INDEX
                                                                 Pages

Report of Independent Accountants                                 	1

Financial Statements:

  Consolidated Balance Sheets as of December 31, 1997 and 1996	    2-3

  Consolidated Statements of Operations for the years ended
   		December 31, 1997, 1996 and 1995	                             4

 	Consolidated Statements of Partners' Deficit for the
     years ended	December 31, 1997, 1996 and 1995                 	5

 	Consolidated Statements of Cash Flows for the years ended
   		December 31, 1997, 1996 and 1995	                             6

  Notes to Consolidated Financial Statements	                      7-18

Report of Independent Accountants

To the Partners of the
Prime Motor Inns Limited Partnership
and AMI Operating Partners, L.P.

We have audited the accompanying consolidated balance
sheets of Prime Motor Inns Limited Partnership and Subsidiary
Limited Partnership (the Partnerships) as of December 31, 1997
and 1996, and the related consolidated statements of operations,
partners' deficit and cash flows for each of the three years in
the period ended December 31, 1997.  These financial statements
are the responsibility of the Partnerships' 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 financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Prime Motor Inns Limited Partnership and
Subsidiary 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 in the period ended December
31, 1997, in conformity with generally accepted accounting
principles.

The accompanying consolidated financial statements
have been prepared assuming that the Partnerships will continue
as a going concern.  As discussed in Note 1, the Partnerships
have incurred significant operating losses and have a capital
deficit at December 31, 1997.  These matters raise substantial
doubt about the Partnerships' ability to continue as a going
concern.  The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.

Coopers & Lybrand L.L.P.
Cincinnati, Ohio
February 27, 1998, except for Note 2, as to which
the date is March 12, 1998, and Note 4b,
as to which the date is March 10, 1998


Prime Motor Inns Limited Partnership
and Subsidiary Limited Partnership
Consolidated Balance Sheets
December 31, 1997 and 1996 (dollars in thousands)

<TABLE>
<CAPTION>
             ASSETS 	 	           	 	 	 	 	 	 	 	1997 	    	1996
<S>                                           <C>        <C>
Current assets:
 	Cash and cash equivalents 	 	 	 	     	  	 	$   	989 		$   	834

 	Accounts receivable, net of allowance
    for doubtful accounts in 1997 and
    1996 of $22 and $19, respectively 	 	 	 	 	    823   	 	 	774
 	Inventories 	 	 	 	 	 	 	 	 	                   	205 	   	 	222
  Prepaid expenses 	 	 	 	 	 	 	 	 	              	719 	   	 	952
  Other current assets 	 	 	 	 	 	 	 	 	           	90 	   	 	106

   	Total current assets 	 	 	 	 	 	 	 	 	       2,826  	 		2,888

Property and equipment:
  Land 		                              						 	 	7,130 	 	 	7,653
  Buildings and leasehold improvements 	 	    		54,156	 	 	55,382
  Furniture and equipment 	 	 	 	 	 	 	 	 		    39,227 	 		39,978

                          	 	 	 	 		           100,513 		 	103,013

Less accumulated depreciation
  and amortization                            	(54,950) 	 	(54,188)

                           	 	 	 	 	 	 	 	 	 	 	45,563 	 	 	48,825

Cash and cash equivalents restricted for:
	 Acquisition of property and equipment 	 	 	 	 	2,165  	 	 	1,195
  Interest and taxes 	 	            	 	 	 	 	 	 	 	728 	    	 	522
Other assets, net 	 	             	 	 	 	 	 	 	 	 	425 	    	 	542

	  	Total assets 	 	 	 	              	 	 	 	$ 	51,707 	 $ 	53,972
</TABLE>

Prime Motor Inns Limited Partnership
and Subsidiary Limited Partnership
Consolidated Balance Sheets, Continued
December 31, 1997 and 1996 (dollars in thousands)

<TABLE>
<CAPTION>
LIABILITIES AND PARTNERS' DEFICIT 		 	 	 	 	 	 	1997 	   	 	1996
<S>                                         <C>          <C>
Current liabilities:
  Trade accounts payable 	    	 	 	 	 	 	 	 	$ 	   481 	 $    	484
  Accrued payroll 	 	 	 	 	               	 	 	 	 	614    	 	 	660
  Accrued payroll taxes 	 	 	         	 	 	 	 	 	 	149    	 	 	165
  Accrued vacation 	 	 	 	 	 	 	 	 	              	453 	    	 	437
  Accrued utilities 	 	             	 	 	 	 	 	 	 	287 	 	    	322
  Sales tax payable 	 	 	 	 	 	 	 	             	 	265    	 	 	274
  Other current liabilities 	 	 	 	 	 	 	 	 	     	486     	 		772

    Total current liabilities 	 	    	 	 	 	 	 		2,735 	   		3,114

  Long-term debt 	 	            	 	 	 	 	 	 	 		63,544 	 	 	65,691
  Deferred interest 	 	 	 	 	 	 	 	 	 	         	1,974 	  	 	2,872
  Accrued shared appreciation 	 	 	 	 	 	 	 	 	 	4,500      	 	 	-
  Other liabilities 	 	 	 	 	 	 	 	 	            		205 	    	 	216

   	Total liabilities 	 	 	 	 	 	 	           		72,958  	 		71,893

Commitments

Partners' deficit:
  General partner 	 	 	               	 	 	 	 	 		(784) 	  	 	(751)
  Limited partners 	           	 	 	 	 	 	 	 		(20,467) 			(17,170)

    Total partners' deficit 		        					 	 	(21,251)  		(17,921)

    Total liabilities and partners' deficit  $ 	51,707 	 $ 	53,972
</TABLE>

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

Prime Motor Inns Limited Partnership
and Subsidiary Limited Partnership
Consolidated Statements of Operations
for the years ended December 31, 1997, 1996 and 1995
(dollars in thousands, except per unit amounts)

<TABLE>
<CAPTION>
	 	 	 	 	 	 	 	 	 	                        1997 	 	 	   1996 	 		    1995
<S>                                    <C>          <C>          <C>
Revenues:
  Direct operating revenues:
    Lodging 	           	 	 	 	 	 	 	  $ 	40,852 	 	$ 	39,488 	 	$ 	36,668
   	Food and beverage 	 	     	 	 	 	 	 	 	9,138   	 	 	9,735       	9,402
  Other income 	 	 	 	 	 	 	 	 	            	362 	     	 	361 	     	 	374
  Lease settlement proceeds 	 	 	 	 	 	 	 	 	 	- 	 	 	      -	 	    	1,025

      Total revenues 	 	 	 	     	 	 	 	 	50,352 	 	  	49,584	 	   	47,469

Direct operating expenses:
  Lodging 								                       		9,622     			9,462     			8,998
  Food and beverage 								 	            	7,827 	   	 	8,112    	 		7,809
 	Marketing 	                     									3,521     			3,500     			3,334
 	Utilities 		                   						 	 	2,896   	 	 	3,053 	   	 	2,956
 	Repairs and maintenance 		     						 	 	3,600 	   	 	3,680	 	    	3,490
 	Rent 				                        				 	 	1,304 	   	 	1,316 	   	 	1,317
 	Insurance 			                     					 	 	771 	     	 	705 	     	 	630
 	Property taxes 				              				 	 	1,395 	   	 	1,382    	 		1,380
	 Other 		                       						 	 	8,644 	   	 	8,369 	   	 	7,718
Other general and administrative
  expenses 	                                	887 	     	 	701 	     	 	587
Depreciation and amortization 									 	 	3,838 	 	   	5,423 	 	   	5,473
Interest expense 									 	 	             5,888 	   	 	6,069 	    		6,057
Shared appreciation expense 	 	 	 	 	 	 	 	4,500	        	 	- 	       	 	-
Net gain on sale of Inn 				     					 	 	(1,011) 	      	 	- 	 	       	-

                     	 	 	 	 	 	 	 	 	 	 	53,682 	  	 	51,772 	  	 	49,749

Net loss 	 	 	 	 	 	 	 	 	 	 	            (3,330) 	 	 	(2,188) 	  		(2,280)

Net loss allocable to general partner 	 	 	 	(33) 	    	 	(22) 	    	 	(23)

Net loss allocable to limited partners	$ 	(3,297) 	 $ 	(2,166) 	 $ 	(2,257)

Number of limited partner units
  outstanding 		 	 	                    	 	4,000 	   	 	4,000   	 	 	4,000

Net loss allocable to limited
partners per unit 	 	 	 	   	 	 	 	 	 	$   	(.82) 		$   	(.54)  	$   	(.56)
</TABLE>

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


Prime Motor Inns Limited Partnership
and Subsidiary Limited Partnership
Consolidated Statements of Partners' Deficit
for the years ended December 31, 1997, 1996 and 1995
(dollars in thousands)

<TABLE>
<CAPTION>
 	 	 	 	 	 	 	 	                   General  	  Limited
                                   Partner     Partner        Total
<S>                               <C>         <C>            <C>
Balance at December 31, 1994 	 		 $ 	(706) 	 	$ 	(12,747) 	 	$ 	(13,453)

Net loss 	 	               							 	 	(23) 	   	 	(2,257) 	   	 	(2,280)

Balance at December 31, 1995 	 	 				(729) 	   		(15,004) 	  	 	(15,733)

Net loss 	 	 	 	 	 	 	 	 	 	 	        (22) 	   	 	(2,166)    	 		(2,188)

Balance at December 31, 1996 		 	 	 	(751)    	 	(17,170) 	  	 	(17,921)

Net loss 		                  									(33)     			(3,297)     			(3,330)

Balance at December 31, 1997 					$ 	(784) 		 $ 	(20,467) 	 	$ 	(21,251)
</TABLE>

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


Prime Motor Inns Limited Partnership
and Subsidiary Limited Partnership
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1996 and 1995
(dollars in thousands)

<TABLE>
<CAPTION>
                             	 	 	 	 	 	 	 	 	 	1997 	 	   	1996 	 	  	 1995
<S>                                          <C>         <C>         <C>
Cash flows from operating activities:
	 Net loss 	 	                  	 	 	 	 	 	 	$	(3,330) 		$	(2,188) 		$	(2,280)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization of property  	 	 	3,596  	 	 	5,201  	 	 	5,158
Lease settlement proceeds 	 	        	 	 	 	 	 	 	 	- 	      	 	-	  	 	(1,025)
Amortization of other assets 	 	 	 	 	 	 	 	 	   	242 	    	 	222 	    	 	315
Amortization of debt discount 	 	 	 	 	 	 	 	 	   	49 	     	 	46 	     	 	43
Long-term borrowings prepayment penalty 	 	 	 	  	(43) 	     	 	- 	      	 	-
Gain on sale of Inn 	 	 	 	 	 	 	 	 	 	        (1,011) 	     	 	- 	        	-
Changes in operating assets and liabilities:
		Accounts receivable 	 	 	 	 	 	 	 	            	(49) 	  	 	(113)     	 	220
 	Inventories 	 	 	 	 	 	 	 	                     	17 	     	 	40 	     	 	10
 	Prepaid expenses 	 	               	 	 	 	 	 	 	233 	    	 	(11) 	     		45
 	Other current assets 			                 				 	 	16 	      	 	7 	      	 	6
 	Other assets 	                  	 	 	 	 	 	 	 	(125)     	 	 	- 	     	 	10
 	Trade accounts payable 	 	          	 	 	 	 	 	 	(3) 	    		(84)   	 	 	166
 	Accrued payroll 	 	 	 	 	 	 	 	                	(46) 	   	 	(28) 	    		(26)
 	Accrued payroll taxes 	          	 	 	 	 	 	 	 	(16)   	 		(121) 	    	 	28
 	Accrued vacation 	 	 	 	 	 	 	 	                	16 	    	 	(36) 	     		37
 	Accrued utilities 	 	              	 	 	 	 	 	 	(35)    	 	 	(4)     	 		77
 	Sales tax payable 	 	 	 	 	 	 	 	               	(9) 	    	 	32 	      		21
 	Other current liabilities 	 	     	 	 	 	 	 	 	(286)    	 		101 	     	 	28
 	Deferred interest 	 	 	 	 	 	 	 	             	(898) 	  	 	(813)	   	 	(741)
 	Accrued shared appreciation 	  	 	 	 	 	 	 	 	4,500 	      	 	- 	      	 	-
 	Other liabilities 	 	              	 	 	 	 	 	 	(11) 	    	 	66 	       		-

  Net cash provided by operating activities 	  	2,807 	  	 	2,317 	  	 	2,092

Cash flows from investing activities:
 	Net proceeds from sale of Inn 	 	 	 	 	  	 	 	2,239	       	 	- 	      	 	-
 	Additions to property and equipment 	 		 	 		(1,519)	 	 	(1,880) 	  	(2,423)
 	Increase in restricted cash 	 	 	 	 	 	 	 	 	(1,176)	 	   	(395)  	 	 	(245)

   	Net cash used in investing activities 	   	 	(456) 	  	(2,275)  	 	(2,668)

Cash flows from financing activities:
  Repayment of long-term borrowings 	 	 	 	 	 	(2,196) 	     	 	- 	      	 	-
  Borrowings under revolving credit facility 	 	1,600 	  	 	1,600 	  	 	1,200
  Repayment of revolving credit facility 	 	 	 (1,600)  	 	(1,600) 	  	(1,200)

 	 	Net cash used in financing activities 	 		 (2,196) 	     	 	- 	      	 	-

Net increase (decrease) in cash
  and cash equivalents 	          		 	 	 	 	 	 	 	155 	     	 	42 	   	 	(576)

Cash and cash equivalents, beginning of year 	 	 	834 	    	 	792  	 	 	1,368

Cash and cash equivalents, end of year 	 	 	 $   	989 	  $   	834  	 $   	792

Supplementary cash flow data:
	 	 	 	  	Interest paid 	 	 	     	 	 	 	 	 	$ 	6,737 	 	$ 	6,836  		$ 	6,755

Noncash activities:
Lease settlement received from former
  affiliate in the form  of stock
 	used to reduce long-term debt 	 	 	 	 	 	 	$ 	    -  		$     	- 	 	$ 	1,025
</TABLE>

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


Prime Motor Inns Limited Partnership
and Subsidiary Limited Partnership
Notes to Consolidated Financial Statements

1. 		Organization, Operations and Bankruptcy:

Prime Motor Inns Limited Partnership (the
"Partnership") and its 99%-owned subsidiary, AMI Operating
Partners, L.P. ("AMI"), were formed in October 1986 under the
Delaware Revised Uniform Limited Partnership Act.  The
Partnership and AMI are referred to collectively as the
"Partnerships".  Prime-American Realty Corp. (the "General
Partner"), a subsidiary of Prime Hospitality Corporation
("Prime"), formerly Prime Motor Inns, Inc., is the general
partner of and holds as its principal asset a 1% partnership
interest in the Partnership and in AMI.

In December 1986, the Partnership consummated an
initial public offering (the "Offering") of 4,000,000 units of
limited partnership interest (the "Units") in the Partnership,
and used the funds received to acquire the 99% limited
partnership interest in AMI. AMI commenced operations in
December 1986 when it used the Offering proceeds and issued
mortgage notes (the "Mortgage Notes") in the principal amount of
$61,470,000 to purchase 16 full service hotels (the "Inns") from
subsidiaries of Prime.  At December 31, 1997 the Partnerships
operated and maintained 8 Inns in Maryland, 5 in Pennsylvania
and 2 in Connecticut, all of which are presently franchised as
part of the "Holiday Inn" system (see Note 4b).

Profits and losses from operations and cash
distributions of the Partnerships combined are generally
allocated 1.99% to the General Partner and 98.01% to the limited
partners.  Any profits and losses from operations in excess of
certain specified annual and cumulative returns on investments
in limited partner shares, as defined (generally 12.5%), are
allocated approximately 30% to the General Partner and 70% to
the limited partners.

Until November 30, 1990, the Inns were operated by
AMI Management Corp. ("AMI Management"), another subsidiary of
Prime, under the terms of a lease between AMI Management and AMI
(the "Lease"), guaranteed by Prime (the "Guaranty").  The Lease
was a net lease that granted AMI Management the right to use the
Inns until December 31, 1991.

1.	Organization, Operations and Bankruptcy, Continued:

On September 18, 1990, Prime announced that it and
certain of its subsidiaries, including AMI Management but not
the General Partner, had filed for reorganization under Chapter
11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of Florida.  AMI
Management defaulted on the payment of base rent due November 1,
1990 under the Lease.  On November 7, 1990, the Partnership gave
notice of default to, and demanded payment from, AMI Management
and Prime.  AMI Management and Prime also filed a motion to
reject the Lease and Guaranty and, by order of the bankruptcy
court dated December 7, 1990, the bankruptcy court approved such
rejection and the Lease and Guaranty  were terminated, effective
as of November 30, 1990 (see Note 3).

AMI was in default under its mortgage loan agreement
as of and prior to December 31, 1990 as a result of, among other
things, the bankruptcy filing by Prime and AMI Management.  On
March 28, 1991, the Partnerships received a notice of
acceleration and demand for payment of the entire outstanding
balance of the Mortgage Notes along with certain conditions
under which the lenders would pursue discussions with respect to
restructuring the Mortgage Notes.

On February 28, 1992, AMI filed with the United
States Bankruptcy Court for the Southern District of New York a
voluntary petition for reorganization under Chapter 11 of the
United States Bankruptcy Code, seeking confirmation by the
bankruptcy court of a prepackaged plan of reorganization (the
"Plan"). The New York Bankruptcy Court confirmed the Plan, on
May 28, 1992, which became effective as of June 12, 1992 (the
"Effective Date").  Upon confirmation of the Plan, the New York
Bankruptcy Court approved the Restated Loan Agreement (the
"Restated Loan Agreement") which, among other things, extended
the maturity date of the Mortgage Notes to December 31, 1999
(see Note 5 for a further discussion of this matter).

Although the Plan was approved, the Partnerships may
not be able to continue as going concerns unless cash flow from
operations are sufficient.  The Partnerships have incurred
significant operating losses and have a capital deficit at
December 31, 1997. While the General Partner believes that
improvements have been made in the physical condition and
attractiveness of the Inns, the market position and
competitiveness of the Inns and the financial condition and
results of operations of AMI, the General Partner believes that
financing is not available on acceptable terms to take the
actions necessary to preserve the Unitholders' interest in the
Inns.  Additionally, the General Partner believes that the
proposed sale to Servico (see Note 2) maximizes and protects
Unitholder value better than any of the available alternative
courses of action, including continuing to hold and trying to
operate the Inns, and that further delay is likely to result in
the loss of certain of the "Holiday Inn" franchises (see Note
4b), foreclosure of the Priming and Mortgage Loans (see Note 6),
and diminution or loss of the value of the Unitholders' equity
in the Partnership. The accompanying consolidated financial
statements do not include any adjustments relating to the
recoverability of recorded asset amounts or the amounts of
liabilities that might be necessary should the Partnerships be
unable to continue as going concerns.
<PAGE>
<Spacing>

2. Proposed Sale of AMI and the General Partner:

The Partnerships entered into a definitive agreement
dated as of November 7, 1997, as amended as of March 12, 1998,
pursuant to which the 99% limited partnership interest in AMI
will be sold for $12,000,000 in cash to Service Acquisition
Corp., a wholly owned subsidiary of Servico, Inc. ("Servico").
The closing is conditioned on, among other things, approval of
the limited partners. Upon closing of the aforementioned
transaction, the Partnership's only asset will be the cash
received from Servico.  It is anticipated that the Partnership
will dissolve and wind up its affairs and distribute the net
proceeds from the sale to the limited partners in accordance
with a Plan of Liquidation.

The General Partner and its parent have entered in to
an agreement with Servico pursuant to which Servico will acquire
the General Partner's 1% general partnership interest in AMI in
exchange for a five year warrant to acquire 100,000 shares of
Servico Common Stock at a price of $18 per share.

3.	Summary of Significant Accounting Policies:

The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial
statements and reported amounts of revenues and expenses during
the reporting periods.  Actual results could differ from those
estimates.

The following is a summary of certain significant
accounting policies used in the preparation of the consolidated
financial statements.

a.	Principles of Consolidation:  The consolidated
   financial statements include the accounts of the Partnership and
   its 99%-owned subsidiary limited partnership, AMI.  AMI operates
   on the basis of a year ending on the Friday which is most
   proximate to December 31 of any given year.  All material
   intercompany accounts and transactions have been eliminated.

b.	Cash Equivalents:  Cash equivalents are highly
   liquid investments with a maturity of three months or less when
   acquired.
<PAGE>
<Note Number>

c. Inventories:  Inventories are stated at the
   lower of cost or market, with cost determined on the first-in,
   first-out method.  Inventories consist of:

<TABLE>
<CAPTION>
            	 	 	 	 	 	 	 	 	 	1997 	     	 	1996
     <S>                   <C>           <C>
     Food 	 	 	 	 	 	 	 	 	$ 	130,000 	 	$ 	131,000
    	Beverage 	 	 	 	 	 	 	 	 	64,000   	 	 	70,000
    	Linen 	 	 	 	 	 	 	 	 	  	11,000 	   	 	21,000

        	 	 	 	 	 	 	 	 	 	$ 	205,000 	 	$ 	222,000

</TABLE>


d. Property and Equipment:  Property and equipment
   are stated at the lower of cost or fair market value.  The net
   carrying value of property and equipment as of December 31, 1991
   was reduced to estimated fair market value, through a charge to
   expenses in the amount of $46,354,000.  Expenditures for
   improvements and major renewals are capitalized.  Expenditures
   for maintenance and repairs, which do not extend the useful life
   of the asset, are expensed as incurred.  For financial statement
   purposes, provision is made for depreciation and amortization
   using the straight-line method over the lesser of the estimated
   useful lives of the assets, ranging from 15 to 40 years for
   buildings and leasehold improvements and 3 to 10 years for
   furniture and equipment, and the terms of the related leases.
   For federal income tax purposes, accelerated methods are used in
   calculating depreciation.

e.	Impairment of Long Lived Assets: The Partnerships
   review for impairment and recoverability of property and
   equipment whenever events or changes in circumstances indicate
   that the carrying amount of an asset may not be recoverable.  If
   an evaluation is required, the estimated future undiscounted
   cash flows associated with the asset would be compared to the
   assets carrying amount to determine if a write-down to fair
   market value would be required. Properties held for sale are
   stated at the lower of cost or fair value less cost to sell.  No
   write-downs have been recorded by the Company under the
   provisions of SFAS 121, "Accounting for the Impairment of
   Long-Lived Assets".

f.	Other Assets:  Franchise fees, deferred lease
   costs, and deferred debt acquisition costs are amortized on a
   straight-line basis over the estimated lives of the assets or
   the specific term of the related agreement, lease or mortgage
   loan.

g.	Net Loss per Unit:  Net loss per Unit is
   calculated based on the net loss allocable to limited partners
   divided by the 4,000,000 Units outstanding.

h.	Reclassifications:  Certain 1996 amounts have
   been reclassified to conform to the 1997 presentation.

i. Fair Value of Financial Instruments:  It is not
   practicable to estimate the fair value of borrowings under the
   Partnerships' long term debt due to the lack of quoted market
   prices for similar debt issues and the lack of current rates
   which would be offered to the Partnerships for debt with similar
   terms.

4		Operations of the Inns:

a.	Lease and Guaranty:  Prior to the rejection and
   termination of the Lease and Guaranty effective as of November
   30, 1990, the Lease granted AMI Management the right to use the
   Inns for the operation of hotels and related purposes.

   AMI Management defaulted on the payment of
   $1,311,000 of base rent due on November 1, 1990.  Pursuant to
   the joint motion approved by order of the bankruptcy court on
   January 8, 1991, the Partnerships, AMI Management and Prime
   entered into an agreement providing for the assumption by AMI of
   the operations of the Inns (the "Agreement").  The Partnerships
   also effectively assumed control over certain accounts
   receivable, supplies, equipment and other assets and
   responsibility for certain accounts payable and other
   liabilities arising from the operations of the Inns by AMI
   Management during the term of the lease.  Disputes between the
   parties existed at December 31, 1991 as to, among other things,
   the value of certain assets and liabilities under the Agreement.
   AMI entered into an agreement in 1992 (the "Omnibus Agreement")
   under which, among other things, AMI assigned to the holders of
   the Mortgage Notes its claims against Prime and AMI Management
   and agreed that amounts recovered on such claims would be
   allocated among financial claims (the proceeds of which would be
   applied to the repayment of the Mortgage Notes) and operating
   claims (the proceeds of which would be available to finance
   capital improvements to the Inns).

   In July, 1992 the servicing agent for the holders
   of the Mortgage Notes, Prime and AMI Management reached a
   settlement (the "Settlement") of claims which was approved by
   the Florida Bankruptcy Court.  Under the Settlement, various
   claims of the holders of the Mortgage Notes against Prime and
   AMI Management were allowed; AMI will not make any payments to
   or for the  benefit of any other party; and Prime, AMI
   Management and AMI exchanged mutual releases.

a.	Lease and Guaranty:  Since 1992, AMI and the
   mortgage lenders received total proceeds as a result of the
   Settlement of approximately $8,874,000, of which $8,827,000 was
   utilized to reduce the principal amount of the Mortgage Notes
   (of which $1,025,000 was recognized in 1995) and $47,000 was
   used to fund capital improvements as required by the Omnibus
   Agreement.  Lease settlement proceeds recorded as income in 1995
   represent the value assigned to 127,924 shares of Prime common
   stock allocated to the Partnerships during 1995 related to the
   settlement of financial claims.  In accordance with the terms of
   the Omnibus Agreement, the settlement proceeds were required to
   be applied to the repayment of the Mortgage Notes.

b.	Franchise Agreements:  The Inns are operated as
   part of the "Holiday Inn" system which is administrated by
   Holiday Hospitality Corporation, formerly Holiday Inns Inc., and
   its affiliates (collectively "HHC").  The Holiday Inn franchise
   agreements for four Inns expire one each in 1998, 1999, 2001 and
   2005.

   During 1997, eleven of the Inns' franchise
   agreements expired, which subsequently were extended through
   March 10, 1998.  For five of these Inns, HHC has advised the
   Partnerships that they do not intend to renew such franchises.
   However, HHC agreed that if, by March 10, 1998, it received
   franchise license applications from a "viable" applicant for the
   remaining six Inns and were paid application fees of $517,000,
   it would extend the franchises for all eleven Inns for 60 days.
   Applications were filed by Servico, and the fees were paid by
   the Partnerships, on or prior to March 10, 1998. HHC has also
   notified the Partnerships that certain capital expenditure
   projects at the Inns will be required to renew the Inns'
   franchise status, the scope and cost of which are currently not
   determinable. The loss of the Holiday Inn franchise status of
   these Inns may have a near term adverse impact on the
   Partnerships' results of operations.

c.	W&H Management Agreement:  Winegardner & Hammons,
   Inc. ("W&H") continues to manage the operations of the Inns
   pursuant to its management agreement with AMI which provides for
   an annual management fee of 2.25% of the gross revenues of the
   Inns and certain incentive management fees.  W&H is also
   reimbursed for miscellaneous out-of-pocket expenses allocated to
   the Inns, including expenses incurred in providing certain
   administrative services for the Partnerships, royalties and
   marketing, advertising, public relations, and reservation
   services, subject to certain limitations.  The management
   agreement expires December 31, 2000 and is cancelable by either
   W&H or AMI, without cause or penalty, upon ninety days written
   notification.  At December 31, 1997 and 1996, the Partnerships
   had approximately $57,000 and $61,000, respectively, in
   receivables from an entity controlled by W&H which manages
   certain of the Inns' lounges.
<PAGE>
<Note Alpha>

d.	Properties Sold and Held for Sale: In July 1997,
   the Partnerships sold an Inn located in Glen Burnie, Maryland
   for $2,400,000 in cash, which resulted in a gain of $1,011,000.
   Direct revenues of approximately $945,000, $1,724,000 and
   $1,565,000, and direct expenses of $813,000, $1,364,000 and
   $1,295,000, related to this Inn were included in the
   Consolidated Statement of Operations of the years ended December
   31, 1997, 1996 and 1995, respectively.

   The Partnerships intend to sell the five Inns whose
   franchises will not be renewed (see Note 4b).  Direct revenues
   of approximately $9,148,000, $8,875,000 and $8,735,000, and
   direct expenses of $7,908,000, $7,876,000 and $7,645,000,
   related to these five Inns were included in the Consolidated
   Statement of Operations for the years ended December 31, 1997,
   1996 and 1995, respectively.

The components of other assets are as follows (in thousands):
<TABLE>
<CAPTION>
     	 	 	 	 	 	 	 	               	1997 	    	 	1996
<S>                             <C>          <C>
Deferred lease costs 	 	 	 	 	 	$     	21 	 	$     	21
Debt acquisition costs 	 	 	 	 	 	 	2,839 	 		   2,839
Franchise fees 	 	 	 	 	 	 	 	 	 	    945 	     	 	820
Other 	 	 	 	 	 	 	 	 	                	4 	       	 	4

               	 	 	 	 	 	 	 	 	 	 	3,809   	 	 	3,684

Less accumulated amortization 	 	 		3,384   	 	 	3,142

                	 	 	 	 	 	 	 	 $    	425	 	 $    	542
</TABLE>

In June 1997, the Partnerships paid $125,000 to HHC
to extend the Holiday Inn franchises to July 31, 1997, which
were subsequently extended to May 9, 1998 (See Note 4b).

Amortization of debt acquisition costs charged to
expense was $163,000, $161,000 and $174,000 in 1997, 1996 and
1995, respectively.  Amortization of franchise fees charged to
expense was $79,000, $61,000 and $141,000 in 1997, 1996 and
1995, respectively.
<PAGE>
<Spacing>

6. Debt:
<TABLE>
<CAPTION>
Long-term debt consists of:
 	 	 	 	 	 	 	 	 	                                  1997 	 	 	       1996
<S>                                             <C>              <C>
Mortgage notes, net of unamortized discount
  of $109,000 in 1997 and $158,000 in 1996 					$ 	54,240,000 	 	$ 	54,191,000

Priming loan, interest at 11% 								 	 	          9,304,000 	  	 	11,500,000

                                 	 	 	 	 	 	 	 	$ 	63,544,000 	 	$ 	65,691,000
</TABLE>

In confirming the bankruptcy Plan of Reorganization on May 28,
1992, the New York Bankruptcy Court approved the Restated Loan
Agreement which called for the following provisions: $3,467,127
of accrued and unpaid interest at December 31, 1991 (the
"Deferred Amount") to be added to the principal amount of the
Mortgage Notes, but to bear interest only from and after January
1, 1995; the Mortgage Notes (not including the Deferred Amount)
to bear interest payable at a rate of 8% per annum in 1994; the
principal amount of the Mortgage Notes (including the Deferred
Amount) to bear interest at the rate of 10% per annum from
January 1, 1995 until maturity; and maturity of the Mortgage
Notes (including the Deferred Amount) to be extended to December
31, 1999.  In addition, the Restated Loan Agreement provides for
the deeds to the Inns and assignments of other assets of AMI to
be held in escrow until maturity of the Mortgage Notes.  Under
the terms of the Restated Loan Agreement, the Mortgage Notes are
repayable at any time without penalty.

The Restated Loan Agreement was accounted for as a
modification of terms in accordance with Statement of Financial
Accounting Standards No. 15 "Accounting by Debtors and Creditors
for Troubled Debt Restructurings".  Accordingly, the carrying
value of the Mortgage Notes and Deferred Amount was not adjusted
to reflect the terms of the Restated Loan Agreement.  The effect
of the changes in the terms of the Mortgage Notes will be
recognized prospectively over the life of the Mortgage Notes,
through an adjustment of the effective interest rate on the
Mortgage Notes and Deferred Amount to approximately 8.5% per
annum (the "Effective Rate").  The amount by which interest
payable at the Effective Rate exceeded the amount of interest
paid at the stated rate, has been accrued and is included in
deferred interest payable at December 31, 1997 and 1996.  The
amount by which interest paid at the stated rate exceeds the
amount of interest payable at the Effective Rate will reduce the
deferred interest balance in future periods.
<PAGE>
<Note Text>

As part of the Plan, certain members of the lending
group also agreed to provide AMI post-petition financing (the
"Priming Loan").  Borrowings under the Priming Loan may be used
to finance capital improvements or to fund operating cash
requirements.  The portion used for capital improvements
(defined as the Tranche A Loan), which may be up to the full
amount of the $14,000,000 available, is due on December 31, 1999
and provides for a prepayment premium of 2%.  The portion used
for operating cash requirements (defined as the Tranche B Loan),
which cannot exceed $2,500,000, is also limited to the amount
remaining after borrowings for capital improvements.  Borrowings
under the Tranche B Loan are pursuant to a revolving facility,
such that amounts repaid can be reborrowed up to the limits of
availability.  These revolving credit borrowings are subject to
the mandatory repayment provisions described below.  There were
no outstanding borrowings under the revolving facility at
December 31, 1997 or 1996.

As of December 31, 1997 and 1996, the outstanding
balance under the Priming loan was $9,304,000 and $11,500,000,
respectively,  and the entire amount in 1997 and 1996 represents
borrowings under the Tranche A Loan.  The Priming Loan agreement
places certain restrictions on the use of AMI's cash flow and
sales proceeds.  Operating cash flow can be used only in
accordance with the Priming Loan agreement, which calls for,
among other things, monthly deposits into an escrow account held
by or on behalf of the lenders for the payment of a furniture,
fixtures and equipment reserve of 5% of gross revenues.  The
cash on hand from the operation of the Inns less the current
month projected cash deficiency, if any, less a working capital
reserve not to exceed $2,000,000, shall be utilized first to
repay any outstanding borrowings under the Tranche B Loan and
then paid into an escrow account held on behalf of the lenders
for the payment of taxes and insurance.

During 1997, the Partnerships sold an Inn and
received net proceeds of approximately $2,239,000 (See Note 4d).
 As required by the Priming Loan, the proceeds were used to
repay approximately $2,196,000 of outstanding borrowings under
the Tranche A Loan and to pay a prepayment premium of
approximately $43,000.
<PAGE>
<Spacing>

7.	Shared Appreciation:

The Restated Loan Agreement and the W&H Management
Agreement provide for a shared appreciation feature that calls
for AMI to pay additional interest and an additional incentive
management fee to the lenders and W&H, respectively, based on
(i) in the case of any Inn sold prior to the maturity date of
the Mortgage Notes, the amount (if any) by which the net sale
price of the Inn exceeds the amount of the Mortgage Notes
allocated to it, and (ii) in the case of the Inns still owned by
AMI at the maturity date of the Mortgage Notes (December 31,
1999 or upon acceleration), the amount (if any) by which the
sale price or appraised value of such Inns exceeds the then
outstanding principal amount of the Mortgage Notes, with such
computations also being net of any obligations under the Priming
Loan.  However, no amount is payable as additional interest or
incentive management fees until all obligations under the
Priming Loan have been paid.  The Partnerships periodically
estimate the fair value of the Inns to determine if an accrual
is needed for future payments to the Lenders and W&H under the
shared appreciation feature.  The Partnerships did not provide
for additional interest or incentive management fees in 1995 or
1996.  For 1997, the Partnerships recorded $4,500,000 as
additional interest and incentive management fees under the
Restated Loan Agreement and the W&H Management Agreement.  The
additional interest and incentive management fees are based on
estimates of fair value of ten of the Inns at December 31, 1999
and the estimated sales proceeds for the five Inns held for
sale.  However, such amounts (if any) as the Partnerships will
ultimately realize upon the sale of any of the Inns and the
appraised values of the Inns owned by AMI at the maturity date
of the Mortgage Notes, could differ materially from the
estimated fair values used in the determination of the
additional interest and incentive management fee.  In addition,
any amount of shared appreciation that may be paid is subject to
interpretation or negotiation by the Partnerships, the Lenders
and W&H.

8. Commitments:

Four of the Inns are held pursuant to land leases and
three of the Inns are held pursuant to land and building leases,
which are accounted for as operating leases.  The leases have
terms expiring at various dates from 2000 through 2024 and
options to renew the leases for terms varying from ten to forty
years.  Five of the leases are subject to an escalating rent
provision based upon inflation indexes, which adjust the lease
payment every five to ten years depending on the respective
lease.  One of the leases is a land lease with a subsidiary of
Prime that expires in 2000 (with an option to extend 40 years)
and requires annual rentals of $24,000.  Future minimum lease
payments will be as follows:

<TABLE>
<CAPTION>
          	Year 	        	 	  	 	 	 	 	Amount
           <S>                     <C>
          	1998  	 	 	 	 	 	       $ 	1,324,000
          	1999  	 	  	 	 	 	        	1,324,000
          	2000  	  	 	 	 	 	 	       1,332,000
          	2001     							 	        	1,308,000
          	2002  	  	 	 	 	 	        	1,308,000
          	2003  and thereafter 	   	15,209,000

                                   $ 21,805,000
</TABLE>

Rent expense under these leases totaled $1,273,000, $1,258,000
and $1,260,000 in 1997, 1996, and 1995, respectively.

9. 		Income Taxes:

No federal or state income taxes are reflected in the
accompanying financial statements of the Partnerships.  Based
upon an opinion of counsel of the Partnership obtained in 1986,
which is not binding upon the Internal Revenue Service, the
Partnerships were not taxable entities at their inception.  The
partners must report their allocable shares of the profits and
losses of the Partnerships in their respective income tax
returns.

The Revenue Act of 1987 (the "1987 Act") added
several provisions to the Internal Revenue Code which affect
publicly traded partnerships such as the Partnership.  Under
these rules, a publicly traded partnership is taxed as a
corporation unless 90% or more of its income constitutes
"qualifying income" such as real property rents, dividends and
interest.  The 1987 Act also provided certain transitional
rules, however, which generally exempt publicly traded
partnerships in existence on December 17, 1987 from application
of the new rules until after 1997, subject to various
limitations.
<PAGE>
<Spacing>

If the Partnership's operations continue as described
herein, effective January 1, 1998, the Partnership will be
treated as a corporation for federal income tax purposes, unless
the Partnership makes an election to be treated as an "electing
partnership".  As an electing partnership, the Partnership would
still be treated as a partnership for federal income tax
purposes, but would be subject to a 3.5% tax on all gross income
earned by the Partnership.  The Partnership made this election.

Publicly traded partnerships which add a substantial
new line of business are not eligible for relief under these
transitional rules and it is possible that the Internal Revenue
Service could contend that the Partnership should be taxed as a
corporation after November 30, 1990, the date of termination of
the Lease.  Also, it should be noted that with respect to the
partners, the 1987 Act also contained rules under which the
income of the Partnership will be treated, effectively, as
"portfolio income" for tax purposes and will not be eligible to
offset losses from other passive activities.  Similarly, any
losses of the Partnership will not be eligible to offset any
income from other sources.

The Partnerships have determined that they do not
have to provide for deferred tax liabilities based on temporary
differences between financial and tax reporting purposes.  The
tax basis of the net assets of the Partnerships exceeded the
financial reporting basis at December 31, 1997.
<PAGE>
<Spacing>