##### 



SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
    
    Commission file number 0-23732
 WINSTON HOTELS, INC.
  North Carolina
    
    56-1624289(State of incorporation)
    
    (I.R.S. Employer Identification No.)
 2626 Glenwood Avenue
Raleigh, North Carolina 27608
 (919) 510-6019
 þ o
 þ o




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##### 



WINSTON HOTELS, INC.
 Index
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1
    
    Financial StatementsConsolidated Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004
    
    
    3Unaudited Consolidated Statements of Operations for the three months ended June 30, 2005 and 2004
    
    
    4Unaudited Consolidated Statements of Operations for the six months ended June 30, 2005 and 2004
    

    
    5Unaudited Consolidated Statement of Shareholders Equity for the six months ended June 30, 2005
    
    
    6Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004
    
    
    7Notes to Unaudited Consolidated Financial Statements
    
    
    8Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    31Item 4
    
    Controls and Procedures
    
    
    32PART II.
    
    OTHER INFORMATIONItem 4
    
    Submissions of Matters to Vote of Security Holders
    
    
    33Item 6
    
    Exhibits
    
    
    34SIGNATURES
    
    
    35EXHIBIT INDEX
    
    
    36
 2




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##### 



WINSTON HOTELS, INC.
 CONSOLIDATED BALANCE SHEETS  ($ in thousands, except per share amounts)
 June 30, 2005
    
    December 31, 2004(unaudited)ASSETSLand
    
    $
    46,111
    
    
    $
    46,215Buildings and improvements
    
    
    380,201
    
    
    
    382,458Furniture and equipment
    
    
    57,588
    
    
    
    54,661Operating properties
    
    
    483,900
    
    
    
    483,334Less accumulated depreciation
    
    
    140,672
    
    
    
    134,261343,228
    
    
    
    349,073Properties under development
    
    
    7,020
    
    
    
    3,962Net investment in hotel properties
    
    
    350,248
    
    
    
    353,035Assets held for sale
    
    
    
    
    
    
    7,037Corporate furniture fixtures and equipment, net
    
    
    384
    
    
    
    397Cash
    
    
    6,738
    
    
    
    4,115Accounts receivable, net
    
    
    3,153
    
    
    
    2,676Notes receivable
    
    
    31,905
    
    
    
    30,849Investment in joint ventures
    
    
    2,420
    
    
    
    2,512Deferred expenses, net
    
    
    5,926
    
    
    
    3,759Prepaid expenses and other assets
    
    
    11,817
    
    
    
    7,976Deferred tax asset
    
    
    11,872
    
    
    
    12,024Total assets
    
    $
    424,463
    
    
    $
    424,380LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS EQUITYLine of credit
    
    $
    67,900
    
    
    $
    66,850Long-term debt
    
    
    88,040
    
    
    
    88,075Accounts payable and accrued expenses
    
    
    14,635
    
    
    
    13,066Distributions payable
    
    
    6,011
    
    
    
    5,994Total liabilities
    
    
    176,586
    
    
    
    173,985Minority interest
    
    
    9,867
    
    
    
    10,154Shareholders equity:Preferred stock, Series B, $.01 par value, 5,000,000 shares authorized,
3,680,000 shares issued and outstanding
(liquidation preference of $93,840)
    
    
    37
    
    
    
    37Common stock, $.01 par value, 50,000,000 shares authorized,
26,508,327 and 26,397,574 shares issued and outstanding
    
    
    265
    
    
    
    264Additional paid-in capital
    
    
    325,249
    
    
    
    323,947Unearned compensation
    
    
    (1,799
    )
    
    
    (1,145
    )Distributions in excess of earnings
    
    
    (85,742
    )
    
    
    (82,862
    )Total shareholders equity
    
    
    238,010
    
    
    
    240,241Total liabilities, minority interest and shareholders equity
    
    $
    424,463
    
    
    $
    424,380
  3




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##### 



WINSTON HOTELS, INC.
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS  (in thousands, except per share amounts)
 Three Months EndedJune 30, 2005
    
    June 30, 2004Operating revenue:Rooms
    
    $
    36,703
    
    
    $
    32,216Food and beverage
    
    
    2,665
    
    
    
    2,419Other operating departments
    
    
    1,191
    
    
    
    1,019Percentage lease revenue
    
    
    
    
    
    
    9Joint venture fee income
    
    
    63
    
    
    
    45Total operating revenue
    
    
    40,622
    
    
    
    35,708Hotel operating expenses:Rooms
    
    
    8,169
    
    
    
    6,999Food and beverage
    
    
    1,949
    
    
    
    1,751Other operating departments
    
    
    743
    
    
    
    705Undistributed operating expenses:Property operating expenses
    
    
    7,708
    
    
    
    6,952Real estate taxes and property and casualty insurance
    
    
    1,882
    
    
    
    1,617Franchise costs
    
    
    2,656
    
    
    
    2,304Maintenance and repair
    
    
    2,056
    
    
    
    1,772Management fees
    
    
    1,266
    
    
    
    847General and administrative
    
    
    1,901
    
    
    
    1,508Depreciation
    
    
    4,697
    
    
    
    4,254Amortization
    
    
    396
    
    
    
    329Total operating expenses
    
    
    33,423
    
    
    
    29,038Operating income
    
    
    7,199
    
    
    
    6,670Interest and other income
    
    
    1,227
    
    
    
    424Interest expense
    
    
    (2,423
    )
    
    
    (1,673
    )Income before allocation to minority interest in Partnership,
allocation to minority interest in consolidated joint ventures,
income taxes, and equity in income (loss) of unconsolidated
joint ventures
    
    
    6,003
    
    
    
    5,421Income allocation to minority interest in Partnership
    
    
    (175
    )
    
    
    (176
    )Income allocation to minority interest in consolidated joint ventures
    
    
    (139
    )
    
    
    (78
    )Income tax benefit (expense)
    
    
    (291
    )
    
    
    296Equity in income (loss) of unconsolidated joint ventures
    
    
    29
    
    
    
    (33
    )Income from continuing operations
    
    
    5,427
    
    
    
    5,430Discontinued operations:Earnings (loss) from discontinued operations
    
    
    (100
    )
    
    
    375Gain (loss) on sale of discontinued operations
    
    
    449
    
    
    
    (270
    )Loss on impairment of asset held for sale
    
    
    
    
    
    
    (24
    )Net income
    
    
    5,776
    
    
    
    5,511Preferred stock distribution
    
    
    (1,840
    )
    
    
    (1,840
    )Net income available to common shareholders
    
    $
    3,936
    
    
    $
    3,671Basic weighted average number of common shares outstanding
    
    
    26,298
    
    
    
    26,217Diluted weighted average number of common shares outstanding
    
    
    27,611
    
    
    
    27,542Income per common share basic and diluted:Income from continuing operations
    
    $
    0.14
    
    
    $
    0.14Income from discontinued operations
    
    
    0.01
    
    
    
    Net income available to common shareholders
    
    $
    0.15
    
    
    $
    0.14Per share dividends to common shareholders
    
    $
    0.15
    
    
    $
    0.15
  4




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##### 



WINSTON HOTELS, INC.
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS  (in thousands, except per share amounts)
 Six Months EndedJune 30, 2005
    
    June 30, 2004Operating revenue:Rooms
    
    $
    68,592
    
    
    $
    60,766Food and beverage
    
    
    4,810
    
    
    
    4,379Other operating departments
    
    
    2,032
    
    
    
    1,997Percentage lease revenue
    
    
    
    
    
    
    701Joint venture fee income
    
    
    124
    
    
    
    73Total operating revenue
    
    
    75,558
    
    
    
    67,916Hotel operating expenses:Rooms
    
    
    15,393
    
    
    
    13,403Food and beverage
    
    
    3,687
    
    
    
    3,220Other operating departments
    
    
    1,453
    
    
    
    1,413Undistributed operating expenses:Property operating expenses
    
    
    15,086
    
    
    
    13,789Real estate taxes and property and casualty insurance
    
    
    3,676
    
    
    
    3,235Franchise costs
    
    
    4,965
    
    
    
    4,357Maintenance and repair
    
    
    4,092
    
    
    
    3,527Management fees
    
    
    2,057
    
    
    
    1,555General and administrative
    
    
    3,890
    
    
    
    3,140Depreciation
    
    
    9,350
    
    
    
    8,536Amortization
    
    
    652
    
    
    
    656Total operating expenses
    
    
    64,301
    
    
    
    56,831Operating income
    
    
    11,257
    
    
    
    11,085Interest and other income
    
    
    2,747
    
    
    
    756Interest expense
    
    
    (4,830
    )
    
    
    (3,404
    )Income before allocation to minority interest in Partnership,
allocation to minority interest in consolidated joint ventures,
income taxes, and equity in loss of unconsolidated
joint ventures
    
    
    9,174
    
    
    
    8,437Income allocation to minority interest in Partnership
    
    
    (238
    )
    
    
    (172
    )Income allocation to minority interest in consolidated joint ventures
    
    
    (267
    )
    
    
    (262
    )Income tax benefit (expense)
    
    
    (109
    )
    
    
    933Equity in loss of unconsolidated joint ventures
    
    
    (33
    )
    
    
    (54
    )Income from continuing operations
    
    
    8,527
    
    
    
    8,882Discontinued operations:Earnings (loss) from discontinued operations
    
    
    (137
    )
    
    
    428Net gain on sale of discontinued operations
    
    
    364
    
    
    
    15Loss on impairment of asset held for sale
    
    
    
    
    
    
    (47
    )Net income
    
    
    8,754
    
    
    
    9,278Preferred stock distribution
    
    
    (3,680
    )
    
    
    (3,635
    )Loss on redemption of Series A Preferred Stock
    
    
    
    
    
    
    (1,720
    )Net income available to common shareholders
    
    $
    5,074
    
    
    $
    3,923Basic weighted average number of common shares outstanding
    
    
    26,290
    
    
    
    26,216Diluted weighted average number of common shares outstanding
    
    
    27,607
    
    
    
    27,561Income per common share basic and diluted:Income from continuing operations
    
    $
    0.18
    
    
    $
    0.13Income from discontinued operations
    
    
    0.01
    
    
    
    0.02Net income available to common shareholders
    
    $
    0.19
    
    
    $
    0.15Per share dividends to common shareholders
    
    $
    0.30
    
    
    $
    0.30
  5




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##### 



WINSTON HOTELS, INC.
 UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2005  (in thousands, except per share amounts)
 Additional
    
    
    
    
    
    Distributions
    
    TotalPreferred Stock
    
    Common Stock
    
    Paid-in
    
    Unearned
    
    In Excess of
    
    ShareholdersShares
    
    Dollars
    
    Shares
    
    Dollars
    
    Capital
    
    Compensation
    
    Earnings
    
    EquityBalances at December 31,
2004
    
    
    3,680
    
    
    $
    37
    
    
    
    26,398
    
    
    $
    264
    
    
    $
    323,947
    
    
    $
    (1,145
    )
    
    $
    (82,862
    )
    
    $
    240,241Issuance of shares and other
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    1
    
    
    
    1,302
    
    
    
    (1,249
    )
    
    
    
    
    
    
    54Distributions ($0.30 per
common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,954
    )
    
    
    (7,954
    )Distributions ($1.00 per
preferred B share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,680
    )
    
    
    (3,680
    )Unearned compensation
amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    595
    
    
    
    
    
    
    
    595Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,754
    
    
    
    8,754Balances at June 30, 2005
    
    
    3,680
    
    
    $
    37
    
    
    
    26,508
    
    
    $
    265
    
    
    $
    325,249
    
    
    $
    (1,799
    )
    
    $
    (85,742
    )
    
    $
    238,010
  6




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##### 



WINSTON HOTELS, INC.
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS  ($ in thousands)
 Six Months EndedJune 30, 2005
    
    June 30, 2004Cash flows from operating activities:Net income
    
    $
    8,754
    
    
    $
    9,278Adjustments to reconcile net income to net cash
provided by operating activities:Income allocation to minority interest
    
    
    249
    
    
    
    193Income allocation to consolidated joint ventures
    
    
    267
    
    
    
    262Depreciation
    
    
    9,472
    
    
    
    9,024Amortization
    
    
    652
    
    
    
    660Deferred income tax expense (benefit)
    
    
    152
    
    
    
    (990
    )Net gain on sale of hotel properties
    
    
    (381
    )
    
    
    (16
    )Loss on impairment of hotel properties
    
    
    
    
    
    
    50Loss allocations from unconsolidated joint ventures
    
    
    33
    
    
    
    54Distributions from joint ventures
    
    
    59
    
    
    
    31Unearned compensation amortization
    
    
    595
    
    
    
    338Changes in assets and liabilities:Lease revenue receivable
    
    
    
    
    
    
    179Accounts receivable
    
    
    (477
    )
    
    
    (963
    )Prepaid expenses and other assets
    
    
    (246
    )
    
    
    (6,670
    )Accounts payable and accrued expenses
    
    
    1,569
    
    
    
    945Net cash provided by operating activities
    
    
    20,698
    
    
    
    12,375Cash flows from investing activities:Issuance of notes receivable
    
    
    (5,700
    )
    
    
    (8,378
    )Collection of notes receivable
    
    
    6,069
    
    
    
    Deferred acquisition costs
    
    
    
    
    
    
    10Acquisition of minority interest
    
    
    
    
    
    
    (8,162
    )Investment in hotel properties
    
    
    (14,356
    )
    
    
    (11,108
    )Proceeds from sale of hotel properties
    
    
    10,087
    
    
    
    10,533Investment in unconsolidated joint ventures
    
    
    
    
    
    
    (747
    )Net cash used in investing activities
    
    
    (3,900
    )
    
    
    (17,852
    )Cash flows from financing activities:Net increase in line of credit
    
    
    1,050
    
    
    
    10,800Proceeds from long-term debt
    
    
    940
    
    
    
    3,914Payment of long-term debt
    
    
    (975
    )
    
    
    (10,244
    )Fees paid in connection with financing activities
    
    
    (2,824
    )
    
    
    (297
    )Proceeds from issuance of Series B Preferred shares, net
    
    
    
    
    
    
    88,810Redemption of Series A Preferred shares, net
    
    
    
    
    
    
    (75,000
    )Distributions to shareholders
    
    
    (11,617
    )
    
    
    (11,421
    )Distributions to minority interest in partnership
    
    
    (389
    )
    
    
    (389
    )Distributions to minority interest in consolidated joint ventures
    
    
    (360
    )
    
    
    (569
    )Net cash provided by (used in) financing activities
    
    
    (14,175
    )
    
    
    5,604Net increase in cash
    
    
    2,623
    
    
    
    127Cash at beginning of period
    
    
    4,115
    
    
    
    5,623Cash at end of period
    
    $
    6,738
    
    
    $
    5,750Supplemental disclosure:Cash paid for interest
    
    $
    4,402
    
    
    $
    3,462Summary of non-cash investing and financing activities:Distributions to shareholders declared but not paid
    
    $
    12,023
    
    
    $
    11,538Distributions to minority interest declared but not paid
    
    $
    389
    
    
    $
    389Issuance of stock grants
    
    $
    1,249
    
    
    $
    765Adjustment to minority interest due to
issuance of common stock
    
    $
    54
    
    
    $
    26Sale of hotel property for note receivable
    
    $
    1,425
    
    
    $
    Interest rate swap adjustment to market value
    
    $
    
    
    
    $
    33
  7




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##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
 1. ORGANIZATION
    2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
 Basis of Presentation
  Accounting for Long-Lived Assets
  8




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##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
    Minority Interest
  Franchise Agreements
   9




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##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
   Recently Issued Accounting Standards
     3. CREDIT FACILITIES
   10




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##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
 4. EARNINGS PER SHARE
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Income from continuing operations
    
    $
    5,427
    
    
    $
    5,430
    
    
    $
    8,527
    
    
    $
    8,882Less: preferred stock distributions
    
    
    (1,840
    )
    
    
    (1,840
    )
    
    
    (3,680
    )
    
    
    (3,635
    )Less: loss on redemption of Series A Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,720
    )Income from continuing operations available to
common shareholders
    
    
    3,587
    
    
    
    3,590
    
    
    
    4,847
    
    
    
    3,527Income from discontinued operations
    
    
    349
    
    
    
    81
    
    
    
    227
    
    
    
    396Net income available to common shareholders
    
    
    3,936
    
    
    
    3,671
    
    
    
    5,074
    
    
    
    3,923Plus: income allocation to minority interest
    
    
    175
    
    
    
    176
    
    
    
    238
    
    
    
    172Net income available to common
shareholders  assuming dilution
    
    $
    4,111
    
    
    $
    3,847
    
    
    $
    5,312
    
    
    $
    4,095Weighted average number of common shares
    
    
    26,298
    
    
    
    26,217
    
    
    
    26,290
    
    
    
    26,216Minority interest units with redemption rights
    
    
    1,299
    
    
    
    1,299
    
    
    
    1,299
    
    
    
    1,299Stock options and unvested stock grants
    
    
    14
    
    
    
    26
    
    
    
    18
    
    
    
    46Weighted average number of common shares
assuming dilution
    
    
    27,611
    
    
    
    27,542
    
    
    
    27,607
    
    
    
    27,561Earnings per share  assuming dilution
    
    $
    0.15
    
    
    $
    0.14
    
    
    $
    0.19
    
    
    $
    0.15
  5. INCOME TAXES
  6. SUMMARIZED FINANCIAL STATEMENT INFORMATION FOR JOINT VENTURES AND FIN 46R
  11




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##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
 Consolidated Joint Ventures
    June 30, 2005
    
    December 31, 2004Marsh Landing Hotel AssociatesAssets
    
    $
    6,820
    
    
    $
    7,044Liabilities
    
    
    4,916
    
    
    
    4,978Equity
    
    $
    1,904
    
    
    $
    2,066March Landing LesseeAssets
    
    $
    89
    
    
    $
    Liabilities
    
    
    3
    
    
    
    Equity
    
    $
    86
    
    
    $
    Chapel Hill Hotel AssociatesAssets
    
    $
    14,322
    
    
    $
    13,576Liabilities
    
    
    10,856
    
    
    
    9,916Equity
    
    $
    3,466
    
    
    $
    3,660Chapel Hill LesseeAssets
    
    $
    196
    
    
    $
    130Liabilities
    
    
    166
    
    
    
    187Equity (deficit)
    
    $
    30
    
    
    $
    (57
    )
 12




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##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
 Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Marsh Landing Hotel AssociatesRevenue
    
    $
    340
    
    
    $
    408
    
    
    $
    713
    
    
    $
    809Expense
    
    
    222
    
    
    
    191
    
    
    
    431
    
    
    
    383Net income
    
    $
    118
    
    
    $
    217
    
    
    $
    282
    
    
    $
    426March Landing LesseeRevenue
    
    $
    812
    
    
    $
    
    
    
    $
    1,696
    
    
    $
    Expense
    
    
    799
    
    
    
    
    
    
    
    1,609
    
    
    
    Net income
    
    $
    13
    
    
    $
    
    
    
    $
    87
    
    
    $
    Chapel Hill Hotel AssociatesRevenue
    
    $
    550
    
    
    $
    
    
    
    $
    977
    
    
    $
    2Expense
    
    
    488
    
    
    
    55
    
    
    
    909
    
    
    
    110Net income (loss)
    
    $
    62
    
    
    $
    (55
    )
    
    $
    68
    
    
    $
    (108
    )Chapel Hill LesseeRevenue
    
    $
    1,311
    
    
    $
    
    
    
    $
    2,303
    
    
    $
    Expense
    
    
    1,231
    
    
    
    9
    
    
    
    2,216
    
    
    
    9Net income (loss)
    
    $
    80
    
    
    $
    (9
    )
    
    $
    87
    
    
    $
    (9
    )
 Unconsolidated Joint Ventures
     13




---



##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
 June 30,
    
    December 31,2005
    
    2004Current assets
    
    $
    2,804
    
    
    $
    4,193Gross fixed assets
    
    
    49,858
    
    
    
    47,599Accumulated depreciation
    
    
    (3,265
    )
    
    
    (2,178
    )Other assets
    
    
    586
    
    
    
    914Total assets
    
    
    49,983
    
    
    
    50,528Current liabilities
    
    
    2,107
    
    
    
    3,303Outstanding debt
    
    
    32,061
    
    
    
    30,768Total liabilities
    
    
    34,168
    
    
    
    34,071Equity
    
    
    15,815
    
    
    
    16,457Companys share of equity
    
    
    1,992
    
    
    
    2,077Companys additional basis
    
    
    428
    
    
    
    435Investment in joint venture
    
    $
    2,420
    
    
    $
    2,512
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Revenues
    
    $
    4,187
    
    
    $
    2,743
    
    
    $
    7,272
    
    
    $
    5,049Hotel operating expenses
    
    
    2,429
    
    
    
    1,764
    
    
    
    4,468
    
    
    
    3,114Management fees
    
    
    200
    
    
    
    122
    
    
    
    342
    
    
    
    226Fixed expenses
    
    
    1,237
    
    
    
    1,027
    
    
    
    2,503
    
    
    
    1,966Hotel net income (loss)
    
    
    321
    
    
    
    (170
    )
    
    
    (41
    )
    
    
    (257
    )Charlesbank Ventures 87% share of net income (loss)
    
    
    279
    
    
    
    (148
    )
    
    
    (36
    )
    
    
    (224
    )Corporate charges
    
    
    (62
    )
    
    
    (45
    )
    
    
    (136
    )
    
    
    (84
    )Charlesbank Venture net income (loss)
    
    
    217
    
    
    
    (193
    )
    
    
    (172
    )
    
    
    (308
    )Winstons 15% share of Charlesbank
Venture net income (loss)
    
    
    33
    
    
    
    (29
    )
    
    
    (26
    )
    
    
    (46
    )Amortization of investment true-up
    
    
    (4
    )
    
    
    (4
    )
    
    
    (7
    )
    
    
    (8
    )Equity in income (loss) of
unconsolidated joint ventures
    
    $
    29
    
    
    $
    (33
    )
    
    $
    (33
    )
    
    $
    (54
    )
 14




---



##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
 Notes Receivable
  June 30,
    
    December 31,2005
    
    2004$1.1 million mezzanine loan collateralized by
the ownership interest of the entity that owns
the hotel, matures December 2006 at an interest
rate of 30-day LIBOR plus 7.36%, with
interest-only payments through maturity, with
additional interest of 2% of gross monthly
revenues until maturity of which 75% is
accrued, at maturity Company will receive
greater of accrued interest or 15% of the
appreciation in value
    
    $
    1,080
    
    
    $
    1,080$2.2 million mezzanine loan collateralized by
the ownership interest of the entity that owns
the hotel, matures January 2006, at an interest
rate of 30-day LIBOR plus 8.44%, with
interest-only payments through maturity, with
additional interest of 2% of gross monthly
revenues until maturity of which 75% is
accrued, at maturity Company will receive
greater of accrued interest or 20% of the
appreciation in value
    
    
    2,186
    
    
    
    2,186$1.8 million mezzanine loan collateralized by
the ownership interest of the entity that owns
the hotel, matures October 2005, at an interest
rate of 30-day LIBOR plus 10.21%, with interest
and principal payments based on a ten year
amortization, with additional accrued interest
of 10% of gross monthly revenues until
maturity, at maturity Company will receive
greater of accrued interest or 60% of the
appreciation in value
    
    
    1,643
    
    
    
    1,683$2.4 million mezzanine loan collateralized by
the ownership interest of the entity that owns
the hotel, matures February 2009, at an
interest rate of 60-day LIBOR (with a 2% floor)
plus 9%, with interest-only payments through
maturity, with additional interest of 2% of
outstanding principal balance
    
    
    2,400
    
    
    
    2,400$6 million B-note collateralized by the hotel
property, matures June 2006, at an interest
rate of 10%, interest only payments until
maturity or payoff, paid in full March 2005
    
    
    
    
    
    
    6,000$5.5 million mezzanine loan collateralized by
the ownership interest of the entity that owns
the hotel, matures September 2009, at an
interest rate of 30-day LIBOR plus 10.25%, with
interest only for the first two years of
operations and interest and principal payments
thereafter based on a ten year amortization
schedule, with additional interest of 3% of
outstanding principal balance accruing monthly
    
    
    5,500
    
    
    
    5,500$6.0 million senior participating loan
collateralized by the hotel property, matures
December 2005, at an interest rate of 11%, with
interest only payments until maturity
    
    
    6,000
    
    
    
    6,000$6.0 million mezzanine loan collateralized by
the ownership interest of the entity that owns
the hotel, matures December 2007, at an
interest rate of 30-day LIBOR plus 9%, with
interest only payments until maturity
    
    
    6,000
    
    
    
    6,000$1.4 million loan collateralized by the hotel
property, matures January 2010, at an interest
rate of prime plus 1.5%, with principal
payments of $6, based on a twenty year
amortization schedule (see Note 7)
    
    
    1,395
    
    
    
    $3.4 million mezzanine loan collateralized by
the ownership interest of the entity that owns
the hotel, matures August 2011, at an interest
rate of 30-day LIBOR plus 9.41%, with interest
only payments until maturity, with additional
interest of 4% accruing monthly until maturity
    
    
    3,375
    
    
    
    $2.3 million B-notes collateralized by three
hotel properties, mature September 2011, at an
effective interest rate of 9.3% (and a yield to
maturity of 11.7%), interest and principal
payments based on a six and one-half year
amortization schedule
    
    
    2,326
    
    
    
    Total
    
    $
    31,905
    
    
    $
    30,849
 15




---



##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
    7. DISCONTINUED OPERATIONS
   16




---



##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Total revenue
    
    $
    185
    
    
    $
    2,060
    
    
    $
    709
    
    
    $
    3,848Total expenses
    
    
    225
    
    
    
    1,716
    
    
    
    808
    
    
    
    3,454Income (loss) from discontinued operations
    
    
    (40
    )
    
    
    344
    
    
    
    (99
    )
    
    
    394Allocation to minority interest in Partnership  (income)
loss from discontinued operations
    
    
    4
    
    
    
    (19
    )
    
    
    6
    
    
    
    (23
    )Gain (loss) on sale of discontinued operations
    
    
    471
    
    
    
    (284
    )
    
    
    381
    
    
    
    16Allocation to minority interest in Partnership  (gain)
loss on sale of discontinued operations
    
    
    (22
    )
    
    
    14
    
    
    
    (17
    )
    
    
    (1
    )Loss on impairment of asset held for sale
    
    
    
    
    
    
    (25
    )
    
    
    
    
    
    
    (49
    )Allocation to minority interest in Partnership  loss on
impairment of asset held for sale
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2Income tax benefit (expense)
    
    
    (64
    )
    
    
    50
    
    
    
    (44
    )
    
    
    57Income from discontinued operations
    
    $
    349
    
    
    $
    81
    
    
    $
    227
    
    
    $
    396
 8. SEGMENT REPORTING
   17




---



##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
 Three months ended June 30, 2005:Hotel
    
    HotelOwnership
    
    Financing
    
    Corporate
    
    ConsolidatedOperating revenues
    
    $
    40,622
    
    
    $
    
    
    
    $
    
    
    
    $
    40,622Operating expenses
    
    
    (26,429
    )
    
    
    (10
    )
    
    
    (1,891
    )
    
    
    (28,330
    )Depreciation and amortization
    
    
    (5,093
    )
    
    
    
    
    
    
    
    
    
    
    (5,093
    )Interest and other income
    
    
    
    
    
    
    1,151
    
    
    
    76
    
    
    
    1,227Interest expense
    
    
    (2,021
    )
    
    
    (402
    )
    
    
    
    
    
    
    (2,423
    )Income before allocation to minority interest in Partnership,
allocation to minority interest in consolidated joint ventures,
income taxes, and equity in income of unconsolidated
joint ventures
    
    
    7,079
    
    
    
    739
    
    
    
    (1,815
    )
    
    
    6,003Minority interest in Partnership
    
    
    
    
    
    
    
    
    
    
    (175
    )
    
    
    (175
    )Minority interest in consolidated joint ventures
    
    
    (139
    )
    
    
    
    
    
    
    
    
    
    
    (139
    )Income tax expense
    
    
    (291
    )
    
    
    
    
    
    
    
    
    
    
    (291
    )Equity in income of unconsolidated joint ventures
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    29Income (loss) from continuing operations
    
    $
    6,678
    
    
    $
    739
    
    
    $
    (1,990
    )
    
    $
    5,427Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    349Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,776Total assets
    
    $
    391,131
    
    
    $
    33,332
    
    
    $
    
    
    
    $
    424,463
 Three months ended June 30, 2004:Hotel
    
    HotelOwnership
    
    Financing
    
    Corporate
    
    ConsolidatedOperating revenues
    
    $
    35,708
    
    
    $
    
    
    
    $
    
    
    
    $
    35,708Operating expenses
    
    
    (22,947
    )
    
    
    (2
    )
    
    
    (1,506
    )
    
    
    (24,455
    )Depreciation and amortization
    
    
    (4,583
    )
    
    
    
    
    
    
    
    
    
    
    (4,583
    )Interest and other income
    
    
    
    
    
    
    355
    
    
    
    69
    
    
    
    424Interest expense
    
    
    (1,607
    )
    
    
    (66
    )
    
    
    
    
    
    
    (1,673
    )Income before allocation to minority interest in Partnership,
allocation to minority interest in consolidated joint ventures,
income taxes, and equity in loss of unconsolidated
joint ventures
    
    
    6,571
    
    
    
    287
    
    
    
    (1,437
    )
    
    
    5,421Minority interest in Partnership
    
    
    
    
    
    
    
    
    
    
    (176
    )
    
    
    (176
    )Minority interest in consolidated joint ventures
    
    
    (78
    )
    
    
    
    
    
    
    
    
    
    
    (78
    )Income tax benefit
    
    
    296
    
    
    
    
    
    
    
    
    
    
    
    296Equity in loss of unconsolidated joint ventures
    
    
    (33
    )
    
    
    
    
    
    
    
    
    
    
    (33
    )Income (loss) from continuing operations
    
    $
    6,756
    
    
    $
    287
    
    
    $
    (1,613
    )
    
    $
    5,430Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,511Total assets
    
    $
    383,703
    
    
    $
    14,160
    
    
    $
    
    
    
    $
    397,863
 18




---



##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
 Six months ended June 30, 2005:Hotel
    
    HotelOwnership
    

Financing
    
    Corporate
    
    ConsolidatedOperating revenues
    
    $
    75,558
    
    
    $
    
    
    
    $
    
    
    
    $
    75,558Operating expenses
    
    
    (50,409
    )
    
    
    (11
    )
    
    
    (3,879
    )
    
    
    (54,299
    )Depreciation and amortization
    
    
    (10,002
    )
    
    
    
    
    
    
    
    
    
    
    (10,002
    )Interest and other income
    
    
    
    
    
    
    2,614
    
    
    
    133
    
    
    
    2,747Interest expense
    
    
    (4,011
    )
    
    
    (819
    )
    
    
    
    
    
    
    (4,830
    )Income before allocation to minority interest in Partnership,
allocation to minority interest in consolidated joint ventures,
income taxes, and equity in loss of unconsolidated
joint ventures
    
    
    11,136
    
    
    
    1,784
    
    
    
    (3,746
    )
    
    
    9,174Minority interest in Partnership
    
    
    
    
    
    
    
    
    
    
    (238
    )
    
    
    (238
    )Minority interest in consolidated joint ventures
    
    
    (267
    )
    
    
    
    
    
    
    
    
    
    
    (267
    )Income tax expense
    
    
    (109
    )
    
    
    
    
    
    
    
    
    
    
    (109
    )Equity in loss of unconsolidated joint ventures
    
    
    (33
    )
    
    
    
    
    
    
    
    
    
    
    (33
    )Income (loss) from continuing operations
    
    $
    10,727
    
    
    $
    1,784
    
    
    $
    (3,984
    )
    
    $
    8,527Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,754Total assets
    
    $
    391,131
    
    
    $
    33,332
    
    
    $
    
    
    
    $
    424,463
 Six months ended June 30, 2004:Hotel
    
    HotelOwnership
    
    Financing
    
    Corporate
    
    ConsolidatedOperating revenues
    
    $
    67,916
    
    
    $
    
    
    
    $
    
    
    
    $
    67,916Operating expenses
    
    
    (44,499
    )
    
    
    (2
    )
    
    
    (3,138
    )
    
    
    (47,639
    )Depreciation and amortization
    
    
    (9,192
    )
    
    
    
    
    
    
    
    
    
    
    (9,192
    )Interest and other income
    
    
    
    
    
    
    616
    
    
    
    140
    
    
    
    756Interest expense
    
    
    (3,283
    )
    
    
    (121
    )
    
    
    
    
    
    
    (3,404
    )Income before allocation to minority interest in Partnership,
allocation to minority interest in consolidated joint ventures,
income taxes, and equity in loss of unconsolidated
joint ventures
    
    
    10,942
    
    
    
    493
    
    
    
    (2,998
    )
    
    
    8,437Minority interest in Partnership
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    (172
    )Minority interest in consolidated joint ventures
    
    
    (262
    )
    
    
    
    
    
    
    
    
    
    
    (262
    )Income tax benefit
    
    
    933
    
    
    
    
    
    
    
    
    
    
    
    933Equity in loss of unconsolidated joint ventures
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    (54
    )Income (loss) from continuing operations
    
    $
    11,559
    
    
    $
    493
    
    
    $
    (3,170
    )
    
    $
    8,882Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    396Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,278Total assets
    
    $
    383,703
    
    
    $
    14,160
    
    
    $
    
    
    
    $
    397,863
 19




---



##### 



WINSTON HOTELS, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  ($ in thousands, except per share amounts)
 9. MINORITY INTEREST IN PARTNERSHIP
 
 20




---



##### 



Item 2 -
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations($ in thousands)
 Executive Overview
    
    
    acquiring and developing hotels with a favorable current yield and an opportunity for appreciation,
    
    implementing selective capital improvements designed to increase profitability consistent with
franchisor standards and mandates,
    
    directing our hotel managers to minimize operating costs and increase revenues, and
    
    originating or acquiring hotel loans, and other investments that our Board of Directors deems
appropriate.
    Recent Developments
  
    
    The Company is under contract to purchase a six-property, 698-room portfolio for $46.0
million. The properties consist of one Courtyard by Marriott hotel and five Towneplace
Suites hotels.
 21




---



##### 




    
    The Company closed on the purchase of 4.5 acres of land for $2.94 million and plans to
build a 142-room Homewood Suites hotel in the Forrestal Center of Princeton University for
an all-in cost of approximately $19.6 million, $12.0 million of which is expected to be
financed. The hotel is scheduled to break ground this summer and is expected to open in the
first quarter of 2007.
    
    The Company recently formed a joint venture with DeHoff Development Company, a
diversified real estate owner and developer and plans to build a 121-room Hilton Garden Inn
at Gateway Corporate Park, adjacent to the Akron-Canton Airport in Green, Ohio for
approximately $12.0 million.
  Results of Operations for the Three and Six Months Ended June 30, 2005 versus the Three and Six
Months Ended June 30, 2004
 HOTEL OWNERSHIP SEGMENT
 Revenues
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Percentage
    
    
    
    
    
    
    
    
    
    Percentage2005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeHotels owned as of June 30, 2005 (a):Hotel room revenues
    
    $
    36,703
    
    
    $
    32,216
    
    
    
    13.9
    %
    
    $
    68,592
    
    
    $
    60,766
    
    
    
    12.9
    %RevPAR
    
    $
    64.75
    
    
    $
    59.55
    
    
    
    8.7
    %
    
    $
    60.83
    
    
    $
    56.77
    
    
    
    7.2
    %Occupancy
    
    
    72.9
    %
    
    
    73.3
    %
    
    
    -0.5
    %
    
    
    69.4
    %
    
    
    70.4
    %
    
    
    -1.4
    %Average daily rate (ADR)
    
    $
    88.84
    
    
    $
    81.25
    
    
    
    9.3
    %
    
    $
    87.70
    
    
    $
    80.67
    
    
    
    8.7
    %
 
 (a)
    
    Includes all owned or partially owned consolidated hotels as of June 30, 2005. Room
  22




---



##### 



Food and Beverage 
 Other Operating Departments 
 Percentage Lease Revenue
 Expenses
 Rooms 
 Food and Beverage 
 Other Operating Departments
 Property Operating
 Real Estate Taxes and Property and Casualty Insurance 
 Franchise Costs 
 23




---



##### 



Maintenance and Repair Costs 
 Management Fees 
 Depreciation and Amortization
 Interest Expense
 Income Allocation to Minority Interest in Consolidated Joint Ventures
 Income Tax Benefit (Expense)
 HOTEL FINANCING SEGMENT
 General and Administrative
 Interest and Other Income
 24




---



##### 



Interest Expense
 GENERAL CORPORATE INCOME AND EXPENSES
  General and Administrative
 Interest and Other Income
 Income Allocation to Minority Interest in Partnership
 Discontinued Operations
 Liquidity and Capital Resources
 Operating
   25




---



##### 



Investing
      Financing
  26




---



##### 



Off-Balance Sheet Arrangements
  Contractual Obligations and Commercial Commitments
  Critical Accounting Policies
  Accounts and Notes Receivable.
 27




---



##### 



Accounting for Long-Lived Assets
   Franchise Agreements
  28




---



##### 



Seasonality
  Funds From Operations (FFO)
   29




---



##### 



WINSTON HOTELS, INC.
 RECONCILIATION AND CALCULATION OF FFO AND
FFO AVAILABLE TO COMMON SHAREHOLDERS
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income
    
    $
    5,776
    
    
    $
    5,511
    
    
    $
    8,754
    
    
    $
    9,278(Gain) loss on sale of discontinued operations
    
    
    (471
    )
    
    
    284
    
    
    
    (381
    )
    
    
    (16
    )Minority interest in Partnership allocation of income
    
    
    175
    
    
    
    176
    
    
    
    238
    
    
    
    172Minority interest in Partnership allocation of gain
(loss) on sale of discontinued operations
    
    
    22
    
    
    
    (14
    )
    
    
    17
    
    
    
    1Minority interest in Partnership allocation of earnings
(loss) from discontinued operations
    
    
    (4
    )
    
    
    19
    
    
    
    (6
    )
    
    
    20Depreciation
    
    
    4,422
    
    
    
    4,165
    
    
    
    8,806
    
    
    
    8,151Depreciation from discontinued operations
    
    
    29
    
    
    
    231
    
    
    
    123
    
    
    
    489Depreciation from joint ventures
    
    
    189
    
    
    
    101
    
    
    
    380
    
    
    
    308FFO
    
    
    10,138
    
    
    
    10,473
    
    
    
    17,931
    
    
    
    18,403Loss on redemption of Series A Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,720
    )Preferred stock dividend
    
    
    (1,840
    )
    
    
    (1,840
    )
    
    
    (3,680
    )
    
    
    (3,635
    )FFO Available to Common Shareholders
    
    $
    8,298
    
    
    $
    8,633
    
    
    $
    14,251
    
    
    $
    13,048
 Forward Looking Statements
  30




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##### 



Item 3 -
    
    Quantitative and Qualitative Disclosures About Market Risk
($ in thousands)
   2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    Thereafter
    
    Total
    
    Fair ValueVariable rate GE line:
    
    $
    67,900
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    67,900
    
    
    $
    67,900Average interest rate
    
    
    (a
    )
    
    
    (a
    )
    
    
    (a
    )
    
    
    (a
    )
    
    
    (a
    )
    
    
    (a
    )
    
    
    (a
    )Long-term debt:Fixed rate
    
    $
    811
    
    
    $
    1,715
    
    
    $
    1,846
    
    
    $
    58,396
    
    
    $
    
    
    
    $
    
    
    
    $
    62,768
    
    
    $
    64,350Average interest rate
    
    
    7.38
    %
    
    
    7.38
    %
    
    
    7.38
    %
    
    
    7.38
    %
    
    
    7.38
    %
    
    
    7.38
    %
    
    
    7.38
    %Variable rate
    
    $
    125
    
    
    $
    262
    
    
    $
    281
    
    
    $
    300
    
    
    $
    321
    
    
    $
    10,181
    
    
    $
    11,470
    
    
    $
    11,470Average interest rate
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )Consolidated joint venture long-term debt:Fixed rate
    
    $
    101
    
    
    $
    213
    
    
    $
    229
    
    
    $
    247
    
    
    $
    267
    
    
    $
    7,951
    
    
    $
    9,008
    
    
    $
    9,352Average interest rate
    
    
    7.51
    %
    
    
    7.51
    %
    
    
    7.51
    %
    
    
    7.51
    %
    
    
    7.51
    %
    
    
    7.51
    %
    
    
    7.51
    %Variable rate
    
    $
    43
    
    
    $
    92
    
    
    $
    100
    
    
    $
    109
    
    
    $
    119
    
    
    $
    4,331
    
    
    $
    4,794
    
    
    $
    4,794Average interest rate
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )
 (a)
    
    Weighted average interest rate for the six months ended June 30, 2005 was 5.02%. Rate is 30-day to 180-day LIBOR
plus 1.75% to 2.50%, (30-day and 180-day LIBOR were 3.34% and 3.71%, respectively, at June 30, 2005).
(see Note 3 to consolidated financial statements)(b)
    
    Weighted average interest rate for the six months ended June 30, 2005 was 6.11%. Rate is 30-day LIBOR plus 3.0%. 31




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##### 



Item 4  Controls and Procedures
     32




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##### 



PART II  OTHER INFORMATION
 Item 4  Submission of Matters to Vote of Security Holders
   Voted Against or
    
    Number of BrokerName
    
    Votes For
    
    Withheld
    
    Non-votes
    
    TotalsCharles M. Winston
    
    
    16,660,642
    
    
    
    8,401,670
    
    
    
    
    
    
    
    25,062,312Robert W. Winston
    
    
    16,681,200
    
    
    
    8,381,112
    
    
    
    
    
    
    
    25,062,312Thomas F. Darden
    
    
    15,839,768
    
    
    
    9,222,544
    
    
    
    
    
    
    
    25,062,312Richard L. Daugherty
    
    
    24,022,807
    
    
    
    1,039,505
    
    
    
    
    
    
    
    25,062,312Edwin B. Borden
    
    
    23,972,126
    
    
    
    1,090,186
    
    
    
    
    
    
    
    25,062,312David C. Sullivan
    
    
    24,503,791
    
    
    
    558,521
    
    
    
    
    
    
    
    25,062,312
  Votes for:
    
    
    17,908,936Votes against or withheld:
    
    
    950,067Votes abstained:
    
    
    132,482Broker non-votes:
    
    
    6,070,827Total
    
    
    25,062,312
  Votes for:
    
    
    24,710,147Votes against or withheld:
    
    
    318,968Votes abstained:
    
    
    33,197Total
    
    
    25,062,312
 33




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##### 



Item 6  Exhibits
 Exhibit Number
    
    Description3.1(a)
    
    Restated Articles of Incorporation, as amended (Incorporated by reference to Exhibit 3.1
to the Companys Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on August 4, 1999 and Exhibit 4.4(b) to the Companys Registration Statement on
Form 8-A as filed with the Securities and Exchange Commission on January 30, 2004).3.1(b)
    
    Articles of Amendment to the Restated Articles of Incorporation of the Registrant
Deleting Article 7 therein.31.1
    
    Certification of Principal Executive Officer of Periodic Report Pursuant to Rule
13a-14(a) or Rule 15d-14(a)31.2
    
    Certification of Principal Financial Officer of Periodic Report Pursuant to Rule
13a-14(a) or Rule 15d-14(a)32.1
    
    Certification of Robert W. Winston, III, Chief Executive Officer of Winston
Hotels, Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 and dated August 5, 200532.2
    
    Certification of Joseph V. Green, Chief Financial Officer of Winston Hotels,
Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and dated August 5, 2005
 34




---



##### 



SIGNATURES
  WINSTON HOTELS, INC.Date    August 5, 2005
    /s/ Joseph V. GreenJoseph V. GreenPresident and Chief Financial Officer
(Authorized officer and Principal Financial Officer) 35




---



##### 



EXHIBIT INDEX
 Exhibit Number
    
    Description3.1(a)
    
    Restated Articles of Incorporation, as amended (Incorporated by reference to Exhibit 3.1
to the Companys Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on August 4, 1999 and Exhibit 4.4(b) to the Companys Registration Statement on
Form 8-A as filed with the Securities and Exchange Commission on January 30, 2004).3.1(b)
    
    Articles of Amendment to the Restated Articles of Incorporation of the Registrant
Deleting Article 7 therein.31.1
    
    Certification of Principal Executive Officer of Periodic Report Pursuant to Rule
13a-14(a) or Rule 15d-14(a)31.2
    
    Certification of Principal Financial Officer of Periodic Report Pursuant to Rule
13a-14(a) or Rule 15d-14(a)32.1
    
    Certification of Robert W. Winston, III, Chief Executive Officer of Winston
Hotels, Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 and dated August 5, 200532.2
    
    Certification of Joseph V. Green, Chief Financial Officer of Winston Hotels,
Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and dated August 5, 2005
 36