EXECUSTAY CORP, 424B4, 1997-08-27

EXECUSTAY CORP
424B4, 1997-08-27
HOTELS, ROOMING HOUSES, CAMPS & OTHER LODGING PLACES

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<PAGE> 1

2,650,000 Shares

EXECUSTAY LOGO

Common Stock
------------------

All of the 2,650,000 shares of Common Stock (the "Common Stock") offered
hereby are being sold by ExecuStay Corporation ("ExecuStay" or the "Company").

Prior to this offering, there has been no public market for the Common
Stock. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. The Common Stock has been
approved for quotation on the Nasdaq National Market under the trading symbol
"EXEC." Following completion of this offering, the Company's four current
stockholders, three of whom are directors and officers of the Company, will
beneficially own a total of approximately 58.6% of the outstanding Common Stock
and will have the ability to control the affairs of the Company.
------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share....................................... $10.00 $0.70 $9.30
- ------------------------------------------------------------------------------------------------
Total (3)....................................... $26,500,000 $1,855,000 $24,645,000
================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting estimated offering expenses of $500,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 397,500 additional shares of Common Stock on the same terms and
conditions as set forth above solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $30,475,000, $2,133,250 and
$28,341,750, respectively. See "Underwriting."
------------------

The Common Stock is offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them and subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer or to reject any orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made on or about September 2,
1997.

A.G. EDWARDS & SONS, INC. EQUITABLE SECURITIES CORPORATION

THE DATE OF THIS PROSPECTUS IS AUGUST 27, 1997
<PAGE> 2

ExecuStay -- America's interim housing solution.

[Diagram illustrating Demand Characteristics (Extended Work Assignment,
Permanent Relocation, More Mobile and Transitory Population) and Product
Attributes (Flexibility of Location, Personalized Amenities and Decor, Cost
Effective Alternative)]

[Graph showing on the horizontal axis various housing accommodation markets
(Short Stay (1 to 5 days), Extended Stay (5 to 30 days) and Interim Stay (30
days to one year +)) and indicating the categories of lodging facilities that
serve each market (Traditional Hotel (1 to 5 + days), All-Suite Hotel (1 to 15 +
days), Extended Stay Hotel (5 to 60 +/- days) and Interim Housing (30 days to
one year +)]

------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF A PENALTY BID. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

ExecuStay(R) is a registered trademark of the Company. This Prospectus also
includes trade names, trademarks and registered trademarks of companies other
than the Company.

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. Investors
should carefully consider the risk factors related to the purchase of the Common
Stock. See "Risk Factors." Unless otherwise indicated, the information in this
Prospectus (i) gives effect to the June 4, 1997 recapitalization whereby the
Company acquired all of the shares of its operating subsidiaries in exchange for
all of the outstanding shares of the Common Stock of the Company (the
"Recapitalization") and (ii) assumes that the Underwriters' over-allotment
option will not be exercised.

THE COMPANY

ExecuStay is a leading provider of interim housing for corporate clients
and professionals. Through its ten regional offices, ExecuStay provides fully
furnished high-quality apartments for stays of 30 days or more, offering a
choice of locations, types of accommodation and accessories. ExecuStay residents
enjoy home-like accommodations that are furnished according to their needs and
preferences and generally priced comparably or more affordably than traditional
full service hotels or all-suite hotels. The number of apartments occupied by
ExecuStay residents has grown from approximately 190 at December 31, 1994 to
approximately 1,800 at June 30, 1997, with an average rental period in the first
half of 1997 of more than three months. The Company currently leases apartments
in over 35 states.

The Company believes that demand for interim housing services has been
driven by continued growth in management and professional employment, the
increasing importance to American business of flexibility and outsourcing and
the impact of a more mobile and transitory population. The Company's customers
include Fortune 500 companies, federal and state governmental agencies, small
businesses and individuals. Corporate clients generally use interim housing to
meet seasonal, temporary or startup needs and to accommodate employees who have
been relocated or are on temporary assignment. The Company owns no residential
housing; instead, housing occupied by ExecuStay residents is leased to the
Company (as tenant) from a variety of unaffiliated property owners and managers.
When responding to inquiries from prospective ExecuStay residents, the Company
is not limited to any particular pool of apartment units and therefore is able
to select suitable accommodations from any apartment property in the desired
location, affording greater flexibility in accommodating the preferences of its
customers. The Company generally has been able to enter into leases with
property owners that match each resident's desired length of stay and, as a
result, the units leased to the Company were vacant less than 2% of the time in
the first half of 1997. Virtually all ExecuStay accommodations are apartments,
although the Company occasionally provides housing at townhomes or single-family
homes.

The Company generally can locate and furnish a residence within 24 hours of
a request and usually can arrange the length of each lease to fit the customer's
needs. The Company furnishes residences, from its own warehouse or through
unaffiliated rental companies, to each customer's taste with furniture, linens,
electronics and housewares, along with art work and decorative accessories.
Residential office furniture, fax machines, additional phone lines, computer
equipment, exercise equipment and maid service can also be provided upon
request. ExecuStay can locate accommodations for families with young children,
infants or pets. Amenities vary by location but often include a swimming pool,
hot tub, sauna, fitness center, tennis courts and clubhouse. All expenses
relating to each residence, including rent, local and long-distance telephone
service, cable television, utilities and trash removal, are billed to and paid
by ExecuStay, which then bills each customer monthly in a single invoice.

ExecuStay has established marketing, sales and service offices in the
Atlanta, Charlotte, Ft. Lauderdale, Los Angeles, Orlando, Philadelphia, Raleigh,
Richmond, San Francisco and Washington metropolitan areas. ExecuStay provides
housewares (non-furniture accessories) both to its residents and to others from
its warehouses in the Los Angeles, Ft. Lauderdale, Charlotte and Washington
locations. The ownership of housewares inventory allows the Company to offer
personalized accessories packages and enables it to monitor and control product
quality and consistency. In addition to housewares rental, the Washington
warehouse also provides furniture for ExecuStay residents in the Mid-Atlantic
area and rents residential and commercial furniture to customers other than
ExecuStay residents. In areas other than the Mid-Atlantic region, the Company
uses unaffiliated furniture rental companies to provide furniture to ExecuStay
residents.

3
<PAGE> 4

EXPANSION STRATEGY

The Company is pursuing an expansion strategy designed to enhance its
national presence and brand name recognition in the interim housing industry.
The Company believes that, as it strengthens its presence in new and existing
markets, the Company's services will become increasingly attractive to national
corporate clients that need employee accommodations throughout the country. The
key components of the Company's expansion strategy are as follows:

Acquisitions. The interim housing industry is highly fragmented and
includes a large number of single-city and regional businesses, which the
Company believes creates significant consolidation opportunities. The primary
focus of the Company's expansion strategy will be the selective acquisition of
smaller local and regional interim housing service providers that operate in
markets where the Company does not yet have a presence or where the Company has
identified significant growth opportunities.

On April 1, 1997, the Company began implementing its acquisition strategy
by purchasing for $850,000 certain assets and all existing customer leases of an
Orlando interim housing business that had 1996 revenue of approximately $1.7
million. On June 1, 1997, the Company purchased for $1.9 million an interim
housing business in San Francisco, which had 1996 revenue of approximately $9.0
million, from a local property developer and obtained the exclusive right to
provide interim housing services at 15 properties owned by the developer. The
Company borrowed approximately $2.9 million to finance these two acquisitions,
which loans are expected to be repaid with a portion of the net proceeds of this
offering. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Recent Expansion."

Internal Expansion. The Company intends to open additional regional
offices in strategically identified geographic locations where it currently does
not conduct business and where it has been unable to identify attractive
acquisition candidates. In June 1997, ExecuStay established a regional office in
Atlanta and has hired an office manager with existing relationships with interim
housing customers and suppliers in that market. The Company recently signed an
agreement with a national apartment property owner and manager to operate an
interim housing program at 22 properties in Phoenix. The Company intends to
begin operations in Phoenix within the next few months.
------------------

The Company commenced operations in 1986. ExecuStay Corporation was
incorporated in Maryland on June 4, 1997 to acquire and hold all of the
outstanding shares of its operating subsidiaries. References to the "Company" or
"ExecuStay" in this Prospectus include ExecuStay Corporation and its
subsidiaries. The Company's headquarters are located at 7595 Rickenbacker Drive,
Gaithersburg, Maryland 20879, and its telephone number is 301-948-4888.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,650,000 shares
Common Stock to be outstanding after the
offering (1)............................... 6,400,000 shares
Use of proceeds.............................. Payment of S corporation and other distributions to
current stockholders, repayment of debt, funding of
possible future acquisitions and for working capital
and other general corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol................ "EXEC"
</TABLE>

- ---------------
(1) Excludes 700,000 shares of Common Stock reserved for issuance under the
Company's recently adopted stock option plan, of which options to purchase
173,650 shares will be granted immediately upon the effectiveness of this
offering at an exercise price equal to the initial public offering price per
share. See "Management -- Stock Plan."

4
<PAGE> 5

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------- ------- ------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue......................... $7,436 $8,722 $13,773 $17,208 $29,645 $11,858 $20,436
Total operating costs and expenses.... 6,536 7,810 12,248 15,092 26,679 10,939 18,593
------ ------ ------- ------- ------- ------- -------
Earnings from operations.............. 900 912 1,525 2,116 2,966 919 1,843
Interest expense...................... 113 68 195 240 308 133 209
------ ------ ------- ------- ------- ------- -------
Net income............................ $ 787 $ 844 $ 1,330 $ 1,876 $ 2,658 $ 786 $ 1,634
====== ====== ======= ======= ======= ======= =======
PRO FORMA DATA (1):
Net income............................ $ 1,595 $ 981
======= =======
Net income per common share........... $ 0.40 $ 0.25
======= =======
Weighted average common shares
outstanding (2)..................... 3,965 3,965
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED (3)
------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash........................................................................... $ 7 $13,500
Property on or held for lease, net............................................. 4,221 4,221
Total assets................................................................... 14,950 28,443
Total bank debt................................................................ 7,552 --
Due to stockholders............................................................ 1,102 --
Total stockholders' equity..................................................... 2,230 24,192
</TABLE>

- ---------------
(1) For all periods presented, the Company elected to be treated as an S
corporation and was not subject to federal and certain state income taxes.
The Pro Forma Data reflect federal and state income taxes based on
applicable tax rates as if the Company had not elected S corporation status
for the periods indicated. See Note M to the Consolidated Financial
Statements.

(2) The pro forma weighted average common shares outstanding is based on: (i)
the weighted average shares outstanding during the period; and (ii) the
assumed sale of a sufficient number of shares of Common Stock necessary to
provide funds to make a distribution of all undistributed S corporation
earnings at June 30, 1997 in excess of earnings for the twelve-month period
then ended and to make the distribution of $1.1 million declared on June 13,
1997. See "Termination of S Corporation Status and Related Distributions"
and "Dividend Policy."

(3) Gives effect to: (i) a distribution to the Company's current stockholders of
undistributed S corporation earnings, which totaled approximately $2.0
million as of June 30, 1997; (ii) a distribution to current stockholders of
$1.1 million declared on June 13, 1997; (iii) the recording of an
anticipated $183,000 deferred tax liability relating to the termination of
the Company's S corporation status; and (iv) the sale of the 2,650,000
shares of Common Stock offered by the Company hereby and the application of
a portion of the net proceeds therefrom to repay indebtedness as described
under "Use of Proceeds." The actual amount of the S corporation distribution
to be funded using a portion of the proceeds of this offering will reflect
additional earnings of the Company from July 1, 1997 through the closing of
this offering. See "Termination of S Corporation Status and Related
Distributions," "Dividend Policy" and Note M to the Consolidated Financial
Statements.

5
<PAGE> 6

RISK FACTORS

Prospective investors should consider carefully the following risk factors
relating to the Company and the Common Stock, in addition to the other
information contained in this Prospectus. Certain statements contained in this
Prospectus that are not related to historical results are forward-looking
statements. Actual results may differ materially from those projected or implied
in the forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, the following risk factors.

RISKS ASSOCIATED WITH ACQUISITIONS

A significant element of the Company's growth strategy involves the
acquisition of interim housing businesses in new markets throughout the country.
The Company's ability to expand through acquisitions depends on many factors,
including the availability of capital to purchase other businesses and to
support such growth, the successful identification and acquisition of businesses
and management's ability to effectively integrate and operate the new
businesses. The Company currently has no commitments, understandings or
arrangements with respect to any future acquisitions. There is significant
competition for acquisition opportunities in the industry. Competition may
intensify due to consolidation in the industry, which could increase the costs
of future acquisitions. The Company competes for acquisition opportunities with
other companies, some of which may have significantly greater financial and
management resources than the Company. Further, the anticipated benefits from
any acquisition may not be achieved unless the operations of the acquired
business are successfully combined with those of the Company. The integration of
acquired businesses also requires substantial attention from management. The
diversion of the attention of management and any difficulties encountered in the
transition process could have a material adverse effect on the Company's
business, operating results and financial condition. There can be no assurance
that the Company will be able to identify suitable acquisition candidates,
acquire any such candidates on reasonable terms or integrate acquired businesses
successfully.

Future acquisitions may result in the issuance of additional shares of the
Company's Common Stock or the incurrence of additional indebtedness, may entail
the payment of consideration in excess of book value and could have a dilutive
effect on the Company's net income per share. The incurrence of additional
indebtedness would increase the Company's interest expense and, depending on the
future operating results of the acquired business, could have a material adverse
effect on the Company's net income. Many business acquisitions must be accounted
for as a purchase. Most of the businesses that might become attractive
acquisition candidates for the Company are likely to have significant goodwill
and intangible assets, and acquisition of these businesses, if accounted for as
a purchase, would typically result in substantial goodwill amortization charges
to the Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources," "Recent
Expansion" and "Business -- Business Strategy."

One or more large acquisitions could exhaust the Company's proceeds from
this offering and create the need to raise additional capital in the near future
to finance new acquisitions. Although the Company currently has a $2.0 million
line of credit, there can be no assurance that sufficient capital will be
available if and when required on terms acceptable to the Company, if at all.
Any additional equity financing may be dilutive to purchasers in this offering,
and any debt financing may involve restrictive covenants. Failure to secure
additional financing if and when needed could adversely affect the Company,
including requiring the Company to delay, scale back or eliminate its expansion
strategy. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Business Strategy."

MANAGEMENT OF EXPANSION

The Company's ability to manage any future expansion effectively will
require it to attract, retain, train, motivate and manage new employees
successfully, to integrate regional offices, new management and employees into
its overall operations and to continue to improve its operational, financial and
management systems and controls. The Company's failure to manage any expansion
effectively could have a material

6
<PAGE> 7

adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Business Strategy."

FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY

The Company's operating results have fluctuated from quarter to quarter in
the past, and may fluctuate significantly in the future, based on many factors,
including expansion into new markets, seasonal fluctuations in interim housing
demand, the tactics of the Company's competitors and the overall strength of the
economy. In particular, the Company believes that, because of its significant
recent growth, period-to-period comparisons of its financial results should not
be relied upon as an indication of future performance. The Company's business
levels are also tied to the volume of corporate long-term assignments and
relocation activities in its market areas and throughout the country. Corporate
relocations decline from September through January, which includes the holiday
season. Partly because of the effect of seasonality, the Company's 1996
quarterly revenue increased from $5.1 million in the first quarter to $6.8
million in the second quarter and to $8.9 million in the third quarter, before
declining by $33,000 in the fourth quarter. During the same period, net income
increased from $182,000 in the first quarter to $603,000 in the second quarter
and to $1.2 million in the third quarter, before declining to $664,000 in the
fourth quarter. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Quarterly Results of Operations." Although the
revenue and net income growth during the first three quarters of the year was
due in part to the addition and development of new offices, the aggregate 1996
quarterly revenue at the four more established offices (Los Angeles, Washington,
Philadelphia and Richmond) increased from $2.9 million in the first quarter to
$3.8 million in the second quarter and to $4.8 million in the third quarter,
before declining to $4.4 million in the fourth quarter. Gross revenue then
increased to $4.5 million and $5.1 million in the first two quarters of 1997.
Fluctuations caused by variations in quarterly operating results or the
Company's failure to meet securities analysts' projections or public
expectations as to operating results for a particular quarter may adversely
affect the market price of the Company's Common Stock.

COMPETITION

The interim housing industry is highly competitive. The Company competes
against numerous local, regional and national interim housing service providers,
both for customers and for accommodations. The Company expects competition in
its business to intensify as existing competitors expand and new competitors
enter the industry. The financial barriers to entry in the interim housing
industry are relatively low, making it an attractive industry for potential new
competitors. In particular, entities that maintain a vendor-vendee relationship
with companies in this industry, such as real estate managers or furniture
rental businesses, have entered the industry and more such entities may enter
the industry in the future. Certain of the Company's existing competitors have,
and new competitors that enter the industry may have, access to significantly
greater financial resources and more rental properties than the Company.
Competitive market conditions could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- The Housing Accommodations Industry" and "Business -- Competition."

Providers of interim housing compete with each other and with traditional,
all-suite and extended-stay hotels. A number of lodging chains and developers
have recently announced plans to develop, or are currently developing,
extended-stay hotels that may compete with the interim housing accommodations
provided by the Company. Moreover, several extended-stay lodging companies have
recently raised substantial amounts of capital in public offerings for purposes
of constructing and expanding lodging facilities. There can be no assurance that
new or existing lodging companies, including traditional hotels with nationally
recognized brand names, will not significantly lower rates or offer greater
convenience, services or amenities or significantly expand or improve
facilities, thereby adversely affecting the Company's competitive position. See
"Business -- The Housing Accommodations Industry."

7
<PAGE> 8

DOWNTURNS IN GENERAL ECONOMIC CONDITIONS

The Company believes that the market for interim housing is significantly
influenced by economic conditions generally and particularly by levels of job
creation, temporary relocation of employees and general business activity.
Significant economic downturns could have a material adverse effect on the
Company.

DEPENDENCE ON CERTAIN CUSTOMERS

The Company's ten largest customers accounted for approximately 26% and 25%
of the Company's revenue during 1996 and the first six months of 1997,
respectively. Although no single customer accounted for more than 10% of the
Company's revenue during these periods, the loss of or a material reduction in
the revenue from one or more of the Company's significant customers could have a
material adverse effect on the Company's business, financial condition and
results of operations.

DEPENDENCE ON AVAILABILITY OF INTERIM HOUSING ACCOMMODATIONS

The Company is dependent upon the continued availability of an adequate
supply of interim housing units in each of its markets. Local or regional
declines in either vacancy rates or new apartment construction could lead to an
increase in leasing costs or an inability to satisfy client demand, which could
adversely affect the Company's operating margins and have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, although historically the Company has closely matched the length of
its leasing obligations with clients' rental commitments, the Company's ability
to continue to do so will depend upon the willingness of property owners to
agree to flexible lease terms. In particular, as the Company enters into new
markets characterized by a scarcity of available rental housing, such as the San
Francisco market where the Company recently began operations, the Company may be
required to agree to longer lease terms that do not necessarily match its
customers' rental terms, which could result in a decrease in the Company's
occupancy rates. The Company considers the added risks of longer lease terms
when pricing the rental units in such markets. However, there can be no
assurance that market conditions will allow the Company to pass on the cost of
potentially higher vacancies to its customers. See "Business."

DEPENDENCE ON KEY PERSONNEL

The Company depends to a significant degree on its key management
personnel, particularly Mr. Abrahams, Mr. Kaplan and Mr. Zaugg, the loss of any
one of whom could have a material adverse effect on its business, financial
condition and results of operations. The Company does not maintain life
insurance on any of its key personnel. See "Management."

CONTROL BY MANAGEMENT

Following the completion of this offering, the Company's four current
stockholders, three of whom are directors and officers of the Company, will
beneficially own a total of approximately 58.6% of the outstanding Common Stock.
If these stockholders vote together as a group, they will have the ability to
elect the Company's entire board of directors and control the affairs of the
Company, including all fundamental corporate transactions such as mergers,
consolidations and the sale of substantially all of the Company's assets. Among
other things, these stockholders could prevent or delay a change in control of
the Company that may be favored by a majority of the remaining stockholders.
Such ability to prevent or delay such a change in control of the Company also
may have an adverse effect on the market price of the Common Stock. See
"Principal Stockholders."

ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Certificate of Incorporation and Bylaws
could have the effect of preventing or discouraging an acquisition of the
Company deemed undesirable by its Board of Directors. These include the
existence of authorized but unissued Common Stock and the existence of
authorized but unissued Preferred Stock, which could be issued by the Company's
Board of Directors without stockholder approval, on such terms as the Board of
Directors may approve. In addition, certain provisions of Maryland

8
<PAGE> 9

law applicable to the Company could have the effect of delaying, deferring or
preventing a change in control of the Company. See "Description of Capital
Stock."

NO PRIOR PUBLIC MARKET FOR COMMON STOCK

Prior to this offering, there has been no public market for the Common
Stock. There can be no assurance that an active trading market in the Common
Stock will develop or be sustained upon completion of this offering or that the
market price of the Common Stock will not decline below the initial public
offering price. The initial public offering price of the Common Stock has been
determined by negotiations between the Company and the Representatives of the
Underwriters and may not be indicative of the market prices that will prevail in
the public market after this offering, which may be highly volatile depending
upon various factors, including the general economy, stock market conditions,
announcements by the Company or its competitors and fluctuations in the
Company's operating results. See "Underwriting."

DILUTION

Purchasers of Common Stock offered hereby will experience immediate and
substantial dilution in the pro forma net tangible book value per share of $6.63
from the initial public offering price of $10.00. See "Dilution."

NO DIVIDENDS

The Company currently intends to retain earnings for use in the operation
and expansion of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future. In addition, the Company's loan agreements
restrict its ability to pay dividends. See "Dividend Policy."

POSSIBLE ADVERSE MARKET EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE

Sales of significant amounts of Common Stock in the public market or the
perception that such sales will occur could adversely affect the market price of
the Common Stock or the future ability of the Company to raise capital through
an offering of its equity securities. Of the 6,400,000 shares of Common Stock to
be outstanding upon completion of this offering, the 2,650,000 shares offered
hereby will be eligible for immediate sale in the public market without
restriction unless they are held by "affiliates" of the Company within the
meaning of Rule 144 of the Securities Act of 1933, as amended (the "Securities
Act"). Pursuant to Rule 144, the remaining 3,750,000 shares of Common Stock will
become eligible for sale 90 days following the date of this Prospectus. All of
these shares are subject to lock-up agreements pursuant to which their holders
have agreed that they will not sell, directly or indirectly, any Common Stock
without the prior consent of A.G. Edwards & Sons, Inc. for a period of 180 days
starting on the date of this Prospectus. See "Shares Eligible for Future Sale"
and "Underwriting."

9
<PAGE> 10

TERMINATION OF S CORPORATION STATUS AND RELATED DISTRIBUTIONS

Since its inception in 1986, the Company has elected to operate under
Subchapter S of the Internal Revenue Code of 1986 (the "Code") and comparable
provisions of certain state income tax laws. An S corporation generally is not
subject to income tax at the corporate level (with certain exceptions under
state income tax laws). Instead, the S corporation's income, as determined for
income tax purposes, is reportable by the stockholders on their personal income
tax returns. As a result, the Company's earnings have been taxed for federal and
state income tax purposes, with certain exceptions, directly to the existing
stockholders of the Company. Upon the effective date of this offering (the
"Termination Date"), the Company's election as an S corporation will terminate
and it will become taxed for federal and state income tax purposes as a C
corporation.

All undistributed S corporation earnings through the Termination Date will
be distributed to the Company's four current stockholders using a portion of the
net proceeds of this offering. At June 30, 1997, the undistributed S corporation
earnings of the Company were estimated to be $2.0 million. The Company has
accumulated additional earnings from July 1, 1997 to the Termination Date, which
the Company estimates are between $200,000 and $1.0 million.

On June 13, 1997, in conjunction with the Recapitalization, the Company
declared a distribution to the current stockholders totaling approximately $1.1
million, representing capital previously contributed to two of the Company's
subsidiaries by those stockholders for tax basis purposes. The original amounts
contributed were funded by distributions of previously taxed S corporation
earnings from the Company's other two subsidiaries.

As a result of the termination of the Company's S corporation status, the
Company will record a one-time charge against earnings of approximately $183,000
to reflect a deferred income tax liability arising as a result of cumulative
differences between financial statement and income tax reporting, principally
relating to depreciation.

On August 22, 1997, the Company entered into an agreement (the "Tax
Indemnification Agreement") with the four current stockholders of the Company
providing for, among other things, the indemnification of the Company by such
stockholders for any federal and state income taxes (including interest)
incurred by the Company if for any reason the Company or any of its subsidiaries
is deemed to be treated as a C corporation during any period that it reported
its taxable income as an S corporation. The Tax Indemnification Agreement
further provides for the cross-indemnification of the Company and of each
current stockholder for any losses or liabilities with respect to certain
additional taxes (including interest and, in the case of such stockholders,
penalties) resulting from the Company's operations during the period in which it
was an S corporation. Purchasers of Common Stock in this offering will not be
parties to the Tax Indemnification Agreement.

10
<PAGE> 11

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,650,000 shares of
Common Stock offered hereby are estimated to be approximately $24.1 million
($27.8 million if the Underwriters' over-allotment option is exercised in full),
after deducting the underwriting discount and estimated offering expenses.

The Company will use a portion of the net proceeds of this offering to (i)
distribute to current stockholders an amount equal to undistributed S
corporation earnings through the Termination Date and (ii) pay current
stockholders the previously declared $1.1 million distribution. The Company
currently estimates that undistributed accumulated earnings as of the
Termination Date are between $2.2 million and $3.0 million. The S corporation
distribution will be reduced to the extent any distributions of accumulated
earnings were made by the Company to its current stockholders prior to the
Termination Date. See "Termination of S Corporation Status and Related
Distributions" and "Dividend Policy."

The Company also intends to use a portion of the net proceeds to repay
various bank term loans and any balance outstanding on its line of credit. The
Company's term loans had an aggregate outstanding balance of approximately $5.6
million as of June 30, 1997. This balance includes approximately $2.9 million
borrowed to finance the Company's April 1, 1997 acquisition in Orlando and the
June 1, 1997 acquisition in San Francisco, which loans are due in June 2000 and
bear interest at the bank's Prime Rate plus 0.50%. The remaining term loan
balance is comprised of a $1.5 million note bearing interest at the bank's Prime
Rate plus 0.50% due June 1999, a $1.1 million note bearing interest at 8.70% due
August 1998 and a $104,000 note bearing interest at 8.08% due July 1997 (which
has been paid in full), the borrowings under all of which were used for general
working capital purposes. The Company's line of credit bears interest at the
bank's Prime Rate plus 0.50% and at June 30, 1997 had an outstanding balance of
$2.0 million.

The Company may also use a portion of the net proceeds of the offering to
finance the acquisition of other interim housing businesses. The Company
currently does not have any commitment, understanding or arrangement with
respect to any acquisition.

All proceeds not used as described above will be used for working capital
or other general corporate purposes. Pending utilization of the proceeds of this
offering, the Company plans to invest such net proceeds in short-term money
market investments, including certificates of deposit and interest-bearing bank
accounts.

DIVIDEND POLICY

The Company made distributions to its stockholders related to its S
corporation status of approximately $878,000, $1.3 million and $2.2 million
during the years ended December 31, 1994, 1995 and 1996, respectively, and of
$1.3 million for the period from January 1, 1997 through June 30, 1997. In
addition, on June 13, 1997, the Company declared a distribution of $1.1 million
to current stockholders, which will be funded with a portion of the net proceeds
of this offering.

Other than the anticipated distribution of undistributed S corporation
earnings through the Termination Date, the Company does not anticipate declaring
or paying cash dividends in the foreseeable future. In addition, the Company's
existing credit facility contains net worth covenants that could limit the
payment of cash dividends without the consent of the lender.

11
<PAGE> 12

CAPITALIZATION

The following table sets forth the short-term debt and capitalization of
the Company at June 30, 1997 on an actual and a pro forma as adjusted basis.
This table should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED (1)
------ ---------------
(IN THOUSANDS)

<S> <C> <C>
Bank line of credit................................................... $1,990 $ --
====== =======
Notes payable to bank................................................. $5,562 $ --
Due to stockholders................................................... $1,102 $ --
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares authorized;
none
issued and outstanding......................................... -- --
Common Stock, $.01 par value, 45,000,000 shares authorized;
3,750,000 shares issued and outstanding actual, and 6,400,000
shares issued and outstanding pro forma as adjusted (2)........ 38 64
Additional paid-in capital....................................... 55 24,128
Retained earnings................................................ 2,137 --
------ -------
Total stockholders' equity.................................. 2,230 24,192
------ -------
Total capitalization................................... $8,894 $24,192
====== =======
</TABLE>

- ---------------
(1) Gives effect to: (i) a distribution to the Company's current stockholders of
undistributed S corporation earnings, which totaled approximately $2.0
million as of June 30, 1997; (ii) a distribution to current stockholders of
$1.1 million declared on June 13, 1997; (iii) the recording of an
anticipated $183,000 deferred tax liability relating to the termination of
the Company's S corporation status; and (iv) the sale of the 2,650,000
shares of Common Stock offered by the Company hereby and the application of
a portion of the net proceeds therefrom to repay indebtedness as described
under "Use of Proceeds." The actual amount of the S corporation distribution
to be funded using a portion of the proceeds of this offering will reflect
additional earnings of the Company from July 1, 1997 through the closing of
this offering. See "Termination of S Corporation Status and Related
Distributions" and "Dividend Policy."
(2) Excludes 700,000 shares of Common Stock reserved for issuance under the
Company's recently adopted stock option plan, of which options to purchase
173,650 shares will be granted immediately upon the effectiveness of this
offering at an exercise price equal to the initial public offering price per
share. See "Management -- Stock Plan."

12
<PAGE> 13

DILUTION

The Company's pro forma net tangible book value as of June 30, 1997 was a
deficit of ($2.6) million, or approximately ($0.69) per share. Pro forma net
tangible book value per share as of June 30, 1997 represents total assets less
intangible assets and total liabilities, after giving effect to the distribution
of undistributed S corporation earnings, which were $2.0 million at June 30,
1997, a distribution to current stockholders of $1.1 million declared on June
13, 1997 and the related provision for deferred tax liabilities of $183,000,
divided by the number of shares outstanding. After giving effect to the sale of
the 2,650,000 shares of Common Stock offered hereby and the receipt of the net
proceeds of such sale (after deducting the underwriting discount and estimated
offering expenses), the pro forma net tangible book value as of June 30, 1997
would have been $21.5 million, or $3.37 per share. This represents an immediate
increase in pro forma net tangible book value of $4.06 per share to existing
stockholders and an immediate dilution to new investors of $6.63 per share. The
following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $10.00
Pro forma net tangible book value per share at June 30, 1997... $(0.69)
Increase per share attributable to new investors............... 4.06
------
Pro forma net tangible book value per share at June 30, 1997 after
the offering...................................................... 3.37
------
Dilution in pro forma net tangible book value per share to new
investors......................................................... $ 6.63
======
</TABLE>

If the Underwriters' over-allotment option is exercised in full, the pro
forma net tangible book value per share of Common Stock after this offering
would be $3.71 per share, which would result in dilution to new investors of
$6.29 per share.

The following table sets forth, as of June 30, 1997, the total number of
shares of Common Stock purchased from the Company, the total consideration paid
and the average price per share paid by existing stockholders and new investors
(before deducting the underwriting discount and estimated offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................... 3,750,000 58.6% $ 84,000 0.3% $ 0.01
New investors.............................. 2,650,000 41.4 26,500,000 99.7 $ 10.00
--------- ----- ----------- -----
Total................................. 6,400,000 100.0% $26,584,000 100.0%
========= ===== =========== =====
</TABLE>

13
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data of the Company should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus. The consolidated statement of
operations data for the years ended December 31, 1994, 1995 and 1996 and the
consolidated balance sheet data at December 31, 1995 and 1996 are derived from,
and are qualified by reference to, the audited consolidated financial statements
included elsewhere in this Prospectus. The consolidated statement of operations
data for the years ended December 31, 1992 and 1993, and the consolidated
balance sheet data at December 31, 1992, 1993 and 1994 are derived from audited
financial statements not included herein. The selected financial data as of and
for the six months ended June 30, 1996 and 1997 have been derived from unaudited
financial statements of the Company which, in the opinion of management, include
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of the financial information set forth therein. The results of
operations for the six months ended June 30, 1997 are not necessarily indicative
of the results to be expected for the entire year ending December 31, 1997.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Interim housing revenue................... $2,727 $3,651 $ 6,917 $ 9,390 $20,905 $ 7,963 $15,553
Furniture and houseware revenue........... 4,709 5,071 6,856 7,818 8,740 3,895 4,883
------ ------ ------- ------- ------- ------- -------
Total revenue......................... 7,436 8,722 13,773 17,208 29,645 11,858 20,436
Operating costs and expenses:
Cost of interim housing revenue........... 2,280 3,024 5,779 7,466 16,640 6,310 12,435
Cost of furniture and houseware revenue... 1,767 1,729 1,891 2,148 1,832 995 927
Personnel and payroll costs............... 1,769 2,390 3,464 3,876 5,597 2,463 3,506
Occupancy costs and nonrental depreciation
and amortization........................ 347 455 626 660 994 427 685
Other operating costs..................... 373 212 488 942 1,616 744 1,040
------ ------ ------- ------- ------- ------- -------
Total operating costs and expenses.... 6,536 7,810 12,248 15,092 26,679 10,939 18,593
------ ------ ------- ------- ------- ------- -------
Earnings from operations...................... 900 912 1,525 2,116 2,966 919 1,843
Interest expense.............................. 113 68 195 240 308 133 209
------ ------ ------- ------- ------- ------- -------
Net income.................................... $ 787 $ 844 $ 1,330 $ 1,876 $ 2,658 $ 786 $ 1,634
====== ====== ======= ======= ======= ======= =======
PRO FORMA DATA (1):
Net income.................................... $ 1,595 $ 981
======= =======
Net income per common share................... $ 0.40 $ 0.25
======= =======
Weighted average common shares outstanding
(2)......................................... 3,965 3,965
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash............................................... $ 214 $ 19 $ 24 $ 229 $ 503 $ 7
Property on or held for lease, net................. 1,669 1,907 2,660 3,059 4,099 4,221
Total assets....................................... 2,538 3,241 5,932 6,519 9,678 14,950
Bank line of credit................................ -- 612 546 200 800 1,990
Notes payable to bank.............................. 1,083 490 453 743 1,882 5,562
Due to stockholders................................ -- -- -- -- -- 1,102
Total stockholders' equity......................... 975 1,409 1,862 2,481 2,983 2,230
</TABLE>

- ------------------
(1) For all periods presented, the Company elected to be treated as an S
corporation and was not subject to federal and certain state income taxes.
The Pro Forma Data reflects federal and state income tax based on applicable
tax rates as if the Company had not elected S corporation status for the
periods indicated. See Note M to the Consolidated Financial Statements.
(2) The pro forma weighted average common shares outstanding is based on: (i)
the weighted average shares outstanding during the period; and (ii) the
assumed sale of a sufficient number of shares of Common Stock necessary to
provide funds to make a distribution of all undistributed S corporation
earnings at June 30, 1997 in excess of earnings for the twelve-month period
then ended and to make the distribution of $1.1 million declared on June 13,
1997. See "Termination of S Corporation Status and Related Distributions,"
"Dividend Policy" and Note M to the Consolidated Financial Statements.

14
<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

ExecuStay is a leading provider of interim housing for corporate clients
and professionals. In addition to providing fully furnished interim housing to
ExecuStay residents, the Company also rents housewares and furniture to
customers other than ExecuStay residents such as owners and managers of
apartment communities who wish to offer fully furnished accommodations directly
to their tenants. While houseware rental services are provided by the Company in
most locations where it has sales offices, the Company provides furniture rental
services to its residents located within approximately 200 miles of its
warehouse in Washington.

The Company has been profitable since it began interim housing operations
in 1988. Prior to 1997, the Company's expansion had been achieved entirely
through internal growth. Before 1995, the Company had offices in three cities
(Washington, Los Angeles and Philadelphia). In early 1995, the Company added a
location in Richmond and, in November 1995, an office was opened in Charlotte.
In January 1996, offices were opened in Raleigh and Ft. Lauderdale. In June
1997, the Company opened an office in Atlanta. The Company recently signed an
agreement with a national apartment property owner and manager to operate an
interim housing program at 22 properties in Phoenix. The Company intends to
begin operations in Phoenix within the next few months.

In recent years, the Company has experienced significant increases in
revenue from its interim housing operations. Since the costs associated with
interim housing revenue are greater as a percentage of revenue than the costs of
furniture and housewares revenue, the Company's earnings from operations as a
percentage of total revenue has declined. As interim housing revenue continues
to increase as a percentage of the Company's total revenue, this percentage may
continue to decline.

The Company began implementing its acquisition strategy in 1997. In April
1997, the Company purchased for $850,000 certain assets and all existing
customer leases of an Orlando interim housing business that had 1996 revenue of
approximately $1.7 million. On June 1, 1997, the Company purchased for $1.9
million an interim housing business in San Francisco, which had 1996 revenue of
approximately $9.0 million, from a local property developer and obtained the
exclusive right to provide interim housing services at 15 properties owned by
the developer. See "Recent Expansion."

Growth in revenue is derived primarily from increases in the number of
leases signed with ExecuStay residents. As the Company has opened sales offices,
the number of apartments under lease has increased each year at each office. The
four new offices opened in 1995 and 1996 achieved operating profitability within
six to twelve months.

15
<PAGE> 16

RESULTS OF OPERATIONS

The following table sets forth consolidated statement of operations data as
a percentage of total revenue for the periods indicated.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
----------------------- --------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenue:
Interim housing revenue......................... 50.2% 54.6% 70.5% 67.2% 76.1%
Furniture and houseware revenue................. 49.8 45.4 29.5 32.8 23.9
----- ----- ----- ----- -----
Total revenue.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of interim housing revenue................. 42.0 43.4 56.1 53.2 60.8
Cost of furniture and houseware revenue......... 13.7 12.5 6.2 8.4 4.5
----- ----- ----- ----- -----
Total cost of revenue...................... 55.7 55.9 62.3 61.6 65.3
----- ----- ----- ----- -----
Personnel and payroll costs..................... 25.2 22.5 18.8 20.8 17.2
Occupancy costs and nonrental depreciation and
amortization.................................. 4.5 3.8 3.4 3.6 3.4
Other operating costs........................... 3.5 5.5 5.5 6.3 5.1
----- ----- ----- ----- -----
Total operating costs and expenses......... 88.9 87.7 90.0 92.3 91.0
----- ----- ----- ----- -----
Earnings from operations............................. 11.1 12.3 10.0 7.7 9.0
Interest expense..................................... 1.4 1.4 1.0 1.1 1.0
----- ----- ----- ----- -----
Net income........................................... 9.7% 10.9% 9.0% 6.6% 8.0%
===== ===== ===== ===== =====
Number of leased units at end of period.............. 188 517 923 994 1,807
</TABLE>

The following table sets forth, for each component of revenue, the cost of
such revenue as a percentage of such revenue for the periods indicated:

Interim housing revenue consists of the total charges to ExecuStay
residents for their housing accommodations, including charges for furniture,
housewares, accessories and utilities.

Furniture and houseware revenue includes all income from customers other
than ExecuStay residents and also includes revenue from the sale of used
inventory.

Cost of interim housing revenue primarily includes rent paid by the
Company, as lessee, to apartment owners and also includes furniture and
houseware rental expense and utilities paid by the Company related to apartment
units used by ExecuStay residents. Commissions and other compensation paid to
Company office managers and salespersons are not included in the cost of interim
housing revenue.

Cost of furniture and houseware revenue includes depreciation on furniture
and housewares inventory used or held in inventory. Payroll expense directly
related to delivery of furniture and housewares is not included in the cost of
furniture and houseware revenue.

16
<PAGE> 17

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 TO THE SIX MONTHS ENDED JUNE
30, 1996

The Company's total revenue increased 71% to $20.4 million for the six
months ended June 30, 1997 from $11.9 million for the same period in 1996. This
increase resulted primarily from a $7.6 million increase (95%) in interim
housing revenue, reflecting the Company's primary focus on expanding its interim
housing business. Aggregate interim housing revenue from the seven offices that
had been open throughout both periods accounted for $6.0 million of this
increase, reflecting the continued development and market penetration of these
offices. The balance of the increase in total revenue resulted from a $988,000
increase (25%) in furniture and houseware revenue from the first six months of
1996 to the same period in 1997, including a sale of approximately $480,000 to
one customer in 1997.

The cost of interim housing revenue increased 97% to $12.4 million for the
six months ended June 30, 1997 from $6.3 million for the same period in 1996.
The cost of furniture and houseware revenue decreased 7% to $927,000 from
$995,000 during the same periods due to the net effect of cost increases
attributable to the growth in revenue in 1997 and nonrecurring houseware
expenditures of approximately $261,000 during the 1996 period. Personnel and
payroll costs and occupancy and nonrental depreciation and amortization
increased by $1.0 million (40%) and $258,000 (60%), respectively, during the
same periods. These increases were due to the addition of sales and office
personnel as well as increases in office space and related costs in some
offices, which were necessary to create and support the increased business
levels. Other operating costs increased 34% to $1.0 million from $744,000 during
the same periods primarily as a result of increased advertising and promotion
relating to the recently opened offices.

Interest expense increased by $76,000 in the six months ended June 30, 1997
due to greater utilization of the Company's bank line of credit as the Company
expanded internally and completed its acquisitions in Orlando and San Francisco.

Net income increased by 108% to $1.6 million for the six months ended June
30, 1997 from $786,000 for the six months ended June 30, 1996.

COMPARISON OF 1996 TO 1995

The Company's total revenue increased 72% to $29.6 million for the year
ended December 31, 1996 from $17.2 million for the year ended December 31, 1995.
Substantially all of this increase resulted from an $11.5 million increase
(122%) in interim housing revenue, which was $20.9 million in 1996 compared to
$9.4 million in 1995. The three offices that had been opened prior to 1995
accounted for $4.9 million of this $11.5 million increase, and the balance of
this increase was the result of increased activity at the four sales offices
opened in 1995 and early 1996. Furniture and houseware revenue increased 12% to
$8.7 million in 1996 from $7.8 million in 1995. The growth in furniture and
houseware revenue was less than the growth in interim housing revenue primarily
because of the Company's strategy to focus on expanding its interim housing
business.

The cost of interim housing revenue increased 121% to $16.6 million in 1996
from $7.5 million in 1995. This cost increase paralleled the increase in related
interim housing revenue. The cost of furniture and houseware revenue decreased
14% to $1.8 million in 1996 from $2.1 million in 1995 due to a decrease in
furniture and houseware inventory depreciation expense. Personnel and payroll
costs increased by 44% to $5.6 million in 1996 from $3.9 million in 1995. This
increase primarily resulted from the addition of three offices and increased
staffing in four established offices. Interim housing operations were
responsible for $1.0 million (60%) of this increase. Similarly, occupancy costs
increased by 51% to $994,000 in 1996 from $660,000 in 1995. This increase was
due to the opening of the Charlotte, Raleigh and Fort Lauderdale offices and
related warehouse locations. Other operating costs increased 70% to $1.6 million
in 1996 from $942,000 in 1995. This increase was primarily due to additional
advertising, promotion and other selling expenses incurred in new and existing
interim housing markets.

Interest expense increased to $308,000 in 1996 from $240,000 in 1995 due to
an increase in indebtedness associated with establishing new office and
warehouse locations.

Net income increased 42% to $2.7 million in 1996 from $1.9 million in 1995.

17
<PAGE> 18

COMPARISON OF 1995 TO 1994

The Company's total revenue increased 25% to $17.2 million for the year
ended December 31, 1995 from $13.8 million for the year ended December 31, 1994.
Most of this increase resulted from a $2.5 million increase (36%) in interim
housing revenue, which was $9.4 million in 1995 compared to $6.9 million in
1994. The two offices that opened in 1995 accounted for 83% of this increase.
Furniture and houseware revenue increased 13% to $7.8 million in 1995 from $6.9
million in 1994. The growth in furniture and houseware revenue was less than the
growth in interim housing revenue primarily because of the Company's strategy to
focus on expanding its interim housing business.

The cost of interim housing revenue increased 29% to $7.5 million in 1995
from $5.8 million in 1994 due to the increased volume of leased apartment units.
The cost of furniture and houseware revenue increased by 11% to $2.1 million in
1995 from $1.9 million in 1994. Personnel and payroll costs and occupancy costs
increased (11% and 5%, respectively) from 1994 to 1995, although at a lesser
rate than related revenue growth. These expenses increased from $3.5 million and
$626,000, respectively, in 1994 to $3.9 million and $660,000, respectively, in
1995. Other operating costs, although only 5% of total revenue in 1995,
increased 93% to $942,000 in 1995 from $488,000 in 1994. This increase was
primarily due to costs and expenses associated with establishing two offices and
a warehouse in 1995.

Interest expense increased to $240,000 in 1995 from $195,000 in 1994.

Net income increased 46% to $1.9 million in 1995 from $1.3 million in 1994.

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain statement of operations data for the
last ten quarters, and such data expressed as a percentage of total revenue for
each quarter. This data has been derived from the Company's unaudited quarterly
financial statements. In management's opinion, these quarterly financial
statements have been prepared on a basis consistent with the audited financial
statements contained elsewhere herein, and include all adjustments, consisting
only of normal recurring adjustments, which the Company considers necessary for
a fair presentation of the information presented, when read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus. The results of operations for any quarter and any
quarter-to-quarter trends are not necessarily indicative of the results to be
expected for any future periods. The Company's business levels are tied to the
volume of corporate long-term assignments and relocation activities in its
market areas and throughout the country. Corporate relocations typically decline
from September through January, which includes the holiday season. This may
cause fluctuations in the Company's quarterly earnings. See "Risk
Factors -- Fluctuations in Operating Results; Seasonality."

18
<PAGE> 19

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------------------------------------------
1995 1996 1997
---------------------------------------- ---------------------------------------- ------------------
3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Interim housing
revenue......... $1,897 $2,270 $2,441 $2,782 $3,308 $4,655 $6,361 $6,581 $6,911 $ 8,642
Furniture and
houseware
revenue......... 1,725 1,967 2,027 2,099 1,794 2,101 2,549 2,296 2,734 2,149
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenue... 3,622 4,237 4,468 4,881 5,102 6,756 8,910 8,877 9,645 10,791
Operating costs and
expenses:
Cost of interim
housing
revenue......... 1,493 1,773 1,967 2,233 2,652 3,658 4,967 5,363 5,501 6,934
Cost of furniture
and houseware
revenue......... 463 673 543 469 478 517 429 408 666 261
Personnel and
payroll costs... 846 947 980 1,103 1,153 1,310 1,543 1,591 1,674 1,832
Occupancy costs
and nonrental
depreciation and
amortization.... 147 159 172 182 204 223 248 319 283 402
Other operating
costs........... 173 178 220 371 374 370 425 447 506 534
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
costs and
expenses...... 3,122 3,730 3,882 4,358 4,861 6,078 7,612 8,128 8,630 9,963
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings from
operations........ 500 507 586 523 241 678 1,298 749 1,015 828
Interest expense.... 59 63 61 57 59 75 89 85 81 128
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income.......... $ 441 $ 444 $ 525 $ 466 $ 182 $ 603 $1,209 $ 664 $ 934 $ 700
====== ====== ====== ====== ====== ====== ====== ====== ====== =======
Number of leased
units at end of
period*:
MidAtlantic....... 201 316 355 385 491 653 647 511 645 820
West.............. 154 129 96 81 93 117 111 81 107 548
South East........ N/A N/A N/A 51 101 224 395 331 304 439
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total........... 355 445 451 517 685 994 1,153 923 1,056 1,807
====== ====== ====== ====== ====== ====== ====== ====== ====== =======
</TABLE>

- ---------------
* Regional data for the MidAtlantic region includes the Philadelphia, Washington
and Richmond offices; the West region includes the Los Angeles and San
Francisco offices; and the South East region includes the North Carolina,
Florida and Atlanta offices.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------------------------------------------
1995 1996 1997
---------------------------------------- ---------------------------------------- ------------------
3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Interim housing
revenue......... 52.4% 53.6% 54.6% 57.0% 64.8% 68.9% 71.4% 74.1% 71.7% 80.1%
Furniture and
houseware
revenue......... 47.6 46.4 45.4 43.0 35.2 31.1 28.6 25.9 28.3 19.9
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenue... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and
expenses:
Cost of interim
housing
revenue......... 41.2 41.8 44.0 45.8 52.0 54.1 55.7 60.4 57.0 64.3
Cost of furniture
and houseware
revenue......... 12.7 15.9 12.2 9.6 9.4 7.7 4.8 4.6 6.9 2.4
Personnel and
payroll costs... 23.4 22.3 21.9 22.6 22.6 19.4 17.3 17.9 17.4 17.0
Occupancy costs
and nonrental
depreciation and
amortization.... 4.1 3.8 3.8 3.7 4.0 3.3 2.8 3.6 2.9 3.7
Other operating
costs........... 4.8 4.2 4.9 7.6 7.3 5.5 4.8 5.0 5.3 4.9
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
costs and
expenses...... 86.2 88.0 86.8 89.3 95.3 90.0 85.5 91.5 89.5 92.3
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings from
operations........ 13.8 12.0 13.2 10.7 4.7 10.0 14.6 8.5 10.5 7.7
Interest expense.... 1.6 1.5 1.4 1.2 1.1 1.1 1.0 1.0 .8 1.2
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income.......... 12.2% 10.5% 11.8% 9.5% 3.6% 8.9% 13.6% 7.5% 9.7% 6.5%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

19
<PAGE> 20

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided (used) by operating activities was $1.1 million for the
year ended December 31, 1996, and ($2,781,000) for the six months ended June 30,
1997. In addition to the cash generated from operations, the Company has a line
of credit arrangement with a commercial bank that has also provided term loans
with two-year repayment terms at fixed interest rates. The term loans have been
used to repay the line of credit balances on an annual basis. Total bank loans
(including the outstanding balance on the line of credit) were $7.6 million at
June 30, 1997, an increase of $4.9 million over total bank loans of $2.7 million
at December 31, 1996, which was a $1.7 million increase over total bank loans of
$943,000 at December 31, 1995. These increases in bank loans were partly due to
the startup of new offices and warehouses in late 1995 and early 1996, as well
as the Orlando and San Francisco acquisitions in 1997. Additionally, the net
purchase of inventory on or held for lease was $2.6 million during 1996 compared
to $1.5 million during 1995 and $1.8 million during 1994.

The Company's term loans had an aggregate outstanding balance of
approximately $5.6 million as of June 30, 1997. This balance included
approximately $2.9 million borrowed to finance the Company's April 1, 1997
acquisition in Orlando and the June 1, 1997 acquisition in San Francisco, which
loans are due in June 2000 and bear interest at the bank's Prime Rate plus
0.50%. The remaining term loan balance was comprised of a $1.5 million note
bearing interest at the bank's Prime Rate plus 0.50% due June 1999, a $1.1
million note bearing interest at 8.70% due August 1998, and a $104,000 note
bearing interest at 8.08% due July 1997 (which has been paid in full).

The Company also has a $2.0 million line of credit with its term loan
lender, the material terms of which are as follows. The line of credit expires
May 31, 1998. Advances under the line of credit bear interest at the bank's
Prime Rate plus 0.50%. As of June 30, 1997, the outstanding balance under the
line of credit was $2.0 million.

The term loans and the line of credit are guaranteed by Mr. Abrahams, Mr.
Kaplan and Mr. Zaugg and are secured by the Company's assets. The lender has
agreed to release the current stockholders from their personal guarantees upon
the completion of this offering. The loan agreements include various covenants,
including (i) a prohibition on distributions in excess of 60% of net earnings,
(ii) a requirement that, after December 30, 1997, the Company maintain a
tangible net worth of at least $15 million and a cash flow to debt service ratio
of at least 1.5 to 1, and (iii) a requirement that the aggregate outstanding
principal balance of the loans at no time be greater than 1.5 times the
Company's earnings before interest, taxes, depreciation and amortization for the
most recent twelve-month period.

The Company intends to use a portion of the net proceeds of this offering
to repay its currently outstanding term loans as well as any outstanding balance
under its line of credit. The Company intends to maintain, and may seek to
increase, the bank line of credit arrangement after the offering.

The Company believes that the net proceeds of this offering, together with
cash generated from operations and borrowing under the bank line of credit, will
be sufficient to meet the working capital needs of the Company for at least the
next twelve months.

20
<PAGE> 21

RECENT EXPANSION

Management intends to continue implementing its expansion strategy both
through acquisitions and by opening additional regional offices in new markets.
The Company believes that, as it acquires interim housing businesses and
strengthens its presence in new and existing markets, the Company's services
will become increasingly attractive to national corporate clients. As part of
its expansion strategy, the Company has recently acquired businesses located in
Orlando and San Francisco, has opened a new office in Atlanta and intends to
open an office in Phoenix in the near future.

ACQUISITIONS

Orlando. On April 1, 1997, the Company paid $850,000 in cash to Corporate
Accommodations, Inc. ("Corporate Accommodations") to acquire certain assets and
all existing customers leases related to its interim housing business in
Orlando. In connection with the acquisition, the Company and Corporate
Accommodations' sole shareholder entered into a five-year employment and
non-competition agreement. The Company accounted for the transaction using
purchase accounting and recorded tangible assets of $25,000 and certain
intangible assets including $120,000 relating to a non-compete agreement and
goodwill of $705,000.

San Francisco. On June 1, 1997, the Company acquired for $1.9 million in
cash the interim housing business of Prom X, Inc. ("Prom X"). In addition to the
purchase of all intangible assets of the Prom X business, the Company has the
right, for a period of 36 months, to provide interim housing services at 17
apartment complexes (the "Properties") owned or managed by affiliates of Prom X
throughout the San Francisco metropolitan area. The Company has the right to be
the exclusive provider of interim housing services at 15 of these Properties. In
connection with the purchase, Prom X has agreed to refrain from engaging in the
interim housing business in Northern California for a period of eight years. The
Company accounted for the transaction using purchase accounting and recorded
intangible assets including $100,000 relating to a non-compete agreement,
$160,000 relating to existing contract rights and to an exclusivity agreement,
and goodwill of $1.6 million.

The Company has the right to lease up to a specified maximum number of
apartment units (approximately 7% of the units) at each Property. The Company's
exclusive rights with respect to a Property are subject to certain conditions,
including the Company's rental of a minimum number of apartment units
(approximately 5% of the units) at such Property for at least nine months in
each of the three twelve-month periods beginning June 1, 1997. Failure to rent
the minimum number of units at a particular Property will result in the loss of
the Company's exclusive rights with respect to such Property.

The San Francisco market is characterized by high occupancy rates and
scarcity of housing accommodations available for rent. The Company believes
that, in order to establish operations in markets such as San Francisco, it must
ensure that a reliable supply of apartment units is available.

The following table summarizes certain unaudited operating data of
Corporate Accommodations and Prom X for the year ended December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
------------------------
CORPORATE
ACCOMMODATIONS PROM X
-------------- ------
(IN THOUSANDS)

<S> <C> <C>
Interim housing revenue....................................... $1,707 $9,018
Cost of interim housing revenue............................... 1,266 7,692
------ ------
Gross margin.................................................. $ 441 $1,326
====== ======
</TABLE>

21
<PAGE> 22

NEW OFFICES

Atlanta. In June 1997, the Company established a regional office in
Atlanta. The Company has hired an office manager who has worked for various
providers of interim housing and has relationships with interim housing
corporate clients in the local market.

Phoenix. The Company recently signed an agreement with a national
apartment property owner and manager to operate an interim housing program at 22
properties in the Phoenix area. The Company is actively seeking an experienced
office manager and intends to begin operations in Phoenix within the next few
months.

22
<PAGE> 23

BUSINESS

OVERVIEW

The Company does not own any apartments, thereby avoiding the risks and
capital requirements normally associated with real estate ownership. Instead,
housing occupied by ExecuStay customers is leased to the Company (as tenant)
from a variety of unaffiliated property owners and managers. When responding to
inquiries from prospective ExecuStay residents, the Company is not limited to
any particular pool of apartment units and therefore is able to select suitable
accommodations from any apartment property in the desired location, affording
greater flexibility in accommodating the preferences of its customers. The
Company generally has been able to enter into leases with property owners that
match each resident's desired length of stay and, as a result, the units leased
to the Company were vacant less than 2% of the time in the first half of 1997.
As the Company expands into markets with a scarcity of housing accommodations
available for rent, it may enter into longer leases that do not necessarily
match the lease terms of its residents, which could result in a decrease in the
Company's overall occupancy rate.

23
<PAGE> 24

THE HOUSING ACCOMMODATIONS INDUSTRY

The U.S. lodging industry has experienced significant growth and increased
market segmentation in the 1990s. According to D.K. Shifflet & Associates, the
interim housing segment of the lodging industry, defined as stays of four weeks
or longer, has grown faster than the lodging industry as a whole. Total U.S.
paid room nights grew at a 4.8% compound annual growth rate from 1992 to 1996
while U.S. paid room nights for stays of four weeks or more grew at a 12.3%
compound annual growth rate over the same period. The Company believes that the
growth in the interim housing industry is a result of favorable economic and
business conditions in recent years, continued growth in management and
professional employment, the increasing importance to American business of
flexibility and outsourcing, the heightened awareness of interim housing as a
lodging alternative and the impact of a more mobile and transitory population.

The following graph generally illustrates what the Company considers to be
the various housing accommodation markets based on length of stay and the
categories of lodging facilities that serve each market.

[Short, Extended and Interim Stay CHART]

24
<PAGE> 25

Amenities found in these accommodations vary greatly. The following chart
illustrates typical amenities and characteristics found in each of these types
of accommodations:

<TABLE>
<CAPTION>
TRADITIONAL ALL-SUITE EXTENDED STAY EXECUSTAY INTERIM
HOTEL HOTEL FACILITIES HOUSING
----------- ---------- ------------- -----------------
<S> <C> <C> <C> <C>
Average rate....................... $69* $91* $75* $2,000
per night per night per night per month
Kitchen............................ No Efficiency Efficiency/ Full
Full
Dining room........................ No Rarely Rarely Always
Residential feel................... No No Rarely Always
Washer/dryer....................... No No Rarely Usually
Choice of furnishings.............. No No No Wide
Selection
</TABLE>

- ---------------
* Source: D.K. Shifflet & Associates, which has consented to the use of its name
in this Prospectus. With respect to extended stay facilities, the average rate
per night is based on data for Residence Inn, Homewood Suites, Amerisuites and
Summerfield facilities.

INTERIM HOUSING RESIDENTS AND PROVIDERS

Because of the length of their stays, interim housing residents seek a
"home away from home." Just like any individual or family seeking a permanent
home, interim housing residents desire accommodations that have a residential
feel and the conveniences typically found only in homes. Interim housing
residents typically have the following needs and preferences:

Flexibility in Locations and Types of Accommodations. Interim housing
residents typically seek housing accommodations conveniently located near their
temporary workplace or in a desired neighborhood or school district. Residents
also have varying needs with respect to the size, style and cost of their
housing accommodations.

Flexibility in Furnishings, Housewares and Amenities. Interim housing
residents like to choose their own furniture and many wish to have fax machines,
computers, home exercise equipment, extra televisions or telephones or other
additional accessories. Many interim housing residents are also accustomed to
amenities found in apartment or condominium complexes, such as swimming pools
and fitness centers.

Flexibility in Length of Stay. Interim housing residents have varying
rental term needs, which are often less than the minimum rental periods
typically available to individual tenants from apartment managers.

Convenience. An interim housing customer generally prefers to avoid the
difficulties and inconvenience of locating and leasing an apartment, arranging
utilities, contracting for furniture, housewares and accessories and preparing
the residence for occupancy.

Interim housing customers traditionally have had to choose between two
alternatives to meet their needs: renting a hotel room or leasing an apartment.
Traditional hotel rooms do not offer the most basic amenities found in
apartments or houses, such as kitchen and dining facilities. Interim housing
customers staying at hotels live as permanent travelers rather than temporary
residents. Although all-suite hotels usually provide larger units than
traditional hotel rooms and often contain efficiency kitchens, most all-suite
hotel rates are priced for short-stay business travelers, which may be too
expensive for the longer stays of interim housing customers. In addition,
traditional hotels and all-suite hotels generally are not located in residential
neighborhoods and may not be located near an interim housing customer's
workplace.

To meet the increasing demand for housing accommodations for stays longer
than five days, a growing number of hotel companies are building chains of
extended-stay hotels, which offer standardized, pre-furnished units. However,
extended-stay facilities are limited in the number of locations, types of
accommodations and choice of amenities that they offer. In addition,
extended-stay hotels do not offer the flexibility in furnishings and housewares
that interim housing customers often desire, nor do they offer the feel of a
residential community.

25
<PAGE> 26

Interim housing providers either own or lease living accommodations from
third parties. These providers then rent the housing accommodations, usually
fully furnished, to customers seeking long-term, but not permanent,
accommodations.

Interim housing providers vary widely in their structure, size and
location. Some are apartment and condominium owners or managers who seek to fill
vacancies or increase rental revenues by making a percentage of their units
available to interim housing customers. These property owners and managers have
an incentive to place customers in the limited number of apartments or
condominiums that they manage. Also, many of these owners and managers
pre-furnish their apartments or condominiums, limiting their customers' choices.
Other competitors include small or medium size local and regional businesses
that locate and furnish housing accommodations and operate much like ExecuStay.

As corporations are increasingly outsourcing non-core functions, many have
turned to service providers for their interim housing needs. These corporate
clients generally prefer to deal with a single source that can provide
customized services on a national basis. Because of this trend, the Company
believes that local and regional providers of interim housing will find it
increasingly difficult to compete for corporate clients. The Company believes
that the general preference of corporate clients to work with a single national
provider already has spurred consolidation within the interim housing services
industry.

BUSINESS STRATEGY

ExecuStay's goal is to strengthen its position as a leading provider of
interim housing. The Company's business strategy encompasses the following
elements:

Expand Nationally. The Company believes that as it expands into new
markets, its growing national presence and brand name recognition will enhance
its ability to attract additional corporate clients and professionals as well as
increase business with existing clients. The primary focus of the Company's
expansion strategy is the acquisition of local and regional interim housing
providers, while continuing to grow internally by selectively opening additional
regional offices.

ExecuStay evaluates potential expansion markets based on local competition,
the availability of rental properties, the overall health and growth trends of
local economies and the presence of corporate and government employers with
significant interim housing needs. ExecuStay then decides whether to enter a new
market through acquisition or by internal expansion.

Acquisitions. In target markets, the Company intends to pursue the
acquisition of existing businesses with profitable operating histories, a
recognized local and regional presence and existing management that fits
well with the Company's entrepreneurial management style. Expanding through
acquisitions allows the Company to quickly gain market share in new or
existing regions. When acquiring an existing business, ExecuStay generally
attempts to retain key marketing and sales personnel, typically by offering
incentive compensation based on the performance of the acquired business.

Internal Expansion. In target markets where ExecuStay has not
identified an attractive acquisition prospect, the Company may open
additional regional offices to support its existing relationships or to
establish new relationships with suppliers of housing accommodations. When
establishing a new office, the Company generally seeks to hire an
individual who has relationships with local interim housing customers as
well as property managers that would give the Company both a supply of
rental units and interim housing referrals. The Company's strategy is to
pursue internal expansion opportunities where it believes it has the
potential to achieve profitability within twelve months.

As part of its expansion strategy, ExecuStay has acquired interim housing
businesses in Orlando and San Francisco, has recently opened an office in
Atlanta and intends to open an office in Phoenix in the near future. See "Recent
Expansion."

Expand Corporate Client Base. The Company strives to broaden its corporate
client base through its growing national presence and name recognition, regional
and national advertising and by increasing and strengthening its corporate
relationships. The Company's customized billing and reporting services and its

26
<PAGE> 27

ability to locate and furnish the desired accommodations of a corporate employee
in as little as 24 hours, are attractive to corporate clients. The Company
believes that its specialized corporate client services, flexibility and
increasing national presence and name recognition will be particularly
attractive to corporate clients seeking a single national provider.

Develop and Enhance Relationships with REITs and Other Apartment Owners and
Managers. A key component of the Company's business strategy is to strengthen
its existing relationships and to build new relationships with REITs and other
property owners and managers throughout the country. These property owners and
managers are not only the primary suppliers of rental units, but also are
important sources of interim housing referrals. Maintaining close relationships
with property owners and managers has helped the Company become established in
new markets and strengthen its presence in existing markets.

The Company believes that apartment owners and managers prefer to do
business with the Company because it provides the property owner and manager
with a single reliable tenant. Further, because ExecuStay does not own any real
estate, it does not compete for tenants with property owners and managers but
instead provides incremental business to them. By leasing to ExecuStay, property
managers avoid the cost of finders' fees as well as tenant credit and reference
checks. Apartment managers have also contracted with ExecuStay to operate their
existing interim housing programs, providing ExecuStay an opportunity for
immediate increases in local market share.

Maintain Housing Flexibility / No Real Estate Ownership. The Company does
not own and does not plan to own any of the accommodations that it rents to
ExecuStay customers. As a result, ExecuStay can expand into new markets more
quickly, avoid competing with property owners and avoid the risks normally
associated with real estate ownership. This approach also reduces the Company's
capital requirements and overhead costs and enables the Company to quickly
adjust the quantity, mix and location of its accommodations as client needs
dictate and local economic conditions warrant. In markets characterized by
rental property shortages, the Company may be required to enter into longer term
leases (six months to one year) with property owners in order to secure the
needed supply of housing units. The Company considers the added risk of longer
lease terms when pricing the rental units in such markets.

Maintain and Enhance Management Information System. ExecuStay intends to
maintain and enhance its proprietary management information system ("MIS"). The
MIS operates through a wide area network that connects all ExecuStay offices
throughout the country. ExecuStay's MIS assists the Company in controlling and
managing customer service, lease and furnishings inventory and accounting and
billing functions. At each ExecuStay regional office, service personnel input
customer needs and preferences into the MIS, which seeks to match each new
customer's occupancy date with the vacate date of an existing ExecuStay
resident, thereby reducing turn-over costs. If a suitable match is not
available, the MIS indicates the need for and facilitates the selection of a new
apartment lease. As a result, ExecuStay is usually able to obtain a customer's
desired housing accommodations within 24 hours of the customer's request. The
MIS capabilities have enabled the Company to establish and access a nationwide
database and will, the Company believes, facilitate the effective integration of
the operations of acquired businesses and newly established offices.

EXECUSTAY SERVICES

The Company provides the following services in markets throughout the
country:

Interim Housing Rental. ExecuStay provides high-quality interim housing
accommodations. Residents specify the desired location, size and type of
accommodations and also choose from an ExecuStay catalog of furniture and
housewares. The Company generally arranges the length of each lease to fit the
resident's needs. All leases are for 30 days or more. After locating the desired
residence, the Company furnishes it with the resident's choice of furniture,
linens, electronics, housewares, art work and decorative accessories. Upon
request, the Company provides office furniture, fax machines, additional phone
lines, computer equipment, exercise equipment and maid service. ExecuStay
arranges all utility services, including cable television and long distance
telephone service. Amenities vary by location but often include a swimming pool,
hot tub, sauna, fitness center, tennis courts and clubhouse.

27
<PAGE> 28

Houseware Rental. Housewares for substantially all of the ExecuStay
accommodations are supplied from the Company's regional warehouses located in
Washington, Los Angeles, Ft. Lauderdale and Charlotte. In markets where the
Company does not have a warehouse that can service its customers, the Company
rents housewares from unaffiliated rental companies. In addition to servicing
ExecuStay's interim housing customers, the Company's warehouses provide
housewares to other interim housing providers and local apartment owners and
managers. As it implements its expansion strategy, the Company plans to continue
to supply most of its customers' houseware needs. ExecuStay's houseware business
generates an attractive return on investment, complements the Company's other
interim housing services and allows the Company to control the quality and
availability of housewares.

Furniture Rental. Except in the Mid-Atlantic area, the Company furnishes
its accommodations with furniture rented from unaffiliated rental companies. In
the Mid-Atlantic area, ExecuStay furnishes its housing accommodations with
furniture from its Washington warehouse. ExecuStay's furniture division rents
both to ExecuStay residents and to other interim housing service providers. In
1995, the Company established a commercial office furniture rental division,
which also utilizes the Washington warehouse.

Convenient Billing. The Company provides one monthly invoice to its
customers. All expenses relating to each residence, including rent, furnishings,
basic and long-distance telephone service, cable television, utilities and trash
removal, are billed to and paid by ExecuStay, which then bills each customer in
one charge on a single monthly invoice. For corporate employees, the Company
bills either the employee or the corporate employer. For other ExecuStay
residents, the Company typically charges the individual's credit card, which is
provided by the customer before commencement of occupancy. ExecuStay also offers
customized billing options and reporting to national corporate clients.

Quality Assurance. ExecuStay monitors the quality of its services both
through regional personnel and by a satisfaction survey that residents are asked
to complete upon expiration of their stays. Because of the short-term nature of
most of ExecuStay's leases, ExecuStay can quickly change suppliers of rental
properties if a landlord is not responsive to the needs of ExecuStay and its
customers. Similarly, in cases where ExecuStay does not provide furniture and
housewares, ExecuStay can easily change the suppliers from whom it rents such
items.

HEADQUARTERS AND REGIONAL OFFICES

ExecuStay's headquarters, Washington regional office and Mid-Atlantic
warehouse are located in Gaithersburg, Maryland. The Company performs all of its
administrative services from this office, including accounting, national
marketing and inventory management. ExecuStay established the following regional
offices in the years indicated:

<TABLE>
<S> <C>
Los Angeles, California July 1988
Washington, D.C.* March 1991
Philadelphia, Pennsylvania April 1993
Richmond, Virginia* March 1995
Charlotte, North Carolina November 1995
Raleigh, North Carolina January 1996
Ft. Lauderdale, Florida January 1996
Orlando, Florida* April 1997
San Francisco, California June 1997
Atlanta, Georgia June 1997
</TABLE>

- ---------------
* The Washington regional office has a satellite sales office in Chantilly,
Virginia. The Richmond office has a satellite sales office in Virginia Beach,
Virginia. The Orlando office has a satellite sales office in Tampa, Florida.

ExecuStay has found that the key elements to successful regional offices
are: (i) providing ExecuStay's high-quality service and attention to customer
needs; (ii) establishing strong relationships with corporate

28
<PAGE> 29

clients and with local apartment owners and managers; and (iii) attracting and
retaining key personnel who have industry experience and relationships with
local interim housing customers and suppliers.

SALES, MARKETING AND ADVERTISING

Each of the regional offices employ office managers who are responsible for
developing and maintaining relationships with corporate clients and property
owners and managers. Because the Company does not own any real estate, it can
establish mutual referral programs with property owners and managers. As a
result of ExecuStay's centralized administration, managers and salespersons can
focus on obtaining new clients and servicing existing ones. To develop client
relationships, ExecuStay's salespersons regularly attend seminars and
conferences attended by human resources professionals.

Through its MIS, the Company offers customized billing and reporting to
corporate clients. In addition, as ExecuStay's operations expand throughout the
country, ExecuStay may offer temporary incentive programs to selected corporate
clients to encourage them to use ExecuStay in new markets.

The Company also obtains customers from advertisements in local rental
property magazines and newspapers. The Company intends to begin a new
advertising campaign in local business and rental property magazines emphasizing
ExecuStay's growing national presence.

REGIONAL WAREHOUSES

ExecuStay maintains warehouses in Washington, Los Angeles, Ft. Lauderdale
and Charlotte. These warehouses provide items such as cutlery, dishes, kitchen
utensils, linens and electronic products, including televisions, VCRs and
stereos. The Washington furniture warehouse provides both residential and office
furniture to ExecuStay's customers in the Mid-Atlantic area. ExecuStay does not
plan to open new furniture warehouses, although the Company currently intends to
expand the furniture warehouse facilities in Washington to better meet actual
and anticipated growth in the region.

ExecuStay leases all of its warehouse properties. ExecuStay anticipates
opening a new warehouse to provide housewares in the San Francisco market.
Additional regional warehouses may be opened in existing markets or to serve new
markets.

COMPETITION

The interim housing industry is highly competitive. The Company competes
against numerous local, regional and national interim housing providers, both
for customers and for accommodations. The Company expects competition in its
business to intensify as existing competitors expand and new competitors enter
the industry. The financial barriers to entry in the interim housing industry
are relatively low, making it an attractive industry for potential new
competitors. In particular, entities that maintain a vendor-vendee relationship
with companies in this industry, such as real estate managers or furniture
rental businesses, have entered the industry and more such entities may decide
to enter the industry in the future.

ExecuStay believes that the larger providers of interim housing are the
Company's primary competitors. At the present time, such competitors include
Oakwood Corporate Housing, Inc. ("Oakwood"), Bridgestreet Accommodations, Inc.,
Globe Business Resources, Inc. and Accommodations America, Inc. Oakwood has
established itself as the largest provider of interim housing accommodations,
currently renting more than 10,000 interim housing units. Other significant
competitors may emerge in the future. Certain of the Company's existing
competitors have, and any new competitors that enter the industry may have,
access to significantly greater financial resources than the Company.

Providers of interim housing services also compete with traditional hotels,
motels and all-suite and extended-stay hotels. A number of lodging chains and
developers have recently announced plans to develop, or are currently
developing, extended-stay hotels that may compete with the interim housing
services provided by the Company. Moreover, several extended-stay lodging
companies have recently raised substantial amounts of capital in public
offerings for purposes of constructing and expanding lodging facilities.

29
<PAGE> 30

Factors that influence an interim housing customer's decision to choose one
service provider over another include location, price and quality of
accommodations, quality and scope of service and brand name recognition.

EMPLOYEES

As of June 30, 1997, the Company employed approximately 240 full-time
employees. The Company's employees are not subject to any collective bargaining
agreements, and management believes that its relationship with its employees is
good.

LEGAL PROCEEDINGS

The Company is not a party to any material litigation.

30
<PAGE> 31

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------- --- ------------------------------------------------
<S> <C> <C>
Gary R. Abrahams............................ 44 Chief Executive Officer, President and Director
Marc B. Kaplan.............................. 48 Chief Financial Officer, Treasurer and Director
Robert W. Zaugg............................. 52 Chief Operating Officer, Secretary and Director
Benny E. Anderson........................... 34 Executive Vice President-Western Operations
Joseph C. Porpiglia......................... 50 Senior Vice President-Furniture Operations
David S. Santee (1)(2)...................... 38 Director
Stuart C. Siegel (1)(2)..................... 54 Director
</TABLE>

- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee

ExecuStay Corporation was organized on June 4, 1997. Mr. Abrahams, Mr.
Kaplan and Mr. Zaugg co-founded the Company's original subsidiary in 1986 and
have held positions similar to those set forth above with each of the Company's
subsidiaries since their respective inceptions. The following is a brief summary
of the business experience of each of the executive officers and directors of
the Company:

GARY R. ABRAHAMS. Mr. Abrahams is the Company's Chief Executive Officer,
President, a Director and a co-founder of the Company. He was an executive
officer of Horizon Financial Corporation in Washington, D.C. from 1983 to 1987,
was employed by Standard Federal Savings & Loan in Gaithersburg, Maryland from
1979 to 1983, and by Ernst & Ernst from 1975 to 1978.

MARC B. KAPLAN. Mr. Kaplan is the Company's Chief Financial Officer,
Treasurer, a Director and a co-founder of the Company. He was president of
Horizon Financial Corporation from 1983 to 1987, was employed by Standard
Federal Savings & Loan from 1976 to 1983, and by Arthur Young & Company from
1972 to 1976.

ROBERT W. ZAUGG. Mr. Zaugg is the Company's Chief Operating Officer,
Secretary, a Director and a co-founder of the Company. He was an executive
officer of Horizon Financial Corporation from 1983 to 1987, was employed by
Standard Federal Savings & Loan from 1975 to 1983, by Equitable Federal Savings
from 1972 to 1974, and by Peat, Marwick, Mitchell & Company from 1968 to 1972.

BENNY E. ANDERSON. Mr. Anderson joined the Company in 1991 and is
currently the Company's Executive Vice President of Western Operations. Before
joining the Company, Mr. Anderson worked at Seychelles, Inc. as a controller
from 1990 to 1991. He also worked as a controller from 1988 to 1990 at
Trendmasters, Inc., a Los Angeles-based toy manufacturer.

JOSEPH C. PORPIGLIA. Mr. Porpiglia has served as Senior Vice President of
Furniture Operations since 1995. From 1989 to 1995, Mr. Porpiglia was a General
Manager of CORT Business Services Corporation, a furniture rental company, where
he most recently managed the furniture rental operations in Los Angeles and
Washington.

DAVID S. SANTEE. Mr. Santee has been a Director of the Company since June
1997. Since 1994, he has served as Division Vice President of Equity Residential
Properties Trust ("Equity Properties"), a publicly traded REIT, where he is
responsible for the operations of over 115 properties. Before joining Equity
Properties in 1994, Mr. Santee was Vice President of Summit Properties, another
publicly traded REIT. From 1983 to 1992, Mr. Santee worked for R&B Realty Group
in various capacities.

STUART C. SIEGEL. Mr. Siegel has been a Director of the Company since June
1997. For the last fourteen years, he has served as Chairman of the Board of
Directors and Chief Executive Officer of S & K Famous Brands, Inc., a menswear
retailer.

31
<PAGE> 32

The term of office of each director of the Company ends at the next annual
meeting of the Company's stockholders or when his or her successor is elected
and qualified. Executive officers of the Company serve at the discretion of the
Board of Directors. There are no family relationships among any of the directors
or executive officers.

COMMITTEES

In June 1997, the Board of Directors established a Compensation Committee
and an Audit Committee. The Compensation Committee, comprised of Mr. Santee and
Mr. Siegel, has the authority to determine the compensation of the Company's
executive officers, including bonuses, and to administer the 1997 Incentive and
Stock Option Plan. The Audit Committee, also comprised of Mr. Santee and Mr.
Siegel, has the authority to make recommendations concerning the engagement of
independent public accountants, review with the independent public accountants
the plan and results of the audit engagement, review the independence of the
public accountants, consider the range of audit and nonaudit fees and review the
adequacy of the Company's internal accounting controls.

DIRECTORS' COMPENSATION

Directors who are employees of the Company do not receive any compensation
for their service as directors. Following this offering, the Company will
reimburse each director who is not an employee of the Company for out-of-pocket
expenses incurred to attend meetings. Upon the effectiveness of this offering,
the two non-employee directors will be granted an option to purchase 10,000
shares of Common Stock under the 1997 Incentive and Stock Option Plan. Any
non-employee director first elected to the Board of Directors following the
offering will likewise be granted an option to purchase 10,000 shares. In
addition, each non-employee director will be granted an additional option to
purchase 10,000 shares at the fourth anniversary of the initial grant if he or
she is then still serving as a director. The exercise price will be the market
price of the Company's Common Stock on the date of the grant, except that the
exercise price of the first grant of options to non-employee directors shall be
equal to the price per share in this initial public offering. Options to non-
employee directors shall vest in 25% increments, starting on the date of grant
and thereafter on each anniversary of such grant.

EXECUTIVE COMPENSATION

The following table sets forth the cash and noncash compensation for 1996
awarded to or earned by Mr. Abrahams (the Company's Chief Executive Officer) and
Messrs. Kaplan and Zaugg (all of whom are collectively referred to as the "Named
Officers"). No other executive officer of the Company had salary and bonus
earned in 1996 in excess of $100,000. The Company has not granted any options to
the Named Officers.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
NAME AND ------------------
PRINCIPAL POSITION YEAR SALARY (1)
- ---------------------------------------------------------------------------- ---- ----------
<S> <C> <C>
Gary R. Abrahams............................................................ 1996 $ 99,616
Chief Executive Officer and President
Marc B. Kaplan.............................................................. 1996 99,616
Chief Financial Officer and Treasurer
Robert W. Zaugg............................................................. 1996 99,616
Chief Operating Officer and Secretary
</TABLE>

- ---------------
(1) The Company anticipates that the annual salary for the Named Officers will
be increased to approximately $125,000 commencing in 1998. Any bonuses paid
to the Named Officers will be determined by the Compensation Committee.

32
<PAGE> 33

STOCK PLAN

The Company has adopted the 1997 Incentive and Stock Option Plan (the "1997
Plan"), under which the Compensation Committee may grant options to purchase up
to 700,000 shares of Common Stock to directors, executive officers, other
employees and consultants of the Company. The 1997 Plan provides for the grant
of incentive stock options ("Incentive Options") within the meaning of Section
422 of the Code and nonqualified stock options that do not qualify for such
treatment ("Non-Qualifying Options"). The Board of Directors has granted,
effective immediately following the effectiveness of this offering, options to
purchase an aggregate of 173,650 shares of Common Stock at an exercise price per
share equal to the initial public offering price in this offering. Such options
will vest at a rate of 25% per year beginning on the effective date of this
offering. No other options have been granted under the 1997 Plan. The 1997 Plan
also provides for awards of other stock-based grants consistent with the terms
and purposes of the 1997 Plan.

The 1997 Plan also provides for automatic grants of Non-Qualifying Options
to each non-employee director as described above under "-- Directors'
Compensation."

SAVINGS PLAN

On January 1, 1996, the Company adopted a savings plan (the "401(k) Plan")
covering all eligible employees. Employees must be at least 21 years of age and
have completed one year of service to be eligible to participate in the 401(k)
Plan. Enrollment occurs semiannually on January 1 or July 1 of each year.
Participants may contribute up to 15% of their compensation, and the Company
provides a matching contribution of 15% of the participant's contribution. In
addition to the matching contribution, the Company may make an additional
discretionary contribution annually. Vesting in the employer's contribution is
at a rate of 25% per year beginning with the participant's third year of
service.

INDEMNIFICATION AND EXCULPATION ARRANGEMENTS

The Company's Articles of Incorporation and Bylaws provide for the
indemnification of the Company's directors and officers to the fullest extent
permitted by the Maryland General Corporation Law, as amended (the "Maryland
Law"). The Maryland Law provides that a corporation may indemnify a director or
officer with respect to proceedings instituted against such officer or director
by reason of his or her service in that capacity, unless the act or omission in
question was material and was committed in bad faith or was the result of active
and deliberate dishonesty, or unless the director or officer received an
improper personal benefit or the director or officer had reasonable cause to
believe that the act or omission was unlawful.

The Company's Articles of Incorporation include a provision limiting the
liability of its directors and officers to the corporation and its stockholders
for money damages, subject to specified restrictions. Maryland Law does not,
however, permit the liability of directors and officers to the corporation or
its stockholders to be limited to the extent that (1) it is proved that the
person actually received an improper benefit or profit in money, property or
services (to the extent such benefit or profit was received) or (2) judgment or
other final adjudication adverse to such person is entered in a proceeding based
on a finding that the person's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors did not have a Compensation Committee prior to June
1997, and the functions of the Compensation Committee have been performed by the
Board of Directors as a whole. For information concerning certain transactions
and relationships between the Company and the current members of the Board of
Directors, see "Certain Transactions."

33
<PAGE> 34

CERTAIN TRANSACTIONS

HEADQUARTERS AND WAREHOUSE LEASE

In August 1993, the Company entered into a 20-year lease with 7595
Rickenbacker LLC, which is owned in equal shares by Messrs. Abrahams, Zaugg and
Kaplan, who are directors, executive officers and principal stockholders of the
Company. Under the terms of the lease, the Company leases approximately 38,000
square feet at 7595 Rickenbacker Drive, Gaithersburg, Maryland 20879, which is
used as the Company's headquarters and primary warehouse facility, at a current
rental rate of approximately $21,000 per month. The rental rate is subject to
annual increases based upon the consumer price index for the Washington
metropolitan area. The Company must bear all maintenance and repair costs and
pay utilities, property taxes and insurance for the premises. The Company
believes that the terms of the lease, including the rental rate, are at least as
favorable to the Company as those which could have been negotiated with an
unaffiliated third party.

COMPANY LOAN GUARANTEE

The Company has guaranteed a loan from a commercial bank to 7595
Rickenbacker LLC, which is owned by Messrs. Abrahams, Zaugg and Kaplan, the
proceeds of which were used to purchase the building that is leased by the
Company and used as its headquarters. The outstanding balance on this loan was
$940,000 at June 30, 1997.

RECAPITALIZATION

ExecuStay Corporation was incorporated in Maryland on June 4, 1997 to
acquire and hold all of the outstanding shares of its operating subsidiaries.
Prior to that time, all of the outstanding shares of the operating subsidiaries
were held by Messrs. Abrahams, Zaugg, Kaplan and Anderson. In anticipation of
the offering contemplated hereby, the four individual stockholders transferred
all of the outstanding shares of common stock of the subsidiaries to the Company
in exchange for an aggregate of 3,750,000 shares of Common Stock of the Company,
which constitute all of the currently outstanding shares.

S CORPORATION DISTRIBUTIONS

A portion of the proceeds of this offering will be used to pay the
distributions of undistributed S corporation earnings through the Termination
Date. See "Termination of S Corporation Status and Related Distributions."

SPECIAL STOCKHOLDERS' DISTRIBUTION

On June 13, 1997, in conjunction with the Recapitalization, the Company
declared a distribution to the current stockholders totaling approximately $1.1
million, representing capital contributed to two of the Company's subsidiaries
by those stockholders for tax basis purposes. The original amounts contributed
were funded by distributions of previously taxed S corporation earnings received
by those stockholders from the Company's other two subsidiaries.

34
<PAGE> 35

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Common Stock, as of the date of this Prospectus, before giving
effect to the sale by the Company of the 2,650,000 shares of Common Stock hereby
and as adjusted to reflect such sale, by (i) each person who is known by the
Company to beneficially own more than 5% of the Common Stock, (ii) each of the
Company's directors, (iii) the Named Officers and (iv) all directors and
executive officers of the Company as a group:

<TABLE>
<CAPTION>
PERCENTAGE OWNED (1)
SHARES ----------------------
BENEFICIALLY BEFORE AFTER
NAME (2) OWNED (1) OFFERING OFFERING
- ---------------------------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Gary R. Abrahams.......................................... 1,187,500 31.7% 18.6%
Marc B. Kaplan............................................ 1,187,500 31.7 18.6
Robert W. Zaugg........................................... 1,187,500 31.7 18.6
Benny E. Anderson......................................... 190,500(3) 5.0 2.9
David S. Santee........................................... 2,500(4) * *
Stuart C. Siegel.......................................... 2,500(4) * *
All executive officers and directors as a group (7
persons)................................................ 3,765,250 100.0% 58.7%
</TABLE>

- ------------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, and generally include voting power
and/or investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or exercisable within
60 days of the date of this Prospectus, are deemed outstanding for computing
the percentage of the person holding such options or warrants but are not
deemed outstanding for computing the percentage of any other person. Except
as indicated by footnote, the Company believes that the persons named in
this table, based on information provided by such persons, have sole voting
and investment power with respect to the shares of Common Stock indicated.
(2) Mr. Santee's address is 4733 Bethesda Ave., Suite 400, Bethesda, Maryland
20814. Mr. Siegel's address is 11100 West Broad Street, Glen Allen, Virginia
23060. The address of all other persons named above is 7595 Rickenbacker
Drive, Gaithersburg, Maryland 20879.
(3) Includes 3,000 shares issuable upon the exercise of options to be granted
upon the effectiveness of this offering to the extent exercisable within 60
days therafter.
(4) Represents shares issuable upon the exercise of options to be granted upon
the effectiveness of this offering to the extent exercisable within 60 days
thereafter.

35
<PAGE> 36

DESCRIPTION OF CAPITAL STOCK

Upon the closing of this offering, the Company's authorized capital stock
will consist of 45,000,000 shares of Common Stock, par value $.01 per share, and
5,000,000 shares of Preferred Stock, par value $.01 per share. Immediately prior
to the closing of this offering, the Company will have 3,750,000 shares of
Common Stock outstanding, held of record by four stockholders.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that holders
of more than 50% of the shares voted for the election of directors can elect all
of the directors. The holders of Common Stock are entitled to receive dividends
ratably when, as and if declared by the Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining available for distribution to them after payment of liabilities
and after provision has been made for each class of stock, if any, having
preference over the Common Stock. The outstanding shares of Common Stock are,
and the shares offered by the Company in this offering will be, when issued and
paid for, fully paid and nonassessable. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
Preferred Stock that the Company may designate and issue in the future.

Upon completion of this offering, the Company's existing stockholders will
beneficially own 58.6% of the outstanding shares of Common Stock (55.2% if the
Underwriters' over-allotment option is exercised in full) and will therefore be
able to elect the entire Board of Directors and control all matters submitted to
stockholders for a vote.

PREFERRED STOCK

Preferred Stock may be issued from time to time in one or more classes or
series with such designations, powers, preferences, rights, qualifications,
limitations and restrictions as may be fixed by the Company's Board of Directors
without stockholder approval. The Board of Directors could issue Preferred Stock
with voting and/or conversion rights and thereby dilute the voting power and
equity of the holders of the Common Stock and adversely affect the market price
of such stock. The issuance of Preferred Stock could also be used as an
anti-takeover measure by the Company without any further action by the
stockholders. The Company has no present plans to issue shares of Preferred
Stock.

CERTAIN PROVISIONS OF MARYLAND LAW

Business Combinations. Under Section 3-601, et seq. of the Maryland Law
(the "Business Combination Statute"), to which the Company is subject, certain
"business combinations" (including mergers or similar transactions subject to a
statutory stockholder vote and additional transactions involving transfers of
assets or securities in specific amounts) between a Maryland corporation subject
to the Business Combination Statute and (i) any person who beneficially owns,
directly or indirectly, 10% or more of the voting power of the corporation's
outstanding voting shares after the date on which the corporation had 100 or
more beneficial owners of its stock, or (ii) any affiliate or associate of the
corporation who, at any time within the preceding two years and after the date
on which the corporation had 100 or more beneficial owners of its stock, was the
beneficial owner, directly or indirectly, of 10% or more of the voting power of
the then-outstanding voting stock of the corporation (an "Interested
Stockholder"), or an affiliate thereof, are prohibited for five years after the
most recent date on which the Interested Stockholder became an Interested
Stockholder unless an exemption is available. Thereafter, any such business
combination must be recommended by the board of directors of the corporation and
approved by the affirmative vote of at least: (i) 80% of the votes entitled to
be cast by all holders of outstanding voting shares of the corporation; and (ii)
two-thirds of the votes entitled to

36
<PAGE> 37

be cast by holders of outstanding voting shares of the corporation other than
shares held by the Interested Stockholder with whom the business combination is
to be effected, unless the corporation's stockholders receive a minimum price
(as described in the Business Combination Statute) for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Stockholder for its shares. The Business Combination Statute does not
apply, however, to business combinations that are (a) exempted in the
corporation's charter prior to the time the corporation became subject to the
Business Combination Statute or (b) approved or exempted by the board of
directors prior to the time that the Interested Stockholder becomes an
Interested Stockholder. After a corporation becomes subject to the Business
Combination Statute, in order to amend the corporation's charter to elect not to
be subject to the foregoing requirements with respect to one or more Interested
Stockholders, the affirmative vote of at least 80% of the votes entitled to be
cast by all holders of outstanding shares of voting stock and two-thirds of the
votes entitled to be cast by holders of outstanding shares of voting stock who
are not Interested Stockholders is required.

Control Share Acquisition. Section 3-701, et seq. of the Maryland Law
provides that "control shares" of a Maryland corporation acquired in a "control
share acquisition" have no voting rights except to the extent approved by a vote
of two-thirds of the votes entitled to be cast on the matter, excluding shares
of stock owned by the acquiror or by officers or directors who are employees of
the corporation. "Control shares" are voting shares of stock which, if
aggregated with all other such shares of stock previously acquired by the
acquiror, or in respect of which the acquiror is able to exercise or direct the
exercise of voting power except solely by virtue of a revocable proxy, would
entitle the acquiror to exercise voting power in electing directors within one
of the following ranges of voting power: (i) one-fifth or more but less than
one-third; (ii) one-third or more but less than a majority or (iii) a majority
of all voting power. Control shares do not include shares the acquiring person
is then entitled to vote as a result of having previously obtained stockholder
approval. A "control share acquisition" means the acquisition of control shares,
subject to certain exceptions.

A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses and
delivery of an "acquiring person statement"), may compel the corporation's board
of directors to call a special meeting of stockholders to be held within 50 days
of demand to consider the voting rights of the shares. If no request for a
meeting is made, the corporation may itself present the question at any
stockholders' meeting.

Unless the certificate of incorporation or bylaws provide otherwise, if
voting rights are not approved at the meeting or if the acquiring person does
not deliver an acquiring person statement within 10 days following a control
share acquisition then, subject to certain conditions and limitations, the
corporation may redeem any or all of the control shares (except those for which
voting rights have previously been approved) for fair value determined, without
regard to the absence of voting rights for the control shares, as of the date of
the last control share acquisition or of any meeting of stockholders at which
the voting rights of such shares are considered and not approved. Moreover,
unless the certificate of incorporation or bylaws provide otherwise, if voting
rights for control shares are approved at a stockholders' meeting and the
acquiror becomes entitled to exercise or direct the exercise of a majority or
more of all voting power, other stockholders may exercise appraisal rights. The
fair value of the shares as determined for purposes of such appraisal rights may
not be less than the highest price per share paid by the acquiror in the control
share acquisition.

The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the certificate of
incorporation or bylaws of the corporation. The Company's Bylaws allow the Board
of Directors to exempt any of the Company's shareholders from the control share
acquisition statute.

The Business Combination Statute and the control share acquisition statute
could have the effect of discouraging takeover proposals and delaying or
preventing a change of control of the Company not approved by its Board of
Directors.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Norwest Bank
Minnesota, N.A.

37
<PAGE> 38

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
6,400,000 shares of Common Stock (assuming no exercise of the Underwriters'
over-allotment option). Of these shares, the 2,650,000 shares sold in this
offering will be freely tradable without restriction or further registration
under the Securities Act of 1933, unless they are purchased by "affiliates" of
the Company as that term is defined in Rule 144 under the Securities Act of 1933
(which sales would be subject to certain limitations and restrictions described
below). All of the remaining 3,750,000 shares of Common Stock may be sold in the
public market commencing 90 days following the date of this Prospectus, subject
to the volume and other limitations of Rule 144 promulgated under the Securities
Act of 1933. However, the holders of all of these remaining shares have executed
lock-up agreements with A.G. Edwards & Sons, Inc., under which such stockholders
agreed that they will not sell, directly or indirectly, any Common Stock without
the prior consent of A.G. Edwards & Sons, Inc. for a period of 180 days from the
date of this Prospectus. See "Underwriting."

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned shares for at least one year (including the holding
period of any prior owner except an affiliate) is entitled to sell in "brokers'
transactions" or to market makers, within any three-month period a number of
shares that does not exceed the greater of (i) one percent of the number of
shares of Common Stock then outstanding (approximately 64,000 shares immediately
after this offering) or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the required filing of a Form 144
with respect to such sale. Sales under Rule 144 are subject to the availability
of current public information about the Company. Under Rule 144(k), a person who
is not deemed to have been an affiliate of the Company at any time during the 90
days preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least two years, is entitled to sell such shares without having to
comply with the manner of sale, public information, volume limitation or notice
filing provisions of Rule 144.

After the completion of this offering, the Company intends to file one or
more registration statements on Form S-8 under the Securities Act to register an
aggregate of 700,000 shares of Common Stock issuable pursuant to the Company's
1997 Plan. After the date of such filing, shares purchased pursuant to this plan
generally would be available for resale in the public market. Upon the
effectiveness of this offering, the Company will have outstanding options to
purchase an aggregate of 173,650 shares of Common Stock. See
"Management -- Stock Plans."

38
<PAGE> 39

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the underwriters named
below (the "Underwriters"), for whom A.G. Edwards & Sons, Inc. and Equitable
Securities Corporation are acting as representatives (the "Representatives"),
and each of the Underwriters has severally agreed to purchase from the Company,
the respective number of shares of Common Stock set forth opposite its name
below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
----------------------------------------------------------------- ---------
<S> <C>
A.G. Edwards & Sons, Inc. ....................................... 732,000
Equitable Securities Corporation................................. 732,000
Bear, Stearns & Co. Inc. ........................................ 53,000
Alex. Brown & Sons Incorporated.................................. 53,000
Credit Lyonnais Securities (USA) Inc. ........................... 53,000
Dillon, Read & Co. Inc. ......................................... 53,000
Donaldson, Lufkin & Jenrette Securities.......................... 53,000
Everen Securities, Inc. ......................................... 53,000
Goldman, Sachs & Co. ............................................ 53,000
Lehman Brothers Inc. ............................................ 53,000
Montgomery Securities............................................ 53,000
Oppenheimer & Co., Inc. ......................................... 53,000
Prudential Securities Incorporated............................... 53,000
Smith Barney..................................................... 53,000
Advest, Inc. .................................................... 25,000
J.C. Bradford & Co. ............................................. 25,000
Brean Murray & Co., Inc. ........................................ 25,000
Crowell, Weedon & Co. ........................................... 25,000
Fahnestock & Co. Inc. ........................................... 25,000
Ferris, Baker Watts, Incorporated................................ 25,000
Interstate/Johnson Lane Corporation.............................. 25,000
Janney Montgomery Scott Inc. .................................... 25,000
Jefferies & Company, Inc. ....................................... 25,000
Johnston, Lemon & Co., Inc. ..................................... 25,000
Ladenburg Thalmann & Co. Inc. ................................... 25,000
Legg Mason Wood Walker Incorporated.............................. 25,000
McDonald & Company Securities, Inc. ............................. 25,000
Morgan Keegan & Company, Inc. ................................... 25,000
The Ohio Company................................................. 25,000
Raymond James & Associates, Inc. ................................ 25,000
The Robinson-Humphrey Company, Inc. ............................. 25,000
Sanders Morris Mundy Inc. ....................................... 25,000
Scott & Stringfellow, Inc. ...................................... 25,000
Sutro & Co. Incorporated......................................... 25,000
Tucker Anthony Inc. ............................................. 25,000
Wheat, First Securities, Inc. ................................... 25,000
---------
Total.................................................. 2,650,000
=========
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all 2,650,000 shares of
Common Stock offered hereby if any such shares of Common Stock are purchased. In
the event of a default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.

39
<PAGE> 40

The Company has been advised by the Representatives that the several
Underwriters propose initially to offer such shares of Common Stock to the
public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $0.40 per share. The Underwriters may allow and such dealers may re-allow a
concession not in excess of $0.10 per share to other dealers. After the initial
public offering, the public offering price and such concessions may be changed.

The Company has granted to the Underwriters an option, expiring 30 days
from the date of this Prospectus, to purchase up to an aggregate of 397,500
additional shares of Common Stock at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriters may exercise such option solely to cover over-allotments, if any,
made in connection with the sale of shares of Common Stock that the Underwriters
have agreed to purchase. To the extent the Underwriters exercise such option,
each of the Underwriters will have a firm commitment, subject to certain
conditions, to purchase a number of option shares proportionate to such
Underwriter's initial commitment.

The Company has agreed that it will not sell, without the consent of A.G.
Edwards & Sons, Inc., any Common Stock or any securities convertible into Common
Stock, during the 180 days following the date of this Prospectus except for the
Common Stock offered in this offering. In addition, each current stockholder of
the Company, including each officer and director, has agreed not to sell,
without the consent of A.G. Edwards & Sons, Inc., any Common Stock for the
180-day period. A.G. Edwards & Sons, Inc. will not consent to any shortening of
such period unless, in its judgment, the timing of the sales and the number of
shares of Common Stock sold as a result of any such consent would not have a
material adverse effect on the market for the Common Stock. In such event, such
sales would not necessarily be preceded by a public announcement by the Company
or A.G. Edwards & Sons, Inc. that such consent has been given.

Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the shares of Common Stock included
in this offering was determined by negotiation among the Company and the
Representatives. Among the factors considered in determining such price were the
history of and prospects for the Company's business and the industry in which it
operates, an assessment of the Company's management, past and present revenue
and earnings of the Company, the prospects for growth of the Company's revenue
and earnings and currently prevailing conditions in the securities markets.

The Representatives have advised the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.

In connection with the offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the offering than
they are committed to purchase from the Company, and in such case may purchase
Common Stock in the open market following completion of the offering to cover
all or a portion of such short position. The Underwriters may also cover all or
a portion of such short position, up to 397,500 shares of Common Stock, by
exercising the Underwriters' over-allotment option referred to above. In
addition, A.G. Edwards & Sons, Inc., on behalf of the Underwriters, may impose
"penalty bids" under contractual arrangements with the Underwriters whereby it
may reclaim from an Underwriter (or dealer participating in the offering) for
the account of the other Underwriters, the selling concession with respect to
Common Stock that is distributed in the offering but subsequently purchased for
the account of the Underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Common Stock at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph is required and, if
undertaken, may be discontinued at any time.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

40
<PAGE> 41

LEGAL MATTERS

Certain legal matters relating to this offering will be passed upon for the
Company by Dorsey & Whitney LLP, Minneapolis, Minnesota. Certain matters
relating to Maryland law, including the validity of the securities offered
hereby, will be passed upon by Piper & Marbury L.L.P., Washington, D.C. Certain
legal matters relating to the offering will be passed upon for the Underwriters
by Hale and Dorr LLP, Washington, D.C.

EXPERTS

The Consolidated Balance Sheets of the Company as of December 31, 1995 and
1996 and the related Consolidated Statements of Operations, Changes in
Stockholders' Equity and Cash Flows and the Schedule for each of the years in
the three-year period ended December 31, 1996, included in this Prospectus and
Registration Statement have been audited by Grant Thornton LLP, independent
certified public accountants, as stated in their reports, which are included
elsewhere herein, and have been so included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement," which term shall include all amendments, exhibits, annexes and
schedules thereto) under the Securities Act of 1933 with respect to the shares
of Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement. Certain items are omitted
in accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is hereby made to such Registration Statement, including exhibits,
schedules and reports filed as part thereof. The Registration Statement,
including the exhibits and schedules thereto, may be inspected without charge at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Room 1204, Washington, D.C. 20549, and at the
Commission's Regional Offices located at Seven World Trade Center, 13th Floor,
New York, New York, 10048 and the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may be
obtained at prescribed rates by mail from the Public Reference Section of the
Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, including the Company. The address is
http://www.sec.gov.

The Company intends to furnish to its stockholders annual reports
containing financial statements audited by an independent accounting firm and
quarterly reports containing unaudited financial information for the first three
quarters of each year.

41
<PAGE> 42

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 and Unaudited
Consolidated Balance Sheet as of June 30, 1997...................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and
1996 and Unaudited Consolidated Statements of Operations for the six months ended
June 30, 1996 and 1997.............................................................. F-4
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996 and Unaudited Consolidated Statement of Changes in
Stockholders' Equity for the six months ended June 30, 1997......................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996 and Unaudited Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1997.............................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 43

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Board of Directors
ExecuStay Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheets of ExecuStay
Corporation and Subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's 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 financial position of ExecuStay
Corporation and Subsidiaries as of December 31, 1995 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.

GRANT THORNTON LLP

Vienna, Virginia
June 4, 1997

F-2
<PAGE> 44

EXECUSTAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, PRO FORMA
----------------------- JUNE 30, JUNE 30,
1995 1996 1997 1997
---------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(NOTE M)
<S> <C> <C> <C> <C>
ASSETS
Cash........................................ $ 228,910 $ 503,099 $ 6,650 $ 6,650
Accounts receivable, net.................... 911,447 2,266,518 3,809,858 3,809,858
Prepaid rent and other...................... 94,325 323,521 1,647,909 1,647,909
Property on or held for lease, net.......... 3,058,972 4,098,894 4,221,215 4,221,215
Property and equipment, net................. 1,998,446 2,076,330 2,040,621 2,040,621
Other assets................................ 226,914 410,114 3,223,619 3,223,619
---------- ---------- ----------- -----------
Total assets...................... $6,519,014 $9,678,476 $14,949,872 $14,949,872
========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
<S> <C> <C> <C> <C>
Bank line of credit......................... $ 200,000 $ 800,000 $ 1,989,603 $ 1,989,603
Notes payable to bank....................... 742,913 1,881,527 5,562,338 5,562,338
Capital lease obligation.................... 1,585,618 1,555,860 1,538,291 1,538,291
Accounts payable............................ 534,854 1,110,592 1,302,438 1,302,438
Accrued and other liabilities............... 974,363 1,347,664 1,224,975 1,224,975
Due to stockholders......................... -- -- 1,102,467 3,102,467
Deferred taxes payable...................... -- -- -- 183,000
---------- ---------- ----------- -----------
Total liabilities................. 4,037,748 6,695,643 12,720,112 14,903,112
Commitments and contingencies (Note J)
Stockholders' equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized, none
issued and outstanding............... -- -- -- --
Common stock, $.01 par value;
45,000,000 shares authorized,
3,750,000 shares issued and
outstanding.......................... 37,500 37,500 37,500 37,500
Additional paid-in capital............. 1,135,280 1,135,280 55,345 9,260
Retained earnings...................... 1,308,486 1,810,053 2,136,915 --
---------- ---------- ----------- -----------
Total stockholders' equity........ 2,481,266 2,982,833 2,229,760 46,760
---------- ---------- ----------- -----------
Total liabilities and
stockholders' equity....... $6,519,014 $9,678,476 $14,949,872 $14,949,872
========== ========== =========== ===========
</TABLE>

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

F-3
<PAGE> 45

EXECUSTAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

F-4
<PAGE> 46

EXECUSTAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994........... $ -- $36,500 $ 1,108,673 $ 264,201 $ 1,409,374
Net income for 1994.................. -- -- -- 1,330,156 1,330,156
Distributions........................ -- -- -- (877,501) (877,501)
------- ------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1994......... -- 36,500 1,108,673 716,856 1,862,029
Net income for 1995.................. -- -- -- 1,875,683 1,875,683
Distributions........................ -- -- -- (1,284,053) (1,284,053)
Issuance of stock.................... -- 1,000 26,607 -- 27,607
------- ------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1995......... -- 37,500 1,135,280 1,308,486 2,481,266
Net income for 1996.................. -- -- -- 2,658,696 2,658,696
Distributions........................ -- -- -- (2,157,129) (2,157,129)
------- ------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1996......... -- 37,500 1,135,280 1,810,053 2,982,833
Net income (unaudited)............... -- -- -- 1,633,592 1,633,592
Distributions (unaudited)............ -- -- (1,079,935) (1,306,730) (2,386,665)
------- ------- ----------- ----------- -----------
BALANCE AT JUNE 30, 1997
(UNAUDITED)........................ $ -- $37,500 $ 55,345 $ 2,136,915 $ 2,229,760
======= ======= =========== =========== ===========
</TABLE>

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

F-5
<PAGE> 47

EXECUSTAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................ $ 1,330,156 $ 1,875,683 $ 2,658,696 $ 785,638 $ 1,633,592
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation and
amortization............... 1,182,502 1,442,779 1,906,904 834,116 1,179,667
Net purchase of property on
or held for lease.......... (1,782,748) (1,549,326) (2,632,460) (1,623,885) (1,072,516)
Compensation paid in stock... -- 27,607 -- -- --
Changes in assets and
liabilities
Decrease (increase) in
accounts receivable.... 15,406 (62,005) (1,354,340) (674,453) (1,502,672)
Decrease (increase) in
prepaid rent and
other.................. (11,346) (33,572) (229,196) (964,261) (1,324,388)
Decrease (increase) in
other assets .......... (85,588) (20,025) (183,199) (136,500) (2,866,505)
Increase (decrease) in
accounts payable....... 338,889 (76,738) 575,738 314,887 191,846
Increase (decrease) in
accrued and other
liabilities............ 387,556 193,112 373,301 229,370 (122,689)
Increase in due to
stockholders........... -- -- -- -- 1,102,467
----------- ----------- ----------- ----------- -----------
Total adjustments................. 44,671 (78,168) (1,543,252) (2,020,726) (4,414,790)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities................ 1,374,827 1,797,515 1,115,444 (1,235,088) (2,781,198)
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and
equipment....................... (383,384) (252,996) (392,251) (138,998) (140,763)
Net (increase) decrease in due
from unconsolidated
affiliates...................... (9,022) 18,932 (731) 2,642 (40,668)
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities.......................... (392,406) (234,064) (392,982) (136,356) (181,431)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Net borrowings on line of
credit.......................... (195,616) (346,000) 600,000 2,315,530 1,189,603
Distributions to stockholders..... (877,501) (1,284,053) (2,157,129) (904,825) (2,386,665)
Borrowings on bank loans.......... 130,349 750,000 1,900,000 -- 4,350,000
Payments on bank loans............ (26,786) (459,976) (761,386) (249,745) (669,189)
Payments on capital lease
obligations .................... (7,907) (18,683) (29,758) (13,026) (17,569)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities................ (977,461) (1,358,712) (448,273) 1,147,934 2,466,180
----------- ----------- ----------- ----------- -----------
Net increase in cash.................. 4,960 204,739 274,189 (223,510) (496,449)
Cash at beginning of period........... 19,211 24,171 228,910 228,910 503,099
----------- ----------- ----------- ----------- -----------
Cash at end of period................. $ 24,171 $ 228,910 $ 503,099 $ 5,400 $ 6,650
============ ============ ============ ============ ============
Supplemental cash flows information:
Interest paid during the period... $ 195,074 $ 249,818 $ 313,098 $ 126,441 $ 183,848
============ ============ ============ ============ ============
</TABLE>

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

F-6
<PAGE> 48

EXECUSTAY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting principles applied in the
preparation of the consolidated financial statements follows:

FORMATION OF HOLDING COMPANY AND RECAPITALIZATION

ExecuStay Corporation was formed on June 4, 1997, to be a newly created
holding company for its four wholly owned subsidiaries (ExecuStay Corporation
and such subsidiaries being collectively referred to as the "Company"). On June
4, 1997, ExecuStay Corporation issued an aggregate of 1,000,000 shares of a
total of 45,000,000 newly authorized shares of Common Stock in exchange for all
of the outstanding shares of capital stock of the subsidiaries and, in addition,
authorized 5,000,000 preferred shares (the "Recapitalization"). Prior to the
Recapitalization, all subsidiaries were subchapter S corporations. ExecuStay
Corporation intends to qualify itself as an S corporation and all of its
subsidiaries as Qualified Subchapter S Subsidiaries.

On June 13, 1997, the Company effected a 3.75-for-one stock split of its
Common Stock in the form of a stock dividend.

The accompanying financial statements, including stockholders' equity and
per share amounts, give retroactive effect to the Recapitalization and the stock
split for all periods presented.

On June 13, 1997, in conjunction with the Recapitalization, the Company
declared a distribution totaling approximately $1.1 million, representing prior
years' capital contributions made by the current stockholders to two of the
subsidiaries for tax basis purposes. The original contributions were funded from
distributions received by the stockholders from the other two subsidiaries.

NATURE OF OPERATIONS

The Company is in the business of providing furnished interim housing and
short-term rental of furniture and household amenities throughout the United
States.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
ExecuStay and its four wholly owned subsidiaries. Significant intercompany
accounts and transactions have been eliminated.

INTERIM REPORTING

The accompanying condensed financial information as of June 30, 1997, and
for the six months ended June 30, 1996 and 1997, including such information
included in the Notes to Consolidated Financial Statements and disclosures
regarding matters occurring after December 31, 1996, is unaudited. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, considered necessary for a fair presentation have been included.
Operating results for any interim period are not necessarily indicative of the
results for any other interim period or for an entire year.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Depreciation is computed using
the straight-line method over estimated useful lives of five to seven years.
Capital leases and leasehold improvements are amortized over the lesser of the
estimated useful lives of the related assets or the lease term.

F-7
<PAGE> 49

EXECUSTAY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

PROPERTY ON OR HELD FOR LEASE

Furniture and amenities on or held for lease are depreciated over estimated
useful lives ranging from two to seven years for furniture and one to five years
for household amenities. Depreciation is computed on the straight-line method
for financial reporting purposes and on accelerated methods for tax purposes.

The accompanying financial statements for all periods presented have been
retroactively restated for the effects of changing to the straight-line method
of depreciating property on or held for lease. Previously, the Company had used
certain tax methods and lives, and salvage values, for depreciating such assets,
the net effect of which approximated generally accepted accounting methods. The
effect of the change on operations for 1994, 1995 and 1996 was not material. The
Company intends to use the straight-line methods for future financial reporting
purposes, believing it more closely matches costs with revenue.

INCOME TAXES

The Company has elected to be taxed as an S corporation for federal and
state income tax purposes. As a result, no federal or state income taxes were
payable at the corporate level. The stockholders pay tax on their respective
shares of the Company's taxable income, even if such income is not distributed.

Pro forma income taxes reflect a provision for income taxes at the
effective statutory federal and state rates applied to the Company's financial
statement net income.

Upon the effective date of the proposed initial public offering, the
Company will terminate its S corporation status, convert to a C corporation, and
be subject to both federal and state income taxes in future periods. Any income
tax liability arising from terminating the S corporation status will be
reflected in the operating results of the first quarter following the effective
date of the offering.

USING ESTIMATES

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenue and expenses during the reporting period. Actual results could differ
from those estimates.

CASH AND CASH EQUIVALENTS

The Company defines cash and cash equivalents as all cash held by
depository institutions, cash on hand and short-term liquid investments with
initial maturities of three months or less. Cash balances may exceed insurable
amounts.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.

Cash and cash equivalents, accounts receivable, accounts payable, line of
credit and other accrued liabilities -- The carrying amounts approximate fair
value because of the short maturity of these instruments.

Installment notes payable to bank -- The carrying amounts are deemed to be
substantially equal to fair value.

F-8
<PAGE> 50

EXECUSTAY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

INTANGIBLE ASSETS

Intangible assets consist primarily of amounts paid for non-compete
agreements in connection with business acquisitions, purchased contract rights
and goodwill. Non-compete agreements and purchased contract rights are amortized
on a straight-line basis over the lives of the respective agreements, ranging
from three to eight years. Goodwill is amortized on a straight-line basis over
20 years. Impairment losses, if any, are measured as the excess of carrying cost
over estimated fair market value, and are recognized in operations if a
permanent decline in value occurs.

STOCK-BASED COMPENSATION

Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," encourages but does not require companies to
record stock-based employee compensation plans at their fair value. The Company
has elected to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. Accordingly,
compensation cost for employee stock options is measured as the excess, if any,
of the quoted market price of the Company's stock at the date of the grant over
the exercise price an employee must pay to acquire the stock.

NOTE B -- ACQUISITIONS

On April 1, 1997, the Company purchased for cash certain leases and
contracts of an interim housing business in Orlando for $850,000. In conjunction
with the purchase, the Company entered into a five-year non-compete agreement
and a five-year employment agreement which provides for base salary and
incentive compensation. The Company obtained additional financing from its bank
to fund the transaction, as discussed in Note G. The Company accounted for the
transaction using purchase accounting and recorded certain intangible assets
including $120,000 relating to a non-compete agreement and goodwill of $705,000.

On June 1, 1997, the Company purchased an interim housing business in the
San Francisco area for a total purchase price of $1,890,000. The Company
obtained additional financing from its bank to fund the transaction, as
discussed in Note G. The acquisition included certain rental exclusivity and
seller non-compete arrangements, along with the existing customer base. The
Company also entered into employment agreements with certain seller employees.
The Company has accounted for the transaction using purchase accounting and
recorded intangible assets including $100,000 relating to a non-compete
agreement, $160,000 relating to existing contract rights and an exclusivity
agreement and goodwill of $1,630,000.

NOTE C -- ACCOUNTS RECEIVABLE, NET

The Company grants credit to corporate and individual customers. Provisions
have been established for uncollectible amounts and vacancy credits.

F-9
<PAGE> 51

EXECUSTAY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE C -- ACCOUNTS RECEIVABLE, NET -- (CONTINUED)

Following is a summary of accounts receivable:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Accounts receivable.............................. $1,037,663 $2,490,548 $4,179,721
Due from nonconsolidated affiliates.............. 13,295 14,026 54,694
Reserve for vacancies and doubtful accounts...... (139,511) (238,056) (424,557)
---------- ---------- ----------
Accounts receivable -- net....................... $ 911,447 $2,266,518 $3,809,858
========== ========== ==========
</TABLE>

NOTE D -- PROPERTY ON OR HELD FOR LEASE

The following is a summary of property on or held for lease:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Furniture........................................ $4,468,674 $5,867,089 $6,015,597
Household amenities.............................. 1,337,891 1,890,866 2,449,027
---------- ---------- ----------
5,806,565 7,757,955 8,464,624
Less accumulated depreciation.................... 2,747,593 3,659,061 4,243,409
---------- ---------- ----------
$3,058,972 $4,098,894 $4,221,215
========== ========== ==========
</TABLE>

Depreciation expense for the years ended December 31, 1994, 1995 and 1996
totaled $977,330, $1,149,902 and $1,579,624, respectively. Depreciation expense
for the six months ended June 30, 1997 totaled $950,195.

NOTE E -- PROPERTY AND EQUIPMENT

The following is a summary of property and equipment:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Vehicles......................................... $ 501,988 $ 544,110 $ 544,109
Leasehold improvements........................... 56,490 125,208 130,046
Computer equipment and software.................. 222,642 399,262 504,420
Furniture and equipment.......................... 298,770 388,061 420,204
Capital lease -- building........................ 1,612,208 1,612,208 1,612,208
---------- ---------- ----------
2,692,098 3,068,849 3,210,987
Less accumulated depreciation and amortization... 693,652 992,519 1,170,366
---------- ---------- ----------
$1,998,446 $2,076,330 $2,040,621
========== ========== ==========
</TABLE>

F-10
<PAGE> 52

EXECUSTAY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE E -- PROPERTY AND EQUIPMENT -- (CONTINUED)
Depreciation and amortization expense for the years ended December 31,
1994, 1995 and 1996 totaled $205,172, $292,877 and $327,280, respectively.
Depreciation and amortization for the six months ended June 30, 1997 totaled
$176,472.

NOTE F -- OTHER ASSETS

The following is a summary of other assets:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
-------- -------- ----------
<S> <C> <C> <C>
Goodwill............................................ $ -- $ -- $2,321,018
Non-complete agreements............................. -- -- 328,024
Deposits............................................ 206,475 410,114 437,929
Other............................................... 20,439 -- 136,648
-------- -------- ----------
$226,914 $410,114 $3,223,619
======== ======== ==========
</TABLE>

Amortization expense for the six months ended June 30, 1997 totaled
approximately $53,000.

NOTE G -- BANK NOTES

The Company has a revolving line of credit and various term loans with a
bank.

Under the terms of the current line-of-credit agreement, which expires May
31, 1998, the Company may borrow up to $2,000,000 at the bank's Prime Rate plus
0.50% (9.25% at December 31, 1995, 8.75% at December 31, 1996 and 9.00% at June
30, 1997). At December 31, 1995 and 1996, the borrowings outstanding on the line
of credit amounted to $200,000 and $800,000, respectively. Outstanding
borrowings under the line of credit at June 30, 1997 amounted to $1,989,603. The
revolving credit agreement is collateralized by a blanket security interest on
all assets of the Company, and is personally guaranteed by the current
stockholders.

F-11
<PAGE> 53

EXECUSTAY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE G -- BANK NOTES -- (CONTINUED)
Term notes payable to the bank are as follows. They are deemed to be
substantially equal to fair value.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1995 1996 1997
-------- ---------- ----------
<S> <C> <C> <C>
$1,900,000 note dated July 29, 1996, payable to bank,
interest at 8.70%, with 24 payments of $79,167 plus
interest due monthly through August 1998; collateralized
by a blanket security interest on all assets of the
Company and personally guaranteed by the current
stockholders............................................. $ -- $1,583,333 $1,108,333
$750,000 note dated June 21, 1995, payable to bank,
interest at 8.08%, with 24 payments of $31,250 plus
interest due monthly through July 1997; collateralized by
a blanket security interest on all assets of the Company
and personally guaranteed by the current stockholders.... 619,444 282,909 104,005
Notes payable to bank with interest ranging from 6.75% to
7.75%; principal and interest payments due monthly
through June 1997; secured by vehicles with a cost of
$130,350................................................. 60,969 15,285 --
$500,000 note dated February 16, 1994, payable to bank,
interest at 7.38%, with 24 payments of $20,833 plus
interest due monthly through March 1996; collateralized
by a blanket security interest on all assets of the
Company and personally guaranteed by the current
stockholders............................................. 62,500 -- --
$1,500,000 note dated June 2, 1997, payable to bank,
interest at bank's prime rate plus 0.5%, with 24 payments
of $62,500 plus interest due monthly through June 1999;
collateralized by a blanket security interest on all
assets of the Company and personally guaranteed by the
current stockholders..................................... -- -- 1,500,000
$850,000 note dated June 2, 1997, payable to bank, interest
at bank's prime rate plus 0.5%, with 36 payments of
$23,611 plus interest due monthly through June 2000;
collateralized by a blanket security interest on all
assets of the Company and personally guaranteed by the
current stockholders..................................... -- -- 850,000
$2,000,000 note dated June 2, 1997, payable to bank,
interest at bank's prime rate, with 36 payments of
$55,556 plus interest due monthly through June 2000;
collateralized by a blanket security interest on all
assets of the Company and personally guaranteed by the
current stockholders..................................... -- -- 2,000,000
-------- ---------- ----------
$742,913 $1,881,527 $5,562,338
======== ========= =========
</TABLE>

F-12
<PAGE> 54

EXECUSTAY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE G -- BANK NOTES -- (CONTINUED)
Following are aggregate maturities of term notes:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
-----------------------------------------------------------
<S> <C>
1997....................................................... $1,248,194
1998....................................................... 633,333
----------
$1,881,527
=========
</TABLE>

NOTE H -- ACCRUED AND OTHER LIABILITIES

The following is a summary of accrued and other liabilities:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1995 1996 1997
-------- ---------- ----------
<S> <C> <C> <C>
Accrued payroll and related expenses............... $264,396 $ 442,118 $ 449,790
Accrued sales tax payable.......................... 20,833 199,764 195,900
Customer deposits held............................. 265,512 295,111 290,902
Other accrued expenses............................. 423,622 410,671 288,383
-------- ---------- ----------
$974,363 $1,347,664 $1,224,975
======== ========= =========
</TABLE>

NOTE I -- RELATED PARTY TRANSACTIONS

UNCONSOLIDATED AFFILIATE

In 1993, the Company entered into a capital lease for a building owned by
7595 Rickenbacker LLC, an entity owned by three of the Company's current
stockholders (see Note J).

NOTE J -- COMMITMENTS AND CONTINGENCIES

CAPITAL LEASE

In 1993, the Company entered into a 20-year noncancelable lease commencing
in May 1994, for its Washington headquarters, warehouse and regional office
building with 7595 Rickenbacker LLC. The building portion of the lease is
classified as a capital lease, and the related asset and liability have been
recorded at the lower of the present value of the minimum lease payments or the
fair value of the asset. The land portion of the lease is classified as an
operating lease, as discussed below. The asset is being amortized over the
related lease term, and amortization of the asset has been included in
depreciation for fiscal years 1994, 1995 and 1996 and for the six months ended
June 30, 1997.

F-13
<PAGE> 55

EXECUSTAY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE J -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Minimum future payments under the capital lease as of December 31, 1996,
for each of the next five years and in the aggregate are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
-------------------------------------------------------------
<S> <C>
1997......................................................... $ 186,900
1998......................................................... 186,900
1999......................................................... 186,900
2000......................................................... 186,900
2001......................................................... 186,900
Thereafter................................................... 2,305,100
-----------
Total minimum lease payments................................. 3,239,600
Less amounts representing interest........................... (1,683,740)
-----------
Present value of net minimum lease payments.................. $ 1,555,860
==========
</TABLE>

In addition to the lease arrangement, the Company has guaranteed one of two
notes on the building. The balance on the note guaranteed by the Company at
December 31, 1995 and 1996, amounted to approximately $967,000 and $950,000,
respectively. The balance on the note at June 30, 1997, amounted to
approximately $940,000.

The accompanying financial statements for all periods presented have been
retroactively restated for the effects of accounting for the building lease as a
capital lease, in accordance with SFAS No. 13, "Accounting for Leases."
Previously the Company accounted for the building lease under income tax
principles as an operating lease. The effect on operations for 1994, 1995 and
1996 was not material.

OPERATING LEASES

The Company leases the land associated with its Washington facility as well
as other office and warehouse space, vehicles and equipment under noncancelable
operating leases expiring on various dates through April 2014. Certain leases
include various provisions for annual increases based on the Consumer Price
Index.

Minimum future rental payments are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
--------------------------------------------------------------
<S> <C>
1997.......................................................... $ 329,000
1998.......................................................... 314,000
1999.......................................................... 211,000
2000.......................................................... 131,000
2001.......................................................... 76,000
Thereafter.................................................... 795,000
----------
$1,856,000
=========
</TABLE>

F-14
<PAGE> 56

EXECUSTAY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE J -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Rent expense under the operating leases amounted to approximately $206,000,
$162,000 and $279,000 for 1994, 1995 and 1996, respectively.

NOTE K -- BENEFIT PLANS

SAVINGS PLAN

1997 INCENTIVE AND STOCK OPTION PLAN

In June 1997, the Board of Directors and shareholders adopted the 1997
Incentive and Stock Option Plan (the "Plan"). The Plan provides for the granting
of options to employees of the Company to purchase shares of the Company's
Common Stock at a price equal to or in excess of the Fair Market value of the
Common Stock at the date of grant. A total of 700,000 shares of Common Stock are
reserved for issuance under the Plan. The Plan expires in June 2001.

NOTE L -- PROPOSED PUBLIC OFFERING

The Company's Board of Directors has authorized the filing of a
registration statement in 1997 relating to an initial public offering of shares
of Common Stock.

NOTE M -- PRO FORMA INFORMATION

Pro Forma Statement of Income (Unaudited)

The Company has elected to be taxed as an S corporation and is not subject
to federal and state income taxes. The pro forma presentation in the Statements
of Operations for 1996 and the six months ended June 30, 1997 reflects a
provision for income taxes as if the Company had been subject to such taxes. The
pro forma income tax provision has been prepared in accordance with SFAS No.
109. The effective pro forma tax rate of the Company differs from the federal
rate of 34%, primarily because of the effects of state income taxes.

The pro forma provision for income taxes consists of the following:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------
<S> <C> <C>
Federal.............................................. $824,000 $506,000
State................................................ $239,000 $147,000
</TABLE>

Pro Forma Net Income Per Share (Unaudited)

Pro forma net income per share is based on the weighted average number of
common shares outstanding during the period totaling 3,965,000 shares. The
shares outstanding for all periods presented give retroactive

F-15
<PAGE> 57

EXECUSTAY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE M -- PRO FORMA INFORMATION -- (CONTINUED)

effect to the Recapitalization and stock split described in Note A as well as
215,000 shares deemed to be outstanding at June 30, 1997, which represent the
approximate number of shares deemed to be sold by the Company (at the initial
offering price of $10.00 per share) to fund: (1) the portion of the S
corporation distribution as of June 30, 1997 in excess of the previous twelve
months' undrawn earnings; and (2) the distribution declared on June 13, 1997.

Pro Forma Balance Sheet Information (Unaudited)

The Company intends to declare a final S corporation distribution to its
current stockholders immediately prior to the effective date of the proposed
public offering, in an amount equal to the undistributed cumulative earnings
reported for tax purposes at that date.

In addition, upon the effective date of the proposed public offering, the
Company will terminate its S corporation status and certain deferred income tax
liabilities will result.

The pro forma balance sheet information of the Company at June 30, 1997,
reflects adjustments for the effects of: (1) distribution to the current
stockholders of the undistributed taxable earnings of approximately $2,000,000
as of June 30, 1997; and (2) additional income tax liabilities of approximately
$183,000 which would have resulted if the S corporation status had been
terminated at June 30, 1997.

The following table illustrates the effect of the pro forma balance sheet
adjustment described above:

<TABLE>
<CAPTION>
JUNE 30,
1997
------------
<S> <C>
Historical stockholders' equity.............................................. $ 2,229,760
Effect of pro forma adjustments:
S corporation undistributed taxable earnings distribution to
stockholders........................................................... (2,000,000)
Additional income tax liabilities resulting from termination of
S corporation status.................................................. (183,000)
------------
Pro forma stockholders' equity............................................... $ 46,760
============
</TABLE>

F-16
<PAGE> 58

[INSIDE BACK COVER]

[PHOTOGRAPH OF CUSTOMER IN FURNISHED APARTMENT]
<PAGE> 59

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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER
TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 6
Termination of S Corporation Status and
Related Distributions.................. 10
Use of Proceeds.......................... 11
Dividend Policy.......................... 11
Capitalization........................... 12
Dilution................................. 13
Selected Consolidated Financial Data..... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 15
Recent Expansion......................... 21
Business................................. 23
Management............................... 31
Certain Transactions..................... 34
Principal Stockholders................... 35
Description of Capital Stock............. 36
Shares Eligible for Future Sale.......... 38
Underwriting............................. 39
Legal Matters............................ 41
Experts.................................. 41
Additional Information................... 41
Index to Consolidated Financial
Statements............................. F-1
</TABLE>

------------------

UNTIL SEPTEMBER 21, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

2,650,000 SHARES

EXECUSTAY LOGO

COMMON STOCK

------------------------

PROSPECTUS

------------------------

A.G. EDWARDS & SONS, INC.

EQUITABLE SECURITIES CORPORATION

AUGUST 27, 1997

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