HOST MARRIOTT CORP/, DEF 14A, 1999-04-15

HOST MARRIOTT CORP/
DEF 14A, 1999-04-15
HOTELS & MOTELS

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

Host Marriott Corporation
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

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[LOGO FOR HOST MARRIOTT APPEARS HERE]
10400 Fernwood Road
Bethesda, Maryland 20817-1109

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 20, 1999

April 15, 1999

The Annual Meeting of Shareholders of Host Marriott Corporation (the "Company")
will be held on Thursday, May 20, 1999, at 11:00 a.m. in Salons 3, 4 and 5 of
The Ritz-Carlton, Buckhead, located at 3434 Peachtree Road, Northeast, in At-
lanta, Georgia. Doors to the meeting will open at 10:30 a.m.

The meeting will be conducted:

1. To consider and vote upon the following proposals described in the
accompanying Proxy Statement, which provide for:

(i) Proposal One: The election of J.W. Marriott, Jr., John G. Schreiber
and Harry L. Vincent, Jr. as Directors for three-year terms expiring
at the 2002 Annual Meeting;

(ii) Proposal Two: The ratification of the appointment of Arthur
Andersen LLP as independent auditors;

(iii) Proposal Three: The ratification of the action of the Board of
Directors amending the Company's Employee Stock Purchase Plan;

(iv) Proposal Four: The ratification of the action of the Board of
Directors amending the Company's 1997 Comprehensive Stock Incentive
Plan; and

(v) Proposal Five: The consideration of a shareholder proposal to
reinstate the annual election of all Directors.

2. To transact such other business as may properly come before the meeting.

Shareholders of record of the Company's Common Stock at the close of business
on March 29, 1999 are entitled to notice of and to vote at this meeting.

[/S/ CHRISTOPHER G. TOWNSEND]

Christopher G. Townsend
Corporate Secretary

REFER TO THE NOTE ON THE OUTSIDE OF THE BACK COVER FOR INFORMATION ON
ACCOMMODATIONS AND TRANSPORTATION.

EACH SHAREHOLDER IS REQUESTED TO SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. A PREPAID ENVELOPE IS ENCLOSED
FOR THAT PURPOSE.

PROXY STATEMENT

HOST MARRIOTT CORPORATION
10400 FERNWOOD ROAD
BETHESDA, MARYLAND 20817-1109

ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1999
INTRODUCTION

This Proxy Statement (the "Proxy Statement") is being furnished to shareholders
of Host Marriott Corporation, a Maryland corporation (the "Company"), in con-
nection with the solicitation of proxies by the Board of Directors of the Com-
pany (the "Board") from holders of record of the Company's outstanding shares
of common stock, par value $.01 per share (the "Company Common Stock"), as of
the close of business on March 29, 1999 (the "Annual Meeting Record Date") for
use at the Annual Meeting of Shareholders of the Company (the "Annual Meeting")
to be held on Thursday, May 20, 1999, at 11:00 a.m. in Salons 3, 4 and 5 of The
Ritz-Carlton, Buckhead, located at 3434 Peachtree Road, Northeast, in Atlanta,
Georgia, and at any adjournment or postponement thereof. This Proxy Statement
is first being mailed to the Company's shareholders on April 15, 1999. The
Company's Annual Report and the Company's Securities and Exchange Commission
Form 10-K for the 1998 fiscal year ended December 31, 1998 are being mailed
with this Proxy Statement to shareholders of record as of the Annual Meeting
Record Date.

The Company is the successor to the former Host Marriott Corporation, a Dela-
ware corporation, with which the Company merged on December 29, 1998. The pur-
pose of the merger was to reincorporate the Company in Maryland. The merger was
part of a series of transactions pursuant to which the Company and its subsidi-
aries converted their business operations to qualify as a real estate invest-
ment trust or "REIT" for federal income tax purposes. (For more information
about these transactions, see the section entitled "The REIT Conversion" on
page 21 of this Proxy Statement.) All references in this Proxy Statement to the
"Company" shall also include the Company's predecessor Delaware corporation.

VOTING RIGHTS AND PROXY INFORMATION

Only holders of record of shares of Company Common Stock as of the close of
business on the Annual Meeting Record Date will be entitled to notice of and to
vote at the Annual Meeting or any adjournment or postponement thereof. Such
holders of shares of Company Common Stock are entitled to one vote per share on
any matter which may properly come before the Annual Meeting. The presence, ei-
ther in person or by properly executed proxy, of the holders of a majority of
the then outstanding shares of Company Common Stock is necessary to constitute
a quorum at the Annual Meeting and to permit action to be taken by the share-
holders at such meeting. Instructions for voting by proxy are contained on the
enclosed proxy card.

The affirmative vote of a plurality of shares of Company Common Stock present
in person or represented by proxy and voting at the Annual Meeting is required
to elect the Directors nominated pursuant to Proposal One. "Plurality" means
that the individuals who receive the largest number of votes cast are elected
as Directors up to the max- imum number of Directors to be chosen at the meet-
ing. Consequently, any shares not

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voted, whether by abstention, "broker non-vote" (i.e., shares held by a broker
or nominee which are represented at the Annual Meeting, but with respect to
which such broker or nominee is not empowered or chooses not to vote on a par-
ticular proposal) or otherwise, will have no impact in the election of Direc-
tors, except to the extent that the failure to vote for an individual results
in another individual's receiving a larger proportion of votes.

The affirmative vote of the holders of at least a majority of the shares of
Company Common Stock present in person or represented by properly executed
proxy and voting at the Annual Meeting is required to approve Proposals Two
through Four. Under the Company's Articles of Incorporation, the affirmative
vote of the holders of at least two-thirds of the total number of outstanding
shares of Company Common Stock as of the Annual Meeting Record Date is required
to approve Proposal Five. Shares represented at the Annual Meeting (either by
properly executed proxy or in person) that reflect abstentions or broker non-
votes will be counted as shares that are present and entitled to vote for pur-
poses of determining the presence of a quorum. Abstentions and broker non-votes
will be treated as unvoted for purposes of determining approval of Proposals
Two through Five (and therefore will reduce the absolute number--although not
the percentage--of the votes needed for approval) and will not be counted as
votes for or against such proposals.

As of March 29, 1999, there were 227,520,088 shares of Company Common Stock
outstanding and entitled to vote at the Annual Meeting.

All shares of Company Common Stock that are represented at the Annual Meeting
by properly executed proxies received prior to or at the Annual Meeting and not
revoked will be voted at the Annual Meeting in accordance with the instructions
indicated in such proxies. If no instructions are indicated for Proposals One,
Two, Three or Four, such proxies will be voted in accordance with the recommen-
dations of the Board of Directors as set forth herein with respect to such pro-
posals. If no instructions are indicated for Proposal Five, such proxies will
be treated as abstentions. If any other matters are properly brought before the
Annual Meeting, all shares that are represented by properly executed proxies
may be voted in the discretion of the holders of the proxies named on the proxy
card.

In the event that a quorum is not present at the time the Annual Meeting is
convened, or if for any other reason the Company believes that additional time
should be allowed for the solicitation of proxies, the Company may adjourn the
Annual Meeting with or without a vote of the shareholders. If the Company pro-
poses to adjourn the Annual Meeting by a vote of the shareholders, the persons
named in the enclosed proxy card will vote all shares of Company Common Stock
for which they have voting authority in favor of such adjournment.

Any proxy given pursuant to this solicitation may be revoked by the person giv-
ing it at any time before it is voted. Proxies may be revoked by (i) filing
with First Chicago Trust Company of New York in its capacity as transfer agent
for the Company (the "Transfer Agent"), at or before the Annual Meeting, a
written notice of revocation bearing a later date than the proxy, (ii) duly ex-
ecuting a later dated proxy relating to the same shares of Company Common Stock
and delivering it to the Transfer Agent at or before the Annual Meeting, or
(iii) attending the Annual Meeting and voting in person (although attendance at
the Annual Meeting will not in and of itself constitute a revocation of a
proxy). Any written notice re-

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voking a proxy should be sent to First Chicago Trust Company of New York, P.O.
Box 8611, Edison, New Jersey 08818-9119.

The Company will bear the cost of the solicitation. In addition to solicitation
by mail, the Company will request banks, brokers and other custodian nominees
and fiduciaries to supply proxy materials to the beneficial owners of Company
Common Stock of whom they have knowledge, and the Company will reimburse them
for their expenses in so doing; and certain Directors, officers and other em-
ployees of the Company, not specially employed for the purpose, may solicit
proxies, without additional compensation therefor, by personal interview, mail,
telephone or telegraph.

DIRECTORS

[PHOTO OF RICHARD E. MARRIOTT]

Richard E. Mr. Richard E. Marriott is a Director of
Marriott* Marriott International, Inc., Host
Chairman of the Marriott Services Corporation and the Pol-
Board ynesian Cultural Center, and he is Chair-
Director since 1979 man of the Board of First Media Corpora-
Age: 60 tion. He is a past President of the Na-
tional Restaurant Association. In addi-
tion, Mr. Marriott is the President and a
Trustee of the Marriott Foundation for
People with Disabilities. Mr. Marriott's
term as a Director of the Company expires
at the 2001 annual meeting of sharehold-
ers. For additional information on Mr.
Marriott, see "Executive Officers" below.
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[PHOTO OF J. W. MARRIOTT, JR.]

J.W. Marriott, Mr. J.W. Marriott, Jr. is Chairman of the
Jr.* Board and Chief Executive Officer of
Director since 1964 Marriott International, Inc., and a Direc-
Age: 67 tor of Host Marriott Services Corporation,
General Motors Corporation, the U.S.-Rus-
sia Business Council and the Naval Academy
Endowment Trust. He also serves on the
Board of Directors of Georgetown Univer-
sity and on the Board of Trustees of the
National Geographic Society. He serves on
the Executive Committee of the World
Travel & Tourism Council and is a member
of the Business Council. Mr. Marriott's
term as a Director of the Company expires
at the 1999 annual meeting of sharehold-
ers.

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* Richard E. Marriott and J. W. Marriott, Jr. are brothers.

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[PHOTO OF R. THEODORE AMMON]

R. Theodore Ammon Mr. Ammon is a private investor and Chair-
Director since man of Big Flower Holdings, Inc. He was
1992 formerly a General Partner of Kohlberg
Age: 49 Kravis Roberts & Company (a New York and
San Francisco-based investment firm) from
1990 to 1992, and was an executive of such
firm prior to 1990. Mr. Ammon is also the
Chairman of the Board of 24/7Media, Inc.
and serves on numerous boards of privately
held companies. In addition, he is in-
volved in a number of not-for-profit orga-
nizations, including as a member of the
Board of Directors of The Municipal Art
Society of New York, The New York YMCA and
Jazz @ Lincoln Center, and of the Board of
Trustees of Bucknell University. Mr.
Ammon's term as a Director of the Company
expires at the 2001 annual meeting of
shareholders.

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[PHOTO OF ROBERT M. BAYLIS]

Robert M. Baylis Mr. Baylis is a Director of The Interna-
Director since tional Forum, an executive education pro-
1996 gram of the Wharton School of the Univer-
Age: 60 sity of Pennsylvania. He was formerly Vice
Chairman of CS First Boston. Mr. Baylis
also serves as a Director of New York Life
Insurance Company, Covance, Inc. and
Gildan Activewear, Inc. In addition, he is
an overseer of the University of Pennsyl-
vania Museum of Archeology and Anthropolo-
gy. Mr. Baylis's term as a Director of the
Company expires at the 2000 annual meeting
of shareholders.

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[PHOTO TERENCE C. GOLDEN]

Terence C. Golden Mr. Golden is President and Chief Execu-
President and tive Officer of the Company. He also
Chief Executive serves as Chairman of Bailey Realty Corpo-
Officer ration and Bailey Capital Corporation and
Director since 1995 various affiliated companies. In addition,
Age: 54 Mr. Golden is a Director of Prime Retail,
Inc., Cousins Properties, Inc., Potomac
Electric Power Company, The Morris and
Gwendolyn Cafritz Foundation and the Dis-
trict of Columbia Early Childhood Collabo-
rative. He is also a member of the Execu-
tive Committee of the Federal City Coun-
cil. Mr. Golden's term as a Director of
the Company expires at the 2000 annual
meeting of shareholders. For additional
information on Mr. Golden, see "Executive
Officers" below.

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[PHOTO ANN DORE MCLAUGHLIN]

Ann Dore Ms. McLaughlin is Chairman of the Aspen
McLaughlin Institute. She formerly served as Presi-
Director since dent of the Federal City Council from 1990
1993 until 1995. Ms. McLaughlin has served with
Age: 57 distinction in several United States Ad-
ministrations in such positions as Secre-
tary of Labor and Under Secretary of the
Department of the Interior. She also
serves as a Director of AMR Corporation,
Fannie Mae, General Motors Corporation,
Kellogg Company, Nordstrom, Inc., Union
Camp Corporation, Donna Karan Internation-
al, Inc., Vulcan Materials Company and
Harman International Industries, Inc. Ms.
McLaughlin's term as Director of the Com-
pany expires at the 2000 annual meeting of
shareholders.

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[PHOTO JOHN G. SCHREIBER]

John G. Schreiber Mr. Schreiber is President of Schreiber
Director since Investments, Inc. and a senior advisor and
1998 partner of Blackstone Real Estate Advisors
Age: 52 L.P., an affiliate of The Blackstone Group
L.P. He serves as a Trustee of AMLI Resi-
dential Properties Trust and as a Director
of Urban Shopping Centers, Inc., JMB Re-
alty Corporation, The Brickman Group, Ltd.
and a number of mutual funds advised by T.
Rowe Price Associates, Inc. Prior to his
retirement as an officer of JMB Realty
Corporation in 1990, Mr. Schreiber was
Chairman and Chief Executive Officer of
JMB/Urban Development Company and an Exec-
utive Vice President of JMB Realty Corpo-
ration. Mr. Schreiber's term as Director
of the Company expires at the 1999 annual
meeting of shareholders.

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[PHOTO HARRY L. VINCENT, JR.]

Harry L. Vincent, Mr. Vincent is a retired Vice Chairman of
Jr. Booz-Allen & Hamilton, Inc. He also served
Director since 1969 as a Director of Signet Banking Corpora-
Age: 79 tion from 1973 until 1989. Mr. Vincent's
term as Director of the Company expires at
the 1999 annual meeting of shareholders.

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PRINCIPAL SHAREHOLDERS

Set forth below is the beneficial ownership as of March 29, 1999 of Company
Common Stock and of units of limited partner interest in Host Marriott, L.P.
("OP Units") by each Director of the Company, each nominee, each executive
officer named in the Summary Compensation Table (Table I) included elsewhere
in this Proxy Statement, and by all Directors and executive officers of the
Company as a group, and, to the best of the Company's knowledge, by beneficial
owners of 5% or more of Company Common Stock or OP Units. Information with
respect to ownership of OP Units is included in the following table because
the OP Units are redeemable for shares of Company Common Stock.

<TABLE>
<CAPTION>
% of All
Number of % of Shares % of Company Company
Shares of Company of Company Number of % of Common Stock Common Stock
Name Common Stock Common Stock(1) OP Units OP Units(2) and OP Units(3) and All OP Units(4)
- ---- ----------------- --------------- ---------- ----------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Directors:
R. Theodore Ammon(5). 17,455 * 0 * * *
Robert M. Baylis(5).. 24,307 * 0 * * *
Terence C. Golden(6). 1,333,970 0.59 0 * 0.59 0.46
J.W. Marriott,
Jr.(6)(7)(8)........ 13,017,492 5.72 17,055 0.03 5.73 4.46
Richard E.
Marriott(6)(8)(9)... 13,788,787 6.06 14,402 0.02 6.07 4.73
Ann Dore
McLaughlin(5)....... 11,263 * 0 * * *
John G.
Schreiber(5)(10).... 898 * 36,855,538 57.07 13.94 12.62
Harry L. Vincent,
Jr.(5).............. 30,063 0.01 0 * 0.01 0.01

Non-Director
Executive Officers:
Christopher J.
Nassetta(6)......... 733,229 0.32 0 * 0.32 0.25
Robert E. Parsons,
Jr.(6).............. 676,662 0.30 0 * 0.30 0.23
Christopher G.
Townsend(6)......... 216,999 0.09 0 * 0.09 0.07

All Directors and
Executive Officers
as a group
(12 persons,
including the
foregoing)(6)(11)... 25,652,245 11.27 36,886,995 57.12 23.65 21.41

Certain Beneficial
Owners:
Blackstone
Entities(12)........ 0 * 43,778,760 67.79 16.14 14.99
FMR Corp.(13)........ 12,587,900 5.53 0 * 5.53 4.31
Harris Associates,
L.P.(14)............ 11,452,190 5.03 0 * 5.03 3.92
Southeastern Asset
Management,
Inc.(15)............ 40,249,200 17.69 0 * 17.69 13.78
</TABLE>
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* Reflects ownership of less than l/l00th of 1%.
(1) Any descriptions of ownership or aggregations of ownership of Company
Common Stock within this Proxy Statement are based upon the disclosure
requirements of the federal securities laws, and are not an indication of
ownership of Company Common Stock under the Internal Revenue Code of
1986. as amended, or for purposes of the ownership limitations set forth
in the Company's Articles of Incorporation.
(2) Represents the number of OP Units held by the named person or entity as a
percentage of the total number of OP Units held by persons or entities
other than the Company and its subsidiaries (64,578,687 OP Units). As of
March 29, 1999, the Company and its subsidiaries held an aggregate of
227,520,088 OP Units, but such OP Units do not figure into any of the to-
tals or calculations used in this table.
(3) Assumes that all OP Units held by the named person or entity are redeemed
for shares of Company Common Stock on a one-for-one basis, but that none
of the OP Units held by other persons or entities are redeemed for shares
of Company Common Stock.
(4) Assumes that all outstanding OP Units held by persons or entities other
than the Company and its subsidiaries are redeemed for shares of Company
Common Stock on a one-for-one basis, which would bring the total number
of shares of Company Common Stock to 292,098,775 when added to the number
of shares of Company Common Stock outstanding as of March 29, 1999.
(5) The number of shares of Company Common Stock includes the deferred shares
awarded annually to non-employee Directors under the Company's Non-Em-
ployee Directors' Deferred Stock Compensation Plan and, for Mr. Ammon,
Mr. Baylis, Ms. McLaughlin and Mr. Vincent, the special one-time award of
deferred shares under such plan in 1997.
(6) Includes (i) the shares of restricted stock granted under the Company's
1993 and 1997 Comprehensive Stock Incentive Plans, which are voted by the
holder thereof, and (ii) the following number of shares which could be
acquired by the named persons through the exercise of stock options
within 60 days of March 29, 1999: for J.W. Marriott, Jr., 209,508 shares;
for Mr. Parsons, 18,229 shares; for Mr. Townsend, 6,676 shares; and for
all Directors and executive

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officers as a group, 260,573 shares. For additional information, see Tables
I and II under the caption "Executive Officer Compensation." Does not in-
clude any other shares reserved, contingently vested or awarded under the
above-named plans.
(7) Includes: (i) 2,046,181 shares held in trust for which J.W. Marriott, Jr.
is the trustee or a co-trustee; (ii) 68,426 shares held by the wife of
J.W. Marriott, Jr.; (iii) 765,847 shares held in trust for which the wife
of J.W. Marriott, Jr. is the trustee or a co-trustee; (iv) 2,665,091
shares held by the J. Willard and Alice S. Marriott Foundation of which
J.W. Marriott, Jr. is a co-trustee; (v) 2,707,590 shares held by a lim-
ited partnership whose general partner is a corporation of which J.W.
Marriott, Jr. is the controlling shareholder; and (vi) 80,000 shares held
by a limited partnership whose general partner is J.W. Marriott, Jr. Does
not include shares held by the adult children of J.W. Marriott, Jr.; J.W.
Marriott, Jr. disclaims beneficial ownership of all such shares.
(8) J.W. Marriott, Jr., Richard E. Marriott, their mother Alice S. Marriott
and other members of the Marriott family and various trusts established
by members of the Marriott family owned beneficially an aggregate of
25,201,621 shares, or 11.08% of the total shares outstanding of Company
Common Stock, as of March 29, 1999.
(9) Includes: (i) 1,903,440 shares held in trust for which Richard E.
Marriott is the trustee or a co-trustee; (ii) 74,154 shares held by the
wife of Richard E. Marriott; (iii) 603,828 shares held in trust for which
the wife of Richard E. Marriott is the trustee or a co-trustee; (iv)
2,665,091 shares held by the J. Willard and Alice S. Marriott Foundation
of which Richard E. Marriott is a co-trustee; and (v) 2,503,066 shares
held by a corporation of which Richard E. Marriott is the controlling
shareholder. Does not include shares held by the adult children of Rich-
ard E. Marriott; Richard E. Marriott disclaims beneficial ownership of
all such shares.
(10) With respect to the calculations regarding OP Units, the listed figures
represent the number of OP Units deemed beneficially owned by Mr. Schrei-
ber as the result of his sharing dispositive power over such OP Units
which are held by several of the Blackstone Entities (as defined in foot-
note 12 below). Mr. Schreiber has reported in a Schedule 13D under the
Exchange Act, filed with the Commission, shared dispositive power over
34,768,246 OP Units and no voting power over any of the OP Units. Addi-
tional OP Units were issued to the Blackstone Entities following the fil-
ing of the Schedule 13D by the Blackstone Entities and Mr. Schreiber, and
the number of OP Units listed in the table as being beneficially owned by
Mr. Schreiber reflects the adjustment made to the OP Units over which he
had reported shared dispositive power. The OP Units which are listed in
the table as being beneficially owned by Mr. Schreiber are also included
in the total and calculations for the Blackstone Entities elsewhere in
the table.
(11) Includes the total number of shares held by trusts for which both J.W.
Marriott, Jr. and Richard E. Marriott are co-trustees. Beneficial owner-
ship of such shares is attributable to each of J.W. Marriott, Jr. and
Richard E. Marriott in the table above under the Director subheading, but
such shares are included only once in reporting the total number of
shares owned by all Directors and executive officers as a group. All Di-
rectors and executive officers as a group (other than members of the
Marriott family) owned beneficially an aggregate of 3,154,808 shares, or
1.39% of the total shares outstanding of Company Common Stock as of March
29, 1999. In addition, the Company's Retirement and Savings Plan owned
83,456 shares, or 0.04% of the total shares outstanding of Company Common
Stock as of March 29, 1999.
(12) The Blackstone Entities constitute The Blackstone Group L.P. and a series
of partnerships, persons and other entities affiliated with Blackstone
Real Estate Associates. The Blackstone Entities, as a group, have re-
ported in a Schedule 13D under the Exchange Act, filed with the Commis-
sion, beneficial ownership of an aggregate of 40,463,844 OP Units, with
varying levels of dispositive power and voting power over such OP Units
depending upon the partnership, person or entity involved. Additional OP
Units were issued to the Blackstone Entities following the filing of the
Schedule 13D by the Blackstone Entities, and the number of OP Units
listed in the table as being beneficially owned by the Blackstone Enti-
ties includes such additional OP Units. The principal business address of
the Blackstone Entities is 345 Park Avenue, 31st Floor, New York, New
York 10154.
(13) Represents shares of Company Common Stock held by FMR Corp. ("FMR") and
its subsidiary, Fidelity Management & Research Company ("FM&R"), as de-
rived from information that FMR has reported in a Schedule 13G under the
Exchange Act, filed with the Commission. Such Schedule 13G indicates that
FMR, through its control of FM&R and certain investment funds for which
FM&R acts as an investment adviser, has sole power to dispose of
12,587,900 shares of Company Common Stock owned by such investment funds,
including the 12,528,400 shares of Company Common Stock (or 5.51% of the
total shares outstanding of Company Common Stock as of March 29, 1999)
held by the Fidelity Magellan Fund. FMR has no power to vote or direct
the voting of the shares of Company Common Stock owned by the investment
funds, which power resides with the Board of Trustees of such investment
funds. The Schedule 13G filed by FMR also indicates that its investment
funds own an aggregate of 893,600 shares of the Company's convertible
preferred securities, which would be convertible under certain circum-
stances into 2,677,045 shares of Company Common Stock. The principal
business address for FMR and FM&R is 82 Devonshire Street, Boston, Massa-
chusetts 02109-3614.
(14) Represents shares of Company Common Stock held by Harris Associates L.P.
and Harris Associates, Inc., its general partner (collectively, "Har-
ris"). Harris has reported in a Schedule 13G under the Exchange Act,
filed with the Commission, sole dispositive power over 7,499,990 shares
and shared dispositive power over 3,952,200 shares. Of these shares, Har-
ris has reported no sole voting power over any of the shares and shared
voting power over all 11,452,190 shares. The principal business address
of Harris is Two North LaSalle Street, Suite 500, Chicago, Illinois
60602-3790.
(15) Represents shares of Company Common Stock held by Southeastern Asset Man-
agement, Inc. ("Southeastern"), which acts as an investment adviser for
certain investment funds. Southeastern has reported in a Schedule 13G un-
der the Exchange Act, filed with the Commission, sole dispositive power
over 23,956,200 shares, shared dispositive power over 16,234,000 shares
and no dispositive power over 59,000 shares. Of these shares, Southeast-
ern has reported sole voting power over 19,876,600 shares, shared voting
power over 16,234,000 shares and no voting power over 4,138,600 shares.
The principal business address of Southeastern is 6410 Poplar Avenue,
Suite 900, Memphis, Tennessee 38119.

7
<PAGE>

THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

Presently, the Board of Directors is composed of eight members, six of whom
are not officers or employees of the Company. The Board met eleven times in
1998. Each Director attended 75% or more of the meetings held during 1998 for
the period during which he or she was a Director.

The Board has adopted three standing committees: (i) Audit, (ii) Compensation
Policy and (iii) Nominating and Corporate Governance. The Audit Committee is
composed of five Directors who are not employees of the Company, namely, R.
Theodore Ammon (Chair), Harry L. Vincent, Jr., Ann Dore McLaughlin, Robert M.
Baylis and John G. Schreiber. The Audit Committee meets at least three times a
year with the independent auditors, management representatives and internal
auditors; recommends to the Board of Directors appointment of independent au-
ditors; approves the scope of audits and other services to be performed by the
independent and internal auditors; considers whether the performance of any
professional service by the auditors other than services provided in connec-
tion with the audit function could impair the independence of the outside au-
ditors; and reviews the results of internal and external audits, the account-
ing principles applied in financial reporting, and financial and operational
controls. The independent auditors and internal auditors have unrestricted ac-
cess to the Audit Committee and vice versa. The Audit Committee met five times
in 1998. Each member attended 75% or more of the meetings held in 1998 for the
period during which he or she was a Director. No membership changes are con-
templated for 1999.

The Compensation Policy Committee is composed of six Directors who are not em-
ployees of the Company, namely, Harry L. Vincent, Jr. (Chair), R. Theodore
Ammon, Robert M. Baylis, J.W. Marriott, Jr., Ann Dore McLaughlin and John G.
Schreiber. The Compensation Policy Committee's functions include recommenda-
tions on policies and procedures relating to senior officers' compensation and
various employee stock plans, and approval of individual salary adjustments
and stock awards in those areas. The Compensation Policy Committee met ten
times in 1998, and a subcommittee of the Compensation Policy Committee met two
times in 1998. Each member attended 75% or more of the meetings held in 1998
for the period during which he or she was a Director. No membership changes
are contemplated for 1999.

The Nominating and Corporate Governance Committee is composed of six Directors
who are not employees of the Company, namely, Ann Dore McLaughlin (Chair),
Harry L. Vincent, Jr., R. Theodore Ammon, Robert M. Baylis, J.W. Marriott, Jr.
and John G. Schreiber. It considers candidates for election as Directors and
is responsible for keeping abreast of and making recommendations with respect
to corporate governance in general. In addition, the Nominating and Corporate
Governance Committee fulfills an advisory function with respect to a range of
matters affecting the Board of Directors and its Committees, including the
making of recommendations with respect to qualifications of Director candi-
dates, compensation of Directors, the selection of committee chairs, committee
assignments and related matters affecting the functioning of the Board. The
Nominating and Corporate Governance Committee met eight times in 1998. Each
member attended 75% or more of the meetings held in 1998 for the period during
which he or she was a Director. No membership changes are contemplated for
1999.

COMPENSATION OF DIRECTORS

Directors who are also officers of the Company receive no additional compensa-
tion

8
<PAGE>

for their services as Directors. Directors who are not officers receive an an-
nual retainer fee of $30,000 as well as an attendance fee of $1,250 for each
shareholders' meeting, meeting of the Board of Directors or meeting of a com-
mittee of the Board of Directors, regardless of the number of meetings held on
a given day. The chair of each committee of the Board of Directors receives an
additional annual retainer fee of $1,000, except for the chair of the Compensa-
tion Policy Committee, Mr. Vincent, who receives an annual retainer fee of
$6,000. (The higher annual retainer fee paid to the chair of the Compensation
Policy Committee relates to his additional duties which include, among other
things, the annual performance appraisal of the chief executive officer on be-
half of the Board, although the final performance appraisal is determined by
the Board.) Any individual Director receiving these fees may elect to defer
payment of all or any portion of such fees pursuant to the Company's Executive
Deferred Compensation Plan and/or the Company's Non-Employee Directors' De-
ferred Stock Compensation Plan. Directors are also reimbursed for travel ex-
penses and other out-of-pocket costs incurred in attending meetings or in vis-
iting Marriott or Ritz-Carlton hotels or other properties controlled by the
Company or by Marriott International, Inc.

In addition, pursuant to the Company's Non-Employee Directors' Deferred Stock
Compensation Plan (the "Non-Employee Directors' Stock Plan"), those Directors
who are not employees of the Company or its affiliates (other than J.W.
Marriott, Jr.) have received an annual award of 750 deferred shares of Company
Common Stock. (Pursuant to the terms of the Non-Employee Directors' Stock Plan,
all awards of deferred shares under the plan have been proportionately adjusted
to reflect the distribution of the common stock of Crestline Capital Corpora-
tion and the special dividend to the Company's shareholders, as further de-
scribed in this Proxy Statement under the heading "The REIT Conversion.") Upon
the proposal of the Company's senior management, the Board has amended the Non-
Employee Directors' Stock Plan to replace the fixed annual award of 750 de-
ferred shares of Company Common Stock with an annual award of deferred shares
having a value equal to the amount of the annual retainer fee paid to Directors
who are not employees of the Company or its affiliates. The Board has also
amended the Non-Employee Directors' Stock Plan to permit participants under the
plan to be credited with dividend equivalents which are equal in value to the
dividends paid with respect to shares of Company Common Stock.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's ex-
ecutive officers and Directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of owner-
ship and changes in ownership with the Securities and Exchange Commission and
the New York Stock Exchange. Specific due dates for these reports have been es-
tablished, and the Company is required to report in this Proxy Statement any
failure to file by these dates. All of these filing requirements were satisfied
by the Company's executive officers and Directors in 1998.

9
<PAGE>

EXECUTIVE OFFICERS

Set forth below is certain information with respect to the persons who are cur-
rently serving as executive officers of the Company.

<TABLE>
<CAPTION>
Business Experience Prior to Becoming
Name and Title Age an Executive Officer of the Company
- -------------- --- -------------------------------------
<S> <C> <C>
Richard E. Marriott 60 Richard E. Marriott joined the Company in 1965 and
Chairman of the Board has served in various executive capacities. In 1979,
Mr. Marriott was elected to the Board of Directors.
In 1984, he was elected Executive Vice President,
and in 1986, he was elected Vice Chairman of the
Board of Directors. In 1993, Mr. Marriott was
elected Chairman of the Board.

Terence C. Golden 54 Terence C. Golden was named President and Chief Ex-
President and Chief ecutive Officer of the Company in 1995. Prior to
Executive Officer joining the Company, Mr. Golden was Chairman of Bai-
ley Realty Corporation and prior to that had served
as Chief Financial Officer of The Oliver Carr Compa-
ny. Before joining The Oliver Carr Company, he
served as Administrator of the General Services Ad-
ministration and as Assistant Secretary of Treasury,
and he was co-founder and national managing partner
of Trammel Crow Residential Companies.

Christopher J. Nassetta 36 Christopher J. Nassetta joined the Company in Octo-
Executive Vice ber 1995 as Executive Vice President and was elected
President and Chief Chief Operating Officer of the Company in 1997.
Operating Officer Prior to joining the Company, Mr. Nassetta served as
President of Bailey Realty Corporation from 1991 un-
til 1995. He had previously served as Chief Develop-
ment Officer and in various other positions with The
Oliver Carr Company from 1984 through 1991.

Robert E. Parsons, Jr. 43 Robert E. Parsons, Jr. joined the Company's Corpo-
Executive Vice rate Financial Planning staff in 1981 and was made
President and Chief Assistant Treasurer in 1988. In 1993, Mr. Parsons
Financial Officer was elected Senior Vice President and Treasurer of
the Company, and in 1995, he was elected Executive
Vice President and Chief Financial Officer of the
Company.

Christopher G. Townsend 51 Christopher G. Townsend joined the Company's Law De-
Senior Vice President, partment in 1982 as a Senior Attorney. In 1984, Mr.
General Counsel and Townsend was made Assistant Secretary of the Compa-
Corporate Secretary ny, and in 1986, he was made Assistant General Coun-
sel. In 1993, Mr. Townsend was elected Senior Vice
President, Corporate Secretary and Deputy General
Counsel. In January 1997, he was elected General
Counsel.

</TABLE>

10
<PAGE>

<TABLE>
<CAPTION>
Business Experience Prior to Becoming
Name and Title Age an Executive Officer of the Company
- -------------- --- -------------------------------------
<S> <C> <C>
Donald D. Olinger 40 Donald D. Olinger joined the Company in 1993 as
Senior Vice President Director--Corporate Accounting. Later in 1993, Mr.
and Corporate Olinger was promoted to Senior Director and Assis-
Controller tant Controller. He was promoted to Vice President--
Corporate Accounting in 1995. In 1996, he was
elected Senior Vice President and Corporate Control-
ler. Prior to joining the Company, Mr. Olinger was
with the public accounting firm of Deloitte & Tou-
che.
</TABLE>

11
<PAGE>

EXECUTIVE OFFICER COMPENSATION

Summary of Compensation

The table below sets forth a summary of the compensation paid by the Company
for the last three fiscal years to the Chief Executive Officer of the Company
and the four additional most highly compensated executive officers of the Com-
pany for the Company's fiscal year 1998.

TABLE I

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Restricted All Other
Other Annual Stock Compen-
Fiscal Salary(1) Bonus(2) Compensation Awards(3)(4) sation(5)
Name and Principal Position Year ($) ($) ($) ($) ($)
- --------------------------- ------ --------- -------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Marriott 1998 290,450 116,180 275,607(6)(7) 2,138,750 23,923
Chairman of the Board 1997 271,449 108,580 212,324(6)(7) 0 22,668
1996 262,951 105,180 223,162(6)(7) 0 21,439

Terence C. Golden 1998 669,782 602,804 67,489(8) 11,800,000 73,051
President and Chief 1997 619,045 557,141 58,783(8) 354,693 66,105
Executive Officer 1996 600,017 480,013 0 10,476,603 560,827(9)

Christopher J. Nassetta 1998 382,563 286,922 0 7,375,000 36,970
Executive Vice President 1997 338,889 254,167 0 0 36,231
and Chief Operating 1996 328,447 263,490 0 3,647,513 119,168(9)
Officer

Robert E. Parsons, Jr. 1998 369,583 277,187 0 6,195,000 36,970
Executive Vice President 1997 338,889 254,167 0 0 36,231
and Chief Financial 1996 328,447 263,490 0 3,658,277 26,273
Officer

Christopher G. Townsend 1998 215,904 118,747 0 1,696,250 19,683
Senior Vice President 1997 202,962 111,629 0 1,015,800 18,405
and General Counsel 1996 186,232 102,428 0 0 15,891
</TABLE>
- --------
(1) Fiscal year 1996 base salary earnings were for 53 weeks. All other fiscal
year base salary earnings were for 52 weeks. Salary amounts include base
salary earned and paid in cash during the fiscal year and the amount of
base salary deferred at the election of the named executive officer under
the Company's Executive Deferred Compensation Plan. An increase in base
salary for the period November 2, 1997 through the end of the fiscal year
was paid in 1998 and reported as 1997 earnings. The 1998 salary includes
a competitive pay adjustment, paid in 1999 but effective as of November
2, 1998 and reported as 1998 earnings, resulting from a compensation
study conducted by an independent consulting firm retained by the Compen-
sation Policy Committee of the Board of Directors (the "Committee").
(2) Bonus includes the amount of cash bonus earned pursuant to the Company's
Performance-Based Annual Incentive Bonus Plan (which was approved by the
shareholders in 1996) and to the named individual's performance-based bo-
nus plan during the fiscal year and either paid subsequent to the end of
each fiscal year or deferred under the Executive Deferred Compensation
Plan.
(3) Restricted Stock. Restricted stock awards are subject to general restric-
tions, such as continued employment, and performance restrictions. Hold-
ers of restricted stock receive dividends and exercise voting rights on
their restricted shares. For the 1998 award (effective in 1999) the named
executive officers have agreed that any cash dividends on the shares of
restricted stock shall, after withholding for or payment of any taxes due
on the dividends, be reinvested in shares of Company Common Stock either
through a dividend reinvestment program or otherwise. Deferred Bonus
Stock. The amount of a deferred bonus stock award generally equals 20
percent of each individual's annual cash bonus award, based on the stock
price on the last trading day for the fiscal year. Holders of deferred
bonus stock awards do not receive dividends or exercise voting rights on
their deferred bonus stock until such stock has been distributed to them.
The recipient can designate an award as current, which is distributed in
10 annual installments beginning one year after the award is granted, or
deferred, which is distributed in a lump sum or in up to 10 annual in-
stallments following termination of employment. Deferred bonus stock
awards contingently vest in 10 equal annual installments beginning one
year after the award is granted.

12
<PAGE>

(4) In late 1998, the Committee approved the grant of restricted stock to
certain key employees of the Company, including the Chief Executive Offi-
cer and the four additional most highly compensated executive officers,
which became effective in 1999 and vests over a three-year period (the
"1998 Award"). Under the terms of the 1998 Award, restricted shares
granted in previous years which would have vested for time and perfor-
mance periods beginning on and after January 1, 1999, and for Mr.
Marriott ending before January 1, 2002, were forfeited and replaced by
the 1998 Award. The 1998 Award reflects the dollar value of the re-
stricted shares at the date of grant without adjustments for any shares
granted in previous years that were forfeited and replaced. Seventy per-
cent of the shares under the 1998 Award have performance restrictions and
thirty percent have general restrictions conditioned upon continued em-
ployment. The performance criteria are based upon the measurement of the
Company's annual stock performance (Shareholder Return Performance) and
the relative performance of the Company stock measured against a pub-
lished peer index (Relative Performance), subject to approval by the Com-
mittee. For shares awarded during 1996 and 1997, sixty percent of the
shares awarded to each executive officer had annual performance restric-
tions, and forty percent of the shares awarded had general restrictions
conditioned upon continued employment. The total number of restricted or
deferred shares held by each named executive officer as of the end of the
1998 fiscal year (exclusive of the 1998 Award itself, but inclusive of
the shares forfeited in connection with the 1998 Award), and the aggre-
gate value of these shares is as follows:

<TABLE>
<CAPTION>
Named Executive Restricted Stock Deferred Bonus Stock Aggregate Value at 12/31/98
--------------- ---------------- -------------------- ---------------------------
<S> <C> <C> <C>
Mr.
Marriott 240,000 0 $3,277,440
Mr.
Golden 549,020 0 $7,497,417
Mr.
Nassetta 292,475 0 $3,994,039
Mr.
Parsons 308,754 3,666 $4,291,522
Mr.
Townsend 60,000 3,652 $1,180,503
</TABLE>

The following chart shows (i) the total number of restricted shares granted
in the 1998 Award, (ii) the total number of restricted shares previously
granted which were forfeited as a condition of receiving the 1998 Award,
and (iii) the total number of restricted shares granted in the 1998 Award
as adjusted to reflect the initial earnings and profits dividend made pur-
suant to the conversion of the Company into a real estate investment trust
(including the spin-off of Crestline Capital Corporation):

<TABLE>
<CAPTION>
1998 Restricted Stock Previous Restricted 1998 Restricted Stock
Named Executive Awards (before adjustment) Stock Awards Forfeited Awards (as adjusted)
--------------- -------------------------- ---------------------- ---------------------
<S> <C> <C> <C>
Mr.
Marriott 145,000 120,000 150,176
Mr.
Golden 800,000 345,128 895,151
Mr.
Nassetta 500,000 121,255 578,414
Mr.
Parsons 420,000 130,986 479,837
Mr.
Townsend 115,000 18,667 134,945
</TABLE>

(5) This column represents Company matching contributions made under the
Company's Retirement and Savings Plan and Executive Deferred Compensation
Plan for fiscal year 1998, as follows:

<TABLE>
<CAPTION>
Retirement and Executive Deferred
Named Executive Savings Plan Compensation Plan
--------------- -------------- ------------------
<S> <C> <C>
Mr. Marriott $9,600 $14,324
Mr. Golden $9,600 $63,451
Mr. Nassetta $9,600 $27,370
Mr. Parsons $9,600 $27,370
Mr. Townsend $9,600 $10,083
</TABLE>

(6) Effective beginning in 1996, Mr. Marriott waived (i) payments due to be
made to him under the Executive Deferred Compensation Plan following his
retirement and (ii) Company Common Stock due to be distributed to him un-
der the Company's 1993 Comprehensive Stock Incentive Plan (the "1993
Stock Incentive Plan") following his retirement as an officer of the Com-
pany. The payments and stock distributions that were waived were dis-
closed in earlier proxy statements of the Company. In connection with
this waiver, the Company entered into an arrangement to purchase life in-
surance policies for the benefit of a trust established by Mr. Marriott.
The cost of the life insurance policies to the Company has been actuari-
ally determined and will not exceed the projected after-tax cost the Com-
pany expected to incur in connection with the payments under the Execu-
tive Deferred Compensation Plan and the stock distributions under the
1993 Stock Incentive Plan that were waived by Mr. Marriott.
(7) Amount also includes $97,000, $92,000, and $86,700 in 1998, 1997 and
1996, respectively, for the allocation of Company personnel costs for
non-Company business, and $133,626, $101,535 and $108,194 in 1998, 1997
and 1996, respectively, for additional cash compensation to cover taxes
payable for all other compensation in this column.
(8) Amount represents reimbursement of travel expenses of Mr. Golden's spouse
when she accompanies him on Company business trips, plus additional cash
compensation to cover taxes payable for such reimbursement.
(9) As part of their restricted stock agreements with the Company, Mr. Golden
and Mr. Nassetta were awarded 44,910 and 8,421 shares of Company Common
Stock, respectively, on February 1, 1996. The value of the shares on the
date of grant was $516,465 for Mr. Golden and $96,842 for Mr. Nassetta.

13
<PAGE>

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

The table below sets forth information as of December 31, 1998 concerning the
issuance of stock appreciation rights ("SARs") in the last fiscal year. Effec-
tive as of December 29, 1998, the Company entered into an issuance agreement
with Mr. R.E. Marriott pursuant to which all of his outstanding options for
Company Common Stock were canceled and replaced with SARs on equivalent eco-
nomic terms. The Company did not grant any other options or SARs to the named
executive officers listed on the Executive Compensation table above in fiscal
year 1998.

TABLE II

SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
Potential Realizable Value
Number of Percentage of at Assumed Annual Rates
Securities Total SARs of Stock Price Appreciation
Underlying Granted to Exercise or Market Price for SAR Term ($)
SARs Employees in Base Price on Grant Expiration ---------------------------
Name Granted(1) Fiscal Year(%) ($) Date($) Date 0%(2) 5% 10%
- ---- ---------- -------------- ----------- ------------ ---------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R.E. Marriott 29,930 45.7 1.1990 13.6560 10/12/2005 372,838 533,227 744,731
R.E. Marriott 19,395 27.8 2.2075 13.6560 10/03/2006 222,044 340,870 512,347
R.E. Marriott 17,360 26.5 2.7070 13.6560 10/20/2007 190,075 311,565 501,976
------ ----- ------- --------- ---------
Total 66,685 100.0 784,957 1,185,662 1,759,054
</TABLE>
- --------
(1) The SARs listed in this table replace options previously granted and re-
ported in the amounts of 25,000, 16,200 and 14,500, respectively, which
were canceled pursuant to the issuance agreement described above. The
number of SARs has been adjusted to reflect the distribution of all of
the outstanding common stock of Crestline Capital Corporation and the re-
mainder of the earnings and profits dividend in connection with the REIT
Conversion.
(2) For years prior to this year's conversion of Mr. Marriott's outstanding
stock options to SARs, these amounts were reported as Exercisable under
the "Value of Unexercised In-the-Money Options" on the Aggregated Stock
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Table (see Table III).

14
<PAGE>

Aggregated Stock Option Exercises and Year-End Value

The table below sets forth, on an aggregated basis, (1) information regarding
the exercise during fiscal year 1998 of options to purchase Company Common
Stock (and shares of common stock of other companies which the Company has
previously spun off) by each of the named executive officers listed on the Ex-
ecutive Compensation table above, and (2) the value on December 31, 1998 of
all unexercised options held by such individuals. Terence C. Golden and Chris-
topher J. Nassetta do not have any options to purchase stock in any of the
companies listed in the following table.

TABLE III

AGGREGATED STOCK OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year End(2) Fiscal Year End(3)
(#) ($)
---------------------------------- -------------------------
Shares
Acquired Value
on Exercise Realized
Name Company(1) (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ---------- ----------- -------- ---------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
R.E. Marriott HM 0 0 0 0 0 0
HMS 0 0 11,140 0 100,223 0
MI 0 0 122,634 0 3,008,980 0
TOTAL 0 0 133,525 0 3,109,203 0

R.E. Parsons, Jr. HM 5,000 75,853 18,229 0 197,022 0
HMS 1,000 11,667 3,045 0 25,299 0
MI 1,625 104,877 0 0 0 0
TOTAL 7,625 192,397 21,274 0 222,321 0

C.G. Townsend HM 0 0 8,353 0 90,816 0
HMS 1,395 15,927 0 0 0 0
MI 0 0 0 0 0 0
TOTAL 1,395 15,927 8,353 0 90,816 0
</TABLE>
- --------
(1) "HM" represents options to purchase Company Common Stock. "HMS" represents
options to purchase Host Marriott Services Corporation ("HM Services")
common stock. "MI" represents options to purchase Marriott International,
Inc. ("Marriott International") common stock.
(2) The number and terms of these options reflect several adjustments made as
a result of the spin-off of Marriott International from the Company in Oc-
tober 1993; the spin-off of HM Services from the Company in December 1995;
the spin-off of Marriott International from Sodexho Marriott Services Cor-
poration in March 1998; and the conversion of the Company into a real es-
tate investment trust (and the related spin-off of Crestline Capital Cor-
poration) in December 1998, each in accordance with the applicable em-
ployee benefit plans covering those options. These adjustments preserved,
but did not increase or decrease, the economic value of the options.
(3) Based on a per share price for Company Common Stock of $13.656, a per
share price for HM Services common stock of $10.344, and a per share price
for Marriott International common stock of $29.5940. These prices reflect
the average of the high and low trading prices on the New York Stock Ex-
change on December 31, 1998.

15
<PAGE>

Employment Arrangements

Certain of the terms and conditions of employment of Messrs. Golden, Nassetta,
Parsons and Townsend, are governed by a written "Key Executives/Termination of
Employment" policy. The policy provides a basic framework to govern the termi-
nation of employment under specific circumstances. This policy is not a binding
contract and can be changed by the Company unilaterally at any time. The terms
of the policy are subject to the approval of the Board of Directors or the
Chief Executive Officer/President, as applicable.

Certain of the terms and conditions of Mr. Golden's employment are also gov-
erned by a written employment agreement which provides for an annual salary of
$575,000, which was increased to $653,000 for 1998. Under the agreement, in the
event of a "termination event" (defined as the significant reduction in Mr.
Golden's responsibilities, a requirement to relocate, a change in control, a
change in his responsibility to the Company's Chairman or his failure to re-
ceive a bonus equal to at least half of the maximum bonus available to be
earned for a particular year), Mr. Golden will receive a payment equal to one
year's salary and an amount equal to the maximum bonus that could have been
earned for the year in which such termination event occurs, and the restric-
tions will be lifted on all remaining restricted stock held by Mr. Golden. If
terminated without cause, Mr. Golden will receive one year's salary and bonus
and the restrictions will be lifted on the restricted stock that is not subject
to performance goals. In the event of termination for cause or resignation, Mr.
Golden will receive no termination payment and restricted stock will be can-
celed.

1998 Employee Benefits Allocation Agreement

As part of the conversion of the Company into a real estate investment trust,
the Company, Host Marriott, L.P. (the "Operating Partnership") and Crestline
Capital Corporation ("Crestline") entered into an Employee Benefits and Other
Employment Matters Allocation Agreement (the "Allocation Agreement") which gov-
erns the allocation of responsibilities with respect to various compensation,
benefits and labor matters. Under the Allocation Agreement, Crestline assumed
from the Company certain liabilities relating to covered benefits and labor
matters with respect to individuals who were employed by the Company or its af-
filiates before they became employed by Crestline or its affiliates, and the
Operating Partnership assumed certain other liabilities relating to employee
benefits and labor matters. The Allocation Agreement also governs the treatment
of awards under the Host Marriott Corporation 1997 Comprehensive Stock Incen-
tive Plan (the "Comprehensive Stock Incentive Plan"), as part of the Company's
conversion into a REIT. The Allocation Agreement required Crestline to estab-
lish the Crestline Capital Corporation 1998 Comprehensive Stock Incentive Plan
to grant awards of Crestline common stock. Additionally, the Allocation Agree-
ment provided that the Operating Partnership adopt the Comprehensive Stock In-
centive Plan.

16
<PAGE>

REPORT ON EXECUTIVE COMPENSATION

To Our Shareholders

The Compensation Policy Committee of the Board of Directors is charged with
overseeing and administering the executive pay program for the Company on be-
half of the Board and, by extension, the Company's shareholders. This report
provides details and background information regarding that program.

The Committee

The Compensation Policy Committee, composed of six independent members of the
Board of Directors, approves the executive compensation programs and policies
of the Company, sets performance targets and evaluates the performance of the
Company and its senior management. The Committee met ten times during the
year.

Goals of the Program

The Committee has established three primary objectives for the executive com-
pensation program:

. To provide annual and long-term incentives that emphasize performance-based
compensation dependent upon achieving corporate and individual performance
goals;

. To foster a strong relationship between shareholder value and executive
compensation programs and rewards by having a significant portion of com-
pensation comprised of equity-based incentives; and

. To provide overall levels of compensation that are competitive, and to pro-
vide the means to attract, retain and motivate highly qualified executives.

Competitiveness Targets

To establish compensation targets, the Committee uses data from independent
consultants that reflect the median compensation practices at a large group of
general industry, lodging and real estate companies.

These surveys contain a broader group of companies than the comparison group
used in the performance graph because the Committee believes that targeting
compensation at a diverse group of companies more appropriately reflects the
labor market for Company executives. With respect to base salary and annual
incentive levels, the Committee reviews the data provided by these surveys
with a focus on the median level of compensation. The Committee then makes de-
cisions on compensation actions for individual executives based on competitive
levels of compensation and the need to retain an experienced and effective
management team. Consistent with the philosophy of aligning shareholder value
with executive compensation, long-term incentive awards represent a substan-
tial portion of the total pay package for executive officers and are targeted
at levels higher than the median for achievement of outstanding business per-
formance as determined by the Committee.

Base Salary

The Committee regularly reviews each senior executive's base salary and ap-
proves the assignment of each senior executive to a salary grade. Actual base
salaries fall in a range around the midpoint, based on tenure, experience and
individual performance. Increases to base salary are primarily driven by indi-
vidual performance and the salary increase guidelines established by the Com-
pany. There are no specific weightings that are applied to the factors consid-
ered by the Committee in arriving at base salary actions.

Stock Incentives

The Company provides long-term incentives through its Comprehensive Stock In-
centive

17
<PAGE>

Plan, under which restricted stock, stock options, deferred stock awards and
other stock-based awards are permitted. The Committee believes that manage-
ment's interest should be aligned with that of the shareholders, and that stock
ownership is an efficient and effective way to accomplish this goal.

Compensation of the Chief Executive Officer and other Executive Officers

Base Salary

Mr. Golden received a salary adjustment in late November 1998 as a result of a
compensation study that was conducted by an independent compensation consulting
firm for the Committee. His salary was adjusted from $653,000 to $750,000. This
salary is at the median for the survey group. The salaries for Mr. Marriott,
Mr. Nassetta, Mr. Parsons and Mr. Townsend were also adjusted based upon re-
sults of the same compensation study.

Annual Incentive Awards

Mr. Golden received a bonus award for 1998 of $602,804, or 90% of fiscal year
base salary earnings under the Performance-Based Annual Incentive Bonus Plan
and pursuant to the performance criteria which the Committee set for Mr. Golden
to achieve for 1998. The other named executive officers received bonus payments
for 1998 ranging from 40% to 75% of salary. The Committee considered the
Company's financial performance and other objective individual criteria in mak-
ing the awards from the bonus pool.

Impact of Internal Revenue Code Section 162(m)

In 1993, provisions were added to the Internal Revenue Code that limit the tax
deduction for compensation expense in excess of $1,000,000 a year for each of
the five highest paid executive officers. However, performance-based compensa-
tion can be excluded from the determination of compensation expense so long as
it meets certain requirements. The Committee's policy is to qualify as much of
executive compensation programs for the performance-based exclusion as is pos-
sible.

The Committee, the Board of Directors and the Company's shareholders approved
the 1997 Comprehensive Stock Incentive Plan, which includes provisions that put
the Plan into compliance with Section 162(m) of the Internal Revenue Code.
Stock grants made pursuant to the 1997 Comprehensive Stock Incentive Plan may
qualify, if so determined by the Committee, as exempt compensation under Sec-
tion 162(m), which would permit the maximum tax benefit to the Company. The
performance-based restricted stock awards have annual measures and goals which
allow them to qualify as performance-based compensation under Section 162(m).
The annual cash incentive awards made under the Performance-Based Annual Incen-
tive Bonus Plan also qualify as performance-based compensation under Section
162(m) of the Internal Revenue Code. (The Committee has approved an amendment
to the 1997 Comprehensive Stock Incentive Plan, subject to shareholder ratifi-
cation, which would consolidate the performance-based cash incentive awards un-
der the 1997 Comprehensive Stock Incentive Plan, at which point the Plan would
be renamed the 1997 Comprehensive Stock and Cash Incentive Plan and the sepa-
rate Performance-Based Annual Incentive Bonus Plan would be discontinued. See
"Proposal Four: Ratification of Amendments to the 1997 Comprehensive Stock In-
centive Plan" elsewhere in this Proxy Statement.)

The Committee believes that it is appropriate to consider the tax implications
of the

18
<PAGE>

Company's compensation plans, but the Committee does not believe it is neces-
sarily in the best interest of the Company and its shareholders that all plans
meet the requirements of Section 162(m) for deductibility. Accordingly, the
Committee anticipates that the Company may lose or defer deductions in future
years with respect to vesting of the time-based restricted stock grants or
other awards.

Restricted Stock

Restricted stock is the primary long-term incentive vehicle for senior execu-
tives. Its purpose is to provide an incentive to senior executives to manage
the Company in a manner that creates significant long-term value for sharehold-
ers. The 1997 Comprehensive Stock Incentive Plan permits the Committee to make
awards with either restrictions relating to continued employment ("time-based"
awards) or awards with performance restrictions established by the Committee
("performance-based" awards). The Committee emphasizes performance-based
awards.

The performance criteria applicable to the performance-based awards are deter-
mined at the beginning of each year by the Committee. The performance measures
adopted for 1998 were based on the financial performance of the Company in the
areas of total acquisition volume, capital productivity, liquidity and share-
holder return. The performance measures were weighted equally in 1998.

In 1998, the Committee retained the services of an independent outside compen-
sation consulting firm to conduct an executive compensation study (i) to deter-
mine the competitiveness of the Company's total compensation program, (ii) to
further link incentive plans with shareholder interest and (iii) to align com-
pensation plans with the Company's new REIT structure. As part of this study,
new awards of restricted stock were granted in November 1998 (see Table I on
pages 12 and 13 of this Proxy Statement). These awards were conditioned upon
forfeiture of unvested shares awarded in prior years. In compliance with Secu-
rities and Exchange Commission regulations, the Company is reporting this mul-
ti-year (three-year) stock grant and its total (three-year) value at the date
of grant in Table I under the "Restricted Stock Awards" column. This three-year
grant is subject to 70% performance-based criteria and 30% general restrictions
conditioned upon continued employment. The performance criteria are based on
the measurement of the Company's stock performance and the relative performance
of the Company stock measured against a published peer index. The Committee be-
lieves tying the payout of performance shares directly to stock performance
aligns the interests of Company executives with those of shareholders. The
amounts listed in the "Restricted Stock Awards" column in Table I do not mean
that the executives received the shares of restricted stock in 1998.

Summary

The Committee believes that the caliber and motivation of the employees, and
especially their leadership, are critical to the Company's success in a compet-
itive marketplace. Effective and motivational compensation programs are essen-
tial ingredients to success. The Committee believes that the compensation pro-
grams of the Company are effective in serving the Company and its shareholders,
both in the short and long term.

MEMBERS OF THE COMPENSATION POLICY COMMITTEE

Harry L. Vincent, Jr., Chairman
R. Theodore Ammon
Robert M. Baylis
J. W. Marriott, Jr.
Ann Dore McLaughlin
John G. Schreiber

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<PAGE>

PERFORMANCE GRAPH

The following line graph compares the yearly percentage change in the cumula-
tive total shareholder return on the Company's Common Stock against the cumula-
tive total return of the Standard & Poor's Corporation Composite 500 Index (the
"S&P 500") and a peer group index of companies (the "Peer Group") over the pe-
riod of December 31, 1993 through December 31, 1998. The graph assumes an in-
vestment of $100 at the start of this period in the Company's Common Stock and
in each of the indexes, with the reinvestment of all dividends, including (i)
the Company's distribution of Host Marriott Services Corporation common stock
on December 29, 1995 to shareholders, and (ii) the Company's distribution of
Crestline Capital Corporation common stock on December 29, 1998 to sharehold-
ers, each of which is treated as a reinvested special dividend.

The Peer Group index consists of the following companies: Catellus Development
Corp., Hilton Hotels Corp., Hospitality Franchise System, Inc., La Quinta Inns,
Inc., Marriott International, Inc., Red Lion Inns LP, The Rouse Company, and
Del Webb Corp.

Comparisons of Five-Year Cumulative Total
Shareholder Returns

[LINE GRAPH APPEARS HERE]

1993 1994 1995 1996 1997 1998

Host Marriott Corp. $100.00 $105.48 $143.84 $193.53 $237.37 $197.77

S&P 500 Index $100.00 $101.36 $139.32 $171.23 $228.27 $293.38

Peer Group $100.00 $100.03 $126.12 $172.47 $224.25 $146.10

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<PAGE>

THE REIT CONVERSION

As previously noted in the Introduction to this Proxy Statement, the Company is
the successor to the former Host Marriott Corporation, a Delaware corporation,
with which the Company merged on December 29, 1998. The purpose of the merger
was to reincorporate the Company in Maryland. The merger was part of a series
of transactions pursuant to which the Company and its subsidiaries converted
their business operations to qualify as a real estate investment trust or
"REIT" for federal income tax purposes (the "REIT Conversion").

As a result of the REIT Conversion, the Company conducts its business primarily
through Host Marriott, L.P., a Delaware limited partnership (the "Operating
Partnership"). The Company serves as the sole general partner of the Operating
Partnership and also holds the majority of the units of limited partner inter-
est in the Operating Partnership ("OP Units"). As part of the REIT Conversion,
the Company and its subsidiaries contributed substantially all of their assets
to the Operating Partnership and its subsidiaries in exchange for their owner-
ship interests in the Operating Partnership and the assumption by the Operating
Partnership and its subsidiaries of substantially all the liabilities of the
Company and its subsidiaries. In addition, all employees who were employed by
the Company at the time of the REIT Conversion became employees of the Operat-
ing Partnership.

The Company did not contribute to the Operating Partnership (and the Operating
Partnership therefore does not own) certain other assets formerly held by the
Company and its subsidiaries (principally consisting of 31 retirement communi-
ties and controlling interests in the hotel lessees (as described below)). Most
of these assets are owned by Crestline Capital Corporation ("Crestline"), for-
merly a wholly owned subsidiary of the Company. Crestline became a separate
publicly traded company on December 29, 1998, when the Company made certain
taxable distributions to its shareholders, including substantially all of the
shares of common stock of Crestline. In addition, the Company distributed to
its shareholders a special dividend in which they received, for each share of
Company Common Stock they held, either $1.00 in cash or an additional 0.087
share of Company Common Stock, at the election of the shareholder. The aggre-
gate value of the Crestline common stock, Company Common Stock and cash dis-
tributed to the Company's shareholders was approximately $510 million.

Under current federal income tax law, a REIT cannot derive income from the op-
eration of hotels but can derive rental income by leasing hotels. Therefore,
the Operating Partnership and its subsidiaries have leased virtually all of
their hotel properties to certain subsidiaries of Crestline. Generally, there
is a separate Crestline hotel lessee for each hotel property; however, there is
a separate lessee for each group of hotel properties that has a separate mort-
gage financing or has owners in addition to the Operating Partnership and its
subsidiaries. Each of the lessees is a limited liability company or limited
partnership, whose purpose is limited to acting as lessee under an applicable
lease.

The hotel management agreements to which the Company or its subsidiaries were
parties were assigned to the Crestline hotel lessees for the term of the appli-
cable leases. Although the lessees have primary liability under the management
agreements while the leases are in effect, the Operating Partnership retains
primary liability for certain obligations and contingent liability under the
management agreements for all other obligations that the lessees do not per-
form.

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<PAGE>

In connection with the REIT Conversion, the Operating Partnership acquired from
The Blackstone Group L.P. and a series of partnerships, persons and other enti-
ties affiliated with Blackstone Real Estate Associates (together, the
"Blackstone Entities"), ownership of or a controlling interest in 12 upscale
and luxury full-service hotels, a mortgage loan secured by a thirteenth hotel,
and certain other assets (the "Blackstone Acquisition"). As part of the
Blackstone Acquisition, the Operating Partnership also acquired a 25% interest
in Swissotel Management (USA) L.L.C., which in turn was transferred to
Crestline in connection with the distribution of Crestline stock to the
Company's shareholders. In exchange for these assets, the Operating Partnership
issued to the Blackstone Entities approximately 43.8 million OP Units (which
are redeemable for cash or, at the Company's option, shares of Company Common
Stock), assumed debt and made cash payments totaling approximately $920 mil-
lion, and distributed approximately 1.4 million shares of Crestline common
stock and other consideration to the Blackstone Entities.

Prior to the REIT Conversion, the Company and several of its subsidiaries were
the sole general partners of eight publicly traded limited partnerships (to-
gether, the "Public Partnerships") which, in the aggregate, owned or held a
controlling interest in 24 full-service hotels operating under the Marriott
brand. The Operating Partnership acquired these Public Partnerships through
mergers involving its subsidiaries (the "Public Partnership Mergers"). In con-
nection with each such Public Partnership Merger, each limited partner of a
Public Partnership received a number of OP Units equal in value to the greatest
of the appraised value, continuation value or liquidation value of such limited
partner's interest in such Public Partnership. Certain limited partners of such
Public Partnerships elected to exchange OP Units for unsecured notes issued by
the Operating Partnership or for shares of Company Common Stock.

The Operating Partnership also acquired from unaffiliated partners, in exchange
for OP Units, partnership interests in four private partnerships holding lodg-
ing assets in which the Company or a subsidiary held an interest. As a result,
the Operating Partnership owns substantially all of the interests in those
partnerships. The Company obtained the consent of unaffiliated partners in cer-
tain other partnerships holding lodging assets in which the Company or a sub-
sidiary held an interest, where the partners retained their interests, to lease
the hotels owned by such partnerships to a Crestline lessee. The Operating
Partnership remained a partner in such partnerships. In certain other cases,
the Operating Partnership transferred its partnership interests to a non-con-
trolled subsidiary.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Relationship between the Company and Crestline Capital Corporation

As described above, on December 29, 1998, the Company made certain taxable dis-
tributions to its shareholders, including substantially all of the shares of
common stock of Crestline, which was formerly a wholly owned subsidiary of the
Company (the "Crestline Distribution"). At that time, Crestline became a sepa-
rate publicly traded company.

Christopher J. Nassetta, an Executive Vice President and the Chief Operating
Officer of the Company, is a Director of Crestline. Richard E. Marriott, the
Company's Chairman of the Board, and J.W. Marriott, Jr., a Director of the Com-
pany, beneficially own approximately 5.9% and 5.6%, respectively,

22
<PAGE>

of the outstanding shares of common stock of Crestline.

In connection with the Crestline Distribution, the Company and Crestline en-
tered into a Distribution Agreement (the "Crestline Distribution Agreement"),
which provided for, among other things, (i) the distribution of shares of
Crestline to the Company's shareholders in connection with the Crestline Dis-
tribution; (ii) the division between Crestline and the Company of certain as-
sets and liabilities; (iii) the transfer to Crestline of the 25% interest in
Swissotel Management (USA) L.L.C. which the Company acquired from the
Blackstone Entities; (iv) certain other agreements governing the relationship
between Crestline and the Company following the Crestline Distribution.
Crestline also granted the Company contingent right to purchase Crestline's
interest in Swissotel Management (USA) L.L.C. at fair market value in the
event the tax laws are changed so that the Company could own such interest
without jeopardizing its status as a REIT.

Subject to certain exceptions, the Crestline Distribution Agreement also pro-
vided for, among other things, assumptions of liabilities and cross-indemni-
ties designed to allocate to Crestline, effective as of the date of the
Crestline Distribution, financial responsibilities for liabilities arising out
of, or in connection with, the business of the senior living communities.

For the purpose of governing the ongoing relationships between the Company and
Crestline, the Company and Crestline have entered into other agreements. The
Company believes that the agreements are fair to both parties and contain
terms which are generally comparable to those which would have been reached in
arm's-length negotiations with unaffiliated parties. Among such other agree-
ments between the Company and Crestline are:

(i) Hotel Leases. Through the Operating Partnership and its subsidiaries, the
Company entered into leases with subsidiaries of Crestline (the "Hotel
Leases") for 120 full-service hotels. Each Hotel Lease has a fixed term gener-
ally ranging from seven to ten years. Crestline is required to pay (i) a mini-
mum rent specified in each Hotel Lease, plus (ii) to the extent it exceeds the
minimum rent, a percentage rent based upon a specified percentage of aggregate
sales from the hotels in excess of specified thresholds. The amount of minimum
rent and percentage rent thresholds will be increased each year based upon any
increases in CPI and the Employment Cost Index during the previous twelve
months. The Hotel Leases will generally provide for a rent adjustment in the
event of damage, destruction, partial taking or certain capital expenditures.

Crestline is responsible under the Hotel Leases for paying all of the expenses
of operating the hotels, including all personnel costs, utility costs, and
general repair and maintenance of the hotels. In addition, Crestline is re-
sponsible for all fees payable to the hotel manager, including base and incen-
tive management fees, chain services payments and franchise or system fees.
The Company, however, remains responsible for real estate and personal prop-
erty taxes, property casualty insurance, ground lease rent and capital expen-
ditures and for maintaining a reserve fund for furnishings, fixtures and
equipment ("FF&E") replacements.

In the event that the Company disposes of a hotel free and clear of the Hotel
Lease, the Company would have to pay a termination fee equal to the fair mar-
ket value of Crestline's leasehold interest in the remaining term of the Hotel
Lease using a discount rate of 12%. Alternatively, the Com-

23
<PAGE>

pany would be entitled (i) to substitute a comparable hotel for any hotel that
is sold, with the terms agreed to by Crestline, or (ii) to sell the hotel sub-
ject to the Hotel Lease, subject to Crestline's approval under certain circum-
stances, without having to pay a termination fee. In addition, the Company has
the right to terminate up to twelve Hotel Leases, in connection with a sale of
a hotel, without having to pay a termination fee. Conversely, Crestline may
terminate up to twelve full-service leases without penalty upon 180-days' no-
tice to the Company.

Also, in the event that changes in the federal income tax laws allow the Com-
pany or its subsidiaries directly to operate the hotels without jeopardizing
the Company's REIT status, the Company may terminate all of the Hotel Leases
upon payment of the termination fee. The payment of the termination fee will
be payable in cash or, subject to certain conditions, shares of Company Common
Stock at the election of the Company.

As part of the Crestline Distribution, Crestline and the Company, through the
Operating Partnership, entered into guaranty and pooling agreements by which
Crestline and certain of its subsidiaries guarantee the Hotel Lease obliga-
tions. The Hotel Leases were placed into four different pools with all of the
Hotel Leases having similar terms placed into the same pool. The parent sub-
sidiary of each pool has a full guarantee obligation of the Hotel Leases in
its respective pool. For each pool, however, the cumulative limit of
Crestline's guaranty obligation will be the greater of 10% of the aggregate
rent payable for the immediately preceding fiscal year under all Hotel Leases
in the pool or 10% of the aggregate rent payable under all Hotel Leases in the
pool for 1999. In the event that Crestline's obligation under a guaranty
agreement for a pool is reduced to zero, Crestline can terminate its guaranty
and pooling agreement for that pool and the Company can terminate the Hotel
Leases in the pool without penalty.

Upon the commencement of the Hotel Leases, Crestline purchased the working
capital of the hotels from the Company for approximately $95 million, with the
purchase price evidenced by notes that bear interest at 5.12%. Interest on
each note is due simultaneously with the rent payment of each Hotel Lease. The
principal amount of each note is due upon the termination of each Hotel Lease.
Upon termination of the Hotel Lease, Crestline will sell to the Company the
existing working capital at its current value. To the extent the working capi-
tal delivered to the Company is less than the value of the note, Crestline
will pay the Company the difference in cash.

(ii) FF&E Leases. In connection with the Crestline Distribution, if the aver-
age tax basis of a hotel's FF&E and other personal property exceeded 15% of
the aggregate average tax basis of the hotel's real and personal property (the
"Excess FF&E"), subsidiaries of Crestline and non-controlled subsidiaries of
the Company entered into lease agreements (the "FF&E Leases") for the Excess
FF&E. The terms of the FF&E Leases generally range from two to three years and
rent under the FF&E Leases is a fixed amount. Crestline will have the option
at the expiration of the lease term to either (i) renew the FF&E Leases for
consecutive one year renewal terms at a fair market rental rate, or (ii) pur-
chase the Excess FF&E for a price equal to its fair market value. If Crestline
does not exercise its purchase or renewal option, Crestline is required to pay
a termination fee equal to approximately one month's rent.

(iii) Limited-Service Hotel Subleases. The Company leases from Hospitality
Properties Trust, Inc. ("HPT") 71 limited-service hotels under the Residence
Inn and Courtyard

24
<PAGE>

brands (the "HPT" Leases"). The HPT Leases have initial terms expiring through
2012 for the Courtyard properties and 2010 for the Residence Inn properties,
and are renewable at the Company's option. In connection with the Crestline
Distribution, subsidiaries of Crestline entered into sublease agreements with
the Company for these limited-service hotels ("Subleases"). The terms of the
Subleases will expire simultaneously with the expiration of the initial term of
the HPT Leases. If the Company elects to renew the HPT Leases, Crestline can
elect to also renew the Subleases for the corresponding renewal term.

Each Sublease provides that generally all of the terms in the HPT Leases will
apply to the Subleases. Under the Subleases, subsidiaries of Crestline are re-
quired to pay rent to the Company equal to the minimum rent due under the HPT
Leases and an additional rent based on a percentage of revenues. To the extent
the reserves for FF&E replacements are insufficient to meet the hotel's capital
expenditure requirements, HPT is required to fund the shortfall. The rent pay-
able under the Subleases is guaranteed by Crestline up to a maximum of $30 mil-
lion. The Crestline subsidiaries that are parties to the Subleases were capi-
talized with $30 million in notes from Crestline payable on demand.

In the event that changes in the federal income tax laws allow the Company or
its subsidiaries directly to operate the hotels without jeopardizing the
Company's REIT status, the Company may terminate all of the Subleases upon pay-
ment of the termination fee equal to the fair market value of Crestline's
leasehold interests in the remaining term of the Subleases using a discount
rate of five percent.

(iv) Asset Management Agreements. The Company and certain of its subsidiaries
entered into asset management agreements (the "Asset Management Agreements")
with Crestline pursuant to which Crestline agreed to provide advice on the op-
eration of the hotels and review financial results, projections, loan documents
and hotel management agreements. Crestline also agreed to consult on market
conditions and competition, as well as monitor and negotiate with governmental
agencies, insurance companies and contractors. Crestline will be paid a fee not
to exceed $4.5 million for each calendar year for its consulting services under
the Asset Management Agreements. The Asset Management Agreements each have
terms of two years with an automatic one-year renewal, unless earlier termi-
nated by either party in accordance with the terms of such agreements.

(v) Tax Sharing Agreement. The Company and Crestline entered into a tax shar-
ing agreement which defines each party's rights and obligations with respect to
deficiencies and refunds of federal, state and other income or franchise taxes
relating to Crestline's business for taxable years prior to the Crestline Dis-
tribution date and with respect to certain tax attributes of Crestline after
the Crestline Distribution date. Generally, the Company will be responsible for
filing consolidated returns and paying taxes for periods through the date of
the Crestline Distribution, and Crestline will be responsible for filing re-
turns and paying taxes for subsequent periods.

(vi) Corporate Transitional Services Agreement. The Company and Crestline en-
tered into a transitional services agreement, pursuant to which the Company and
Crestline will provide certain limited services to each other for a fee. Among
other things, the Company will provide centralized administrative and computer
systems services to Crestline for a period of time. Such services will be pro-
vided, as needed, at cost (includ-

25
<PAGE>

ing a reasonable overhead allocation) on a time and materials basis. The
charges associated with such services are not expected to be material.

(vii) Non-Competition Agreement. Crestline and the Company entered into a non-
competition agreement that limits the respective parties' future business op-
portunities. Pursuant to this non-competition agreement, Crestline agreed,
among other things, that until the earlier of December 31, 2008, or the date on
which it is no longer a lessee of more than 25% of the number of hotels owned
by the Company at the time of the Crestline Distribution, it will not own, op-
erate or control any full-service hotel, manage any limited-service or full-
service hotel owned by the Company, or own or operate a full-service hotel
franchise system operating under a common name brand, subject to certain excep-
tions. In addition, the Company agreed (i) for the time period set forth above,
not to lease limited-service or full-service hotels from any real estate in-
vestment trust, or to invest in or advise any other entity that leases hotels
under the same type of arrangement, subject to certain exceptions, and (ii) un-
til December 31, 2003, not to participate in the business of owning, financing
or operating senior living communities, subject to certain exceptions.

(viii) Employee Benefits and Other Employment Matters Allocation Agreement. As
part of the REIT Conversion, the Company, the Operating Partnership and
Crestline entered into an Employee Benefits Allocation Agreement relating to
various compensation, benefits and labor matters. Under the agreement, the Op-
erating Partnership and Crestline each assumed certain liabilities related to
covered benefits and labor matters arising prior to the effective date of the
Crestline Distribution and relating to employees of each organization, respec-
tively, after the Crestline Distribution. The agreement also governs the treat-
ment of awards under the Company's Comprehensive Stock Incentive Plan by the
Operating Partnership and requires Crestline to establish a similar plan.

Relationship between the Company and the Blackstone Entities

As described above under "The REIT Conversion," in December 1998 the Operating
Partnership acquired 12 upscale and luxury full-service hotels, a mortgage loan
secured by a thirteenth hotel, and certain other assets from the Blackstone En-
tities. As part of the Blackstone Acquisition, the Company, the Operating Part-
nership and the Blackstone Entities entered into a contribution agreement (the
"Blackstone Contribution Agreement") which provides, among other things, that
for so long as the Blackstone Entities own at least 5% of all of the outstand-
ing OP Units (including those OP Units held by the Company and its subsidiar-
ies), an affiliate of the Blackstone Entities will have the right to designate
one person to be included in the slate of Directors nominated for election to
the Board of Directors of the Company. John G. Schreiber, a Director of the
Company and a nominee for re-election at the Annual Meeting, has been so desig-
nated. Mr. Schreiber is a senior advisor and partner of Blackstone Real Estate
Advisors L.P., an affiliate of the Blackstone Entities.

In addition, the Blackstone Contribution Agreement provides that the OP Units
beneficially owned by the Blackstone Entities (and their permitted transferees)
(the "Blackstone OP Units") are redeemable for cash or, at the election of the
Company, Company Common Stock as follows: (i) up to 50% of the Blackstone OP
Units may be redeemed beginning July 1, 1999, (ii) an additional 25% of the
Blackstone OP Units may be redeemed beginning October 1, 1999 and (iii) the re-
maining 25% of the Blackstone OP Units may be redeemed be-

26
<PAGE>

ginning January 1, 2000. The Company has granted to the Blackstone Entities
(and their permitted transferees) certain registration rights with respect to
shares of Company Common Stock obtained upon conversion of the Blackstone OP
Units.

The Blackstone Contribution Agreement also grants the Blackstone Entities an
exemption from the ownership limitations contained in the Operating Partner-
ship's partnership agreement and contains standstill provisions which prohibit
certain activities of the Blackstone Entities with respect to the Operating
Partnership and the Company. Such provisions provide generally that the
Blackstone Entities may not take any actions in opposition to the Company's
Board of Directors and place certain restrictions on the Blackstone Entities'
acquisition and disposition of the Company's voting securities.

Relationship between the Company and Marriott International, Inc.

Prior to October 8, 1993, the Company and Marriott International were operated
as a single consolidated company. On October 8, 1993, in connection with the
issuance of a special dividend (the "Marriott International Distribution"), the
consolidated company's businesses were split between the Company and Marriott
International. Thereafter, the Company retained the capital intensive lodging
real estate business and the airport/tollroad concessions business, while
Marriott International took over the management of the lodging and service man-
agement businesses. (On December 29, 1995, the Company distributed the
airport/tollroad concessions business to its shareholders in the spin-off of
Host Marriott Services Corporation; see "Relationship between the Company and
Host Marriott Services Corporation" below.)

Richard E. Marriott, the Company's Chairman of the Board, and J.W. Marriott,
Jr., a Director of the Company, beneficially own approximately 10.6% and 10.9%,
respectively, of the outstanding shares of common stock of Marriott Interna-
tional. J.W. Marriott, Jr. and Richard E. Marriott serve as Chairman and a Di-
rector, respectively, of Marriott International.

In connection with the Marriott International Distribution, the Company and
Marriott International entered into a Distribution Agreement (the "Marriott In-
ternational Distribution Agreement") which provided for, among other things,
assumptions of liabilities and cross-indemnities designed to allocate to the
appropriate company financial responsibility for the liabilities arising out of
or in connection with their respective businesses. Under the Marriott Interna-
tional Distribution Agreement, which has been amended from time to time,
Marriott International also obtained a right, until June 2017, to purchase up
to 20% of each class of the Company's voting stock (determined after assuming
full exercise of the right) at its then fair market value (based on an average
of trading prices during a specified period), upon the occurrence of certain
specified events generally involving a change in control of the Company. The
Company has granted Marriott International an exception to the ownership limi-
tations in the Company's charter to permit the full exercise of the purchase
right, but the purchase right remains subject to certain ownership limitations
applicable to REITs generally.

For the purpose of governing the ongoing relationships between the Company and
Marriott International, as well as in the ordinary course of business, the Com-
pany and Marriott International have entered into other agreements. The Company
believes that the agreements are fair to both parties and contain terms which
are generally comparable to those which would have

27
<PAGE>

been reached in arm's-length negotiations with unaffiliated parties. Among
such other agreements between the Company and Marriott International are:

(i) Lodging Management and Franchise Agreements. Marriott International and
certain of its subsidiaries entered into management agreements with the Com-
pany and certain of its subsidiaries to manage for fees the Marriott Hotels,
Resorts and Suites, Ritz-Carlton hotels, Courtyard hotels and Residence Inns
owned or leased by the Company and its subsidiaries. Marriott International
also entered into franchise agreements with the Company and certain of its
subsidiaries to allow the Company to use the Marriott brand, associated trade-
marks, reservation systems and other related items in connection with the
Company's operation of 13 Marriott hotels not managed by Marriott Internation-
al.

Each of those management and franchise agreements reflects market terms and
conditions and is substantially similar to the terms of management and fran-
chise agreements with other third-party owners regarding lodging facilities of
a similar type. In 1998, the Company paid to Marriott International fees of
$205 million from the managed and franchised lodging properties owned or
leased by the Company. As a result of the REIT Conversion, however, the Com-
pany has assigned the management and franchise agreements to Crestline and,
consequently, it will be the primary obligation of Crestline to pay to
Marriott International the management and franchise fees owed under such
agreements for so long as Crestline remains the lessee for hotels governed by
such agreements.

In addition, the Company or one of its subsidiaries was a partner in several
unconsolidated partnerships that during 1998 owned 238 lodging properties op-
erated by Marriott International or certain of its subsidiaries under long-
term agreements. In such cases, the Company or its subsidiary typically served
as the general partner. In 1998, the Company's unconsolidated partnerships
paid to Marriott International fees of $121 million pursuant to such agree-
ments. The partnerships also paid $21 million in rent to Marriott Interna-
tional in 1998 for land leased from Marriott International upon which certain
of the partnerships' hotels are located. In connection with the REIT Conver-
sion, however, 13 lodging properties owned by partnerships were rolled up into
the Operating Partnership. The management agreements with Marriott Interna-
tional with respect to such properties (but not the land leases) have been as-
signed to Crestline and, consequently, it will be the primary obligation of
Crestline to pay to Marriott International any fees owed under such agreements
for so long as Crestline remains the lessee for hotels governed by such agree-
ments.

(ii) Senior Living Services Agreements. Marriott International and certain of
its subsidiaries entered into management agreements with the Company to manage
for fees the 31 senior living communities formerly owned by the Company. Dur-
ing 1998, the Company paid to Marriott International management fees of $13
million with respect to such properties. All of the senior living properties
are now owned by Crestline as a result of the REIT Conversion.

(iii) Acquisition Financing. Marriott International has provided, and the Com-
pany expects that Marriott International in the future will provide, financing
to the Company for a portion of the cost of acquiring properties to be oper-
ated or franchised by Marriott International. In 1998, Marriott International
did not provide any new acquisition financing, although the Company remained
indebted to Marriott International for acquisition financing from prior years.

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<PAGE>

In 1996, Marriott International and the Company formed a joint venture, and
Marriott International provided the Company with $29 million in debt financing
at an average interest rate of 12.7% and with $28 million in preferred equity,
for the acquisition of two full-service hotels in Mexico City. Following the
REIT Conversion, a non-controlled subsidiary of the Company is now the obligor
under such debt.

In addition, in 1997 Marriott International provided $92 million of financing
at an average interest rate of 9% relating to the Company's discontinued senior
living operations. In 1997, the Company also acquired all but 1% of the remain-
ing 50% interest in the joint venture which owned the 418-unit Leisure Park se-
nior living community from Marriott International for approximately $27 mil-
lion, including approximately $19 million of mortgage debt assumed by the Com-
pany. As part of the REIT Conversion, that debt is now the obligation of
Crestline, although the Operating Partnership remains as a guarantor.

(iv) Tax Sharing Agreement. The Company and Marriott International entered
into a tax sharing agreement that defines the parties' rights and obligations
with respect to deficiencies and refunds of federal, state and other income or
franchise taxes relating to the Company's businesses for tax years prior to the
Marriott International Distribution and with respect to certain tax attributes
of the Company after the Marriott International Distribution. The Company and
Marriott International have agreed to cooperate with each other and to share
information in preparing tax returns and in dealing with other tax matters.

(v) Non-Competition Agreement. The Company and Marriott International entered
into a non-competition agreement that defines the parties' rights and obliga-
tions with respect to certain businesses operated by Marriott International and
the Company. In general, under the non-competition agreement, the Company and
its subsidiaries are prohibited from entering into or acquiring any business
that competes with the hotel management business as conducted by Marriott In-
ternational.

(vi) Administrative Services Agreements. Marriott International and the Company
have entered into a number of agreements pursuant to which Marriott Interna-
tional has agreed to provide certain continuing administrative services to the
Company and its subsidiaries. Such services are provided on market terms and
conditions, and in 1998 the Company paid Marriott International $3 million for
such services. In general, the administrative services agreements can be kept
in place at least through the end of 1999.

(vii) Guarantees. In connection with the Marriott International Distribution,
the Company and Marriott International entered into agreements pursuant to
which Marriott International agreed to guarantee the Company's performance in
connection with certain partnership, real estate and project loans and other
Company obligations. Such guarantees are limited in an aggregate principal
amount of up to $70 million at December 31, 1998. Marriott International has
not been required to make any payments pursuant to the guarantees.

Relationship between the Company and Host Marriott Services Corporation

Prior to December 29, 1995, the Company and Host Marriott Services Corporation
("HM Services") were operated as a single consolidated company. On December 29,
1995, the Company issued a special dividend (the "HMSC Distribution") which
split the consolidated company's businesses be-

29
<PAGE>

tween the Company and HM Services. Thereafter, the Company retained the capital
intensive lodging real estate business, while HM Services took over the
airport/tollroad concessions business.

Richard E. Marriott, the Company's Chairman of the Board, and J.W. Marriott,
Jr., a Director of the Company, beneficially own approximately 7.4% and 7.6%,
respectively, of the outstanding shares of common stock of HM Services. Richard
E. Marriott and J.W. Marriott, Jr. serve as Directors of HM Services.

In connection with the HMSC Distribution, the Company and HM Services entered
into a Distribution Agreement (the "HMSC Distribution Agreement"), which pro-
vided for, among other things, assumptions of liabilities and cross-indemnities
designed to allocate to the appropriate company financial responsibility for
the liabilities arising out of or in connection with their respective business-
es. The HMSC Distribution Agreement also provided that HM Services would assume
its proportionate share of the Company's current obligation for certain em-
ployee benefit awards denominated in Company Common Stock currently held by em-
ployees of Marriott International.

For the purpose of governing the ongoing relationships between the Company and
HM Services, the Company and HM Services have entered into other agreements.
The Company believes that the agreements are fair to both parties and contain
terms which are generally comparable to those which would have been reached in
arm's-length negotiations with unaffiliated parties. Among such other agree-
ments between the Company and HM Services are:

(i) Tax Sharing Agreement. The Company and HM Services entered into a tax shar-
ing agreement that defines the parties' rights and obligations with respect to
deficiencies and refunds of federal, state and other income or franchise taxes
relating to the Company's businesses for tax years prior to the HMSC Distribu-
tion and with respect to certain tax attributes of the Company after the HMSC
Distribution. The Company and HM Services have agreed to cooperate with each
other and to share information in preparing tax returns and in dealing with
other tax matters.

(ii) Guarantees of Concession Agreements. The Company and HM Services entered
into agreements pursuant to which the Company agreed to guarantee HM Services'
performance in connection with certain tollroad concessions operated by HM
Services. The Company has not been required to make any payment pursuant to the
guarantees and does not anticipate making any such payment in 1999.

PROPOSAL ONE: ELECTION OF DIRECTORS

The Board of Directors of the Company is composed of eight Directors. The Arti-
cles of Incorporation classify the eight-member Board of Directors into three
classes. Each such Director serves for three years.

The terms of office of J.W. Marriott, Jr., John G. Schreiber and Harry L. Vin-
cent, Jr. expire at the 1999 Annual Meeting of Shareholders. The Board of Di-
rectors, acting upon the recommendation of its Nominating and Corporate Gover-
nance Committee, has nominated and recommends the re-election of Mr. Marriott,
Mr. Schreiber and Mr. Vincent, each for a three-year term as Director expiring
at the 2002 Annual Meeting of Shareholders.

Unless otherwise instructed, the proxy holders will vote the proxies received
by them for Mr. Marriott, for Mr. Schreiber and for Mr. Vincent.

30
<PAGE>

If elected, Mr. Marriott, Mr. Schreiber and Mr. Vincent have consented to
serve as Directors for terms of three years and until their respective succes-
sors are elected and qualified. Further information with respect to the nomi-
nees is set forth in this Proxy Statement under the section entitled "Direc-
tors." Although it is not contemplated that any nominee will be unable to
serve as Director, in such event, the proxies will be voted by the proxy hold-
ers for such other person or persons as may be designated by the present Board
of Directors.

Vote Required

Approval of the election of the nominees is subject to the affirmative vote of
a plurality of shares of Company Common Stock present in person or represented
by proxy and voting at the Annual Meeting at which a quorum is present.

The Board of Directors of the Company unanimously recommends a vote FOR the
foregoing nominees as Directors of the Company.

PROPOSAL TWO: APPOINTMENT OF AUDITORS

Subject to shareholder approval, the Board of Directors, acting on the recom-
mendation of its Audit Committee, has appointed Arthur Andersen LLP, a firm of
independent public accountants, as auditors, to examine and report to share-
holders on the consolidated financial statements of the Company and its sub-
sidiaries for fiscal year 1999. Representatives of Arthur Andersen LLP will be
present at the Annual Meeting and will be given the opportunity to make a
statement and will be available to respond to appropriate questions.

Vote Required

The action of the Board of Directors in appointing Arthur Andersen LLP as the
Company's auditors for fiscal year 1999 is subject to ratification by an af-
firmative vote of the holders of a majority of shares of Company Common Stock
present in person or represented by proxy and voting at the Annual Meeting at
which a quorum is present.

The Board of Directors of the Company unanimously recommends a vote FOR such
appointment.

PROPOSAL THREE: RATIFICATION OF AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN

Following the REIT Conversion, all employees who had been employed by the Com-
pany became employees of the Operating Partnership, through which the Company
primarily operates its business. At the Special Meeting of Shareholders on De-
cember 15, 1998 with respect to the REIT Conversion (the "Special Meeting"),
the Company's shareholders approved the transfer of the rights and obligations
of the Company under the Employee Stock Purchase Plan to the Operating Part-
nership, with any stock acquired by participants under the Employee Stock Pur-
chase Plan being shares of Company Common Stock.

As a result of the REIT Conversion, the Board has approved certain amendments
to the Company's Employee Stock Purchase Plan and renamed it the "Host
Marriott Corporation and Host Marriott, L.P. Employee Stock Purchase Plan."
Most of those were technical amendments within the authority granted to the
Board under Section 12 of the Employee Stock Purchase Plan and were designed
to conform the Employee Stock Purchase Plan to the REIT structure of the Com-
pany and the Operating Partnership. Such changes have already been implemented
into the Employee Stock Purchase Plan and the Board is not seeking

31
<PAGE>

shareholder approval of such amendments. It should also be noted that share-
holder approval is not being requested to authorize additional shares to be
available under the Employee Stock Purchase Plan.

The Board does, however, request the ratification by the shareholders of one
amendment to the Employee Stock Purchase Plan. Federal tax provisions do not
permit the Operating Partnership to offer participants under the Company's Em-
ployee Stock Purchase Plan the tax advantages of Section 423 of the Internal
Revenue Code that such participants had received before the REIT Conversion.
Consequently, the Board has amended the Employee Stock Purchase Plan to provide
a new method for offering participants the opportunity to purchase shares of
Company Common Stock which takes into account the different tax treatment of
such purchases.

Under the terms of the amended Employee Stock Purchase Plan, an individual who
is (i) an active eligible employee of the Company, the Operating Partnership or
a participating affiliate on the first day of January of the relevant plan
year, (ii) working more than 20 hours per week and (iii) customarily employed
more than five months in a calendar year, may, at the end of the plan year,
purchase shares of Company Common Stock through contributions or payroll deduc-
tions at the lower of (a) 90% of the fair market value of such shares on the
first day of such plan year or (b) 90% of the fair market value of such shares
on the last day of such plan year. A participant may elect to contribute up to
10% of his or her compensation per year, with a limit of $25,000 in any plan
year.

During prior plan years when participants did receive the tax advantages under
Section 423 of the Internal Revenue Code, participants were not taxed on the
difference between the opening price and the closing price if the stock was
held for at least two years. If the stock was sold prior to the end of that
two-year holding period, participants were taxed on the difference at ordinary
income tax rates.

Now, under the amended Employee Stock Purchase Plan, participants will be taxed
on the difference between (i) the fair market value of shares of Company Common
Stock on the closing date of the relevant plan year and (ii) the actual pur-
chase price (after the 10% discount set forth above) paid by the participant.
Income and employment taxes on this amount will be withheld through the payroll
system.

Accordingly, the Board seeks the ratification by the Company's shareholders to
amending and restating in its entirety Section 1 of the Employee Stock Purchase
Plan as follows:

"1. Stock Offered and Price. Subject to Section 15(a), an option to pur-
chase Shares through payroll savings will be granted to eligible employees
in the manner stated below. The "Purchase Price" of each Share will be the
lesser of (i) 90% of its Fair Market Value on the date the option is grant-
ed, or (ii) 90% of the Fair Market Value on the date the option is exer-
cised. The maximum number of Shares that may be purchased under this Plan
shall not exceed the maximum number of Shares authorized under the Plan.
Such Shares may include authorized but unissued Shares. In the event that
the Corporation should declare a stock dividend or a stock split or reclas-
sify its stock, the Purchase Price and the number of Shares reserved for
the Plan will be adjusted proportionately. The determination of the adjust-
ment, if any, shall be made by the Compensation Policy Com-

32
<PAGE>

mittee of the Board of Directors of the Corporation, and such determination
shall be final, binding and conclusive."

All amendments to the Employee Stock Purchase Plan, including the amended and
restated Section 1 above, are effective as of January 1, 1999, the beginning of
the current plan year.

Vote Required

The action of the Board of Directors in approving the amendment to the Employee
Stock Purchase Plan as set forth above is subject to the affirmative vote of
the holders of a majority of the shares of Company Common Stock present in per-
son or represented by proxy and voting at the Annual Meeting at which a quorum
is present.

The Board of Directors unanimously recommends a vote FOR ratification of the
amendment to the Employee Stock Purchase Plan.

PROPOSAL FOUR: RATIFICATION OF AMENDMENTS TO THE 1997 COMPREHENSIVE STOCK
INCENTIVE PLAN

As a result of the REIT Conversion, the Board has approved certain amendments
to the Company's 1997 Comprehensive Stock Incentive Plan (the "Comprehensive
Stock Incentive Plan"). Most of those were technical amendments within the au-
thority granted to the Board's Compensation Policy Committee (the "Committee")
under Article 3 and Article 12 of the Comprehensive Stock Incentive Plan and
were designed to provide greater internal consistency to the Comprehensive
Stock Incentive Plan and to facilitate the administration of the Comprehensive
Stock Incentive Plan. The Committee made certain other changes to conform the
Comprehensive Stock Incentive Plan to the REIT structure of the Company and the
Operating Partnership, as approved by the Company's shareholders at the Special
Meeting. Such changes have already been implemented into the Comprehensive
Stock Incentive Plan and the Board is not seeking shareholder approval of such
amendments.

The Board does, however, request the ratification by the shareholders of two
changes to the Comprehensive Stock Incentive Plan. Shareholder approval is not
being requested to authorize additional shares to be available for the grant of
awards under the Comprehensive Stock Incentive Plan. Indeed, neither of these
proposed amendments affects in any way the number of shares of Company Common
Stock which may be issued under the Comprehensive Stock Incentive Plan.

The first such amendment is a technical one and a result of the REIT Conver-
sion. As noted above under Proposal Three, following the REIT Conversion, all
employees who had been employed by the Company became employees of the Operat-
ing Partnership, through which the Company primarily operates its business. At
the Special Meeting, the shareholders approved the transfer of the rights and
obligations of the Company under the Comprehensive Stock Incentive Plan to the
Operating Partnership, with any stock awards issued to participants in the Com-
prehensive Stock Incentive Plan being made in shares of Company Common Stock.
What was not included in that approval was the possibility that employees of
subsidiaries of either the Operating Partnership or the Company be covered as
participants under the Comprehensive Stock Incentive Plan. Although neither the
Operating Partnership nor the Company currently has any subsidiaries with any
employees or has any present intention to add such employees, the Company
wishes to maintain the flexibility necessary to deal

33
<PAGE>

with future situations where it may be in the Company's best interests to add
employees either at one of its subsidiaries or at a subsidiary of the Operating
Partnership. Predecessors to the current Comprehensive Stock Incentive Plan
have automatically included employees of subsidiaries as participants under
such plans.

The possibility that employees of subsidiaries of either the Operating Partner-
ship or the Company be covered as participants under the Comprehensive Stock
Incentive Plan could be deemed as an expansion of the eligibility requirements
for participation in the Comprehensive Stock Incentive Plan. Consequently, pur-
suant to Article 12 of the Comprehensive Stock Incentive Plan, the Board seeks
the ratification by the Company's shareholders of the addition of the following
language to the preamble of the Comprehensive Stock Incentive Plan:

"Set forth herein are all of the terms of the three plans comprising the
Plan, one for the benefit of the employees of Host Marriott Corporation
(the "Host REIT Plan"), one for the benefit of the employees of Host
Marriott, L.P. (the "Operating Partnership Plan"), and one for the benefit
of the employees of any Subsidiary of Host Marriott Corporation or Host
Marriott, L.P. (the "Subsidiary Companies Plan"). The Committee shall ad-
minister all three plans."

The second amendment to the Comprehensive Stock Incentive Plan for which share-
holder ratification is sought concerns the granting of certain performance-
based cash awards under the Comprehensive Stock Incentive Plan. In 1995 and
1996, the shareholders voted to approve the Company's Performance-Based Annual
Incentive Bonus Plan (the "Incentive Bonus Plan"). Under the Incentive Bonus
Plan, cash bonus awards for senior executive officers of the Company were
linked to a performance goal with respect to the Company's annual earnings be-
fore interest expense, taxes, depreciation, amortization and other non-cash
items ("EBITDA"). In 1997, the shareholders approved the Comprehensive Stock
Incentive Plan, which had been amended and restated from a predecessor plan for
the principal purpose of putting the Comprehensive Stock Incentive Plan into
compliance with Section 162(m) of the Internal Revenue Code. Prior to 1997,
provisions had been added to the Internal Revenue Code that limit the tax de-
duction available to the Company for compensation expense with respect to cer-
tain executive officers of the Company. Because the shareholders approved the
Comprehensive Stock Incentive Plan in 1997, stock awards made pursuant to the
Comprehensive Stock Incentive Plan may qualify, if so determined by the Commit-
tee, as exempt compensation under Section 162(m), which permits the maximum tax
benefit to the Company.

Although performance-based cash awards granted under the Incentive Bonus Plan
may qualify for the same tax benefits to the Company under Section 162(m), the
Board now seeks to consolidate all performance-based awards under a single
plan, namely, the Comprehensive Stock Incentive Plan. Not only does such con-
solidation facilitate the administration of both stock and cash awards, but
also the performance measures for determining performance-based awards would be
selected from the same list of criteria. This is particularly helpful to the
Company following the REIT Conversion, since the Company's financial perfor-
mance is now reported--like that of other REITs--in terms of "funds from opera-
tions" rather than in terms of EBITDA. Article 11 of the Comprehensive Stock
Incentive Plan currently sets forth a series of performance measures from which
the Committee may select in determining performance-based awards under the Com-
prehensive Stock Incentive Plan.

34
<PAGE>

Under the proposed amendment, performance-based cash awards under the Compre-
hensive Stock Incentive Plan, which are called Other Cash Performance-Based
Awards, would be determined by the Committee based on the same performance
measures under Article 11. Accordingly, the Board seeks the ratification by
the Company's shareholders of the addition of the following new Section 10.4
to the Comprehensive Stock Incentive Plan:

"10.4 Other Cash Performance-Based Awards. The Committee may grant Other
Cash Performance-Based Awards based on performance measures set forth in
Article 11 not based on Shares upon such terms and at any time and from
time to time as shall be determined by the Committee. Each such Other Cash
Performance-Based Award shall be evidenced by an award agreement that shall
specify such terms and conditions as the Committee shall determine. An
Other Cash Performance-Based Award not based upon Shares shall not decrease
the number of Shares under Article 4 which may be issued pursuant to other
Awards. No individual shall be eligible to receive a payment with respect
to cash performance-based awards in excess of $4,000,000 in any calendar
year. Other Cash Performance-Based Awards may relate to annual bonus or
long-term performance awards."

Upon shareholder ratification of the foregoing amendments, the name of the
Comprehensive Stock Incentive Plan will be changed to "Host Marriott Corpora-
tion and Host Marriott, L.P. 1997 Comprehensive Stock and Cash Incentive
Plan." All amendments to the Comprehensive Stock Incentive Plan, including the
foregoing, are effective as of December 29, 1998, the date of the REIT Conver-
sion.

Vote Required

The action of the Board of Directors in approving the amendments to the
Company's 1997 Comprehensive Stock Incentive Plan as set forth above is sub-
ject to the affirmative vote of the holders of a majority of the shares of
Company Common Stock present in person or represented by proxy and voting at
the Annual Meeting at which a quorum is present.

The Board of Directors unanimously recommends a vote FOR ratification of the
amendments to the Company's 1997 Comprehensive Stock Incentive Plan.

PROPOSAL FIVE: SHAREHOLDER PROPOSAL REGARDING ELECTION OF DIRECTORS ANNUALLY

Shareholder's Proposal

Mrs. Evelyn Y. Davis of Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C. 20037, who owns 200 shares of Company Common
Stock, has notified the Company of her intention to propose the following res-
olution at the Annual Meeting of Shareholders:

"RESOLVED: That the shareholders of Host Marriott Corporation recommend
that the Board of Directors take the necessary steps to reinstate the elec-
tion of directors ANNUALLY, instead of the stagger system which was adopt-
ed."

Shareholder's Supporting Statement

In support of the resolution, Mrs. Davis has submitted the following state-
ment:

"The great majority of New York Stock Exchange listed corporations elect
all their directors each year.

"This insures that ALL directors will be more accountable to ALL sharehold-
ers each year and to a certain extent prevents the self-perpetuation of the
Board.

35
<PAGE>

"Last year the owners of 68,372,067 shares, representing approximately
39.1% of shares voting, voted FOR this proposal.

"If you AGREE, please mark your proxy FOR this proposal."

The Company's Statement in Opposition

This proposal has been submitted at the last thirteen Annual Meetings of
Shareholders and was defeated on each occasion. The Board of Directors has
again considered the proposal (as has the Nominating and Corporate Governance
Committee) and again recommends that shareholders vote AGAINST it for the fol-
lowing reasons: At the 1984 Annual Meeting of Shareholders, holders of more
than 86% of the shares of Company Common Stock approved an amendment to the
Company's then Certificate of Incorporation (as a Delaware corporation) to
classify the Board of Directors into three classes, with one class being
elected each year. Moreover, at the recent Special Meeting with respect to the
REIT Conversion, holders of more than 99% of the shares of Company Common
Stock voted to approve the transactions comprising the REIT Conversion, in-
cluding the adoption of the Company's Articles of Incorporation for the
Company's reincorporation in Maryland. Those Articles of Incorporation, which
were described in detail and included in full in the proxy statement relating
to the Special Meeting, similarly classify the Board of Directors into three
classes, with one class being elected each year.

As a result of the Company's having a classified Board of Directors, at least
two shareholder meetings will be required to effect a change of control of the
Board of Directors, thus making it more difficult to change the membership of
the Board of Directors. The Board of Directors believes that the longer time
required to elect a majority of a classified Board of Directors also helps to
assure continuity and stability of the Company's management and policies since
a majority of the Directors will always have prior experience as Directors of
the Company. Another benefit of the existing arrangement is to enhance manage-
ment's ability to negotiate with the proponent of a proposal to take over or
restructure the Company. The Board of Directors therefore believes that the
proposed resolution would, if implemented, be detrimental to the best inter-
ests of the Company and its shareholders.

Vote Required

Under the Company's Articles of Incorporation, approval of the proposed reso-
lution is subject to the affirmative vote of the holders of at least two-
thirds (66 2/3%) of the total number of outstanding shares of Company Common
Stock as of the Annual Meeting Record Date.

The Board of Directors of the Company unanimously recommends a vote AGAINST
such proposal.

36
<PAGE>

SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING

The annual meeting of shareholders for 2000 is tentatively scheduled to be held
on Wednesday, May 17, 2000. Any shareholder who meets the requirements of the
proxy rules under the Securities Exchange Act of 1934, as amended (the "Ex-
change Act") may submit to the Board of Directors proposals to be considered
for submission to the shareholders at the 2000 annual meeting. For any such
proposal to be eligible for inclusion in the proxy materials for that meeting,
it must be submitted in writing by notice delivered to the Corporate Secretary,
Host Marriott Corporation, 10400 Fernwood Road, Department 862, Bethesda, Mary-
land 20817-1109 no later than December 16, 1999. Furthermore, such notice must
set forth: (a) the name and address of the shareholder and the text of the pro-
posal to be introduced; (b) the number of shares of Company Common Stock held
of record, owned beneficially and represented by proxy by such shareholder as
of the date of such notice; and (c) a representation that the shareholder in-
tends to appear in person or by proxy at the meeting to introduce the proposal
specified in the notice.

In addition, any shareholder who meets the requirements of the proxy rules un-
der the Exchange Act may nominate a candidate for Director of the Company or
may bring other business before the annual meeting of shareholders for 2000
(although in order for such other business to be included in the proxy materi-
als for that meeting, it must meet the additional requirements set forth in the
paragraph above). Any such nomination or other business must be submitted in
writing by notice delivered to the Corporate Secretary, Host Marriott Corpora-
tion, 10400 Fernwood Road, Dept. 862, Bethesda, Maryland 20817-1109 not later
than February 15, 2000 nor earlier than January 16, 2000. If the shareholder
proposes to nominate a person for election as a Director, such shareholder's
notice must set forth all information relating to such person that is required
to be disclosed in solicitations of proxies for election of directors in an
election contest, or is otherwise required, under the Exchange Act (including
such person's written consent to serving as a Director if elected). If the
shareholder proposes to bring other business before the meeting, such share-
holder's notice must set forth a brief description of the business desired to
be brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such shareholder and of
the beneficial owner, if any, on whose behalf the proposal is made. In either
case, the shareholder's notice must also set forth, both as to the shareholder
giving the notice and the beneficial owner, if any, on whose behalf the nomina-
tion or proposal is made, (i) the name and address of such shareholder and of
such beneficial owner, as they appear on the Company's books, and (ii) the num-
ber of each class of shares of the Company which are owned beneficially and of
record by such shareholder and such beneficial owner.

SOLICITATION OF PROXIES

Proxies will be solicited by mail, telephone, or other means of communication.
Solicitation also may be made by Directors, officers and regular employees of
the Company. The Company has retained MacKenzie Partners to assist in the so-
licitation of proxies from shareholders. MacKenzie Partners will receive a fee
of $6,500 plus reimbursement of certain out-of-pocket expenses. The Company
will reimburse brokerage firms, custodians, nominees and fiduciaries in accor-
dance with the rules of the New York Stock Exchange, for reasonable expenses
incurred by them in forwarding materials to the beneficial owners of shares.
The entire cost of solicitation will be borne by the Company.

37
<PAGE>

ANNUAL REPORT AND FORM 10-K

All shareholders of record on the Annual Meeting Record Date will receive with
this Proxy Statement a copy of both the Company's 1998 Annual Report and the
Form 10-K filed with the Securities and Exchange Commission. Any shareholder
who desires additional copies of the Company's 1998 Annual Report or the Form
10-K may obtain a copy (excluding exhibits) without charge by addressing a re-
quest to the Corporate Secretary, Host Marriott Corporation, 10400 Fernwood
Road, Dept. 862, Bethesda, Maryland 20817-1109. A charge equal to the reproduc-
tion cost will be made if the exhibits are requested.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Christopher G. Townsend

Christopher G. Townsend
Corporate Secretary

38
<PAGE>

ANNUAL MEETING OF SHAREHOLDERS
OF HOST MARRIOTT CORPORATION

The 1999 Annual Meeting of Shareholders of Host Marriott Corporation will
be held on Thursday, May 20, 1999 at The Ritz-Carlton, Buckhead, located
at 3434 Peachtree Road, Northeast, in Atlanta, Georgia. The meeting will
begin at 11:00 a.m. in Salons 3, 4 and 5, with a continental breakfast be-
ginning at 10:00 a.m. being provided to shareholders attending the meet-
ing. Doors to the meeting will open at 10:30 a.m.

A special "Shareholder Annual Meeting" rate is offered at the hotel for
Wednesday, May 19, 1999, the night before the meeting. A limited number of
rooms is available for this special rate of $205.00, single or double oc-
cupancy. To receive this special rate, please call the hotel directly
prior to April 28, 1999 and ask for the Host Marriott Corporation "Share-
holder Annual Meeting" rate for May 19. Applicable taxes and gratuities
will be additional and reservations are required in advance. This discount
may not be used in conjunction with any other discount, coupon or group
rate.

The Ritz-Carlton, Buckhead
3434 Peachtree Road, Northeast
Atlanta, Georgia 30326
Telephone: (404) 237-2700

Directions to the hotel:

North on I-85 from Hartsfield Airport: Take I-85 North through downtown
Atlanta. I-75 and I-85 will merge and then split. Please stay on I-85.
Continue to the off-ramp for GA 400 (Exit 29). Take GA 400 to Lenox
Road/Buckhead (Exit 2). At the bottom of the ramp, turn right and follow
the signs for Peachtree Road. You will see Parisian department store ahead
on the left. The Ritz-Carlton, Buckhead is on the right.

South on I-85: Take the exit for Lenox Road (Exit 30) and at the bottom of
the exit ramp, turn right onto Lenox Road. Go 1.9 miles and then follow
the signs to Monarch Drive/Ritz Drive. Turn left into the hotel.

South on I-75: Take a left exit onto I-85 North. Exit to GA 400 (Exit 29).
Then exit on Lenox Road/Buckhead (Exit 2). At the bottom of the ramp, turn
right and follow the signs for Peachtree Road. You will see Parisian de-
partment store ahead on the left. The Ritz-Carlton, Buckhead is on the
right.

East or West on I-20: Take I-20 into downtown Atlanta. Follow the signs to
I-85 North through downtown to GA 400 (Exit 29). Take GA 400 North to Exit
2, Lenox/Buckhead. At the bottom of the ramp, turn right and follow the
signs for Peachtree Road. You will see Parisian department store ahead on
the left. The Ritz-Carlton, Buckhead is on the right.
<PAGE>

PROXY

HOST MARRIOTT CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 20, 1999, 11:00 A.M.

The undersigned appoints Richard E. Marriott and Terence C. Golden as Proxies.
Each shall have power to appoint his substitute. They are authorized to
represent and vote, as designated on the reverse side, all shares of Host
Marriott Corporation common stock held of record by the undersigned on March 29,
1999 at the Annual Meeting of Shareholders to be held on May 20, 1999, or any
adjournment thereof. The Board of Directors recommends votes FOR proposals 1, 2,
3 and 4 and AGAINST proposal 5.

Nominees for election as directors for COMMENTS OR CHANGE OF ADDRESS
three-year terms expiring at the 2002
Annual Meeting: ------------------------------
------------------------------
J.W. Marriott, Jr. ------------------------------
John G. Schreiber ------------------------------
Harry L. Vincent, Jr. (If you have written in the
above space, please mark the
corresponding box on the
reverse side of the card)

CONTINUED AND TO BE SIGNED ON REVERSE SIDE -------------
SEE REVERSE
SIDE
-------------
- --------------------------------------------------------------------------------
Detach Proxy Card Here

[LOGO OF HOST MARRIOTT APPEARS HERE]

HOST MARRIOTT
CORPORATION
10400 Fernwood Road
Bethcada, Maryland 20817-1109

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 20, 1999

The Annual Meeting of Shareholders of Host Marriott Corporation (the "Company")
will be held on Thursday, May 20, 1999, at 11:00 a.m. in Salons 3, 4 and 5 of
The Ritz-Carlton, Buckhead, located at 3434 Peachtree Road, Northeast, in
Atlanta, Georgia. Doors to the meeting will open at 10:30 a.m.

The Meeting will be conducted:

1. To consider and vote upon the following proposals described in the
accompanying Proxy Statement, which provide for:

(i) Proposal One: The election of J.W. Marriott, Jr., John G. Schreiber
and Harry L. Vincent, Jr. as Directors for three-year terms expiring
at the 2002 Annual Meeting;
(ii) Proposal Two: The ratification of the appointment of Arthur
Andersen LLP as independent auditors;
(iii) Proposal Three: The ratification of the action of the Board of
Directors amending the Company's Employee Stock Purchase Plan;
(iv) Proposal Four: The ratification of the action of the Board of
Directors amending the Company's 1997 Comprehensive Stock Incentive
Plan; and
(v) Proposal Five: The consideration of a shareholder proposal to
reinstate the annual election of all Directors.

2. To transact such other business as may properly come before the meeting.

Shareholders of record at the close of business on March 29, 1999 will be
entitled to notice of and to vote at this meeting.

Christopher G. Townsend
Corporate Secretary

<PAGE>

[X] Please mark your votes
as in this example.

This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of directors, FOR
proposals 2, 3 and 4, and AGAINST proposal 5.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors Recommends a vote FOR proposals 1, 2, 3 and 4.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of [_] [_] 2. Ratification [_] [_] [_] 4. Ratification of [_] [_] [_]
Directors (see of appointment amendments to the
reverse) of Arthur 1997 Comprehensive
Andersen LLP as Stock Incentive Plan
independent auditors
<CAPTION>
----------------------------------------------
The Board of Directors Recommends a vote
AGAINST proposal 5.
----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For, except vote withheld from 3. Ratification of [_] [_] [_]
the following nominee(s): amendment to
the Employee 5. Shareholders proposal [_] [_] [_]
Stock Purchase to reinstate the annual
_______________________________ Plan election of directors
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
I WILL ATTEND THE [_]
ANNUAL MEETING

<S> <C> <C> <C>
SIGNATURE(S) DATE Change of [_]
------------------------------------------------------------------- -------------- address/Comments on
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as Reverse Side.
attorney, executor, administrator, trustee or guardian, please give full title as such.
</TABLE>
- --------------------------------------------------------------------------------

Please carefully detach here and return this proxy in the enclosed reply
envelope.

Admission Ticket
Host Marriott Corporation
Annual Meeting of Shareholders
Thursday, May 20, 1999, 11:00 a.m. EDT

The Ritz-Carlton, Buckhead
Salons 3, 4 and 5
3434 Peachtree Road, Northeast
Atlanta, Georgia 30326
- --------------------------------------------------------------------------------
AGENDA
- --------------------------------------------------------------------------------
1. ELECTION OF THREE DIRECTORS
.

2. RATIFICATION OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
.

3. RATIFICATION OF AMENDMENTS TO THE
EMPLOYEE STOCK PURCHASE PLAN
.

4. RATIFICATION OF AMENDMENTS TO THE 1997
COMPREHENSIVE STOCK INCENTIVE PLAN
.

5. SHAREHOLDER PROPOSAL TO REINSTATE ANNUAL ELECTION OF ALL
DIRECTORS
.

TRANSACTION OF OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

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

It is important that your shares be represented at this meeting, whether or not
you attend the meeting in person. To make sure your shares are represented, we
urge you to complete and mail the proxy card above.

- --------------------------------------------------------------------------------
If you and your guest plan on attending the Annual Meeting, please mark the
appropriate box on the proxy card above. Present this Admission Ticket to the
Host Marriott Corporation representative at the entrance.
- --------------------------------------------------------------------------------