HOST MARRIOTT CORP/, 424B3, 1999-07-21

HOST MARRIOTT CORP/
424B3, 1999-07-21
HOTELS & MOTELS

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<PAGE>

Pursuant to Rule 424(B)(3)
Registration No. 333-67907

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus supplement is not complete and +
+may be changed. These securities have been registered under a registration +
+statement that was filed with the Securities and Exchange Commission and has +
+been declared effective. This preliminary prospectus supplement and the +
+accompanying prospectus are not an offer to sell these securities and are not +
+soliciting an offer to buy these securities in any jurisdiction where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PROSPECTUS SUPPLEMENT (Subject to Completion, Issued July 20, 1999)
(To Prospectus dated December 30, 1998)

4,000,000 Shares
Host Marriott Corporation

% Class A Cumulative Redeemable Preferred Stock
(Liquidation Preference $25 Per Share)

-----------

Dividends on the Class A preferred stock will be cumulative from the date of
original issuance and will be payable quarterly in arrears at the rate of % of
the liquidation preference per annum, starting October 15, 1999. The Class A
preferred stock will not be redeemable before , 2004, except under limited
circumstances intended to preserve our status as a real estate investment trust
and the status of our operating partnership as a partnership for federal income
tax purposes. Beginning , 2004, we may redeem any Class A preferred stock at
$25 per share plus accrued and unpaid dividends.

-----------

We have applied for approval from the New York Stock Exchange to list the Class
A preferred stock on the NYSE. If so approved, we expect that trading on the
NYSE will commence within 30 days after the initial delivery of the Class A
preferred stock.

-----------

Investing in the Class A preferred stock involves risks. See "Risk Factors"
beginning on page 2 of the accompanying prospectus.

-----------

PRICE $25 PER SHARE

-----------

<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Company
-------- ------------- -----------
<S> <C> <C> <C>
Per Share................................ $25.00 $ $
Total.................................... $100,000,000 $ $
</TABLE>

For sales of 400,000 or more shares of Class A preferred stock to a single
purchaser, underwriting discounts and commissions will be $ per share.

-----------

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

We have granted the underwriters the right to purchase up to an additional
600,000 shares of Class A preferred stock to cover over-allotments, if any. The
underwriters expect to deliver the Class A preferred stock to purchasers on
, 1999.

-----------

MORGAN STANLEY DEAN WITTER PAINEWEBBER INCORPORATED

BEAR, STEARNS & CO. INC.
DEUTSCHE BANC ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
PRUDENTIAL SECURITIES

July , 1999
<PAGE>

We have not authorized any person to make a statement that differs from what
is in this prospectus supplement and the accompanying prospectus. If any person
does make a statement that differs from what is in this prospectus supplement
and the accompanying prospectus, you should not rely on it. This prospectus
supplement and the accompanying prospectus are not, together or individually,
an offer to sell, nor are they seeking an offer to buy, these securities in any
jurisdiction where the offer or sale is not permitted. The information in this
prospectus supplement and the accompanying prospectus is complete and accurate
as of their respective dates, but the information may change after those dates.

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

TABLE OF CONTENTS

Prospectus Supplement

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement Summary............................................ S-3
Recent Developments...................................................... S-9
Use of Proceeds.......................................................... S-13
Capitalization........................................................... S-14
Pro Forma Financial Information.......................................... S-15
The Company.............................................................. S-23
Description of the Class A Preferred Stock............................... S-29
Federal Income Tax Considerations........................................ S-39
Underwriters............................................................. S-43
Legal Matters............................................................ S-45
Experts.................................................................. S-45
Where You Can Find More Information...................................... S-45

Prospectus

Risk Factors............................................................. 2
About This Prospectus.................................................... 14
Where You Can Find More Information...................................... 14
Forward-Looking Statements............................................... 15
The Company.............................................................. 16
Use of Proceeds.......................................................... 17
ERISA Matters............................................................ 17
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Divi-
dends................................................................... 18
Ratio of Earnings to Fixed Charges....................................... 18
Description of Common Stock.............................................. 19
Description of Preferred Stock........................................... 21
Restrictions on Ownership and Transfer................................... 27
Description of Depositary Shares......................................... 30
Description of Warrants.................................................. 34
Description of Subscription Rights....................................... 35
Federal Income Tax Considerations........................................ 36
Plan of Distribution..................................................... 58
Legal Matters............................................................ 59
Experts.................................................................. 59
</TABLE>

S-2
<PAGE>

PROSPECTUS SUPPLEMENT SUMMARY

The following summary may not contain all the information that may be
important to you. You should read this summary together with the more detailed
information included elsewhere in this prospectus supplement and the
accompanying prospectus, including the risk factors, financial data and
information concerning the REIT conversion referred to below. In addition,
important information is incorporated by reference into the accompanying
prospectus. Unless otherwise expressly stated or the context otherwise
requires, the information in this prospectus supplement assumes that the
underwriters do not exercise their option to purchase additional shares of
Class A preferred stock to cover over-allotments.

On December 29, 1998, we reincorporated in Maryland in connection with the
REIT conversion described below under "Recent Developments". As used in this
prospectus supplement, references to "we", "our", the "company" and "Host
Marriott" and similar references are to Host Marriott Corporation, a Maryland
corporation, and its consolidated subsidiaries from and after December 29, 1998
and to Host Marriott Corporation, a Delaware corporation, and its consolidated
subsidiaries before December 29, 1998, unless otherwise expressly stated or the
context otherwise requires. Information included in this prospectus supplement,
the accompanying prospectus and incorporated by reference in the accompanying
prospectus concerning the hotel industry is for the United States and has been
derived principally from publicly available information and from data provided
by Smith Travel Research. Although we believe that this information is
reliable, we have not independently verified its accuracy. All hotel room and
properties data are as of June 1, 1999 unless otherwise indicated.

The Company

We were formed as a Maryland corporation in 1998, under the name HMC Merger
Corporation, as a wholly owned subsidiary of Host Marriott Corporation, a
Delaware corporation, in connection with Host Marriott's efforts to reorganize
its business operations to qualify as a REIT for federal income tax purposes.
As part of this reorganization, which we refer to as the REIT conversion, on
December 29, 1998 we merged with Host Marriott and changed our name to Host
Marriott Corporation. As a result, we have succeeded to the hotel ownership
business formerly conducted by Host Marriott. We conduct our business as an
umbrella partnership REIT, or UPREIT, through Host Marriott, L.P., a Delaware
limited partnership, of which we are the sole general partner and in which we
hold approximately 78% of the partnership interests. In this prospectus
supplement, we refer to Host Marriott, L.P. as the operating partnership. The
"Recent Developments" section of this prospectus supplement contains a summary
of the transactions comprising the REIT conversion.

Under current federal income tax law, REITs are restricted in their ability
to derive revenues directly from the operation of hotels. Accordingly, we lease
substantially all of our hotels to certain entities we refer to as the lessees,
which are principally subsidiaries of Crestline Capital Corporation. The
lessees operate the hotels pursuant to management agreements with hotel
managers such as Marriott International, Inc., who are responsible for the day-
to-day management of the hotels. However, we are responsible for, among other
things, decisions with respect to sales and purchases of hotels, the financing
of the hotels, the leasing of the hotels, and capital expenditures for the
hotels, although some matters relating to capital expenditures are addressed in
the terms of the applicable leases and management agreements. Crestline and
Marriott International are both publicly traded companies, separate from Host
Marriott. For more information regarding Crestline's relationship with us,
please see "Recent Developments".

Our principal executive offices are located at 10400 Fernwood Road,
Bethesda, MD, 20817-1109, and our telephone number is (301) 380-9000.

S-3
<PAGE>

The Offering

Issuer................ Host Marriott Corporation

Securities Offered.... 4,000,000 shares of % Class A Cumulative Redeemable
Preferred Stock, par value $.01 per share. We may sell
up to 600,000 additional shares of Class A preferred
stock to the underwriters to cover over-allotments, if
any.

Maturity.............. The Class A preferred stock does not have any maturity
date nor are we required to redeem the Class A
preferred stock. Accordingly, the Class A preferred
stock will remain outstanding unless we decide to
redeem it. In addition, we are not required to set
aside funds to redeem the Class A preferred stock.

Dividends............. Investors will be entitled to receive cumulative cash
dividends on the Class A preferred stock at a rate of
% per annum of the $25.00 per share liquidation
preference (equivalent to $ per annum per share).
Dividends on the Class A preferred stock will be
payable quarterly in arrears on January 15, April 15,
July 15 and October 15 of each year, commencing October
15, 1999. Dividends on the Class A preferred stock will
be cumulative from the date of original issuance, which
is expected to be , 1999. Because the first
dividend payment date is October 15, 1999, the dividend
payable on each share of Class A preferred stock on
that date will be less than the amount of a full
quarterly dividend.

Optional Redemption... We may not redeem the Class A preferred stock prior to
, 2004, except under limited circumstances intended
to preserve our status as a real estate investment
trust for federal income tax purposes and the operating
partnership's status as a partnership for federal
income tax purposes. On and after , 2004, we may,
at our option, redeem the Class A preferred stock, in
whole or from time to time in part, for cash in the
amount of $25.00 per share, plus accrued and unpaid
dividends to, but not including, the date of
redemption.

Liquidation
Preference............ If we liquidate, dissolve or wind up, holders of the
Class A preferred stock will have the right to receive
$25.00 per share, plus accrued and unpaid dividends to,
but not including, the date of payment. Payment of this
liquidation preference must be made before any payment
is made to the holders of our common stock with respect
to the distribution of assets upon our liquidation,
dissolution or winding up.

Ranking............... The Class A preferred stock will rank senior to our
common stock as to the payment of dividends and the
distribution of our assets in the event of our
liquidation, dissolution or winding up.

Voting Rights......... Holders of Class A preferred stock will generally have
no voting rights. However, if we do not pay dividends
on the Class A preferred stock for six or more
quarterly dividend periods (whether or not
consecutive), the holders of the Class A preferred
stock, voting as a class with the holders of any other
class or series of our capital stock which has similar
voting rights, will be entitled to vote for the
election of two additional directors to serve on our
board of directors until we pay all dividends which we
owe on the

S-4
<PAGE>

Class A preferred stock. In addition, the affirmative
vote of the holders of at least two-thirds of the
outstanding shares of Class A preferred stock is
required for us to issue capital stock ranking senior
to the Class A preferred stock or to amend our articles
of incorporation in a manner that materially and
adversely affects the Class A preferred stock.

Listing............... We have applied for approval from the New York Stock
Exchange to list the Class A preferred stock on the
NYSE. If our application is approved, we expect that
trading of the Class A preferred stock on the NYSE will
commence within 30 days after initial delivery of the
Class A preferred stock.

Restrictions on
Ownership and
Transfer.............. The Class A preferred stock will be subject to certain
restrictions on ownership and transfer intended to
assist us in maintaining our status as a REIT for
federal income tax purposes and the status of the
operating partnership as a partnership for federal
income tax purposes. In general, no person may own, or
be deemed to own under the attribution rules of the
Internal Revenue Code, more than 9.8% of the Class A
preferred stock that is outstanding. A detailed
description of these restrictions is contained in the
accompanying prospectus under "Restrictions on
Ownership and Transfer".

Conversion............ The Class A preferred stock will not be convertible
into or exchangeable for any other securities or
property.

Use of Proceeds....... We will contribute the net proceeds from the offering
of the Class A preferred stock to the operating
partnership in exchange for preferred partnership
interests in the operating partnership which will have
rights and preferences substantially identical to those
of the Class A preferred stock. The operating
partnership will use these net proceeds for general
partnership purposes, which may include the repayment
of indebtedness and the acquisition or development of
hotel properties.

Risk Factors

You should carefully consider the matters set forth under "Risk Factors"
beginning on page 2 of the accompanying prospectus.

S-5
<PAGE>

Forward-Looking Statements

This prospectus supplement, the accompanying prospectus and the information
incorporated by reference into the accompanying prospectus include forward-
looking statements. We have based these forward-looking statements on our
current expectations and projections about future events. We intend to identify
forward-looking statements in this prospectus supplement, the accompanying
prospectus and the information incorporated by reference into the accompanying
prospectus by using words or phrases such as "anticipate", "believe",
"estimate", "expect", "intend", "may be", "objective", "plan", "predict",
"project" and "will be" and similar words or phrases, or the negative thereof.

These forward-looking statements are subject to numerous assumptions, risks
and uncertainties. Factors which may cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by us in those statements include, among
others, the following:

. national and local economic and business conditions that will affect,
among other things, demand for products and services at our hotels and
other properties, the level of room rates and occupancy that can be
achieved by such properties and the availability and terms of financing;

. our ability to maintain the properties in a first-class manner, including
meeting capital expenditure requirements;

. our ability to compete effectively in areas such as access, location,
quality of accommodations and room rate structures;

. our ability to acquire or develop additional properties and the risk that
potential acquisitions or developments may not perform in accordance with
expectations;

. changes in travel patterns, taxes and government regulations which
influence or determine wages, prices, construction procedures and costs;

. government approvals, actions and initiatives including the need for
compliance with environmental and safety requirements, and change in laws
and regulations or the interpretation thereof;

. the effects of tax legislative action, including the proposed Real Estate
Investment Trust Modernization Act of 1999 which is discussed on page S-
42;

. the effect on us and our operations of the year 2000 issue;

. our ability to satisfy complex rules in order to qualify as a REIT for
federal income tax purposes and in order for the operating partnership to
qualify as a partnership for federal income tax purposes, and our ability
to operate effectively within the limitations imposed by these rules; and

. other factors discussed under the headings "Risk Factors" and "Forward
Looking Statements" in the accompanying prospectus and in our filings
with the Securities and Exchange Commission.

Although we believe the expectations reflected in our forward-looking
statements are based upon reasonable assumptions, we can give no assurance that
we will attain these expectations or that any deviations will not be material.
We disclaim any obligations or undertaking to disseminate to you any updates or
revisions to any forward-looking statement contained in this prospectus
supplement, the accompanying prospectus and the information incorporated by
reference into the accompanying prospectus to reflect any change in our
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.

S-6
<PAGE>

Summary Historical and Pro Forma Financial Data

In the following table we set forth summary historical consolidated
financial data for us and our subsidiaries for the three fiscal years ended
December 31, 1998 and for the twelve weeks ended March 26, 1999 (our first
quarter of 1999) and March 27, 1998 (our first quarter of 1998). Effective
December 31, 1998, we changed our fiscal year to end on December 31.
Previously, our fiscal year ended on the Friday closest to January 1. The
summary historical consolidated financial data as of and for the three fiscal
years ended December 31, 1998 have been derived from our audited financial
statements. The summary historical consolidated financial data as of and for
the first quarters of 1998 and 1999 are unaudited but, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such data. Interim results
are not indicative of fiscal year performance because of the impact of seasonal
and short term variations.

Throughout 1998, we engaged in various transactions for the purposes of
qualifying as a REIT for federal income tax purposes. In order to qualify as a
REIT, we are restricted from operating hotels directly and, as part of the REIT
conversion, we have leased substantially all of our hotels to subsidiaries of
Crestline Capital Corporation. Accordingly, we do not believe that our results
of operations prior to the REIT conversion are comparable to our results of
operations following the REIT conversion.

The summary pro forma consolidated financial data set forth below reflect:

. the issuance of Class A preferred stock in this offering;

. several hotel acquisitions and dispositions consummated by us and our
subsidiaries and various financing transactions; and

. various transactions effected as part of, or contemporaneously with, the
REIT conversion.

The summary pro forma statement of operations and other data reflects the
foregoing transactions as if the transactions had been completed at the
beginning of the periods presented. As discussed further in the "Pro Forma
Financial Information" beginning on page S-15, certain of these transactions
occurred prior to March 26, 1999 and therefore were included in the March 26,
1999 historical balance sheet. Consequently no pro forma adjustments to the pro
forma balance sheet data as of March 26, 1999 are required for these
transactions. Our pro forma statement of operations and other data presented
below include only income from continuing operations and, therefore, they
exclude the operations of the discontinued senior living business.

The summary pro forma financial data set forth below are unaudited, are
based upon a number of assumptions and estimates and do not purport to be
indicative of the operating results or financial position that we would have
achieved had the transactions actually been consummated on the dates specified,
nor do they purport to be indicative of our operating results or financial
position for any future periods or dates.

The summary historical and pro forma consolidated financial data should be
read in conjunction with the audited and unaudited consolidated financial
statements which we incorporate by reference into the accompanying prospectus
and the pro forma financial information beginning on page S-15. For details
concerning the transactions reflected in the pro forma financial data and for
information regarding the assumptions and adjustments used in preparing the pro
forma financial data, investors should carefully review the documents which we
incorporate by reference.

S-7
<PAGE>

Summary Historical and Pro Forma Financial Data

<TABLE>
<CAPTION>
First Quarter(1) Fiscal Year(1)(2)
------------------------ ----------------------------------------
Pro Forma Historical Pro Forma Historical
--------- -------------- ----------- ----------------------------
1999 1999 1998(3) 1998 1998(3)(4) 1997(3)(4) 1996
--------- ------ ------- ----------- ---------- ---------- ------
(unaudited) (unaudited)
(in millions, except ratio data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of operations
data:
Revenues(5)............. $ 295 $ 307 $ 805 $1,302 $3,564 $2,875 $2,005
Income (loss) from
continuing operations.. 29 45 28 108 194 47 (13)
Income (loss) before
extraordinary
items(6)............... -- 45 30 -- 195 47 (13)
Net income (loss)(6).... -- 45 30 -- 47 50 (13)
Other data:
Ratio of earnings to
combined fixed charges
and preferred stock
dividends(7)........... 1.4x 1.6x 1.7x 1.3x 1.5x 1.3x 1.0x
Balance sheet data:
Total assets(6)(8)...... $8,504 $8,177 $6,762 -- $8,268 $6,141 $5,152
Debt(6)(8).............. 5,333 5,113 3,914 -- 5,131 3,466 2,647
</TABLE>
- --------
(1) The comparison of results for 1998, 1997 and 1996 is affected by a change
in the reporting period for our hotels not managed by Marriott
International, which resulted in the inclusion of 13 months of results in
1998 versus 12 months in 1997 and 1996 for 15 of those hotels. The
additional month of operations increased our revenues by $44 million for
1998. As a result of the reporting change, the 1999 first quarter consists
of the second and third months results of operations for 24 hotels while
the 1998 first quarter consisted of the first, second and third months
results of operations for 15 of those 24 hotels. Accordingly, first quarter
1998 revenues include approximately $54 million representing the
incremental month of operation.
(2) Fiscal year 1996 includes 53 weeks. Fiscal years 1997 and 1998 include 52
weeks.
(3) The historical financial data for fiscal years 1998 and 1997 and the first
quarter of 1998 reflect as discontinued operations our senior living
business that we formerly conducted but disposed of in the spin-off of
Crestline as part of the REIT conversion. We recorded income from the
discontinued operations, net of taxes, of $6 million, $0 and $2 million in
fiscal years 1998 and 1997 and the first quarter of 1998, respectively.
(4) In 1998, we recognized a $148 million extraordinary loss, net of taxes, on
the extinguishment of debt. In 1997, we recognized a $3 million
extraordinary gain, net of taxes, on the extinguishment of debt. Also in
1998, we recognized REIT conversion expenses of $64 million and recorded a
tax benefit of $106 million related to tax liabilities that we will not
recognize as a result of our conversion to a REIT.
(5) Historical revenue for the first quarter of 1999 and pro forma revenues
for all periods primarily represent lease income generated by our leases
with Crestline. Periods prior to 1999 have been restated in accordance
with Emerging Issues Task Force 97-2 "Application of FASB Statement No. 94
and APB Opinion No. 16 to Physician Practice Management Entities and
Certain Other Entities with Contractual Management Arrangements". EITF 97-
2 addresses the circumstances in which a management entity may include the
revenues and expenses of a managed entity in its financial statements.
Application of EITF 97-2 for the first quarter of 1998 and fiscal years
1998, 1997 and 1996 increased both historical revenues and historical
operating expenses by approximately $466 million, $2.1 billion, $1.7
billion and $1.2 billion, respectively, and had no impact on net income
(loss). Revenues for fiscal years 1998, 1997 and 1996 and the first
quarter of 1998 have also been adjusted to reclassify interest income as
revenue (previously classified as other income from operations) in order
to be consistent with our 1999 statement of operations presentation.
(6) The Securities and Exchange Commission rules do not permit the inclusion
of extraordinary items or income from discontinued operations in the pro
forma statement of operations. Accordingly, although both extraordinary
items and income from discontinued operations were present in the
historical financial statements for fiscal year 1998, they are not present
in the pro forma statement of operations data for that year. Also, pro
forma balance sheet information is only presented as of the last reporting
date and therefore no pro forma assets or debt were determined as of
December 31, 1998.
(7) The ratio of earnings to combined fixed charges and preferred stock
dividends is computed by dividing income from continuing operations before
income taxes, fixed charges and preferred stock dividends by total fixed
charges and preferred stock dividends. Fixed charges represent interest
expense (including capitalized interest), amortization of debt issuance
costs and the portion of rent expense that is deemed to represent
interest.
(8) Total assets for fiscal year 1997 include $236 million related to net
investment in discontinued operations. The first quarter of 1998 has not
been restated to reflect our former senior living business as discontinued
operations and therefore includes approximately $689 million in assets and
approximately $323 million of debt.

S-8
<PAGE>

RECENT DEVELOPMENTS

The REIT Conversion

During 1998, Host Marriott and its subsidiaries and affiliates consummated a
series of transactions intended to enable us to qualify as a REIT for federal
income tax purposes. As a result of these transactions, the hotels formerly
owned by Host Marriott and its subsidiaries and other affiliates are now owned
by the operating partnership and its subsidiaries; the operating partnership
and its subsidiaries lease substantially all of these hotels to Crestline, and
Marriott International and other hotel operators conduct the day to day
management of the hotels pursuant to management agreements with Crestline. We
intend to elect to be treated as a REIT for federal income tax purposes
effective January 1, 1999. The important transactions comprising the REIT
conversion are summarized below. A more detailed description of the
transactions comprising the REIT conversion can be found in the documents
incorporated by reference in the accompanying prospectus.

Reorganization of lodging assets under the operating partnership. During
1998, Host Marriott reorganized its hotels and certain other assets so that
they were owned by the operating partnership and its subsidiaries. Host
Marriott and its subsidiaries received a number of units of general and limited
partnership interests in the operating partnership -- which we refer to as OP
units -- equal to the number of then outstanding shares of Host Marriott common
stock, and the operating partnership and its subsidiaries assumed substantially
all of the liabilities of Host Marriott and its subsidiaries. As a result of
this reorganization and the related transactions described below, we are the
sole general partner in the operating partnership and as of June 1, 1999 held
approximately 78% of the outstanding OP units. The operating partnership and
its subsidiaries conduct our hotel ownership business. OP units owned by
holders other than us are redeemable at the option of the holder, generally
commencing one year after the issuance of their OP units. Upon redemption of an
OP unit, the holder would receive from the operating partnership cash in an
amount equal to the market value of one share of our common stock. However, in
lieu of a cash redemption by the operating partnership, we have the right to
acquire any OP unit offered for redemption directly from the holder thereof in
exchange for either one share of our common stock or cash in an amount equal to
the market value of one share of our common stock.

Host Marriott did not transfer to the operating partnership, and, therefore,
the operating partnership does not own, other assets formerly held by Host
Marriott and its subsidiaries which principally consist of 31 retirement
communities and controlling interests in the entities that currently lease our
hotels. Most of these assets are owned by Crestline, a Maryland corporation and
formerly a wholly owned subsidiary of Host Marriott. Crestline became a
separate publicly traded company on December 29, 1998 as a result of the spin-
off discussed below.

Acquisitions by the operating partnership. Host Marriott and several of its
subsidiaries were the sole general partners of eight publicly-traded limited
partnerships and four private partnerships. We obtained ownership of
substantially all of the limited partnership interests in these partnerships
during 1998. The following table lists each of these partnerships and the hotel
properties owned by them or in which they held a controlling interest.

S-9
<PAGE>

<TABLE>
<CAPTION>
Partnership Hotel Properties Rooms
- ----------- ---------------- -----
<S> <C> <C>
Public Partnerships
Atlanta Marriott Marquis II
Limited Partnership(1)....... Atlanta Marriott Marquis 1,671
Desert Springs Marriott
Limited Partnership(1)....... Desert Springs Resort and Spa, California 884
Hanover Marriott Limited
Partnership(1)............... Hanover, New Jersey 353
Marriott Hotel Properties
Limited Partnership(1)....... Orlando World Center 1,503
Harbor Beach Resort, Florida 624
Marriott Hotel Properties II
Limited Partnership(1)....... San Antonio Rivercenter 999
New Orleans 1,290
San Ramon, California 368
Santa Clara, California 754
Marriott Diversified American
Hotels Limited
Partnership(2)............... Dayton, Ohio 399
Fairview Park, Virginia 395
Livonia, Michigan 224
Fullerton, California 224
Research Triangle Park, North Carolina 224
Southfield, Michigan 226
Mutual Benefit Chicago
Marriott Suite Hotel Limited
Partnership(2)............... Chicago O'Hare Suites 256
Potomac Hotel Limited
Partnership(2)............... Albuquerque, New Mexico 411
Greensboro/High Point, North Carolina 299
Houston Medical Center 386
Mountain Shadows Resort, Arizona 337
Miami Biscayne Bay 605
Raleigh Crabtree, North Carolina(3) 375
Seattle Sea-Tac Airport 459
Tampa Westshore(3) 309
Private Partnerships
HMC BN Limited
Partnership(4)............... Ritz-Carlton, Buckhead, Georgia 553
Ritz-Carlton, Naples, Florida 463
Ivy Street Hotel Limited
Partnership(4)............... Atlanta Marriott Marquis 1,671
Times Square Marquis Hotel,
L.P.(4)...................... New York Marriott Marquis 1,919
HMC/RGI Hartford Limited
Partnership(4)............... Hartford/Farmington, Connecticut 380
</TABLE>
- --------
(1) We owned or had a controlling interest in these partnerships prior to the
REIT conversion and these properties were previously consolidated for
financial accounting purposes.
(2) We owned a general partnership interest in these partnerships prior to the
REIT conversion but did not control the partnerships and therefore prior to
the REIT conversion did not consolidate these partnerships for financial
accounting purposes.
(3) We consolidated these properties through our investments, including the
ownership of mortgage notes, prior to the REIT conversion.
(4) We acquired substantially all of the unaffiliated partnership interests in
these partnerships prior to the REIT conversion and these properties were
previously consolidated for financial accounting purposes.

As part of the REIT conversion, the operating partnership, directly and
through its subsidiaries, acquired substantially all of the partnership
interests in the public and private partnerships indicated in the table above
which it did not already own in exchange for approximately 26 million OP units.
Through June 1, 1999, approximately 8.6 million of these OP units had been
converted into shares of our common stock. Additionally, approximately 0.3
million OP units were exchanged for notes of the operating partnership with an
aggregate principal amount of approximately $3 million. In connection with the
operating partnership's issuance of OP units to acquire the public and private
partnerships referred to above and the OP units issued in the Blackstone

S-10
<PAGE>

acquisition discussed below, the operating partnership issued to parties other
than Host Marriott and its subsidiaries a total of approximately 73.5 million
OP units, of which approximately 64.6 million were outstanding as of June 1,
1999. As of July 1999, 23.9 million OP units are redeemable. The remaining
outstanding OP units are restricted from being redeemed until October 1999 and
January 2000 when 11.9 million and 28.8 million OP units, respectively, are
eligible for redemption.

In addition to the partnerships listed above, we own controlling interests
in private partnerships which we consolidate for financial accounting purposes.
Certain of the minority partners in these partnerships were granted the right
to exchange their interests in these partnerships for OP units, subject to
certain conditions. We estimate that approximately 9 million OP units could be
issued at various points in time in the event that all such minority partners
were to elect to exchange their partnership interests.

On December 30, 1998, the operating partnership also acquired from The
Blackstone Group, a Delaware limited partnership, and a series of funds
controlled by affiliates of Blackstone Real Estate Partners (together, the
"Blackstone Entities"), ownership of, or a controlling interest in, twelve
upscale and luxury full-service hotels in the U.S., a mortgage loan secured by
a thirteenth hotel and certain other assets. As part of the Blackstone
acquisition, the operating partnership also acquired a 25% interest in the U.S.
Swissotel management company which was immediately sold to Crestline at book
value. In exchange for these assets, the operating partnership issued to the
Blackstone Entities approximately 47.7 million OP units. The operating
partnership also assumed debt of, and made cash payments to, the Blackstone
Entities totaling approximately $920 million and distributed approximately 1.4
million shares of Crestline common stock and other consideration to the
Blackstone Entities. As of June 1, 1999, the Blackstone Entities owned
approximately 47.7 million OP units which represented 16.4% of the OP units
outstanding as of that date. The Blackstone hotel portfolio consisted of two
Ritz-Carlton, two Four Seasons, one Grand Hyatt, three Hyatt Regency and four
Swissotel properties. John G. Schreiber, co-chairman of Blackstone Real Estate
Partners' investment committee, is a member of our board of directors. The
total cost of the Blackstone acquisition was approximately $1.55 billion.

In April 1999, we completed a 210-room addition to the Philadelphia Marriott
for $37 million. In July 1999, we refinanced the addition with $23 million of
mortgage debt due 2009 at an interest rate of approximately 8.7%.

On June 29, 1999, the operating partnership completed a merger transaction
in which it acquired the general and limited partnership interests of two
private partnerships that owned the remaining 6.1% partnership interests in
Times Square Marquis Hotel, L.P. not already owned by the operating
partnership. In the merger transaction, the partners of the two private
partnerships received approximately 585,000 cumulative redeemable preferred OP
units in exchange for their general and limited partnership interests in the
two private partnerships. The cumulative redeemable preferred OP units had an
aggregate value of approximately $7.4 million as of the date of the merger
transaction. One year from the date of issuance, the cumulative redeemable
preferred OP units are convertible into common OP units which are in turn
redeemable for cash or, at our option, for shares of our common stock on the
same terms as the common OP units described above. In addition, following the
merger transaction, the operating partnership repaid a total of approximately
$5.9 million of indebtedness of the two private partnerships that it assumed in
the merger transaction.

Contribution of assets to non-controlled subsidiaries. In connection with
the REIT conversion, two taxable corporations were formed in which the
operating partnership owns approximately 95% of the economic interest but none
of the voting interest. We refer to these two subsidiaries as the non-
controlled subsidiaries. The non-controlled subsidiaries hold various assets
which were originally contributed by Host Marriott and its subsidiaries to the
operating partnership, but whose direct ownership by the operating partnership
or its other subsidiaries would jeopardize our status as a REIT and the
operating partnership's status as a partnership for federal income tax
purposes. These assets primarily consist of interests in certain partnerships
or other interests in hotels which are not leased, and certain furniture,
fixtures and equipment -- also known as FF&E -- used in the hotels and certain
international hotels. The operating partnership has no control over the
operation or management of the hotels or other assets owned by the non-
controlled subsidiaries. The Host Marriott Statutory

S-11
<PAGE>

Employee/Charitable Trust acquired all of the voting common stock of each non-
controlled subsidiary, representing, in each case, the remaining approximately
5% of the total economic interests in each non-controlled subsidiary. The
beneficiaries of the Employee/Charitable Trust are a trust formed for the
benefit of certain employees of the operating partnership and the J. Willard
and Alice S. Marriott Foundation.

Leases of hotels. Under current federal income tax law, REITs are restricted
in their ability to derive revenues from the operation of hotels. However, they
can derive rental income by leasing hotels. Therefore, the operating
partnership and its subsidiaries lease virtually all of their hotel properties
to subsidiaries of Crestline. The lessees pay rent to the operating partnership
and its subsidiaries generally equal to the greater of (1) a specified minimum
rent or (2) rent based on specified percentages of different categories of
aggregate sales at the relevant hotels. Generally, there is a separate lessee
for each hotel property or there is a separate lessee for each group of hotel
properties that has separate mortgage financing or has owners in addition to
the operating partnership and its wholly owned subsidiaries. The lessees for
all but four of our hotels are wholly owned subsidiaries of Crestline, formed
as limited liability companies, each of whose purpose is limited to acting as
lessee under an applicable lease. The limited liability company agreement for
each Crestline lessee provides that Crestline will have full control over the
management of the business of the lessee, except with respect to certain
decisions for which the consent of other members or the hotel manager will be
required. In addition, although the Crestline lessees are wholly owned
subsidiaries of Crestline, Marriott International or its appropriate subsidiary
has a non-economic voting interest on certain matters pertaining to hotels
which are managed by Marriott International or its subsidiaries.

Prior to the REIT conversion, our hotels were managed by Marriott
International and other hotel operating companies pursuant to hotel management
agreements. In connection with the REIT conversion, these management agreements
were assigned to the lessees for the term of the applicable leases. Each of the
management agreements provides for base and incentive management fees, plus
reimbursement of certain costs. So long as the leases are in effect, such fees
and cost reimbursements are the primary obligation of the lessees and not the
operating partnership or its subsidiaries, although the operating partnership
or its subsidiaries remain liable under the management agreements to the extent
such fees and reimbursements are not paid by the lessees. The operating
partnership retains contingent liability under the management agreements for
all other obligations in the event that the lessees do not perform and also
remains primarily liable for certain obligations under the management
agreements.

Proposed legislation has been introduced in both the House of
Representatives and the Senate. The legislation would allow a REIT to own up to
100% of the voting stock of taxable REIT subsidiaries. In the event that the
legislation is enacted in its current form it would enable the operating
partnership to lease its hotels to wholly owned taxable subsidiaries. If this
were to occur, the operating partnership, at its discretion, could terminate
the leases with Crestline upon payment of a termination fee equal to the fair
market value of Crestline's interest in the leases over the remaining terms of
the leases. For a more detailed description of this legislative proposal,
please see "Federal Income Tax Considerations--Legislative Proposals" on page
S-42.

Crestline's spin-off and other stockholder distributions. As part of the
REIT conversion, Host Marriott made taxable distributions to its stockholders
in which they received, for each share of common stock, (1) one-tenth of one
share of common stock of Crestline and (2) either $1 in cash or 0.087 share of
our common stock at the election of the stockholder. The aggregate value of the
Crestline common stock, our common stock and cash distributed to stockholders
of Host Marriott was approximately $510 million.

Mortgage Financing

In July 1999, we refinanced $592 million of mortgage debt secured by eight
hotel properties with new mortgage debt of approximately $665 million at an
interest rate of approximately 7.5% per annum and due 2009. The related
interest rate swap agreements on the prior mortgages were terminated. The new
mortgage loans have a term of ten years and will be amortized over a twenty
year schedule, with the unamortized balance due at maturity.

S-12
<PAGE>

USE OF PROCEEDS

We expect our net proceeds from the offering, after deducting the
underwriting discounts and commissions and estimated expenses payable by us,
will be approximately $96 million, or approximately $110 million if the over-
allotment option granted to the underwriters is exercised in full. We will
contribute the net proceeds from the offering to the operating partnership in
exchange for preferred OP units which will have rights and preferences
substantially identical to those of the Class A preferred stock. The operating
partnership will use the net proceeds for general partnership purposes, which
may include the repayment of indebtedness and the acquisition or development of
hotel properties. Pending application of the net proceeds by the operating
partnership for the foregoing purposes, the operating partnership may invest
the net proceeds in short-term interest bearing investment grade securities.

S-13
<PAGE>

CAPITALIZATION

In the following table we set forth our capitalization as of March 26, 1999
on an historical basis and on a pro forma basis after giving effect to the
transactions described in footnotes (1), (4) and (5) below, including the
issuance and sale of the Class A preferred stock offered hereby, as if such
transactions had occurred as of March 26, 1999. The following table should be
read in conjunction with our combined consolidated financial statements and the
notes thereto incorporated by reference in the accompanying prospectus and the
unaudited pro forma financial information on page S-15.

<TABLE>
<CAPTION>
As of March 26, 1999
------------------------------
Pro
Historical Forma(1)
------------- ------------
(unaudited, in millions)
<S> <C> <C>
Debt
Senior notes of the
operating partnership
7 7/8% Series A Senior
Notes due 2005......... $ 500 $ 500
7 7/8% Series B Senior
Notes due 2008......... 1,192(2) 1,192(2)
8.45% Series C Senior
Notes due 2008......... 498(3) 498(3)
8 3/8% Series D Senior
Notes due 2006......... 300 --
8 3/8% Series E Senior
Notes due 2006......... -- 300(4)
Other senior notes........ 55 55
Mortgage debt............. 2,111 2,331(5)
Bank credit facility...... 350(6) 350(6)
Other debt................ 107 107
------------ ------------
Total debt.................. 5,113 5,333
------------ ------------
Minority interests(7)....... 365 372
Company-obligated
mandatorily redeemable pre-
ferred securities of sub-
sidiary trust holding
solely subordinated debt
securities of the company.. 550 550
Stockholders' equity
Preferred Stock, par value
$.01 per share, 50
million shares
authorized;
0 shares and 4 million
shares, Class A
Cumulative Redeemable
Preferred Stock
(liquidation preference
$25.00 per share) issued
and outstanding,
historical and pro forma,
respectively ............ -- -- (8)
Common Stock, $.01 par
value per share, 750
million shares
authorized;
227.6 million shares
issued and outstanding
for both historical and
pro forma................ 2 2
Additional paid-in
capital.................. 1,864 1,960
Accumulated other
comprehensive income..... (5) (5)
Retained (deficit)
earnings................. (558) (554)
------------ ------------
Total stockholders' equity.. 1,303 1,403
------------ ------------
Total capitalization........ $ 7,331 $ 7,658
============ ============
</TABLE>
- --------
(1) Reflects the estimated net proceeds to us from this offering of Class A
preferred stock and acquisitions, dispositions and other financing
transactions that occurred subsequent to March 26, 1999. See "Pro Forma
Financial Information" on page S-15 for further details.
(2) Amount is net of an $8 million discount.
(3) Amount is net of a $2 million discount.
(4) The Series D senior notes were issued on February 25, 1999. The operating
partnership intends to exchange them for a like principal amount of its 8
3/8% Series E senior notes. This amount assumes 100% participation in the
proposed exchange offer.
(5) The incremental increase in mortgage debt of $220 million on a pro forma
basis is due to the refinancing of $592 million mortgage debt on eight
properties completed in July 1999, the April 1999 refinancing of the $121
million mortgage on the New York Marriott Marquis with a new $245 million
mortgage and the July 1999 refinancing of the $23 million mortgage debt on
the Philadelphia Marriott.
(6) Represents outstanding borrowings under our bank credit facility at March
26, 1999. At that date, an additional $900 million was available under the
revolving portion of the bank credit facility subject to the terms and
conditions thereof.
(7) Represents approximately 64.6 million and 65.1 million OP units on a
historical and pro forma basis, respectively, held by unaffiliated parties
which represent approximately 22% of the OP units outstanding on both a
historical and pro forma basis.
(8) Amount is less than $1 million.

S-14
<PAGE>

PRO FORMA FINANCIAL INFORMATION

In connection with the REIT conversion, substantially all of Host
Marriott's and its subsidiaries assets and liabilities were contributed to and
assumed by the operating partnership. The pro forma financial information set
forth below is based on Host Marriott's audited consolidated financial
statements for the fiscal year ended December 31, 1998 and unaudited financial
statements for the twelve weeks ended March 26, 1999.

Our pro forma financial information reflects the issuance and sale of the
Class A preferred stock in this offering, various transactions effected as
part of, or contemporaneously with, the REIT conversion and other 1999 and
1998 transactions, acquisitions and dispositions consummated by us and
financing transactions and other transactions relating to the REIT conversion.

Our unaudited pro forma statements of operations reflect the transactions
described below for the fiscal year ended December 31, 1998 and the twelve
weeks ended March 26, 1999 as if those transactions had been completed at the
beginning of the periods presented. Our unaudited pro forma statements of
operations which we present below include only income from continuing
operations and therefore exclude the operations of the discontinued senior
living business which were included as part of the Crestline distribution.

The pro forma financial statements reflect the following acquisitions,
dispositions and other activities that are not related to the REIT conversion:

1999 Transactions

. Offering of Class A preferred stock made hereby

. July refinancing of the mortgages on eight hotels

. June acquisition of two private partnerships which owned minority
interests in the New York Marriott Marquis Hotel in exchange for
preferred OP units and the assumption and repayment of certain
indebtedness of the two private partnerships

. April addition to the Philadelphia Marriott and the related July
refinancing of the mortgage debt on the addition

. April refinancing of the mortgage on the New York Marriott Marquis

. February issuance of Series D senior notes

. Disposition of two hotels

1998 Transactions

. December acquisition of properties and other assets from the Blackstone
Entities

. December issuance of Series C senior notes

. August issuance of Series A senior notes and Series B senior notes and
retirement of previously outstanding senior notes

. Acquisition of, or purchase of controlling interests in, eleven hotels

. Purchase of minority interests in two hotels

. Disposition of two hotels

All of the above transactions except for this offering of Class A preferred
stock, the refinancing of the mortgages on eight hotels, the acquisition of
two private partnerships, the refinancing of the New York Marriott Marquis,
the addition, and refinancing of the mortgage debt on the addition, to the
Philadelphia Marriott and the disposition of one hotel are already reflected
in our consolidated balance sheet as of March 26, 1999 and, therefore, no pro
forma adjustments for these transactions were necessary in the unaudited pro
forma balance sheet.

The pro forma statements of operations reflect the following transactions
effected as part of, or contemporaneously with, the REIT conversion, all of
which are reflected in the historical balance sheet as of March 26, 1999:

S-15
<PAGE>

. 1998 contribution of assets and liabilities to the non-controlled
subsidiaries, including the sale of certain FF&E to the non-controlled
subsidiaries

. 1998 acquisitions of eight publicly-traded partnerships in exchange for
OP units

. 1998 acquisition of minority interests in four private partnerships in
exchange for OP units

. 1998 lease of substantially all of our hotel properties to Crestline and
conversion of revenues and certain operating expenses to rental income

. 1998 adjustment to remove deferred taxes and the impact on the tax
provision resulting from the change in tax status related to the REIT
conversion

. 1999 special dividend to Host Marriott shareholders of either .087
shares of our common stock or $1.00 in cash per share of Host Marriott
common stock, at the election of each shareholder ("Special Dividend")

. 1998 sale of an investment in a subsidiary to Crestline

Our unaudited pro forma financial statements do not purport to represent
what our results of operations or financial condition would actually have been
if these transactions had in fact occurred at the beginning of the periods
presented, or to project our results of operations or financial condition for
any future period.

Our unaudited pro forma financial statements are based upon available
information and upon assumptions and estimates, some of which are set forth in
the notes to the unaudited pro forma financial statements, that we believe are
reasonable under the circumstances. The unaudited pro forma financial
statements and accompanying notes should be read in conjunction with the
financial statements and notes thereto incorporated by reference in the
accompanying prospectus.

S-16
<PAGE>

UNAUDITED PRO FORMA BALANCE SHEET
March 26, 1999
(in millions, except share amounts)

<TABLE>
<CAPTION>
A B/C D/E F
Host Preferred Mortgage
Marriott Stock Debt Pro
Historical Offering Refinancing Acquisitions Disposition Forma
---------- --------- ----------- ------------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Property and equipment,
net.................... $ 7,173 $-- $-- $50 $(11) $7,212
Notes and other
receivables, net....... 202 -- -- -- -- 202
Rent receivable......... 78 -- -- -- -- 78
Investments in
affiliates............. 44 -- -- -- -- 44
Other assets............ 396 -- 12 -- -- 408
Cash and cash
equivalents ........... 284 96 185 (20) 15 560
------- ---- ---- --- ---- ------
$ 8,177 $ 96 $197 $30 $ 4 $8,504
======= ==== ==== === ==== ======
LIABILITIES AND EQUITY
Debt.................... $ 5,113 $-- $197 $23 $-- $5,333
Accounts payable and
accrued expenses....... 162 -- -- -- -- 162
Deferred income taxes... 97 -- -- -- -- 97
Other liabilities....... 439 -- -- -- -- 439
------- ---- ---- --- ---- ------
Total liabilities....... 5,811 -- 197 23 -- 6,031
Minority interests...... 513 -- -- 7 -- 520
Convertible preferred
securities of
subsidiary trust....... 550 -- -- -- -- 550
Equity
Common stock............ 2 -- -- -- -- 2
Preferred stock (on a
pro forma basis 4.0
million shares
outstanding)............ -- -- -- -- -- --
Additional paid-in
capital................ 1,864 96 -- -- -- 1,960
Accumulated other
comprehensive loss..... (5) -- -- -- -- (5)
Retained deficit........ (558) -- -- -- 4 (554)
------- ---- ---- --- ---- ------
$ 8,177 $ 96 $197 $30 $ 4 $8,504
======= ==== ==== === ==== ======
</TABLE>

See Notes to the Unaudited Pro Forma Financial Statements.

S-17
<PAGE>

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Fiscal Year 1998
(in millions, except per share amounts)

<TABLE>
<CAPTION>
G H/K I J L N O P
Debt
Host Issuance, Non- Public Private Earnings
Marriott Blackstone Acquisi- Repayment & Controlled Partnership Partner- & Profits
Historical Acquisition tions Dispositions Refinancing Subsidiaries Mergers ships Distribution
---------- ----------- -------- ------------ ----------- ------------ ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Rental
revenues....... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Hotel sales..... 3,442 459 116 (48) -- (73) 223 -- --
Net gains
(losses) on
property
transactions... 57 -- -- (53) -- -- -- -- --
Interest
income......... 51 (13) (17) (1) -- 4 1 -- (4)
Other revenues.. 14 -- -- -- -- (3) -- -- --
------ ----- ----- ----- ----- ----- ----- ----- -----
Total revenues.. 3,564 446 99 (102) -- (72) 224 -- (4)
------ ----- ----- ----- ----- ----- ----- ----- -----
EXPENSES
Hotels.......... (2,824) (382) (98) 39 -- 55 (194) (2) --
Minority
interest....... (52) -- (1) -- -- 4 26 1 --
Corporate
expenses....... (50) -- -- (1) -- 1 -- -- --
REIT conversion
expenses....... (64) -- -- -- -- -- -- -- --
Interest
expense........ (335) (39) (3) 1 (57) 7 (29) -- --
Dividends on
convertible
preferred
securities of
subsidiary
trust.......... (37) -- -- -- -- -- -- -- --
Other........... (28) -- -- -- -- 2 -- -- --
------ ----- ----- ----- ----- ----- ----- ----- -----
Income (loss)
before income
taxes.......... 174 25 (3) (63) (57) (3) 27 (1) (4)
Benefit
(provision) for
income taxes... 20 (10) 1 25 23 3 (11) -- 1
------ ----- ----- ----- ----- ----- ----- ----- -----
Income (loss)
from continuing
operations..... $ 194 $ 15 $ (2) $ (38) $ (34) $ -- $ 16 $ (1) $ (3)
====== ===== ===== ===== ===== ===== ===== ===== =====
Basic earnings
per share from
continuing
operations(U).. $ 0.90
======
<CAPTION>
R/T M/Q S
Other Lease Income
REIT Conver- Tax Pro
Activities sion Adjustment Forma
---------- -------- ---------- -------
<S> <C> <C> <C> <C>
REVENUE
Rental
revenues....... $ -- $ 1,260 $ -- $1,260
Hotel sales..... -- (4,119) -- --
Net gains
(losses) on
property
transactions... -- -- -- 4
Interest
income......... -- 6 -- 27
Other revenues.. -- -- -- 11
---------- -------- ---------- -------
Total revenues.. -- (2,853) -- 1,302
---------- -------- ---------- -------
EXPENSES
Hotels.......... -- 2,806 -- (600)
Minority
interest....... (2) -- -- (24)
Corporate
expenses....... -- -- -- (50)
REIT conversion
expenses....... 64 -- -- --
Interest
expense........ -- -- -- (455)
Dividends on
convertible
preferred
securities of
subsidiary
trust.......... -- -- -- (37)
Other........... -- -- -- (26)
---------- -------- ---------- -------
Income (loss)
before income
taxes.......... 62 (47) -- 110
Benefit
(provision) for
income taxes... (25) 19 (47) (2)
---------- -------- ---------- -------
Income (loss)
from continuing
operations..... $ 37 $ (28) $ (47) $ 108
========== ======== ========== =======
Basic earnings
per share from
continuing
operations(U).. $ 0.48
=======
</TABLE>

See Notes to the Unaudited Pro Forma Financial Statements.

S-18
<PAGE>

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the twelve weeks ended March 26, 1999
(in millions, except per share amounts)

<TABLE>
<CAPTION>
J I
Mortgage
Host Marriott, Debt Pro
Historical Refinancing Dispositions Forma
-------------- ----------- ------------ -----
<S> <C> <C> <C> <C>
REVENUE
Rental revenues................ $ 286 $-- $ (1) $ 285
Net gains on property
transactions.................. 12 -- (11) 1
Interest income................ 8 -- -- 8
Other revenues................. 1 -- -- 1
----- ---- ---- -----
Total revenues................. 307 -- (12) 295
----- ---- ---- -----
EXPENSES
Hotels......................... (124) -- -- (124)
Minority interest.............. (18) -- -- (18)
Corporate expenses............. (8) -- -- (8)
Interest expense............... (99) (4) -- (103)
Dividends on convertible
preferred securities of
subsidiary trust.............. (9) -- -- (9)
Other.......................... (4) -- -- (4)
----- ---- ---- -----
Income (loss) before income
taxes......................... 45 (4) (12) 29
Benefit for income taxes....... -- -- -- --
----- ---- ---- -----
Income (loss) from continuing
operations.................... $ 45 $ (4) $(12) $ 29
===== ==== ==== =====
Basic earnings per share from
continuing operations (U)..... $0.20 $0.13
===== =====
</TABLE>

See Notes to the Unaudited Pro Forma Financial Statements.

S-19
<PAGE>

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

A. Represents the adjustment to record the issuance of approximately 4
million shares of Class A preferred stock at an assumed dividend rate of
approximately 10% per annum:

.Record net cash proceeds of $96 million

.Record preferred stock of $100 million, net of $4 million of estimated
transaction costs

B. Represents the adjustment to record the April 1999 refinancing of the
$121 million mortgage on the New York Marriott Marquis with a $245 million
mortgage at an interest rate of 7.4% and maturing June 2000.

.Record increase in cash of $121 million

.Record deferred financing costs of $3 million

.Record net increase in mortgage debt of $124 million

C. Adjustment to record the July 1999 refinancing of mortgages for eight
hotel properties with $665 million of new mortgages due 2009 at an interest
rate of approximately 7.5% per annum.

.Record net increase in cash of $64 million

.Record deferred financing costs of $9 million, related to the new
mortgages

. Record net increase in debt of $73 million resulting from the repayment
of $592 million of mortgage debt with $665 million of new mortgage debt

D. Represents the adjustment to record the acquisition of minority partners'
interest in the New York Marriott Marquis.

.Record increase in property of $13 million

.Record decrease in cash of $6 million

. Record increase in minority interest liability of $7 million for
approximately 585,000 preferred OP Units issued

E. Represents the adjustment to record the $37 million addition to the
Philadelphia Marriott completed in April 1999 and refinanced with $23 million
of mortgage debt due 2009 at an interest rate of approximately 8.7%.

.Record increase in property of $37 million

.Record the decrease in cash of $14 million

.Record the increase in mortgage debt of $23 million.

F. Represents the adjustment to record the sale of the Saddle Brook
Marriott:

.Record the decrease in property and equipment of $11 million

.Record the increase in cash for the sale proceeds of $15 million

.Record the increase in equity of $4 million from the gain on disposition

G. Represents the adjustment to record the historical revenues, operating
expenses, interest expense, and income taxes and to reduce interest income
associated with the Blackstone acquisition.

H. Represents the adjustment to record the historical revenues, operating
expenses, minority interest, interest expense, and income taxes and to reduce
interest income associated with the 1998 acquisition of, or purchase of
controlling interests in, 11 full-service hotels.

I. Represents the adjustment to record the historical revenues, operating
expenses, minority interest, interest expense, and income taxes and to reduce
interest income for the 1998 sale of the New York Marriott East Side and the
Napa Valley Marriott, and the 1999 sale of the Minneapolis/Bloomington Airport
Marriott and the Saddle Brook Marriott, including the elimination of the non-
recurring gains on the sales totalling $50 million and related taxes of $20
million in fiscal year 1998 and the $11 million gain in the first quarter of
1999.

S-20
<PAGE>

J. Represents the adjustment to record interest expense and related
amortization of deferred financing fees, reduce interest income, and to record
income taxes as a result of the issuance of the Series A senior notes, the
Series B senior notes, the Series C senior notes, the Series D senior notes,
the refinancing of the New York Marriott Marquis and the repayment or
refinancing of the various mortgages, the old Host Marriott credit facility and
outstanding senior notes. The adjustment excludes the extraordinary loss of
$148 million, net of taxes, resulting from the write-off of deferred financing
fees and the payment of bond tender and consent fees related to the outstanding
senior notes which were repurchased. The change in interest expense related to
the Series D senior notes and the associated repayment or refinancing of
various mortgages was not material in the first quarter of 1999.

The following table represents the adjustment to interest expense, including
amortization of deferred financing fees, for the following periods:

<TABLE>
<CAPTION>
Fiscal Year First Quarter
1998 1999
----------- -------------
<S> <C> <C>
Series A and Series B senior notes.................. $(86) $--
Credit facility..................................... (17) --
Series C senior notes............................... (40) --
Series D senior notes............................... (26) --
Old senior notes.................................... 72 --
Old credit facility................................. 2 --
Debt repaid, refinanced or acquired with proceeds of
Series C senior notes.............................. 17 --
Debt repaid, refinanced, or acquired with proceeds
of Series D senior notes........................... 24 --
New York Marriott Marquis refinancing............... 4 (2)
Debt refinanced for eight hotel properties.......... (7) (1)
---- ----
$(57) $ (3)
==== ====
</TABLE>

K. Represents the adjustment to record interest expense and related
amortization of deferred financing fees and reduce interest income as a result
of the $23 million mortgage debt on the addition to the Philadelphia Marriott.

L. Represents the adjustment for revenues, operating expenses, minority
interest, interest expense, corporate expenses, income taxes and interest
income of the non-controlled subsidiaries and to reflect our share of their
income as equity in earnings of affiliates.

M. Represents the adjustment to reduce depreciation expense by $8 million
for fiscal year 1998 related to certain furniture and equipment sold to the
non-controlled subsidiaries, record interest income of approximately $1 million
for fiscal year 1998 earned on the $15 million of 8.75% notes issued to us by
the non-controlled subsidiaries and reduce lease payments to us from the
lessees.

N. Represents the adjustment to record the historical revenues, operating
expenses, minority interest, interest expense, interest income and income taxes
associated with the publicly-traded partnerships, including three partnerships
not previously consolidated.

O. Represents the adjustment to record additional depreciation expense and
the decrease in minority interest expense related to the purchase of the
remaining minority interests in the private partnerships.

P. Represents the adjustment to reduce interest income and related income
tax expense for the $69 million cash payment made as part of the Special
Dividend to shareholders of Host Marriott.

Q. Represents the adjustment to remove hotel revenues of $4,119 million and
management fees and other expenses of $2,806 million for fiscal year 1998, and
to record rental revenues associated with the leasing of substantially all of
our hotel properties to Crestline and interest income of $6 million for fiscal
year 1998 earned on the $95 million in 5.12% notes issued to us by Crestline
and one of the non-controlled subsidiaries. Rental revenues under the leases
are based on the greater of percentage rent or minimum rent. Total rent in the

S-21
<PAGE>

pro forma statements of operations is calculated based on the historical gross
sales of the property and the negotiated rental rates and thresholds by
property as if the leases were entered into on the first day of fiscal year
1998. There are generally three sales categories utilized in the rent
calculation: rooms, food and beverage, and other. For rooms and food and
beverage, there generally are three tiers of rent with two thresholds, while
the other category generally has one tier of rent with no threshold. The
percentage rent thresholds are increased annually on the first day of each year
after the initial lease year based on a blended increase of the consumer price
index and a wage and benefit index.

R. Represents the adjustment to record minority interest expense related to
amendments made to partnership agreements in connection with the REIT
conversion.

S. Represents the adjustment to the income tax provision to reflect the REIT
conversion.

T. Represents the adjustment to eliminate non-recurring expenses incurred in
connection with the REIT conversion of $64 million.

U. The historical weighted average common shares outstanding was 216.3
million and 226.9 million for fiscal year 1998 and first quarter of 1999,
respectively. On a pro forma basis weighted average common shares outstanding
for fiscal year 1998 would be 224.8 million to reflect shares issued in
conjunction with the REIT conversion.

S-22
<PAGE>

THE COMPANY

We are a self-managed and self-administered real estate investment trust, or
REIT, owning full service hotel properties. Through our subsidiaries, we
currently own 124 hotels, representing approximately 58,000 rooms located
throughout the United States and in Toronto and Calgary, Canada. Most of our
hotels are operated under the Marriott brand name. In addition, we own hotels
operated under other major brands such as Ritz-Carlton, Four Seasons, Swissotel
and Hyatt. These brands are among the most respected and widely recognized
brand names in the lodging industry. As we describe more fully below, our
hotels are held by our subsidiaries and leased by them to lessees, principally
subsidiaries of Crestline. The hotels are managed on behalf of the lessees by
subsidiaries of Marriott International and other companies.

As the sole general partner of the operating partnership, we are responsible
for, among other things, decisions with respect to sales and purchases of
hotels, the financing of the hotels, the leasing of the hotels, and capital
expenditures for the hotels, although some matters relating to such capital
expenditures are addressed in the terms of the applicable leases and management
agreements.

Under current federal income tax law, REITs are restricted in their ability
to derive revenues directly from the operation of hotels. Therefore, the
operating partnership and its subsidiaries lease substantially all of our
hotels to certain entities we refer to as the lessees. The lessees pay rent to
the operating partnership and its subsidiaries generally equal to the greater
of (1) a specified minimum rent or (2) rent based on specified percentages of
different categories of aggregate sales at the relevant hotels. The lessees
operate the hotels pursuant to management agreements with the managers. Each of
the management agreements provides for base and incentive management fees, plus
reimbursement of certain costs, as further described below. So long as the
leases are in effect, such fees and cost reimbursements are the primary
obligation of the lessees and not the operating partnership or its
subsidiaries, although the operating partnership or its subsidiaries remain
liable under the management agreements to the extent such fees and
reimbursements are not paid by the lessees. The operating partnership retains
contingent liability under the management agreements for all other obligations
in the event that the lessees do not perform and also remains primarily liable
for certain obligations under the management agreements. A summary of material
terms of these leases and management agreements is provided in the documents
incorporated by reference in the accompanying prospectus.

The leases, through the percentage rent provisions, are designed to allow
the operating partnership and its subsidiaries to participate in any sales
growth above specified levels at the hotels. Although the economic trends
affecting the hotel industry will be a major factor in determining whether
there will be growth in lease revenues, the abilities of the lessees and the
managers will also have a material impact on future results of operations.

The operating partnership intends to continue to pursue external growth
through new acquisitions. In addition, the operating partnership intends to
carefully and periodically review its portfolio to identify opportunities to
selectively enhance existing assets to improve operating performance through
major capital improvements. The leases of the operating partnership and its
subsidiaries provide the operating partnership and its subsidiaries with the
right to approve and finance major capital improvements.

S-23
<PAGE>

Business Strategy

Our primary objective is to acquire upscale and luxury hotels and achieve
long-term sustainable growth in "funds from operations" per common share and
cash flow. Funds from operations, or FFO, is defined as our net income computed
in accordance with generally accepted accounting principles, excluding gains or
losses from debt restructuring and sales of properties, plus real estate-
related depreciation and amortization, and after adjustments for less than 100%
owned partnerships and joint ventures. Our portfolio has grown since the
beginning of 1994 as a result of our acquisition of 105 hotels for
approximately $6.2 billion. We now own 124 hotels representing approximately
58,000 rooms in the United States and Toronto and Calgary, Canada.

Although competition for acquisitions has increased, we believe that the
upscale and luxury segments of the hotel market offer opportunities to acquire
assets at attractive multiples of cash flow and at discounts to replacement
value. We have increased our pool of potential acquisition candidates by
including select non-Marriott and non-Ritz-Carlton hotels that offer long-term
growth potential and are consistent with the overall quality of our current
portfolio. We will focus on upscale and luxury hotels in difficult to duplicate
locations with high barriers to entry, such as hotels located in downtown,
airport and resort/convention locations, which are operated by quality
managers. For example, in December 1998, we consummated the Blackstone
acquisition for approximately $1.55 billion in a combination of OP units,
assumed debt, and other consideration. The Blackstone acquisition included
twelve luxury hotels operated under the Hyatt, Four Seasons, Swissotel and
Ritz-Carlton brand names.

We also plan to selectively expand our existing upscale and luxury hotels
and to develop new upscale and luxury hotels in major urban markets and
convention/resort locations with strong growth prospects, unique or difficult
to duplicate sites, high barriers to entry for other new hotels and limited new
supply. We intend to target development projects that show promise of providing
financial returns that are superior to those which could have been attained
through acquisitions of upscale and luxury hotels. For example, in 1997, Host
Marriott announced that it would develop the 717-room Tampa Convention Center
Marriott for $104 million, including a $16 million subsidy provided by the City
of Tampa. The hotel is expected to open in the spring of 2000.

We plan to increase the value of our existing portfolio by selectively re-
investing in the expansion and capital improvement of properties where strong
market demand presents an opportunity to enhance hotel performance and create
additional value. We look for projects which we believe present low risks and
the potential for superior returns. For example during 1998, we completed a $25
million renovation of the New Orleans Marriott, a $13 million renovation of the
Ritz-Carlton, Naples, Florida and a $15 million capital improvements program to
the Denver Marriott Tech Center Hotel. We also began construction of a 500 room
expansion of the Marriott Orlando World Center which we expect to complete
early in 2001.

We believe we are well qualified to pursue our acquisition and development
strategy. Management has extensive experience in acquiring and financing
lodging properties and believes its industry knowledge, relationships and
access to market information provide a competitive advantage with respect to
identifying, evaluating and acquiring hotel assets.

Hotel Lodging Properties

We have assembled a high quality portfolio of luxury and upscale hotels. Our
portfolio currently includes 124 upscale and luxury hotels in many prime
locations with approximately 58,000 rooms. Our properties average close to 467
rooms, and thirteen contain over 750 rooms. Hotel amenities typically include
meeting and banquet facilities, a variety of restaurants and lounges, swimming
pools, gift shops and parking facilities. Our hotels primarily serve business
and pleasure travelers and group meetings at locations throughout the United
States. We believe that two important factors used by hotel guests in choosing
a hotel are brand and location. Our properties are generally well-situated in
locations where there are significant obstacles for competitors, including
downtown areas of major metropolitan cities, airports and resort/convention
locations where there are limited or no development sites. The average age of
our properties is sixteen years, although

S-24
<PAGE>

recently several of the properties have had substantial renovations or major
additions. However, we plan to renovate all our hotels on a cyclical basis.

The prime locations of most of our hotels are complemented by the brand
names in our portfolio. We also continue to benefit from our strategic alliance
with Marriott International. Marriott International serves as the manager for
98 of our 124 hotels under the Marriott or Ritz-Carlton brands and all but
thirteen of our properties are currently operated under those brand names. The
Marriott brand remains an integral part of our strategy, as we believe that the
Marriott brand creates operating gains and performance premiums.

One commonly used indicator of market performance for hotels is room revenue
per available room, or REVPAR, which measures daily room revenues generated on
a per room basis, excluding food and beverage revenues or other ancillary
revenues generated by the property. REVPAR represents the product of the
average daily room rate charged and the average daily occupancy rate achieved.
Based upon data provided by Smith Travel Research, for the first fiscal quarter
of 1999 and fiscal year 1998, average occupancy for our comparable properties,
as defined below, was 9.2 and 7.7 percentage points higher, respectively, than
for our competitive set, as defined below, and REVPAR for those properties was
25% and 21% higher, respectively, than for our competitive set. Additionally,
our portfolio has outperformed the Marriott International system of full
service hotels. For the first fiscal quarter of 1999 and fiscal year 1998 our
comparable properties had REVPAR growth of 4.4% and 7.3%, compared to the first
fiscal quarter of 1998 and fiscal year 1997, respectively, as compared to
Marriott International's REVPAR growth of 4.2% and 6.1%, respectively for the
same periods.

Comparable properties refer to properties that we owned for the same period
of time in each of the periods covered. Our competitive set refers to hotels in
the upscale and luxury segment of the lodging industry, the segment which we
believe is most representative of our hotels, and consists of Marriott Hotels,
Resorts and Suites, Ritz-Carlton, Four Seasons, Crowne Plaza, Doubletree,
Hyatt, Hilton, Swissotels, Radisson, Sheraton, Westin, Renaissance and Wyndham.

The chart below sets forth performance information for our comparable
properties:

<TABLE>
<CAPTION>
First Fiscal
Quarter Fiscal Year
---------------- ----------------
1999 1998 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Comparable Hotels(1)
Number of properties........................ 89 89 78 78
Number of rooms............................. 44,386 44,386 38,589 38,589
Average daily rate.......................... $151.87 $147.77 $142.67 $133.45
Average occupancy percentage................ 79.3% 78.0% 78.8% 78.5%
REVPAR...................................... $120.37 $115.32 $112.39 $104.79
REVPAR % change............................. 4.4% -- 7.3% --
</TABLE>
- --------
(1) Consists of the 89 properties owned, directly or indirectly, by us for the
entire 1999 and 1998 first fiscal quarters and the 78 properties owned,
directly or indirectly, by us for the entire 1998 and 1997 fiscal years,
respectively. These properties, for the respective periods, represent the
"comparable properties".

S-25
<PAGE>

The chart below sets forth certain performance information for all of our
properties:

<TABLE>
<CAPTION>
First
Fiscal Fiscal Year
Quarter ---------------------------
1999(1) 1998 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Hotel Portfolio
Number of properties (end of period)...... 125 126(2) 95 79
Number of rooms (end of period)........... 57,975 58,445(2) 45,718 37,210
Average daily rate........................ $150.86 $140.35 $133.74 $119.94
Average occupancy percentage.............. 78.1% 77.7% 78.4% 77.3%
REVPAR.................................... $117.81 $109.06 $104.84 $ 92.71
</TABLE>
- --------
(1) The operating results include operations for the Minneapolis/Bloomington
Marriott and the Saddle Brook Marriott, which were sold in February 1999
and May 1999, respectively. Number of properties and rooms also includes
the Saddle Brook Marriott, but does not include the Minneapolis/Bloomington
Marriott.
(2) Number of properties and rooms is as of December 31, 1998 and includes 25
properties (9,965 rooms) acquired in the public partnerships merger and the
Blackstone acquisition. For more information please see "Recent
Developments" beginning on page S-9.

The following table presents information for all of our properties by
geographic region:

<TABLE>
<CAPTION>
As of June 1, 1999 First Quarter 1999
------------------------ ------------------------------------
Number Average Number Average Average
Geographic Region of Hotels of Rooms Occupancy(1) Daily Rate(1) REVPAR(1)
- ----------------- --------- -------------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C>
Atlanta.......... 11 486 78.8% $147.13 $115.91
Florida.......... 13 513 86.1 177.28 152.59
Mid-Atlantic..... 17 364 70.8 126.81 89.74
Midwest.......... 16 362 71.7 117.41 84.16
New York......... 11 652 82.0 184.88 151.53
Northeast........ 11 379 68.7 119.42 82.03
South Central.... 18 497 79.1 137.00 108.30
Western.......... 27 491 80.3 160.51 128.94
All regions...... 124 467 78.1 150.86 117.81
</TABLE>
- --------
(1) The operating results include operations for the Minneapolis/Bloomington
Marriott and the Saddle Brook Marriott, which were sold in February and May
1999, respectively.

S-26
<PAGE>

The following table sets forth, as of June 1, 1999, the location and number
of rooms of each of our 124 hotels. Unless otherwise indicated, all of the
properties are leased to subsidiaries of Crestline and are operated by Marriott
International under the Marriott brand.
<TABLE>
<CAPTION>
Number
Location of Rooms
- -------- --------
<S> <C>
Alabama
Grand Hotel Resort and Golf
Club............................ 306
Arizona
Mountain Shadows Resort.......... 337
Scottsdale Suites................ 251
The Ritz-Carlton, Phoenix........ 281
California
Coronado Island Resort(1)(2)..... 300
Costa Mesa Suites................ 253
Desert Springs Resort and Spa.... 884
Fullerton(2)..................... 224
Hyatt Regency, Burlingame(3)..... 793
Manhattan Beach(1)(2)(4)......... 380
Marina Beach(1)(2)............... 368
Newport Beach.................... 570
Newport Beach Suites............. 250
Ontario Airport(4)............... 299
Sacramento Airport(2)(3)(7)...... 85
San Diego Marriott Hotel and
Marina(2)(6).................... 1,355
San Diego Mission Valley(4)(7)... 350
San Francisco Airport............ 684
San Francisco Fisherman's
Wharf(4)........................ 285
San Francisco Moscone Center(2).. 1,498
San Ramon(2)..................... 368
Santa Clara(2)................... 754
The Ritz-Carlton, Marina del
Rey(2).......................... 306
The Ritz-Carlton, San Francisco.. 336
Torrance......................... 487
Colorado
Denver Southeast(2).............. 595
Denver Tech Center(1)............ 625
Denver West(2)................... 307
Marriott's Mountain Resort at
Vail(1)......................... 349
Connecticut
Hartford/Farmington.............. 380
Hartford/Rocky Hill(2)........... 251
Florida
Fort Lauderdale Marina(2)........ 580
Harbor Beach Resort(2)(5)(6)(7).. 624
Jacksonville(2)(4)............... 256
Miami Airport(2)................. 782
Miami Biscayne Bay(2)............ 605
Orlando World Center............. 1,503
Palm Beach Gardens(4)............ 279
Singer Island Holiday Inn(3)..... 222
</TABLE>
<TABLE>
<CAPTION>
Number
Location of Rooms
- -------- --------
<S> <C>
Tampa Airport(2).................
Tampa Westshore(2)............... 309
The Ritz-Carlton, Amelia Island.. 449
The Ritz-Carlton, Naples......... 463
Georgia
Atlanta Marriott Marquis(6)...... 1,671
Atlanta Midtown Suites(2)........ 254
Atlanta Norcross................. 222
Atlanta Northwest................ 400
Atlanta Perimeter(2)............. 400
Four Seasons, Atlanta(3)......... 246
Grand Hyatt, Atlanta(3).......... 439
JW Marriott Hotel at Lenox(2).... 371
Swissotel, Atlanta(3)............ 348
The Ritz-Carlton, Atlanta(2)..... 447
The Ritz-Carlton, Buckhead....... 553
Illinois
Chicago/Deerfield Suites......... 248
Chicago/Downers Grove Suites..... 254
Chicago/Downtown Courtyard....... 334
Chicago O'Hare(2)................ 681
Chicago O'Hare Suites(2)......... 256
Swissotel, Chicago(3)............ 630
Indiana
South Bend(2).................... 300
Louisiana
New Orleans...................... 1,290
Maryland
Bethesda(2)...................... 407
Gaithersburg/Washingtonian
Center.......................... 284
Massachusetts
Boston/Newton.................... 430
Hyatt Regency, Cambridge(3)...... 469
Swissotel, Boston(3)............. 498
The Ritz-Carlton, Boston......... 275
Michigan
The Ritz-Carlton, Dearborn....... 308
Detroit Livonia.................. 224
Detroit Romulus.................. 245
Detroit Southfield............... 226
Minnesota
Minneapolis City Center(2)....... 583
Minneapolis Southwest(4)(7)...... 320
Missouri
Kansas City Airport(2)........... 382
</TABLE>

S-27
<PAGE>

<TABLE>
<CAPTION>
Number
Location of Rooms
- -------- --------
<S> <C>
New York
Albany(4)(7)..................... 359
New York Marriott Financial
Center.......................... 504
New York Marriott Marquis(2)(6).. 1,919
Marriott World Trade
Center(1)(2).................... 820
Swissotel, The Drake(3).......... 494
New Hampshire
Nashua........................... 251
New Jersey
Hanover.......................... 353
Newark Airport(2)................ 590
Park Ridge(2).................... 289
New Mexico
Albuquerque(2)................... 411
North Carolina
Charlotte Executive Park(4)...... 298
Greensboro/Highpoint(2).......... 299
Raleigh Crabtree Valley.......... 375
Research Triangle Park........... 224
Ohio
Dayton........................... 399
Oklahoma
Oklahoma City.................... 354
Oklahoma City Waterford(1)(4).... 197
Oregon
Portland......................... 503
Pennsylvania
Four Seasons, Philadelphia(3).... 365
Philadelphia Convention
Center(2)....................... 1,410
Philadelphia Airport(2).......... 419
Pittsburgh City Center(1)(2)(4).. 400
Tennessee
Memphis(1)(2).................... 404
</TABLE>

<TABLE>
<CAPTION>
Number
Location of Rooms
- -------- --------
<S> <C>
Texas
Dallas/Fort Worth Airport........ 492
Dallas Quorum(2)................. 547
El Paso(2)....................... 296
Houston Airport(2)............... 566
Houston Medical Center(2)........ 386
JW Marriott Houston.............. 503
Plaza San Antonio(1)(2)(4)....... 252
San Antonio Rivercenter(2)....... 999
San Antonio Riverwalk(2)......... 500
Utah
Salt Lake City(2)................ 510
Virginia
Dulles Airport(2)................ 370
Fairview Park(2)................. 395
Hyatt Regency, Reston(3)......... 514
Key Bridge(2).................... 588
Norfolk Waterside(2)(4).......... 404
Pentagon City Residence Inn...... 300
The Ritz-Carlton, Tysons
Corner(2)....................... 397
Washington Dulles Suites......... 254
Westfields(1).................... 335
Williamsburg(1).................. 295
Washington
Seattle Sea-Tac Airport.......... 459
Washington, DC
Washington Metro Center(1)....... 456
Canada
Calgary(1)....................... 380
Toronto Airport.................. 423
Toronto Eaton Center(2).......... 459
Toronto Delta Meadowvale(3)...... 374
------
TOTAL............................ 57,964
======
</TABLE>

- --------
(1) This property was converted to the Marriott brand after acquisition.
(2) The land on which this hotel is built is leased to us under one or more
long-term lease agreements.
(3) This property is not operated under the Marriott brand and is not managed
by Marriott International.
(4) This property is operated as a Marriott franchised property.
(5) This property is leased to Marriott International.
(6) This property is not wholly owned by us.
(7) This property is not leased to Crestline.

S-28
<PAGE>

DESCRIPTION OF THE CLASS A PREFERRED STOCK

This description of material terms of the % Class A Cumulative Redeemable
Preferred Stock, par value $.01 per share, offered hereby supplements, and to
the extent inconsistent therewith or as expressly provided herein replaces, the
description of certain general terms and provisions of our preferred stock, par
value $.01 per share, set forth in the accompanying prospectus. As used under
this caption "Description of the Class A Preferred Stock" and in the
accompanying prospectus under "Description of Preferred Stock", all references
to "Host Marriott" or the "company" mean Host Marriott Corporation, excluding,
unless otherwise expressly stated or the context otherwise requires, our
subsidiaries.

The following summary of material terms of the Class A preferred stock does
not purport to be complete and is subject to and qualified in its entirety by
reference to all of the provisions of our Articles of Amendment and Restatement
of Articles of Incorporation--which we refer to as our Charter--and the form of
articles supplementary relating to the Class A preferred stock, all of which
have been or will be filed as exhibits to or incorporated by reference in the
registration statement of which the accompanying prospectus is a part. You may
obtain copies of these documents in the manner described under "Where You Can
Find More Information" in the accompanying prospectus.

Prospective investors should carefully review the information in the
accompanying prospectus under "Restrictions on Ownership and Transfer" for
important information concerning the restrictions on ownership and transfer
applicable to the Class A preferred stock.

General

Our Charter provides that the total number of shares of stock, which we
refer to as capital stock, of all classes which we are authorized to issue is
800,000,000, 750,000,000 of which initially were classified as common stock,
par value $.01 per share, and 50,000,000 of which initially were classified as
preferred stock, par value $.01 per share. Currently, 750,000,000 shares are
classified as common stock, 49,350,000 shares are classified as preferred stock
and 650,000 shares are classified as Series A Junior Participating Preferred
Stock, par value $.01 per share. Under our Charter, our board of directors is
authorized, without a vote of the stockholders, to classify or reclassify any
unissued shares of capital stock by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of such shares
of capital stock. The board of directors also has the power to classify or
reclassify any unissued shares of capital stock (including shares initially
classified as common stock or preferred stock) into any other class or series
of capital stock, and to divide and classify shares of any class into one or
more series of such class. Thus, the board of directors could authorize the
issuance of a class or series of capital stock with terms and conditions which
could have the effect of delaying, deferring or preventing a transaction or a
change in control of Host Marriott that might involve a premium price for
holders of shares of common stock or Class A preferred stock or otherwise be in
their respective best interests.

We have previously authorized the issuance of shares of Series A Junior
Participating Preferred Stock in connection with our stockholder rights plan.
As of the date of this prospectus supplement, no shares of preferred stock or
Series A Junior Participating Preferred Stock were outstanding, although we
have reserved for issuance 650,000 shares of Series A Junior Participating
Preferred Stock. For a description of our stockholder rights plan, see the
accompanying prospectus under "Description of Common Stock--Stockholder Rights
Plan/Preferred Stock Purchase Rights".

We have authorized the issuance of a class of preferred stock, consisting of
4,000,000 shares, plus up to an additional 600,000 shares issuable upon
exercise of the underwriters' over-allotment option, designated as the %
Class A Cumulative Redeemable Preferred Stock.

We have applied for approval from the New York Stock Exchange to list the
Class A preferred stock on the NYSE. If so approved, we expect that trading of
the Class A preferred stock on the NYSE will commence within 30 days after the
initial delivery of the Class A preferred stock.

S-29
<PAGE>

The Class A preferred stock does not contain any provisions affording
holders of the Class A preferred stock protection in the event of a highly
leveraged or other transaction that might adversely affect holders of the Class
A preferred stock, except to the limited extent described below under "--Voting
Rights".

The transfer agent, registrar and paying agent for the Class A preferred
stock will be First Chicago Trust Company of New York. The articles
supplementary for the Class A preferred stock will provide that we will at all
times maintain an office or agency in the Borough of Manhattan, The City of New
York, where shares of Class A preferred stock may be surrendered for payment
(including upon redemption, if any), registration of transfer or exchange.

The certificates evidencing the Class A preferred stock will initially be
issued in the form of temporary certificates. Holders of temporary certificates
will be entitled to exchange them for definitive certificates as soon as
definitive certificates are available, which we anticipate will be within 150
days after the original issuance of the Class A preferred stock.

Ranking

The Class A preferred stock will rank, with respect to the payment of
dividends and the distribution of assets upon our liquidation, dissolution or
winding up: (1) senior to our common stock, senior to our Series A Junior
Participating Preferred Stock, and senior to any other class or series of our
capital stock other than capital stock referred to in clauses (2) and (3) of
this sentence; (2) on a parity with any class or series of our capital stock
the terms of which specifically provide that such class or series of capital
stock ranks on a parity with the Class A preferred stock as to the payment of
dividends and the distribution of assets upon our liquidation, dissolution or
winding up; and (3) junior to any class or series of our capital stock the
terms of which specifically provide that such class or series of capital stock
ranks senior to the Class A preferred stock as to the payment of dividends and
the distribution of assets upon our liquidation, dissolution or winding up. The
term "capital stock" does not include convertible debt securities. The
description of the ranking of the Class A preferred stock set forth in this
paragraph supersedes and replaces, insofar as it concerns the Class A preferred
stock, the discussion set forth in the accompanying prospectus under
"Description of Preferred Stock--Rank".

Our board of directors may, from time to time, without stockholder approval,
authorize the issuance of one or more classes or series of capital stock
ranking on a parity with the Class A preferred stock. See "--General" above and
"--Voting Rights" below. In addition, with the affirmative vote or consent of
the holders of at least two-thirds of the shares of Class A preferred stock
outstanding at the time, as described below under "--Voting Rights", we may
issue one or more classes or series of capital stock which rank senior to the
Class A preferred stock as to the payment of dividends and/or the distribution
of assets upon our liquidation, dissolution or winding up, and the rights of
holders of Class A preferred stock to receive dividends and amounts due upon
our liquidation, dissolution or winding up will be subject to the preferential
rights of any such senior class or series of our capital stock. However, no
such senior capital stock is currently outstanding.

In addition, because our operations are conducted primarily through the
operating partnership and its subsidiaries, our cash flow and our consequent
ability to pay dividends on our capital stock, including the Class A preferred
stock, are dependent upon the results of operations of those subsidiaries and
the distribution of monies by those subsidiaries to us.

Dividend and Redemption Restrictions Under Debt Instruments

We and our subsidiaries are, and may in the future become, parties to
agreements and instruments which restrict or prevent the payment of dividends
on, or the purchase or redemption of, Class A preferred stock and any other
class or series of our capital stock, including indirect restrictions (for
example, through covenants requiring maintenance of specified levels of net
worth) and direct restrictions. The operating partnership's credit facility, to
which we are a party, provides that distributions may only be paid to holders
of equity

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interests of the operating partnership, including Host Marriott as a partner of
the operating partnership, and we may only pay dividends on our capital stock,
including the Class A preferred stock, so long as (1) no default or event of
default under the credit facility exists at the time of the payment or would
exist immediately after giving effect to such payment and (2) we qualify or
have taken all actions necessary to qualify as a REIT for federal income tax
purposes. Assuming the foregoing conditions are met, during any four
consecutive fiscal quarters, the operating partnership may distribute to us and
the other holders of OP units, and we may pay dividends to our stockholders, in
an amount not to exceed the greater of (A) 85% of our adjusted funds from
operations (as defined in the credit facility) for those four consecutive
fiscal quarters and (B) the minimum amount necessary for us to maintain our
status as a REIT for federal income tax purposes.

In addition, the indenture governing the operating partnership's outstanding
senior debt provides that no distributions may be made to holders of its equity
interests, including Host Marriott as a partner of the operating partnership,
(1) during the continuance of defaults or events of defaults under the
indenture, (2) if the operating partnership could not incur at least $1.00 of
indebtedness (as defined) under the terms of the indebtedness covenant of the
indenture or (3) if all restricted payments (as defined) made since the issue
date of the debt securities generally exceed the sum of (a) 95% of the
aggregate funds from operations (as defined) beginning on the first day of the
fiscal quarter in which the relevant debt securities were issued, (b) 100% of
the net cash proceeds from the permitted issuance of certain equity interests
of the operating partnership and from the issuance of specified convertible
indebtedness upon conversion thereof, or otherwise received as capital
contributions (as defined), (c) the total net reduction in certain investments
resulting from payments to the operating partnership or the sale of those
investments, (d) the fair market value of noncash tangible assets or capital
stock (other than that of the operating partnership or Host Marriott) acquired
in exchange for qualified capital stock (as defined), and (e) fair market value
of noncash tangible assets or capital stock (other than that of the operating
partnership or Host Marriott) contributed to the operating partnership as a
capital contribution (as defined). However, notwithstanding the foregoing
restrictions on distributions by the operating partnership, it may make
distributions as required to allow us to make all dividend payments necessary
to maintain our status as a REIT for federal income tax purposes unless (1) it
is during the continuance of a default or event of default under the indenture
or (2) the aggregate principal amount of all outstanding debt of the operating
partnership and its restricted subsidiaries (as defined) other than specified
convertible indebtedness at such time is equal to or greater than 80% of the
value of the operating partnership's adjusted total assets (as defined).

In the event of a deterioration in our financial condition or results of
operations or the financial condition or results of operations of our
subsidiaries, the terms of the debt instruments or agreements to which we or
our subsidiaries are, or in the future may become, parties could limit or
prohibit the payment of dividends on shares of Class A preferred stock and any
other class or series of our capital stock. Our failure to pay dividends as
required by the Internal Revenue Code, whether as a result of restrictive
covenants in debt instruments or otherwise, would result in the loss of our
status as a REIT for federal income tax purposes. As described in "Risk
Factors--Our Failure to Qualify as a REIT Would Have Serious Adverse
Consequences" in the accompanying prospectus, this loss of our status as a REIT
would likely have a material adverse effect on us.

Dividends

Subject to the preferential rights of holders of any class or series of our
capital stock ranking senior to the Class A preferred stock as to dividends,
holders of the Class A preferred stock will be entitled to receive, when, as
and if authorized by our board of directors and declared by us, out of our
funds legally available for the payment of dividends, cumulative cash dividends
at the rate of % per annum of the $25.00 per share liquidation preference
(equivalent to an annual rate of $ per share). Dividends will accrue and be
cumulative from the first date on which any shares of Class A preferred stock
are originally issued and will be payable quarterly in arrears on January 15,
April 15, July 15 and October 15 of each year or, if such day is not a Business
Day, as defined in the articles supplementary for the Class A preferred stock,
the next succeeding Business Day. The first dividend, which will be payable on
October 15, 1999 (or, if such day is not a Business

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Day, on the next succeeding Business Day), will be for less than a full
quarterly dividend period. Dividends payable on the Class A preferred stock,
including dividends payable for partial dividend periods, will be computed on
the basis of a 360-day year consisting of twelve 30-day months. Dividends will
be payable to holders of record as they appear in our stock transfer books at
the close of business on the applicable dividend record date, which will be the
1st day of the calendar month in which the applicable dividend payment date
falls or such other date designated by our board of directors that is not more
than 30 nor less than ten days prior to such dividend payment date.

If any dividend payment date or redemption date for the Class A preferred
stock falls on a day which is not a Business Day, the payment which would
otherwise be due on such dividend payment date or redemption date, as the case
may be, may be made on the next succeeding Business Day with the same force and
effect as if made on such dividend payment date or redemption date, as the case
may be, and no interest or additional dividends or other sum will accrue on the
amount so payable for the period from and after such dividend payment date or
redemption date, as the case may be, to such next succeeding Business Day.

If any shares of Class A preferred stock are outstanding, no full dividends
will be declared or paid or set apart for payment on any shares of our capital
stock of any other class or series ranking, as to dividends, on a parity with,
or junior to, the Class A preferred stock for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for such payment on the
Class A preferred stock for all past dividend periods (including, without
limitation, any dividend period that terminates on any date upon which
dividends on such other class or series of our capital stock are declared or
paid or set apart for payment, as the case may be). When such cumulative
dividends are not paid in full, or a sum sufficient for such full payment is
not so set apart, upon the Class A preferred stock and the shares of any other
class or series of our capital stock ranking on a parity as to dividends with
the Class A preferred stock, all dividends declared upon the Class A preferred
stock and any other class or series of our capital stock ranking on a parity as
to dividends with the Class A preferred stock shall be declared pro rata so
that the amount of dividends declared per share of Class A preferred stock and
such other class or series of our capital stock shall in all cases bear to each
other the same ratio that accrued and unpaid dividends per share on the Class A
preferred stock and such other class or series of capital stock, which will not
include any accrual in respect of unpaid dividends for prior dividend periods
if the other class or series of capital stock does not provide for cumulative
dividends, bear to each other.

Except as provided in the immediately preceding paragraph, unless full
cumulative dividends on the Class A preferred stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods
(including, without limitation, any dividend period that terminates on a date
that also is a Subject Date (as defined below)), then

. no dividends, other than in common stock or shares of any other class or
series of our capital stock ranking junior to the Class A preferred stock
as to dividends and as to the distribution of assets upon our
liquidation, dissolution or winding up, shall be declared or paid or set
aside for payment and no other distribution shall be declared or made
upon our common stock or any other class or series of our capital stock
ranking junior to or on a parity with the Class A preferred stock as to
dividends or as to the distribution of assets upon our liquidation,
dissolution or winding up, and

. no common stock, or shares of any other class or series of our capital
stock ranking junior to or on parity with the Class A preferred stock as
to dividends or as to the distribution of assets upon our liquidation,
dissolution or winding up, shall be redeemed, purchased or otherwise
acquired for any consideration or any money paid to or made available for
a sinking fund for the redemption of any such shares by us, (1) except by
conversion into or exchange for shares of any other class or series of
our capital stock ranking junior to the shares of Class A preferred stock
as to dividends and as to the distributions of assets upon our
liquidation, dissolution or winding up and (2) except for the redemption,
purchase or acquisition by us of our capital stock of any class or series
in order to preserve our status as a REIT for federal income tax purposes
or the operating partnership's status as a partnership for federal income
tax purposes.

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As used in this paragraph, the term "Subject Date" means (1) any date on which
any dividends are declared or paid or set apart for payment or other
distribution declared or made upon our common stock or any other class or
series of our capital stock ranking junior to or on a parity with the Class A
preferred stock as to dividends or as to the distribution of assets upon our
liquidation, dissolution or winding up, and (2) any date on which any shares of
our common stock or any other class or series of our capital stock ranking
junior to or on a parity with the Class A preferred stock as to dividends or as
to the distribution of assets upon our liquidation, dissolution or winding up
are redeemed, purchased or otherwise acquired for any consideration or any
money paid to or made available for a sinking fund for the redemption of any
such shares by us.

Our Charter provides that our ability to pay dividends on any class or
series of our capital stock is not limited by the amount that would be needed,
if we were to be dissolved at the time of the dividend, to satisfy the
preferential rights upon our liquidation, dissolution or winding up of classes
or series of capital stock ranking senior to the capital stock receiving the
dividends, unless otherwise specifically provided for in the terms of any class
or series of capital stock. The terms of the Class A preferred stock do not
provide otherwise and, accordingly, the Class A preferred stock will be subject
to the foregoing provisions.

No dividends on any shares of Class A preferred stock will be declared or
paid or set apart for payment at such time as any agreement, including any
agreement relating to our indebtedness, prohibits such declaration, payment or
setting apart for payment or provides that such declaration, payment or setting
apart for payment would constitute a breach thereof or a default thereunder, or
if such declaration, payment or setting apart for payment will be restricted or
prohibited by applicable law.

Notwithstanding the foregoing, dividends on the Class A preferred stock will
accrue regardless of whether or not we have earnings, regardless of whether or
not there are funds legally available for the payment of such dividends, and
regardless of whether or not such dividends are declared. No interest, or sum
of money in lieu of interest, will be payable in respect of any dividend
payment or payments on the Class A preferred stock that may be in arrears, and
holders of the Class A preferred stock will not be entitled to any dividends,
whether payable in cash, securities or other property, in excess of the full
cumulative dividends described above. Any dividend payment made on the Class A
preferred stock will first be credited against the earliest accrued but unpaid
dividend due with respect to the Class A preferred stock.

If for any taxable year, we elect to designate as "capital gain dividends",
as defined in the Internal Revenue Code, any portion of the dividends paid or
made available for the year to holders of all classes and series of our capital
stock, then the portion of the dividends designated as capital gain dividends
that will be allocable to the holders of the Class A preferred stock will be an
amount equal to the total capital gain dividends multiplied by a fraction, the
numerator of which will be the total dividends, within the meaning of the
Internal Revenue Code, paid or made available to the holders of the Class A
preferred stock for the year, and the denominator of which will be the total
dividends paid or made available to holders of all classes and series of our
capital stock for that year.

Information contained under this caption "Dividends" supersedes and
replaces, insofar as it concerns the Class A preferred stock, the discussion
set forth in the accompanying prospectus under "Description of Preferred
Stock--Distributions".

Liquidation Preference

Upon any voluntary or involuntary liquidation, dissolution or winding up of
the company, then, before any distribution or payment will be made to the
holders of any common stock or any other class or series of our capital stock
ranking junior to the Class A preferred stock as to the distribution of assets
upon the liquidation, dissolution or winding up of the company, but subject to
the preferential rights of the holders of any other class or series of our
capital stock ranking senior to the Class A preferred stock as to such
distribution of assets, the holders of Class A preferred stock will be entitled
to receive and to be paid out of our assets legally available

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for distribution to stockholders liquidating distributions in the amount of
$25.00 per share, plus an amount equal to all accrued and unpaid dividends to,
but not including, the date of payment. After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of shares of
Class A preferred stock, as such, will have no right or claim to any of our
remaining assets. If, upon any such voluntary or involuntary liquidation,
dissolution or winding up, our assets legally available for distribution to
stockholders are insufficient to pay the full amount of the liquidating
distributions on all outstanding shares of Class A preferred stock and the full
amount of the liquidating distributions payable on all shares of any other
classes or series of our capital stock ranking on a parity with the Class A
preferred stock as to the distribution of assets upon our liquidation,
dissolution or winding up, then the holders of the Class A preferred stock and
all other such classes and series of capital stock will share ratably in any
such distribution of assets in proportion to the full liquidating distributions
to which they would otherwise be respectively entitled.

If liquidating distributions shall have been made in full to all holders of
Class A preferred stock and any other classes or series of our capital stock
ranking on a parity with the Class A preferred stock as to the distribution of
assets upon our liquidation, dissolution or winding up, then our remaining
assets will be distributed among the holders of any other classes or series of
our capital stock ranking junior to the Class A preferred stock as to the
distribution of assets upon our liquidation, dissolution or winding up,
according to their respective rights and preferences.

For purposes of the two preceding paragraphs, neither the consolidation or
merger of the company with or into any other corporation, trust or entity, nor
the sale, lease or conveyance of all or substantially all of our property or
business, will be deemed to constitute a liquidation, dissolution or winding up
of the company.

The information contained under this caption "Liquidation Preference"
supersedes and replaces, insofar as it concerns the Class A preferred stock,
the discussion set forth in the accompanying prospectus under "Description of
Preferred Stock--Liquidation Preference".

Optional Redemption

The Class A preferred stock is not redeemable prior to 2004, except that
we will be entitled, pursuant to provisions of our Charter, to redeem,
repurchase or acquire shares of Class A preferred stock in order to preserve
our status as a REIT for federal income tax purposes or the status of the
operating partnership as a partnership for federal income tax purposes. For a
description of these provisions, see "--Other" below and "Restrictions on
Ownership and Transfer" in the accompanying prospectus.

On and after , 2004, we may, at our option upon not less than 30 nor more
than 60 days' prior written notice to the holders of the Class A preferred
stock, redeem the Class A preferred stock, in whole or from time to time in
part, for a cash redemption price equal to $25.00 per share plus, except as
described below with respect to redemption after a dividend record date and on
or prior to the corresponding dividend payment date, accrued and unpaid
dividends to, but not including, the date fixed for redemption.

Notwithstanding anything to the contrary in this prospectus supplement or in
the accompanying prospectus, unless full cumulative dividends on the Class A
preferred stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods (including, without limitation, any dividend period
that terminates on the date of any redemption of shares of Class A preferred
stock referred to below or on the date of any direct or indirect purchase or
other acquisition of shares of Class A preferred stock referred to below, as
the case may be), then

. no shares of Class A preferred stock will be redeemed unless all
outstanding shares of Class A preferred stock are simultaneously
redeemed; provided, however, that the foregoing will not prevent our
redemption, repurchase or acquisition of shares of Class A preferred
stock (a) to preserve our status as a REIT for federal income tax
purposes or the status of the operating partnership as a partnership for
federal income tax purposes or (b) pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of
Class A preferred stock, and

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. we will not purchase or otherwise acquire directly or indirectly any
shares of Class A preferred stock, except by conversion into or exchange
for other capital stock ranking junior to the Class A preferred stock as
to dividends and with respect to the distribution of assets upon our
liquidation dissolution and winding up; provided, however, that the
foregoing will not prevent our redemption, purchase or acquisition of
shares of Class A preferred stock (a) to preserve our status as a REIT
for federal income tax purposes or the status of the operating
partnership as a partnership for federal income tax purposes or (b)
pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Class A preferred stock.

If fewer than all of the outstanding shares of Class A preferred stock are
to be redeemed, the number of shares to be redeemed will be determined by us
and the shares to be so redeemed will be selected by us pro rata from the
holders of record of the Class A preferred stock in proportion to the number of
shares held of record by the holders, as nearly as may be practicable without
creating fractional shares, or by lot or by any other equitable method
determined by us that will not result in the transfer of any shares of Class A
preferred stock to a trust for the benefit of a charitable beneficiary as
described in the accompanying prospectus under "Restrictions on Ownership and
Transfer". If fewer than all of the shares of Class A preferred stock evidenced
by a stock certificate are to be redeemed, we will issue one or more new
certificates for the unredeemed shares.

We will give notice of redemption by publication in the Wall Street Journal,
or if such newspaper is not then published, a newspaper of general circulation
in The City of New York, such publication to be made once a week for two
successive weeks commencing not less than 30 nor more than 60 days prior to the
redemption date. Notice of redemption also will be mailed, not less than 30 nor
more than 60 days prior to the applicable redemption date, to each holder of
record of shares of Class A preferred stock at the holder's address in our
share transfer records. Each such notice shall state:

. the redemption price and the redemption date;

. the number of shares of Class A preferred stock to be redeemed;

. the place or places, which will include a place in the Borough of
Manhattan, The City of New York, where the Class A preferred stock is to
be surrendered for payment of the redemption price; and

. that dividends on the shares of Class A preferred stock to be redeemed
will cease to accrue on the applicable redemption date.

If fewer than all of the outstanding shares of Class A preferred stock are
to be redeemed, the notice mailed to each holder will also specify the number
of shares to be redeemed from that holder. No failure to mail or defect in any
mailed notice or in the mailing thereof will affect the validity of the
proceedings for the redemption of any shares of Class A preferred stock except
as to the holder to whom notice was defective or not given.

If notice of redemption has been given and if funds necessary for such
redemption have been irrevocably set aside in trust for the benefit of the
holders of the shares of Class A preferred stock called for redemption, then
from and after the date fixed for redemption, dividends will cease to accrue on
the shares of Class A preferred stock so called for redemption, such shares of
Class A preferred stock will no longer be deemed outstanding, and all rights of
the holders of such shares of Class A preferred stock will terminate, except
the right to receive the redemption price, including, if applicable, any
accrued and unpaid dividends to, but not including, the redemption date.

If any redemption date is not a Business Day, then payment of the redemption
price may be made on the next Business Day with the same force and effect as if
made on the redemption date, and no interest, additional dividends or other
sums will accrue on the amount payable from the redemption date to the next
Business Day.

The holders of record of shares of Class A preferred stock at the close of
business on a dividend record date will be entitled to receive the dividend
payable with respect to those shares on the corresponding dividend payment date
notwithstanding the redemption of those shares after that dividend record date
and on or prior to

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the dividend payment date or our default in the payment of the dividend due on
that payment date. If a redemption date falls after a dividend record date and
on or prior to the corresponding dividend payment date, the amount payable upon
redemption will not include the dividend payable on that dividend payment date
and the full amount of that dividend will instead be paid on the applicable
dividend payment date to the holders of record on the corresponding dividend
record date. Except as provided in this paragraph and except to the extent that
accrued and unpaid dividends are payable as part of the redemption price, we
will make no payment or allowance for unpaid dividends, regardless of whether
or not in arrears, on shares of Class A preferred stock called for redemption.

The Class A preferred stock has no stated maturity and is not subject to any
sinking fund or mandatory redemption.

The information under this caption "--Optional Redemption" supersedes and
replaces, insofar as it concerns the Class A preferred stock, the discussion in
the accompanying prospectus under "Description of Preferred Stock--Redemption".

Voting Rights

Holders of Class A preferred stock will not have any voting rights, except
as set forth in the articles supplementary creating the Class A preferred stock
which terms are described below or as otherwise from time to time required by
law.

Whenever dividends on any shares of Class A preferred stock are in arrears
for six or more quarterly dividend periods, whether or not consecutive:

. The board of directors of the company will be automatically increased by
two, if not already increased by two by reason of the election of
directors by the holders of any other class or series of our capital
stock upon which like voting rights have been conferred and are
exercisable and with which the Class A preferred stock is entitled to
vote as a class with respect to the election of those two directors, and

. the holders of Class A preferred stock, voting together as single class
with all other classes or series of our capital stock upon which like
voting rights have been conferred and are exercisable and which are
entitled to vote as a class with the Class A preferred stock in the
election of those two directors, will be entitled to vote for the
election of a total of two additional directors at a special meeting
called by an officer of the company at the request of holders of record
of at least 10% of the outstanding Class A preferred stock or by the
holders of any such other class or series of our capital stock, unless
such request is received less than 90 days before the date fixed for the
next annual or special meeting of our stockholders, in which case the
vote will be held at the earlier of the next annual or special meeting of
our stockholders, and at each subsequent annual meeting, until all
dividends accumulated on the Class A preferred stock for all prior
dividend periods and the then current dividend period have been fully
paid or declared and a sum sufficient for the payment thereof set aside
for payment in full.

If and when full cumulative dividends on the Class A preferred stock for all
prior dividend periods and the then current dividend period have been paid in
full or declared and a sum sufficient for the payment thereof set aside for
payment in full, the right of holders of Class A preferred stock to elect those
two directors will cease and, unless there are other classes and series of our
capital stock upon which like voting rights have been conferred and are
exercisable, the term of office of each of the two directors so elected will
immediately and automatically terminate.

If a special meeting for the election of the additional directors is not
called by one of our officers within 30 days after request, then the holders of
record of at least 10% of the outstanding shares of Class A preferred stock may
designate a holder of Class A preferred stock to call that meeting at our
expense. At all times that the voting rights described above are exercisable,
the holders of Class A preferred stock will have access to our stock transfer
records. We will pay all costs and expenses of calling and holding any meeting
and of electing directors as described above.

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So long as any shares of Class A preferred stock remain outstanding, we will
not, without the affirmative vote or consent of the holders of at least two-
thirds of the Class A preferred stock outstanding at the time, given in person
or by proxy either in writing or at a meeting, with the Class A preferred stock
voting separately as a class,

. authorize, create or issue, or increase the authorized or issued amount
of, any class or series of our capital stock ranking senior to the Class
A preferred stock as to the payment of dividends or the distribution of
assets upon our liquidation, dissolution or winding up, or reclassify any
authorized capital stock into such shares, or create, authorize or issue
any obligation or security convertible into, exchangeable or exercisable
for, or evidencing the right to purchase, any such shares; or

. amend, alter or repeal the provisions of our Charter, including, without
limitation, the articles supplementary creating the Class A preferred
stock, whether by merger, consolidation or otherwise (an "Event"), so as
to materially and adversely affect any right, preference, privilege or
voting power of the Class A preferred stock or the holders thereof;
provided, however, with respect to the occurrence of any Event, so long
as shares of Class A preferred stock remain outstanding or are converted
into like securities of the surviving entity, in each case with the
preferences, rights, privileges, voting powers and other terms thereof
materially unchanged, taking into account that upon the occurrence of an
Event we may not be the surviving entity and that the surviving entity
may be a non-corporate entity, such as a limited liability company,
limited partnership or business trust, in which case the Class A
preferred stock would be converted into an equity interest, other than
capital stock, having preferences, rights, privileges, voting powers and
other terms which are materially unchanged from those of the Class A
preferred stock, the occurrence of such Event will not be deemed to
materially and adversely affect such rights, preferences, privileges or
voting powers of the Class A preferred stock or the holders thereof; and
provided further that any increase in the amount of authorized preferred
stock or common stock or increase in the amount of authorized shares of
Class A preferred stock or the creation, issuance or increase in the
amount of authorized shares of any other class or series of capital
stock, in each case ranking on a parity with or junior to the Class A
preferred stock as to dividends and the distribution of assets upon our
liquidation, dissolution or winding up, will not be deemed to materially
and adversely affect such rights, preferences, privileges or voting
powers.

The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required will
be effected, all outstanding shares of Class A preferred stock have been
redeemed or called for redemption and sufficient funds will have been deposited
in trust to effect such redemption.

In any matter in which the Class A preferred stock is entitled to vote,
including any action by written consent, each share of Class A preferred will
shall be entitled to one vote, except that when shares of any other class or
series of our capital stock have the right to vote with the Class A preferred
stock as a single class on any matter, the Class A preferred stock and the
shares of each such other class or series will have one vote for each $25.00 of
liquidation preference (excluding accrued dividends).

The description of the voting rights set forth above supersedes and
replaces, insofar as it concerns the Class A preferred stock, the discussion
set forth in the accompanying prospectus under "Description of Preferred
Stock--Voting Rights".

Other

The Class A preferred stock will not be exchangeable for or convertible into
any other property or securities of Host Marriott. The Class A preferred stock
will not be entitled to any preemptive rights.

Except as expressly stated in the articles supplementary creating the Class
A preferred stock, the holders of the Class A preferred stock will not have any
relative, participating, optional or other special voting rights or powers, and
the consent of such holders shall not be required for the taking of any
corporate actions.

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Restrictions on Ownership and Transfer

Our Charter contains certain provisions intended to help preserve our status
as a REIT for federal income tax purposes and the status of the operating
partnership as a partnership for federal income tax purposes. Our board of
directors, or a committee thereof, is authorized to take such actions as it
deems advisable to refuse to give effect to or to prevent transfers of capital
stock which would endanger our status as a REIT or the status of the operating
partnership as a partnership. Such actions could include, among other things,
redeeming shares of our capital stock, including Class A preferred stock. In
the event of any such redemption of Class A preferred stock, the redemption
price will be $25.00 per share plus accrued and unpaid dividends unless the
redemption date falls after a dividend record date and on or prior to the
corresponding dividend payment date, in which case the amount payable upon
redemption will not include the dividend payable on that dividend payment date
and the full amount of that dividend will instead be paid on the applicable
dividend payment date to the holder of record on the corresponding dividend
record date.

In addition to the above powers of our board of directors, or a committee
thereof, other provisions of our Articles of Incorporation which are described
in the accompanying prospectus under "Restrictions on Ownership and Transfer"
apply irrespective of any action or inaction by the board of directors or a
committee thereof. The Class A preferred stock will be subject to such
provisions. All certificates evidencing shares of Class A preferred stock will
bear a legend referring to these restrictions.

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FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the federal income tax considerations
anticipated to be material to purchasers of our Class A preferred stock. This
summary is based on current law, is for general information only and is not tax
advice. Your tax treatment will vary depending on your particular situation and
this discussion does not purport to deal with all aspects of taxation that may
be relevant to a holder of Class A preferred stock in light of the holder's
personal investments or tax circumstances, or to stockholders who receive
special treatment under the federal income tax laws. Stockholders receiving
special treatment include, without limitation:

. insurance companies,

. financial institutions or broker-dealers,

. tax-exempt organizations,

. stockholders holding securities as part of a conversion transaction, or
as part of a hedge or hedging transaction or as a position in a straddle
for tax purposes, and

. foreign corporations or partnerships and persons who are not citizens or
residents of the United States.

This discussion is also limited to persons who hold the Class A preferred
stock as a capital asset (generally property held for investment). In addition,
the summary below does not consider the effect of any foreign, state, local or
other tax laws that may be applicable to you as a holder of Class A preferred
stock.

Except as provided below under the heading "--Legislative Proposals", this
prospectus supplement does not address any aspect of federal income taxation
applicable to us and our election to be taxed as a REIT. A summary of the
material federal income tax considerations applicable to us is provided in the
accompanying prospectus.

The discussion set forth below assumes that we qualify as a REIT under the
Internal Revenue Code. We believe that we qualify as a REIT for federal income
tax purposes. In addition, at the time of the issuance of the Class A preferred
stock, we will receive an opinion from Hogan & Hartson L.L.P. confirming their
opinion to us described in the accompanying prospectus to the effect that we
have been organized in conformity with the requirements for qualification as a
REIT, and, beginning in 1999, our proposed method of operation will enable us
to meet the requirements for qualification and taxation as a REIT under the
Internal Revenue Code. Such opinion is conditioned upon the various assumptions
and representations, and is subject to the various limitations, described in
the accompanying prospectus under the caption "Federal Income Tax
Considerations--Federal Income Taxation of Host Marriott--General". If in any
taxable year we fail to qualify as a REIT, we would not be allowed a deduction
for dividends paid to stockholders in computing our taxable income and we would
therefore be subject to federal income tax on our taxable income at regular
corporate rates. Unless entitled to relief under specific statutory provisions,
we would be ineligible to be taxed as a REIT for the four succeeding tax years.
As a result, the funds available for distribution to our stockholders would be
reduced. See "Federal Income Tax Considerations--Federal Income Taxation of
Host Marriott" in the accompanying prospectus.

The information in this section is based on:

. the Internal Revenue Code,

. current, temporary and proposed Treasury Regulations promulgated under
the Internal Revenue Code,

. the legislative history of the Internal Revenue Code,

. current administrative interpretations and practices of the Internal
Revenue Service, including its practices and policies as expressed in
private letter rulings which are not binding on the Internal Revenue
Service except with respect to the particular taxpayers who requested and
received such rulings, and

. court decisions,

S-39
<PAGE>

in each case as of the date of this prospectus supplement. There is no
assurance that future legislation, Treasury Regulations, administrative
interpretations and practices or court decisions will not adversely affect
existing interpretations. Any change could apply retroactively to transactions
preceding the date of the change. We have not requested, and do not plan to
request, any rulings from the Internal Revenue Service concerning the tax
treatment discussed below, and the statements in this prospectus supplement are
not binding on the Internal Revenue Service or a court. Thus, there is no
assurance that these statements will not be challenged by the Internal Revenue
Service or sustained by a court if challenged by the Internal Revenue Service.

The material federal income tax consequences of holding our Class A
preferred stock are generally the same as the material federal income tax
consequences of holding our common stock. As such, the following summary only
discusses the material federal income tax consequences that are relevant to
purchasers of our Class A preferred stock which are not fully discussed in the
accompanying prospectus (or for which the treatment discussed in the prospectus
has been affected by subsequent changes in law) under the headings "Federal
Income Tax Considerations--Taxation of Taxable U.S. Stockholders Generally";
"--Backup Withholding For Host Marriott's Distributions"; "--Taxation of Tax
Exempt Stockholders"; and "--Taxation of Non-U.S. Stockholders". You should
refer to the discussion in the accompanying prospectus under the headings
referred to in the preceding sentence for a summary of the material federal
income tax consequences of holding the Class A preferred stock which are not
discussed below.

You should refer to the accompanying prospectus for a summary of the federal
income tax considerations to us of our REIT election and for a summary of the
tax consequences of holding our capital stock generally. You are advised to
consult your tax advisor regarding the specific tax consequences of the
purchase, ownership and sale of Class A preferred stock, including the Federal,
state, local, foreign and other tax consequences of the purchase, ownership and
sale and of potential changes in applicable tax laws.

Taxation Of Taxable U.S. Stockholders

When we use the term "U.S. Stockholder", we mean a holder of shares of Class
A preferred stock who is, for United States federal income tax purposes:

. a citizen or resident of the United States,

. a corporation, partnership, or other entity treated as a corporation or
partnership for United States federal income tax purposes, created or
organized in or under the laws of the United States or of a state
thereof or in the District of Columbia, unless, in the case of a
partnership, Treasury Regulations provide otherwise,

. an estate the income of which is subject to United States federal income
taxation regardless of its source or

. a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have the authority to control all substantial decisions of the trust.

Notwithstanding the preceding sentence, to the extent provided in Treasury
Regulations, some trusts in existence on August 20, 1996, and treated as United
States persons prior to this date that elect to continue to be treated as
United States persons, shall also be considered U.S. Stockholders.

Distributions

Earnings and Profits. For purposes of determining whether distributions to
holders of our Class A preferred stock are made out of our current or
accumulated earnings and profits for federal income tax purposes, our earnings
and profits will be allocated first to the Class A preferred stock and then to
our common stock.

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<PAGE>

Capital Gain Distributions. Distributions that we properly designate as
capital gain dividends will be taxable to taxable U.S. Stockholders as gains,
to the extent that they do not exceed our actual net capital gain for the
taxable year, from the sale or disposition of a capital asset. Depending on the
period of time we have held the assets which produced these gains, and on
specific designations, if any, which we make, these gains may be taxable to
non-corporate U.S. stockholders at a 20% or 25% rate. U.S. Stockholders that
are corporations may, however, be required to treat up to 20% of some capital
gain dividends as ordinary income.

If for any taxable year, we elect to designate as "capital gain dividends",
as defined in the Internal Revenue Code, any portion of the dividends paid or
made available for the year to holders of all classes and series of our capital
stock, then the portion of dividends designated as capital gain dividends that
will be allocable to the holders of the Class A preferred stock will be an
amount equal to the total capital gain dividends multiplied by a fraction, the
numerator of which will be the total dividends, within the meaning of the
Internal Revenue Code, paid or made available to the holders of the Class A
preferred stock for the year, and the denominator of which shall be the total
dividends paid or made available to holders of all classes and series of our
capital stock for the year.

Redemption, Sale and Exchange of Class A Preferred Stock. A redemption of
shares of Class A preferred stock for cash or a sale or exchange of Class A
preferred stock for cash or other property will be a taxable event.

A redemption of Class A preferred stock for cash generally will be treated
as a sale or exchange if the U.S. Stockholder does not own, actually or
constructively, within the meaning of Section 318 of the Internal Revenue Code,
any of our stock other than the stock that is redeemed. If the U.S. Stockholder
owns, actually or constructively, other stock, including Class A preferred
stock that is not redeemed, a redemption of Class A preferred stock may be
treated as a dividend to the extent of our current or accumulated earnings and
profits for federal income tax purposes. Dividend treatment, however, would not
apply if the redemption:

. is "substantially disproportionate" with respect to the stockholder
under section 302(b)(2) of the Internal Revenue Code; or

. is "not essentially equivalent to a dividend" with respect to the
stockholder under section 302(b)(1) of the Internal Revenue Code.

In determining whether these tests have been met, a U.S. Stockholder must
take into account not only stock he actually owns, but also stock he
constructively owns within the meaning of section 318 of the Internal Revenue
Code. A distribution to a stockholder is "not essentially equivalent to a
dividend" if it results in a "meaningful reduction" in the stockholder's
interest in our stock. If, as a result of a redemption of the Class A preferred
stock, a stockholder whose relative stock interest in us is minimal and who
exercises no control over our corporate affairs suffers a significant reduction
in its proportionate interest in us, taking into account constructive
ownership, that stockholder should be regarded as having suffered a meaningful
reduction in its interest in our stock. There can be no certainty, however, as
to when a meaningful reduction has occurred because the applicable test is not
based on numerical criteria. Satisfaction of the "substantially
disproportionate" exception is dependent upon compliance with the objective
tests set forth in section 302(b)(2) of the Internal Revenue Code.

If the redemption of Class A preferred stock is not treated as a
distribution taxable as a dividend, the redemption of the Class A preferred
stock, and any sale of the Class A preferred stock for cash or other property,
would result in taxable gain or loss equal to the difference between the amount
of cash and the fair market value of property, if any, received and the
stockholder's adjusted tax basis in the Class A preferred stock redeemed or
sold. Any gain or loss recognized by a holder of the Class A preferred stock
will be treated as long-term capital gain or loss if the Class A preferred
stock has been held for more than one year. In addition, if a holder of Class A
preferred stock recognizes a loss upon a sale or a redemption that is not
treated as a distribution taxable as a dividend, and the stock has been held
for six months or less after applying specific holding period rules, the loss
will be treated as long-term capital loss to the extent a holder received
distributions from us which were required to be treated as long-term capital
gains.

S-41
<PAGE>

Legislative Proposals

The Clinton Administration's fiscal year 2000 budget proposal, announced
February 1, 1999, includes a proposal that would limit a REIT's ability to own
more than 10% by vote or value of the stock of another corporation. As
discussed under the heading "Federal Income Tax Considerations--Federal Income
Taxation of Host Marriott" in the accompanying prospectus, a REIT cannot
currently own more than 10% of the outstanding voting securities of any one
issuer. A REIT can, however, own more than 10% by value of the stock of a
corporation provided no more than 25% of the value of the REIT's assets consist
of subsidiaries that conduct impermissible activities and that the stock of any
one single corporation does not account for more than 5% of the total value of
the REIT's asset. The Clinton budget proposal would allow a REIT to own all or
a portion of the voting stock and value of a "taxable REIT subsidiary" provided
all of a REIT's taxable REIT subsidiaries do not represent more than 15% of the
REIT's total assets. In addition under the Clinton budget proposal, a "taxable
REIT subsidiary" would not be entitled to deduct any interest on debt funded
directly or indirectly by the REIT. The budget proposal, if enacted in its
current form, may require that we restructure our ownership of the non-
controlled subsidiaries because we currently own more than 10% of the value of
the non-controlled subsidiaries. The Clinton budget proposal, if enacted in its
current form, would be effective after the date of its enactment and would
provide transition rules to allow corporations, like our non-controlled
subsidiaries, to convert into "taxable REIT subsidiaries" tax-free.

Proposals that are similar to the Clinton Administration's fiscal year 2000
budget proposal have been introduced in both the House of Representatives and
the Senate under the title of Real Estate Investment Trust Modernization Act of
1999 and in the House of Representatives under the title Financial Freedom Act
of 1999. As with the Clinton budget proposal, the bills introduced in the House
of Representatives and the Senate would prohibit the ownership by a REIT of
more than 10%, by vote or value, of the stock of another corporation, but would
likewise permit a REIT to own all of the voting stock and value of a taxable
REIT subsidiary. However, the provisions of these proposed bills are less
restrictive than the Clinton budget proposal in many respects. For example,
instead of limiting the value of a REIT's taxable REIT subsidiaries to 15% of
the REIT's total assets, under the bills introduced in the House of
Representatives and the Senate, a REIT's ownership of taxable REIT subsidiaries
would be limited only by the 75% asset test. The 75% asset test is described in
the accompanying prospectus under the heading "Federal Income Taxation of Host
Marriott-Asset Tests Applicable to REITs". Additionally, unlike the Clinton
budget proposal, these proposed bills permit the deduction by a taxable REIT
subsidiary of interest on debt funded directly or indirectly by the REIT,
subject only to rules regarding the subsidiary's debt to equity ratio and the
amount of this interest expense. The proposed bills also propose specific
changes to the REIT provisions of the Internal Revenue Code which are not
discussed in the Clinton budget proposal. Most notably they would allow a REIT
to lease hotels to a taxable REIT subsidiary if the hotel is operated and
managed on behalf of such subsidiary by an independent third party. In the
event this provision of the Real Estate Investment Modernization Act of 1999
(or the corresponding provision of the Financial Freedom Act of 1999) is
enacted, then we, at our discretion, may elect to terminate the leases of our
hotels with Crestline and pay termination fees. The Real Estate Investment
Trust Modernization Act of 1999 and the Financial Freedom Act of 1999 propose a
reduction of the REIT distribution requirements from 95% to 90% of a REIT's
taxable income. As with the Clinton budget proposal, the bills introduced in
the House of Representatives and the Senate provide transitional rules which
would allow a REIT to convert its "non-controlled" subsidiaries into taxable
REIT subsidiaries tax-free.

It is presently uncertain whether any proposal regarding REIT subsidiaries,
including the Clinton budget proposal, will be enacted, or if enacted, what the
terms of such proposal, including its effective date, will be.

S-42
<PAGE>

UNDERWRITERS

Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus supplement, the underwriters named
below, for whom Morgan Stanley & Co. Incorporated, PaineWebber Incorporated,
Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc., Donaldson, Lufkin &
Jenrette Securities Corporation and Prudential Securities Incorporated are
acting as representatives, have severally agreed to purchase, and we have
agreed to sell to them, severally, the number of shares of Class A preferred
stock indicated below:

<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated..................................
PaineWebber Incorporated...........................................
Bear, Stearns & Co. Inc. ..........................................
Deutsche Bank Securities Inc. ....................................
Donaldson, Lufkin & Jenrette Securities Corporation................
Prudential Securities Incorporated.................................
---------
Total............................................................ 4,000,000
=========
</TABLE>

Morgan Stanley & Co. Incorporated and PaineWebber Incorporated will be the
joint lead managers of this offering. Morgan Stanley & Co. Incorporated will be
the sole book-running manager of this offering.

The underwriters are offering the shares of Class A preferred stock subject
to their acceptance of the shares from us and subject to prior sale. The
underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of Class A preferred
stock offered by this prospectus supplement are subject to the approval of
certain legal matters by their counsel and to certain other conditions. The
underwriters are obligated to take and pay for all of the shares of Class A
preferred stock offered by this prospectus supplement if any such shares are
taken. However, the underwriters are not required to take or pay for the shares
covered by the underwriters' over-allotment option described below.

The underwriters initially propose to offer part of the shares of Class A
preferred stock directly to the public at the public offering price set forth
on the cover page of this prospectus supplement and part to certain dealers at
a price that represents a concession not in excess of $ a share under the
public offering price. Any underwriter may allow, and such dealers may re-
allow, a concession not in excess of $ a share to other underwriters or to
certain dealers. After the initial offering of the shares of Class A preferred
stock, the offering price and other selling terms may from time to time be
varied by the representatives.

We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus supplement, to purchase up to an aggregate of
600,000 additional shares of Class A preferred stock at the public offering
price set forth on the cover page of this prospectus supplement less
underwriting discounts and commissions. The underwriters may exercise this
option solely for the purpose of covering over-allotments, if any, made in
connection with the offering of the shares of Class A preferred stock offered
by this prospectus supplement. To the extent the option is exercised, each
underwriter will become obligated, subject to certain conditions, to purchase
about the same percentage of the additional shares of Class A preferred stock
as the number set forth next to the underwriter's name in the preceding table
bears to the total number of shares of

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<PAGE>

Class A preferred stock listed next to the names of all underwriters in the
preceding table. If the underwriters' option is exercised in full, the total
price to public would be $ , the total underwriting discounts and commissions
would be $ , and the total proceeds to us would be $ . Underwriting discounts
and commissions for sales of 400,000 or more shares of Class A preferred stock
to a single purchaser will be $ per share. If any of these sales occurs, the
total underwriting discounts and commissions will be less than the amounts set
forth on the cover page of this prospectus supplement and, if applicable, in
the preceding sentence.

We are applying for approval from the New York Stock Exchange to list the
shares of Class A preferred stock on the NYSE. Trading of the shares of Class A
preferred stock on the NYSE is expected to commence within the 30-day period
after initial delivery of the shares. The underwriters have advised us that
they intend to make a market in the shares of Class A preferred stock prior to
the commencement of trading on the NYSE. The underwriters will have no
obligation to make a market in the shares of Class A preferred stock, however,
and may cease market-making activities, if commenced, at any time.

We have agreed that, without the prior written consent of Morgan Stanley &
Co. Incorporated on behalf of the underwriters, we will not, during the period
ending 30 days after the date of this prospectus supplement:

. offer, issue, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of Class A preferred stock or other
preferred stock, any shares of any other class or series of our capital
stock which is substantially similar to the Class A preferred stock or
any depositary shares or depositary receipts representing or evidencing
any of the foregoing, or any securities convertible into or exercisable
or exchangeable for any of the foregoing, or

. enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of any
Class A preferred stock or other preferred stock, any shares of any other
class or series of our capital stock which is substantially similar to
the Class A preferred stock or any depositary shares or depositary
receipts representing or evidencing any of the foregoing or any
securities convertible into or exercisable or exchangeable any of the
foregoing;

whether any transaction described above is to be settled by delivery of Class A
preferred stock, other securities, in cash or otherwise. The restrictions
described in this paragraph do not apply to the sale of shares of Class A
preferred stock to the underwriters.

In order to facilitate the offering of the shares of Class A preferred
stock, the underwriters may engage in transactions that stabilize, maintain or
otherwise affect the price of the shares of Class A preferred stock.
Specifically, the underwriters may over-allot in connection with the offering,
creating a short position in the shares of Class A preferred stock for their
own account. In addition, to cover over-allotments or to stabilize the price of
the shares of Class A preferred stock, the underwriters may bid for, and
purchase, shares of Class A preferred stock in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the shares of Class A preferred stock
in the offering, if the syndicate repurchases previously distributed shares of
Class A preferred stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the shares of Class A preferred stock above
independent market levels. The underwriters are not required to engage in these
activities, and may end any of these activities at any time.

Certain of the underwriters and their affiliates have from time to time
provided investment banking and other services to Host Marriott, including
acting as underwriters for offerings by Host Marriott or its subsidiaries, and
may continue to do so in the future. In that regard, affiliates of certain of
the underwriters act as agents and/or lenders under the operating partnership's
bank credit facility and, in addition, affiliates of certain underwriters
provided the mortgage financing described under "Recent Developments--Mortgage
Financing".

Host Marriott and the underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act of
1933. In addition, Host Marriott has agreed to pay expenses incurred by the
underwriters in connection with the offering of Class A preferred stock in an
amount not to exceed $ .

S-44
<PAGE>

LEGAL MATTERS

Certain legal matters in connection with the offering of the Class A
preferred stock will be passed upon for us by Christopher G. Townsend, Senior
Vice President and General Counsel of Host Marriott and by Latham & Watkins,
Washington, D.C. Certain Maryland law matters relating to the offering will be
passed upon by Ballard Spahr Andrews & Ingersoll, LLP, special Maryland counsel
to Host Marriott. Brown & Wood llp, San Francisco, California, will act as
counsel for the underwriters.

EXPERTS

The financial statements and schedules incorporated by reference in the
accompanying prospectus and elsewhere in the registration statement, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included therein in reliance upon
the authority of said firm as experts in giving said reports.

WHERE YOU CAN FIND MORE INFORMATION

This section supersedes listed items 1 through 6 of the section entitled
"Where You Can Find More Information" in the accompanying prospectus.

The following documents, which we have filed with the Securities and
Exchange Commission since the date of the accompanying prospectus, have been
incorporated by reference into the prospectus:

1. Annual Report on Form 10-K for the fiscal year ended December 31, 1998.

2. Quarterly Report on Form 10-Q for the quarter ended March 26, 1999.

3. Current Reports on Form 8-K dated:

. December 30, 1998 (filed on January 14, 1999), as amended by Form 8-K/A
dated December 30, 1998 (filed on March 15, 1999);

. December 30, 1998 (filed on January 15, 1999);

. January 12, 1999 (filed on January 14, 1999);

. January 21, 1999 (filed on January 22, 1999); and

. May 3, 1999 (filed on May 3, 1999).

4. Proxy Statement on Schedule 14A dated April 15, 1999.

S-45
<PAGE>

PROSPECTUS

$1,050,000,000
HOST MARRIOTT CORPORATION

Common Stock, Preferred Stock, Depositary Shares,
Warrants and Subscription Rights

By this prospectus, we may offer, from time to time, in one or more series
or classes the following securities:

. shares of our common stock,
. shares of our preferred stock,
. shares of preferred stock represented by depositary shares,
. our warrants exercisable for common stock, preferred stock or depositary
shares and
. subscription rights evidencing the right to purchase any of the above
securities.

The offered securities have an aggregate initial offering price of
$1,050,000,000. We may offer the offered securities in amounts, at prices and
on terms determined at the time of the offering. We will provide you with
specific terms of the applicable offered securities in supplements to this
prospectus.

You should read this prospectus and any supplement carefully before you
decide to invest. This prospectus may not be used to consummate sales of the
offered securities unless it is accompanied by a prospectus supplement
describing the method and terms of the offering of those offered securities.

Investing in the offered securities involves risks. See "Risk Factors"
beginning on page 6.

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

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these offered securities or
determined if this prospectus is truthful or complete. It is illegal for any
person to tell you otherwise.

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

The date of this prospectus is December 30, 1998.
<PAGE>

As used herein and in the accompanying prospectus supplement, "Host
Marriott" means Host Marriott Corporation, a Maryland corporation, and/or its
subsidiary Host Marriott, L.P., a Delaware limited partnership and its
subsidiaries.

RISK FACTORS

Prospective investors should carefully consider, among other factors, the
material risks described below.

We Do Not Control Our Hotel Operations

Because federal income tax laws restrict real estate investment trusts from
deriving revenues directly from operating a hotel, we do not operate any of
our hotels. Instead, we lease virtually all of our hotels to subsidiaries of
Crestline Capital Corporation which, in turn, retain managers to manage our
hotels pursuant to management agreements. Under the hotel leases, we have
little influence over how the lessees operate our hotels. Similarly, we have
virtually no influence over how the managers manage our hotels. As a result,
our revenue depends upon the ability of the lessees and the managers to
operate and manage our hotels. We have no recourse if we believe that the
hotel managers do not maximize the revenues from our hotels, which in turn
will maximize the rental payments we receive under the leases. We may seek
redress under most leases only if the lessee violates the terms of the lease
and then only to the extent of the remedies set forth in the lease. We may
terminate a lease if the lessee defaults, but terminating a lease could impair
our ability to qualify as a REIT for federal income tax purposes unless
another suitable lessee is found.

We Do Not Control Certain Assets Held by the Non-Controlled Subsidiaries

We own economic interests in certain taxable corporations, which we refer
to as the "non-controlled subsidiaries," that hold various assets not
exceeding, in the aggregate, 15% in value of our assets. These assets consist
primarily of interests in hotels which are not leased, certain furniture,
fixtures and equipment ("FF&E") used in our hotels, and certain international
hotels that could jeopardize our REIT status. Although we own 95% of the
economic interests of the non-controlled subsidiaries, the Host Marriott
Statutory Employee/Charitable Trust owns all of the voting common stock, which
represents the remaining 5% of the economic interest, of the non-controlled
subsidiaries. This voting stockholder elects the directors who are responsible
for overseeing the operations of the non-controlled subsidiaries. As a result,
we have no control over the operation or management of the hotels or other
assets owned by the non-controlled subsidiaries, even though we depend upon
the non-controlled subsidiaries for a significant portion of our revenues.

We Are Dependent on the Lessees' Rent Payments As Our Primary Source of
Revenues

Subsidiaries of Crestline lease virtually all of our hotels. The lessees'
rent payments are the primary source of our revenues. Crestline guarantees the
obligations of its subsidiaries under the hotel leases, but Crestline's
liability is limited to a relatively small portion of the aggregate rent
obligation of its subsidiaries. Crestline's and each of its subsidiaries'
ability to meet its obligations under the leases will determine the amount of
our revenue and, likewise, our ability to make distributions to stockholders.
We have no control over Crestline or any of its subsidiaries and cannot assure
you that Crestline or any of its subsidiaries will have sufficient assets,
income and access to financing to enable them to satisfy their obligations
under the leases or to make payments of fees under the management agreements.
Because of our dependence on Crestline, our credit rating will be affected by
its general creditworthiness.

We Are Dependent on the Hotel Managers to Operate the Hotels Effectively

Our revenue will be affected by the performance of the managers of our
hotels. It also will be affected by the relationships between the managers and
the lessees. Their decisions involving hotel management may not

2
<PAGE>

necessarily be in our best interests, and disagreements between them could
adversely affect us. We have no control over these relationships. Moreover,
each lessee's ability to pay rent accrued under its lease depends to a large
extent on the ability of the hotel manager to operate the hotel effectively
and to generate gross sales in excess of its operating expenses. Our rental
income from the hotels may therefore be adversely affected if the managers
fail to provide quality services and amenities and competitive room rates at
our hotels or fail to maintain the quality of the hotel brand names. Although
the lessees have primary liability under the management agreements while the
leases are in effect, we remain liable under the leases for all obligations
that the lessees do not perform.

Our Revenues and the Value of Our Properties Could be Adversely Affected by
Conditions Affecting the Lodging Industry

If our assets do not generate income sufficient to pay our expenses,
service our debt and maintain our properties, we will be unable to make
expected distributions to our stockholders. Factors that could adversely
affect our revenues and the economic performance and value of our properties
include:

. changes in the national, regional and local economic climate,

. local conditions such as an oversupply of hotel properties or a reduction
in demand for hotel properties,

. the attractiveness of our hotels to consumers and competition from
comparable hotels,

. the quality, philosophy and performance of the hotel managers (primarily
Marriott International, Inc.),

. the ability of any hotel lessee to maximize rental payments,

. changes in room rates and increases in operating costs due to inflation
and other factors and

. the need to periodically repair and renovate our hotels.

Our Expenses May Remain Constant Even If Our Revenues Drop

The expenses of owning a property are not necessarily reduced when
circumstances such as market factors and competition cause a reduction in
income from the property. If a property is mortgaged and we are unable to meet
the mortgage payments, the lender could foreclose and take the property. Our
financial condition and ability to service debt and make distributions to our
stockholders could be adversely affected by:

.interest rate levels,

.the availability of financing,

.the cost of compliance with government regulation, including zoning and
tax laws and

.changes in laws and governmental regulations, including those governing
usage, zoning and taxes.

New Acquisitions May Fail to Perform as Expected and We May Be Unable to Make
Any Acquisitions

We intend to acquire additional full-service hotels and other types of real
estate. Newly acquired properties may fail to perform as expected, which could
adversely affect our financial condition. We may underestimate the costs
necessary to bring an acquired property up to standards established for its
intended market position. We expect to acquire hotels and other types of real
estate with cash from secured or unsecured financings and proceeds from
offerings of equity or debt, to the extent available. We may not be in a
position or have the opportunity in the future to make suitable property
acquisitions on favorable terms. In addition, we cannot guarantee that the
leases for newly acquired hotels will be as favorable to us as the Leases.

3
<PAGE>

Competition for Acquisitions May Result in Increased Prices for Hotels

Other major investors with significant capital compete with us for
attractive investment opportunities. These competitors include other REITs and
hotel companies, investment banking firms and private institutional investment
funds. This competition may increase prices for hotel properties, thereby
decreasing the potential return on our investment.

The Seasonality of the Hotel Industry May Affect the Ability of the Lessees to
Make Timely Rent Payments

The seasonality of the hotel industry may, from time to time, affect either
the amount of rent that accrues under the hotel leases or the ability of the
lessees to make timely rent payments under the leases. A lessee's or
Crestline's inability to make timely rent payments to us could adversely affect
our financial condition and ability to service debt and make distributions to
our stockholders.

We May Be Unable to Sell Properties When Appropriate Because Real Estate
Investments Are Illiquid

Real estate investments generally cannot be sold quickly. We may not be able
to vary our portfolio promptly in response to economic or other conditions.
This inability to respond promptly to changes in the performance of our
investments could adversely affect our financial condition and ability to
service debt and make distributions to our stockholders.

We May Be Unable to Renew Leases or Find Other Lessees

Our current hotel leases have terms of seven to ten years. There can be no
assurance that the affected hotels will be relet to Crestline or the current
lessees, or if relet, will be relet on terms as favorable to us. If our hotels
are not relet, we will be required to find other lessees who meet certain
requirements of the management agreements and of the REIT tax rules. We cannot
assure you that we would be able to find satisfactory lessees or that the terms
of any new leases would be as favorable as under the current leases. Failure to
find satisfactory lessees could cause us to lose our REIT status, and failure
to enter leases on satisfactory terms could result in reduced cash available
for distribution.

Terms of the Hotel Ground Leases May Adversely Affect Our Revenues

As of December 30, 1998, we lease 54 of our hotels pursuant to ground
leases. These ground leases generally require increases in ground rent payments
every five years. Our ability to make cash distributions to our stockholders
could be adversely affected to the extent that the rents payable by the lessees
under the leases do not increase at the same or a greater rate as the increases
under the ground leases. In addition, if we were to sell a hotel encumbered by
a ground lease, the buyer would have to assume the ground lease, which could
result in a lower sales price.

Some Potential Losses Are Not Covered By Insurance

We carry comprehensive liability, fire, flood, extended coverage and rental
loss (for rental losses extending up to 12 months) insurance with respect to
all of our hotels. We believe the policy specifications and insured limits of
these policies are of the type customarily carried for similar hotels. Certain
types of losses, such as from earthquakes and environmental hazards, however,
may be either uninsurable or too expensive to justify insuring against. Should
an uninsured loss or a loss in excess of insured limits occur, we could lose
all or a portion of the capital we have invested in a hotel, as well as the
anticipated future revenue from the hotel. In such an event, we might
nevertheless remain obligated for any mortgage debt or other financial
obligations related to the property.

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Leases Could Impair the Sale or Other Disposition of Our Hotels

Each lease with a subsidiary of Crestline generally requires us to make a
termination payment to the lessee if we terminate the lease prior to the
expiration of its term. A termination payment is required even if we terminate
a lease because of a change in the federal income tax laws that either would
make continuation of the lease jeopardize our REIT status or would enable us to
operate our hotels ourselves. The termination fee generally is equal to the
fair market value of the lessee's leasehold interest in the remaining term of
the lease, which could be a significant amount. In addition, if we decide to
sell a hotel, we may be required to terminate its lease, and the payment of the
termination fee under such circumstances could impair our ability to sell the
hotel and would reduce the net proceeds of any sale.

Management Agreements Could Impair the Sale or Other Disposition of Our Hotels

Under the terms of the management agreements, we generally may not sell,
lease or otherwise transfer the hotels unless the transferee assumes the
related management agreements and meets certain other conditions. Our ability
to finance, refinance or effect a sale of any of the properties managed by
Marriott International or another manager may, depending upon the structure of
such transactions, require the manager's consent. If Marriott International or
other manager did not consent, we would be prohibited from consummating the
financing, refinancing or sale without breaching the management agreement.

The Acquisition Contracts Relating to Certain Hotels Limit Our Ability to Sell
or Refinance Such Hotels

For reasons relating to federal income tax considerations of the former
owners of certain of our hotels, we have agreed to restrictions on selling
certain hotels or repaying or refinancing the mortgage debt thereon for lock-
out periods which vary depending on the hotel. We anticipate that, in certain
circumstances, we may agree to similar restrictions in connection with future
hotel acquisitions. As a result, even if it were in our best interests to sell
such hotels or refinance their mortgage debt, it may be difficult or impossible
to do so during their respective lock-out periods.

Marriott International's and Crestline's Operation of Their Respective
Businesses Could Result in Decisions Not in Our Best Interest

Marriott International, a public company in the business of hotel
management, manages a significant number of our hotels. In addition, Marriott
International manages hotels owned by others that compete with our hotels. As a
result, Marriott International may make decisions regarding competing lodging
facilities which it manages that would not necessarily be in our best
interests. Further, J.W. Marriott, Jr., a member of our Board of Directors, and
Richard E. Marriott, our Chairman of the Board and J.W. Marriott, Jr.'s
brother, serve as directors, and, in the case of J.W. Marriott, Jr., also an
officer, of Marriott International. As of December 30, 1998, J.W. Marriott, Jr.
and Richard E. Marriott also beneficially own approximately 10.6% and 10.3%,
respectively, of the outstanding shares of common stock of Marriott
International, and will beneficially own approximately 6.1% and 6.0%,
respectively, of the outstanding shares of common stock of Crestline, but
neither will serve as an officer or director of Crestline. As a result, J.W.
Marriott, Jr. and Richard E. Marriott have potential conflicts of interest when
making decisions regarding Marriott International, including decisions relating
to the management agreements involving the hotels, Marriott International's
management of competing lodging properties and Crestline's leasing and other
businesses.

The Boards of Directors of both Host Marriott and Marriott International
follow appropriate policies and procedures to limit the involvement of Messrs.
J.W. Marriott, Jr. and Richard E. Marriott in conflict situations, including
requiring them to abstain from voting as directors of either Host Marriott or
Marriott International or their subsidiaries on certain matters which present a
conflict between the companies. If appropriate, these policies and procedures
will apply to other directors and officers.

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Provisions of Our Charter and Bylaws Could Inhibit Changes in Control

Certain provisions of our charter and bylaws may delay or prevent a change
in control of Host Marriott or other transaction that could provide our
stockholders with a premium over the then-prevailing market price of their
shares or which might otherwise be in their best interests. These include a
staggered Board of Directors and the ownership limit described below. Also, any
future class or series of stock may have certain voting provisions that could
delay or prevent a change in control or other transaction that might involve a
premium price or otherwise be good for our stockholders.

The Marriott International Purchase Right May Discourage a Takeover of Host
Marriott

Marriott International has the right to purchase up to 20% of each class of
our outstanding voting shares at the then fair market value upon the occurrence
of certain change of control events involving Host Marriott. We refer to this
right as the "Marriott International purchase right." The Marriott
International purchase right will continue in effect until June 2017, subject
to certain limitations intended to protect the our REIT status. The Marriott
International purchase right may have the effect of discouraging a takeover of
Host Marriott, because any person considering acquiring a substantial or
controlling block of our common stock will face the possibility that its
ability to obtain or exercise control would be impaired or made more expensive
by the exercise of the Marriott International purchase right.

We Have Adopted Maryland Law Limitations on Changes in Control

Maryland corporate law prohibits certain "business combinations" between a
Maryland corporation and any person who owns 10% or more of the voting power of
the corporation's then outstanding shares of stock (an "Interested
Stockholder") or an affiliate of the Interested Stockholder unless a business
combination is approved by the board of directors any time before an Interested
Stockholder first becomes an Interested Stockholder. The prohibition lasts for
five years after the Interested Stockholder becomes an Interested Stockholder.
Thereafter, any such business combination must be approved by stockholders
under certain special voting requirements. We will be subject to such
provisions although we may elect to "opt-out" in the future. As a result, a
change in control of Host Marriott or other transaction that could provide our
stockholders with a premium over the then-prevailing market price of their
shares or which might otherwise be in their best interests may be prevented or
delayed. Our Board of Directors has exempted from this statute the acquisition
of shares by Marriott International pursuant to the terms of the Marriott
International purchase right as well as any other transactions involving Host
Marriott and Marriott International or our respective subsidiaries, or J.W.
Marriott, Jr. or Richard E. Marriott, provided that, if any such transaction is
not in the ordinary course of business, it must be approved by a majority of
our directors present at a meeting at which a quorum is present, including a
majority of the disinterested directors, in addition to any vote of
stockholders required by other provisions of Maryland corporate law.

Maryland Control Share Acquisition Law Could Delay or Prevent a Change in
Control

Under Maryland corporate law, unless a corporation elects not to be subject
thereto, "control shares" acquired in a "control share acquisition" have no
voting rights except to the extent approved by stockholders by a vote of two-
thirds of the votes entitled to be cast on the matter, excluding shares owned
by the acquiror and by officers or directors who are employees of the
corporation. "Control shares" are voting shares which would entitle the
acquiror to exercise voting power in electing directors within certain
specified ranges of voting power. A "control share acquisition" means the
acquisition of control shares, subject to certain exceptions. We are subject to
these control share provisions of Maryland law and, as a result, a change in
control of Host Marriott or other transaction that could provide our
stockholders with a premium over the then-prevailing market price of their
shares or which might otherwise be in their best interests may be delayed or
prevented. Our bylaws contain an exemption from this statute for any shares
acquired by Marriott International, together with its successors and permitted
assignees, pursuant to the Marriott International purchase right.

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We Have Adopted a Rights Agreement Which Could Delay or Prevent a Change in
Control

Our Rights Agreement provides, among other things, that upon the occurrence
of certain events, stockholders will be entitled to purchase shares of our
stock, subject to the ownership limit. These purchase rights would cause
substantial dilution to a person or group that acquires or attempts to acquire
20% or more of our common stock on terms not approved by the Board of Directors
and, as a result, could delay or prevent a change in control of Host Marriott
or other transaction that could provide our stockholders with a premium over
the then-prevailing market price of their shares or which might otherwise be in
their best interests. See "Description of Common Stock--Stockholder Rights
Plan/Preferred Stock Purchase Rights."

We Have a Stock Ownership Limit Primarily for REIT Tax Purposes

Primarily to facilitate maintenance of our REIT qualification, our charter
imposes an ownership limit on our common stock and preferred stock. See
"Restrictions on Ownership and Transfer." The attribution provisions of the
federal tax laws that are used in applying the ownership limit are complex.
They may cause one stockholder to be considered to own the stock of a number of
related stockholders. As a result, these provisions may cause a stockholder
whose direct ownership of stock does not exceed the ownership limit to, in
fact, exceed the ownership limit.

The ownership limit could delay or prevent a change in control and,
therefore, could adversely affect stockholders' ability to realize a premium
over the then-prevailing market price for the common stock in connection with
such transaction.

The Large Number of Shares Available for Future Sale Could Adversely Affect the
Market Price of Our Publicly Traded Securities

In connection with the REIT conversion, we have reserved approximately 96.4
million shares of our common stock for future issuance. Up to approximately
48.2 million shares of this common stock may be issued in January 1999. Such
common stock will be freely transferable upon receipt. The balance of the
reserved common stock may be issued upon the redemption of units of limited
partnership interest in Host Marriott, L.P. These limited partnership units
will become redeemable at various times over the next year, with approximately
21.7 million limited partnership units becoming redeemable beginning on July 1,
1999, pursuant to each holder's right under Host Marriott, L.P.'s partnership
agreement to redeem them for shares of our common stock or, at Host Marriott's
election, the cash equivalent thereof. In addition, we have reserved a
substantial number of shares of our common stock for issuance pursuant to
benefit plans or outstanding options, and such shares of our common stock will
be available for sale in the public markets from time to time. Moreover, we may
issue additional shares of our common stock in the future. We cannot predict
the effect that future sales of shares of our common stock, or the perception
that such sales could occur, will have on the market prices of our equity
securities.

Our FFO and Cash Distributions Will Affect the Market Price of Our Publicly
Traded Securities

We believe that the market value of a REIT's equity securities is based
primarily upon the market's perception of the REIT's growth potential,
including its prospects for accretive acquisitions and development, and its
current and potential future cash distributions, and is secondarily based upon
the real estate market value of the underlying assets. For that reason, our
common stock may trade at prices that are higher or lower than the net asset
value per share. To the extent we retain operating cash flow for investment
purposes, working capital reserves or other purposes, these retained funds,
while increasing the value of our underlying assets, may not correspondingly
increase the market price of our common stock. Our failure to meet the market's
expectations with regard to future FFO and cash distributions would likely
adversely affect the market price of our publicly traded securities.

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Market Interest Rates May Have an Effect on the Value of Our Publicly Traded
Securities

One of the factors that investors consider important in deciding whether to
buy or sell shares of a REIT is the distribution rate on such shares, as a
percentage of the price of such shares relative to market interest rates. If
market interest rates go up, prospective purchasers of our equity securities
may expect a higher dividend yield. Higher interest rates would not, however,
result in more funds for us to distribute and, in fact, would likely increase
our borrowing costs and potentially decrease cash available for distribution to
the extent that our indebtedness has floating interest rates. Thus, higher
market interest rates could cause the market price of our publicly traded
securities to go down.

We are Dependent on External Sources of Capital

To qualify as a REIT, we must distribute to our stockholders each year at
least 95% of our net taxable income, excluding any net capital gain. Because of
these distribution requirements, it is not likely that we will be able to fund
all future capital needs, including acquisitions, from income from operations.
We therefore will have to rely on third-party sources of capital, which may or
may not be available on favorable terms or at all. Our access to third-party
sources of capital depends upon a number of factors, including general market
conditions, the market's perception of our growth potential, our current and
potential future earnings and cash distributions and the market price of our
common stock. Moreover, additional equity offerings may result in substantial
dilution of stockholders' interests, and additional debt financing may
substantially increase our leverage.

Our Degree of Leverage Could Limit Our Ability to Obtain Additional Financing

Our debt-to-total market capitalization ratio was approximately 55% on a pro
forma basis as of December 23, 1998. We have a policy of incurring debt only
if, immediately following such incurrence, our debt-to-total market
capitalization ratio on a pro forma basis would be 60% or less. Our degree of
leverage could affect our ability to obtain financing in the future for working
capital, capital expenditures, acquisitions, development or other general
corporate purposes and to refinancing borrowings on favorable terms. Our
leveraged capital structure also makes us more vulnerable to a downturn in our
business or in the economy generally. Moreover, there are no limitations in our
organizational documents that limit the amount of indebtedness that we may
incur, although our existing debt instruments contain certain restrictions on
the amount of indebtedness that we may incur. Accordingly, our Board of
Directors could alter or eliminate the 60% policy without stockholder approval
to the extent permitted by our debt agreements. If this policy were changed, we
could become more highly leveraged, resulting in an increase in debt service
payments that could adversely affect our cash flow and consequently our ability
to service our debt and make distributions to stockholders.

Rental Revenues from Hotels Are Subject to Prior Rights of Lenders

The mortgages on certain of our hotels require that rent payments under the
leases on such hotels be used first to pay the debt service on such mortgage
loans. Consequently, only the cash flow remaining after debt service will be
available to satisfy other obligations, including property taxes and insurance,
FF&E reserves for the hotels and capital improvements, and debt service on
unsecured debt, and to make distributions to stockholders.

We Depend on Our Key Personnel

We depend on the efforts of our executive officers. While we believe we
could find replacements for these key personnel, the loss of their services
could have a significant adverse effect on our operations. We do not intend to
obtain key-man life insurance with respect to any of our executive officers.

The REIT Conversion Could Result in Litigation

Over the last several years, business reorganizations involving the
combination of several partnerships into a single entity have occasionally
given rise to investor lawsuits. These lawsuits have involved claims against

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the general partners of the participating partnerships, the partnerships
themselves and related persons involved in the structuring of, or benefiting
from, the conversion or reorganization, as well as claims against the surviving
entity and its directors and officers. If any lawsuits are filed in connection
with the partnership mergers or other transactions in connection with our REIT
conversion, such lawsuits could result in substantial damage claims against us,
as successor to the liabilities of our predecessors. Such lawsuits, if
successful, could adversely affect our financial condition and our ability to
service our debt and make distributions to stockholders.

Joint Venture Investments Have Additional Risks

Instead of purchasing hotel properties directly, we may invest as a co-
venturer. Joint venturers often share control over the operation of the joint
venture assets. Actions by a co-venturer could subject such assets to
additional risk. Our co-venturer in an investment might have economic or
business interests or goals that are inconsistent with our interests or goals,
or be in a position to take action contrary to our instructions or requests or
contrary to our policies or objectives. Although we generally will seek to
maintain sufficient control of any joint venture to permit our objectives to be
achieved, we might not be able to take action without the approval of our joint
venture partners. Also, our joint venture partners could take actions binding
on the joint venture without our consent. A joint venture partner could go
bankrupt, leaving us liable for its share of joint venture liabilities. Also,
the requirement that we lease our assets to qualify as a REIT may make it more
difficult for us to enter into joint ventures in the future.

The Year 2000 Problem May Adversely Impact Our Business and Financial Condition

Year 2000 issues have arisen because many existing computer programs and
chip-based embedded technology systems use only the last two digits to refer to
a year, and therefore do not properly recognize a year that begins with "20"
instead of the familiar "19." If not corrected, many computer applications
could fail or create erroneous results. Our potential year 2000 problems
include issues relating to our in-house hardware and software computer systems,
as well as issues relating to third parties with which we have a material
relationship or whose systems are material to the operations of our hotels.

In-House Systems

Since October of 1993, we have invested in the implementation and
maintenance of accounting and reporting systems and equipment that are
intended to enable us to provide adequately for our information and
reporting needs and which are also year 2000 compliant. Substantially all
of our in-house systems have already been certified as year 2000 compliant
through testing and other mechanisms. We have not delayed any systems
projects due to the year 2000 issue. We have engaged a third party to
review our year 2000 in-house compliance.

Third-Party Systems

We rely upon operational and accounting systems provided by third
parties, primarily the managers of our hotels, to provide the appropriate
property-specific operating systems, including reservation, phone,
elevator, security, HVAC and other systems, and to provide us with
financial information. We will continue to monitor the efforts of these
third parties to become year 2000 compliant and will take appropriate steps
to address any non-compliance issues.

Risks

Management believes that future costs associated with year 2000 issues
for its in-house systems will be insignificant and therefore not impact our
business, financial condition and results of operations. However, the
actual effect that year 2000 issues will have on our business will depend
significantly on whether other companies and governmental entities properly
and timely address year 2000 issues and whether broad-based or systemic
failures occur. We cannot predict the severity or duration of any such

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failures, which could include disruptions in passenger transportation or
transportation systems generally, loss of utility and/or telecommunications
services, the loss or disruption of hotel reservations made on centralized
reservation systems and errors or failures in financial transactions or
payment processing systems such as credit cards.

Moreover, we are dependent upon Crestline to interface with third parties
in addressing year 2000 issues at our hotels leased to its subsidiaries.
Due to the general uncertainty inherent with respect to year 2000 issues
and our dependence on third parties, including Crestline, we are unable to
determine at this time whether the consequences of year 2000 failures will
have a material impact on Host Marriott. Although our joint year 2000
compliance program with Crestline is expected to significantly reduce
uncertainties arising out of year 2000 issues and the possibility of
significant interruptions of normal operations, we cannot assure you that
this will be the case.

Compliance with the Americans with Disabilities Act Can Be Costly

The hotels must comply with Title III of the Americans with Disabilities
Act to the extent that such hotels are "public accommodations" or "commercial
facilities" as defined by the ADA. The ADA requires removal of structural
barriers to access by persons with disabilities in certain public areas of
hotels where such removal is readily achievable. We do not believe that
substantial non-budgeted capital expenditures will be required in the future
to comply with the ADA. Our existing hotel leases would require us to fund any
such expenditures. Noncompliance with the ADA could also result in the
imposition of fines or an award of damages to private litigants. Unexpected
capital expenditures or the payment of fines or damages would decrease our
cash available for distribution and potentially adversely affect our ability
to make distributions to stockholders.

Compliance With Other Regulations Can Also Be Costly

Hotels are subject to various forms of regulation in addition to the ADA,
including building codes and fire safety regulations. Such regulations may be
changed from time to time, or new regulations adopted, resulting in additional
or unexpected costs of compliance. Any such increased costs could reduce our
cash available for debt service and distributions to stockholders.

Environmental Problems are Possible and Can Be Costly

We believe that our properties are in compliance in all material respects
with applicable environmental laws. Unidentified environmental liabilities
could arise, however, and could have a material adverse effect on our
financial condition and performance. Federal, state and local laws and
regulations relating to the protection of the environment may require a
current or previous owner or operator of real estate to investigate and clean
up hazardous or toxic substances or petroleum product releases at such
property. The owner or operator may have to pay a governmental entity or third
parties for property damage and for investigation and clean-up costs incurred
by such parties in connection with the contamination. These laws typically
impose clean-up responsibility and liability without regard to whether the
owner or operator knew of or caused the presence of the contaminants. Even if
more than one person may have been responsible for the contamination, each
person covered by the environmental laws may be held responsible for all of
the clean-up costs incurred. In addition, third parties may sue the owner or
operator of a site for damages and costs resulting from environmental
contamination emanating from that site. Environmental laws also govern the
presence, maintenance and removal of asbestos. These laws require that owners
or operators of buildings containing asbestos properly manage and maintain the
asbestos, that they notify and train those who may come into contact with
asbestos and that they undertake special precautions, including removal or
other abatement, if asbestos would be disturbed during renovation or
demolition of a building. These laws may impose fines and penalties on
building owners or operators who fail to comply with these requirements and
may allow third parties to seek recovery from owners or operators for personal
injury associated with exposure to asbestos fibers.

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We Intend to Qualify as a REIT, but We Cannot Guarantee that We Will Qualify

We intend to operate to qualify as a REIT for tax purposes beginning in
1999. If we qualify as a REIT, we generally will not be taxed on our income
that we distribute to our stockholders so long as we distribute currently at
least 95% of our income, excluding our net capital gain. We cannot guarantee,
however, that we will qualify as a REIT in 1999 or in any future year. In
addition, it is possible that even if we do qualify as a REIT, new tax rules
will change the way we are taxed. Hogan & Hartson L.L.P., a law firm, has given
us an opinion that we are organized in conformity with the requirements for
qualification as a REIT and that beginning January 1, 1999, our proposed method
of operation will enable us to satisfy the requirements for qualification and
taxation as a REIT. However, Hogan & Hartson based its opinion on a number of
assumptions and conditions, including the accuracy of factual representations
that we and Host Marriott, L.P. made. These representations relate to a large
number of matters, including how we and our subsidiaries operate and will
operate in the future and how the hotels are leased. With respect to how the
hotels are leased, we made representations to Hogan & Hartson about the
economic terms of the leases and the other terms of the leases. We also made
representations to Hogan & Hartson about our expectations and the expectations
of the lessees regarding the leases. It is important that you understand that
Hogan & Hartson's opinion only represents its judgment based on the facts
represented by us and does not bind the IRS or the courts. Neither we nor Hogan
& Hartson can guarantee that the IRS or a court will agree that we qualify as a
REIT.

Host Marriott, L.P. May Need to Borrow Money or Issue Additional Equity in
Order for Us to Qualify as a REIT

A REIT must distribute to its shareholders at least 95% of its net taxable
income, excluding any net capital gain. The source of the distributions we make
to our stockholders will be money distributed to us by Host Marriott, L.P. We
intend to meet this 95% requirement, but there are a number of reasons why Host
Marriott, L.P.'s cash flow alone may be insufficient for it to distribute to us
the funds we will need. First, as a result of some of the transactions of the
Host Predecessors, we expect to recognize large amounts of taxable income in
future years for which Host Marriott, L.P. will have no corresponding cash flow
or EBITDA. This type of income is often referred to as "phantom income."
Second, in order to qualify as a REIT in 1999, we need to distribute to our
stockholders, prior to the end of 1999, all of the "earnings and profits" that
accumulated prior to 1999. If we do not meet this requirement when the
distributions declared in connection with the REIT conversion are paid, we will
be required to make further distributions prior to the end of 1999. Host
Marriott, L.P. will not have cash flow that corresponds to these distributions
and may not be able to borrow or otherwise obtain the funds necessary to
distribute to us an amount necessary to make these distributions. Third, the
seasonality of the hospitality industry could cause a further mismatch of Host
Marriott, L.P.'s income and its cash flow.

In addition, even if a REIT meets the 95% requirement, it may still be
subject to a 4% nondeductible excise tax. This excise tax applies to the amount
by which certain of the REIT's distributions in a given calendar year are less
than the sum of 85% of its ordinary income, 95% of its capital gain net income
and any undistributed taxable income from prior years. We intend to make
distributions so that we will not be subject to this excise tax, but for the
reasons described above, Host Marriott, L.P.'s cash flow alone may be
insufficient for it to distribute to us the funds we will need.

If Host Marriott, L.P.'s cash flow alone is insufficient for it to
distribute to us the money we need to meet the 95% distribution requirement or
to avoid the 4% excise tax, it will need to issue additional equity or borrow
money. We cannot guarantee that these sources of funds will be available to
Host Marriott, L.P. on favorable terms or even at all. Any problems Host
Marriott, L.P. has in borrowing money could be exacerbated by two factors.
First, it will need to distribute most if not all of its earnings to us and so
it will be unable to retain these earnings. Accordingly, it generally will need
to refinance its maturing debt with additional debt or equity and rely on
third-party sources to fund future capital needs. Second, the borrowing needs
of Host Marriott, L.P.

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will be increased if we are required to pay taxes or liabilities attributable
to prior years. If Host Marriott, L.P. is unable to raise the money necessary
for us to meet the 95% distribution requirement, we will fail to qualify as a
REIT. If it is able to raise the money, but only on unfavorable terms, then our
financial performance may be hurt.

Our Failure to Qualify as a REIT Would Have Serious Adverse Consequences

If we fail to qualify as a REIT, we will be subject to federal income tax at
regular corporate rates. This additional tax would significantly reduce the
cash we would have available to distribute to our stockholders and it could
reduce the value of our common stock by a significant amount. Furthermore, if
we fail to qualify as a REIT, we will go into default under some of our debt
instruments. If we fail to qualify as a REIT, we may be disqualified from
treatment as a REIT for the next four taxable years.

We Are Required to Distribute All of Our Prior Earnings and Profits, but We
Cannot Guarantee that We Will Be Able to Do So

In order to qualify as a REIT for 1999, we are required to distribute to our
stockholders, prior to the end of 1999, all of our earnings and profits that we
accumulated prior to 1999. We believe that we will meet this requirement.
However, it is very hard to determine the exact level of our pre-1999 earnings
and profits because the determination depends on an extremely large number of
factors. The complexity of the determination is compounded by the fact that we
started accumulating earnings and profits in 1929. Also, it is difficult to
value our distributions which have not been cash, such as the distribution of
Crestline common stock we made this past December. Therefore, we cannot
guarantee that we will meet this requirement. If we do not meet this
requirement, then we will not qualify as a REIT at least for 1999. Hogan &
Hartson is not providing us with an opinion regarding the amount of our
earnings and profits or whether we meet this requirement. Moreover, for
purposes of their opinion that we qualify as a REIT, they relied on our
statement that we will meet this requirement.

We Will Qualify as a REIT Only if the Rent from the Leases Meets a Number of
Tests, but We Cannot Guarantee that It Will

A REIT's income must meet certain tests relating to its source. If the
income meets the tests, it is called "good income." Almost all of our income
will be rent from the hotel leases. This rent will be good income only if the
leases are respected as true leases for federal income tax purposes. If the
leases are treated as service contracts, joint ventures or some other type of
arrangement, then this rent will not be good income and we will fail to qualify
as a REIT. See "Federal Income Tax Considerations--Federal Income Taxation of
Host Marriott--Income Tests Applicable to REITs."

In addition, the rent from any particular hotel lease will be good income
only if we own less than 10% of the lessee of the hotel. For purposes of this
test, we are treated as owning both any interests that we hold directly and the
interests owned by a person who owns more than 10% of our stock. In determining
who owns more than 10% of our stock, a person may be treated as owning the
stock of another person who is either a relative or has common financial
interests. We will not directly own more than 10% of any of the lessees. In
addition, we intend to enforce the ownership limit in our charter, which
restricts the amount of our capital stock that any person can own. If the
ownership limit is effective, then no person will ever own more than 10% of our
capital stock and we should never own more than 10% of the lessees. However, we
cannot guarantee that the ownership limit will be effective. If the ownership
limit is not effective, our ownership in the lessees may exceed the 10% limit.
As a result, the rent from our leases would not be good income and we would
fail to qualify as a REIT.

Furthermore, rent from any particular hotel lease will be good income only
if no portion of the rent is based on the income or profits of the lessee of
the hotel. The rent, however, can be based on the gross revenues of the
lessees, unless the arrangement does not conform to normal business practice or
is being used as a

12
<PAGE>

device to base rent on the income or profits of the lessees. The rent from the
current leases, other than the Harbor Beach Resort lease, is based on the gross
revenues of the lessees. We believe that the leases conform to normal business
practice and, other than the Harbor Beach Resort lease, are not being used as a
device to base rent on the income or profits of the lessees. Hogan & Hartson
has not given us an opinion on this issue, and we cannot guarantee that the IRS
will agree with our position. If rent from leases in addition to the Harbor
Beach Resort lease is found to be based on the income or profits of the
lessees, the rent would not be good income and we would fail to qualify as a
REIT.

We Will Qualify as a REIT Only If the Personal Property Arrangements Are
Respected

Rent that is attributable to personal property is not good income under the
REIT rules. Hotels contain significant personal property. Therefore, in order
to protect our ability to qualify as a REIT, Host Marriott, L.P. is selling an
estimated $75 million of personal property associated with some of our hotels
to the non-controlled subsidiaries. The non-controlled subsidiaries lease the
personal property associated with each hotel directly to the lessee that is
leasing the hotel. Under each personal property lease, the non-controlled
subsidiary receives rent payments directly from the applicable lessee. We
believe the amount of the rent represents the fair rental value of the personal
property. If for any reason these lease arrangements are not respected for
federal income tax purposes, we likely would not qualify as a REIT.

We Will Be Subject to Taxes Even if We Qualify as a REIT

Even if we qualify as a REIT, we will be subject to some federal, state and
local taxes on our income and property. For example, we will have to pay tax on
income that we do not distribute. We also will be liable for any tax that the
IRS successfully asserts against Host Marriott's predecessors for corporate
income taxes for years prior to 1999. Furthermore, we will derive income from
the non-controlled subsidiaries and they will be subject to regular corporate
taxes.

In addition, we and our subsidiaries contributed a large number of assets to
Host Marriott, L.P. with a value that was substantially greater than our tax
basis in the assets. We refer to these assets as assets with "built-in gain."
We will be subject to tax on the built-in gain if Host Marriott, L.P. sells
these assets prior to the end of 2008. We also have substantial deferred tax
liabilities that we or a non-controlled subsidiary will recognize, without the
receipt by us of any corresponding cash. Even if Host Marriott, L.P. does not
sell the built-in gain assets prior to the end of 2008, there are a number of
other transactions that likely would cause us to be subject to the tax on the
built-in gain. For example, we are likely to recognize gain if Host Marriott,
L.P. sells a hotel contributed to it after 2008, refinances a loan secured by a
hotel contributed to it, spends money to improve a hotel contributed to it, or
issues additional limited partnership units. Lastly, over time, Host Marriott,
L.P. will allocate income and depreciation to its partners in such a way that
it will eliminate the built-in gain in its assets. As a result of these various
events, it is likely that over the next several years, we will recognize a
large amount of the built-in gain associated with the assets that we
contributed to Host Marriott, L.P. In connection with this gain, neither we nor
Host Marriott, L.P. will receive any corresponding cash.

If the Operating Partnership Is Treated as a Corporation, We Will Fail to
Qualify as a REIT

A REIT cannot own more than 10% of the voting securities of a corporation.
We own more than 10% of the voting securities of Host Marriott, L.P.
Accordingly, if Host Marriott, L.P. is treated as a corporation, we will fail
to qualify as a REIT. See "Federal Income Tax Consideration--Tax Aspects of
Host Marriott's Ownership of Interests in Host Marriott, L.P.--Entity
Classification.

We also should point out that if Host Marriott, L.P. is treated as a
corporation, it will be subject to corporate income tax. This would
significantly reduce the amount of cash it would have available to distribute
to us, which would in turn reduce the amount of cash we would have available to
distribute to our stockholders.

13
<PAGE>

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process under
the Securities Act of 1933. Under the shelf process, we may, from time to time,
sell any combination of the offered securities described in this prospectus in
one or more offerings up to a total dollar amount of $1,050,000,000.

This prospectus and the accompanying prospectus supplement do not contain
all of the information included in the registration statement. We have omitted
parts of the registration statement in accordance with the rules and
regulations of the Commission. For further information, we refer you to the
registration statement on Form S-3, including its exhibits. Statements
contained in this prospectus and any accompanying prospectus supplement about
the provisions or contents of any agreement or other document are not
necessarily complete. If the Commission rules and regulations require that such
agreement or document be filed as an exhibit to the registration statement,
please see such agreement or document for a complete description of these
matters. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of each document.

This prospectus provides you with a general description of the offered
securities. Each time we sell offered securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change any
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
under the heading "Where You Can Find More Information."

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy materials that we have
filed with the Commission, including the registration statement, at the
following Commission public reference rooms:

450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661

Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms.

Our Commission filings can also be read at the following address:

New York Stock Exchange
20 Broad Street
New York, New York 10005

Our Commission filings are also available to the public on the Commission's
Web Site at http://www.sec.gov.

The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is an important part of this prospectus, and information that we file later
with the Commission will automatically update and supersede this information.
We incorporate be reference the documents listed below and any future filings
made with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until we have sold all of the offered
securities to which this prospectus relates or the offering is otherwise
terminated.

1. Annual Report on Form 10-K of Host Marriott Corporation, a Delaware
corporation and predecessor of Host Marriott, for the fiscal year ended
January 2, 1998 (filed on March 27, 1998).

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<PAGE>

2. Quarterly Reports on Form 10-Q of Host Marriott Corporation, a
Delaware corporation and predecessor of the Company, for the quarters
ended:

. March 27, 1998 (filed on May 11, 1998 and amended on May 11, 1998),

. June 19, 1998 (filed on July 21, 1998) and

. September 11, 1998 (filed on October 26, 1998).

3. Current Reports on Form 8-K filed by Host Marriott Corporation, a
Delaware corporation and predecessor of Host Marriott, dated:

. April 17, 1998 (filed on April 17, 1998),

. July 29, 1998 (filed on August 6, 1998),

. August 5, 1998 (filed on September 11, 1998),

. November 24, 1998 (filed on November 25, 1998 and superseding the
Current Reports on Form 8-K dated July 15, 1998 (filed on July 17,
1998), July 17, 1998 (filed on July 28, 1998), July 29, 1998 (filed
on July 30, 1998), and July 29, 1998 (filed on July 31, 1998)) and

. December 18, 1998 (filed on December 22, 1998)

4. Current Reports on Form 8-K filed by Host Marriott, dated:

. November 23, 1998 (filed on December 11, 1998),
. December 18, 1998 (filed on December 24, 1998) and
. December 29, 1998 (filed on December 29, 1998).

5. Description of Host Marriott's Common Stock included in a
Registration Statement on Form 8-A filed on November 18, 1998 (as amended
on December 28, 1998).

6. Description of Host Marriott's Rights included in a Registration
Statement on Form 8-A filed on December 11, 1998 (as amended on December
24, 1998).

You may request a copy of these filings, at no cost, by writing us at the
following address or telephoning us at (301) 380-2070 between the hours of 9:00
a.m. and 4:00 p.m., Eastern Time:

Corporate Secretary Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. In addition to historical
information, this prospectus and other materials filed or to be filed by us
with the Commission and incorporated by reference in this prospectus contain or
will contain forward-looking statements within the meaning of the federal
securities law. Forward-looking statements include information relating to our
intent, belief or current expectations, primarily, but not exclusively, with
respect to:

. capital expenditures,
. cost reduction,
. cash flow,
. economic outlook,
. operating performance or
. improvements and related industry developments.

We intend to identify forward-looking statements in this prospectus and
other materials filed or to be filed by us with the Commission and incorporated
by reference in this prospectus by using words or phrases such as "anticipate,"
"believe," "estimate," "expect," "intend," "may be," "objective," "plan,"
"predict," "project" and "will be" and similar words or phrases (or the
negative thereof).

15
<PAGE>

The forward-looking information involves important risks and uncertainties
that could cause our actual results, performance or achievements to differ
materially from our anticipated results, performance or achievements expressed
or implied by such forward-looking statements. These risks and uncertainties
include, but are not limited to:

. national and local economic and business conditions that will, among
other things, affect demand for hotels and other properties, the level
of rates and occupancy that can be achieved by such properties and the
availability and terms of financing;

. the ability to maintain the properties in a first-class manner,
including meeting capital expenditure requirements;

. our ability to compete effectively in areas such as access, location,
quality of accommodations and room rate structures;

. our ability to acquire or develop additional properties and the risk
that potential acquisitions or developments may not perform in
accordance with expectations;

. changes in travel patterns, taxes and government regulations which
influence or determine wages, prices, construction procedures and costs;

. governmental approvals, actions and initiatives including the need for
compliance with environmental and safety requirements, and changes in
laws and regulations or the interpretation thereof;

. the effects of tax legislative action;

. the effect on us and our operations of the year 2000 issue; and

. the timing of our election to be taxed as a REIT, if it occurs, and our
ability to satisfy complex rules in order to qualify as a REIT for
federal income tax purposes and to operate effectively within the
limitations imposed by these rules.

Although we believe the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, we can give you no assurance
that such expectations will be attained or that any deviations will not be
material. We disclaim any obligation or undertaking to disseminate to you any
updates or revisions to any forward-looking statement contained in this
prospectus or other materials that we have filed or will file with the
Commission and incorporated by reference in this prospectus to reflect any
change in our expectations or any changes in events, conditions or
circumstances on which any statement is based.

THE COMPANY

Host Marriott was formed to continue and expand the hotel lodging property
ownership business of its predecessors. Host Marriott succeeded to this
business as a result of its merger with Host Marriott Corporation, a Delaware
corporation, and other restructuring transactions consummated in December 1998
which we refer to as the "REIT conversion." Host Marriott is one of the largest
owners of hotels in the world, with ownership of or controlling interests in
approximately 126 upscale and luxury full-service hotel lodging properties in
its portfolio as of December 30, 1998. Virtually all of these properties are
leased to subsidiaries of Crestline, formerly a wholly owned subsidiary of Host
Marriott, and are generally operated under the Marriott and Ritz-Carlton brand
names and managed by Marriott International. Host Marriott intends to make an
election to be taxed as a REIT for federal income tax purposes effective for
its taxable year beginning January 1, 1999. Host Marriott owns all of its
assets and conducts substantially all of its business through Host Marriott,
L.P. and its subsidiaries. Host Marriott is the sole general partner of Host
Marriott, L.P.

Host Marriott's principal executive offices are located at 10400 Fernwood
Road, Bethesda, Maryland 20817-1109, and its telephone number is (301) 380-
9000.

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<PAGE>

USE OF PROCEEDS

Unless otherwise indicated in the applicable prospectus supplement, we
anticipate that any net proceeds from the sale of offered securities will be
used for general operational purposes, which may include, but are not limited
to, working capital, capital expenditures, acquisitions and the repayment or
repurchase of the indebtedness of Host Marriott or our subsidiaries or our
capital stock. The factors which we will consider in any repayment or
repurchase of its indebtedness will include the amount and characteristics of
any offered securities issued and may include, among others, the impact of such
refinancing on the liquidity of Host Marriott or on our debt-to-capital ratio
and funds from operations ("FFO") per share. When a particular series of
offered securities is offered, the prospectus supplement relating thereto will
set forth the intended use for the net proceeds received from the sale of such
offered securities. Pending the application of the net proceeds, we expect to
invest such proceeds in short-term, interest-bearing instruments or other
investment-grade debt securities or to reduce indebtedness under our bank
credit agreement.

ERISA MATTERS

Host Marriott and our subsidiaries may each be considered a "party in
interest," within the meaning of the Employee Retirement Income Security Act,
or a "disqualified person," within the meaning of Section 4975 of the Internal
Revenue Code, with respect to many employee benefit plans that are subject to
ERISA. The purchase of offered securities by an ERISA plan, including an
individual retirement plan, that is subject to the fiduciary responsibility
provisions of ERISA or the prohibited transaction provisions of the Internal
Revenue Code and with respect to which Host Marriott or any of our affiliates
is a service provider, or otherwise is a party in interest or a disqualified
person, may constitute or result in a prohibited transaction under ERISA or the
Internal Revenue Code, unless such offered securities are acquired pursuant to
and in accordance with an applicable federal statutory exemption, or
administrative exemption issued on a class-wide basis by the United States
Department of Labor. Any pension or other employee benefit plan proposing to
acquire any offered securities should consult with its counsel.

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<PAGE>

RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

The following table sets forth Host Marriott's ratio of earnings to combined
fixed charges and preferred stock dividends on a historical basis for the
periods indicated.

<TABLE>
<CAPTION>
3rd Quarter Fiscal Year
----------- --------------------------------------
1998 1997 1997 1996 1995 1994 1993
----- ----- ------- ------- ------ ------ ------
(in millions, except ratio data)
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined
fixed charges and preferred
stock dividends(a)........... 1.7x 1.4x 1.3x 1.0x -- -- --
Deficiency of earnings to com-
bined fixed charges and pre-
ferred stock dividends(b).... -- -- -- -- $ 70 $ 12 $ 45
</TABLE>
- --------
(a) The ratio of earnings to fixed charges and preferred stock dividends is
computed by dividing income from continuing operations before income taxes
and fixed charges and preferred stock dividends by total fixed charges and
preferred stock dividends. Fixed charges represent interest expense
(including capitalized interest), the amortization of debt issuance costs,
and the portion of rental expense that represents interest.
(b) The deficiency of earnings to fixed charges and preferred stock dividends
in 1995, 1994 and 1993 is largely the result of depreciation and
amortization of $122 million in 1995, $113 million in 1994 and $196 million
in 1993. In addition, the deficiency for 1995 was impacted by the $60
million pre-tax charge to write-down the carrying value of one undeveloped
land parcel to its estimated sales value.

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth Host Marriott's ratio of earnings to fixed
charges on a historical basis for the periods indicated.

<TABLE>
<CAPTION>
3rd Quarter Fiscal Year
----------- --------------------------------------
1998 1997 1997 1996 1995 1994 1993
----- ----- ------- ------- ------ ------ ------
(in millions, except ratio data)
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(a)................ 1.7x 1.4x 1.3x 1.0x -- -- --
Deficiency of earnings to
fixed charges(b).......... -- -- -- -- $ 70 $ 12 $ 45
</TABLE>
- --------
(a) The ratio of earnings to fixed charges is computed by dividing income from
continuing operations before income taxes and fixed charges by total fixed
charges. Fixed charges represent interest expense (including capitalized
interest), the amortization of debt issuance costs, and the portion of
rental expense that represents interest.
(b) The deficiency of earnings to fixed charges in 1995, 1994 and 1993 is
largely the result of depreciation and amortization of $122 million in
1995, $113 million in 1994 and $196 million in 1993. In addition, the
deficiency for 1995 was impacted by the $60 million pre-tax charge to write
down the carrying value of one undeveloped land parcel to its estimated
sales value.

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<PAGE>

DESCRIPTION OF COMMON STOCK

The following description sets forth the general terms of the common stock
which Host Marriott may issue. The description set forth below and in any
prospectus supplement does not purport to be complete and is subject to and
qualified in its entirety by reference to Host Marriott's Articles of Amendment
and Restatement of Articles of Incorporation and Bylaws, each of which will be
made available upon request.

General

Our Articles of Incorporation provide that the total number of shares of
stock of all classes which Host Marriott has authority to issue is 800,000,000
shares of stock, initially consisting of 750,000,000 shares of common stock and
50,000,000 shares of preferred stock. The Board of Directors is authorized,
without a vote of stockholders, to classify or reclassify any unissued shares
of capital stock and to establish the preferences and rights of any preferred
or other class or series of capital stock to be issued. At December 28, 1998,
205,262,058 shares of our common stock were issued and outstanding.

Subject to the preferential rights of any other classes or series of shares
of capital stock and to the provisions of the Articles of Incorporation
regarding restrictions on transfers of shares of capital stock, holders of our
common stock are entitled to receive distributions if, as and when authorized
and declared by the Board of Directors, out of assets legally available
therefor and to share ratably in the assets of Host Marriott legally available
for distribution to its stockholders in the event of its liquidation,
dissolution or winding-up after payment of, or adequate provision for, all
known debts and liabilities of Host Marriott. Host Marriott currently intends
to pay regular quarterly distributions.

Subject to the provisions of the Articles of Incorporation regarding
restrictions on the transfer of shares of capital stock, each outstanding share
of common stock entitles the holder to one vote on all matters submitted to a
vote of stockholders, including the election of directors, and, except as
provided with respect to any other class or series of shares of Host Marriott's
capital stock, the holders of shares of common stock will possess the exclusive
voting power. There is no cumulative voting in the election of directors, which
means that the holders of a majority of the outstanding common stock can elect
all of the directors then standing for election.

Holders of shares of common stock have no preferences, conversion, sinking
fund, redemption rights or preemptive rights to subscribe for any securities of
Host Marriott. Subject to the provisions of the Articles of Incorporation
regarding restrictions on transfer of capital stock, shares of common stock
have equal distribution, liquidation and other rights.

Under Maryland corporate law, a Maryland corporation generally cannot
dissolve, amend its charter, merge, consolidate, effect a share exchange or
transfer its assets unless approved by the Board of Directors and by
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a greater or lesser percentage, but not less than a majority, is
set forth in the corporation's charter. Under our Articles of Incorporation,
any merger, consolidation, share exchange or transfer of assets must be
approved by the Board of Directors and by stockholders. The Articles of
Incorporation generally provide for stockholder approval of such transactions
by a two-thirds vote of all the votes entitled to be cast, except that any
merger of Host Marriott with or into a trust organized for the purpose of
changing Host Marriott's form of organization from a corporation to a trust
will require the approval of stockholders of Host Marriott by the affirmative
vote only of a majority of all the votes entitled to be cast on the matter. In
addition, under the MGCL, certain mergers may be accomplished without a vote of
stockholders. For example, no stockholder vote is required for a merger of a
subsidiary of a Maryland corporation into its parent, provided the parent owns
at least 90% of the subsidiary. In addition, a merger need not be approved by
stockholders of a Maryland successor corporation if the merger does not
reclassify or change the outstanding shares or otherwise amend the charter, and
the number of shares to be issued or delivered in the merger is not more than
20% of the number of its shares of the same class or series outstanding
immediately before the merger becomes effective. A share exchange need be
approved by a Maryland successor only by its Board of Directors. Any amendments
to the provisions contained in the Articles

19
<PAGE>

of Incorporation relating to restrictions on transferability of stock, the
classified Board and fixing the size of the Board within the range set forth
in the Articles of Incorporation, as well as the provisions relating to
removal of directors, the filling of Board vacancies and the exclusive
authority of the Board of Directors to amend the Bylaws will require the
approval of the Board of Directors and stockholders by the affirmative vote of
the holders of not less than two-thirds of the votes entitled to be cast on
the matter. Other amendments to the Articles of Incorporation may be effected
by requisite action of the Board of Directors and approval by stockholders by
the affirmative vote of not less than a majority of the votes entitled to be
cast on the matter.

The Articles of Incorporation authorize the Board of Directors to
reclassify any unissued shares of common stock into other classes or series of
capital stock, including preferred stock, and to establish the number of
shares in each class or series and to set the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications or terms or conditions of redemption for
each such class or series.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock will be First Chicago
Trust Company of New York.

Stockholder Rights Plan/Preferred Stock Purchase Rights

The Board of Directors has adopted a stockholder rights plan pursuant to a
Rights Agreement dated as of November 23, 1998 between Host Marriott and The
Bank of New York, as rights agent. Each share of common stock issued by Host
Marriott between the date of adoption of the Rights Agreement and the Rights
Distribution Date or the date, if any, on which the Rights are redeemed, would
have one preferred stock purchase right (a "Right") attached to it. The Rights
will expire on November 22, 2008, unless earlier redeemed or exchanged. Each
Right, when exercisable, would entitle the holder to purchase one unit of Host
Marriott Series A Junior Participating Preferred Stock, equal to one one-
thousandth of a share of such stock, at a purchase price equal to $55.00 per
unit, subject to adjustment. Until a Right is exercised, the holder thereof,
as such, would have no rights as a stockholder of Host Marriott, including,
without limitation, the right to vote or to receive dividends.

The Rights Agreement provides that the Rights initially attach to all
certificates representing common stock then outstanding. The Rights would
separate from the common stock and a distribution of Rights certificates would
occur (a "Rights Distribution Date") upon the earlier to occur of

. ten days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of 20% or more of
the outstanding common stock (the "Stock Acquisition Date") or

. ten business days, or such later date as the Board of Directors may
determine, following the commencement of a tender offer or exchange
offer, the consummation of which would result in the beneficial
ownership by a person of 20% or more of the outstanding common stock.

For the purposes of determining the 20% threshold amount, the following
shares of Host Marriott common stock are not included:

. shares received pursuant to the Agreement and Plan of Merger, dated
November 23, 1998, pursuant to which Host Marriott Corporation, a
Delaware corporation, was merged into Host Marriott, in exchange for
shares of common stock of Host Marriott Corporation, which such person
beneficially owned on February 3, 1989 and owned continuously
thereafter;

. shares acquired by a person pursuant to a gift, bequest, inheritance or
distribution from a trust or from a corporation controlled by such
person where such shares of common stock were exempt shares under the
Rights Agreement immediately prior to such acquisition and where such
shares of common stock were beneficially owned by such person
continuously after such acquisition;

. shares acquired as a result of a stock dividend, stock distribution or
other recapitalization with respect to exempt shares under the Rights
Agreement; and

20
<PAGE>

. shares that can be acquired by Marriott International pursuant to the
Marriott International purchase right.

Until the Rights Distribution Date, the Rights will be evidenced by the
common stock certificates, and will be transferred with, and only with, the
common stock certificates. The Rights are not exercisable until the Rights
Distribution Date.

If a person becomes the beneficial owner of 20% or more of the then
outstanding common stock, except pursuant to an offer for all outstanding
common stock which the directors by a two-thirds vote determine to be fair to
and otherwise in the best interests of Host Marriott and its stockholders, each
holder of a Right would, after the end of a redemption period, have the right
to exercise the Right by purchasing, for an amount equal to the purchase price,
shares of common stock having a value equal to two times the purchase price,
subject to the ownership limit. All Rights acquired by the Acquiring Person
will be null and void.

Each holder of a Right would have the right to receive, upon exercise,
common shares of the acquiring company having a value equal to two times the
purchase price of the Right if, at any time following the Stock Acquisition
Date,

. Host Marriott is acquired in a merger or other business combination
transaction in which it is not the surviving corporation, other than a
merger which follows an offer described in the preceding paragraph, or

. 50% or more of Host Marriott's assets or earning power is sold or
transferred.

At any time after a person becomes an Acquiring Person, the Board of
Directors may exchange the Rights at an exchange ratio of one share of Host
Marriott common stock per Right.

In general, the Board of Directors may redeem the Rights at a price of $.005
per Right at any time until ten days after an Acquiring Person has been
identified as such. If the decision to redeem the Rights occurs after a person
becomes an Acquiring Person, the decision will require a two-thirds vote of
directors.

The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire Host
Marriott. The Rights, however, would not interfere with any merger or other
business combination approved by the Board of Directors since the Board may, at
its option, at any time prior to any person becoming an Acquiring Person,
redeem all rights or amend the Rights Agreement to exempt the person from the
Rights Agreement.

DESCRIPTION OF PREFERRED STOCK

The following description sets forth the general terms of the preferred
stock which Host Marriott may issue. The description set forth below and in any
prospectus supplement does not purport to be complete and is subject to and
qualified in its entirety by reference to the Articles of Incorporation, the
applicable Articles Supplementary to the Articles of Incorporation determining
the terms of the related series of preferred stock and the Bylaws, each of
which will be made available upon request.

General

The Articles of Incorporation authorize the Board of Directors to issue 50
million shares of preferred stock and to classify or reclassify any unissued
preferred shares into one or more classes or series of capital stock, including
common stock. Prior to issuance of shares of any class or series of stock other
than common stock, the Board of Directors is required, under the MGCL, to set,
subject to the provisions of the Articles of Incorporation regarding the
restriction on transfer of capital stock, the terms, preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or

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conditions of redemption for each such class or series. Thus, the Board of
Directors could authorize the issuance of preferred stock or other capital
stock with terms and conditions which could have the effect of delaying,
deferring or preventing a transaction or a change in control of Host Marriott
that might involve a premium price for holders of shares of common stock or
otherwise be in their best interest. As of the date hereof, only common stock
is outstanding, but the Company may issue preferred stock or other capital
stock in the future.

Reference is made to the prospectus supplement relating to the class or
series of preferred stock being offered for the specific terms thereof,
including:

(a) The title and stated value of such preferred stock;

(b) The number of shares of such preferred stock offered, the
liquidation preference per share and the purchase price of such preferred
stock;

(c) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such preferred stock;

(d) Whether dividends shall be cumulative or non-cumulative and, if
cumulative, the date from which dividends on such preferred stock shall
accumulate;

(e) The procedures for any auction and remarketing, if any, for such
preferred stock;

(f) The provisions for a sinking fund, if any, for such preferred stock;

(g) The provisions for redemption, if applicable, of such preferred
stock;

(h) Any listing of such preferred stock on any securities exchange or
market;

(i) The terms and conditions, if applicable, upon which such preferred
stock will be convertible into common stock of Host Marriott, including the
conversion price or manner of calculation thereof and conversion period;

(j) The terms and conditions, if applicable, upon which preferred stock
will be exchangeable into debt securities, including the exchange price or
manner of calculation thereof and exchange period;

(k) Voting rights, if any, of such preferred stock;

(l) Whether interests in such preferred stock will be represented by
depositary shares;

(m) A discussion of any material and/or special United States federal
income tax considerations applicable to such preferred stock;

(n) The relative ranking and preferences of such preferred stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of Host Marriott;

(o) Any limitations on issuance of any class or series of preferred
stock ranking senior to or on a parity with such series of preferred stock
as to dividend rights and rights upon liquidation, dissolution or winding
up of the affairs of Host Marriott; and

(p) Any other specific terms, preferences, rights, limitations or
restrictions of such preferred stock.

Rank

Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will, with respect to distribution rights and rights upon
liquidation, dissolution or winding up of Host Marriott, rank

(i) senior to all classes or series of common stock of Host Marriott and
to all equity securities the terms of which specifically provide that such
equity securities rank junior to such preferred stock;

(ii) on a parity with all equity securities issued by Host Marriott
other than referred to in clauses (i) and (iii); and

(iii) junior to all equity securities issued by Host Marriott the terms
of which specifically provide that such equity securities rank senior to
such preferred stock.

The term "equity securities" does not include convertible debt securities.

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Distributions

Holders of the preferred stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors, out of assets of Host
Marriott legally available for payment to stockholders, cash distributions, or
distributions in kind or in other property if expressly permitted and described
in the applicable prospectus supplement, at such rates and on such dates as
will be set forth in the applicable prospectus supplement. Each such
distribution shall be payable to holders of record as they appear on the stock
transfer books of Host Marriott on such record dates as shall be fixed by the
Board of Directors.

Distributions on any series of preferred stock, if cumulative, will be
cumulative from and after the date set forth in the applicable prospectus
supplement. If the Board of Directors fails to declare a distribution payable
on a distribution payment date on any series of the preferred stock for which
distributions are non-cumulative, then the holders of such series of preferred
stock will have no right to receive a distribution in respect of the
distribution period ending on such distribution payment date, and Host Marriott
will have no obligation to pay the distribution accumulated for such period,
whether or not distributions on such series are declared payable on any future
distribution payment date.

Unless otherwise specified in the applicable prospectus supplement, if any
shares of preferred stock of any series are outstanding, no full distributions
shall be declared or paid or set apart for payment on any shares of capital
stock of Host Marriott of any other series ranking, as to distributions, on a
parity with or junior to the shares of preferred stock of such series for any
period unless full distributions, including any cumulative amount if
applicable, have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on the
preferred stock of such series. When distributions are not paid in full, or a
sum sufficient for such full payment is not so set apart, upon preferred stock
of any series and the shares of any other series of preferred stock ranking on
a parity as to distributions with the shares of preferred stock of such series,
all distributions declared upon preferred stock of such series and any other
series of preferred stock ranking on a parity as to distributions with such
shares of preferred stock shall be declared pro rata so that the amount of
distributions declared per share of preferred stock of such series and such
other series of preferred stock shall in all cases bear to each other the same
ratio that accumulated distributions per share on the preferred stock of such
series and such other series of preferred stock, which shall not include any
accumulation in respect of unpaid distributions for prior distribution periods
if such shares of preferred stock do not have a cumulative distribution, bear
to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any distribution payment or payments on shares of
preferred stock of such series which may be in arrears.

Except as provided in the immediately preceding paragraph, unless full
distributions, including any cumulative amount if applicable, on the shares of
preferred stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
the then current distribution period, then

. no distributions, other than in common stock or other shares of capital
stock ranking junior to the shares of preferred stock of such series as
to distributions and upon liquidation, shall be declared or paid or set
aside for payment or other distribution upon the common stock, or any
other shares of capital stock of Host Marriott ranking junior to or on a
parity with the shares of preferred stock of such series as to
distributions or upon liquidation, and

. no common stock, or any other shares of capital stock of Host Marriott
ranking junior to or on a parity with the shares of preferred stock of
such series as to distributions or upon liquidation shall be redeemed,
purchased or otherwise acquired for any consideration or any money paid
to or made available for a sinking fund for the redemption of any such
shares, by Host Marriott, except by conversion into or exchange for
other shares of capital stock of Host Marriott ranking junior to the
shares of preferred stock of such series as to distributions and upon
liquidation.

If, for any taxable year, Host Marriott elects to designate as "capital gain
dividends" any portion (the "Capital Gains Amount") of the dividends paid or
made available for the year to holders of all classes of

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capital stock (the "Total Dividends"), then the portion of the Capital Gains
Amount that will be allocable to the holders of preferred stock will be the
Capital Gains Amount multiplied by a fraction, the numerator of which will be
the total dividends paid or made available to the holders of the preferred
stock for the year and the denominator of which shall be the Total Dividends.

Redemption

If so provided in the applicable prospectus supplement, the preferred stock
will be subject to mandatory redemption or redemption at the option of Host
Marriott, in whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such prospectus supplement.

The prospectus supplement relating to a series of preferred stock that is
subject to mandatory redemption will specify the number of such shares of
preferred stock that shall be redeemed by Host Marriott on the date(s) or
during the period(s) to be specified, at a redemption price per share to be
specified therein. Notwithstanding the foregoing, the holders of record of
preferred stock at the close of business on a dividend record date will be
entitled to receive the dividend payable on such preferred stock on the
corresponding dividend payment date notwithstanding the redemption of such
preferred stock after such record date and on or prior to such payment date, in
which case the redemption price shall not include such dividend. The redemption
price may be payable in cash or other property, as specified in the applicable
prospectus supplement. If the redemption price for preferred stock of any
series is payable only from the net proceeds of the issuance of shares of
capital stock of Host Marriott, the terms of such preferred stock may provide
that, if no such shares of capital stock shall have been issued or to the
extent the net proceeds from any issuance are insufficient to pay in full the
aggregate redemption price then due, such preferred stock shall automatically
and mandatorily be converted into the applicable shares of capital stock of
Host Marriott pursuant to conversion provisions specified in the applicable
prospectus supplement.

Notwithstanding the foregoing, unless full distributions, including any
cumulative amount if applicable, on the shares of preferred stock of such
series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for the then
current distribution period, then

. no preferred stock of any series shall be redeemed unless all outstanding
shares of preferred stock of such series are simultaneously redeemed
provided, however, that the foregoing shall not prevent the redemption,
purchase or acquisition of shares of preferred stock of such series to
preserve the REIT status of Host Marriott or pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding
preferred stock of such series, and

. Host Marriott shall not purchase or otherwise acquire directly or
indirectly any shares of preferred stock of such series, except by
conversion into or exchange for shares of capital stock of Host Marriott
ranking junior to the preferred stock of such series as to distributions
and upon liquidation; provided, however, that the foregoing shall not
prevent the redemption, purchase or acquisition of shares of preferred
stock of such series to assist in maintaining the REIT status of Host
Marriott or pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding shares of preferred stock of such
series.

If fewer than all of the outstanding shares of preferred stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
Host Marriott and such shares may be redeemed pro rata from the holders of
record of such shares in proportion to the number of such shares held or for
which redemption is requested by such holder or by lot in a manner determined
by Host Marriott.

Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of preferred stock of
any series to be redeemed at the address shown on the stock transfer books of
Host Marriott. Each notice shall state:

(a) the redemption date;

(b) the number and series of shares of preferred stock to be redeemed;

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<PAGE>

(c) the place or places where certificates for such preferred stock are
to be surrendered for payment of the redemption price;

(d) that distributions on the shares to be redeemed will cease to accrue
on such redemption date; and

(e) the date upon which the holders' conversion rights, if any, as to
such shares shall terminate.

If fewer than all of the shares of preferred stock of any series are to be
redeemed, the notice mailed to each such holder thereof shall also specify the
number of shares of preferred stock to be redeemed from each such holder. If
notice of redemption of any preferred stock has been given and if the funds
necessary for such redemption have been set aside by Host Marriott in trust
for the benefit of the holders of any preferred stock so called for
redemption, then from and after the redemption date distributions will cease
to accumulate on such preferred stock, and all rights of the holders of such
shares will terminate, except the right to receive the redemption price.

Liquidation Preference

Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of Host Marriott, then, before any distribution or payment shall
be made to the holders of any common stock or any other class or series of
shares of capital stock of Host Marriott ranking junior to the preferred stock
in the distribution of assets upon any liquidation, dissolution or winding up
of Host Marriott, the holders of each series of preferred stock shall be
entitled to receive out of assets of Host Marriott legally available for
distribution to shareholders liquidating distributions in the amount of the
liquidation preference set forth in the applicable prospectus supplement, plus
an amount equal to all accumulated and unpaid distributions. After payment of
the full amount of the liquidating distributions to which they are entitled,
the holders of shares of preferred stock will have no right or claim to any of
the remaining assets of Host Marriott. If, upon any such voluntary or
involuntary liquidation, dissolution or winding up, the available assets of
Host Marriott are insufficient to pay the amount of the liquidating
distributions on all outstanding shares of preferred stock and the
corresponding amounts payable on all shares of other classes or series of
shares of capital stock of Host Marriott ranking on a parity with the
preferred stock in the distribution of assets, then the holders of the
preferred stock and all other such classes or series of shares of capital
stock shall share ratably in any such distribution of assets in proportion to
the full liquidating distributions to which they would otherwise be
respectively entitled.

If liquidating distributions shall have been made in full to all holders of
preferred stock, the remaining assets of Host Marriott shall be distributed
among the holders of any other classes or series of shares of capital stock
ranking junior to the preferred stock upon liquidation, dissolution or winding
up, according to their respective rights and preferences and in each case
according to their respective number of shares. For such purposes, the
consolidation or merger of Host Marriott with or into any other corporation,
trust or entity, or the sale, lease or conveyance of all or substantially all
of the property or business of Host Marriott, shall not be deemed to
constitute a liquidation, dissolution or winding up of Host Marriott.

Voting Rights

Holders of preferred stock will not have any voting rights, except as set
forth below or as otherwise from time to time required by law or as indicated
in the applicable prospectus supplement.

Whenever distributions on any shares of preferred stock shall be in arrears
for six or more quarterly periods, whether or not consecutive:

. the holders of such preferred stock, voting together as a single class
with all other series of preferred stock upon which like voting rights
have been conferred and are exercisable, will be entitled to vote for the
election of two additional Directors of Host Marriott at a special
meeting called by the holders of record of at least 10% of any series of
preferred stock so in arrears, unless such request is received less than
90 days before the date fixed for the next annual or special meeting of
the stockholders, or at the next annual meeting of stockholders, and at
each subsequent annual meeting and

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<PAGE>

. such voting rights will continue until all distributions accumulated on a
series of cumulative preferred stock for the past distribution periods
and the then current distribution period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for
payment or four consecutive quarterly distributions on a non-cumulative
preferred series shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment.

Unless provided otherwise for any series of preferred stock, so long as any
shares of preferred stock remain outstanding, Host Marriott will not, without
the affirmative vote or consent of the holders of at least two-thirds of each
series of preferred stock outstanding at the time, given in person or by proxy,
either in writing or at a meeting,

. authorize or create, or increase the authorized or issued amount of, any
class or series of shares of capital stock ranking senior to such series
of preferred stock with respect to the payment of distributions or the
distribution of assets upon liquidation, dissolution or winding up or
reclassify any authorized shares of capital stock of Host Marriott into
such shares, or create, authorize or issue any obligation or security
convertible into or evidencing the right to purchase any such shares; or

. amend, alter or repeal the provisions of Host Marriott's charter or the
Articles Supplementary for such series of preferred stock, whether by
merger, consolidation or otherwise (an "Event"), so as to materially and
adversely affect any right, preference, privilege or voting power of such
series of preferred stock or the holders thereof; provided, however, with
respect to the occurrence of any Event, so long as the shares of
preferred stock remain outstanding or are converted into like securities
of the surviving entity, in each case with the terms thereof materially
unchanged, taking into account that upon the occurrence of an Event, Host
Marriott may not be the surviving entity and that the surviving entity
may be a non-corporate entity, such as a limited liability company,
limited partnership or business trust in which case the preferred stock
would be converted into an equity interest, other than stock, having
substantially equivalent terms, the occurrence of any such Event shall
not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers of holders of preferred stock;
and provided further that any increase in the amount of the authorized
preferred stock or any increase in the amount of authorized shares of
such series or any other series of preferred stock, in each case ranking
on a parity with or junior to the preferred stock of such series with
respect to payment of distributions and the distribution of assets upon
liquidation, dissolution or winding up of Host Marriott, shall not be
deemed to materially and adversely affect such rights, preferences,
privileges or voting powers.

The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of preferred stock of such series shall
have been converted or redeemed or called for redemption and sufficient funds
shall have been deposited in trust to effect such redemption.

Conversion Rights

The terms and conditions, if any, upon which any series of preferred stock
is convertible into common stock will be set forth in the applicable prospectus
supplement relating thereto. Such terms will include the number of shares of
common stock into which the shares of preferred stock are convertible, the
conversion price or the manner of calculating the conversion price, the
conversion date(s) or period(s), provisions as to whether conversion will be at
the option of the holders of the preferred stock or Host Marriott, the events
requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such series of preferred stock.

Transfer Agent and Registrar

The transfer agent and registrar for the preferred stock will be set forth
in the applicable prospectus supplement.

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RESTRICTIONS ON OWNERSHIP AND TRANSFER

For Host Marriott to qualify as a REIT under the Internal Revenue Code, no
more than 50% in value of its outstanding shares of stock may be owned,
actually or constructively, by five or fewer individuals, as defined in the
Internal Revenue Code to include certain entities

. during the last half of a taxable year other than the first year for
which an election to be treated as a REIT has been made or

. during a proportionate part of a shorter taxable year.

In addition, if Host Marriott, or one or more owners of 10% or more of Host
Marriott, actually or constructively owns 10% or more of a tenant of Host
Marriott or a tenant of any partnership in which Host Marriott is a partner,
the rent received by Host Marriott either directly or through any such
partnership from such tenant will not be qualifying income for purposes of the
REIT gross income tests of the Internal Revenue Code. A REIT's shares also must
be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of twelve months or during a proportionate part of a shorter
taxable year other than the first year for which an election to be treated as a
REIT has been made.

Primarily because the Board of Directors believes it is desirable for Host
Marriott to qualify as a REIT, the Articles of Incorporation provide that,
subject to certain exceptions, no person or persons acting as a group may own,
or be deemed to own by virtue of the attribution provisions of the Internal
Revenue Code, more than

. 9.8% of the lesser of the number or value of shares of common stock
outstanding or

. 9.8% of the lesser of the number or value of the issued and outstanding
preferred or other shares of any class or series of Host Marriott's
stock.

The foregoing are subject to

. an exception for a holder of shares of common stock solely by reason of
the Merger in excess of the ownership limit so long as such holder would
not own, directly or by attribution under the Internal Revenue Code, more
than 9.9% by value of the outstanding capital stock of Host Marriott as
of December 30, 1998, and

. a limitation on the application of the "group" limitation, but no other
element of the ownership limit, to any "group" that otherwise would
exceed the ownership limit at the effective time of the Merger solely by
reason of its status as a "group."

The ownership limit prohibits Marriott International and its subsidiaries
and affiliates, including members of the Marriott family, from collectively
owning shares of capital stock in excess of the ownership limit, but the Board
of Directors will grant an exception that will permit Marriott International to
exercise its right to purchase up to 20% of each class of Host Marriott's
voting stock in connection with a change in control of Host Marriott, but only
in the event that

. Marriott International and its subsidiaries and affiliates, including
members of the Marriott family, do not own at such time or thereafter,
directly and by attribution, 10% or more of Crestline or any of the
lessees and

. such ownership of Host Marriott's shares would not cause Host Marriot,
L.P. to be considered to own, directly or by attribution, 10% or more of
Crestline or any of the lessees.

The ownership attribution rules under the Internal Revenue Code are complex
and may cause capital stock owned actually or constructively by a group of
related individuals and/or entities to be owned constructively by one
individual or entity. As a result, the acquisition of less than 9.8% of the
common stock or the acquisition or ownership of an interest in an entity that
owns, actually or constructively, common stock, by an individual or entity
could nevertheless cause that individual or entity, or another individual or
entity, to own constructively in excess of 9.8% of the outstanding common stock
and thus subject such common stock to the remedy provision

27
<PAGE>

under the ownership limit. The Board of Directors may grant an exemption from
the ownership limit with respect to one or more persons who would not be
treated as "individuals" for purposes of the Internal Revenue Code if it is
satisfied, based upon an opinion of counsel and such other evidence as is
satisfactory to the Board of Directors in its sole discretion, that

. such ownership will not cause a person who is an individual to be treated
as owning capital stock in excess of the ownership limit, applying the
applicable constructive ownership rules, and

. will not otherwise jeopardize Host Marriott's status as a REIT by, for
example, causing any tenant of Host Marriott, L.P., including Crestline
and the lessees, to be considered a "related party tenant" for purposes
of the REIT qualification rules.

As a condition of such waiver, the Board of Directors may require
undertakings or representations from the applicant with respect to preserving
the REIT status of Host Marriott.

The Board of Directors will have the authority to increase the ownership
limit from time to time, but will not have the authority to do so to the extent
that after giving effect to such increase, five beneficial owners of capital
stock could beneficially own in the aggregate more than 49.5% of the
outstanding capital stock.

The Articles of Incorporation further prohibit

. any person from actually or constructively owning shares of beneficial
interest of Host Marriott that would result in Host Marriott being
"closely held" under Section 856(h) of the Internal Revenue Code or
otherwise cause Host Marriott to fail to qualify as a REIT and

. any person from transferring shares of Host Marriott's capital stock if
such transfer would result in shares of Host Marriott's capital stock
being owned by fewer than 100 persons.

Any person who acquires or attempts or intends to acquire actual or
constructive ownership of shares of Host Marriott's capital stock that will or
may violate any of the foregoing restrictions on transferability and ownership
is required to give notice immediately to Host Marriott and provide Host
Marriott with such other information as Host Marriott may request in order to
determine the effect of such transfer on Host Marriott's status as a REIT.

If any purported transfer of shares of Host Marriott's capital stock or any
other event would otherwise result in any person violating the ownership limit
or the other restrictions in the Articles of Incorporation, then any such
purported transfer will be void and of no force or effect with respect to the
purported transferee (the "Prohibited Transferee") as to that number of shares
that exceeds the ownership limit (referred to as "excess shares") and

. the Prohibited Transferee shall acquire no right or interest in such
excess shares and

. in the case of any event other than a purported transfer, the person or
entity holding record title to any such shares in excess of the ownership
limit (the "Prohibited Owner") shall cease to own any right or interest
in such excess shares.

Any such excess shares described above will be transferred automatically, by
operation of law, to a trust, the beneficiary of which will be a qualified
charitable organization selected by Host Marriott (the "Beneficiary"). Such
automatic transfer shall be deemed to be effective as of the close of business
on the business day prior to the date of such violating transfer. Within 20
days of receiving notice from Host Marriott of the transfer of shares to the
trust, the trustee of the trust, who shall be designated by Host Marriott and
be unaffiliated with Host Marriott and any Prohibited Transferee or Prohibited
Owner, will be required to sell such excess shares to a person or entity who
could own such shares without violating the ownership limit, and distribute to
the Prohibited Transferee an amount equal to the lesser of the price paid by
the Prohibited Transferee for such excess shares or the sales proceeds received
by the trust for such excess shares. In the case of any excess shares resulting
from any event other than a transfer, or from a transfer for no consideration,
such as a gift, the trustee will be required to sell such excess shares to a
qualified person or entity and distribute to

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<PAGE>

the Prohibited Owner an amount equal to the lesser of the fair market value of
such excess shares as of the date of such event or the sales proceeds received
by the trust for such excess shares. In either case, any proceeds in excess of
the amount distributable to the Prohibited Transferee or Prohibited Owner, as
applicable, will be distributed to the Beneficiary. Prior to a sale of any such
excess shares by the trust, the trustee will be entitled to receive, in trust
for the Beneficiary, all dividends and other distributions paid by Host
Marriott with respect to such excess shares, and also will be entitled to
exercise all voting rights with respect to such excess shares. Subject to
Maryland law, effective as of the date that such shares have been transferred
to the trust, the trustee shall have the authority to rescind as void any vote
cast by a Prohibited Transferee prior to the discovery by Host Marriott that
such shares have been transferred to the trust and to recast such vote in
accordance with the desires of the trustee acting for the benefit of the
Beneficiary.

However, if Host Marriott has already taken irreversible corporate action,
then the trustee shall not have the authority to rescind and recast such vote.
Any dividend or other distribution paid to the Prohibited Transferee or
Prohibited Owner, prior to the discovery by Host Marriott that such shares had
been automatically transferred to a trust as described above, will be required
to be repaid to the trustee upon demand for distribution to the Beneficiary. If
the transfer to the trust as described above is not automatically effective to
prevent violation of the ownership limit, then the Articles of Incorporation
provides that the transfer of the excess shares will be void.

In addition, shares of Host Marriott's stock held in the trust shall be
deemed to have been offered for sale to Host Marriott, or its designee, at a
price per share equal to the lesser of the price per share in the transaction
that resulted in such transfer to the trust or, in the case of a devise or
gift, the market value at the time of such devise or gift and the market value
of such shares on the date Host Marriott, or its designee, accepts such offer.
Host Marriott will have the right to accept such offer until the trustee has
sold the shares held in the trust. Upon such a sale to Host Marriott, the
interest of the Beneficiary in the shares sold will terminate and the trustee
will distribute the net proceeds of the sale to the Prohibited Owner.

The foregoing restrictions on transferability and ownership will not apply
if the Board of Directors determines that it is no longer in the best interests
of Host Marriott to attempt to qualify, or to continue to qualify, as a REIT.

All certificates representing shares of Host Marriott's capital stock will
bear a legend referring to the restrictions described above.

All persons who own, directly or by virtue of the attribution provisions of
the Internal Revenue Code, more than 5%, or such other percentage between 1/2
of 1% and 5% as provided in the rules and regulations under the Internal
Revenue Code, of the lesser of the number or value of the outstanding shares of
Host Marriott's capital stock must give a written notice to Host Marriott
within 30 days after the end of each taxable year. In addition, each
stockholder will, upon demand, be required to disclose to Host Marriott in
writing such information with respect to the direct, indirect and constructive
ownership of shares of Host Marriott's capital stock as the Board of Directors
deems reasonably necessary to comply with the provisions of the Internal
Revenue Code applicable to a REIT, to comply with the requirements of any
taxing authority or governmental agency or to determine any such compliance.

These ownership limitations could have the effect of delaying, deferring or
preventing a takeover or other transaction in which holders of some, or a
majority, of the common stock might receive a premium for their common stock
over the then prevailing market price or which such holders might believe to be
otherwise in their best interest.

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<PAGE>

DESCRIPTION OF DEPOSITARY SHARES

General

Host Marriott may issue depositary receipts for depositary shares, each of
which will represent a fractional interest of a share of a particular series of
preferred stock, as specified in the applicable prospectus supplement. Shares
of preferred stock of each series represented by depositary shares will be
deposited under a separate Deposit Agreement among Host Marriott and the
depositary named therein. Subject to the terms of the Deposit Agreement, each
owner of a depositary receipt will be entitled, in proportion to the fractional
interest of a share of a particular series of preferred stock represented by
the depositary shares evidenced by such depositary receipt, to all the rights
and preferences of the preferred stock represented by such depositary shares,
including dividend, voting, conversion, redemption and liquidation rights.

The depositary shares will be evidenced by depositary receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the preferred stock by Host Marriott to the
depositary, Host Marriott will cause the depositary to issue, on behalf of Host
Marriott, the depositary receipts. Copies of the applicable form of Deposit
Agreement and depositary receipt may be obtained from Host Marriott upon
request, and the statements made hereunder relating to the Deposit Agreement
and the depositary receipts to be issued thereunder are summaries of certain
provisions thereof and do not purport to be complete and are subject to, and
qualified in their entirety by reference to, all of the provisions of the
applicable Deposit Agreement and related depositary receipts.

Dividends and Other Distributions

The depositary will distribute all cash dividends or other cash
distributions received in respect of the preferred stock to the record holders
of depositary receipts evidencing the related depositary shares in proportion
to the number of such depositary receipts owned by such holders, subject to
certain obligations of holders to file proofs, certificates and other
information and to pay certain charges and expenses to the depositary.

In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary receipts
entitled thereto, subject to certain obligations of holders to file proofs,
certificates and other information and to pay certain charges and expenses to
the depositary, unless the depositary determines that it is not feasible to
make such distribution, in which case the depositary may, with the approval of
Host Marriott, sell such property and distribute the net proceeds from such
sale to such holders.

No distribution will be made in respect of any depositary share to the
extent that it represents any preferred stock converted into other securities.

Withdrawal of Stock

Upon surrender of the depositary receipts at the corporate trust office of
the depositary (unless the related depositary shares have previously been
called for redemption or converted into other securities), the holders thereof
will be entitled to delivery at such office, to or upon such holder's order, of
the number of whole or fractional shares of the preferred stock and any money
or other property represented by the depositary shares evidenced by such
depositary receipts. Holders of depositary receipts will be entitled to receive
whole or fractional shares of the related preferred stock on the basis of the
proportion of preferred stock represented by such depositary share as specified
in the applicable prospectus supplement, but holders of such shares of
preferred stock will not thereafter be entitled to receive depositary shares
therefor. If the depositary receipts delivered by the holder evidence a number
of depositary shares in excess of the number of depositary shares representing
the number of shares of preferred stock to be withdrawn, the depositary will
deliver to such holder at the same time a new depositary receipt evidencing
such excess number of depositary shares.

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Redemption of Depositary Shares

Whenever Host Marriott redeems shares of preferred stock held by the
depositary, the depositary will redeem, as of the same redemption date, the
number of depositary shares representing shares of the preferred stock so
redeemed, provided Host Marriott shall have paid in full to the depositary the
redemption price of the preferred stock to be redeemed plus an amount equal to
any accrued and unpaid dividends thereon to the date fixed for redemption. The
redemption price per depositary share will be equal to the corresponding
proportion of the redemption price and any other amounts per share payable with
respect to the preferred stock. If fewer than all the depositary shares are to
be redeemed, the depositary shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional depositary shares) or
by any other equitable method determined by Host Marriott.

From and after the date fixed for redemption, all dividends in respect of
the shares of preferred stock so called for redemption will cease to accrue,
the depositary shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the depositary receipts evidencing
the depositary shares so called for redemption will cease, except the right to
receive any moneys payable upon such redemption and any money or other property
to which the holders of such depositary receipts were entitled upon such
redemption and surrender thereof to the depositary.

Voting of the Preferred Stock

Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the depositary will mail the information contained
in such notice of meeting to the record holders of the depositary receipts
evidencing the depositary shares which represent such preferred stock. Each
record holder of depositary receipts evidencing depositary shares on the record
date, which will be the same date as the record date for the preferred stock,
will be entitled to instruct the depositary as to the exercise of the voting
rights pertaining to the amount of preferred stock represented by such holder's
depositary shares. The depositary will vote the amount of preferred stock
represented by such depositary shares in accordance with such instructions, and
Host Marriott will agree to take all reasonable action which may be deemed
necessary by the depositary in order to enable the depositary to do so. The
depositary will abstain from voting the amount of preferred stock represented
by such depositary shares to the extent it does not receive specific
instructions from the holders of depositary receipts evidencing such depositary
shares. The depositary shall not be responsible for any failure to carry out
any instruction to vote, or for the manner or effect of any such vote made, as
long as such action or non-action is in good faith and does not result from
negligence or willful misconduct of the depositary.

Liquidation Preference

In the event of the liquidation, dissolution or winding up of Host Marriott,
whether voluntary or involuntary, the holders of each depositary receipt will
be entitled to the fraction of the liquidation preference accorded each share
of preferred stock represented by the depositary shares evidenced by such
depositary receipt, as set forth in the applicable prospectus supplement.

Conversion of Preferred Stock

The depositary shares, as such, are not convertible into common stock or any
other securities or property of Host Marriott. Nevertheless, if so specified in
the applicable prospectus supplement relating to an offering of depositary
shares, the depositary receipts may be surrendered by holders thereof to the
depositary with written instructions to the depositary to instruct Host
Marriott to cause conversion of the preferred stock represented by the
depositary shares evidenced by such depositary receipts into whole shares of
common stock, other shares of preferred stock of Host Marriott or other shares
of stock, and Host Marriott has agreed that upon receipt of such instructions
and any amounts payable in respect thereof, it will cause the conversion
thereof utilizing the same procedures as those provided for delivery of
preferred stock to effect such conversion. If the depositary shares evidenced
by a depositary receipt are to be converted in part only, a new depositary
receipt or receipts will be issued for any depositary shares not to be
converted. No fractional shares of common stock will be

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issued upon conversion, and if such conversion would result in a fractional
share being issued, an amount will be paid in cash by Host Marriott equal to
the value of the fractional interest based upon the closing price of the common
stock on the last business day prior to the conversion.

Amendment and Termination of the Deposit Agreement

The form of depositary receipt evidencing the depositary shares which
represent the preferred stock and any provision of the Deposit Agreement may at
any time be amended by agreement between Host Marriott and the depositary.
However, any amendment that materially and adversely alters the rights of the
holders of depositary receipts or that would be materially and adversely
inconsistent with the rights granted to the holders of the related preferred
stock will not be effective unless such amendment has been approved by the
existing holders of at least 66% of the depositary shares evidenced by the
depositary receipts then outstanding. No amendment shall impair the right,
subject to certain exceptions in the Deposit Agreement, of any holder of
depositary receipts to surrender any depositary receipt with instructions to
deliver to the holder the related preferred stock and all money and other
property, if any, represented thereby, except in order to comply with law.
Every holder of an outstanding depositary receipt at the time any such
amendment becomes effective shall be deemed, by continuing to hold such
receipt, to consent and agree to such amendment and to be bound by the Deposit
Agreement as amended thereby.

The Deposit Agreement may be terminated by Host Marriott upon not less than
30 days prior written notice to the depositary if a majority of each series of
preferred stock affected by such termination consents to such termination,
whereupon the depositary shall deliver or make available to each holder of
Depositary Receipts, upon surrender of the depositary receipts held by such
holder, such number of whole or fractional shares of preferred stock as are
represented by the depositary shares evidenced by such depositary receipts
together with any other property held by the depositary with respect to such
depositary receipt. In addition, the Deposit Agreement will automatically
terminate if

. all outstanding depositary shares shall have been redeemed,

. there shall have been a final distribution in respect of the related
preferred stock in connection with any liquidation, dissolution or
winding up of Host Marriott and such distribution shall have been
distributed to the holders of depositary receipts evidencing the
depositary shares representing such preferred stock or

. each share of the related preferred stock shall have been converted into
securities of Host Marriott not so represented by depositary shares.

Charges of Preferred Stock Depositary

Host Marriott will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, Host
Marriott will pay the fees and expenses of the depositary in connection with
the performance of its duties under the Deposit Agreement. However, holders of
depositary receipts will pay the fees and expenses of the depositary for any
duties requested by such holders to be performed which are outside of those
expressly provided for in the Deposit Agreement.

Resignation and Removal of Depositary

The depositary may resign at any time by delivering to Host Marriott notice
of its election to do so, and Host Marriott may at any time remove the
depositary, any such resignation or removal to take effect upon the appointment
of a successor depositary. A successor depositary must be appointed within 60
days after delivery of the notice of resignation or removal and must be a bank
or trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.

Miscellaneous

The depositary will forward to holders of depositary receipts any reports
and communications from Host Marriott which are received by the depositary with
respect to the related preferred stock.

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Neither the depositary nor Host Marriott will be liable if it is prevented
from or delayed in, by law or any circumstances beyond its control, performing
its obligations under the Deposit Agreement. The obligations of Host Marriott
and the depositary under the Deposit Agreement will be limited to performing
their duties thereunder in good faith and without negligence, in the case of
any action or inaction in the voting of preferred stock represented by the
depositary shares, gross negligence or willful misconduct, and Host Marriott
and the depositary will not be obligated to prosecute or defend any legal
proceeding in respect of any depositary receipts, depositary shares or shares
of preferred stock represented thereby unless satisfactory indemnity is
furnished. Host Marriott and the depositary may rely on written advice of
counsel or accountants, or information provided by persons presenting shares of
preferred stock represented thereby for deposit, holders of depositary receipts
or other persons believed in good faith to be competent to give such
information, and on documents believed in good faith to be genuine and signed
by a proper party.

In the event the depositary shall receive conflicting claims, requests or
instructions from any holders of depositary receipts, on the one hand, and Host
Marriott, on the other hand, the depositary shall be entitled to act on such
claims, requests or instructions received from Host Marriott.

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DESCRIPTION OF WARRANTS

General

Host Marriott may issue warrants to purchase preferred stock, depositary
shares or common stock. Warrants may be issued independently or together with
any offered securities and may be attached to or separate from such offered
securities. The warrants are to be issued under Warrant Agreements to be
entered into between Host Marriott and a bank or trust company, as warrant
agent, all as shall be set forth in the prospectus supplement relating to the
warrants being offered pursuant thereto. The warrant agent will act solely as
an agent of Host Marriott in connection with the warrants of such series and
will not assume any obligation or relationship of agency or trust for or with
any holders or beneficial owners of warrants.

The applicable prospectus supplement will describe the following terms of
warrants in respect of which this prospectus is being delivered:

(i) the title of such warrants;

(ii) the securities for which such warrants are exercisable;

(iii) the price or prices at which such warrants will be issued;

(iv) the number of such warrants issued with each share of preferred
stock or common stock;

(v) any provisions for adjustment of the number or amount of shares of
preferred stock or common stock receivable upon exercise of such warrants
or the exercise price of such warrants;

(vi) if applicable, the date on and after which such warrants and the
related preferred stock or common stock will be separately transferable;

(vii) if applicable, a discussion of the material United States federal
income tax considerations applicable to the exercise of such warrants;

(viii) any other terms of such warrants, including terms, procedures and
limitations relating to the exchange and exercise of such warrants;

(ix) the date on which the right to exercise such warrants shall
commence, and the date on which such right shall expire; and

(x) the maximum or minimum number of such warrants which may be
exercised at any time.

Exercise of Warrants

Each warrant will entitle the holder of warrants to purchase for cash such
amount of shares of preferred stock, shares of common stock or depositary
shares at such exercise price as shall in each case be set forth in, or be
determinable as set forth in, the prospectus supplement relating to the
warrants offered thereby. Warrants may be exercised at any time up to the close
of business on the expiration date set forth in the prospectus supplement
relating to the warrants offered thereby. After the close of business on the
expiration date, unexercised warrants will become void.

Warrants may be exercised as set forth in the prospectus supplement relating
to the warrants offered thereby. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the prospectus
supplement, Host Marriott will, as soon as practicable, forward the shares of
preferred stock, shares of common stock or depositary shares purchasable upon
such exercise. If less than all of the warrants represented by such warrant
certificate are exercised, a new warrant certificate will be issued for the
remaining warrants.

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DESCRIPTION OF SUBSCRIPTION RIGHTS

General

Host Marriott may issue subscription rights to purchase common stock,
preferred stock, depositary shares or warrants to purchase preferred stock or
common stock. Subscription rights may be issued independently or together with
any other offered security and may or may not be transferable by the purchaser
receiving the subscription rights. In connection with any subscription rights
offering to Host Marriott's stockholders, Host Marriott may enter into a
standby underwriting arrangement with one or more underwriters pursuant to
which such underwriter will purchase any offered securities remaining
unsubscribed for after such subscription rights offering. In connection with a
subscription rights offering to Host Marriott's stockholders, certificates
evidencing the subscription rights and a prospectus supplement will be
distributed to Host Marriott's stockholders on the record date for receiving
subscription rights in such subscription rights offering set by Host Marriott.

The applicable prospectus supplement will describe the following terms of
subscription rights in respect of which this prospectus is being delivered:

(i) the title of such subscription rights;

(ii) the securities for which such subscription rights are exercisable;

(iii) the exercise price for such subscription rights;

(iv) the number of such subscription rights issued to each stockholder;

(v) the extent to which such subscription rights are transferable;

(vi) if applicable, a discussion of the material United States federal
income tax considerations applicable to the issuance or exercise of such
subscription rights;

(vii) any other terms of such subscription rights, including terms,
procedures and limitations relating to the exchange and exercise of such
subscription rights;

(viii) the date on which the right to exercise such subscription rights
shall commence, and the date on which such right shall expire.

(ix) the extent to which such subscription rights includes an over-
subscription privilege with respect to unsubscribed securities.

(x) if applicable, the material terms of any standby underwriting
arrangement entered into by Host Marriott in connection with the
subscription rights offering.

Exercise of Subscription Rights

Each subscription right will entitle the holder of subscription rights to
purchase for cash such principal amount of shares of preferred stock,
depository shares, common stock, warrants or any combination thereof, at such
exercise price as shall in each case be set forth in, or be determinable as set
forth in, the prospectus supplement relating to the subscription rights offered
thereby. Subscription rights may be exercised at any time up to the close of
business on the expiration date for such subscription rights set forth in the
prospectus supplement. After the close of business on the expiration date, all
unexercised subscription rights will become void.

Subscription rights may be exercised as set forth in the prospectus
supplement relating to the subscription rights offered thereby. Upon receipt of
payment and the subscription rights certificate properly completed and duly
executed at the corporate trust office of the subscription rights agent or any
other office indicated in the prospectus supplement, Host Marriott will, as
soon as practicable, forward the shares of preferred stock or common stock,
depository shares or warrants purchasable upon such exercise. In the event that
not all of the subscription rights issued in any offering are exercised, Host
Marriott may determine to offer any unsubscribed

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<PAGE>

offered securities directly to persons other than stockholders, to or through
agents, underwriters or dealers or through a combination of such methods,
including pursuant to standby underwriting arrangements, as set forth in the
applicable prospectus supplement.

FEDERAL INCOME TAX CONSIDERATIONS

Introduction

The following discussion summarizes the federal income tax considerations
reasonably anticipated to be material to a stockholder in connection with the
purchase, ownership and disposition of common stock. The applicable prospectus
supplement will contain information about additional federal income tax
considerations, if any, relating to particular offerings. The following
discussion is intended to address only those federal income tax consequences
that are generally relevant to all stockholders. Accordingly, it does not
discuss all aspects of federal income taxation that might be relevant to a
specific stockholder in light of his particular investment or tax
circumstances. Therefore, it is imperative that a stockholder review the
following discussion and consult with his own tax advisors to determine the
interaction of his individual tax situation with the tax considerations
associated with the purchase, ownership and disposition of common stock.

The following discussion provides general information only, is not
exhaustive of all possible tax considerations and is not tax advice. For
example, this summary does not give a detailed description of any state, local
or foreign tax considerations. In addition, the discussion does not purport to
deal with all aspects of taxation that may be relevant to a stockholder subject
to special treatment under the federal income tax laws, including, without
limitation, insurance companies, financial institutions or broker-dealers, tax-
exempt organizations or foreign corporations and persons who are not citizens
or residents of the United States.

The information in this section is based on the Internal Revenue Code,
current, temporary and proposed regulations thereunder, the legislative history
of the Internal Revenue Code, current administrative interpretations and
practices of the IRS, including its practices and policies as endorsed in
private letter rulings, which are not binding on the IRS, and court decisions,
all as of the date hereof. No assurance can be given that future legislation,
regulations, administrative interpretations and court decisions will not
significantly change the current law or adversely affect existing
interpretations of current law. Any such change could apply retroactively to
transactions preceding the date of the change. No assurance can be provided
that the statements set forth herein will not be challenged by the IRS or will
be sustained by a court if so challenged.

Hogan & Hartson has given Host Marriott an opinion to the effect that the
discussion herein under the heading "Federal Income Tax Considerations," to the
extent that it contains descriptions of applicable federal income tax law, is
correct in all material respects. The opinion, however, does not purport to
address the actual tax consequences of the purchase, ownership and disposition
of common stock to any particular stockholder. The opinion is based on the
Internal Revenue Code and regulations in effect on the date hereof, current
administrative interpretations and positions of the IRS and existing court
decisions. No assurance can be given that future legislation, regulations,
administrative interpretations and court decisions will not significantly
change the law on which the above opinion is based. Any such change could
adversely affect the opinion. In addition, any such change could apply
retroactively. Moreover, opinions of counsel merely represent counsel's best
judgment with respect to the probable outcome on the merits and are not binding
on the IRS or the courts. Accordingly, even if there is no change in applicable
law, no assurance can be provided that such opinion, which does not bind the
IRS or the courts, will not be challenged by the IRS or will be sustained by a
court if so challenged.

The specific tax attributes of a particular stockholder could have a
material impact on the tax considerations associated with the purchase,
ownership and disposition of common stock. Therefore, it is essential that each
prospective stockholder consult with his own tax advisors with regard to the
application of the federal income tax laws to such stockholder's personal tax
situation, as well as any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction.

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Federal Income Taxation of Host Marriott

General. Host Marriott plans to make an election to be taxed as a REIT under
Sections 856 through 859 of the Internal Revenue Code, effective for the
taxable year beginning January 1, 1999. Host Marriott intends that, commencing
with such year, it will be organized and will operate in such a manner as to
qualify for taxation as a REIT, but no assurance can be given that it in fact
will qualify or remain qualified as a REIT.

The sections of the Internal Revenue Code and the corresponding regulations
that govern the federal income tax treatment of a REIT and its stockholders are
highly technical and complex. The following discussion is a summary of the
material aspects of these rules, which is qualified in its entirety by the
applicable Internal Revenue Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof.

Hogan & Hartson has provided to Host Marriott an opinion to the effect that
Host Marriott will be organized in conformity with the requirements for
qualification as a REIT, and, beginning in 1999, its proposed method of
operation will enable it to meet the requirements for qualification and
taxation as a REIT under the Internal Revenue Code. It must be emphasized that
this opinion is conditioned upon certain assumptions and representations made
by Host Marriott and Host Marriott, L.P. as to factual matters relating to the
organization and operation of Host Marriott and its subsidiaries, Host
Marriott, L.P. and its subsidiaries, the non-controlled subsidiaries, the Host
Employee/Charitable Trust and Crestline and its subsidiaries, including the
economic and other terms of each lease and the expectations of Host Marriott
and the lessees with respect thereto. This opinion also is based on the timely
completion of all of the transactions comprising the REIT conversion, which are
described in detail in certain documents that are incorporated by reference
into this prospectus. See "Where You Can Find More Information." This generally
means that all of the transactions are completed prior to end of 1998, except
for those transactions that clearly are contemplated to be completed afterward.
In addition, this opinion is based upon the factual representations of Host
Marriott concerning its business and properties as described in, or
incorporated by reference into, this prospectus. Moreover, qualification and
taxation as a REIT depends upon Host Marriott's ability to meet the various
qualification tests imposed under the Internal Revenue Code discussed below.
Hogan & Hartson will not review Host Marriott's operating results. Accordingly,
no assurance can be given that the actual results of Host Marriott's operations
for any particular taxable year will satisfy such requirements. Further, the
anticipated income tax treatment described below may be changed, perhaps
retroactively, by legislative, administrative or judicial action at any time.
See "--Failure of Host Marriott to Qualify as a REIT" below.

If Host Marriott qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on its net income that it currently
distributes to its stockholders. This treatment substantially eliminates the
"double taxation" at the corporate and stockholder levels that generally
results from an investment in a regular corporation. However, Host Marriott
will be subject to federal income tax as follows:

1. Host Marriott will be taxed at regular corporate rates on any
undistributed "REIT taxable income," including undistributed net capital
gains; provided, however, that properly designated undistributed capital
gains will effectively avoid taxation at the stockholder level. A REIT's
"REIT taxable income" is the otherwise taxable income of the REIT subject
to certain adjustments, including a deduction for dividends paid.

2. Under certain circumstances, Host Marriott may be subject to the
"alternative minimum tax" on its items of tax preference.

3. If Host Marriott has net income from the sale or other disposition of
"foreclosure property" which is held primarily for sale to customers in the
ordinary course of business or other nonqualifying income from foreclosure
property, it will be subject to tax at the highest corporate rate on such
income.

4. Host Marriott's net income from "prohibited transactions" will be
subject to a 100% tax. In general, "prohibited transactions" are certain
sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business other than foreclosure
property.

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5. If Host Marriott fails to satisfy the 75% gross income test or the
95% gross income test discussed below, but nonetheless maintains its
qualification as a REIT because certain other requirements are met, it will
be subject to a tax equal to (1) the gross income attributable to the
greater of the amount by which Host Marriott fails the 75% or 95% test
multiplied by (2) a fraction intended to reflect its profitability.

6. If Host Marriott fails to distribute during each calendar year at
least the sum of (1) 85% of its REIT ordinary income for such year, (2) 95%
of its REIT capital gain net income for such year and (3) any undistributed
taxable income from prior periods, Host Marriott will be subject to a 4%
excise tax on the excess of such required distribution over the sum of
amounts actually distributed and amounts retained but with respect to which
federal income tax was paid.

7. If Host Marriott acquires any asset from a taxable "C" corporation in
a transaction in which the basis of the asset in the hands of Host Marriott
is determined by reference to the basis of the asset in the hands of the
"C" corporation, and Host Marriott recognizes gain on the disposition of
such asset during the ten-year period beginning on the date on which such
asset was acquired by Host Marriott (the "Recognition Period"), then, to
the extent of the asset's "built-in gain," such gain will be subject to tax
at the highest regular corporate rate applicable. Built-in gain is the
excess of the fair market value of an asset over Host Marriott's adjusted
basis in the asset, determined when Host Marriott acquired the asset.

Host Marriott owns an indirect interest in appreciated assets that its
predecessors held before the REIT conversion. Such appreciated assets have a
"carryover" basis and thus have built-in gain with respect to Host Marriott. If
such appreciated property is sold within the ten-year period following the REIT
conversion, Host Marriott generally will be subject to regular corporate tax on
that gain to the extent of the built-in gain in that property at the time of
the REIT conversion. The total amount of gain on which Host Marriott can be
taxed is limited to the excess of the aggregate fair market value of its assets
on January 1, 1999 over the adjusted tax bases of those assets at that time.
This tax could be very material, however, and may result in the Host Marriott,
L.P. and Host Marriott seeking to avoid a taxable disposition of any
significant asset owned by the Host Predecessors at the time of the REIT
conversion for the ten taxable years following the REIT conversion even though
such disposition might otherwise be in the best interests of Host Marriott.

Notwithstanding Host Marriott's status as a REIT, it is likely that
substantial deferred liabilities of its predecessors will be recognized over
the next ten years. Deferred liabilities include, but are not limited to, tax
liabilities attributable to built-in gain assets and deferred tax liabilities
attributable to taxable income for which neither Host Marriott nor Host
Marriott, L.P. will receive corresponding cash. In addition, the IRS could
assert substantial additional liabilities for taxes against Host Marriott's
predecessors for taxable years prior to the time Host Marriott qualifies as a
REIT. Under the terms of the REIT conversion and the partnership agreement of
Host Marriott, L.P., Host Marriott, L.P. will be responsible for paying, or
reimbursing Host Marriott for the payment of all such tax liabilities as well
as any other liabilities, including contingent liabilities and liabilities
attributable to litigation that Host Marriott may incur, whether such
liabilities are incurred by reason of activities prior to the REIT conversion
or activities subsequent thereto.

Host Marriott, L.P. will pay, or reimburse Host Marriott for the payment of
all taxes incurred by Host Marriott, except for taxes imposed on Host Marriott
by reason of its failure to qualify as a REIT or to distribute to its
stockholders an amount equal to its "REIT taxable income," including net
capital gains. This obligation by Host Marriott, L.P. includes any federal
corporate income tax imposed on built-in gain.

Requirements for Qualification. The Internal Revenue Code defines a REIT as
a corporation, trust or association

(1) which is managed by one or more directors or trustees;

(2) the beneficial ownership of which is evidenced by transferable shares
or by transferable certificates of beneficial interest;

(3) which would be taxable as a domestic corporation, but for Sections 856
through 859 of the Internal Revenue Code;

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(4) which is neither a financial institution nor an insurance company
subject to certain provisions of the Internal Revenue Code;

(5) the beneficial ownership of which is held by 100 or more persons;

(6) during the last half of each taxable year not more than 50% in value of
the outstanding stock of which is owned, actually or constructively, by
five or fewer individuals (as defined in the Internal Revenue Code to
include certain entities); and

(7) which meets certain other tests, described below, regarding the nature
of its income and assets.

Conditions (1) to (4), inclusive, must be met during the entire taxable year
and condition (5) must be met during at least 335 days of a taxable year of
twelve months, or during a proportionate part of a taxable year of less than
twelve months. Conditions (5) and (6) will not apply until after the first
taxable year for which Host Marriott makes the election to be taxed as a REIT.
For purposes of conditions (5) and (6), pension funds and certain other tax-
exempt entities are treated as individuals, subject to a "look-through"
exception in the case of condition (6). Compliance with condition (5) shall be
determined by disregarding the ownership of Host Marriott shares by any
person(s) who: (a) acquired such shares as a gift or bequest or pursuant to a
legal separation or divorce; (b) is the estate of any person making such
transfer to the estate; or (c) is a company established exclusively for the
benefit of (or wholly owned by) either the person making such transfer or a
person described in (a) or (b).

In connection with condition (6), Host Marriott is required to send annual
letters to its stockholders requesting information regarding the actual
ownership of its shares. If Host Marriott complies with this requirement, and
it does not know, or exercising reasonable diligence would not have known,
whether it failed to meet condition (6), then it will be treated as having met
condition (6). If Host Marriott fails to send such annual letters, it will be
required to pay either a $25,000 penalty or, if the failure is intentional, a
$50,000 penalty. The IRS may require Host Marriott, under those circumstances,
to take further action to ascertain actual ownership of its shares, and failure
to comply with such an additional requirement would result in an additional
$25,000 (or $50,000) penalty. No penalty would be assessed in the first
instance, however, if the failure to send the letters is due to reasonable
cause and not to willful neglect.

Host Marriott believes that it meets and will continue to meet conditions
(1) through (4). In addition, Host Marriott believes that it will have
outstanding (commencing with its first taxable year as a REIT) common stock
with sufficient diversity of ownership to allow it to satisfy conditions (5)
and (6). With respect to condition (6), Host Marriott intends to comply with
the requirement that it send annual letters to its stockholders requesting
information regarding the actual ownership of its shares. In addition, the Host
Marriott Articles of Incorporation contains an ownership limit, which is
intended to assist Host Marriott in continuing to satisfy the share ownership
requirements described in (5) and (6) above. See "Restrictions on Ownership and
Transfer." The ownership limit, together with compliance with the annual
stockholder letter requirement described above, however, may not ensure that
Host Marriott will, in all cases, be able to satisfy the share ownership
requirements described above. If Host Marriott fails to satisfy such share
ownership requirements, Host Marriott will not qualify as a REIT. See "--
Failure of Host Marriott to Qualify as a REIT."

A corporation may not elect to become a REIT unless its taxable year is the
calendar year. Although Host Marriott previously had a 52-53 week year ending
on the Friday closest to January 1, it adopted a calendar year taxable year in
connection with the REIT conversion.

Distribution of "Earnings and Profits" Attributable to "C" Corporation
Taxable Years. A REIT cannot have at the end of any taxable year any
undistributed earnings and profits ("E&P") that are attributable to a "C"
corporation taxable year, which includes all undistributed E&P of Host
Marriott's predecessors. Accordingly, Host Marriott has until December 31, 1999
to distribute such E&P. In connection with the REIT conversion, Host Marriott
declared dividends intended to eliminate the substantial majority, if not all,
of such E&P. To the extent, however, that any such E&P remains (the "Acquired
Earnings"), Host Marriott is required to distribute such E&P prior to the end
of 1999. Failure to do so would result in disqualification of Host

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Marriott as a REIT at least for 1999. If Host Marriott should be so
disqualified for 1999, subject to the satisfaction by Host Marriott of certain
"deficiency dividend" procedures described below in "--Annual Distribution
Requirements Applicable to REITs" and assuming that Host Marriott otherwise
satisfies the requirements for qualification as a REIT, Host Marriott should
qualify as a REIT for 2000 and thereafter. Host Marriott believes that the
dividends it has already declared will be sufficient to distribute all of the
Acquired Earnings as of December 31, 1999. However, there are substantial
uncertainties relating to both the estimate of the Acquired Earnings, as
described below, and the value of noncash consideration that Host Marriott has
distributed or will distribute. Accordingly, there can be no assurance this
requirement will be met.

The estimated amount of the Acquired Earnings will be based on the allocated
consolidated E&P of Host Marriott's predecessors accumulated from 1929 through
and including 1998 and taking into account the allocation, as a matter of law,
of 81% of Host Marriott's predecessors' accumulated E&P to Marriott
International on October 8, 1993 in connection with the spin-off of Marriott
International. The estimate was determined based on the available tax returns
and certain assumptions with respect to both such returns and other matters.
The calculation of the Acquired Earnings, however, depends upon a number of
factual and legal interpretations related to the activities and operations of
Host Marriott's predecessors during their entire corporate existence and is
subject to review and challenge by the IRS. There can be no assurance that the
IRS will not examine the tax returns of Host Marriott's predecessors and
propose adjustments to increase their taxable income. The impact of such
proposed adjustments, if any, may be material. If the IRS examines Host
Marriott's calculation of its E&P, the IRS can consider all taxable years of
Host Marriott's predecessors as open for review for purposes of such
determination.

Hogan & Hartson has expressed no opinion as to the amount of E&P of Host
Marriott and Host Marriott's predecessors. Accordingly, for purposes of its
opinion as to the qualification of Host Marriott as a REIT following the REIT
conversion, Hogan & Hartson is relying upon a representation from Host Marriott
that by the end of 1999 it will have eliminated all Acquired Earnings.

Qualified REIT Subsidiary. If a REIT owns a corporate subsidiary that is a
"qualified REIT subsidiary," that subsidiary will be disregarded for federal
income tax purposes, and all assets, liabilities and items of income, deduction
and credit of the subsidiary will be treated as assets, liabilities and items
of the REIT itself. Generally, a qualified REIT subsidiary is a corporation all
of the capital stock of which is owned by one REIT. Host Marriott holds several
qualified REIT subsidiaries that hold de minimis indirect interests in the
partnerships that own hotels. These entities will not be subject to federal
corporate income taxation, although they may be subject to state and local
taxation in certain jurisdictions.

Ownership of Partnership Interests by a REIT. A REIT which is a partner in a
partnership will be deemed to own its proportionate share of the assets of the
partnership and will be deemed to be entitled to the income of the partnership
attributable to such share. In addition, the character of the assets and gross
income of the partnership shall retain the same character in the hands of the
REIT for purposes of Section 856 of the Internal Revenue Code, including
satisfying the gross income tests and the asset tests. Thus, Host Marriott's
proportionate share of the assets and items of income of Host Marriott, L.P.,
including Host Marriott, L.P.'s share of such items of any subsidiaries that
are partnerships or LLCs, are treated as assets and items of income of Host
Marriott for purposes of applying the requirements described herein. A summary
of the rules governing the federal income taxation of partnerships and their
partners is provided below in "--Tax Aspects of Ownership of Interests in Host
Marriott, L.P." As the sole general partner of Host Marriott, L.P., Host
Marriott has direct control over Host Marriott, L.P. and indirect control over
the subsidiaries in which Host Marriott, L.P. or a subsidiary has a controlling
interest. Host Marriott intends to operate these entities consistent with the
requirements for qualification of Host Marriott as a REIT.

Income Tests Applicable to REITs. In order to maintain qualification as a
REIT, Host Marriott must satisfy two gross income requirements. First, at least
75% of Host Marriott's gross income, excluding gross income from "prohibited
transactions," for each taxable year must be derived directly or indirectly
from

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investments relating to real property or mortgages on real property, including
"rents from real property" and, in certain circumstances, interest, or from
certain types of temporary investments. Second, at least 95% of Host Marriott's
gross income, excluding gross income from "prohibited transactions," for each
taxable year must be derived from any combination of such real property
investments, dividends, interest, certain hedging instruments and gain from the
sale or disposition of stock or securities, including certain hedging
instruments.

Rents paid pursuant to Host Marriott's leases, together with dividends and
interest received from the non-controlled subsidiaries, will constitute
substantially all of the gross income of Host Marriott. Several conditions must
be satisfied in order for rents received by Host Marriott, including the rents
received pursuant to the leases, to qualify as "rents from real property."
First, the amount of rent must not be based in whole or in part on the income
or profits of any person. However, an amount received or accrued generally will
not be excluded from the term "rents from real property" solely by reason of
being based on a fixed percentage or percentages of receipts or sales. Second,
rents received from a tenant will not qualify as "rents from real property" if
Host Marriott, or an actual or constructive owner of 10% or more of Host
Marriott, actually or constructively owns 10% or more of such tenant (a
"Related Party Tenant"). Third, if rent attributable to personal property
leased in connection with a lease of real property is greater than 15% of the
total rent received under the lease, then the portion of rent attributable to
such personal property will not qualify as "rents from real property."

Finally, if Host Marriott operates or manages a property or furnishes or
renders services to the tenants at the property other than through an
independent contractor from whom Host Marriott derives no revenue, excluding
for these purposes services "usually or customarily rendered" in connection
with the rental of real property and not otherwise considered "rendered to the
occupant," and the income derived from such services (the "Impermissible
Service Income") exceeds one percent of the total amount received by Host
Marriott with respect to the property, then no amount received by Host Marriott
with respect to the property will qualify as "rents from real property." For
these purposes, Impermissible Service Income cannot be less than 150% of the
cost of providing the service. If the Impermissible Service Income is one
percent or less of the total amount received by the REIT with respect to the
property, then only the Impermissible Service Income will not qualify as "rents
from real property." To the extent that services other than those customarily
furnished or rendered in connection with the rental of real property are
rendered to the tenants of the property by an independent contractor, the cost
of the services must be borne by the independent contractor.

Host Marriott, L.P. and each subsidiary that owns hotels have entered into
leases with subsidiaries of Crestline, pursuant to which the hotels are leased
for a term ranging generally from seven to ten years commencing on January 1,
1999. Each lease provides for thirteen payments per annum of a specified base
rent plus, to the extent that it exceeds the base rent, additional rent which
is calculated based upon the gross sales of the hotels subject to the lease,
plus certain other amounts.

Neither Host Marriott nor Host Marriott, L.P. intends to do any of the
following:

. provide any services to the lessees with respect to the operation of the
hotels;

. charge rent for any hotel that is based in whole or in part on the
income or profits of any person, except for the Harbor Beach Resort,
where the lease provides for rent based upon net profits, but which Host
Marriott currently believes will not jeopardize Host Marriott's status
as a REIT;

. rent any hotel to a Related Party Tenant unless the Board of Directors
determines in its discretion that the rent received from such Related
Party Tenant is not material and will not jeopardize Host Marriott's
status as a REIT; or

. derive rental income attributable to personal property other than
personal property leased in connection with the lease of real property,
the amount of which is less than 15% of the total rent received under
the lease, unless the Board of Directors determines in its discretion
that the amount of such rent attributable to personal property is not
material and will not jeopardize Host Marriott's status as a REIT.

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In order for the rent paid pursuant to the leases to constitute "rents from
real property," the lessees must not be regarded as Related Party Tenants, and
the leases must be respected as true leases for federal income tax purposes.
Accordingly the lessee cannot be treated as service contracts, joint ventures
or some other type of arrangement. A lessee will be regarded as a Related Party
Tenant only if Host Marriott and/or one or more actual or constructive owners
of 10% or more of Host Marriott, actually or constructively, own 10% or more of
such lessee through an ownership interest in Crestline. In order to help
preclude the lessees from being regarded as Related Party Tenants, the
following organizational documents contain the following ownership limits:

. the articles of incorporation of Crestline expressly prohibit any person
or persons acting as a group, including Host Marriott and/or any 10% or
greater stockholder of Host Marriott, from owning more than 9.8% of the
lesser of the number or value of the shares of capital stock of
Crestline;

. the Host Marriott Articles of Incorporation expressly prohibits any
person or persons acting as a group or entity from owning, actually
and/or constructively, more than 9.8% of the lesser of the number or
value of capital stock of Host Marriott (subject to a limited exception
for a holder of shares of capital stock of Host Marriott solely by
reason of the Merger in excess of the ownership limit so long as the
holder thereof did not own, directly or by attribution under the
Internal Revenue Code, more than 9.9% in value of the outstanding shares
of capital stock of Host Marriott) or any other class or series of
shares of Host Marriott; and

. Host Marriott, L.P.'s partnership agreement expressly prohibits any
person, or persons acting as a group, or entity, other than Host
Marriott and an affiliate of the The Blackstone Group and a series of
related funds controlled by Blackstone Real Estate Partners (the
"Blackstone Entities"), from owning more than 4.9% by value of any class
of interests in Host Marriott, L.P. Each of these prohibitions contains
self-executing enforcement mechanisms. Assuming that these prohibitions
are enforced at all times and no waivers thereto are granted, the
lessees should not be regarded as Related Party Tenants.

There can be no assurance, however, that these ownership restrictions will
be enforced in accordance with their terms in all circumstances or otherwise
will ensure that the lessees will not be regarded as Related Party Tenants.

The determination of whether the leases are true leases depends upon an
analysis of all the surrounding facts and circumstances. In making such a
determination, courts have considered a variety of factors, including the
following:

. the intent of the parties;

. the form of the agreement;

. the degree of control over the property that is retained by the property
owner (e.g., whether the lessee has substantial control over the
operation of the property or whether the lessee was required simply to
use its best efforts to perform its obligations under the agreement);
and

. the extent to which the property owner retains the risk of loss with
respect to the property (e.g., whether the lessee bears the risk of
increases in operating expenses or the risk of damage to the property)
or the potential for economic gain (e.g., appreciation) with respect to
the property.

In addition, Section 7701(e) of the Internal Revenue Code provides that a
contract that purports to be a service contract or a partnership agreement is
treated instead as a lease of property if the contract is properly treated as
such, taking into account all relevant factors. Since the determination of
whether a service contract should be treated as a lease is inherently factual,
the presence or absence of any single factor may not be dispositive in every
case. Some of the relevant factors include whether:

. the service recipient is in physical possession of the property;

. the service recipient controls the property;

. the service recipient has a significant economic or possessory interest
in the property (e.g., the property's use is likely to be dedicated to
the service recipient for a substantial portion of the useful

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life of the property, the recipient shares the risk that the property
will decline in value, the recipient shares in any appreciation in the
value of the property, the recipient shares in savings in the property's
operating costs or the recipient bears the risk of damage to or loss of
the property);

. the service provider does not bear any risk of substantially diminished
receipts or substantially increased expenditures if there is
nonperformance under the contract;

. the service provider does not use the property concurrently to provide
significant services to entities unrelated to the service recipient; and

. the total contract price does not substantially exceed the rental value
of the property for the contract period.

Host Marriott's leases have been structured with the intent to qualify as
true leases for federal income tax purposes. For example, with respect to each
lease:

. Host Marriott, L.P. or the applicable subsidiary or other lessor entity
and the lessee intend for their relationship to be that of a lessor and
lessee and such relationship is documented by a lease agreement,

. the lessee has the right to exclusive possession and use and quiet
enjoyment of the hotels covered by the lease during the term of the
lease,

. the lessee bears the cost of, and will be responsible for, day-to-day
maintenance and repair of the hotels other than the cost of certain
capital expenditures, and will dictate through the hotel managers, who
work for the lessees during the terms of the leases, how the hotels are
operated and maintained,

. the lessee bears all of the costs and expenses of operating the hotels,
including the cost of any inventory used in their operation, during the
term of the lease, other than the cost of certain furniture, fixtures
and equipment, and certain capital expenditures,

. the lessee benefits from any savings and bears the burdens of any
increases in the costs of operating the hotels during the term of the
lease,

. in the event of damage or destruction to a hotel, the lessee is at
economic risk because it will bear the economic burden of the loss in
income from operation of the hotels subject to the right, in certain
circumstances, to terminate the lease if the lessor does not restore the
hotel to its prior condition,

. the lessee has indemnified Host Marriott, L.P. or the applicable
subsidiary against all liabilities imposed on Host Marriott, L.P. or the
applicable subsidiary during the term of the lease by reason of (A)
injury to persons or damage to property occurring at the hotels or (B)
the lessee's use, management, maintenance or repair of the hotels,

. the lessee is obligated to pay, at a minimum, substantial Base Rent for
the period of use of the hotels under the lease,

. the lessee stands to incur substantial losses or reap substantial gains
depending on how successfully it, through the hotel managers, who work
for the lessees during the terms of the leases, operates the hotels,

. Host Marriott and Host Marriott, L.P. believe that each lessee
reasonably expects to derive a meaningful profit, after expenses and
taking into account the risks associated with the lease, from the
operation of the hotels during the term of its leases, and

. upon termination of each lease, the applicable hotel is expected to have
a remaining useful life equal to at least 20% of its expected useful
life on the date of the consummation of the REIT conversion, and a fair
market value equal to at least 20% of its fair market value on the date
of the consummation of the REIT conversion.

If, however, the leases were recharacterized as service contracts or
partnership agreements, rather than true leases, or disregarded altogether for
tax purposes, all or part of the payments that Host Marriott, L.P. receives
from the lessees would not be considered rent or would not otherwise satisfy
the various requirements for qualification as "rents from real property." In
that case, Host Marriott very likely would not be able to satisfy either the
75% or 95% gross income tests and, as a result, would lose its REIT status.

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As indicated above, "rents from real property" must not be based in whole or
in part on the income or profits of any person. Payments made pursuant to Host
Marriott's leases should qualify as "rents from real property" since they are
based on either fixed dollar amounts or on specified percentages of gross sales
fixed at the time the leases were entered into, except for the Harbor Beach
Resort, which lease provides for rents based upon net profits. The foregoing
assumes that the leases are not renegotiated during their term in a manner that
has the effect of basing either the percentage rent or base rent on income or
profits. The foregoing also assumes that the leases are not in reality used as
a means of basing rent on income or profits. More generally, the rent payable
under the leases will not qualify as "rents from real property" if, considering
the leases and all the surrounding circumstances, the arrangement does not
conform with normal business practice. Host Marriott intends that it will not
renegotiate the percentages used to determine the percentage rent during the
terms of the leases in a manner that has the effect of basing rent on income or
profits. In addition, Host Marriott believes that the rental provisions and
other terms of the leases conform with normal business practice and, other than
the Harbor Beach Resort lease, were not intended to be used as a means of
basing rent on income or profits. Furthermore, Host Marriott intends that, with
respect to other properties that it acquires in the future, it will not charge
rent for any property that is based in whole or in part on the income or
profits of any person, except by reason of being based on a fixed percentage of
gross revenues, as described above.

Host Marriott leases certain items of personal property to the lessees in
connection with its leases. Under the Internal Revenue Code, if a lease
provides for the rental of both real and personal property and the portion of
the rent attributable to personal property is 15% or less of the total rent due
under the lease, then all rent paid pursuant to such lease qualifies as "rent
from real property." If, however, a lease provides for the rental of both real
and personal property, and the portion of the rent attributable to personal
property exceeds 15% of the total rent due under the lease, then the portion of
the rent that is attributable to personal property does not qualify as "rent
from real property." The amount of rent attributable to personal property is
that amount which bears the same ratio to total rent for the taxable year as
the average of the adjusted tax bases of the personal property at the beginning
and end of the year bears to the average of the aggregate adjusted tax bases of
both the real and personal property at the beginning and end of such year. Host
Marriott has represented that, with respect to each of its leases that includes
a lease of items of personal property, the amount of rent attributable to
personal property with respect to such lease, determined as set forth above,
will not exceed 15% of the total rent due under the lease (except for a
relatively small group of leases where the rent attributable to personal
property, which would constitute non-qualifying income for purposes of the 75%
and 95% gross income tests, would not be material relative to the overall gross
income of Host Marriott). Each lease permits Host Marriott, L.P. to take
certain measures, including requiring the lessee to purchase certain furniture,
fixtures and equipment or to lease such property from a third party, including
a non-controlled subsidiary, if necessary to ensure that all of the rent
attributable to personal property with respect to such lease will qualify as
"rent from real property." In order to protect Host Marriott's ability to
qualify as a REIT, Host Marriott, L.P. sold substantial personal property
associated with a number of hotels acquired in connection with the REIT
conversion to a non-controlled subsidiary. The non-controlled subsidiary
separately leases all such personal property directly to the applicable lessee
and receives rental payments which Host Marriott believes represent the fair
rental value of such personal property directly from the lessees. If such
arrangements are not respected for federal income tax purposes, Host Marriott
likely would not qualify as a REIT.

If any of the hotels were to be operated directly by Host Marriott, L.P. or
a subsidiary as a result of a default by a lessee under the applicable lease,
such hotel would constitute foreclosure property until the close of the third
tax year following the tax year in which it was acquired, or for up to an
additional three years if an extension is granted by the IRS, provided that:

(1) the operating entity conducts operations through an independent
contractor, which might, but would not necessarily in all
circumstances, include Marriott International and its subsidiaries,
within 90 days after the date the hotel is acquired as the result of a
default by a lessee,

(2) the operating entity does not undertake any construction on the
foreclosed property other than completion of improvements that were
more than 10% complete before default became imminent, and

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<PAGE>

(3) foreclosure was not regarded as foreseeable at the time the applicable
partnership entered into such lease. For as long as any of these
hotels constitute foreclosure property, the income from the hotels
would be subject to tax at the maximum corporate rates, but it would
qualify under the 75% and 95% gross income tests.

However, if any of these hotels does not constitute foreclosure property at
any time in the future, income earned from the disposition or operation of such
property will not qualify under the 75% and 95% gross income tests.

"Interest" generally will not qualify under the 75% or 95% gross income
tests if it depends in whole or in part on the income or profits of any person.
However, interest will not fail to so qualify solely by reason of being based
upon a fixed percentage or percentages of receipts or sales. Host Marriott does
not expect to derive significant amounts of interest that will not qualify
under the 75% and 95% gross income tests.

The non-controlled subsidiaries hold various assets, the ownership of which
by Host Marriott, L.P. might jeopardize Host Marriott's status as a REIT. These
assets primarily consist of partnership or other interests in hotels that are
not leased, certain foreign hotels, and approximately $75 million in value of
personal property associated with certain Hotels. Host Marriott, L.P. owns 100%
of the nonvoting stock of each non-controlled subsidiary but none of the voting
stock or control of that non-controlled subsidiary. Each non-controlled
subsidiary is taxable as a regular "C" corporation. Host Marriott, L.P.'s share
of any dividends received from a non-controlled subsidiary should qualify for
purposes of the 95% gross income test, but not for purposes of the 75% gross
income test. Host Marriott, L.P. does not anticipate that it will receive
sufficient dividends from the non-controlled subsidiaries to cause it to fail
the 75% gross income test.

Host Marriott inevitably will have some gross income from various sources
that fails to constitute qualifying income for purposes of one or both of the
75% or 95% gross income tests. These include, but are not limited to, the
following:

. ""safe harbor" leases,
. the lease of the Harbor Beach Resort, which provides for rent based upon
net profits,
. the operation of the hotel that is located in Sacramento,
. minority partnership interests in partnerships that own hotels that are
not leased under leases that produce rents qualifying as "rents from
real property," and
. rent attributable to personal property at a relatively small group of
hotels that does not satisfy the 15% personal property test.

Host Marriott, however, believes that, even taking into account the
anticipated sources of non-qualifying income, its aggregate gross income from
all sources will satisfy the 75% and 95% gross income tests applicable to REITs
for each taxable year commencing subsequent to the date of the REIT conversion.

If Host Marriott fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Internal Revenue
Code. These relief provisions will be generally available if Host Marriott's
failure to meet such tests was due to reasonable cause and not due to willful
neglect, Host Marriott attaches a schedule of the sources of its income to its
federal income tax return and any incorrect information on the schedule was not
due to fraud with intent to evade tax. It is not possible, however, to state
whether in all circumstances Host Marriott would be entitled to the benefit of
these relief provisions. For example, if Host Marriott fails to satisfy the
gross income tests because nonqualifying income that Host Marriott
intentionally incurs exceeds the limits on such income, the IRS could conclude
that Host Marriott's failure to satisfy the tests was not due to reasonable
cause. If these relief provisions are inapplicable to a particular set of
circumstances involving Host Marriott, Host Marriott will not qualify as a
REIT. As discussed above in "--General," even if these relief provisions apply,
a tax would be imposed with respect to the excess net income.

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Any gain realized by Host Marriott on the sale of any property held as
inventory or other property held primarily for sale to customers in the
ordinary course of business, including Host Marriott's share of any such gain
realized by Host Marriott, L.P., will be treated as income from a "prohibited
transaction" that is subject to a 100% penalty tax. Such prohibited transaction
income may also have an adverse effect upon Host Marriott's ability to satisfy
the income tests for qualification as a REIT. Under existing law, whether
property is held as inventory or primarily for sale to customers in the
ordinary course of a trade or business is a question of fact that depends upon
all the facts and circumstances with respect to the particular transaction.
Host Marriott, L.P. intends that both it and its subsidiaries will hold hotels
for investment with a view to long-term appreciation, to engage in the business
of acquiring and owning hotels and to make such occasional sales of hotels as
are consistent with Host Marriott, L.P.'s investment objectives. There can be
no assurance, however, that the IRS might not contend that one or more of such
sales is subject to the 100% penalty tax.

Asset Tests Applicable to REITs. Host Marriott, at the close of each quarter
of its taxable year, must satisfy three tests relating to the nature of its
assets. First, at least 75% of the value of Host Marriott's total assets must
be represented by real estate assets. Host Marriott's real estate assets
include, for this purpose, its allocable share of real estate assets held by
Host Marriott, L.P. and the non-corporate subsidiaries of Host Marriott, L.P.,
as well as stock or debt instruments held for less than one year purchased with
the proceeds of a stock offering, or long-term (at least five years) debt
offering of Host Marriott, cash, cash items and government securities. Second,
no more than 25% of Host Marriott's total assets may be represented by
securities other than those in the 75% asset class. Third, of the investments
included in the 25% asset class, the value of any one issuer's securities owned
by Host Marriott may not exceed 5% of the value of Host Marriott's total assets
and Host Marriott may not own more than 10% of any one issuer's outstanding
voting securities.

Host Marriott, L.P. does not own any of the voting stock of any of non-
controlled subsidiaries but it does own 100% of the nonvoting stock of each
non-controlled subsidiary. Host Marriott, L.P. may also own nonvoting stock,
representing substantially all of the equity, in other corporate entities that
serve as partners or members in the various entities that hold title to the
hotels. Neither Host Marriott, Host Marriott, L.P., nor any of the non-
corporate subsidiaries of Host Marriott, L.P., own more than 10% of the voting
securities of any entity that is treated as a corporation for federal income
tax purposes. In addition, Host Marriott believes that the securities of any
one issuer owned by Host Marriott, Host Marriott, L.P., or any of the non-
corporate subsidiaries of Host Marriott, L.P., including Host Marriott's pro
rata share of the value of the securities of each non-controlled subsidiary do
not exceed 5% of the total value of Host Marriott's assets. There can be no
assurance, however, that the IRS might not contend that the value of such
securities exceeds the 5% value limitation or that nonvoting stock of a non-
controlled subsidiary or another corporate entity owned by Host Marriott, L.P.
should be considered "voting stock" for this purpose.

After initially meeting the asset tests at the close of any quarter, Host
Marriott will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset
values. If the failure to satisfy the asset tests results from an acquisition
of securities or other property during a quarter the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close
of that quarter. An example of such an acquisition would be an increase in Host
Marriott's interest in Host Marriott, L.P. as a result of the exercise of a
limited partner's unit redemption right or an additional capital contribution
of proceeds from an offering of capital stock by Host Marriott. Host Marriott
to maintains adequate records of the value of its assets to ensure compliance
with the asset tests and to take such other actions within 30 days after the
close of any quarter as may be required to cure any noncompliance. If Host
Marriott fails to cure noncompliance with the asset tests within such time
period, Host Marriott would cease to qualify as a REIT.

Clinton Administration's Proposed Changes to REIT Asset Test. The Clinton
Administration's fiscal year 1999 budget proposal, announced on February 2,
1998, includes a proposal to amend the 10% voting securities test. The proposal
would require a REIT to own no more than 10% of the vote or value of all
classes of stock of any corporation (except for qualified REIT subsidiaries or
corporations that qualify as REITs). Corporations

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existing prior to the effective date of the proposal generally would be
"grandfathered"; i.e., the REIT would be subject to the existing 10% voting
securities test described above with respect to grandfathered corporations.
However, such "grandfathered" status would terminate with respect to a
corporation if the corporation engaged in a new trade or business or acquired
substantially new assets.

Because Host Marriott, L.P. owns 100% of the nonvoting stock of each non-
controlled subsidiary, and Host Marriott is deemed to own an interest in each
non-controlled subsidiary equal to its proportionate interest in Host Marriott,
L.P., Host Marriott would not satisfy the proposed 10% value limitation with
respect to any of the non-controlled subsidiaries. Whether any of the non-
controlled subsidiaries would qualify as a grandfathered corporation as the
proposal is currently drafted would depend upon the effective date of the
proposal, which is not yet known. If a non-controlled subsidiary otherwise
eligible for "grandfathered" status were to engage in a new trade or business
or were to acquire substantial new assets, or if Host Marriott were to make a
capital contribution to a non-controlled subsidiary otherwise eligible for
"grandfathered" status, its "grandfathered" status would terminate and Host
Marriott would fail to qualify as a REIT. Moreover, Host Marriott would not be
able to own, directly or indirectly, more than 10% of the vote or value of any
corporation formed or acquired after the effective date of the proposal. Thus,
the proposal, if enacted, would materially impede Host Marriott's ability to
engage in new third-party management or similar activities.

Annual Distribution Requirements Applicable to REITs. Host Marriott, in
order to qualify as a REIT, is required to distribute dividends, other than
capital gain dividends, to its stockholders in an amount at least equal to

(i) the sum of (a) 95% of REIT taxable income, computed without regard to
the dividends paid deduction and Host Marriott's net capital gain, and
(b) 95% of the net income, after tax, if any, from foreclosure
property, minus

(ii) the sum of certain items of noncash income.

In addition, if Host Marriott disposes of any built-in gain asset during its
Recognition Period, Host Marriott is required, pursuant to Treasury Regulations
which have not yet been promulgated, to distribute at least 95% of the built-in
gain, after tax, if any, recognized on the disposition of such asset. See "--
General" above for a discussion of built-in gain assets. Such distributions
must be paid in the taxable year to which they relate, or in the following
taxable year if declared before Host Marriott timely files its tax return for
such year and if paid on or before the first regular dividend payment date
after such declaration. Host Marriott intends to make timely distributions
sufficient to satisfy these annual distribution requirements. In this regard,
Host Marriott, L.P.'s partnership agreement authorizes Host Marriott, as
general partner, to take such steps as may be necessary to cause Host Marriott,
L.P. to distribute to its partners an amount sufficient to permit Host Marriott
to meet these distribution requirements.

To the extent that Host Marriott does not distribute all of its net capital
gain or distributes at least 95%, but less than 100%, of its REIT taxable
income, as adjusted, it is subject to tax thereon at regular ordinary and
capital gain corporate tax rates. Host Marriott, however, may designate some or
all of its retained net capital gain, so that, although the designated amount
will not be treated as distributed for purposes of this tax, a stockholder
would include its proportionate share of such amount in income, as capital
gain, and would be treated as having paid its proportionate share of the tax
paid Host Marriott with respect to such amount. The stockholder's basis in its
capital stock of Host Marriott would be increased by the amount the stockholder
included in income and decreased by the amount of the tax the stockholder is
treated as having paid. Host Marriott would make an appropriate adjustment to
its earnings and profits. For a more detailed description of the federal income
tax consequences to a stockholder of such a designation, see "--Taxation of
Taxable U.S. Stockholders Generally."

There is a significant possibility that Host Marriott's REIT taxable income
will exceed its cash flow, due in part to certain "non-cash" or "phantom"
income expected to be taken into account in computing Host Marriott's REIT
taxable income. Host Marriott anticipates, however, that it will generally have
sufficient cash

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or liquid assets to enable it to satisfy the distribution requirements
described above. It is possible, however, that Host Marriott, from time to
time, may not have sufficient cash or other liquid assets to meet these
distribution requirements. In such event, in order to meet the distribution
requirements, Host Marriott may find it necessary to arrange for short-term, or
possibly long-term, borrowings to fund required distributions and/or to pay
dividends in the form of taxable stock dividends.

Host Marriott calculates its REIT taxable income based upon the conclusion
that the non-corporate subsidiaries of Host Marriott, L.P. or Host Marriott,
L.P. itself, as applicable, is the owner of the hotels for federal income tax
purposes. As a result, Host Marriott expects that the depreciation deductions
with respect to the hotels will reduce its REIT taxable income. This conclusion
is consistent with the conclusion above that the leases entered into with the
Crestline subsidiaries will be treated as true leases for federal income tax
purposes. If the IRS were to challenge successfully this position, in addition
to failing in all likelihood the 75% and 95% gross income tests described
above, Host Marriott also might be deemed retroactively to have failed to meet
the REIT distribution requirements and would have to rely on the payment of a
"deficiency dividend" in order to retain its REIT status.

Under certain circumstances, Host Marriott may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency
dividends" to stockholders in a later year, which may be included in Host
Marriott's deduction for dividends paid for the earlier year. Thus, Host
Marriott may be able to avoid being taxed on amounts distributed as deficiency
dividends; however, Host Marriott would be required to pay interest based upon
the amount of any deduction taken for deficiency dividends.

Furthermore, if Host Marriott should fail to distribute during each calendar
year at least the sum of 85% of its REIT ordinary income for such year, 95% of
its REIT capital gain income for such year, and any undistributed taxable
income from prior periods, it would be subject to an excise tax. The excise tax
would equal 4% of the excess of such required distribution over the sum of
amounts actually distributed and amounts retained with respect to which the
REIT pays federal income tax.

Failure of Host Marriott to Qualify as a REIT. If Host Marriott fails to
qualify for taxation as a REIT in any taxable year, and if the relief
provisions do not apply, Host Marriott will be subject to tax, including any
applicable alternative minimum tax, on its taxable income at regular corporate
rates. Distributions to stockholders in any year in which Host Marriott fails
to qualify will not be deductible by Host Marriott nor will they be required to
be made. As a result, Host Marriott's failure to qualify as a REIT would
significantly reduce the cash available for distribution by Host Marriott to
its stockholders and could materially reduce the value of its capital stock. In
addition, if Host Marriott fails to qualify as a REIT, all distributions to
stockholders will be taxable as ordinary income, to the extent of Host
Marriott's current and accumulated E&P, although, subject to certain
limitations of the Internal Revenue Code, corporate distributees may be
eligible for the dividends received deduction with respect to these
distributions. Unless entitled to relief under specific statutory provisions,
Host Marriott also will be disqualified from taxation as a REIT for the four
taxable years following the year during which qualification was lost. It is not
possible to state whether in all circumstances Host Marriott would be entitled
to such statutory relief.

Taxation of Taxable U.S. Stockholders Generally

Distributions by Host Marriott. As long as Host Marriott qualifies as a
REIT, distributions made by Host Marriott out of its current or accumulated
E&P, and not designated as capital gain dividends constitute dividends taxable
to its taxable U.S. stockholders as ordinary income. Such distributions are not
eligible for the dividends received deduction in the case of U.S. stockholders
that are corporations. To the extent that Host Marriott makes distribution not
designated as capital gain dividends in excess of its current and accumulated
E&P, such distributions are treated first as a tax-free return of capital to
each U.S. stockholder, reducing the adjusted basis which such U.S. stockholder
has in its common stock for tax purposes by the amount of such distribution but
not below zero, with distributions in excess of a U.S. stockholder's adjusted
basis in its common stock taxable as capital gains, provided that the common
stock has been held as a capital asset.

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Dividends declared by Host Marriott in October, November or December of any
year and payable to a stockholder of record on a specified date in any such
month shall be treated as both paid by Host Marriott and received by the
stockholder on December 31 of such year, provided that the dividend is actually
paid by Host Marriott on or before January 31 of the following year.

Distributions made by Host Marriott that are properly designated by Host
Marriott as capital gain dividends are taxable to taxable non-corporate U.S.
stockholders, i.e., individuals, estates or trusts. They are taxed as gain from
the sale or exchange of a capital asset held for more than one year to the
extent that they do not exceed Host Marriott's actual net capital gain for the
taxable year, without regard to the period for which such non-corporate U.S.
stockholder has held his common stock. In the event that Host Marriott
designates any portion of a dividend as a "capital gain dividend," a U.S.
stockholder's share of such capital gain dividend would be an amount which
bears the same ratio to the total amount of dividends paid to such U.S.
stockholder for the year as the aggregate amount designated as a capital gain
dividend bears to the aggregate amount of all dividends paid on all classes of
shares for the year. On November 10, 1997, the IRS issued Notice 97-64, which
provides generally that Host Marriott may classify portions of its designated
capital gain dividend as either a 20% gain distribution, which would be taxable
to non-corporate U.S. stockholders at a maximum rate of 20%, an unrecaptured
Section 1250 gain distribution, which would be taxable to non-corporate U.S.
stockholders at a maximum rate of 25%, or a 28% rate gain distribution, which
would be taxable to non-corporate U.S. stockholders at a maximum rate of 28%.
If no designation is made, the entire designated capital gain dividend will be
treated as a 28% rate gain distribution. Notice 97-64 provides that a REIT must
determine the maximum amounts that it may designate as 20% and 25% rate capital
gain dividends by performing the computation required by the Internal Revenue
Code as if the REIT were an individual whose ordinary income were subject to a
marginal tax rate of at least 28%. Notice 97-64 further provides that
designations made by the REIT only will be effective to the extent that they
comply with Revenue Ruling 89-81, which requires that distributions made to
different classes of shares be composed proportionately of dividends of a
particular type. On July 22, 1998, as part of the IRS Restructuring Act, the
holding period requirement for the application of the 20% and 25% capital gain
tax rates was reduced to 12 months from 18 months for sales of capital gain
assets on or after January 1, 1998. Although Notice 97-64 will apply to sales
of capital gain assets after July 28, 1997 and before January 1, 1998, it is
expected that the IRS will issue clarifying guidance, most likely applying the
same principles set forth in Notice 97-64, regarding a REIT's designation of
capital gain dividends in light of the new holding period requirements. For a
discussion of the capital gain tax rates applicable to non-corporate U.S.
stockholders, see "--Taxpayer Relief Act and IRS Restructuring Act Changes to
Capital Gain Taxation" below.

Distributions made by Host Marriott that are properly designated by Host
Marriott as capital gain dividends will be taxable to taxable corporate U.S.
stockholders as long-term gain to the extent that they do not exceed Host
Marriott's actual net capital gain for the taxable year at a maximum rate of
35% without regard to the period for which such corporate U.S. stockholder has
held its common stock. Such U.S. stockholders may, however, be required to
treat up to 20% of certain capital gain dividends as ordinary income.

U.S. stockholders may not include in their individual income tax returns any
net operating losses or capital losses of Host Marriott. Instead, such losses
would be carried over by Host Marriott for potential offset against future
income, subject to certain limitations. Distributions made by Host Marriott and
gain arising from the sale or exchange by a U.S. stockholder of common stock
will not be treated as passive activity income, and, as a result, U.S.
stockholders generally will not be able to apply any "passive losses" against
such income or gain. In addition, taxable distributions from Host Marriott
generally will be treated as investment income for purposes of the investment
interest limitation. Capital gain dividends and capital gains from the
disposition of shares, including distributions treated as such, however, will
be treated as investment income only if the U.S. stockholder so elects, in
which case such capital gains will be taxed at ordinary income rates.

Host Marriott will notify stockholders after the close of its taxable year
as to the portions of distributions attributable to that year that constitute
ordinary income, return of capital and capital gain. Host Marriott may
designate, by written notice to its stockholders, its net capital gain so that
with respect to retained net capital

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gains, a U.S. stockholder would include its proportionate share of such gain in
income, as long-term capital gain, and would be treated as having paid its
proportionate share of the tax paid by Host Marriott with respect to the gain.
The U.S. stockholder's basis in its common stock would be increased by its
share of such gain and decreased by its share of such tax. With respect to such
long-term capital gain of a U.S. stockholder that is an individual or an estate
or trust, the IRS, as described above in this section, has authority to issue
regulations that could apply the special tax rate applicable generally to the
portion of the long-term capital gains of an individual or an estate or trust
attributable to deductions for depreciation taken with respect to depreciable
real property. IRS Notice 97-64, described above in this section, did not
address the taxation of non-corporate REIT stockholders with respect to
retained net capital gains.

Sales of Common Stock. Upon any sale or other disposition of common stock, a
U.S. stockholder will recognize gain or loss for federal income tax purposes in
an amount equal to the difference between (i) the amount of cash and the fair
market value of any property received on such sale or other disposition and
(ii) the holder's adjusted basis in such common stock for tax purposes. Such
gain or loss will be capital gain or loss if the common stock has been held by
the U.S. stockholder as a capital asset. In the case of a U.S. stockholder who
is an individual or an estate or trust, such gain or loss will be long-term
capital gain or loss, and any such long-term capital gain shall be subject to
the maximum capital gain rate of 20%. In the case of a U.S. stockholder that is
a corporation, such gain or loss will be long-term capital gain or loss if such
shares have been held for more than one year, and any such capital gain shall
be subject to the maximum capital gain rate of 35%. In general, any loss
recognized by a U.S. stockholder upon the sale or other disposition of common
stock that has been held for six months or less, after applying certain holding
period rules, will be treated as a long-term capital loss, to the extent of
distributions received by such U.S. stockholder from Host Marriott that were
required to be treated as long-term capital gains.

Taxpayer Relief Act and IRS Restructuring Act Changes to Capital Gain
Taxation. The Taxpayer Relief Act of 1997 altered the taxation of capital gain
income. Under the Act, individuals, trusts and estates that hold certain
investments for more than 18 months may be taxed at a maximum long-term capital
gain rate of 20% on the sale or exchange of those investments. Individuals,
trusts and estates that hold certain assets for more than one year but not more
than 18 months may be taxed at a maximum long-term capital gain rate of 28% on
the sale or exchange of those investments. The Taxpayer Relief Act also
provides a maximum rate of 25% for "unrecaptured Section 1250 gain" for
individuals, trusts and estates, special rules for "qualified 5-year gain" and
other changes to prior law. The recently enacted IRS Restructuring Act of 1998,
however, reduced the holding period requirement established by the Taxpayer
Relief Act for the application of the 20% and 25% capital gain tax rates to 12
months from 18 months for sales of capital gain assets after December 31, 1997.
The Taxpayer Relief Act allows the IRS to prescribe regulations on how the
Taxpayer Relief Act's capital gain rates will apply to sales of capital assets
by "pass-through entities," including REITs, such as Host Marriott, and to
sales of interests in "pass-through entities." For a discussion of the rules
under the Taxpayer Relief Act that apply to the taxation of distributions by
Host Marriott to its stockholders that are designated by Host Marriott as
"capital gain dividends," see "--Distributions by Host Marriott" above.
Stockholders are urged to consult with their own tax advisors with respect to
the rules contained in the Taxpayer Relief Act and the IRS Restructuring Act.

Backup Withholding for Host Marriott's Distributions

Host Marriott reports to its U.S. stockholders and the IRS the amount of
dividends paid during each calendar year and the amount of tax withheld, if
any. Under the backup withholding rules, a U.S. stockholder may be subject to
backup withholding at the rate of 31% with respect to dividends paid unless
such holder either is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, or provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A U.S. stockholder that does not provide Host Marriott with
a correct taxpayer identification number may also be subject to penalties
imposed by the IRS. Any amount paid as backup withholding is creditable against
the stockholder's income tax liability. In addition, Host Marriott may be
required to withhold a portion of its capital gain distributions to any U.S.
stockholders who fail to certify their non-foreign status to Host Marriott. See
"--Taxation of Non-U.S. Stockholders."

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Taxation of Tax-Exempt Stockholders

Provided that a tax-exempt stockholder has not held its common stock as
"debt financed property" within the meaning of the Internal Revenue Code and
such common stock are not otherwise used in a trade or business, the dividend
income from Host Marriott will not be unrelated business taxable income
("UBTI") to a tax-exempt stockholder. Similarly, income from the sale of common
stock will not constitute UBTI unless such tax-exempt stockholder has held such
common stock as "debt financed property" within the meaning of the Internal
Revenue Code or has used the common stock in a trade or business.

However, for a tax-exempt stockholder that is a social club, voluntary
employee benefit association, supplemental unemployment benefit trust or
qualified group legal services plan exempt from federal income taxation under
Internal Revenue Code Sections 501 (c)(7), (c)(9), (c)(17) and (c)(20),
respectively, income from an investment in Host Marriott will constitute UBTI
unless the organization is properly able to deduct amounts set aside or placed
in reserve for certain purposes so as to offset the income generated by its
investment in Host Marriott. Such a prospective stockholder should consult its
own tax advisors concerning these "set aside" and reserve requirements.

Notwithstanding the above, however, the Omnibus Budget Reconciliation Act of
1993 provides that, effective for taxable years beginning in 1994, a portion of
the dividends paid by a "pension held REIT" shall be treated as UBTI as to any
trust which is described in Section 401(a) of the Internal Revenue Code, is
tax-exempt under Section 501(a) of the Internal Revenue Code and holds more
than 10%, by value, of the interests in the REIT. Tax-exempt pension funds that
are described in Section 401(a) of the Internal Revenue Code are referred to
below as "qualified trusts."

A REIT is a "pension held REIT" if (i) it would not have qualified as a REIT
but for the fact that Section 856(h)(3) of the Internal Revenue Code, added by
the 1993 Act, provides that stock owned by qualified trusts shall be treated,
for purposes of the "not closely held" requirement, as owned by the
beneficiaries of the trust rather than by the trust itself, and (ii) either (a)
at least one such qualified trust holds more than 25% by value, of the
interests in the REIT, or (b) one or more such qualified trusts, each of which
owns more than 10%, by value, of the interests in the REIT, hold in the
aggregate more than 50%, by value, of the interests in the REIT. The percentage
of any REIT dividend treated as UBTI is equal to the ratio of the UBTI earned
by the REIT, treating the REIT as if it were a qualified trust and therefore
subject to tax on UBTI, to the total gross income of the REIT. A de minimis
exception applies where the percentage is less than 5% for any year. The
provisions requiring qualified trusts to treat a portion of REIT distributions
as UBTI will not apply if the REIT is able to satisfy the "not closely held"
requirement without relying upon the "look-through" exception with respect to
qualified trusts.

Based on the current estimated ownership of Host Marriott common stock and
as a result of certain limitations on transfer and ownership of common stock
contained in the Host Marriott Articles of Incorporation, Host Marriott should
not be classified as a "pension held REIT."

Taxation of Non-U.S. Stockholders

The rules governing federal income taxation of the ownership and disposition
of common stock by non-U.S. stockholders are complex and no attempt is made
herein to provide more than a brief summary of such rules. Accordingly, the
discussion does not address all aspects of federal income tax and does not
address state, local or foreign tax consequences that may be relevant to a non-
U.S. stockholder in light of its particular circumstances. In addition, this
discussion is based on current law, which is subject to change, and assumes
that Host Marriott qualifies for taxation as a REIT. Prospective non-U.S.
stockholders should consult with their own tax advisers to determine the impact
of federal, state, local and foreign income tax laws with regard to an
investment in common stock, including any reporting requirements.

Distributions by Host Marriott. Distributions by Host Marriott to a non-U.S.
stockholder that are neither attributable to gain from sales or exchanges by
Host Marriott of United States real property interests nor

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designated by Host Marriott as capital gains dividends will be treated as
dividends of ordinary income to the extent that they are made out of current or
accumulated E&P of Host Marriott. Such distributions ordinarily will be subject
to withholding of United States federal income tax on a gross basis (that is,
without allowance of deductions) at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty, unless the dividends are treated
as effectively connected with the conduct by the non-U.S. stockholder of a
United States trade or business. Under certain treaties, however, lower
withholding rates generally applicable to dividends do not apply to dividends
from a REIT, such as Host Marriott. Certain certification and disclosure
requirements must be satisfied to be exempt from withholding under the
effectively connected income exemption. Dividends that are effectively
connected with such a trade or business will be subject to tax on a net basis
(that is, after allowance of deductions) at graduated rates, in the same manner
as U.S. stockholders are taxed with respect to such dividends and are generally
not subject to withholding. Any such dividends received by a non-U.S.
stockholder that is a corporation may also be subject to an additional branch
profits tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. Host Marriott expects to withhold United States
income tax at the rate of 30% on any distribution made to a non-U.S.
stockholder unless (i) a lower treaty rate applies and any required form or
certification evidencing eligibility for that lower rate is filed with Host
Marriott or (ii) a non-U.S. stockholder files an IRS Form 4224 with Host
Marriott claiming that the distribution is effectively connected income.

Distributions in excess of the current or accumulated E&P of Host Marriott
will not be taxable to a non-U.S. stockholder to the extent that they do not
exceed the adjusted basis of the stockholder's common stock, but rather will
reduce the adjusted basis of such common stock. To the extent that such
distributions exceed the adjusted basis of a non-U.S. stockholder's common
stock, they will give rise to gain from the sale or exchange of its common
stock, the tax treatment of which is described below.

As a result of a legislative change made by the Small Business Job
Protection Act of 1996, it appears that Host Marriott will be required to
withhold 10% of any distribution in excess of its current and accumulated E&P.
Consequently, although Host Marriott intends to withhold at a rate of 30%, or a
lower applicable treaty rate, on the entire amount of any distribution, to the
extent that Host Marriott does not do so, any portion of a distribution not
subject to withholding at a rate of 30%, or lower applicable treaty rate, would
be subject to withholding at a rate of 10%. However, a non-U.S. stockholder may
seek a refund of such amounts from the IRS if it subsequently determined that
such distribution was, in fact, in excess of current or accumulated E&P of Host
Marriott, and the amount withheld exceeded the non-U.S. stockholder's United
States tax liability, if any, with respect to the distribution.

Distributions to a non-U.S. stockholder that are designated by Host Marriott
at the time of distribution as capital gain dividends, other than those arising
from the disposition of a United States real property interest, generally will
not be subject to United States federal income taxation, unless:

(i) the investment in the common stock is effectively connected with the
non-U.S. stockholder's United States trade or business, in which case
the non-U.S. stockholder will be subject to the same treatment as U.S.
stockholders with respect to such gain, except that a stockholder that
is a foreign corporation may also be subject to the 30% branch profits
tax, as discussed above, or

(ii) the non-U.S. stockholder is a nonresident alien individual who is
present in the United States for 183 days or more during the taxable
year and has a "tax home" in the United States, in which case the
nonresident alien individual will be subject to a 30% tax on the
individual's capital gains.

Pursuant to the federal law known as FIRPTA, distributions to a non-U.S.
stockholder that are attributable to gain from sales or exchanges by Host
Marriott of United States real property interests, whether or not designated as
capital gain dividends, will cause the non-U.S. stockholder to be treated as
recognizing such gain as income effectively connected with a United States
trade or business. non-U.S. stockholders would thus generally be taxed at the
same rates applicable to U.S. stockholders, subject to a special alternative
minimum tax in the case of nonresident alien individuals. Also, such gain may
be subject to a 30% branch profits tax in

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the hands of a non-U.S. stockholder that is a corporation, as discussed above.
Host Marriott is required to withhold 35% of any such distribution. That amount
is creditable against the non-U.S. stockholder's federal income tax liability.

Although the law is not entirely clear on the matter, it appears that
amounts designated by Host Marriott pursuant to the Taxpayer Relief Act as
undistributed capital gains in respect of the common stock held by U.S.
Stockholders (see "--Annual Distribution Requirements Applicable to REITs"
above) would be treated with respect to non-U.S. stockholders in the manner
outlined in the preceding two paragraphs for actual distributions by Host
Marriott of capital gain dividends. Under that approach, the non-U.S.
stockholders would be able to offset as a credit against their United States
federal income tax liability resulting therefrom their proportionate share of
the tax paid by Host Marriott on such undistributed capital gains and to
receive from the IRS a refund to the extent their proportionate share of such
tax paid by Host Marriott were to exceed their actual United States federal
income tax liability.

Sales of Common Stock. Gain recognized by a non-U.S. stockholder upon the
sale or exchange of common stock generally will not be subject to United States
taxation unless such shares constitute a "United States real property interest"
within the meaning of FIRPTA. The common stock will not constitute a "United
States real property interest" so long as Host Marriott is a "domestically
controlled REIT." A "domestically controlled REIT" is a REIT in which at all
times during a specified testing period less than 50% in value of its stock is
held directly or indirectly by non-U.S. stockholders. Host Marriott believes,
but cannot guarantee, that it is a "domestically controlled REIT." Moreover,
even if Host Marriott is a "domestically controlled REIT," because the common
stock is publicly traded, no assurance can be given that Host Marriott will
continue to be a "domestically controlled REIT." Notwithstanding the foregoing,
gain from the sale or exchange of common stock not otherwise subject to FIRPTA
will be taxable to a non-U.S. stockholder if the non-U.S. stockholder is a
nonresident alien individual who is present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States. In
such case, the nonresident alien individual will be subject to a 30% United
States withholding tax on the amount of such individual's gain.

Even if Host Marriott does not qualify as or ceases to be a "domestically
controlled REIT," gain arising from the sale or exchange by a non-U.S.
stockholder of common stock would not be subject to United States taxation
under FIRPTA as a sale of a "United States real property interest" if:

(i) the common stock is "regularly traded," as defined by applicable
regulations, on an established securities market such as the NYSE, and

(ii) such non-U.S. stockholder owned 5% or less of the common stock
throughout the five-year period ending on the date of the sale or
exchange.

If gain on the sale or exchange of common stock were subject to taxation
under FIRPTA, the non-U.S. stockholder would be subject to regular United
States income tax with respect to such gain in the same manner as a taxable
U.S. stockholder (subject to any applicable alternative minimum tax, a special
alternative minimum tax in the case of nonresident alien individuals and the
possible application of the 30% branch profits tax in the case of foreign
corporations) and the purchaser of the common stock would be required to
withhold and remit to the IRS 10% of the purchase price.

Backup Withholding Tax and Information Reporting. Backup withholding tax
generally is a withholding tax imposed at the rate of 31% on certain payments
to persons that fail to furnish certain information under the United States
information reporting requirements. Backup withholding and information
reporting will generally not apply to distributions paid to non-U.S.
stockholders outside the United States that are treated as dividends subject to
the 30% (or lower treaty rate) withholding tax discussed above, capital gain
dividends or distributions attributable to gain from the sale or exchange by
Host Marriott of United States real property interests. As a general matter,
backup withholding and information reporting will not apply to a payment of the
proceeds of a sale of common stock by or through a foreign office of a foreign
broker. Generally, information

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reporting (but not backup withholding) will apply, however, to a payment of the
proceeds of a sale of common stock by a foreign office of a broker that:

(a) is a United States person,

(b) derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States, or

(c) is a "controlled foreign corporation," which is, generally, a foreign
corporation controlled by United States stockholders.

If, however, the broker has documentary evidence in its records that the
holder is a non-U.S. stockholder and certain other conditions are met or the
stockholder otherwise establishes an exemption information reporting will not
apply. Payment to or through a United States office of a broker of the proceeds
of a sale of common stock is subject to both backup withholding and information
reporting unless the stockholder certifies under penalty of perjury that the
stockholder is a non-U.S. stockholder, or otherwise establishes an exemption. A
non-U.S. stockholder may obtain a refund of any amounts withheld under the
backup withholding rules by filing the appropriate claim for refund with the
IRS.

The IRS has recently finalized regulations regarding the withholding and
information reporting rules discussed above. In general, these regulations do
not alter the substantive withholding and information reporting requirements
but unify certification procedures and forms and clarify and modify reliance
standards. These regulations generally are effective for payments made after
December 31, 2000, subject to certain transition rules. Valid withholding
certificates that are held on December 31, 1999, will remain valid until the
earlier of December 31, 2000 or the date of expiration of the certificate under
rules currently in effect, unless otherwise invalidated due to changes in the
circumstances of the person whose name is on such certificate. A non-U.S.
stockholder should consult its own advisor regarding the effect of the new
regulations.

Tax Aspects of Host Marriott's Ownership of Interests in Host Marriott, L.P.

General. Substantially all of Host Marriott's investments are held through
Host Marriott, L.P., which will hold the hotels either directly or through
certain subsidiaries. In general, partnerships are "pass-through" entities that
are not subject to federal income tax. Rather, partners are allocated their
proportionate shares of the items of income, gain, loss, deduction and credit
of a partnership, and are potentially subject to tax thereon, without regard to
whether the partners receive a distribution from the partnership. Host Marriott
includes in its income its proportionate share of the foregoing partnership
items for purposes of the various REIT income tests and in the computation of
its REIT taxable income. Moreover, for purposes of the REIT asset tests, Host
Marriott includes its proportionate share of assets held through Host Marriott,
L.P. and certain of its subsidiaries. See "--Federal Income Taxation of Host
Marriott--Ownership of Partnership Interests by a REIT."

Entity Classification. If Host Marriott, L.P. or any non-corporate
subsidiary other than a subsidiary held through an entity treated for federal
income tax purposes as a corporation were treated as an association, the entity
would be taxable as a corporation and therefore would be subject to an entity
level tax on its income. In such a situation, the character of Host Marriott's
assets and items of gross income would change and could preclude Host Marriott
from qualifying as a REIT (see "--Federal Income Taxation of Host Marriott--
Asset Tests Applicable to REITs" and "--Income Tests Applicable to REITs").

The entire discussion of the federal income tax consequences of the
ownership of common stock is based on Host Marriott, L.P. and all of its non-
corporate subsidiaries, other than a subsidiary held by an entity treated as a
corporation for federal income tax purposes, being classified as partnerships
for federal income tax purposes. Pursuant to regulations under Section 7701 of
the Internal Revenue Code, a partnership will be treated as a partnership for
federal income tax purposes unless it elects to be treated as a corporation or
would be treated as a corporation because it is a "publicly traded
partnership." Neither Host Marriott, L.P. nor any of the non-corporate
subsidiaries have elected or will elect to be treated as a corporation, and
therefore, subject to

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the disclosure below, each will be treated as a partnership for federal income
tax purposes (or if it has only one partner or member, disregarded entirely for
federal income tax purposes).

Pursuant to Section 7704 of the Internal Revenue Code, however, a
partnership that does not elect to be treated as a corporation nevertheless
will be treated as a corporation for federal income tax purposes if it is a
"publicly traded partnership," unless at least ninety percent (90%) of its
income consists of "qualifying income" within the meaning of that section. A
"publicly traded partnership" is any partnership (i) the interests in which are
traded on an established securities market or (ii) the interests in which are
readily tradable on a "secondary market or the substantial equivalent thereof."
Units of limited partnership interest in Host Marriott L.P. will not be traded
on an established securities market. There is a significant risk, however, that
after the right to redeem such units becomes exercisable, such interests would
be considered readily tradable on the substantial equivalent of a secondary
market. In this regard, the income requirements generally applicable to REITs
and the definition of "qualifying income" under Section 7704 of the Internal
Revenue Code are similar in most key respects. There is one significant
difference, however, that is relevant to Host Marriott, L.P. For a REIT, rent
from a tenant does not qualify as "rents from real property" if the REIT and/or
one or more actual or constructive owners of 10% or more of the REIT actually
or constructively own 10% or more of the tenant; under Section 7704 of the
Internal Revenue Code, rent from a tenant is not qualifying income if a
partnership and/or one or more actual or constructive owners of 5% or more of
the partnership actually or constructively own 10% or more of the tenant.

A substantial majority of Host Marriott, L.P. income comes from rent
payments by subsidiaries of Crestline. Accordingly, because The Blackstone
Group, Host Marriott and any owner of 10% or more of Host Marriott will own or
be deemed to own 5% or more of Host Marriott, L.P., if The Blackstone Group,
Host Marriott and/or any owner of 10% or more of Host Marriott were to own or
be deemed to own collectively 10% or more of Crestline, none of the rent from
the lessees of Host Marriott's hotels would be qualifying income for purposes
of determining whether Host Marriott, L.P. should be taxed as a corporation. In
order to avoid this result, the Crestline articles of incorporation expressly
provide that no person (or persons acting as a group), including The Blackstone
Group, Host Marriott and any owner of 10% or more of Host Marriott, may own,
actually and/or constructively, more than 9.8% by value of the equity in
Crestline and the Crestline articles of incorporation contain self-executing
mechanisms intended to enforce this prohibition. In addition, Host Marriott,
L.P.'s partnership agreement prohibits any person, or persons acting as a
group, or entity, other than an affiliate of The Blackstone Group and Host
Marriott, from owning, actually and/or constructively, more than 4.9% of the
value of Host Marriott, L.P., and the Host Marriott charter prohibits any
person, or persons acting as a group, or entity, including The Blackstone Group
and the Marriott family and their affiliated entities as a group, from, subject
to certain limited exceptions, owning, actually and/or constructively, more
than 9.8% of the lesser of the number or value of the total outstanding shares
of Host Marriott. Assuming that all of these prohibitions are enforced at all
times in accordance with their terms, then so long as Host Marriott, L.P.'s
income is such that Host Marriott could meet the gross income tests applicable
to REITs (see "--Federal Income Taxation of Host Marriott--Income Tests
Applicable to REITs" and "--Ownership of Partnership Interests by a REIT"),
Host Marriott, L.P.'s "qualifying income" should be sufficient for it to avoid
being classified as a corporation even if it were considered a publicly traded
partnership.

If Host Marriott, L.P. were taxable as a corporation, most, if not all, of
the tax consequences described herein would be inapplicable. In particular,
Host Marriott would not qualify as a REIT because the value of Host Marriott's
ownership interest in Host Marriott, L.P. would exceed 5% of Host Marriott's
assets and Host Marriott would be considered to hold more than 10% of the
voting securities of another corporation (see "--Federal Income Taxation of
Host Marriott--Asset Tests Applicable to REITs"), which would adversely affect
the value of the common stock (see "--Federal Income Taxation of Host
Marriott--Failure of Host Marriott to qualify as a REIT").

Allocations of Operating Partnership Income, Gain, Loss and Deduction. The
partnership agreement of the Host Marriott, L.P. provides that if Host
Marriott, L.P. operates at a net loss, net losses shall be allocated to

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Host Marriott and the limited partners in proportion to their respective
percentage ownership interests in Host Marriott, L.P., provided that net losses
that would have the effect of creating a deficit balance in a limited partner's
capital account as specially adjusted for such purpose ("Excess Losses") will
be reallocated to Host Marriott, as general partner of Host Marriott, L.P. The
partnership agreement also provides that, if Host Marriott, L.P. operates at a
net profit, net income shall be allocated first to Host Marriott to the extent
of Excess Losses with respect to which Host Marriott has not previously been
allocated net income. Any remaining net income shall be allocated in proportion
to the respective percentage ownership interests of Host Marriott and the
limited partners. Finally, the partnership agreement provides that if Host
Marriott, L.P. has preferred units outstanding, income will first be allocated
to such preferred units to the extent necessary to reflect and preserve the
economic rights associated with such preferred units.

Although a partnership agreement will generally determine the allocation of
income and loss among partners, such allocations will be disregarded for tax
purposes if they do not comply with the provisions of Section 704(b) of the
Internal Revenue Code and the applicable regulations. Generally, Section 704(b)
and the applicable regulations require that partnership allocations respect the
economic arrangement of the partners.

If an allocation is not recognized for federal income tax purposes, the item
subject to the allocation will be reallocated in accordance with the partners'
interests in the partnership, which will be determined by taking into account
all of the facts and circumstances relating to the economic arrangement of the
partners with respect to such item. The allocations of taxable income and loss
provided for in the Host Marriott, L.P. partnership agreement and the
partnership agreements and operating agreements of the non-corporate
subsidiaries are intended to comply with the requirements of Section 704(b) of
the Internal Revenue Code and the regulations promulgated thereunder.

Tax Allocations with Respect to the Hotels. Pursuant to Section 704(c) of
the Internal Revenue Code, income, gain, loss and deduction attributable to
appreciated or depreciated property, such as the hotels, that is contributed to
a partnership in exchange for an interest in the partnership must be allocated
in a manner such that the contributing partner is charged with, or benefits
from, respectively, the difference between the adjusted tax basis and the fair
market value of such property at the time of contribution associated with the
property at the time of the contribution. This difference is know as built-in
gain. The Host Marriott, L.P. partnership agreement requires that such
allocations be made in a manner consistent with Section 704(c) of the Internal
Revenue Code. In general, the partners of Host Marriott, L.P., including Host
Marriott, who contributed depreciated assets having built-in gain are allocated
depreciation deductions for tax purposes that are lower than such deductions
would be if determined on a pro rata basis. Thus, the carryover basis of the
contributed assets in the hands of Host Marriott, L.P. may cause Host Marriott
to be allocated lower depreciation and other deductions, and therefore to be
effectively allocated more income, which might adversely affect Host Marriott's
ability to comply with the REIT distribution requirements. See "--Federal
Income Taxation of Host Marriott--Annual Distribution Requirements Applicable
to REITs".

In addition, in the event of the disposition of any of the contributed
assets which have built-in gain, all income attributable to the built-in gain
generally will be allocated to the contributing partners, even though the
proceeds of such sale would be allocated proportionately among all the partners
and likely would be retained by Host Marriott, L.P., rather than distributed.
Thus, if Host Marriott, L.P. were to sell a hotel with built-in gain that was
contributed to Host Marriott, L.P. by Host Marriott's predecessors or Host
Marriott, Host Marriott generally would be allocated all of the income
attributable to the built-in gain, which could exceed the economic or book
income allocated to it as a result of such sale. Such an allocation might cause
Host Marriott to recognize taxable income in excess of cash proceeds, which
might adversely affect Host Marriott's ability to comply with the REIT
distribution requirements. In addition, Host Marriott will be subject to a
corporate level tax on such gain to the extent the gain is recognized within
the 10-year period after the first day of Host Marriott's first taxable year as
a REIT). See "--Federal Income Taxation of Host Marriott--Annual Distribution
Requirements Applicable to REITs" and "--Federal Income Taxation of Host
Marriott--General." It should be noted in this regard that as the general
partner of Host Marriott, L.P., Host Marriott will determine whether or not to
sell a hotel contributed to Host Marriott, L.P. by Host Marriott.

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Host Marriott, L.P. and Host Marriott generally use the traditional method,
with a provision for a curative allocation of gain on sale to the extent prior
allocations of depreciation with respect to a specific hotel were limited by
the "ceiling rule" applicable under the traditional method, to account for
built-in gain with respect to the hotels contributed to Host Marriott, L.P. in
connection with the REIT conversion. This method is generally a more favorable
method for accounting for built-in gain from the perspective of those partners,
including Host Marriott, who received units of limited partnership interest in
Host Marriott, L.P. in exchange for property with a low basis relative to value
at the time of the REIT conversion and is a less favorable method from the
perspective of those partners who contributed cash or "high basis" assets to
Host Marriott, L.P., including Host Marriott, to the extent it contributes cash
to Host Marriott, L.P.

Any property purchased by Host Marriott, L.P. subsequent to the REIT
conversion will initially have a tax basis equal to its fair market value, and
Section 704(c) of the Internal Revenue Code will not apply.

Other Tax Consequences for Host Marriott and Its Stockholders

Host Marriott and its stockholders are subject to state or local taxation in
various state or local jurisdictions, including those in which Host Marriott,
L.P. or they transact business or reside. The state and local tax treatment of
Host Marriott and its stockholders may not conform to the federal income tax
consequences discussed above. Consequently, prospective stockholders of Host
Marriott should consult their own tax advisors regarding the effect of state
and local tax laws on an investment in Host Marriott.

A portion of the cash to be used by Host Marriott to fund distributions
comes from each non-controlled subsidiary through payments of dividends on the
shares of such corporation held by Host Marriott, L.P. and, in some cases,
interest on notes held by Host Marriott, L.P. Each non-controlled subsidiary
pays federal and state income tax at the full applicable corporate rates on its
taxable income computed without regard to any deduction for dividends. To the
extent that a non-controlled subsidiary is required to pay federal, state or
local taxes, the cash otherwise available for distribution by Host Marriott to
its stockholders will be reduced accordingly.

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PLAN OF DISTRIBUTION

Host Marriott may sell the offered securities being offered hereby: (i)
directly to purchasers; (ii) through agents; (iii) through dealers; (iv)
through underwriters; (v) directly to its stockholders; or (vi) through a
combination of any such methods of sale. In addition, the offered securities
may be issued by Host Marriott as a dividend or distribution.

The distribution of the offered securities may be effected from time to time
in one or more transactions either: (i) at a fixed price or prices, which may
be changed; (ii) at market prices prevailing at the time of sale; (iii) at
prices related to such prevailing market prices; or (iv) at negotiated prices.

Offers to purchase offered securities may be solicited directly by Host
Marriott. Offers to purchase offered securities may also be solicited by agents
designated by Host Marriott from time to time. Any such agent, who may be
deemed to be an "underwriter" as that term is defined in the Securities Act,
involved in the offer or sale of the offered securities in respect of which
this prospectus is delivered will be named, and any commissions payable by Host
Marriott to such agent will be set forth in the prospectus supplement.

If a dealer is utilized in the sale of the offered securities in respect of
which this prospectus is delivered, Host Marriott will sell such offered
securities to the dealer, as principal. The dealer, who may be deemed to be an
"underwriter" as that term is defined in the Securities Act, may then resell
such offered securities to the public at varying prices to be determined by
such dealer at the time of resale.

If an underwriter is, or underwriters are, utilized in the sale, Host
Marriott will execute an underwriting agreement with such underwriters at the
time of sale to them and the names of the underwriters will be set forth in the
prospectus supplement, which will be used by the underwriter to make resales of
the offered securities in respect of which this prospectus is delivered to the
public. In connection with the sale of offered securities, such underwriter may
be deemed to have received compensation from Host Marriott in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of offered securities for whom they may act as agents. Underwriters
may also sell offered securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act
as agents. Any underwriting compensation paid by Host Marriott to underwriters
in connection with the offering of offered securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable prospectus supplement.

Pursuant to any standby underwriting agreement entered into in connection
with a subscription rights offering to Host Marriott's stockholders, persons
acting as standby underwriters may receive a commitment fee for all securities
underlying the subscription rights that the underwriter commits to purchase on
a standby basis. Additionally, prior to the expiration date with respect to any
subscription rights, any standby underwriters in a subscription rights offering
to Host Marriott's stockholders may offer such securities on a when-issued
basis, including securities to be acquired through the purchase and exercise of
subscription rights, at prices set from time to time by the standby
underwriters. After the expiration date with respect to such subscription
rights, the underwriters may offer securities of the type underlying the
subscription rights, whether acquired pursuant to a standby underwriting
agreement, the exercise of the subscription rights or the purchase of such
securities in the market, to the public at a price or prices to be determined
by the underwriters. The standby underwriters may thus realize profits or
losses independent of the underwriting discounts or commissions paid by Host
Marriott. If Host Marriott does not enter into a standby underwriting
arrangement in connection with a subscription rights offering to Host
Marriott's stockholders, Host Marriott may elect to retain a dealer-manager to
manage such a subscription rights offering for Host Marriott. Any such dealer-
manager may offer securities of the type underlying the subscription rights
acquired or to be acquired pursuant to the purchase and exercise of
subscription rights and may thus realize profits or losses independent of any
dealer-manager fee paid by Host Marriott.

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Underwriters, dealers, agents and other persons may be entitled, under
agreements that may be entered into with Host Marriott, to indemnification by
Host Marriott against certain civil liabilities, including liabilities under
the Securities Act, or to contribution with respect to payments which they may
be required to make in respect thereof. Underwriters and agents may engage in
transactions with, or perform services for, Host Marriott in the ordinary
course of business.

If so indicated in the applicable prospectus supplement, Host Marriott will
authorize underwriters, dealers or other persons to solicit offers by certain
institutions to purchase offered securities pursuant to contracts providing for
payment and delivery on a future date or dates. Institutions with which such
contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others. The obligations of any purchasers under any such
contract will not be subject to any conditions except that (i) the purchase of
the offered securities shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which such purchaser is subject, and (ii) if
the offered securities are also being sold to underwriters, Host Marriott shall
have sold to such underwriters the offered securities not sold for delayed
delivery. The underwriters, dealers and such other persons will not have any
responsibility in respect of the validity or performance of such contracts. The
prospectus supplement relating to such contracts will set forth the price to be
paid for offered securities pursuant to such contracts, the commission payable
for solicitation of such contracts and the date or dates in the future for
delivery of offered securities pursuant to such contracts.

Any underwriter may engage in stabilizing and syndicate covering
transactions in accordance with Rule 104 under the Exchange Act. Rule 104
permits stabilizing bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. The underwriters may over-
allot shares of the offered securities in connection with an offering of
offered securities, thereby creating a short position in the underwriters'
account. Syndicate covering transactions involve purchases of the offered
securities in the open market after the distribution has been completed in
order to cover syndicate short positions. Stabilizing and syndicate covering
transactions may cause the price of the offered securities to be higher than it
would otherwise be in the absence of such transactions. These transactions, if
commenced, may be discontinued at any time.

The anticipated date of delivery of offered securities will be set forth in
the applicable prospectus supplement relating to each offer.

LEGAL MATTERS

The validity of the offered securities will be passed upon for Host Marriott
by Christopher G. Townsend, Esq., Vice President of Host Marriott or by other
counsel to Host Marriott. If the offered securities are distributed in an
underwritten offering or through agents, certain legal matters may be passed
upon for any agents or underwriters by counsel for such agents or underwriters
identified in the applicable prospectus supplement.

EXPERTS

The consolidated financial statements and schedules of Host Marriott, Host
Marriott Hotels, Host Marriott, L.P., HMC Senior Communities, Inc., Host
Marriott Corporation, a Delaware corporation, and the combined financial
statements of HMH Properties, Inc., and subsidiaries and HMC Capital Resources
Holding Corporation and subsidiaries and incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.

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