    4/15/98
    
    
    5-31yrs.Residence Inn-Boise, Idaho
    
    
    6
    
    
    
    950
    
    
    
    6,108
    
    
    
    
    
    
    
    2,893
    
    
    
    950
    
    
    
    9,001
    
    
    
    9,951
    
    
    
    2,169
    
    
    
    7,782
    
    
    
    1986
    
    
    
    4/28/98
    
    
    5-31yrs.Residence Inn-Portland, Oregon
    
    
    3
    
    
    
    2,400
    
    
    
    21,235
    
    
    
    
    
    
    
    3,673
    
    
    
    2,400
    
    
    
    24,908
    
    
    
    27,308
    
    
    
    5,622
    
    
    
    21,686
    
    
    

    1990
    
    
    
    4/28/98
    
    
    5-31yrs.Undeveloped Real Estate-Bartlett, Tennessee
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    5/1/98Residence Inn-Somers Point, New Jersey
    
    
    5
    
    
    
    1,094
    
    
    
    7,101
    
    
    
    
    
    
    
    1,610
    
    
    
    1,094
    
    
    
    8,711
    
    
    
    9,805
    
    
    
    2,807
    
    
    
    6,998
    
    
    
    1998
    
    
    
    5/18/98
    
    
    5-31yrs.AmeriSuites-Albuquerque, New Mexico
    
    
    5
    
    
    
    1,776
    
    
    
    7,789
    
    
    
    
    
    
    
    399
    
    
    
    1,776
    
    
    
    8,188
    
    
    
    9,964
    
    
    
    2,390
    
    
    
    7,574
    
    
    
    1997
    
    
    
    6/26/98
    
    
    5-31yrs.AmeriSuites-Baltimore, Maryland
    
    
    5
    
    
    
    659
    
    
    
    9,412
    
    
    
    
    
    
    
    438
    
    
    
    659
    
    
    
    9,850
    
    
    
    10,509
    
    
    
    2,449
    
    
    
    8,060
    
    
    
    1996
    
    
    
    6/26/98
    
    
    5-31yrs.AmeriSuites-Baton Rouge, Louisiana
    
    
    2
    
    
    
    649
    
    
    
    10,242
    
    
    
    
    
    
    
    183
    
    
    
    649
    
    
    
    10,425
    
    
    
    11,074
    
    
    
    3,030
    
    
    
    8,044
    
    
    
    1997
    
    
    
    6/26/98
    
    
    5-31yrs.AmeriSuites-Birmingham, Alabama
    
    
    5
    
    
    
    1,066
    
    
    
    6,629
    
    
    
    
    
    
    
    186
    
    
    
    1,066
    
    
    
    6,815
    
    
    
    7,881
    
    
    
    1,981
    
    
    
    5,900
    
    
    
    1997
    
    
    
    6/26/98
    
    
    5-31yrs,AmeriSuites-Las Vegas, Nevada
    
    
    2
    
    
    
    4,126
    
    
    
    15,021
    
    
    
    
    
    
    
    548
    
    
    
    4,126
    
    
    
    15,569
    
    
    
    19,695
    
    
    
    4,701
    
    
    
    14,994
    
    
    
    1998
    
    
    
    6/26/98
    
    
    5-31yrs.AmeriSuites-Memphis (Wolfchase), Tennessee
    
    
    3
    
    
    
    1,108
    
    
    
    7,333
    
    
    
    
    
    
    
    195
    
    
    
    1,108
    
    
    
    7,528
    
    
    
    8,636
    
    
    
    2,230
    
    
    
    6,406
    
    
    
    1996
    
    
    
    6/26/98
    
    
    5-31yrs.AmeriSuites-Miami (Kendall), Florida
    
    
    2
    
    
    
    2,426
    
    
    
    8,196
    
    
    
    
    
    
    
    329
    
    
    
    2,426
    
    
    
    8,525
    
    
    
    10,951
    
    
    
    2,240
    
    
    
    8,711
    
    
    
    1996
    
    
    
    6/26/98
    
    
    5-31yrs.AmeriSuites-Minneapolis, Minnesota
    
    
    2
    
    
    
    1,312
    
    
    
    8,294
    
    
    
    
    
    
    
    328
    
    
    
    1,312
    
    
    
    8,622
    
    
    
    9,934
    
    
    
    2,449
    
    
    
    7,485
    
    
    
    1997
    
    
    
    6/26/98
    
    
    5-31yrs.AmeriSuites-Nashville, Tennessee
    
    
    2
    
    
    
    1,622
    
    
    
    9,650
    
    
    
    
    
    
    
    194
    
    
    
    1,622
    
    
    
    9,844
    
    
    
    11,466
    
    
    
    2,918
    
    
    
    8,548
    
    
    
    1997
    
    
    
    6/26/98
    
    
    5-31yrs.Homewood Suites-Seattle, Washington
    
    
    2
    
    
    
    2,640
    
    
    
    19,529
    
    
    
    
    
    
    
    956
    
    
    
    2,640
    
    
    
    20,485
    
    
    
    23,125
    
    
    
    5,577
    
    
    
    17,548
    
    
    
    1998
    
    
    
    8/7/98
    
    
    5-31yrs.Homewood Suites-Chicago, Illinois
    
    
    2
    
    
    
    
    
    
    
    29,052
    
    
    
    
    
    
    
    8,565
    
    
    
    
    
    
    
    37,617
    
    
    
    37,617
    
    
    
    9,314
    
    
    
    28,303
    
    
    
    1999
    
    
    
    5/18/99
    
    
    5-31yrs.Homewood Suites-Orlando, Florida
    
    
    2
    
    
    
    4,250
    
    
    
    17,015
    
    
    
    
    
    
    
    3,929
    
    
    
    4,250
    
    
    
    20,944
    
    
    
    25,194
    
    
    
    5,628
    
    
    
    19,566
    
    
    
    1999
    
    
    
    6/25/00
    
    
    5-31yrs.Courtyard by Marriott-Houston, Texas
    
    
    6
    
    
    
    2,175
    
    
    
    14,128
    
    
    
    
    
    
    
    48
    
    
    
    2,175
    
    
    
    14,176
    
    
    
    16,351
    
    
    
    1,695
    
    
    
    14,656
    
    
    
    2002
    
    
    
    12/6/02
    
    
    5-31yrs.Courtyard by Marriott-Tallahassee, Florida
    
    
    6
    
    
    
    1,464
    
    
    
    8,409
    
    
    
    
    
    
    
    
    
    
    
    1,464
    
    
    
    8,409
    
    
    
    9,873
    
    
    
    372
    
    
    
    9,501
    
    
    
    2000
    
    
    
    1/26/04
    
    
    5-31yrs.Residence Inn-Tampa, Florida
    
    
    6
    
    
    
    770
    
    
    
    10,240
    
    
    
    
    
    
    
    
    
    
    
    770
    
    
    
    10,240
    
    
    
    11,010
    
    
    
    403
    
    
    
    10,607
    
    
    
    1998
    
    
    
    3/25/04
    
    
    5-31yrs.Courtyard by Marriott-Gainesville, Florida
    
    
    6
    
    
    
    631
    
    
    
    6,777
    
    
    
    
    
    
    
    
    
    
    
    631
    
    
    
    6,777
    
    
    
    7,408
    
    
    
    228
    
    
    
    7,180
    
    
    
    1996
    
    
    
    4/29/04
    
    
    5-31yrs.Residence Inn-Tallahassee, Florida
    
    
    6
    
    
    
    938
    
    
    
    7,335
    
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    7,335
    
    
    
    8,273
    
    
    
    270
    
    
    
    8,003
    
    
    
    1996
    
    
    
    4/29/04
    
    
    5-31yrs.Residence Inn-Knoxville, Tennessee
    
    
    6
    
    
    
    654
    
    
    
    8,664
    
    
    
    
    
    
    
    
    
    
    
    654
    
    
    
    8,664
    
    
    
    9,318
    
    
    
    298
    
    
    
    9,020
    
    
    
    1997
    
    
    
    5/10/04
    
    
    5-31yrs.Courtyard by Marriott-Asheville, North Carolina
    
    
    6
    
    
    
    760
    
    
    
    6,229
    
    
    
    
    
    
    
    
    
    
    
    760
    
    
    
    6,229
    
    
    
    6,989
    
    
    
    187
    
    
    
    6,802
    
    
    
    1996
    
    
    
    5/28/04
    
    
    5-31yrs.Residence Inn-Chattanooga, Tennessee
    
    
    6
    
    
    
    768
    
    
    
    7,327
    
    
    
    
    
    
    
    
    
    
    
    768
    
    
    
    7,327
    
    
    
    8,095
    
    
    
    234
    
    
    
    7,861
    
    
    
    1996
    
    
    
    5/28/04
    
    
    5-31yrs.Courtyard by Marriott-Athens, Georgia
    
    
    6
    
    
    
    921
    
    
    
    5,641
    
    
    
    
    
    
    
    
    
    
    
    921
    
    
    
    5,641
    
    
    
    6,562
    
    
    
    165
    
    
    
    6,397
    
    
    
    1989
    
    
    
    6/16/04
    
    
    5-31yrs.Residence Inn-Savannah, Georgia
    
    
    6
    
    
    
    861
    
    
    
    5,907
    
    
    
    
    
    
    
    
    
    
    
    861
    
    
    
    5,907
    
    
    
    6,768
    
    
    
    169
    
    
    
    6,599
    
    
    
    1996
    
    
    
    6/29/04
    
    
    5-31yrs.Hampton Inn-Boca Raton, Florida
    
    
    6
    
    
    
    1,030
    
    
    
    9,342
    
    
    
    
    
    
    
    
    
    
    
    1,030
    
    
    
    9,342
    
    
    
    10,372
    
    
    
    76
    
    
    
    10,296
    
    
    
    1996
    
    
    
    10/22/04
    
    
    5-31yrs.Hampton Inn & Suites-Boynton Beach,
Florida
    
    
    6
    
    
    
    1,450
    
    
    
    18,513
    
    
    
    
    
    
    
    
    
    
    
    1,450
    
    
    
    18,513
    
    
    
    19,963
    
    
    
    139
    
    
    
    19,824
    
    
    
    1997
    
    
    
    10/22/04
    
    
    5-31yrs.Hampton Inn-Deerfield Beach, Florida
    
    
    6
    
    
    
    930
    
    
    
    12,040
    
    
    
    
    
    
    
    
    
    
    
    930
    
    
    
    12,040
    
    
    
    12,970
    
    
    
    93
    
    
    
    12,877
    
    
    
    2002
    
    
    
    10/22/04
    
    
    5-31yrs.Hampton Inn-Palm Beach Gardens, Florida
    
    
    6
    
    
    
    1,330
    
    
    
    13,691
    
    
    
    
    
    
    
    
    
    
    
    1,330
    
    
    
    13,691
    
    
    
    15,021
    
    
    
    104
    
    
    
    14,917
    
    
    
    1999
    
    
    
    10/22/04
    
    
    5-31yrs.Hampton Inn-West Palm Beach, Florida
    
    
    6
    
    
    
    990
    
    
    
    15,009
    
    
    
    
    
    
    
    
    
    
    
    990
    
    
    
    15,009
    
    
    
    15,999
    
    
    
    110
    
    
    
    15,889
    
    
    
    2001
    
    
    
    10/22/04
    
    
    5-31yrs.Courtyard by Marriott-Dalton, Georgia
    
    
    
    
    
    
    850
    
    
    
    5,551
    
    
    
    
    
    
    
    
    
    
    
    850
    
    
    
    5,551
    
    
    
    6,401
    
    
    
    55
    
    
    
    6,346
    
    
    
    1999
    
    
    
    11/1/04
    
    
    5-31yrs.Hilton Garden Inn-Louisville, Kentucky
    
    
    
    
    
    
    975
    
    
    
    7,085
    
    
    
    
    
    
    
    
    
    
    
    975
    
    
    
    7,085
    
    
    
    8,060
    
    
    
    67
    
    
    
    7,993
    
    
    
    1999
    
    
    
    11/1/04
    
    
    5-31yrs.Residence Inn-Macon, Georgia
    
    
    6
    
    
    
    640
    
    
    
    5,918
    
    
    
    
    
    
    
    
    
    
    
    640
    
    
    
    5,918
    
    
    
    6,558
    
    
    
    28
    
    
    
    6,530
    
    
    
    1996
    
    
    
    12/06/04
    
    
    5-31yrs.SpringHill Suites-Asheville, North Carolina
    
    
    
    
    
    
    600
    
    
    
    6,737
    
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    6,737
    
    
    
    7,337
    
    
    
    
    
    
    
    7,337
    
    
    
    2002
    
    
    
    12/16/04
    
    
    5-31yrs.
 68




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##### Table of Contents



EQUITY INNS, INC.
SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
AS OF DECEMBER 31, 2004
(in thousands) Cost CapitalizedSubsequent
    
    
    Gross Amount at Which
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Life UponInitial Cost
    
    
    to Acquisition
    
    
    Carried at Close of Period
    
    
    Accumulated
    
    
    Net Book
    
    
    
    
    
    
    
    
    
    
    WhichBuildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    Buildings
    
    
    
    
    
    
    Depreciation
    
    
    Value
    
    
    
    
    
    
    
    
    
    
    Depreciationand
    
    
    
    
    
    
    and
    
    
    
    
    
    
    and
    
    
    
    
    
    
    Buildings and
    
    
    Buildings and
    
    
    Date of
    
    
    Date of
    
    
    In StatementDescription of Property
    
    Footnote
    
    
    Land
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Improvements
    
    
    Improvements
    
    
    Construction
    
    
    Acquisition
    
    
    Is ComputedCourtyard by Marriott-Knoxville, Tennessee
    
    
    6
    
    
    
    640
    
    
    
    8,724
    
    
    
    
    
    
    
    
    
    
    
    640
    
    
    
    8,724
    
    
    
    9,364
    
    
    
    
    
    
    
    9,364
    
    
    
    1996
    
    
    
    12/21/04
    
    
    5-31yrs.Courtyard by Marriott-Mobile, Alabama
    
    
    6
    
    
    
    
    
    
    
    6,542
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,542
    
    
    
    6,542
    
    
    
    
    
    
    
    6,542
    
    
    
    1995
    
    
    
    12/21/04
    
    
    5-31yrs.Construction in Progress
    
    
    
    
    
    
    
    
    
    
    2,270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,270
    
    
    
    2,270
    
    
    
    
    
    
    
    2,270Corporate OfficeMemphis, TN
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    577
    
    
    
    
    
    
    
    577
    
    
    
    577
    
    
    
    361
    
    
    
    216
    
    
    
    1999
    
    
    
    
    
    
    7 Yrs115,562
    
    
    
    845,620
    
    
    
    503
    
    
    
    149,334
    
    
    
    116,065
    
    
    
    994,954
    
    
    
    1,111,019
    
    
    
    258,264
    
    
    
    852,755ASSETS HELD FOR SALEHampton Inn-Birmingham (Vestavia), Alabama
    
    
    2,7
    
    
    
    1,057
    
    
    
    5,703
    
    
    
    
    
    
    
    1,162
    
    
    
    1,057
    
    
    
    6,865
    
    
    
    7,922
    
    
    
    4,073
    
    
    
    3,849
    
    
    
    1986
    
    
    
    6/24/97
    
    
    5-31yrs.$
    116,619
    
    
    $
    851,323
    
    
    $
    503
    
    
    $
    150,496
    
    
    $
    117,122
    
    
    $
    1,001,819
    
    
    $
    1,118,941
    
    
    $
    262,337
    
    
    $
    856,604
 69




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##### Table of Contents



Notes to Schedule III  Real Estate and Accumulated Depreciation (in thousands).  1.
    Collateral for the CMBS Mortgage Bonds with a current balance of $55,8022.
    Collateral for the $110,000 Line of Credit with a current balance of $72,0003.
    Collateral for the GMAC mortgages due July 2009 with a current balance of $89,3184.
    Collateral for the GECC mortgages due November 2010 with a current balance of $65,8235.
    Collateral for the GMAC mortgages due November 2010 with a current balance of $34,0896.
    Collateral for various mortgage notes due from September 2005 to November 2016 with combined
balances of $117,7497.
    This hotel is classified as held for sale at December 31, 2004 2004
    
    
    2003
    
    
    2002Cost of land, buildings and improvements:Balance at beginning of year
    
    $
    930,984
    
    
    $
    946,422
    
    
    $
    918,819Acquisitions
    
    
    220,112
    
    
    
    13,342
    
    
    
    29,210Disposals
    
    
    (30,272
    )
    
    
    (24,407
    )
    
    
    (1,607
    )Impairments
    
    
    (1,883
    )
    
    
    (4,373
    )
    
    
    Balance at end of year
    
    $
    1,118,941
    
    
    $
    930,984
    
    
    $
    946,422Accumulated depreciation on
buildings and improvements:Balance at beginning of year
    
    $
    239,335
    
    
    $
    206,276
    
    
    $
    166,929Depreciation for the period
    
    
    41,171
    
    
    
    39,371
    
    
    
    40,954Disposals
    
    
    (20,040
    )
    
    
    (6,312
    )
    
    
    (1,607
    )Impairments
    
    
    1,871
    
    
    
    
    
    
    
    Balance at end of year
    
    $
    262,337
    
    
    $
    239,335
    
    
    $
    206,276
 70




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##### Table of Contents



ITEM 9.
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE During the fiscal year ended December 31, 2004 and through the date of this report, there has been
no change in the Companys independent accountants, nor have any disagreements with such
accountants or reportable events occurred. 
 ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures As of the end of the period covered by this annual report, we carried out an evaluation, under the
supervision and with the participation of the Companys management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the
Exchange Act), and management necessarily applied its judgment in assessing the costs and benefits
of such controls and procedures, which, by their nature, can provide only reasonable assurance
regarding managements control objectives. You should note that the design of any system of
controls is based in part upon certain assumptions about the likelihood of future events, and we
cannot assure you that any design will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote. Additionally, as part of the assessment of the
effectiveness of internal control over financial reporting, management did not assess the
effectiveness of internal control over financial reporting related to certain hotels that were
acquired in 2004. We excluded thirteen hotels that are managed by McKibbon Hotel Management, Inc.
and five hotels that are managed by Hospitality Group, Inc. Based upon the foregoing evaluation, our Chief Executive Officer and the Chief Financial Officer
concluded that our disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in the reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the Securities and Exchange Commission and that such information is accumulated and
communicated to our management including our principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding required disclosure. Internal Control Over Financial Reporting See Managements Report on Internal Control Over Financial Reporting included in Item 8
Financial Statements and Supplementary Data. Changes in Internal Control Over Financial Reporting There has been no change in the Companys internal control over financial reporting during the
quarter ended December 31, 2004 that has materially affected or is reasonably likely to materially
affect the Companys internal control over financial reporting. 71




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##### Table of Contents



ITEM 9B. OTHER INFORMATION On November 9, 2004 and January 25, 2005, the Compensation Committee of our Board established 2005
salaries and granted 2004 bonuses, respectively, along with certain additional awards of restricted
common stock to each of our executive officers. These grants and awards are summarized in the
following table: 20052004
    
    
    2005 Annual
    
    
    Restricted StockBonus
    
    
    Salary
    
    
    Awards (1)Phillip H. McNeill, Sr.
    
    $
    332,692
    
    
    $
    250,000
    
    
    
    ChairmanHoward A. Silver
    
    $
    309,768
    
    
    $
    385,000
    
    
    
    21,766President and Chief Executive OfficerJ. Mitchell Collins
    
    $
    134,375
    
    
    $
    226,000
    
    
    
    35,834Executive Vice President, Chief
Financial Officer, Treasurer and
SecretaryPhillip H. McNeill, Jr.
    
    $
    33,700
    
    
    $
    177,000
    
    
    
    Executive Vice President of DevelopmentRichard F. Mitchell
    
    $
    26,000
    
    
    $
    175,000
    
    
    
    Senior Vice President of Asset
ManagementEdwin F. Ansbro
    
    $
    
    
    
    $
    175,000
    
    
    
    26,250Senior Vice President of Real EstateJ. Ronald Cooper
    
    $
    61,250
    
    
    $
    162,000
    
    
    
    Vice President, Controller,
Assistant Secretary and
Assistant Treasurer
    Beginning in 2005, our independent directors receive $25,000 annually, payable $6,250 quarterly,
and also $1,000 for each Board meeting attended and $750 for each committee meeting attended. The
Audit Committee Chairman receives an additional $5,000 annually and all other chairs receive an
additional $3,500 annually. Directors who elect to be paid in shares of our common stock instead
of cash receive a 25% premium over the fees stated above. The Company also reimburses all
directors for their out-of-pocket expenses in connection with their service on our Board. 72




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The Compensation Committee also set goals upon which 2005 bonuses will be paid for all of our
executive officers. For Howard A. Silver and J. Mitchell Collins, these executive officers are
eligible to receive a bonus in an amount equal to up to 100% of their annual salaries. Any 2005
bonuses paid to these executive officers will be based on the achievement of the Companys ranking
of total shareholder return as compared to a peer group of hotel REITs and the achievement of
certain annual adjusted funds from operations targets. The remaining executive officers are
eligible to receive a bonus in an amount equal to up to 50% of their annual salaries, based on
predetermined corporate and individual goals. 
 PART III 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information required by this item is incorporated by reference from the section entitled The
Election of Directors and Our Board of Directors in the Proxy Statement as to the Companys
directors and certain of our executive officers. See also Item 1  Business-Executive Officers
of the Company for information regarding our remaining executive officers and Item I 
Business-Available Information for information regarding our Code of Ethics. Information required by this item is incorporated by reference from the section entitled Section
16(a) Beneficial Ownership and Reporting Compliance in the Proxy Statement as to Section 16
reporting compliance. Our Board of Directors has determined that Robert P. Bowen represents its audit committee
financial expert (as that term is defined in the rules promulgated by the Securities and Exchange
Commission pursuant to the Sarbanes-Oxley Act of 2002) in serving on the Audit Committee. Our
Board of Directors has determined that each of the members of our Audit Committee is financially
literate and has accounting or related financial management expertise, as required by the New York
Stock Exchange as interpreted by our Board of Directors. 
 ITEM 11. EXECUTIVE COMPENSATION Information required by this item is incorporated by reference from the section entitled Executive
Compensation in the Proxy Statement. The matters labeled Performance Graph contained in the
Proxy Statement shall not be deemed to be incorporated by reference into this Annual Report on Form
10-K. 
  ITEM 12.
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information required by this item is incorporated by reference from the sections entitled
Ownership of Our Common Stock and Executive Compensation  Equity Compensation Plan in the
Proxy Statement. 73




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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by this item is incorporated by reference from the section entitled Certain
Relationships and Related Transactions in the Proxy Statement. 
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information required by this item is incorporated by reference from the section entitled
Relationship with Independent Public Accountants in the Proxy Statement. 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents are filed as part of this Annual Report on Form 10-K: Financial Statements: The following financial statements and financial statement schedules are located in this report on
the pages indicated: PageEquity Inns, Inc.Managements Report on Internal Control over Financial Reporting
    
    
    31Report of Independent Registered Public Accounting Firm
    
    
    32Consolidated Balance Sheets at December 31, 2004 and 2003
    
    
    34Consolidated Statements of Operations for the years ended
December 31, 2004, 2003 and 2002
    
    
    35Consolidated Statements of Comprehensive Income for the
years ended December 31, 2004, 2003 and 2002
    
    
    36Consolidated Statements of Shareholders Equity for the
years ended December 31, 2004, 2003 and 2002
    
    
    37Consolidated Statements of Cash Flows for the years ended
December 31, 2004, 2003 and 2002
    
    
    39Notes to Consolidated Financial Statements
    
    
    40Schedule II  Valuation and Qualifying Accounts for the years
ended December 31, 2004, 2003 and 2002
    
    
    66Schedule III  Real Estate and Accumulated Depreciation
as of December 31, 2004
    
    
    67
 All other schedules to the consolidated financial statements required by Article 7 of Regulation
S-X are not required under the related instructions or are inapplicable and therefore have been
omitted from this report. Exhibits. ExhibitNumber
    
    Description3.1(a) 
    
    Second Amended and Restated Charter of the Registrant (incorporated by reference to
Exhibit 3.1 to the Companys Current Report on Form 8-K (Registration No. 01-12073)
filed with the SEC on October 23, 1997)
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ExhibitNumber
    
    Description3.1(b) 
    
    Articles of Amendment to the Second Amended and Restated Charter of the
Registrant (incorporated by reference to Exhibit 3.1 to the Companys Current
Report on Form 8-K (Registration No. 01-12073) filed with the SEC on May 28, 1998)3.1(c) 
    
    Articles of Amendment to the Second Amended and Restated Charter of the Registrant
(incorporated by reference to Exhibit 4.1(d) to the Companys Registration Statement on Form
8-A12B (Registration No. 01-12073) filed with the SEC on July 7, 2003, as amended on August 7,
2003)3.2 
    
    By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Companys Registration Statement on Form S-11 (Registration No. 33-73304)4.1(a) 
    
    Form of Share Certificate for the Companys Common Stock, $.01 par value
(incorporated by reference to Exhibit 4.1 to the Companys Registration Statement on
Form S-11 (Registration No. 33-73304))4.1(b) 
    
    Form of Share Certificate for the Companys 9 1/2% Series A Cumulative Preferred
Stock, $.01 par value (incorporated by reference to Exhibit 4.1 to the Companys
Registration Statement on Form S-11 (Registration No. 33-73304))4.1(c) 
    
    Form of share certificate for the Companys 8.75% Series B Cumulative Preferred Stock,
$0.01 par value (incorporated by reference to Exhibit 4.1 to the Companys Current Report on
Form 8-K filed on August 11, 2003)4.2(a) 
    
    Third Amended and Restated Agreement of Limited Partnership of Equity Inns Partnership,
L.P. (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form
8-K dated June 24, 1997 (Registration No. 01-12073) filed with the SEC on July 10, 1997)4.2(b) 
    
    Amendment No. 1 to Third Amended and Restated Agreement of Limited Partnership of Equity
Inns Partnership, L.P. (incorporated by reference to Exhibit 99.1 to the Companys
Current Report on Form 8-K (Registration No. 01-12073) filed with the SEC on June 24, 1998)4.2(c) 
    
    Amendment No. 2 to Third Amended and Restated Agreement of Limited Partnership of Equity
Inns Partnership, L.P. (incorporated by reference to Exhibit 4.2(c)
to the Companys Annual Report on Form 10-K for the year ended
December 31, 2003)4.3, 10.1
    
    Indenture dated as of February 6, 1997 among EQI Financing Partnership I, L.P. as
Issuer, LaSalle National Bank as Trustee, and ABN AMBRO Bank N.V. as Fiscal Agent
(incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form
10-Q (Registration No. 01-12073) for the quarter ended March 31, 1997 and filed with the SEC
on April 30, 1997)10.2(a) 
    
    Form of Lease Agreement, effective as of January 1, 2001 (incorporated by reference to
Exhibit 10.2 to the Companys Current Report on Form 8-K (Registration No. 01-12073)
filed with the SEC on February 26, 2001)10.2(b)
    
    Form of Consolidated Lease Agreement for the AmeriSuites hotels leased by certain
subsidiaries of Equity Inns TRS Holdings, Inc. as lessees, and Equity Inns Partnership, L.P.
as lessor, effective as of January 1, 2002 (incorporated by reference to Exhibit 10.4
 75




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ExhibitNumber
    
    Descriptionto the Companys Current Report on Form 8-K (Registration No. 01-12073) filed with
the SEC on January 25, 2002)10.3(a)
    
    Equity Inns, Inc. 1994 Stock Incentive Plan (incorporated by reference to Exhibit
10.29(a) to the Companys Registration Statement on Form S-11 (Registration No.
33-80318))10.3(b)
    
    Equity Inns, Inc. Non-Employee Directors Stock Option Plan (incorporated by
reference to Exhibit 10.29(b) to the Companys Registration Statement on Form S-11
(Registration No. 33-80318))10.4 
    
    Right of First Refusal Agreement between Wolf River Hotel, L.P. and Equity Inns
Partnership, L.P. (incorporated by reference to Exhibit 10.5 to the Companys
Registration Statement on Form S-3 (Registration No. 33-93158))10.5 
    
    Right of First Refusal Agreement between SAHI I L.P. and Equity Inns Partnership, L.P.
(incorporated by reference to Exhibit 10.6 to the Companys Registration Statement on
Form S-3 (Registration No. 33-93158))10.6(a)
    
    Loan Agreement, dated as of June 16, 1999, among EQI Financing Partnership II, L.P. and
EQI/WV Financing Partnership, L.P., as Borrower Parties, and GMAC Commercial Mortgage
Corporation, as Lender (incorporated by reference to Exhibit 10.2 to the Companys
Current Report on Form 8-K (Registration No. 01-12073) filed with the SEC on February 26,
2001)10.6(b)
    
    Loan Affirmation and Modification Agreement dated as of December 31, 2000 by and among
EQI Financing Partnership II, L.P., EQI/WV Financing Partnership, L.P., ENN Leasing Company
II, L.L.C., Equity Inns Partnership, L.P., Equity Inns, Inc., Norwest Bank Minnesota, National
Association, as trustee, and LaSalle Bank National Association, as trustee (incorporated by
reference to Exhibit 10.4 to the Companys Current Report on Form 8-K (Registration No.
01-12073) filed with the SEC on February 26, 2001)10.6(c) 
    
    Loan Affirmation and Modification Agreement dated as of January 9, 2002, by and among
EQI Financing Partnership II, L.P., EQI/WV Financing Partnership, L.P., EQI Financing
Partnership V, L.P., ENN Leasing Company II, L.L.C., ENN Leasing Company V, L.L.C., Equity
Inns Partnership, L.P., Equity Inns, Inc., Equity Inns Trust, Norwest Bank Minnesota, National
Association, as trustee, and LaSalle Bank National Association, as trustee (incorporated by
reference to Exhibit 10.2 to the Companys Current Report on Form 8-K (Registration No.
01-12073) filed with the SEC on January 25, 2002)10.7 
    
    Loan Agreement, dated as of October 20, 2000, between EQI Financing Partnership V, L.P.,
as Borrower, and GMAC Commercial Mortgage Corporation, as Lender (incorporated by reference to
Exhibit 10.7 to the Companys Annual Report on Form 10-K for the year ended December 31,
2000 (Registration No. 01-12073) filed with the SEC on March 23, 2001)10.8 
    
    Loan Agreement, dated as of November 7, 2000, between EQI Financing Partnership
III, L.P., as Borrower, and General Electric Capital Corporation, as Lender (incorporated
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ExhibitNumber
    
    Descriptionby reference to Exhibit 10.8 to the Companys Annual Report on Form 10-K for the
year ended December 31, 2000 (Registration No. 01-12073) filed with the SEC on March 23,
2001)10.9 
    
    Loan Agreement, dated as of November 7, 2000, by and among EQI Financing Partnership IV,
L.P. and EQI/WV Financing Partnership II, L.P., as Borrowers, and General Electric Capital
Corporation, as Lender (incorporated by reference to Exhibit 10.9 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2000 (Registration No. 01-12073)
filed with the SEC on March 23, 2001)10.10(a) 
    
    Amended and Restated Secured Revolving Credit Agreement dated as of June 11, 2003, by
and among Equity Inns Partnership, L.P., Equity Inns/West Virginia Partnership, L.P. and
Equity Inns Partnership II, L.P. as Borrowers, Bank One, NA, Credit Lyonnais New York Branch,
Fleet National Bank, National Bank of Commerce, AmSouth Bank and Union Planters Bank, National
Association as Lenders, Bank One, NA as Administrative Agent, Banc One Capital Markets, as
Co-Lead Arranger/Sole Book Manager, Credit Lyonnais New York Branch as Syndication Agent and
Co-Lead Arranger and Fleet National Bank as Documentation Agent (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K (Registration No. 01-12073) filed
with the SEC on July 2, 2003)10.10(b) 
    
    First Amendment to Amended and Restated Secured Revolving Credit Agreement dated as of
January 21, 2004 by and among Equity Inns Partnership, L.P., Equity Inns/ West Virginia
Partnership, L.P. and Equity Inns Partnership II, L.P. as Borrower, Bank One, NA as
Administrative Agent and Lender, and the remaining Lenders that are
signatories thereto (incorporated by reference to Exhibit 10.10(b) to
the Companys Annual Report on Form 10-K for the year ended
December 31, 2003)10.10(c)*
    
    Second Amendment to Amended and Restated Secured Revolving Credit Agreement dated as of
March 26, 2004 by and among Equity Inns Partnership, L.P., Equity Inns/ West Virginia
Partnership, L.P. and Equity Inns Partnership II, L.P. as Borrower, Bank One, NA as
Administrative Agent and Lender, and the remaining Lenders that are signatories thereto10.11
    
    Master Lease Termination Agreement dated as of December 20, 2001, by and among Equity Inns,
Inc., Equity Inns Partnership, L.P., Equity Inns/West Virginia Partnership, L.P., EQI
Financing Partnership II, L.P., EQI Financing Partnership V, L.P., EQI/WV Financing
Partnership, L.P., ENN Leasing Company, Inc., ENN Leasing Company II, L.L.C., ENN Leasing
Company V, L.L.C., Prime Hospitality Corp., Oradell Holding Corp., Wayne Holding Corp, and
Caldwell Holding Corp. (incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K (Registration No. 01-12073) filed with the SEC on January 25, 2002)10.12 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and Promus Hotels, Inc., effective as of January 1, 2001 (incorporated by reference to
Exhibit 10.6 to the Companys Current Report on Form 8-K (Registration No. 01-12073)
filed with the SEC on February 26, 2001)10.13 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and Innkeepers Hospitality Management, Inc. (incorporated by
reference to Exhibit 10.13 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2003)10.14 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS
Holdings, Inc. and Crossroads Hospitality Company, L.L.C., effective as of January 1,
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ExhibitNumber
    
    Description2001 (incorporated by reference to
Exhibit 10.8 to the Companys Current Report on
Form 8-K (Registration No. 01-12073) filed with the SEC on February 26, 2001)10.15(a)
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and certain affiliates of Prime Hospitality Corp., effective as of January 1, 2002
(incorporated by reference to Exhibit 10.5 to the Companys Current Report on Form 8-K
(Registration No. 01-12073) filed with the SEC on January 25, 200210.15(b)
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and certain affiliates of Prime Hospitality Corp., effective as
of May 14, 2003 (incorporated by reference to Exhibit 10.15(b)
to the Companys Annual Report on Form 10-K for the year
ended December 31, 2003).10.16 
    
    Form of Deed of Trust dated as of February 6, 1997 by EQI Financing Partnership 1, L.P.
in favor of LaSalle National Bank, as Trustee (incorporated by reference to Exhibit 10.2 to
the Companys Quarterly Report on Form 10-Q (Registration No. 01-12073) for the quarter
ended March 31, 1997 and filed with the SEC on April 30, 1997)10.17 
    
    Commercial Lease dated as of December 17, 1998 between 64 LTD. LLC and Equity Inns
Services, Inc. (incorporated by reference to Exhibit 10.32 to the Companys Annual
Report on Form 10-K for the year ended December 31, 1998 (Registration No. 01-12073) filed
with the SEC on March 23, 1999)10.18 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Phillip H. McNeill, Sr. (incorporated by reference to Exhibit 10.33 to the
Companys Annual Report on Form 10-K for the year ended December 31, 1998 (Registration
No. 01-12073) filed with the SEC on March 23, 1999)10.19 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Howard A. Silver (incorporated by reference to Exhibit 10.34 to the
Companys Annual Report on Form 10-K for the year ended December 31, 1998 (Registration
No. 01-12073) filed with the SEC on March 23, 1999)10.22 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Phillip H. McNeill, Jr. (incorporated by reference to Exhibit 10.36 to the
Companys Annual Report on Form 10-K for the year ended December 31, 1998 (Registration
No. 01-12073) filed with the SEC on March 23, 1999)10.23 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and J. Ronald Cooper (incorporated by reference to Exhibit 10.21 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2001 (Registration No. 01-12073)
filed with the SEC on March 25, 2002)10.24 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Richard F. Mitchell (incorporated by reference to Exhibit 10.22 to the
Companys Annual Report on Form 10-K for the year ended December 31, 2001 (Registration No.
01-12073) filed with the SEC on March 25, 2002)10.25 
    
    Equity Inns, Inc. Executive Deferred Compensation Plan (incorporated by reference to
Exhibit 10.27 to the Companys Annual Report on Form 10-K for the year ended December
31, 1999 (Registration No. 01-12073) filed with the SEC on March 17, 2000)10.26 
    
    Master Lease Termination Agreement dated as of September 7, 2000, by and among
Equity Inns, Inc., Equity Inns Partnership, L.P., Equity Inns/West Virginia Partnership, L.P.,
EQI Financing Partnership I, L.P., EQI Financing Partnership II, L.P., EQI/WV Financing
Partnership, L.P., Equity Inns Partnership II, L.P., E.I.P. Orlando, L.P.,
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ExhibitNumber
    
    DescriptionCrossroads/Memphis Partnership, L.P., Crossroads/Memphis Financing Company, L.L.C.,
Crossroads/Memphis Financing Company II, L.L.C., Crossroads Future Company, L.L.C.,
Crossroads Future Financing Company, L.L.C., Interstate Hotels, LLC and Crossroads
Hospitality Company, L.L.C. (incorporated by reference to Exhibit 10.7 to the Companys
Current Report on Form 8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on January 11, 2001)10.27 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and J. Mitchell Collins (incorporated by reference to
Exhibit 10.27 to the Companys Annual Report on
Form 10-K for the years ended December 31, 2003)10.28 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and Wright Hospitality Management, LLC (incorporated by
reference to Exhibit 10.28 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2003)10.29* 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Edwin F. Ansbro10.30 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and McKibbon Hotel Management, Inc. (incorporated by reference
to Exhibit 10.30 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2003)10.31* 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and Hospitality Group, Inc.10.32* 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and Gateway Lodging Company, Inc.10.33* 
    
    Executive Officer and Independent Director Compensation10.34 
    
    Mortgage Security Agreement,
Financing Statement and Fixture Filing, by and between Equity Inns Partnership, L.P., as
mortgagor, and ING USA Annuity and Life Insurance Company, as
mortgagee, dated as of October 21, 2004 (incorporated by reference
to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC on October 26, 2004)10.35 
    
    Promissory Note executed by Equity
Inns Partnership, L.P. payable to ING USA Annuity and Life Insurance
Company, dated as of October 21, 2004 (incorporated by reference
to Exhibit 10.2 to the Companys Current Report on
Form 8-K filed with the SEC on October 26, 2004).21.1* 
    
    List of subsidiaries of Equity Inns, Inc.23.1* 
    
    Consent of PricewaterhouseCoopers L.L.P.31.1* 
    
    Certification of Howard A. Silver, Chief Executive Officer of Equity Inns, Inc.,
pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and dated March
16, 200531.2* 
    
    Certification of J. Mitchell Collins, Chief Financial Officer of Equity Inns, Inc.,
pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and dated March
16, 200532.1* 
    
    Certification of Howard A. Silver, Chief Executive Officer of Equity Inns, Inc. pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and dated March 16, 200532.2* 
    
    Certification of J. Mitchell Collins, Chief Financial Officer of Equity Inns, Inc.
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 and dated March 16, 2005
   *
    
    Filed herewith. 79




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SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized on the 16th day of March, 2005. EQUITY INNS, INC.By:
    /s/ Howard A. SilverHoward A. SilverPresident and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities indicated on the
16th day of March, 2005. Signature
    
    Title
    
    Date/s/ Phillip H. McNeill, Sr.

Phillip H. McNeill, Sr.
    
    Chairman of the Board
and Director
    
    March 16, 2005/s/ Howard A. Silver

Howard A. Silver
    
    President, Chief Executive
Officer (Principal Executive
Officer) and Director
    
    March 16, 2005/s/ J. Mitchell Collins

J. Mitchell Collins
    
    Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary (Principal Financial
and Accounting Officer)
    
    March 16, 2005/s/ Harry S. Hays

Harry S. Hays
    
    Director
    
    March 16, 2005/s/ Joseph W. McLeary

Joseph W. McLeary
    
    Director
    
    March 16, 2005/s/ Raymond E. Schultz

Raymond E. Schultz
    
    Director
    
    March 16, 2005/s/ Robert P. Bowen

Robert P. Bowen
    
    Director
    
    March 16, 2005
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INDEX OF EXHIBITS ExhibitNumber
    
    Description3.1(a) 
    
    Second Amended and Restated Charter of the Registrant (incorporated by reference to
Exhibit 3.1 to the Companys Current Report on Form 8-K (Registration No. 01-12073)
filed with the SEC on October 23, 1997)3.1(b) 
    
    Articles of Amendment to the Second Amended and Restated Charter of the
Registrant (incorporated by reference to Exhibit 3.1 to the Companys Current
Report on Form 8-K (Registration No. 01-12073) filed with the SEC on May 28, 1998)3.1(c) 
    
    Articles of Amendment to the Second Amended and Restated Charter of the Registrant
(incorporated by reference to Exhibit 4.1(d) to the Companys Registration Statement on Form
8-A12B (Registration No. 01-12073) filed with the SEC on July 7, 2003, as amended on August 7,
2003)3.2 
    
    By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Companys Registration Statement on Form S-11 (Registration No. 33-73304)4.1(a) 
    
    Form of Share Certificate for the Companys Common Stock, $.01 par value
(incorporated by reference to Exhibit 4.1 to the Companys Registration Statement on
Form S-11 (Registration No. 33-73304))4.1(b) 
    
    Form of Share Certificate for the Companys 9 1/2% Series A Cumulative Preferred
Stock, $.01 par value (incorporated by reference to Exhibit 4.1 to the Companys
Registration Statement on Form S-11 (Registration No. 33-73304))4.1(c) 
    
    Form of share certificate for the Companys 8.75% Series B Cumulative Preferred Stock,
$0.01 par value (incorporated by reference to Exhibit 4.1 to the Companys Current Report on
Form 8-K filed on August 11, 2003)4.2(a) 
    
    Third Amended and Restated Agreement of Limited Partnership of Equity Inns Partnership,
L.P. (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form
8-K dated June 24, 1997 (Registration No. 01-12073) filed with the SEC on July 10, 1997)4.2(b) 
    
    Amendment No. 1 to Third Amended and Restated Agreement of Limited Partnership of Equity
Inns Partnership, L.P. (incorporated by reference to Exhibit 99.1 to the Companys
Current Report on Form 8-K (Registration No. 01-12073) filed with the SEC on June 24, 1998)4.2(c) 
    
    Amendment No. 2 to Third Amended and Restated Agreement of Limited Partnership of Equity
Inns Partnership, L.P. (incorporated by reference to Exhibit 4.2(c)
to the Companys Annual Report on Form 10-K for the year ended
December 31, 2003)4.3, 10.1
    
    Indenture dated as of February 6, 1997 among EQI Financing Partnership I, L.P. as
Issuer, LaSalle National Bank as Trustee, and ABN AMBRO Bank N.V. as Fiscal Agent
(incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form
10-Q (Registration No. 01-12073) for the quarter ended March 31, 1997 and filed with the SEC
on April 30, 1997)10.2(a) 
    
    Form of Lease Agreement, effective as of January 1, 2001 (incorporated by reference to
Exhibit 10.2 to the Companys Current Report on Form 8-K (Registration No. 01-12073)
filed with the SEC on February 26, 2001)10.2(b)
    
    Form of Consolidated Lease Agreement for the AmeriSuites hotels leased by certain
subsidiaries of Equity Inns TRS Holdings, Inc. as lessees, and Equity Inns Partnership, L.P.
as lessor, effective as of January 1, 2002 (incorporated by reference to Exhibit 10.4
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ExhibitNumber
    
    Descriptionto the Companys Current Report on Form 8-K (Registration No. 01-12073) filed with
the SEC on January 25, 2002)10.3(a)
    
    Equity Inns, Inc. 1994 Stock Incentive Plan (incorporated by reference to Exhibit
10.29(a) to the Companys Registration Statement on Form S-11 (Registration No.
33-80318))10.3(b)
    
    Equity Inns, Inc. Non-Employee Directors Stock Option Plan (incorporated by
reference to Exhibit 10.29(b) to the Companys Registration Statement on Form S-11
(Registration No. 33-80318))10.4 
    
    Right of First Refusal Agreement between Wolf River Hotel, L.P. and Equity Inns
Partnership, L.P. (incorporated by reference to Exhibit 10.5 to the Companys
Registration Statement on Form S-3 (Registration No. 33-93158))10.5 
    
    Right of First Refusal Agreement between SAHI I L.P. and Equity Inns Partnership, L.P.
(incorporated by reference to Exhibit 10.6 to the Companys Registration Statement on
Form S-3 (Registration No. 33-93158))10.6(a)
    
    Loan Agreement, dated as of June 16, 1999, among EQI Financing Partnership II, L.P. and
EQI/WV Financing Partnership, L.P., as Borrower Parties, and GMAC Commercial Mortgage
Corporation, as Lender (incorporated by reference to Exhibit 10.2 to the Companys
Current Report on Form 8-K (Registration No. 01-12073) filed with the SEC on February 26,
2001)10.6(b)
    
    Loan Affirmation and Modification Agreement dated as of December 31, 2000 by and among
EQI Financing Partnership II, L.P., EQI/WV Financing Partnership, L.P., ENN Leasing Company
II, L.L.C., Equity Inns Partnership, L.P., Equity Inns, Inc., Norwest Bank Minnesota, National
Association, as trustee, and LaSalle Bank National Association, as trustee (incorporated by
reference to Exhibit 10.4 to the Companys Current Report on Form 8-K (Registration No.
01-12073) filed with the SEC on February 26, 2001)10.6(c) 
    
    Loan Affirmation and Modification Agreement dated as of January 9, 2002, by and among
EQI Financing Partnership II, L.P., EQI/WV Financing Partnership, L.P., EQI Financing
Partnership V, L.P., ENN Leasing Company II, L.L.C., ENN Leasing Company V, L.L.C., Equity
Inns Partnership, L.P., Equity Inns, Inc., Equity Inns Trust, Norwest Bank Minnesota, National
Association, as trustee, and LaSalle Bank National Association, as trustee (incorporated by
reference to Exhibit 10.2 to the Companys Current Report on Form 8-K (Registration No.
01-12073) filed with the SEC on January 25, 2002)10.7 
    
    Loan Agreement, dated as of October 20, 2000, between EQI Financing Partnership V, L.P.,
as Borrower, and GMAC Commercial Mortgage Corporation, as Lender (incorporated by reference to
Exhibit 10.7 to the Companys Annual Report on Form 10-K for the year ended December 31,
2000 (Registration No. 01-12073) filed with the SEC on March 23, 2001)10.8 
    
    Loan Agreement, dated as of November 7, 2000, between EQI Financing Partnership
III, L.P., as Borrower, and General Electric Capital Corporation, as Lender (incorporated
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ExhibitNumber
    
    Descriptionby reference to Exhibit 10.8 to the Companys Annual Report on Form 10-K for the
year ended December 31, 2000 (Registration No. 01-12073) filed with the SEC on March 23,
2001)10.9 
    
    Loan Agreement, dated as of November 7, 2000, by and among EQI Financing Partnership IV,
L.P. and EQI/WV Financing Partnership II, L.P., as Borrowers, and General Electric Capital
Corporation, as Lender (incorporated by reference to Exhibit 10.9 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2000 (Registration No. 01-12073)
filed with the SEC on March 23, 2001)10.10(a) 
    
    Amended and Restated Secured Revolving Credit Agreement dated as of June 11, 2003, by
and among Equity Inns Partnership, L.P., Equity Inns/West Virginia Partnership, L.P. and
Equity Inns Partnership II, L.P. as Borrowers, Bank One, NA, Credit Lyonnais New York Branch,
Fleet National Bank, National Bank of Commerce, AmSouth Bank and Union Planters Bank, National
Association as Lenders, Bank One, NA as Administrative Agent, Banc One Capital Markets, as
Co-Lead Arranger/Sole Book Manager, Credit Lyonnais New York Branch as Syndication Agent and
Co-Lead Arranger and Fleet National Bank as Documentation Agent (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K (Registration No. 01-12073) filed
with the SEC on July 2, 2003)10.10(b) 
    
    First Amendment to Amended and Restated Secured Revolving Credit Agreement dated as of
January 21, 2004 by and among Equity Inns Partnership, L.P., Equity Inns/ West Virginia
Partnership, L.P. and Equity Inns Partnership II, L.P. as Borrower, Bank One, NA as
Administrative Agent and Lender, and the remaining Lenders that are
signatories thereto (incorporated by reference to Exhibit 10.10(b) to
the Companys Annual Report on Form 10-K for the year ended
December 31, 2003)10.10(c)*
    
    Second Amendment to Amended and Restated Secured Revolving Credit Agreement dated as of
March 26, 2004 by and among Equity Inns Partnership, L.P., Equity Inns/ West Virginia
Partnership, L.P. and Equity Inns Partnership II, L.P. as Borrower, Bank One, NA as
Administrative Agent and Lender, and the remaining Lenders that are signatories thereto10.11
    
    Master Lease Termination Agreement dated as of December 20, 2001, by and among Equity Inns,
Inc., Equity Inns Partnership, L.P., Equity Inns/West Virginia Partnership, L.P., EQI
Financing Partnership II, L.P., EQI Financing Partnership V, L.P., EQI/WV Financing
Partnership, L.P., ENN Leasing Company, Inc., ENN Leasing Company II, L.L.C., ENN Leasing
Company V, L.L.C., Prime Hospitality Corp., Oradell Holding Corp., Wayne Holding Corp, and
Caldwell Holding Corp. (incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K (Registration No. 01-12073) filed with the SEC on January 25, 2002)10.12 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and Promus Hotels, Inc., effective as of January 1, 2001 (incorporated by reference to
Exhibit 10.6 to the Companys Current Report on Form 8-K (Registration No. 01-12073)
filed with the SEC on February 26, 2001)10.13 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and Innkeepers Hospitality Management, Inc. (incorporated by
reference to Exhibit 10.13 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2003)10.14 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS
Holdings, Inc. and Crossroads Hospitality Company, L.L.C., effective as of January 1,
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ExhibitNumber
    
    Description2001 (incorporated by reference to
Exhibit 10.8 to the Companys Current Report on
Form 8-K (Registration No. 01-12073) filed with the SEC on February 26, 2001)10.15(a)
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and certain affiliates of Prime Hospitality Corp., effective as of January 1, 2002
(incorporated by reference to Exhibit 10.5 to the Companys Current Report on Form 8-K
(Registration No. 01-12073) filed with the SEC on January 25, 200210.15(b)
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and certain affiliates of Prime Hospitality Corp., effective as
of May 14, 2003 (incorporated by reference to Exhibit 10.15(b)
to the Companys Annual Report on Form 10-K for the year
ended December 31, 2003).10.16 
    
    Form of Deed of Trust dated as of February 6, 1997 by EQI Financing Partnership 1, L.P.
in favor of LaSalle National Bank, as Trustee (incorporated by reference to Exhibit 10.2 to
the Companys Quarterly Report on Form 10-Q (Registration No. 01-12073) for the quarter
ended March 31, 1997 and filed with the SEC on April 30, 1997)10.17 
    
    Commercial Lease dated as of December 17, 1998 between 64 LTD. LLC and Equity Inns
Services, Inc. (incorporated by reference to Exhibit 10.32 to the Companys Annual
Report on Form 10-K for the year ended December 31, 1998 (Registration No. 01-12073) filed
with the SEC on March 23, 1999)10.18 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Phillip H. McNeill, Sr. (incorporated by reference to Exhibit 10.33 to the
Companys Annual Report on Form 10-K for the year ended December 31, 1998 (Registration
No. 01-12073) filed with the SEC on March 23, 1999)10.19 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Howard A. Silver (incorporated by reference to Exhibit 10.34 to the
Companys Annual Report on Form 10-K for the year ended December 31, 1998 (Registration
No. 01-12073) filed with the SEC on March 23, 1999)10.22 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Phillip H. McNeill, Jr. (incorporated by reference to Exhibit 10.36 to the
Companys Annual Report on Form 10-K for the year ended December 31, 1998 (Registration
No. 01-12073) filed with the SEC on March 23, 1999)10.23 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and J. Ronald Cooper (incorporated by reference to Exhibit 10.21 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2001 (Registration No. 01-12073)
filed with the SEC on March 25, 2002)10.24 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Richard F. Mitchell (incorporated by reference to Exhibit 10.22 to the
Companys Annual Report on Form 10-K for the year ended December 31, 2001 (Registration No.
01-12073) filed with the SEC on March 25, 2002)10.25 
    
    Equity Inns, Inc. Executive Deferred Compensation Plan (incorporated by reference to
Exhibit 10.27 to the Companys Annual Report on Form 10-K for the year ended December
31, 1999 (Registration No. 01-12073) filed with the SEC on March 17, 2000)10.26 
    
    Master Lease Termination Agreement dated as of September 7, 2000, by and among
Equity Inns, Inc., Equity Inns Partnership, L.P., Equity Inns/West Virginia Partnership, L.P.,
EQI Financing Partnership I, L.P., EQI Financing Partnership II, L.P., EQI/WV Financing
Partnership, L.P., Equity Inns Partnership II, L.P., E.I.P. Orlando, L.P.,
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ExhibitNumber
    
    DescriptionCrossroads/Memphis Partnership, L.P., Crossroads/Memphis Financing Company, L.L.C.,
Crossroads/Memphis Financing Company II, L.L.C., Crossroads Future Company, L.L.C.,
Crossroads Future Financing Company, L.L.C., Interstate Hotels, LLC and Crossroads
Hospitality Company, L.L.C. (incorporated by reference to Exhibit 10.7 to the Companys
Current Report on Form 8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on January 11, 2001)10.27 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and J. Mitchell Collins (incorporated by reference to
Exhibit 10.27 to the Companys Annual Report on
Form 10-K for the years ended December 31, 2003)10.28 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and Wright Hospitality Management, LLC (incorporated by
reference to Exhibit 10.28 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2003)10.29* 
    
    Change in Control and Termination Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Edwin F. Ansbro10.30 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and McKibbon Hotel Management, Inc. (incorporated by reference
to Exhibit 10.30 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2003)10.31* 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and Hospitality Group, Inc.10.32* 
    
    Form of Management Agreement between certain subsidiaries of Equity Inns TRS Holdings,
Inc. and Gateway Lodging Company, Inc.10.33* 
    
    Executive Officer and Independent Director Compensation10.34 
    
    Mortgage Security Agreement,
Financing Statement and Fixture Filing, by and between Equity Inns Partnership, L.P., as
mortgagor, and ING USA Annuity and Life Insurance Company, as
mortgagee, dated as of October 21, 2004 (incorporated by reference
to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC on October 26, 2004)10.35 
    
    Promissory Note executed by Equity
Inns Partnership, L.P. payable to ING USA Annuity and Life Insurance
Company, dated as of October 21, 2004 (incorporated by reference
to Exhibit 10.2 to the Companys Current Report on
Form 8-K filed with the SEC on October 26, 2004).21.1* 
    
    List of subsidiaries of Equity Inns, Inc.23.1* 
    
    Consent of PricewaterhouseCoopers L.L.P.31.1* 
    
    Certification of Howard A. Silver, Chief Executive Officer of Equity Inns, Inc.,
pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and dated March
16, 200531.2* 
    
    Certification of J. Mitchell Collins, Chief Financial Officer of Equity Inns, Inc.,
pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and dated March
16, 200532.1* 
    
    Certification of Howard A. Silver, Chief Executive Officer of Equity Inns, Inc. pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and dated March 16, 200532.2* 
    
    Certification of J. Mitchell Collins, Chief Financial Officer of Equity Inns, Inc.
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 and dated March 16, 2005
   *
    
    Filed herewith. 85