<PAGE>   1
================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-K/A

                                AMENDMENT NO. 2

(MARK ONE)
      [X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                                       OR

      [  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        FOR THE TRANSITION PERIOD FROM TO

                       COMMISSION FILE NUMBER 333-39595-01

                        FELCOR SUITES LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)

                  DELAWARE                                      75-2564994
         (State or other jurisdiction of                      (I.R.S. Employer
         incorporation or organization)                      Identification No.)

545 E. JOHN CARPENTER FRWY., SUITE 1300, IRVING, TEXAS              75062
     (Address of principal executive offices)                     (Zip Code)

                                 (972) 444-4900
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                      NAME OF EACH EXCHANGE
TITLE OF EACH CLASS                                    ON WHICH REGISTERED
-------------------                                   ---------------------
<S>                                                 <C>
       NONE
</TABLE>


Securities registered pursuant to Section 12(g) of the Act:

                                      NONE
                                (Title of class)

      Indicate by check mark whether the registrant (i) 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 (or for such shorter period that the
registrant was required to file such reports), and (ii) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

      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 definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

      The aggregate market value of the voting and non-voting limited
partnership interests held by non-affiliates of the registrant, as of March 10,
1998, was approximately $110 million.



                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

================================================================================


<PAGE>   2


                        FELCOR SUITES LIMITED PARTNERSHIP

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                  
                                                                                                  FORM 10-K
                                                                                                    REPORT   
ITEM NO.                                                                                            PAGE
-------                                                                                            --------
<S>                                                                                               <C>
                                     PART IV

14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K .........................       3
</TABLE>




                                       2
<PAGE>   3
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

          (a) 1. Financial Statements

          Included herein at pages F-1 through F-27.

              2. Financial Statement Schedules

          The following financial statement schedule is included herein at page
          F-26

              Schedule III - Real Estate and Accumulated Depreciation for FelCor
          Suites Limited Partnership
 
          All other schedules for which provision is made in Regulation S-X are
either not required to be included herein under the related instructions or are
inapplicable or the related information is included in the footnotes to the
applicable financial statement and, therefore, have been omitted.

              3. Exhibits

          The following exhibits are filed as part of this Annual Report on Form
          10-K:

  EXHIBIT
  NUMBER                  DESCRIPTION OF EXHIBIT
  -------                 ----------------------
     3.1   -   Certificate of Limited Partnership of the Operating
               Partnership dated May 20, 1994, as filed with the Secretary of
               State of Delaware (filed as Exhibit 3.1 to the Operating
               Partnership's registration statement on Form S-4 (File No.
               333-39595) (the "1997 S-4 Registration Statement") and
               incorporated herein by reference).

     3.2   -   Amended and Restated Agreement of Limited Partnership of the
               Operating Partnership (filed as Exhibit 10.1 to FelCor's Annual
               Report on Form 10-K/A Amendment No. 1 for the fiscal year ended
               December 31, 1994 (the "1994 10-K/A") and incorporated herein by
               reference).



                                      3
<PAGE>   4

     3.2.1 -   First Amendment to Amended and Restated Agreement of
               Limited Partnership of the Operating Partnership dated as of
               November 17, 1995 by and among FelCor, Promus Hotels, Inc. and
               all of the persons or entities who are or shall in the future
               become limited partners of the Operating Partnership (filed as
               Exhibit 10.1.1 to FelCor's Annual Report on Form 10-K, as
               amended, for the fiscal year ended December 31, 1995 (the "1995
               10-K") and incorporated herein by reference).

     3.2.2 -   Second Amendment to Amended and Restated Agreement of
               Limited Partnership of the Operating Partnership dated as of
               January 9, 1996 between FelCor and all of the persons or entities
               who are or shall in the future become limited partners of the
               Operating Partnership (filed as Exhibit 10.1.2 to the 1995 10-K
               and incorporated herein by reference).

     3.2.3 -   Third Amendment to Amended and Restated Agreement of Limited
               Partnership of the Operating Partnership dated as of January 10,
               1996 by and among FelCor, MarRay-LexGreen, Inc. and all of the
               persons and entities who are or shall in the future become
               limited partners of the Operating Partnership (filed as Exhibit
               10.1.3 to the 1995 10-K and incorporated herein by reference).

     3.2.4 -   Fourth Amendment to the Amended and Restated Agreement of
               Limited Partnership of the Operating Partnership dated as of
               January 10, 1996 by and among FelCor, Piscataway-Centennial
               Associates Limited Partnership and all of the persons or entities
               who are or shall in the future become limited partners of the
               Operating Partnership (filed as Exhibit 10.1.4 to the 1995 10-K
               and incorporated herein by reference).

     3.2.5 -   Fifth Amendment to Amended and Restated Agreement of Limited
               Partnership of the Operating Partnership dated as of May 2, 1996,
               between FelCor and all of the persons or entities who are or
               shall in the future become limited partners of the Operating
               Partnership, adopting Addendum No. 2 to Amended and Restated
               Agreement of Limited Partnership of the Operating Partnership
               dated as of May 2, 1996 (filed as Exhibit 10.1.5 to FelCor's Form
               10-Q for the quarter ended June 30, 1996 (the "1996 Second
               Quarter 10-Q") and incorporated herein by reference).

     3.2.6 -   Sixth Amendment to Amended and Restated Agreement of Limited
               Partnership of the Operating Partnership dated as of September
               16, 1996, by and among FelCor, John B. Urbahns, II and all of the
               persons or entities who are or shall in the future become limited
               partners of the Operating Partnership (filed as Exhibit 10.1.6 to
               FelCor's Annual Report on Form 10-K for the fiscal year ended
               December 31, 1996 (the "1996 10-K") and incorporated herein by
               reference).

     3.2.7 -   Seventh Amendment to Amended and Restated Agreement of Limited
               Partnership of the Operating Partnership dated as of May 16,
               1997, by and among the Registrant, PMB Associates, Ltd. and all
               of the persons or entities who are or shall in the future become
               limited partners of the Operating Partnership (filed as Exhibit
               10.1.7 to FelCor's Annual Report on Form 10-K for the fiscal year
               ended December 31, 1997 and incorporated herein by reference).

     3.2.8 -   Eighth Amendment to Amended and Restated Agreement of Limited
               Partnership of the Operating Partnership dated as of February 6,
               1998, by and among the Registrant, Columbus/Front Ltd. and all of
               the persons or entities who are or shall in the future become
               limited partners of the Operating Partnership (filed as Exhibit
               10.1.8 to FelCor's Annual Report on Form 10-K for the fiscal year
               ended December 31, 1997 and incorporated herein by reference).



                                      4
<PAGE>   5

     4.1    -  Indenture dated as of October 1, 1997 by and among the Operating
               Partnership, FelCor, the Subsidiary Guarantors named therein and
               SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit 4.1
               to the 1997 S-4 Registration Statement and incorporated herein by
               reference).

     10.2.1 -  Form of Lease Agreement between the Operating Partnership as
               Lessor and DJONT Operations, L.L.C. ("DJONT") as Lessee (filed as
               Exhibit 10.2.1 to FelCor's 1995 10-K and incorporated herein by
               reference).

     10.2.2 -  Schedule of executed Lease Agreements identifying material
               variations from the form of Lease Agreement with respect to
               hotels acquired by the Operating Partnership through December 31,
               1997 (filed as Exhibit 10.2.2 to FelCor's Annual Report on Form
               10-K for the fiscal year ended December 31, 1997 and incorporated
               herein by reference).
      
     10.3   -  Amended and Restated Loan Agreement dated as of September 26,
               1996, among FelCor and the Operating Partnership, as Borrowers,
               Boatmen's National Bank of Oklahoma, as Agent and Lender, and
               First Tennessee Bank National Association, Liberty Bank and Trust
               Company of Tulsa, National Association, Bank One, Texas, N.A.,
               First National Bank of Commerce, and AmSouth Bank of Alabama, as
               Lenders (filed as Exhibit 10.3.4 to FelCor's Form 10-Q for the
               quarter ended September 30, 1996 (the "1996 Third Quarter 10-Q")
               and incorporated herein by reference).

     10.5   -  Employment Agreement dated as of July 28, 1994 between FelCor
               and Hervey A. Feldman (filed as Exhibit 10.7 to FelCor's 1994
               10-K/A and incorporated herein by reference).

     10.6   -  Employment Agreement dated as of July 28, 1994 between FelCor
               and Thomas J. Corcoran, Jr. (filed as Exhibit 10.8 to FelCor's
               1994 10-K/A and incorporated herein by reference).

     10.7.1 -  Restricted Stock and Stock Option Plan of FelCor (filed as
               Exhibit 10.9 to FelCor's 1994 10-K/A and incorporated herein by
               reference).

     10.7.2 -  1995 Restricted Stock and Stock Option Plan of Felcor filed as
               Exhibit 10.9.2 to FelCor's 1995 10-K and incorporated herein by
               reference).

     10.8.  -  Savings and Investment Plan of FelCor (filed as Exhibit 10.10 to
               FelCor's 1994 10-K/A and incorporated herein by reference).

     10.9   -  Registration Rights Agreement dated as of July 21, 1994 between
               FelCor and the parties named therein (filed as Exhibit 10.11 to
               FelCor's 1994 10-K/A and incorporated herein by reference).

     10.10  -  Agreement dated as of April 15, 1995 among FelCor, the Operating
               Partnership, FelCor, Inc., Thomas J. Corcoran, Jr. and Hervey A.
               Feldman relating to purchase of securities (filed as Exhibit
               10.15 to FelCor's Registration Statement on Form S-11 (File No.
               33-91870) (the "May 1995 Registration Statement") and
               incorporated herein by reference).

     10.11  -  Registration Rights Agreement dated as of November 17, 1995
               between the FelCor and Cleveland Finance Associates Limited
               Partnership (filed as Exhibit 10.27 to FelCor's 1995 10-K and
               incorporated herein by reference).

     10.12  -  Registration Rights Agreement dated as of January 3,
               1996 between FelCor and Robert E. Woolley and Charles M. Sweeney
               (filed as Exhibit 10.28 to FelCor's 1995 10-K and incorporated
               herein by reference).
     
     10.13  -  Credit Agreement dated as of February 6, 1996 by and among the
               Operating Partnership, as borrower, Holdings and FelCor, as
               guarantors, and Canadian Imperial Bank of Commerce, as agent
               (filed as Exhibit 10.30 to FelCor's 1996 Form 8-K and
               incorporated herein by reference).

     10.14  -  Contract for Purchase and Sale of Hotels dated as of June 5, 1997
               by and among ITT Sheraton Corporation, Sheraton Savannah Corp.,
               Sheraton Peachtree Corp., Sheraton Crescent Corp., Sheraton
               Dallas, Corp., Sheraton Gateway Suites O'Hare Investment
               Partnership, and the Operating Partnership (filed as Exhibit
               10.24 to the FelCor's Current Report on Form 8-K dated June 4,
               1997 and incorporated herein by reference).

     10.15  -  Third Amended and Restated Revolving Credit Agreement dated as of
               August 14, 1997 among FelCor and the Operating Partnership, as
               Borrower, the Lenders party thereto, The Chase Manhattan Bank, as
               Administrative Agent, and Wells Fargo Bank, National Association,
               as Documentation Agent (filed as Exhibit 10.23 to the 1997 S-4
               Registration Statement and incorporated herein by reference).

     10.16  -  Registration Rights Agreement dated as of September 26, 1997
               among the General Partner, the Operating Partnership, Morgan
               Stanley & Co. Incorporated, NationsBank Capital Markets, Inc. and
               Salomon Brothers Inc (filed as Exhibit 10.25 to the 1997 S-4
               Registration Statement and incorporated herein by reference).

     21.1   -  List of Subsidiaries of the Registrant.

     23.1   -  Consent of Coopers & Lybrand L.L.P.

     27.1   -  Financial Data Schedule.

     (b)  Reports on Form 8-K:

          None



                                      5
<PAGE>   6

                                   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.


                                             FELCOR SUITES LIMITED PARTNERSHIP
                                             a Delaware limited partnership

                                             By: FelCor Suite Hotels, Inc.
                                                 Its General Partner



                                             By: /s/ Randall L. Churchey
                                                --------------------------------
                                                     Randall L. Churchey
                                          Senior Vice President, Chief Financial
                                                    Officer & Treasurer

Date: June 16, 1998

 





                                      6
<PAGE>   7
                        FELCOR SUITES LIMITED PARTNERSHIP

                          INDEX TO FINANCIAL STATEMENTS

                         PART I - FINANCIAL INFORMATION




                        FELCOR SUITES LIMITED PARTNERSHIP


<TABLE>
<S>                                                                                                      <C>
Report of Independent Accountants ..................................................................      F-2
Consolidated Balance Sheets - December 31, 1997 and 1996 ...........................................      F-3
Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995 .........      F-4
Consolidated Statements of Partners' Capital for the years ended December 31, 1997, 1996 and 1995 ..      F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 .........      F-6
Notes to Consolidated Financial Statements .........................................................      F-7
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 1997 ....................     F-26
</TABLE>


                                       F-1

<PAGE>   8





                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors
of FelCor Suite Hotels, Inc.

         We have audited the accompanying consolidated financial statements and
the financial statement schedule of FelCor Suites Limited Partnership listed in
Item 14(a) of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of FelCor Suite Hotels, Inc.'s (the "Company")
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

         We conducted our audits in accordance with generally accepted auditing
standards. 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 includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
FelCor Suites Limited Partnership as of December 31, 1997 and 1996 and the
consolidated results of their operations and their cash flows for each of the
three years then ended in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be included therein.


COOPERS & LYBRAND L.L.P.

Dallas, Texas
January 20, 1998
     except for Note 13 as to which
     the date is February 17, 1998


                                       F-2

<PAGE>   9



                        FELCOR SUITES LIMITED PARTNERSHIP

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                      ASSETS

                                                                                   1997           1996
                                                                                ----------     ----------
<S>                                                                             <C>             <C>   
Investment in hotels, net of accumulated depreciation of
   $87,400 in 1997 and $36,718 in 1996 ....................................     $1,489,764     $  899,691
Investment in unconsolidated entities .....................................        132,991         59,867
Cash and cash equivalents .................................................         17,543          7,793
Due from Lessee ...........................................................         18,908          5,526
Deferred expenses, net of accumulated amortization of
    $1,987 in 1997 and $364 in 1996 .......................................         10,593          3,235
Other assets ..............................................................          3,565          2,676
                                                                                ----------     ----------

     Total assets .........................................................     $1,673,364     $  978,788
                                                                                ==========     ==========

                                          LIABILITIES AND PARTNERS' CAPITAL



Debt, net of discount of $1,855 at December 31, 1997 ......................     $  465,726     $  226,550
Distributions payable .....................................................         24,671         16,090
Accrued expenses and other liabilities ....................................         11,331          5,235
Capital lease obligations .................................................         11,093         12,875
Minority interest in other partnerships ...................................          8,594
                                                                                ----------     ----------

     Total liabilities ....................................................        521,415        260,750

Commitments and contingencies (Notes 5 and 8)

Redeemable units, at redemption value .....................................        102,933         98,542
Preferred units ...........................................................        151,250        151,250
Partners' capital .........................................................        897,766        468,246
                                                                                ----------     ----------

     Total liabilities and partners' capital ..............................     $1,673,364     $  978,788
                                                                                ==========     ==========
</TABLE>







                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                       F-3

<PAGE>   10


                        FELCOR SUITES LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For the years ended December 31, 1997, 1996 and 1995
                      (in thousands, except per unit data)



<TABLE>
<CAPTION>
                                                                              1997           1996           1995
                                                                           ---------      ---------      ---------
<S>                                                                        <C>            <C>            <C>      
Revenues:
     Percentage lease revenue ........................................     $ 169,114      $  97,950      $  23,787
     Equity in income from unconsolidated entities ...................         6,963          2,010            513
     Other revenue ...................................................           574            984          1,691
                                                                           ---------      ---------      ---------

                  Total revenues .....................................       176,651        100,944         25,991
                                                                           ---------      ---------      ---------
Expenses:
     General and administrative ......................................         3,743          1,819            870
     Depreciation ....................................................        50,798         26,544          5,232
     Taxes, insurance and other ......................................        23,093         13,897          2,563
     Interest expense ................................................        28,792          9,803          2,004
     Minority interest in other partnerships .........................           573
                                                                           ---------      ---------      ---------

                  Total expenses .....................................       106,999         52,063         10,669
                                                                           ---------      ---------      ---------

Income before extraordinary charge ...................................        69,652         48,881         15,322

Extraordinary charge from write off of deferred financing fees .......           185          2,354
                                                                           ---------      ---------      ---------

Net income ...........................................................        69,467         46,527         15,322

Preferred distributions ..............................................        11,797          7,734
                                                                           ---------      ---------      ---------

Net income applicable to unitholders .................................     $  57,670      $  38,793      $  15,322
                                                                           =========      =========      =========

Per unit data:
    Basic:
     Net income applicable to unitholders
          before extraordinary charge ................................     $    1.70      $    1.59      $    1.72
     Extraordinary charge ............................................         (0.01)         (0.09)
                                                                           ---------      ---------      ---------

     Net income applicable to unitholders ............................     $    1.69      $    1.50      $    1.72
                                                                           =========      =========      =========

     Weighted average number of units outstanding ....................        34,126         25,809          8,927
                                                                           =========      =========      =========

    Diluted:
     Net income applicable to unitholders
          before extraordinary charge ................................     $    1.68      $    1.58      $    1.70
     Extraordinary charge ............................................         (0.01)         (0.09)
                                                                           ---------      ---------      ---------

     Net income applicable to unitholders ............................     $    1.67      $    1.49      $    1.70
                                                                           =========      =========      =========

     Weighted average number of units outstanding ....................        34,467         26,004          8,989
                                                                           =========      =========      =========
</TABLE>


                  The accompanying notes are an integral part
                  of these consolidated financial statements.


                                       F-4

<PAGE>   11


                        FELCOR SUITES LIMITED PARTNERSHIP

                         STATEMENTS OF PARTNERS' CAPITAL
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                      (IN THOUSANDS, EXCEPT PER UNIT DATA)





<TABLE>
<S>                                          <C>
Balance, December 31, 1994 .............     $  61,885

Contributions ..........................       402,554
Distributions ..........................       (17,593)
Allocations to redeemable units ........       (16,735)
Net income .............................        15,322
                                             ---------

Balance, December 31, 1995 .............       445,433

Contributions ..........................        44,483
Distributions ..........................       (57,892)
Allocations to redeemable units ........       (10,304)
Net income .............................        46,527
                                             ---------

Balance, December 31, 1996 .............       468,246

Contributions ..........................       449,604
Distributions ..........................       (90,261)
Allocations from redeemable units ......           710
Net income .............................        69,467
                                             ---------

Balance, December 31, 1997 .............     $ 897,766
                                             =========
</TABLE>


                   The accompanying notes are an integral part
                  of these consolidated financial statements.


                                       F-5

<PAGE>   12


                        FELCOR SUITES LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                              1997           1996           1995
                                                                           ---------      ---------      ---------
<S>                                                                        <C>            <C>            <C>      
Cash flows from operating activities:
     Net income .........................................................  $  69,467      $  46,527      $  15,322
     Adjustments to reconcile net income to net cash provided
        by operating activities, net of effects of acquisitions:
        Depreciation ....................................................     50,798         26,544          5,232
        Amortization of deferred financing fees and organization costs...      1,468            554            228
        Amortization of unearned officers' and directors' compensation...      1,017            506            158
        Equity in income from unconsolidated entities ...................     (6,963)        (2,010)          (513)
        Extraordinary charge for write off of deferred financing fees....        185          2,354
        Fully vested officer stock grant ................................                                      108
        Minority interest in other partnerships .........................        573
     Changes in assets and liabilities:
        Due from Lessee .................................................    (13,382)        (3,130)        (1,137)
        Deferred financing fees .........................................     (8,825)        (4,484)        (1,072)
        Deferred costs and other assets .................................     (1,175)           353         (2,064)
        Accrued expenses and other liabilities ..........................      4,315            280            741
                                                                           ---------      ---------      ---------
                  Net cash flow provided by operating activities ........     97,478         67,494         17,003
                                                                           ---------      ---------      ---------
Cash flows from investing activities:
        Acquisition of hotels ...........................................   (574,100)      (365,907)      (219,164)
        Prepayments under purchase agreements ...........................                                  (21,701)
        Acquisition of unconsolidated entities ..........................    (65,271)       (43,424)       (13,166)
        Improvements and additions to hotels ............................    (52,700)       (71,051)        (5,166)
          Cash distributions from unconsolidated entities ...............      4,211          1,954
                                                                           ---------      ---------      ---------
                    Net cash flow used in investing activities ..........   (687,860)      (478,428)      (259,197)
                                                                           ---------      ---------      ---------
Cash flows from financing activities:
        Proceeds from borrowings ........................................    679,144        303,350        128,600
        Repayment of borrowings .........................................   (445,900)      (193,954)      (129,850)
        Contributions ...................................................    448,586         37,980        423,628
        Proceeds from sale of preferred units ...........................                   151,250
        Distributions paid to unitholders ...............................    (69,901)       (41,936)       (14,481)
        Dividends paid to preferred unitholders .........................    (11,797)        (4,784)
                                                                           ---------      ---------      ---------
                   Net cash flow provided by financing activities .......    600,132        251,906        407,897
                                                                           ---------      ---------      ---------
Net change in cash and cash equivalents .................................      9,750       (159,028)       165,703
Cash and cash equivalents at beginning of years .........................      7,793        166,821          1,118
                                                                           ---------      ---------      ---------
Cash and cash equivalents at end of years ...............................  $  17,543      $   7,793      $ 166,821
                                                                           =========      =========      =========

Supplemental cash flow information - interest paid ......................  $  21,414      $   9,168      $   1,467
                                                                           =========      =========      =========
</TABLE>




                   The accompanying notes are an integral part
                  of these consolidated financial statements.


                                       F-6

<PAGE>   13


                        FELCOR SUITES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ORGANIZATION

         FelCor Suites Limited Partnership (the "Operating Partnership") and its
subsidiaries at December 31, 1997, owned interests in 73 hotels with an
aggregate of 17,933 suite/rooms in 27 states (collectively the "Hotels"). The
sole general partner of the Operating Partnership is FelCor Suite Hotels, Inc.
("FelCor"), a self-administered equity real estate investment trust ("REIT")
that at December 31, 1997 owned a 92.7% general partner interest in the
Operating Partnership. Fifty-two of the Hotels are operated as Embassy Suites(R)
hotels (of which 28 were converted from other brands), 13 are operated as
Doubletree Guest Suites(R) hotels, seven are operated as Sheraton(R) hotels
(five of which are upscale, full-service traditional non-suite hotels) and one
is operated as a Hilton Suites(R) hotel. Sixty-three of the Hotels are managed
by subsidiaries of Promus Hotel Corporation ("Promus") which, following its
recent merger with Doubletree Corporation, includes Doubletree Hotel Corporation
and its subsidiaries ("Doubletree"). Promus is the largest operator of
all-suite, full-service hotels in the United States. Of the remaining Hotels,
seven are managed by a subsidiary of ITT Sheraton Corporation ("Sheraton") and
three are managed by independent management companies. At December 31, 1997, the
Operating Partnership was the owner of the largest number of Embassy Suites
hotels in the world. The following table provides certain information regarding
the Hotels acquired through December 31, 1997:


<TABLE>
<CAPTION>
                                       NUMBER OF HOTELS         NUMBER OF
                                            ACQUIRED          SUITES/ROOMS
                                       ----------------       ------------
<S>                                    <C>                    <C>
      1994                                      7                 1,730
      1995                                     13                 2,649
      1996                                     23                 5,769
      1997
        1st Quarter                            15                 3,446
        2nd Quarter                             9                 2,715
        3rd Quarter                             4                 1,000
        4th Quarter                             2                   447
                                           ------                ------
                                               73                17,756
                                           ======
      Additional suites constructed                                 177
                                                                 ------
                                                                 17,933
                                                                 ======
</TABLE>

         The Operating Partnership leases all of the Hotels to DJONT Operations,
L.L.C. or a consolidated subsidiary thereof (collectively the "Lessee") under
operating leases providing for the payment of percentage rent (the "Percentage
Leases"). Hervey A. Feldman and Thomas J. Corcoran, Jr., the Chairman of the
Board of Directors and Chief Executive Officer of FelCor, respectively,
beneficially own a 50% voting equity interest in the Lessee. The remaining 50%
non-voting equity interest is beneficially owned by the children of Charles N.
Mathewson, a director of and major initial investor in the Operating
Partnership. The Lessee has entered into management agreements pursuant to
which, at December 31, 1997, 63 of the Hotels were managed by subsidiaries of
Promus Hotel Corporation ("Promus"), seven of the Hotels are managed by
subsidiaries of ITT Sheraton Corporation ("Sheraton"), and three of the Hotels
are managed by two independent management companies.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Principles of Consolidation -- The consolidated financial statements
include the accounts of the Operating Partnership and its majority owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated.

         Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.


                                       F-7

<PAGE>   14


                        FELCOR SUITES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

         Fair Value of Financial Instruments -- Statement of Financial
Accounting Standards ("SFAS") 107 requires all entities to disclose the fair
value of certain financial instruments in their financial statements.
Accordingly, The Operating Partnership reports the carrying amount of cash and
cash equivalents, amounts due from the Lessee, accounts payable and accrued
expenses at cost which approximates fair value due to the short maturity of
these instruments. The carrying amount of The Operating Partnership's borrowings
approximates fair value due to the Operating Partnership's ability to obtain
such borrowings at comparable interest rates.

         Investment in Hotels -- Hotels are stated at cost and are depreciated
using the straight-line method over estimated useful lives ranging from 31-40
years for buildings and improvements and 5 to 7 years for furniture, fixtures
and equipment.

         The Operating Partnership periodically reviews the carrying value of
each Hotel to determine if circumstances exist indicating an impairment in the
carrying value of the investment in the hotel or that depreciation periods
should be modified. If facts or circumstances support the possibility of
impairment, the Operating Partnership will prepare a projection of the
undiscounted future cash flows, without interest charges, of the specific hotel
and determine if the investment in such hotel is recoverable based on the
undiscounted future cash flows. If impairment is indicated, an adjustment will
be made to the carrying value of the hotel based on discounted future cash
flows. The Operating Partnership does not believe that there are any factors or
circumstances indicating impairment of any of its investment in Hotels.

         Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized. Upon the sale or disposition of a
fixed asset, the asset and related accumulated depreciation are removed from the
accounts, and the related gain or loss is included in operations.

         Investment in Unconsolidated Entities --The Operating Partnership owns
a 50% interest in various partnerships or limited liability companies in which
the partners jointly make all material decisions concerning the business affairs
and operations. Accordingly, the Operating Partnership does not control the
entities and carries its investment in unconsolidated entities at cost, plus its
equity in net earnings, less distributions received since the date of
acquisition. Equity in net earnings is being adjusted for the straight-line
amortization, over a 40 year period, of the difference between the Operating
Partnership's cost and its proportionate share of the underlying net assets at
date of acquisition.

         Cash and Cash Equivalents -- All highly liquid investments with a
maturity of three months or less when purchased are considered to be cash
equivalents.

         Deferred Expenses -- Deferred expenses are recorded at cost and consist
of the following at December 31, 1997 and 1996 (in thousands):


<TABLE>
<CAPTION>
                               1997          1996
                               ----          ----
<S>                          <C>           <C>     
Organization costs.........  $    349      $    349
Deferred financing fees....    12,231         3,250
                             --------      --------
                               12,580         3,599
Accumulated amortization...    (1,987)         (364)
                             --------      --------
                             $ 10,593      $  3,235
                             ========      ========
</TABLE>

         Amortization of organization costs is computed using the straight-line
method over three to five years. Amortization of deferred financing fees is
computed using the interest method over the maturity of the notes.

         Revenue Recognition -- Percentage lease revenue is recognized when
earned from the Lessee under the Percentage Lease agreements. The Lessee is in
compliance with its obligations under the Percentage Leases.

                                       F-8

<PAGE>   15


                        FELCOR SUITES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

         Net Income Per Unit -- The Operating Partnership adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" in the fourth
quarter of 1997, which established new standards for computing and presenting
earnings per unit and requires restatement of prior years' comparative amounts.
Basic earnings per unit have been computed by dividing net income by the
weighted average number of units outstanding.

         Diluted earnings per unit have been computed by dividing net income by
the weighted average number of units and equivalents outstanding. Unit
equivalents represent units issuable upon assumed exercise of stock options.

         Net income applicable to unitholders before extraordinary charges for
both basic earnings per unit and diluted earnings per unit includes a deduction
for preferred distributions of $11.8 million and $7.7 million for the years
ended December 31, 1997 and 1996 respectively. Weighted average number of units
outstanding used in the computation of diluted earnings per unit includes the
dilutive effect of employee stock options and unvested officer restricted stock
grants of 341 thousand, 195 thousand and 62 thousand units at December 31, 1997,
1996 and 1995 respectively.

         At December 31, 1997 and 1996 the Operating Partnership's convertible
preferred units if converted to common shares would be anti-dilutive,
accordingly the convertible preferred units are not assumed to be converted in
the computation of diluted earnings per unit.

         Distributions and Dividends -- The Operating Partnership pays regular
quarterly distributions on its units. Additionally, the Operating Partnership
pays regular quarterly distribution on preferred units in accordance with its
distribution requirements.

         Income Taxes -- No provision for income taxes is provided since all
taxable income or loss or tax credits are passed through to the partners.

         FelCor qualifies as a real estate investment trust ("REIT") and
generally will not be subject to federal income tax to the extent it distributes
its REIT taxable income to shareholders. REITs are subject to a number of
organizational and operational requirements. If FelCor fails to qualify as a
REIT in any taxable year, FelCor will be subject to federal income tax on its
taxable income at regular corporate rates.

3.  INVESTMENT IN HOTELS

         Investment in hotels at December 31, 1997 and 1996 consist of the
following (in thousands):


<TABLE>
<CAPTION>
                                          1997             1996
                                          ----             ----
<S>                                   <C>              <C>        
Land ................................ $   157,554      $    89,106
Building and improvements ...........   1,257,247          744,758
Furniture, fixtures and equipment ...     147,923           77,526
Construction in progress ............      14,440           25,019
                                      -----------      -----------
                                        1,577,164          936,409
Accumulated depreciation ............     (87,400)         (36,718)
                                      -----------      -----------
                                      $ 1,489,764      $   899,691
                                      ===========      ===========
</TABLE>


                                       F-9

<PAGE>   16


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4.  INVESTMENT IN UNCONSOLIDATED ENTITIES

         The Operating Partnership owned 50% interests in separate partnerships
or limited liability companies owning fourteen hotels, a parcel of undeveloped
land and a condominium management company at December 31, 1997, five hotels, a
parcel of undeveloped land and a condominium management company at December 31,
1996 and one hotel at December 31, 1995. The Operating Partnership is accounting
for its investments in these unconsolidated entities under the equity method.

Summarized combined financial information for 100% of these unconsolidated
entities is as follows (in thousands):


<TABLE>
<CAPTION>
                                         DECEMBER 31,
                                    ---------------------
                                      1997         1996
                                    --------     --------
<S>                                 <C>          <C>     
Balance sheet information:
     Investment in hotels ......... $256,032     $110,394
     Non-recourse mortgage debt ... $138,956     $ 49,402
     Equity ....................... $126,324     $ 91,156
</TABLE>

<TABLE>
<CAPTION>
                                              YEAR ENDED DECEMBER 31,
                                         -------------------------------
                                           1997        1996        1995
                                         -------     -------     -------
<S>                                      <C>         <C>         <C>    
Statement of operations information:
     Percentage lease revenue .......... $47,720     $ 9,974     $ 1,420
     Net income  ....................... $17,044     $ 4,366     $ 1,050
</TABLE>

5.  DEBT  AND CAPITAL LEASE OBLIGATIONS

         Debt at December 31, 1997 and 1996 consists of the following (in
thousands):


<TABLE>
<CAPTION>
                                                 DECEMBER 31,
                                            ---------------------
                                              1997         1996
                                            --------     --------
<S>                                         <C>          <C>     
Senior unsecured notes, net of discount ... $298,145
Line of Credit ............................  136,000     $115,000
Term loan .................................                85,000
Renovation loan ...........................   25,000       25,000
Collateralized mortgage note ..............    5,931
Other .....................................      650        1,550
                                            --------     --------
                                            $465,726     $226,550
</TABLE>

         On October 1, 1997 the Operating Partnership completed the private
placement of $300 million in aggregate principal amount of its long term senior
unsecured notes. The notes were issued in two maturities, consisting of $175
million of 7 3/8% senior notes due 2004 priced at 99.489% to yield 7.47% and
$125 million of 7 5/8% senior notes due 2007 priced at 99.209% to yield 7.74%.
The discount on the $300 million senior notes accrete using the interest method
over the maturity of the notes.

         The Operating Partnership has an unsecured line of credit facility
("Line of Credit") of up to $550 million which matures on October 1, 2000.
Interest payable on borrowings under the Line of Credit is variable, determined
from a ratings and leverage-based pricing matrix, and is currently set at LIBOR
(5.71875% at December 31, 1997) plus 140 basis points. Additionally, the
Operating Partnership is required to pay an unused commitment fee which is
variable, determined from a ratings based pricing matrix, currently set at 20
basis points. The Operating Partnership paid unused commitment fees of
approximately $560,000 and $164,000 during 1997 and 1996, respectively. For the
years ended December 31, 1997 and 1996, the Operating Partnership paid interest
on its Line of Credit at the weighted average interest rate of 7.6% and

                                      F-10

<PAGE>   17


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5.  DEBT  AND CAPITAL LEASE OBLIGATIONS -- (CONTINUED)

7.4%, respectively. Up to 10% of the amount available under the Line of Credit
may be used for general corporate or working capital purposes. The total amount
available under the Line of Credit is limited to 50% of the aggregate value of
the Operating Partnership's eligible hotels, which generally includes hotels
that are unencumbered. At December 31, 1997, the aggregate amount borrowed under
the Line of Credit was $136 million. Assuming the Operating Partnership
purchases qualifying hotel assets, it would have up to an additional $414
million available under the existing Line of Credit. The agreements governing
the Line of Credit also contain various negative and affirmative covenants,
including limitations on total indebtedness, total secured indebtedness and cash
distributions, as well as obligations to maintain a certain minimum tangible net
worth and certain interest and debt service coverage ratios. At December 31,
1997, the Operating Partnership was in compliance with all such covenants.

         The Operating Partnership has a $25 million loan facility ("Renovation
Loan") which is guaranteed by Promus, bears interest at LIBOR plus 45 basis
points, requires monthly interest payments, and quarterly principal payments of
$1.25 million beginning June 1999 and matures in June 2000. The weighted average
interest rate for 1997 and 1996 was 6.4% and 6.1%, respectively.

         On December 4, 1997, the Operating Partnership assumed an existing
collateralized mortgage note when it acquired the Dayton, Ohio Doubletree Guest
Suites hotel. The mortgage note bears interest at 10.22 % per annum, requires
monthly installment payments and matures on March 31, 2003. The outstanding
principal balance at December 31, 1997 was approximately $5.9 million. The note
prohibits any prepayment of the outstanding principal before May 1, 1998 upon
which there is a prepayment penalty fee of at least 1% of the then outstanding
principal balance.

         Under its loan agreements, the Operating Partnership is required to
satisfy various affirmative and negative covenants. The Operating Partnership
was in compliance with these covenants at December 31, 1997.

         Future scheduled principal payments on debt at December 31, 1997 are as
follows (in thousands):


<TABLE>
<CAPTION>
YEAR
----
<S>                                          <C>      
1998 ...................................     $     116
1999 ...................................         3,879
2000 ...................................       157,393
2001 ...................................           158
2002 ...................................           175
2003 and thereafter ....................       305,860
                                             ---------
                                               467,581
Discount accretion over term ...........        (1,855)
                                             ---------
                                             $ 465,726
                                             =========
</TABLE>

         To manage the relative mix of its debt between fixed and variable rate
instruments, the Operating Partnership has entered into two separate interest
rate swap agreements. These interest rate swap agreements modify a portion of
the interest characteristics of the Operating Partnership's outstanding debt
without an exchange of the underlying principal amount and effectively convert
variable rate debt to a fixed rate. The fixed rates to be paid, the effective
fixed rate, and the variable rate to be received by the Operating Partnership at
December 31, 1997 are summarized in the following table:


<TABLE>
<CAPTION>
                                                       SWAP RATE
                                                        RECEIVED
                         SWAP RATE     EFFECTIVE      (VARIABLE) AT          SWAP
NOTIONAL AMOUNT         PAID (FIXED)   FIXED RATE        12/31/97          MATURITY
---------------         ------------   ----------     -------------        --------
<S>                      <C>           <C>               <C>                    <C> 
$50 million              6.11125%       7.51125%          5.78125%       October 1999
$25 million              5.95500%       7.35500%          5.75000%       November 1999
</TABLE>


                                      F-11

<PAGE>   18


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5.  DEBT AND CAPITAL LEASE OBLIGATIONS -- (CONTINUED)

         The differences to be paid or received by the Operating Partnership
under the terms of the interest rate swap agreements are accrued as interest
rates change and recognized as an adjustment to interest expense by the
Operating Partnership pursuant to the terms of its interest rate agreement and
will have a corresponding effect on its future cash flows. Agreements such as
these contain a credit risk that the counterparties may be unable to meet the
terms of the agreement. The Operating Partnership minimizes that risk by
evaluating the creditworthiness of its counterparties, which is limited to major
banks and financial institutions, and does not anticipate nonperformance by the
counterparties.

         Capital lease obligations at December 31, 1997 and 1996 consists of the
following (in thousands):


<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                       -------------------
                                                         1997        1996
                                                       -------     -------
<S>                                                    <C>         <C>    
Capital land and building lease obligations ......     $ 9,330     $ 9,675
Capital equipment lease obligations ..............       1,763       3,200
                                                       -------     -------
                                                       $11,093     $12,875
                                                       =======     =======
</TABLE>

         The Operating Partnership assumed the obligation for a capital
industrial revenue bond lease for land and building associated with the purchase
of the Embassy Suites hotel - St. Paul in November 1995. The term of the lease
is through August 31, 2011 and contains a provision that allows the Operating
Partnership to purchase the property at the termination of the lease, under
certain conditions, for a nominal amount.

         The Operating Partnership has assumed various capital equipment leases
associated with hotels purchased. These capital leases are generally for
telephones and televisions and vary in remaining terms from one year to four
years.

         Minimum future lease payments under capital leases at December 31, 1997
are as follows (in thousands):


<TABLE>
<CAPTION>
YEAR
----
<S>                                                              <C>     
1998 .......................................................     $  2,820
1999 .......................................................        1,502
2000 .......................................................        1,336
2001 .......................................................        1,217
2002 .......................................................        1,217
2003 and thereafter ........................................       10,552
                                                                 --------
                                                                   18,644
Executory costs ............................................         (788)
Imputed interest ...........................................       (6,763)
                                                                 --------
Present value of net minimum lease payments ................     $ 11,093
                                                                 ========
</TABLE>

         Included in investment in hotels at December 31, 1997 and 1996, are
assets under capital leases with a net book value of approximately $10.7 million
and $12.5 million, respectively.

6.  REDEEMABLE OPERATING PARTNERSHIP UNITS AND PREFERRED UNITS

Redeemable Operating Partnership Units

         The outstanding units of limited partnership interest in the Operating
Partnership ("Units") are redeemable at the option of the holder for a like
number of shares of common stock of FelCor or, cash or a combination thereof, at
the election of Felcor. Due to these redemption rights, these limited
partnership units have been excluded from partners' capital and are included in
redeemable units and measured at redemption value as of the end of the periods
presented. At December 31, 1997 and 1996 there were 2,899,510 and 2,785,636
redeemable units outstanding. The value of the
                        
                                      F-12

<PAGE>   19


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.  REDEEMABLE OPERATING PARTNERSHIP UNITS AND PREFERRED UNITS -- (CONTINUED)

redeemable units are based on the closing market price of FelCor's common stock
at the balance sheet date, which at December 31, 1997 and 1996 was $35.50 and
$35.375 respectively.

         In 1997, an aggregate of 139,286 Units were issued to sellers in
conjunction with the purchases of interests in one hotel and, in 1996, an
aggregate of 491,703 Units were issued to sellers in conjunction with the
purchase of interests in four hotels.

Preferred Units

         FelCor's Board of Directors is authorized to provide for the issuance
of up to 10,000,000 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 restrictions thereof. In 1996, FelCor issued 6,050,000 shares of its $1.95
Series A Cumulative Preferred Stock ("Series A Preferred Stock") at $25 per
share. The Series A Preferred Stock bears an annual dividend equal to the
greater of $1.95 per share or the cash distributions declared or paid for the
corresponding period on the number of shares of common stock into which the
Series A Preferred Stock is then convertible. Each share of the Series A
Preferred Stock is convertible at the shareholder's option to 0.7752 shares of
common stock, subject to certain adjustments, and may not be redeemed by FelCor
before April 30, 2001. At December 31, 1997 and 1996, all dividends then payable
on the Preferred Stock had been paid. All preferred stock proceeds have been
contributed to the Operating Partnership in exchange for preferred units. The
preference on the preferred units are the same as FelCor's preferred stock.

7.  TAXES, INSURANCE AND OTHER

         Taxes, insurance and other is comprised of the following for the years
ended December 31, 1997, 1996 and 1995 (in thousands):


<TABLE>
<CAPTION>
                                                                  1997        1996        1995
                                                                 -------     -------     -------
<S>                                                              <C>         <C>         <C>    
Real estate and personal property taxes ....................     $18,976     $11,110     $ 2,233
Property insurance .........................................       1,627       1,312         155
Land lease expense .........................................       1,610         952
State franchise taxes ......................................         718         472         175
Other ......................................................         162          51
                                                                 -------     -------     -------
         Total taxes, insurance and other ..................     $23,093     $13,897     $ 2,563
                                                                 =======     =======     =======
</TABLE>

8.  COMMITMENTS AND RELATED PARTY TRANSACTIONS

         At December 31, 1997 the Operating Partnership owned interests in 52
Embassy Suites hotels, 13 Doubletree Guest Suites hotels, five Sheraton hotels,
two Sheraton Suites hotels and one Hilton Suites hotel. The Embassy Suites
hotels and the Hilton Suites hotel operate pursuant to franchise license
agreements, which require the payment of fees based on a percentage of suite
revenue. These fees are paid by the Lessee. There are no separate franchise
license agreements for the Doubletree Guest Suites hotels, Sheraton hotels or
Sheraton Suites hotels, which rights are included in the management agreements.

         The Lessee generally pays the Hotel managers a base management fee
based on a percentage of suite revenue and an incentive management fee based on
the Lessee's income before overhead expenses for each hotel. In certain
instances, the hotel managers have subordinated fees and committed to make
subordinated loans to the Lessee, if needed, to meet its rental and other
obligations under the Percentage Leases.


                                      F-13

<PAGE>   20


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8.  COMMITMENTS AND RELATED PARTY TRANSACTIONS -- (CONTINUED)

         The Operating Partnership is to receive rental income from the Lessee
under the Percentage Leases which expire in 2004 (7 hotels), 2005 (12 hotels),
2006 (19 hotels) and 2007 (21 hotels). The rental income under the Percentage
Leases between the 14 unconsolidated entities, of which the Operating
Partnership owns 50%, and the Lessee is payable to the respective partnerships
and as such is not included in the following schedule of future lease
commitments to the Operating Partnership. Minimum future rental income (i.e.,
base rents) to the Operating Partnership under these noncancellable operating
leases at December 31, 1997 is as follows (in thousands):


<TABLE>
<CAPTION>
YEAR
----
<S>                                                    <C>      
1998 .............................................     $108,182
1999 .............................................      108,182
2000 .............................................      108,182
2001 .............................................      108,182
2002 .............................................      108,182
2003 and thereafter ..............................      385,106
                                                       --------
                                                       $926,016
                                                       ========
</TABLE>

         The Percentage Lease revenue is based on a percentage of suite
revenues, food and beverage revenues, and food and beverage rents of the Hotels.
Both the base rent and the threshold suite revenue in each lease computation are
subject to adjustments for changes in the Consumer Price Index ("CPI"). The
adjustment is calculated at the beginning of each calendar year, for the hotels
acquired prior to July of the previous year. The adjustment in any lease year
may not exceed 7%. The CPI adjustments made in January 1998, 1997 and 1996 were
0.50%, 1.42% and 0.73% respectively.

         Under the Percentage Leases, the Operating Partnership is obligated to
pay the costs of real estate and personal property taxes, property insurance,
maintenance of underground utilities and structural elements of the Hotels, and
to set aside 4% of suite revenues per month, on a cumulative basis, to fund
capital expenditures for the periodic replacement or refurbishment of furniture,
fixtures and equipment required for the retention of the franchise licenses with
respect to the Hotels. Included in cash and cash equivalents at December 31,
1997 and 1996 were cash balances held by the Hotel managers for these capital
expenditures of $7.3 million and $3.5 million, respectively. In addition, the
Operating Partnership will incur certain additional capital expenditures in
connection with the conversion and upgrade of acquired hotels, which may be
funded from cash on hand or borrowings under its Line of Credit.

         The Operating Partnership shares the executive offices and certain
employees with FelCor, Inc. and the Lessee, and each company bears its share of
the costs thereof, including an allocated portion of the rent, compensation of
certain personnel (other than Messrs. Feldman and Corcoran, whose compensation
is borne solely by FelCor), office supplies, telephones and depreciation of
office furniture, fixtures and equipment. Any such allocation of shared expenses
to the Operating Partnership must be approved by a majority of the independent
directors. During 1997, 1996 and 1995, the Operating Partnership paid
approximately $1.3 million (approximately 38%), $807,000 (approximately 38%) and
$387,000 (approximately 38%), respectively, of the allocable expenses under this
agreement.

         FelCor has entered into employment contracts with Messrs. Feldman and
Corcoran, that will continue in effect until December 31, 1999 and, unless
terminated, will be automatically renewed for successive one year terms. Each
was paid a base salary of $10,000 per month in 1995 and $10,270 per month in
1996 and in 1997 Mr. Feldman received $12,500 per month and Mr. Corcoran
received $16,667 per month. Effective January 1, 1998, Mr. Feldman is to receive
$12,500 per month and Mr. Corcoran is to receive $20,833 per month.
Additionally, FelCor is required to maintain a comprehensive medical plan for
such persons.

         The Operating Partnership has a capital upgrade and renovation program
for the Hotels and has committed approximately $55 million to be invested in
1998 under this program for those hotels which are wholly owned and
approximately $11 million for the unconsolidated entities. The Operating
Partnership is also constructing an additional 67

                                      F-14

<PAGE>   21


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8.  COMMITMENTS AND RELATED PARTY TRANSACTIONS -- (CONTINUED)

suites at its Jacksonville, Florida hotel and 67 additional suites at its
Orlando (North), Florida hotel at an aggregate projected cost of $10.2 million
(of which $7.4 million had been spent as of December 31, 1997) with an expected
completion in early 1998.

9.  SUPPLEMENTAL CASH FLOW DISCLOSURE

         The Operating Partnership purchased certain assets and assumed certain
liabilities in connection with the acquisition of hotels. These purchases were
recorded under the purchase method of accounting. The fair values of the
acquired assets and liabilities recorded at the date of acquisition are as
follows (in thousands):


<TABLE>
<CAPTION>
                                        1997           1996           1995
                                     ---------      ---------      ---------
<S>                                  <C>            <C>            <C>      
Assets acquired ...................  $ 588,053      $ 494,354      $ 221,213
Prepayments assumed ...............                                   13,616
Liabilities assumed ...............     (5,932)      (108,744)          (910)
Capital land lease assumed ........                                  (10,045)
Capital equipment leases assumed...                    (2,823)        (1,211)
Common stock issued ...............                    (6,000)        (3,499)
Minority interest contribution ....     (8,021)
Units issued ......................                   (10,880)
                                     ---------      ---------      ---------
         Net cash paid ............  $ 574,100      $ 365,907      $ 219,164
                                     =========      =========      =========
</TABLE>

         The Operating Partnership purchased interests in unconsolidated
entities during 1997, 1996 and 1995. These unconsolidated entities separately
own fourteen hotels, a parcel of undeveloped land and a condominium management
company. These purchases were recorded under the equity method of accounting.
The value of the assets recorded at the date of acquisition is as follows (in
thousands):


<TABLE>
<CAPTION>
                                                          1997          1996          1995
                                                        --------      --------      --------
<S>                                                     <C>           <C>           <C>     
Acquisition of interests in unconsolidated entities...  $ 70,372      $ 45,992      $ 13,166
Units issued .........................................    (5,101)       (2,568)
                                                        --------      --------      --------
         Net cash paid ...............................  $ 65,271      $ 43,424      $ 13,166
                                                        ========      ========      ========
</TABLE>

         Approximately $24.7 million, $16.1 million, and $3.8 million of
aggregate preferred unit distributions and Unit distributions had been declared
as of December 31, 1997, 1996, and 1995, respectively. These amounts were paid
in January following each year.


                                      F-15

<PAGE>   22


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10.  LESSEE

         All of the Operating Partnership's percentage lease revenues is derived
from the Percentage Leases with the Lessee. Certain information, related to the
Lessee's financial statements, is as follows (in thousands):


<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                       ----------------------
                                                         1997          1996
                                                       --------      --------
<S>                                                    <C>           <C>     
Balance Sheet Information:
   Cash and cash equivalents .....................     $ 25,684      $  5,208
   Total assets ..................................     $ 54,702      $ 18,471
   Due to FelCor Suites Limited Partnership ......     $ 18,908      $  5,526
   Shareholders' deficit .........................     $ (9,075)     $ (6,403)
</TABLE>


<TABLE>
<CAPTION>
                                                        YEAR ENDED
                                                       DECEMBER 31,
                                         ---------------------------------------
                                            1997           1996           1995
                                         ---------      ---------      ---------
<S>                                      <C>            <C>            <C>      
Statement of Operations Information:
   Suite revenue ...................     $ 456,614      $ 234,451      $  65,649
   Percentage lease expenses .......     $ 216,990      $ 107,935      $  26,945
   Net loss ........................     $  (2,672)     $  (5,430)     $    (240)
</TABLE>

         Messrs. Feldman and Corcoran, certain entities owning partnership
interests in the Lessee and managers for certain hotels, have agreed to make
loans to the Lessee of up to an aggregate of approximately $16.0 million to the
extent necessary to enable the Lessee to pay rent and other obligations due
under the respective Percentage Leases relating to a total of 34 of these
Hotels. No such loans were outstanding at December 31, 1997.

11.  PRO FORMA INFORMATION (UNAUDITED)

         As discussed in Note 1, the Operating Partnership completed
acquisitions of interests in 23 hotels during 1996 and 30 hotels in 1997 for
aggregate purchase prices of $540.3 million and $658.4 million respectively.
The acquisitions are accounted for using the purchase method and the results of
operations for the hotels acquired are included in the Company's historical
Statements of Operations from the date of acquisition. As such, the historical 
results of operations may not be indicative of future results of operations and 
net income per common share.

         The following unaudited Pro Forma Consolidated Statements of Operations
for the years ended December 31, 1997 and 1996 (in thousands, except per share
data) are presented as if the acquisitions of all 73 hotels owned at December
31, 1997, the private placement of $300 million of senior unsecured notes and
the consummation of the 1997 and 1996 public offerings and the application of
the net proceeds therefrom had occurred at the beginning of the respective 
periods presented, and all of the hotels had been leased to the Lessee pursuant
to the Percentage Leases. Such pro forma information is based in part upon the 
Consolidated Statements of Operations of the Operating Partnership and pro 
forma Statements of Operations of the Lessee. In management's opinion, all 
adjustments necessary to reflect the effects of these transactions have been 
made.



                                     F-16
<PAGE>   23


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11.  PRO FORMA INFORMATION (UNAUDITED) -- (CONTINUED)

         The following unaudited Pro Forma Consolidated Statements of Operations
for the periods presented are not necessarily indicative of what actual results
of operations of the Operating Partnership would have been assuming such
transactions had been completed at the beginning of the respective periods
presented, nor does it purport to represent the results of operations for future
periods.


<TABLE>
<CAPTION>
                                                            1997         1996
                                                        --------     --------
<S>                                                    <C>          <C>
Revenues:
   Percentage lease revenue ........................    $203,922     $177,741
     Income from unconsolidated entities ...........       6,937        4,540
                                                        --------     --------
        Total revenues .............................     210,859      182,281
                                                        --------     --------
Expenses:
   General and administrative ......................       4,163        3,394
   Depreciation ....................................      59,187       44,149
   Taxes, insurance and other ......................      25,933       24,962
   Interest expense ................................      37,527       31,528
   Minority interest in other partnerships .........         663          236
                                                        --------     --------
         Total expenses ............................     127,473      104,269
                                                        --------     --------
Net income .........................................      83,386       78,012
Preferred distributions ............................      11,797       11,797
                                                        --------     --------
Net income applicable to unitholders ...............    $ 71,589     $ 66,215
                                                        ========     ========
Per unit data:
  Basic:
   Net income applicable to unitholders ............    $   1.82     $   1.70
                                                        ========     ========
   Weighted average number of units outstanding ....      39,353       38,970
                                                        ========     ========
  Diluted:
   Net income applicable to unitholders ............    $   1.80     $   1.69
                                                        ========     ========
   Weighted average number of units outstanding ....      39,695       39,165
                                                        ========     ========
</TABLE>


                                      F-17

<PAGE>   24


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12.  RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

         During 1997, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 130 "Reporting Comprehensive Income ("SFAS
130") and No. 131 "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"), both of which are effective for fiscal years
beginning after December 15, 1997.

         SFAS 130 specifies the presentation and disclosure requirements for
reporting comprehensive income which includes those items which have been
formerly reported as a component of shareholders' equity. SFAS 131 establishes
the disclosure requirements for reporting segment information. The Operating
Partnership believes that the adoption of SFAS 130 and 131 will not have a
material impact on previously reported financial statements.

13.  SUBSEQUENT EVENTS

         On January 15, 1998 the Operating Partnership announced the closing of
$114 million of fixed rate nonrecourse secured debt associated with nine Embassy
Suites hotels in which the Operating Partnership and Promus each own a 50%
unconsolidated interest. The new debt carries a coupon of 6.988%, matures in ten
years and amortizes over 25 years. The proceeds were used to repay higher
interest rate debt associated with unconsolidated entities jointly owned with
Promus and to repay other corporate debt.

         On February 12, 1998, the Operating Partnership announced an exchange
offer for the 7 3/8% Senior Notes due 2004 and 7 5/8% Senior Notes due 2007
issued and sold on October 1, 1997 in a transaction exempt from the registration
requirements of the Securities Act of 1993, as amended, and accordingly are
subject to certain restrictions upon transfer. The new notes offered in exchange
for these notes are identical in amount and terms, except the new notes have
been registered under the Securities Act pursuant to a registration statement
declared effective on February 10, 1998.

         On February 17, 1998, FelCor filed a $1 billion omnibus shelf
registration with the Securities and Exchange Commission. This registration
statement will enable the Operating Partnership to provide offerings from time
to time up to an additional $1 billion in securities, which may include debt
securities, preferred stock, depository shares, common stock and/or common stock
warrants.

         On February 17, 1998, the Operating Partnership announced the
acquisition of the 194-suite Doubletree Guest Suites hotel in Columbus, Ohio.
The purchase price includes $14.1 million in cash and approximately 134,000
Units each valued at $37.06. The hotel is managed by a wholly owned subsidiary
of Promus.


                                      F-18

<PAGE>   25


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14.  QUARTERLY OPERATING RESULTS (UNAUDITED)

         The Operating Partnership's unaudited consolidated quarterly operating
data for the years ended December 31, 1997 and 1996 follows (in thousands,
except per share data). In the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
quarterly results have been reflected in the data. It is also management's
opinion, however, that quarterly operating data for hotel enterprises are not
indicative of results to be achieved in succeeding quarters or years. In order
to obtain a more accurate indication of performance, there should be a review of
operating results, changes in shareholders' equity and cash flows for a period
of several years.



<TABLE>
<CAPTION>
                                                                            FIRST         SECOND         THIRD        FOURTH
                               1997                                        QUARTER        QUARTER       QUARTER       QUARTER
                               ----                                        -------        -------       -------       -------
<S>                                                                        <C>           <C>          <C>          <C>     
Revenues:
         Percentage lease revenue ....................................     $ 35,370      $ 38,677     $ 48,603     $ 46,464
         Equity in income from unconsolidated entities ...............        1,127         2,300        2,338        1,198
         Other revenue ...............................................           95            76          112          291
                                                                           --------      --------     --------     --------
                           Total revenues ............................       36,592        41,053       51,053       47,953
                                                                           --------      --------     --------     --------
Expenses:
         General and administrative ..................................          972           874          897        1,000
         Depreciation ................................................       10,417        11,314       14,238       14,829
         Taxes, insurance and other ..................................        5,207         5,549        6,155        6,182
         Interest expense ............................................        5,601         7,313        7,183        8,695
         Minority interest in other partnerships .....................           21           121          195          236
                                                                           --------      --------     --------     --------
                           Total expenses ............................       22,218        25,171       28,668       30,942
                                                                           --------      --------     --------     --------
Income before extraordinary charge ...................................       14,374        15,882       22,385       17,011
Extraordinary charge from write off of deferred financing fees .......                                                  185
                                                                           --------      --------     --------     --------
Net income ...........................................................       14,374        15,882       22,385       16,826
Preferred distributions ..............................................        2,949         2,949        2,949        2,950
                                                                           --------      --------     --------     --------
Net income applicable to unitholders .................................     $ 11,425      $ 12,933     $ 19,436     $ 13,876
                                                                           ========      ========     ========     ========
Earnings per share information:
    Basic:
         Income applicable to unitholders
         before extraordinary charge .................................     $   0.40      $   0.44     $   0.50     $   0.36
         Extraordinary charge ........................................                                                (0.01)
                                                                           --------      --------     --------     --------
         Net income applicable to unitholders ........................     $   0.40      $   0.44     $   0.50     $   0.35
                                                                           ========      ========     ========     ========
         Weighted average number of units outstanding ................       28,174        29,457       39,262       39,417
                                                                           ========      ========     ========     ========
    Diluted:
         Income applicable to unitholders
         before extraordinary charge .................................     $   0.40      $   0.43     $   0.49     $   0.36
         Extraordinary charge ........................................                                                (0.01)
                                                                           --------      --------     --------     --------
         Net income applicable to unitholders ........................     $   0.40      $   0.43     $   0.49     $   0.35
                                                                           ========      ========     ========     ========
         Weighted average number of units outstanding ................       28,474        29,833       39,648       39,784
                                                                           ========      ========     ========     ========
</TABLE>


                                      F-19

<PAGE>   26


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14.  QUARTERLY OPERATING RESULTS (UNAUDITED) -- (CONTINUED)



<TABLE>
<CAPTION>
                                                                            FIRST         SECOND        THIRD       FOURTH
                                1996                                       QUARTER        QUARTER      QUARTER      QUARTER
                                ----                                       -------        -------      -------      -------
<S>                                                                        <C>           <C>          <C>          <C>     
Revenues:
         Percentage lease revenue ....................................     $ 23,976      $ 23,409     $ 25,263     $ 25,302
         Income from unconsolidated entities .........................          320           165          927          598
         Other revenue ...............................................          146           628          163           47
                                                                           --------      --------     --------     --------
                           Total revenues ............................       24,442        24,202       26,353       25,947
                                                                           --------      --------     --------     --------
Expenses:
         General and administrative ..................................          382           466          458          513
         Depreciation ................................................        4,516         5,788        7,529        8,711
         Taxes, insurance and other ..................................        3,529         3,070        3,260        4,038
         Interest expense ............................................        2,424         2,089        1,760        3,530
                                                                           --------      --------     --------     --------
                           Total expenses ............................       10,851        11,413       13,007       16,792
                                                                           --------      --------     --------     --------
Income before extraordinary charge ...................................       13,591        12,789       13,346        9,155
Extraordinary charge from write off of deferred financing fees .......                                   2,354
                                                                           --------      --------     --------     --------
Net income ...........................................................       13,591        12,789       10,992        9,155
Preferred distributions ..............................................                      1,835        2,949        2,950
                                                                           --------      --------     --------     --------
Net income applicable to unitholders .................................     $ 13,591      $ 10,954     $  8,043     $  6,205
                                                                           ========      ========     ========     ========
Earnings per unit information:
    Basic:
         Net income applicable to unitholders
            before extraordinary charge ..............................     $   0.53      $   0.42     $   0.40     $   0.24
         Extraordinary charge ........................................                                   (0.09)
                                                                           --------      --------     --------     --------
         Net income applicable to unitholders ........................     $   0.53      $   0.42     $   0.31     $   0.24
                                                                           ========      ========     ========     ========
         Weighted average number of units outstanding ................       25,629        25,957       26,097       26,224
                                                                           ========      ========     ========     ========
    Diluted:
         Net income applicable to unitholders
            before extraordinary charge ..............................     $   0.53      $   0.42     $   0.40     $   0.23
         Extraordinary charge ........................................                                   (0.09)
                                                                           --------      --------     --------     --------
         Net income applicable to unitholders ........................     $   0.53      $   0.42     $   0.31     $   0.23
                                                                           ========      ========     ========     ========
         Weighted average number of units outstanding ................       25,744        26,254       26,249       26,549
                                                                           ========      ========     ========     ========
</TABLE>

15.  CONSOLIDATING FINANCIAL INFORMATION

         On October 1, 1997 the Operating Partnership completed the private
placement of $300 million in aggregate principal amount of its long term senior
unsecured notes. The notes were issued in two maturities, consisting of $175
million of 7 3/8% senior notes due 2004 priced at 99.489% to yield 7.47% and 
$125 million of 7 5/8% senior notes due 2007 priced at 99.209% to yield 7.74%.
The discount on the $300 million senior notes accrete using the straight line
method over the maturity of the notes.

         FelCor and all the wholly-owned consolidated subsidiaries of the
Operating Partnership (FelCor/CSS Holdings, L.P.; FelCor/CSS Hotels, L.L.C.;
FelCor/LAX Hotels L.L.C.; FelCor Eight Hotels, L.L.C.; FelCor/St. Paul Holdings,
L.P.; and FelCor/LAX Holdings, L.P. collectively "Subsidiary Guarantors") are
guarantors of the debt offering. The following table presents consolidating
information for the Subsidiary Guarantors.



                                      F-20

<PAGE>   27


                       FELCOR SUITES LIMITED PARTNERSHIP

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                          CONSOLIDATING BALANCE SHEET
                               DECEMBER 31, 1997
                                 (IN THOUSANDS)




<TABLE>
<CAPTION>
                                                     ASSETS
                                                                                                                                    

                                                                       SUBSIDIARY     NON-GUARANTOR                         TOTAL
                                                      FELCOR L.P.      GUARANTORS     SUBSIDIARIES     ELIMINATIONS     CONSOLIDATED
                                                     ------------     ------------    -------------    ------------     ------------
<S>                                                  <C>              <C>              <C>             <C>              <C>        
Net investment in hotel properties .............     $   858,338      $   551,882      $    79,544                      $ 1,489,764
Equity investment in consolidated entities .....         652,489                                       $  (652,489)
Investment in unconsolidated entities ..........         132,991                                                            132,991
Cash and cash equivalents ......................          17,543                                                             17,543
Due from Lessee ................................          12,356            4,257            2,295                           18,908
Due (to)/from subsidiary .......................         (57,153)          52,870            4,283
Deferred assets ................................          10,528               65                                            10,593
Other assets ...................................           1,858            1,707                                             3,565
                                                     -----------      -----------      -----------     -----------      -----------

       Total assets ............................     $ 1,628,950      $   610,781      $    86,122     $  (652,489)     $ 1,673,364
                                                     ===========      ===========      ===========     ===========      ===========


                                        LIABILITIES & PARTNERS' CAPITAL



Debt ...........................................     $   440,726      $    25,000                                       $   465,726
Distributions payable ..........................          24,671                                                             24,671
Accrued expenses and other liabilities .........          11,331                                                             11,331
Capitalized leases .............................             273           10,820                                            11,093
Minority interest  - other partnerships ........                                       $     8,594                            8,594
                                                     -----------      -----------      -----------     -----------      -----------

       Total liabilities .......................         477,001           35,820            8,594                          521,415
                                                     -----------      -----------      -----------     -----------      -----------

Redeemable units, at redemption value ..........         102,933                                                            102,933
Preferred units ................................         151,250                                                            151,250
Partners' capital ..............................         897,766          574,961           77,528     $  (652,489)         897,766
                                                     -----------      -----------      -----------     -----------      -----------

       Total liabilities and partners' capital .     $ 1,628,950      $   610,781      $    86,122     $  (652,489)     $ 1,673,364
                                                     ===========      ===========      ===========     ===========      ===========
</TABLE>


                                      F-21

<PAGE>   28


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                           CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 1996
                                 (IN THOUSANDS)




<TABLE>
<CAPTION>
                                                           ASSETS


                                                                       SUBSIDIARY                       TOTAL
                                                         FELCOR L.P.   GUARANTORS     ELIMINATIONS   CONSOLIDATED
                                                         -----------   ----------     ------------   ------------
<S>                                                      <C>            <C>            <C>            <C>      
Net investment in hotel properties .................     $ 341,269      $ 558,422                     $ 899,691
Equity investment in consolidated subsidiaries .....       538,004                     $(538,004)
Investment in unconsolidated entities ..............        59,867                                       59,867
Cash and cash equivalents ..........................         7,793                                        7,793
Due from Lessee ....................................           614          4,912                         5,526
Due (to)/from subsidiary ...........................       (10,929)        10,929
Deferred assets ....................................         3,235                                        3,235
Other assets .......................................         1,060          1,616                         2,676
                                                         ---------      ---------      ---------      ---------

       Total assets ................................     $ 940,913      $ 575,879      $(538,004)     $ 978,788
                                                         =========      =========      =========      =========



                                             LIABILITIES & PARTNERS' CAPITAL



Debt ...............................................     $ 201,550      $  25,000                     $ 226,550
Distributions payable ..............................        16,090                                       16,090
Accrued expenses and other liabilities .............         5,235                                        5,235
Capitalized leases .................................                       12,875                        12,875
Minority interest  - other partnerships
                                                         ---------      ---------      ---------      ---------

       Total liabilities ...........................       222,875         37,875                       260,750

Redeemable units, at redemption value ..............        98,542                                       98,542
Preferred units ....................................       151,250                                      151,250
Partners' capital ..................................       468,246        538,004      $(538,004)       468,246
                                                         ---------      ---------      ---------      ---------

       Total liabilities and partners' capital .....     $ 940,913      $ 575,879      $(538,004)     $ 978,788
                                                         =========      =========      =========      =========
</TABLE>


                                      F-22

<PAGE>   29


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                      CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1997
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                             SUBSIDIARY  NON-GUARANTORS    TOTAL
                                                                FELCOR L.P.  GUARANTORS   SUBSIDIARIES  CONSOLIDATED
                                                                -----------  ----------  -------------- ------------
<S>                                                              <C>          <C>          <C>            <C>     
Revenues:
Percent rent ...............................................     $ 83,528     $ 77,335     $  8,251       $169,114
Equity in income from unconsolidated entities ..............        6,963                                    6,963
Other revenue ..............................................          367          207                         574
                                                                 --------     --------     --------       --------
       Total revenue .......................................       90,858       77,542        8,251        176,551
                                                                 --------     --------     --------       --------

Expenses:
General and administrative .................................        1,848        1,712          183          3,743
Depreciation ...............................................       22,798       26,094        1,906         50,798
Taxes, insurance and other .................................       11,781       10,661          651         23,093
Interest expense ...........................................       26,673        2,119                      28,792
Minority interest other partnerships .......................                                    573            573
                                                                 --------     --------     --------       --------
       Total expenses ......................................       63,100       40,586        3,313        106,999
                                                                 --------     --------     --------       --------

     Net income before extraordinary charge ................       27,758       36,956        4,938         69,652
     Extraordinary charge for write off of deferred
        financing fees .....................................          185                                      185
                                                                 --------     --------     --------       --------
     Net income ............................................       27,573       36,956        4,938         69,467
Preferred distributions ....................................       11,797                                   11,797
                                                                 --------     --------     --------       --------
Net income applicable to unitholders .......................     $ 15,776     $ 36,956     $  4,938       $ 57,670
                                                                 ========     ========     ========       ========
</TABLE>






                        FELCOR SUITES LIMITED PARTNERSHIP

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 1997
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                               SUBSIDIARY      NON-GUARANTORS      TOTAL
                                                              FELCOR L.P.      GUARANTORS       SUBSIDIARIES    CONSOLIDATED
                                                             -------------    ------------    ----------------  ------------
<S>                                                           <C>              <C>              <C>              <C>      
Cash flows from operating activities ..................       $  57,817        $  36,598        $   3,063        $  97,478
Cash flows from investing activities ..................        (598,467)         (16,242)         (73,151)        (687,860)
Cash flows from financing activities ..................         550,400          (20,356)          70,088          600,132
                                                              ---------        ---------        ---------        ---------
Change in cash and cash equivalents ...................           9,750                                              9,750
Cash and cash equivalents at beginning of period ......           7,793                                              7,793
                                                              ---------        ---------        ---------        ---------
Cash and equivalents at end of year ...................       $  17,543        $                $                $  17,543
                                                              =========        =========        =========        =========
</TABLE>


                                      F-23

<PAGE>   30


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                      CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1996
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                       SUBSIDIARY       TOTAL
                                                                       FELCOR L.P.     GUARANTORS    CONSOLIDATED
                                                                       -----------     ----------    ------------
<S>                                                                     <C>            <C>            <C>     
Revenues:
Percent rent ....................................................       $ 39,489       $ 58,461       $ 97,950
Equity in income from unconsolidated entities ...................          2,010                         2,010
Other revenue ...................................................            632            352            984
                                                                        --------       --------       --------
       Total revenue ............................................         42,131         58,813        100,944
                                                                        --------       --------       --------

Expenses:
General and administrative ......................................            733          1,086          1,819
Depreciation ....................................................          9,337         17,207         26,544
Taxes, insurance and other ......................................          4,645          9,252         13,897
Interest expense ................................................          7,369          2,434          9,803
                                                                        --------       --------       --------
       Total expenses ...........................................         22,084         29,979         52,063
                                                                        --------       --------       --------

     Net income before extraordinary charge .....................         20,047         28,834         48,881
     Extraordinary charge for write off of deferred financing ...          2,354                         2,354
                                                                        --------       --------       --------
     Net income .................................................         17,693         28,834         46,527
Preferred distributions .........................................          7,734                         7,734
                                                                        --------       --------       --------
Net income applicable to unitholders ............................       $  9,959       $ 28,834       $ 38,793
                                                                        ========       ========       ========
</TABLE>




                        FELCOR SUITES LIMITED PARTNERSHIP

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 1996
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                        SUBSIDIARY          TOTAL
                                                       FELCOR L.P.      GUARANTORS      CONSOLIDATED
                                                       -----------      ----------      ------------
<S>                                                    <C>              <C>              <C>      
Cash flows from operating activities ...........       $  36,077        $  31,417        $  67,494
Cash flows from investing activities ...........         (66,461)        (411,967)        (478,428)
Cash flows from financing activities ...........        (128,644)         380,550          251,906
                                                       ---------        ---------        ---------
Change in cash and cash equivalents ............        (159,028)                         (159,028)
Cash and cash equivalents at beginning of period         166,821                           166,821
                                                       ---------        ---------        ---------
Cash and equivalents at end of year ............       $   7,793        $                $   7,793
                                                       =========        =========        =========
</TABLE>


                                      F-24

<PAGE>   31


                        FELCOR SUITES LIMITED PARTNERSHIP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                      CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1995
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                      SUBSIDIARY      TOTAL
                                                        FELCOR L.P.   GUARANTORS   CONSOLIDATED
                                                        -----------   ----------   ------------
<S>                                                      <C>           <C>           <C>    
Revenues:
Percent rent .....................................       $22,002       $ 1,785       $23,787
Equity in income from unconsolidated entities ....           513                         513
Other revenue ....................................         1,684             7         1,691
                                                         -------       -------       -------
       Total revenue .............................        24,199         1,792        25,991
                                                         -------       -------       -------

Expenses:
General and administrative .......................           799            71           870
Depreciation .....................................         5,232                       5,232
Taxes, insurance and other .......................         2,134           429         2,563
Interest expense .................................         1,902           102         2,004
                                                         -------       -------       -------
       Total expenses ............................        10,067           602        10,669
                                                         -------       -------       -------
       Net income ................................       $14,132       $ 1,190       $15,322
                                                         =======       =======       =======
</TABLE>





                        FELCOR SUITES LIMITED PARTNERSHIP

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 1995
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                               SUBSIDIARY          TOTAL
                                                              FELCOR L.P.      GUARANTORS      CONSOLIDATED
                                                              -----------      ----------      ------------
<S>                                                           <C>              <C>              <C>      
Cash flows from operating activities ..................       $  18,645        $  (1,642)       $  17,003
Cash flows from investing activities ..................        (110,023)        (149,174)        (259,197)
Cash flows from financing activities ..................         257,081          150,816          407,897
                                                              ---------        ---------        ---------
Change in cash and cash equivalents ...................         165,703                           165,703
Cash and cash equivalents at beginning of period ......           1,118                             1,118
                                                              ---------        ---------        ---------
Cash and equivalents at end of year ...................       $ 166,821        $                $ 166,821
                                                              =========        =========        =========
</TABLE>


                                      F-25
<PAGE>   32

                       FELCOR SUITES LIMITED PARTNERSHIP

            SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                            AS OF DECEMBER 31, 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                     COST CAPITALIZED SUBSEQUENT           
                                                     INITIAL COST                          TO ACQUISITION                  
                                          ---------------------------------------------------------------------------      
                                                       BUILDINGS    FURNITURE                  BUILDINGS    FURNITURE      
                                                          AND          AND                        AND         AND          
DESCRIPTION OF PROPERTY                   LAND        IMPROVEMENTS   FIXTURES        LAND    IMPROVEMENTS   FIXTURES       
-----------------------                   ----        ------------   --------        ----    ------------   --------       
<S>                                       <C>         <C>            <C>             <C>     <C>            <C>            
BIRMINGHAM, AL                            $ 2,843       $29,286       $   160                  $   730       $ 3,174       
FLAGSTAFF, AZ                                 900         6,825           268                    1,561         1,115       
PHOENIX (CAMELBACK), AZ                                  38,998           613       $ 4,695        826         4,808       
PHOENIX (CRESCENT), AZ                      3,608        29,583         2,886                                    326       
ANAHEIM, CA                                 2,548        14,832           607                      554         3,163       
BURLINGAME (SF AIRPORT SO.), CA                          39,929           818                       60         2,998       
DANA POINT, CA                              1,787        15,545           536                       71           883       
EL SEGUNDO (LAX AIRPORT SOUTH), CA          2,660        17,997           798                      809         4,705       
LOS ANGELES (LAX AIRPORT NORTH), CA         2,207        18,764         1,104                                    445       
MILPITAS, CA                                4,021        23,677           562                      943         3,474       
NAPA, CA                                    3,287        14,205           494                      813         2,801       
OXNARD (MANDALAY BEACH), CA                 2,930        22,125           879                      617         4,595       
SO. SAN FRANCISCO (AIRPORT N.), CA          3,418        31,737           527                      768         3,831       
AVON (BEAVER CREEK RESORT), CO              1,134         9,864           340                      186         1,293       
BOCA RATON (DOUBLETREE), FL                 5,327         3,066           304                       41         1,012       
BOCA RATON (EMBASSY), FL                    1,868        16,253           561                      186         2,876       
DEERFIELD BEACH, FL                         4,523        29,443           918                    1,159         3,676       
FT. LAUDERDALE, FL                          5,329        47,850           903                    1,604         4,301       
JACKSONVILLE, FL                            1,130         9,608           456                       28           865       
LAKE BUENA VISTA (DISNEY WORLD), FL         2,896        25,196           869                                              
MIAMI (AIRPORT), FL                         4,135        24,950         1,171                      728         4,309       
ORLANDO (NORTH), FL                         1,673        14,218           684                       28           939       
ORLANDO (SOUTH), FL                         1,632        13,870           799                       28         1,504       
TAMPA (BUSCH GARDENS), FL                     772        12,387           226                       57           621       
TAMPA (ROCKY POINT), FL                     2,142        18,639           643                                     33       
ATLANTA (AIRPORT), GA                       5,113        22,857         2,105                                     16       
ATLANTA (BUCKHEAD), GA                      7,303        38,996         2,437                       13            50       
ATLANTA (GALLERIA), GA                      5,052        28,507         2,526                                    113       
BRUNSWICK, GA                                 705         6,067           247                                    720       
CHICAGO (O'HARE), IL                        8,178        37,043         2,886                                     89       
DEERFIELD, IL                               2,305        20,054           692                      162           684       
LEXINGTON, KY                               1,955        13,604           587                                  1,280       
BATON ROUGE, LA                             2,350        19,092           525                      521         3,322       
NEW ORLEANS, LA                             2,570        22,300           895                    3,854         2,369       
BOSTON - MARLBOROUGH, MA                      948         8,143           325           761     12,394         4,442       
BALTIMORE, MD                               2,568        22,433           770                                    505       
TROY, MI                                    2,968        25,905           909                                    246       
BLOOMINGTON, MN                             2,038        17,731           611                                      8       
MINNEAPOLIS (AIRPORT), MN                   5,416        36,508           602                       78         2,683       
MINNEAPOLIS (DOWNTOWN), MN                    818        16,820           505                       66         3,043       
ST. PAUL, MN                                1,156        17,315           849                       40         2,876       
RALEIGH/DURHAM, NC                          2,124        18,476           637                                     31       
OMAHA, NE                                   1,877        16,328           563                       10           140       

<CAPTION>
                                                       GROSS AMOUNTS AT WHICH                   ACCUMULATED      NET BOOK    
                                                     CARRIED AT CLOSE OF PERIOD                 DEPRECIATION      VALUE      
                                           ------------------------------------------------     BUILDINGS AND  BUILDINGS AND 
                                                        BUILDINGS     FURNITURE                 IMPROVEMENTS;  IMPROVEMENTS; 
                                                           AND           AND                      FURNITURE &   FURNITURE &  
DESCRIPTION OF PROPERTY                      LAND      IMPROVEMENTS    FIXTURES       TOTAL        FIXTURES      FIXTURES    
-----------------------                      ----      ------------    --------       -----        --------      --------    
<S>                                        <C>         <C>             <C>            <C>          <C>           <C>         
BIRMINGHAM, AL                             $ 2,843       $30,015       $ 3,334       $36,192       $ 2,188       $34,005     
FLAGSTAFF, AZ                                  900         8,386         1,383        10,669         1,171         9,497     
PHOENIX (CAMELBACK), AZ                      4,694        39,824         5,420        49,939         3,290        46,649     
PHOENIX (CRESCENT), AZ                       3,608        29,583         3,212        36,403           666        35,736     
ANAHEIM, CA                                  2,548        15,386         3,770        21,704         1,982        19,722     
BURLINGAME (SF AIRPORT SO.), CA                           39,802         4,003        43,805         3,290        40,515     
DANA POINT, CA                               1,787        15,616         1,419        18,822           433        18,389     
EL SEGUNDO (LAX AIRPORT SOUTH), CA           2,660        18,807         5,503        26,969         2,901        24,068     
LOS ANGELES (LAX AIRPORT NORTH), CA          2,207        18,764         1,549        22,520           590        21,930     
MILPITAS, CA                                 4,021        24,620         4,036        32,677         2,452        30,225     
NAPA, CA                                     3,287        15,019         3,295        21,601         1,227        20,374     
OXNARD (MANDALAY BEACH), CA                  2,930        22,742         5,474        31,146         1,984        29,162     
SO. SAN FRANCISCO (AIRPORT N.), CA           3,418        32,506         4,358        40,281         2,794        37,488     
AVON (BEAVER CREEK RESORT), CO               1,134        10,050         1,633        12,816           831        11,986     
BOCA RATON (DOUBLETREE), FL                  5,333         3,102         1,316         9,750           598         9,152     
BOCA RATON (EMBASSY), FL                     1,868        16,438         3,436        21,743         1,700        20,043     
DEERFIELD BEACH, FL                          4,541        30,583         4,593        39,718         2,643        37,075     
FT. LAUDERDALE, FL                           5,374        49,409         5,204        59,986         3,870        56,117     
JACKSONVILLE, FL                             1,130         9,636         1,321        12,088         1,648        10,440     
LAKE BUENA VISTA (DISNEY WORLD), FL          2,896        25,196           869        28,960           335        28,626     
MIAMI (AIRPORT), FL                          4,135        25,679         5,479        35,293         2,793        32,500     
ORLANDO (NORTH), FL                          1,673        14,246         1,624        17,543         2,568        14,974     
ORLANDO (SOUTH), FL                          1,632        13,898         2,303        17,832         2,581        15,251     
TAMPA (BUSCH GARDENS), FL                      772        12,444           848        14,063           804        13,260     
TAMPA (ROCKY POINT), FL                      2,142        18,639           676        21,458           248        21,210     
ATLANTA (AIRPORT), GA                        5,113        22,857         2,121        30,091           498        29,593     
ATLANTA (BUCKHEAD), GA                       7,303        39,009         2,487        48,799         1,707        47,092     
ATLANTA (GALLERIA), GA                       5,052        28,507         2,639        36,198           610        35,588     
BRUNSWICK, GA                                  705         6,067           967         7,739           631         7,108     
CHICAGO (O'HARE), IL                         8,178        37,043         2,975        48,196           757        47,439     
DEERFIELD, IL                                2,305        20,216         1,376        23,897         1,006        22,891     
LEXINGTON, KY                                1,955        13,604         1,866        17,425         1,059        16,366     
BATON ROUGE, LA                              2,350        19,612         3,847        25,810         1,920        23,890     
NEW ORLEANS, LA                              2,569        26,154         3,265        31,989         2,932        29,057     
BOSTON - MARLBOROUGH, MA                     1,709        20,537         4,767        27,014         1,292        25,721     
BALTIMORE, MD                                2,568        22,433         1,275        26,276           621        25,655     
TROY, MI                                     2,968        25,905         1,155        30,028           700        29,329     
BLOOMINGTON, MN                              2,038        17,732           619        20,389           471        19,918     
MINNEAPOLIS (AIRPORT), MN                    5,417        36,396         3,475        45,288         3,060        42,228     
MINNEAPOLIS (DOWNTOWN), MN                     818        16,809         3,625        21,252         2,018        19,234     
ST. PAUL, MN                                 1,156        17,264         3,815        22,236         2,251        19,985     
RALEIGH/DURHAM, NC                           2,124        18,476           668        21,267           246        21,022     
OMAHA, NE                                    1,877        16,338           703        18,918           436        18,481     

<CAPTION>

                                                                           LIFE UPON
                                                                             WHICH
                                                                          DEPRECIATION
                                               DATE OF       DATE         IN STATEMENT
DESCRIPTION OF PROPERTY                     CONSTRUCTION   ACQUIRED       IS COMPUTED
-----------------------                     ------------   --------       -----------
<S>                                         <C>            <C>            <C>
BIRMINGHAM, AL                                  1987       01-03-96       5 - 40 YRS
FLAGSTAFF, AZ                                   1988       02-16-95       5 - 40 YRS
PHOENIX (CAMELBACK), AZ                         1985       01-03-96       5 - 40 YRS
PHOENIX (CRESCENT), AZ                          1986       06-30-97       5 - 40 YRS
ANAHEIM, CA                                     1987       01-03-96       5 - 40 YRS
BURLINGAME (SF AIRPORT SO.), CA                 1986       11-06-95       5 - 40 YRS
DANA POINT, CA                                  1992       02-21-97       5 - 40 YRS
EL SEGUNDO (LAX AIRPORT SOUTH), CA              1985       03-27-96       5 - 40 YRS
LOS ANGELES (LAX AIRPORT NORTH), CA             1990       02-18-97       5 - 40 YRS
MILPITAS, CA                                    1987       01-03-96       5 - 40 YRS
NAPA, CA                                        1985       05-08-96       5 - 40 YRS
OXNARD (MANDALAY BEACH), CA                     1986       05-08-96       5 - 40 YRS
SO. SAN FRANCISCO (AIRPORT N.), CA              1988       01-03-96       5 - 40 YRS
AVON (BEAVER CREEK RESORT), CO                  1989       02-20-96       5 - 40 YRS
BOCA RATON (DOUBLETREE), FL                     1989       11-15-95       5 - 40 YRS
BOCA RATON (EMBASSY), FL                        1989       02-28-96       5 - 40 YRS
DEERFIELD BEACH, FL                             1987       01-03-96       5 - 40 YRS
FT. LAUDERDALE, FL                              1986       01-03-96       5 - 40 YRS
JACKSONVILLE, FL                                1986       07-28-94       5 - 40 YRS
LAKE BUENA VISTA (DISNEY WORLD), FL             1987       07-28-97       5 - 40 YRS
MIAMI (AIRPORT), FL                             1987       01-03-96       5 - 40 YRS
ORLANDO (NORTH), FL                             1985       07-28-94       5 - 40 YRS
ORLANDO (SOUTH), FL                             1985       07-28-94       5 - 40 YRS
TAMPA (BUSCH GARDENS), FL                       1985       11-15-95       5 - 40 YRS
TAMPA (ROCKY POINT), FL                         1986       07-28-97       5 - 40 YRS
ATLANTA (AIRPORT), GA                           1986       06-30-97       5 - 40 YRS
ATLANTA (BUCKHEAD), GA                          1988       10-17-96       5 - 40 YRS
ATLANTA (GALLERIA), GA                          1990       06-30-97       5 - 40 YRS
BRUNSWICK, GA                                   1988       07-19-95       5 - 40 YRS
CHICAGO (O'HARE), IL                            1994       06-30-97       5 - 40 YRS
DEERFIELD, IL                                   1987       06-20-96       5 - 40 YRS
LEXINGTON, KY                                   1987       01-10-96       5 - 40 YRS
BATON ROUGE, LA                                 1985       01-03-96       5 - 40 YRS
NEW ORLEANS, LA                                 1984       12-01-94       5 - 40 YRS
BOSTON - MARLBOROUGH, MA                        1988       06-30-95       5 - 40 YRS
BALTIMORE, MD                                   1987       03-20-97       5 - 40 YRS
TROY, MI                                        1987       03-20-97       5 - 40 YRS
BLOOMINGTON, MN                                 1980       02-01-97       5 - 40 YRS
MINNEAPOLIS (AIRPORT), MN                       1986       11-06-95       5 - 40 YRS
MINNEAPOLIS (DOWNTOWN), MN                      1984       11-15-95       5 - 40 YRS
ST. PAUL, MN                                    1983       11-15-95       5 - 40 YRS
RALEIGH/DURHAM, NC                              1987       07-28-97       5 - 40 YRS
OMAHA, NE                                       1973       02-01-97       5 - 40 YRS
</TABLE>


                                      F-26
<PAGE>   33
                        FELCOR SUITES LIMITED PARTNERSHIP

     SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)


<TABLE>
<CAPTION>
                                                                                                 COST CAPITALIZED SUBSEQUENT
                                                           INITIAL COST                                TO ACQUISITION   
                                           -----------------------------------------      -----------------------------------------
                                                           BUILDINGS       FURNITURE                      BUILDINGS      FURNITURE 
                                                              AND            AND                            AND             AND    
DESCRIPTION OF PROPERTY                       LAND        IMPROVEMENTS      FIXTURES         LAND       IMPROVEMENTS      FIXTURES 
-----------------------                    ----------     ------------     ---------      ----------    ------------     ----------
<S>                                        <C>            <C>              <C>            <C>           <C>              <C>
PISCATAWAY, NJ                                  1,755         17,563            527                            463          2,296
SYRACUSE, NY                                    1,597         14,812          1,330
CLEVELAND, OH                                   1,755         15,329            527                          1,259          1,511
DAYTON, OH                                      1,140          9,924            342
TULSA, OK                                         525          7,344          3,117                            140          1,644
PHILADELPHIA (SOCIETY HILL), PA                 4,542         45,121          1,536
MYRTLE BEACH (KINGSTON PLANTATION), SC          2,940         24,988          1,470                            268            832
NASHVILLE (AIRPORT), TN                         1,073          9,331            322                                            20
NASHVILLE, TN                                   1,118          9,506            961                             28          1,222
AUSTIN (DOWNTOWN), TX                           2,508         21,908            752                                           137
CORPUS CHRISTI, TX                              1,112          9,618            390             51                          1,461
DALLAS (LOVE FIELD), TX                         1,934         16,674            757                            168          1,177
DALLAS (MARKET CENTER), TX                      2,619         24,298          2,182
DALLAS (PARK CENTRAL ES), TX                    1,497         12,722            647                             28          1,415
DALLAS (PARK CENTRAL SH), TX                    4,513         43,125          2,507                                           195
BURLINGTON, VT                                  3,136         27,283            941
                                           ----------     ----------     ----------     ----------      ----------     ----------
TOTAL                                      $  151,978     $1,226,572     $   55,105     $    5,507      $   31,289     $   92,274
                                           ==========     ==========     ==========     ==========      ==========     ==========

<CAPTION>
                                                     GROSS AMOUNTS AT WHICH                            ACCUMULATED
                                                   CARRIED AT CLOSE OF PERIOD                          DEPRECIATION
                                          -------------------------------------------                  BUILDINGS AND 
                                                            BUILDINGS      FURNITURE                   IMPROVEMENTS; 
                                                               AND           AND                        FURNITURE &  
DESCRIPTION OF PROPERTY                      LAND          IMPROVEMENTS    FIXTURES       TOTAL          FIXTURES   
-----------------------                   -----------      ------------   ----------    ----------     ------------- 
<S>                                             <C>        <C>            <C>            <C>           <C>
PISCATAWAY, NJ                                  1,755         18,026          2,822         22,603          1,343
SYRACUSE, NY                                    1,597         14,812          1,331         17,739            318
CLEVELAND, OH                                   1,755         16,588          2,037         20,380          1,237
DAYTON, OH                                      1,140          9,924            342         11,406
TULSA, OK                                         525          7,483          4,762         12,770          4,673
PHILADELPHIA (SOCIETY HILL), PA                 4,542         45,121          1,536         51,199            361
MYRTLE BEACH (KINGSTON PLANTATION), SC          2,940         25,256          2,302         30,498            945
NASHVILLE (AIRPORT), TN                         1,073          9,331            341         10,745            149
NASHVILLE, TN                                   1,118          9,534          2,183         12,836          2,911
AUSTIN (DOWNTOWN), TX                           2,508         21,908            890         25,305            585
CORPUS CHRISTI, TX                              1,164          9,618          1,852         12,634          1,222
DALLAS (LOVE FIELD), TX                         1,934         16,841          1,934         20,710          1,923
DALLAS (MARKET CENTER), TX                      2,619         24,298          2,183         29,100            522
DALLAS (PARK CENTRAL ES), TX                    1,497         12,750          2,062         16,309          2,534
DALLAS (PARK CENTRAL SH), TX                    4,513         43,125          2,702         50,340            802
BURLINGTON, VT                                  3,136         27,283            941         31,360             73
                                           ----------     ----------     ----------     ----------     ----------
TOTAL                                      $  157,554     $1,257,247     $  147,923     $1,562,724     $   87,400
                                           ==========     ==========     ==========     ==========     ==========

<CAPTION>

                                               NET BOOK
                                                 VALUE                                               LIFE UPON
                                              BUILDINGS AND                                             WHICH
                                              IMPROVEMENTS;                                         DEPRECIATION
                                               FURNITURE &          DATE OF             DATE        IN STATEMENT
                                                FIXTURES          CONSTRUCTION        ACQUIRED       IS COMPUTED
                                             --------------       -------------       --------      -------------
<S>                                          <C>                   <C>                <C>           <C>
PISCATAWAY, NJ                                  21,260               1988             01-10-96        5 - 40 YRS 
SYRACUSE, NY                                    17,421               1989             06-30-97        5 - 40 YRS 
CLEVELAND, OH                                   19,143               1990             11-17-95        5 - 40 YRS 
DAYTON, OH                                      11,406               1987             12-30-97        5 - 40 YRS 
TULSA, OK                                        8,097               1985             07-28-94        5 - 40 YRS 
PHILADELPHIA (SOCIETY HILL), PA                 50,838               1986             10-01-97        5 - 40 YRS 
MYRTLE BEACH (KINGSTON PLANTATION), SC          29,553               1987             12-05-96        5 - 40 YRS 
NASHVILLE (AIRPORT), TN                         10,596               1988             06-05-97        5 - 40 YRS 
NASHVILLE, TN                                    9,925               1985             07-28-94        5 - 40 YRS 
AUSTIN (DOWNTOWN), TX                           24,720               1987             03-20-97        5 - 40 YRS 
CORPUS CHRISTI, TX                              11,412               1984             07-19-95        5 - 40 YRS 
DALLAS (LOVE FIELD), TX                         18,787               1986             03-29-95        5 - 40 YRS 
DALLAS (MARKET CENTER), TX                      28,578               1980             06-30-97        5 - 40 YRS 
DALLAS (PARK CENTRAL ES), TX                    13,774               1985             07-28-94        5 - 40 YRS 
DALLAS (PARK CENTRAL SH), TX                    49,537               1983             06-30-97        5 - 40 YRS 
BURLINGTON, VT                                  31,287               1967             12-04-97        5 - 40 YRS 
                                            ----------
TOTAL                                       $1,475,325
                                            ==========
</TABLE>



<TABLE>
<S>                                        <C>              <C>                                             <C>
(a)  BALANCE AT DECEMBER 31, 1995          $   343,398      (b)  BALANCE AT DECEMBER 31, 1994               $   5,026
     ADDITIONS DURING THE PERIOD               568,073           DEPRECIATION EXPENSE DURING THE PERIOD         5,371
     DISPOSITIONS DURING THE PERIOD                (81)                                                     ---------
                                           -----------           BALANCE AT DECEMBER 31, 1995                  10,397
     BALANCE AT DECEMBER 31, 1996              911,390           DEPRECIATION EXPENSE DURING THE PERIOD        26,321
     ADDITIONS DURING THE PERIOD               651,334                                                      ---------
                                           -----------           BALANCE AT DECEMBER 31, 1996                  36,718
     BALANCE AT DECEMBER 31, 1997          $ 1,562,724           DEPRECIATION EXPENSE DURING THE PERIOD        50,682
                                                                                                            ---------
                                                                 BALANCE AT DECEMBER 31, 1997               $  87,400
</TABLE>



                                      F-27