STARWOOD HOTELS & RESORTS, 424B3, 1999-03-23

STARWOOD HOTELS & RESORTS
424B3, 1999-03-23
REAL ESTATE INVESTMENT TRUSTS

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This filing is made pursuant
to Rule 424(b)(3) under
the Securities Act of
1933 in connection with
Registration Nos. 333-73069-01
and 333-73069.

PROSPECTUS

COMMON SHARES

[STARWOOD HOTELS LOGO]

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STARWOOD HOTELS & RESORTS WORLDWIDE, INC. STARWOOD HOTELS & RESORTS
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Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation, together
with its subsidiaries, including Starwood Hotels & Resorts, is one of the
world's largest hotel operating companies.

The common shares offered hereby (the "Common Shares") may be sold from
time to time by the shareholders specified in this prospectus or their
successors in interest (the "Participating Shareholders"). See "Participating
Shareholders." The Company will not receive any of the proceeds from the sale of
the Common Shares in this offering. All of the 27,322,875 shares included herein
are covered by a number of registration rights agreements to which the Company
is a party, and the offer and sale of these shares by the Participating
Shareholders have been registered pursuant to those agreements. In addition,
15,193,291 shares of the Corporation included herein were covered by
registration statements previously filed pursuant to those agreements.

Our Common Shares are listed on the New York Stock Exchange ("NYSE") under
the symbol "HOT."

INVESTING IN OUR COMMON SHARES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
ON PAGES 8 TO 17.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION, THE NEVADA GAMING
COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE NEW JERSEY CASINO CONTROL
COMMISSION, THE MISSISSIPPI GAMING COMMISSION OR THE INDIANA GAMING COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION,
THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE NEW
JERSEY CASINO CONTROL COMMISSION, THE MISSISSIPPI GAMING COMMISSION OR THE
INDIANA GAMING COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

The date of this prospectus is March 23, 1999.
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TABLE OF CONTENTS

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Where You Can Find More
Information................... 2
Forward-Looking Statements...... 3
The Company..................... 4
Risk Factors.................... 8
Use of Proceeds................. 16
Price Range of Common Shares and
Distributions................. 17
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Participating Shareholders...... 18
Plan of Distribution............ 21
Federal Income Tax
Considerations................ 23
Legal Matters................... 41
Experts......................... 41
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WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at l-800-SEC-0330 for further information on the public
reference room. Our SEC filings are available to the public over the Internet at
the SEC's web site at http://www.sec.gov. Our SEC filings also may be obtained
from our website at http://www.starwoodhotels.com.

The SEC 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
considered to be a part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the Participating Shareholders sell all of their
shares being offered by this offering or this offering is otherwise terminated:

1. Joint Annual Report on Form 10-K for the fiscal year ended December 31,
1997;

2. Joint Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998 (as amended);

3. Joint Current Reports on Form 8-K dated January 2, 1998, February 3,
1998, February 23, 1998, February 24, 1998, April 24, 1998, August 26, 1998,
December 31, 1998, January 6, 1999 and March 15, 1999; and

4. The description of our Common Shares contained in the Registration
Statements on Form 8-A filed with the SEC on October 3, 1986, January 4, 1999
and March 15, 1999.

You may request a copy of these filings, at no cost, by writing us at:

Starwood Hotels & Resorts Worldwide, Inc.
2231 E. Camelback Road, Suite 400
Phoenix, Arizona 85016
Attention: Alan M. Schnaid
602-852-3900

You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of the Securities in any state

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where the offer is not permitted. 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 those documents.

FORWARD-LOOKING STATEMENTS

We make statements in this prospectus and the documents we incorporate by
reference that are considered forward-looking statements within the meaning of
the Securities Act of 1933 and the Securities Exchange Act of 1934. These
statements will contain words such as "believes," "expects," "intends," "plans"
and other similar words. These statements are not guarantees of our future
performance and are subject to risks, uncertainties and other important factors
that could cause our actual performance or achievements to be materially
different from those we project. These risks, uncertainties and factors include:

- our integration of the assets and operations of ITT Corporation and
Westin Hotels & Resorts Worldwide, Inc.;

- the availability of capital for acquisitions and for renovations;

- our ability to maintain existing management, franchise or representation
agreements and to obtain new agreements on current terms;

- our ability to make future acquisitions;

- our ability to execute hotel and casino renovation and expansion
programs;

- competition within the hotel and gaming industries;

- the cyclicality of the real estate business, the hotel business and the
gaming business;

- general real estate and economic conditions;

- the continuing ability of Starwood Hotels & Resorts to qualify as a real
estate investment trust under the federal tax code;

- the ability of our Company, owners of properties we manage or franchise,
and others with which we do business to comply with the Year 2000
computer problem, and the costs associated with such compliance;

- foreign exchange fluctuations; and

- political, financial and economic conditions and uncertainties in
countries in which we own or operate properties.

Given these uncertainties, you should not place undue reliance on these
forward-looking statements. Please see the prospectus supplement, if any, and
the documents we incorporate by reference for more information on these factors.
These forward-looking statements represent our expectations, estimates and
assumptions only as of the date the statements are made.

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THE COMPANY

Starwood Hotels & Resorts Worldwide, Inc. (the "Corporation" and, together
with its subsidiaries and joint ventures, "Starwood Hotels" or the "Company"),
is one of the world's largest hotel operating companies. The Corporation
conducts its hotel business both directly and through its subsidiaries,
including ITT Sheraton Corporation ("Sheraton"), Starwood Hotel & Resorts (the
"Trust") and Ciga, S.p.A., and engages in the gaming business principally
through its subsidiary Caesars World, Inc. Our brand names include Sheraton,
Westin, The Luxury Collection, St. Regis, W, Ciga, Four Points and Caesars.
Through these brands, Starwood Hotels is represented in most major markets of
the world.

Starwood Hotels seeks to acquire interests in or management rights with
respect to luxury and upscale full-service hotels and resorts in the United
States and around the world. In the first quarter of 1998, Starwood Hotels
completed two major transactions: the acquisition of Westin Hotels & Resorts
Worldwide, Inc. ("Westin Worldwide") and certain of its affiliates (collectively
with Westin Worldwide, "Westin"), and the acquisition of ITT Corporation
("ITT"). As a result, on December 31, 1998, the Company's portfolio of owned,
leased, managed or franchised hotels and casinos totaled approximately 690
hotels and casinos in 71 countries with over 223,000 rooms. This portfolio is
comprised of approximately 220 hotels and casinos in which Starwood Hotels has
an equity interest (including minority interests) or that we lease
(substantially all of which hotels we also manage), approximately 190 hotels
managed by Starwood Hotels on behalf of third-party owners and approximately 280
hotels for which Starwood Hotels receives franchise fees.

RECENT DEVELOPMENTS

Mortgage Loan. On January 29, 1999, Starwood Hotels completed a $542
million long-term financing (the "Mortgage Loan"), secured by mortgages on a
portfolio of 11 hotels. The Mortgage Loan, which was provided by affiliates of
Goldman Sachs & Co. and Lehman Brothers Inc., bears interest at a rate of 6.95%
(which is fixed for the entire 10-year term of the Mortgage Loan). The proceeds
from the Mortgage Loan were used to refinance a portion of the Company's Senior
Credit Facility that was scheduled to mature on February 23, 1999.

ITT Educational Services, Inc. On February 1, 1999, Starwood Hotels
completed the sale of 7,950,000 shares of common stock of ITT Educational
Services, Inc. ("ESI"), in an underwritten public offering at a price per share
of $34.00. Concurrently, ESI repurchased the Company's remaining 1,500,000
shares of ESI common stock at $32.73 per share. Starwood Hotels received
aggregate net proceeds of approximately $310 million from these transactions,
which were used to repay a portion of the Company's outstanding debt.

Adoption of Rights Plan. On March 15, 1999, the Corporation adopted a
Rights Agreement (the "Rights Agreement"). Under the Rights Agreement, the
Corporation will make a dividend distribution of one preferred stock purchase
right (a "Right") for each outstanding share of common stock of the Corporation
as of the close of business on April 5, 1999. The description and terms of the
purchase rights are set forth in the Rights Agreement, incorporated here by
reference.

The purpose of the Rights Agreement is to help ensure that all stockholders
of the Company receive fair treatment in the event of any proposed attempt to
gain control of the Company. The Rights Agreement was not adopted in response to
any specific effort to gain control of the Company.

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If the Rights become exercisable, each Right will initially entitle the
holder to purchase from the Corporation one one-thousandth of a share of a new
series of preferred stock at an exercise price of $125. Initially, the Rights
will be attached to the Company's Common Shares, and no separate Rights
certificates will be distributed. The Rights generally become exercisable in
certain circumstances following a public announcement that a person has acquired
15% or more of the Corporation's common stock or the announcement that any
person has commenced a tender offer for 15% or more of the Corporation's common
stock. Once the Rights become exercisable, under specified conditions, each
holder of a Right would have the right to receive, upon exercise, Starwood
Hotels' publicly traded Common Shares (or, if the Company is acquired in a
merger or other business combination, common stock of the acquiror) having a
value equal to two times the exercise price of the Right.

THE RESTRUCTURING

In order to avoid certain restrictions that would otherwise have been
imposed on Starwood Hotels by recently enacted federal income tax legislation,
Starwood Hotels completed a restructuring on January 6, 1999, pursuant to which
the Trust became a subsidiary of the Corporation (the "Restructuring").

Prior to the Restructuring, each share of common stock of the Corporation,
par value $.01 per share (a "Corporation Share"), was "paired" with one common
share of beneficial ownership of the Trust, par value $.01 per share (a "Trust
Share"), and could be held and transferred only in units consisting of one
Corporation Share and one Trust Share (a "Paired Share").

In the Restructuring, a newly organized, wholly owned subsidiary of the
Corporation was merged into the Trust. As a result of the merger, each
outstanding Trust Share was converted into a new Class B share of beneficial
interest, par value $.01 per share, in the Trust (a "Class B Share") and each
outstanding share of beneficial interest in the subsidiary (all of which shares
were owned by the Corporation) was converted into one Class A share of
beneficial interest in the Trust, par value $.01 per share (a "Class A Share").
The Class B Shares generally do not entitle their holders to vote. The
Corporation Shares were unaffected by the Restructuring.

Because of the Restructuring, although each Class B Share is traded only as
a unit with an attached Corporation Share (and vice versa), Starwood Hotels is
no longer a "stapled entity" under the Internal Revenue Code of 1986, as amended
(the "Code"). This is because less than fifty percent (by value) of the shares
of the Trust trade together with the Corporation Shares. Since we are no longer
a "stapled entity" we are no longer subject to the "stapled entity" provisions
of the Code. Moreover, the Trust and the Corporation will not be treated as one
entity for purposes of determining whether the Trust qualifies as a real estate
investment trust ("REIT"). In addition, the Trust no longer qualifies as a
grandfathered paired share REIT. Therefore, since the recently enacted
legislation affects only grandfathered paired share REITs, we are no longer
affected by this legislation.

The Restructuring thus allows us to be able to continue to expand,
diversify and improve our hotel portfolio while maintaining the Trust's REIT
status. We believe that the benefits expected to be obtained by retaining our
ability to expand, diversify and improve

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our hotel portfolio outweigh the benefits of retaining our status, with the
Trust, as a grandfathered paired share REIT. It is possible, however, that there
will be new legal interpretations or legislation with respect to the
Restructuring that could have a material adverse effect on Starwood Hotels. See
"Risk Factors -- Tax Risks -- Adoption of Additional Legislation, Regulations or
Interpretations."

We believe that the Restructuring benefits our shareholders by continuing
to align their ownership interests in the Corporation and the Trust, and
allowing them to continue to participate in both the ownership and operations
aspects of the hotel business. As a result of the Restructuring, we will pay
significantly more in federal income taxes, we will pay a smaller dividend, and
we will have the ability to retain significantly more earnings.

The Class B Shares and the Corporation Shares are "paired" pursuant to an
Intercompany Agreement between the Trust and the Corporation (the "Intercompany
Agreement") and may be held and transferred only in combined units consisting of
one Class B Share and one Corporation Share ("Common Shares").

Ordinary limited partnership interests ("Partnership Units") in SLT Realty
Limited Partnership (the "Realty Partnership") and SLC Operating Limited
Partnership (the "Operating Partnership" and, together with the Realty
Partnership, the "Partnerships") are together exchangeable on a one-to-one basis
(subject to certain adjustments) for Common Shares (subject to the rights of
Starwood Hotels to elect to pay cash in lieu of issuing such shares).

The Class A Exchangeable Preferred Shares of the Trust, par value $.01 per
share ("Class A Preferred"), and the Class B Exchangeable Preferred Shares of
the Trust, par value $.01 per share ("Class B Preferred" and, together with the
Class A Preferred, the "Trust Preferred Shares"), were issued to Westin's
equityholders in connection with the acquisition of Westin (the "Westin
Merger"). The Trust Preferred Shares are directly or indirectly exchangeable on
a one-to-one basis (subject to certain adjustments) for Common Shares (subject
to the rights of Starwood Hotels to elect to pay cash in lieu of issuing such
shares). Class B Preferred have a liquidation preference of $38.50 per share and
provide the holders with the right, from and after the fifth anniversary of the
closing date of the Westin Merger (January 2, 1998), to require the Trust to
redeem such shares at a price of $38.50. If a holder of Class B Preferred makes
this redemption election more than one year after the fifth anniversary of the
closing date of the Westin Merger, the Trust has the option to issue shares of
Class A Preferred in lieu of cash.

Additionally, in connection with the Westin Merger, limited partnership
units ("Westin Partnership Units") of the Realty Partnership ("Westin Realty
Units") and of the Operating Partnership ("Westin Operating Units") were issued
and are also exchangeable on a one-to-one basis for Class B Preferred or Common
Shares. As of December 31, 1998, there were outstanding 4,373,457 shares of
Class A Preferred, 3,858,408 shares of Class B Preferred and 783,050 Westin
Partnership Units which are convertible into shares of Class B Preferred.

The limited partnership interests of the Realty Partnership held by the
limited partners, including Westin Realty Units, and the limited partnership
interests of the Operating Partnership held by the limited partners, including
Westin Operating Units, are (subject to the Ownership Limit (as defined below))
exchangeable for, at the option of the Trust and the Corporation, either cash,
Common Shares representing up to 5.8% of the Common Shares after such exchange
(based on the number of Common Shares outstanding on December 31, 1998), or a
combination of cash and such Common Shares.

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The Trust controls the Realty Partnership as its sole general partner; the
Corporation controls the Operating Partnership as its sole general partner.

Acquisition of ITT

On February 23, 1998, pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of November 12, 1997, among the Trust, the Corporation,
Chess Acquisition Corp., a newly formed, wholly owned subsidiary of the Company
("Chess"), and ITT, Chess was merged with and into ITT (the "ITT Merger"). As a
result of the ITT Merger, ITT became a wholly owned subsidiary of the
Corporation, and all outstanding shares of the common stock, no par value, of
ITT ("ITT Common Stock"), together with the associated preferred share purchase
rights (other than shares held by ITT or the Company), were converted into the
right to receive an aggregate of 126,716,121 Paired Shares and $2.992 billion in
cash. In addition, each holder of shares of ITT Common Stock became entitled to
receive for each share of ITT Common Stock converted in the ITT Merger
additional cash consideration in the amount of $0.37 computed as interest for
the period from January 31, 1998 through February 23, 1998.

Acquisition of Westin

On January 2, 1998, pursuant to a Transaction Agreement, dated as of
September 8, 1997 (the "Westin Transaction Agreement") among the Trust, the
Realty Partnership, the Corporation and the Operating Partnership, and inter
alia, WHWE L.L.C., the Company acquired Westin.

Pursuant to the Westin Transaction Agreement, Westin Worldwide was merged
into the Trust. In connection with the Westin Merger, all of the issued and
outstanding shares of capital stock of Westin Worldwide (other than shares held
by Westin and its subsidiaries or shares held by the Starwood Entities and their
subsidiaries) were converted into an aggregate of 6,285,783 shares of Class A
Preferred, 5,294,783 shares of Class B Preferred and cash in the amount of
$177.9 million. The Westin Transaction Agreement provided for an adjustment to
the cash consideration paid in connection with the Westin Merger under certain
circumstances, including adjustments based on the aggregate indebtedness and
working capital of Westin on the closing date and the capital expenditures made
by Westin between the date the Westin Transaction Agreement was signed and the
closing date.

Concurrent with the Westin Merger, (i) the stockholders of certain Westin
affiliates contributed all the outstanding shares of such companies to the
Realty Partnership; (ii) the Realty Partnership issued to such stockholders an
aggregate of 597,844 units of limited partnership interest of the Realty
Partnership. In addition, the Realty Partnership assumed, repaid or refinanced
the indebtedness of such companies and assumed $147.2 million of indebtedness
incurred prior to such contributions; (iii) the stockholders of certain other
Westin affiliates contributed all the outstanding shares of such companies to
the Operating Partnership and the Operating Partnership issued to such
stockholders an aggregate of 393,156 units of limited partnership interest of
the Operating Partnership; and (iv) the Operating Partnership assumed or repaid
the indebtedness of such companies, and assumed $6.0 million of indebtedness
incurred prior to such contributions.

The Trust was organized in 1969 as a Maryland real estate investment trust.
The Corporation is a Maryland corporation formed in 1980. Our executive offices
are located at 777 Westchester Avenue, White Plains, New York 10604; telephone
(914) 640-8100.

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RISK FACTORS

This section describes some, but not all, of the risks of purchasing Common
Shares. The order in which these risks are listed does not necessarily indicate
their relative importance. You should carefully consider these risks, in
addition to the other information contained in this prospectus, before
purchasing any of the shares offered hereby. In connection with the
forward-looking statements which appear in this prospectus, you should carefully
review the factors discussed below and the cautionary statements referred to in
"Forward-Looking Statements."

RISKS RELATED TO INTEGRATION OF ACQUISITIONS

When we acquired Westin and ITT, we expected to be able to achieve greater
efficiency, reduce costs and increase revenues throughout the expanded Company.
In order to meet these expectations, we will need to integrate our existing
administrative, finance, operational and marketing organizations with those of
Westin and ITT. We will also need to coordinate our sales efforts and put new
systems and controls in place for operational, financial and management
functions. Although we have substantial experience with integrating newly
acquired properties and portfolios, none of those prior acquisitions have been
as big or as complicated as the acquisitions of Westin and ITT. Because our
management team needs to divide its attention between managing what we already
have and what we have recently acquired, our revenues and results of operations
may suffer. Moreover, there are always unexpected difficulties in every
transition and integration process. We cannot assure you that we will
successfully integrate the operations of the Westin and ITT properties or the
other properties we have recently acquired with those of our old properties. Nor
can we assure you that we will save as much money as we expect to, or that we
will save it when we expect to.

Our future success and our ability to manage future growth depends largely
upon the work of our senior management and our ability to hire key officers and
other highly qualified personnel and retain them. Competition for such personnel
is intense. Since January 1998, we have experienced significant changes in our
senior management, including our executive officers. We cannot assure you that
we will continue to be successful in attracting and retaining qualified
personnel. Therefore, we cannot assure you that our senior management will be
successful at executing and implementing our growth and operating strategies.

RISKS RELATED TO THE RESTRUCTURING

The Internal Revenue Service Restructuring and Reform Act of 1998 ("H.R.
2676") was enacted on July 22, 1998. H.R. 2676 has the effect of limiting the
"grandfathering" of certain paired-share REITs from the anti-pairing rules of
Section 269B(a)(3) of the Code. Starwood Hotels has benefitted from this
grandfathering since 1984. Starwood Hotels has restructured its organization in
response to H.R. 2676 so that H.R. 2676 will no longer apply to the Company.
However, we cannot assure you that the Restructuring will not have an adverse
effect on the Company. Nor can we assure you that the Restructuring will result
in the benefits we anticipate.

REAL ESTATE INVESTMENT RISKS

GENERAL RISKS

Real property investments are subject to varying degrees of risk. The
investment returns available from equity investments in real estate depend in
large part on the amount

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of income earned and capital appreciation generated by the related properties,
as well as the expenses incurred.

In addition, a variety of other factors affect income from properties and
real estate values, including governmental regulations, real estate, zoning, tax
and eminent domain laws, interest rate levels and the availability of financing.
For example, new or existing real estate, zoning or tax laws can make it more
expensive and/or time consuming to develop real property or expand, modify or
renovate hotels.

Governments can, under eminent domain laws, take real property. Sometimes
this taking is for less compensation than the owner believes the property is
worth. When interest rates increase, the cost of acquiring, developing,
expanding or renovating real property increases. On the other hand, when
interest rates increase, real property values decrease as the number of
potential buyers decreases. Similarly, as financing becomes less available, it
becomes more difficult both to acquire and to sell real property. Any of these
factors could have a material adverse impact on our results of operations or
financial condition, as well as on our ability to make distributions to our
stockholders.

In addition, equity real estate investments, such as the investments we
hold and any additional properties that we may acquire, are relatively difficult
to sell quickly. If our properties do not generate revenue sufficient to meet
operating expenses, including debt service and capital expenditures, our income
will be adversely affected.

HOTEL DEVELOPMENT

We intend to develop hotel properties as suitable opportunities arise and
are currently developing several luxury or upscale full-service hotels. New
project development is subject to a number of risks, including risks associated
with:

- construction delays or cost overruns that may delay the anticipated
opening of the hotels and increase project costs;

- receipt of zoning, occupancy and other required governmental permits and
authorizations; and

- incurring development costs for projects that are not pursued to
completion.

We cannot assure you that any development project will be completed on time
or within budget.

POSSIBLE LIABILITY RELATING TO ENVIRONMENTAL MATTERS

Environmental laws, ordinances and regulations of various federal, state,
local and foreign governments could make us liable for the costs of removing or
cleaning up hazardous or toxic substances on, under or in property we previously
owned or operated. Such laws could impose liability without regard to whether we
knew of, or were responsible for, the presence of such hazardous or toxic
substances. The presence of hazardous or toxic substances, or the failure to
properly clean up such substances when present, could jeopardize our ability to
sell or rent the real property or to borrow using the real property as
collateral. If we arrange for the disposal or treatment of hazardous or toxic
wastes we could be liable for the costs of removing or cleaning up such wastes
at the disposal or treatment facility, even if we never owned or operated that
facility. Other laws, ordinances and regulations could require us to abate or
remove asbestos-containing materials in the event of demolition, renovations or
remodelings. There are also laws that govern emissions of and exposure to
asbestos fibers in the air. Finally, the operation and

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removal of underground storage tanks are often regulated by federal, state,
local and foreign laws.

RISKS RELATING TO HOTEL OPERATIONS

OPERATING RISKS

Our properties are subject to all the operating risks common to the hotel
industry. These risks include:

- changes in general economic conditions;

- decreases in the level of demand for rooms and related services;

- cyclical over-building in the hotel industry;

- restrictive changes in zoning and similar land use laws and regulations
or in health, safety and environmental laws, rules and regulations;

- the inability to obtain property and liability insurance to fully protect
against all losses or to obtain such insurance at reasonable rates; and

- changes in travel patterns.

In addition, the hotel industry is highly competitive. Our properties
compete with other hotel properties in their geographic markets, and some of our
competitors may have substantially greater marketing and financial resources
than we do.

ACQUISITION OPPORTUNITIES

We intend to acquire companies that complement our business. We cannot
assure you, however, that we will be able to identify acquisition candidates on
commercially reasonable terms or at all. If we make additional acquisitions, we
also cannot be sure that any anticipated benefits will actually be realized.
Likewise, we cannot be sure that we will be able to obtain additional financing
for acquisitions, or that such additional financing will not be restricted by
the terms of our debt agreements.

SEASONALITY OF HOTEL BUSINESS

The hotel and gaming industries are seasonal in nature; however, the
periods during which the Company's properties experience higher hotel revenues
or gaming activities vary from property to property and depend principally upon
location. Although the Company's revenues historically have been lower in the
first quarter than in the second, third or fourth quarters, the acquisitions of
Westin and ITT are expected to affect, and future acquisitions may further
affect, seasonal fluctuations in revenues and cash flows.

CAPITAL INTENSIVE BUSINESS

In order for our properties to remain attractive and competitive, we have
to spend money periodically to keep them well maintained, modernized and
refurbished. This creates an ongoing need for cash and, to the extent such
expenditures cannot be funded from cash generated by our operations, we may be
required to borrow or otherwise obtain such funds. Accordingly, our financial
results may be sensitive to the cost and availability of funds.

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RISKS RELATING TO GENERAL ECONOMIC CONDITIONS

Moderate or severe economic downturns may adversely affect our hotel and
gaming operations, including conditions which may be isolated to one or more
geographic regions. As a result, general economic conditions may have a negative
impact on our ability to achieve or sustain substantial improvements in funds
from operations and other important financial tests.

Further, an economic downturn in the countries of our high-end
international customers could cause a reduction in the frequency of their visits
and, consequently, the revenues generated by such customers. Similarly, the
receivables from international gaming customers could be harder to collect due
to future business or economic trends, or significant events, in the countries
where such customers live.

Large parts of the world economy, including Asia, are currently in moderate
to severe recession. In addition, the United States could experience a recession
in the near or medium term. A continued recession overseas or a recession in the
United States would likely have a material adverse effect on the results of
operations of the Company.

RISKS RELATING TO YEAR 2000

Many computer systems were originally designed to recognize calendar years
by the last two digits in the date code field. Beginning in the year 2000, these
date code fields will need to accept four digit entries to distinguish
twenty-first century dates from twentieth century dates -- that is, they will
need to be "Year 2000 Compliant." As a result, the computerized systems and
applications we use need to be reviewed and evaluated and modified or replaced,
if necessary. In less than one year, we will need to ensure that our material
financial, information and operational systems are Year 2000 Compliant.

Because we have tested all major central facilities computerized systems
and applications and have already accepted reservations for the year 2000, we
believe that we have addressed any significant risks related to our reservation
function. The remaining assessment and remediation work primarily relates to the
non-critical business applications, support hardware for the central facilities,
personal computers and applications located at the properties we own or manage
and embedded systems at the properties we own or manage. A failure of certain of
these systems to become Year 2000 Compliant could disrupt the timeliness or the
accuracy of management information provided by the central facilities.

We cannot assure you that our efforts will be sufficient to make the
computerized systems and applications at our hotel and gaming properties Year
2000 Compliant on time or that we have allocated sufficient resources to the
task. A failure to become Year 2000 Compliant could affect the integrity of the
gaming and hotel property guest check-in, billing and accounting functions.
Certain physical hotel property machinery and equipment could also fail,
resulting in safety risks and customer dissatisfaction. Additionally, failure of
the gaming systems to become Year 2000 Compliant could result in the inefficient
processing of operational gaming information and the malfunction of computerized
gaming machines.

TAX RISKS

FAILURE OF THE TRUST TO QUALIFY AS A REIT

We believe that since the taxable year ended December 31, 1995, the Trust
has qualified as a REIT under the Code. The Trust intends to continue to operate
so as to

11
<PAGE> 12

qualify as a REIT. However, we cannot assure you that the Trust will continue to
qualify as a REIT.

Qualifying as a REIT involves highly technical and complex tax provisions
that courts and administrative agencies have interpreted only to a limited
degree. Due to the complexities of the Company's ownership, structure and
operations, the Trust is more likely than are other REITs to face interpretive
issues for which there are no clear answers. Also, facts and circumstances that
we do not control may affect the Trust's ability to qualify as a REIT. In
addition, we cannot assure you that the federal government will not change the
laws governing qualification as a REIT or the tax consequences of those laws.

In order for the Trust to continue to qualify as a REIT, the Trust must
continue to meet various tests relating to, among other things, its share
ownership, assets, income and dividends. In connection with the acquisition of
Westin in January 1998 and ITT in February 1998, the Trust acquired new assets
and operations. By increasing the complexity of our operations, these assets and
operations may make it more difficult for the Trust to continue to satisfy the
REIT qualification requirements.

Prior to the Restructuring, the Trust's ability to qualify as a REIT was
also dependent on its continued exemption from the anti-pairing rules of Section
269B(a)(3) of the Code. Section 269B(a)(3) would ordinarily prevent a company
from qualifying as a REIT if its stock is paired with the stock of another
company (such as the Corporation) whose activities are inconsistent with REIT
status. The "grandfathering rules" governing Section 269B(a)(3) generally
provide, however, that (except to the extent provided by H.R. 2676) Section
269B(a)(3) does not apply to a paired-share REIT if the shares of the REIT and
its paired operating company were paired on or before June 30, 1983, and the
REIT was taxable as a REIT on or before June 30, 1983. However, courts and
administrative agencies have not interpreted Section 269B(a)(3) to any
significant degree.

If the Trust failed to qualify as a REIT in any taxable year, the Trust
could not deduct dividends in computing its taxable income and would have to pay
federal income tax on such income at regular corporate rates. The Trust would
also likely be disqualified as a REIT for the four taxable years after the year
in which qualification was lost. If the Trust failed to qualify as a REIT, the
additional tax liability would reduce the amount of money that could be
distributed as dividends for that year and each year in which qualification was
lost. In addition, distributions (such as dividends) would no longer be
required. If this happened and the Trust were to pay dividends on the assumption
that it would qualify as a REIT, we might have to borrow money or liquidate
investments to pay the extra tax we had not anticipated. The failure to qualify
as a REIT would also constitute a default under certain debt obligations of the
Trust.

OWNERSHIP LIMITATION

Another requirement of REIT qualification is that not more than 50% (in
value) of the Trust's outstanding shares may be owned, directly or indirectly,
by five or fewer individuals (including some types of entities) at any time
during the last half of the Trust's taxable year. In addition, the Trust would
not qualify as a REIT if a significant portion of its assets were leased to
"related parties." To keep this from happening, the Declaration of Trust of the
Trust and the Articles of Incorporation of the Corporation prohibit ownership by
any one person or group of related persons of more than 8% of the shares of the
Trust or the Corporation, whether measured by vote, value or number of shares
(the "Ownership Limit"). Generally, Common Shares owned by related or affiliated
persons will be added

12
<PAGE> 13

together for purposes of the Ownership Limit, and certain options and warrants
will be treated as exercised. Although the Class A Shares, all of which are held
by the Corporation, constitute more than 50% in value of the shares of the
Trust, this ownership is not subject to the Ownership Limit and will not prevent
the Trust from continuing to qualify as a REIT. In addition, the leasing of the
Trust's assets to the Corporation does not constitute a lease to a related party
for purposes of REIT qualification.

The ownership rules of the Code are far-reaching and complicated. Among
other things, these rules may, for purposes of determining whether assets of the
Trust are being leased to a related party, cause Common Shares owned by
affiliated entities to be treated as being owned by one individual or entity. As
a result, the acquisition of less than 8% of the Common Shares (or the
acquisition of an interest in an entity which owns Common Shares) could cause an
individual or entity to be treated as owning more than 8% of the Common Shares.
This would cause such Common Shares to be subject to the Ownership Limit.
Furthermore, going over the Ownership Limit could cause the sale of shares to be
canceled, or cause shares to be converted into "excess shares," which have
limited value. Even so, the Trust and the Corporation cannot continuously
monitor ownership of Common Shares. Therefore there is always a risk that some
person or business entity could somehow be treated as owning enough Common
Shares to disqualify the Trust as a REIT.

REQUIRED DISTRIBUTIONS TO SHAREHOLDERS

In order to qualify as a REIT, the Trust must pay an annual dividend of at
least 95% of its REIT taxable income (excluding any net capital gain). In
addition, the Trust will have to pay tax on taxable income (including net
capital gains) that it does not distribute. Moreover, the Trust would have to
pay a 4% nondeductible excise tax on the amount, if any, by which certain
distributions paid by the Trust with respect to any calendar year are less than
the sum of (i) 85% of the Trust's ordinary income, (ii) 95% of its capital gain
net income for that year and (iii) 100% of its undistributed income from prior
years.

The Trust intends to pay the dividends necessary to comply with the
distribution requirements of the Code and to avoid paying significant income and
excise taxes. The Trust (or the Realty Partnership) might have to borrow money
to meet these REIT distribution requirements, even though borrowing that money
might not otherwise be advisable.

The Trust's Board of Trustees and/or the Corporation's Board of Directors
decide the amount and frequency of dividends and other distributions. Their
decisions depend on a number of factors, including the amount of cash available
for distributions, financial condition, decisions by either board to reinvest
rather than to distribute funds, capital expenditures and (in the case of the
Trust) the annual distribution requirements under the REIT provisions of the
Code.

ADOPTION OF ADDITIONAL LEGISLATION, REGULATIONS OR INTERPRETATIONS

The United States Congress recently enacted tax legislation that adversely
affected the ability of Starwood Hotels to acquire additional hotel properties
because of the Trust's status as a REIT under the Code and the former "paired
share" structure of Starwood Hotels. While the Trust and the Corporation believe
that the Restructuring will alleviate the adverse effects of the new
legislation, that the restructuring is the best alternative in light of such
legislation and that the new structure of Starwood Hotels does not raise the
same concerns that led Congress to enact such legislation, no assurance can be
given that

13
<PAGE> 14

additional legislation, regulations or administrative interpretations will not
be adopted that could eliminate or reduce certain benefits of the Restructuring
and have a material adverse effect on the results of operations, financial
condition and prospects of Starwood Hotels.

RISKS RELATING TO GAMING OPERATIONS

REGULATION OF GAMING OPERATIONS

We own and operate several casino gaming facilities, including Caesars
Palace and the Desert Inn in Las Vegas, Nevada; Caesars Atlantic City in
Atlantic City, New Jersey; and Caesars Tahoe in Stateline, Nevada. Our other
gaming facilities are located in Delaware, Indiana and Mississippi; in six
foreign countries; and on cruise ships operating in international waters. Each
of these gaming operations is subject to extensive licensing, permitting and
regulatory requirements administered by various governmental entities.

Typically, gaming regulatory authorities have broad powers with respect to
the licensing of gaming operations. They may revoke, suspend, condition or limit
our gaming approvals and licenses and those of our gaming subsidiaries, impose
substantial fines and take other actions, any of which could have a material
adverse effect on our business and the value of our hotel/casinos. Our
directors, officers and some key employees, together with those of our gaming
subsidiaries, are subject to licensing or suitability determinations by various
gaming authorities. If any of those gaming authorities were to find someone
unsuitable, we would have to sever our relationship with that person.

INCREASED GAMING COMPETITION

We are facing significant domestic and international competition from both
established casinos and newly emerging gaming operations. Our competitors have
made a significant number of proposals for casinos, both land-based and on
navigable waters, in a number of jurisdictions and large metropolitan areas. If
gaming were legalized in new jurisdictions, our competitors would have
additional opportunities to expand. This could have a negative impact on our
existing gaming operations. We believe that if legalized gaming is adopted in
any jurisdiction near Nevada (particularly California or the southwestern
states) or near New Jersey (particularly New York or Pennsylvania) or on nearby
Native American lands, this could have a material adverse effect on our
operations in Las Vegas and Atlantic City, respectively.

In November 1998, California voters approved a ballot initiative that
mandates that the California governor sign compacts relating to gaming on tribal
lands with California tribes upon their request. The initiative also amended
current California law to permit gambling devices, including slot machines,
banked card games and lotteries, at tribal casinos. The Supreme Court of
California has stayed the implementation of this initiative and its ultimate
impact on our gaming operations is uncertain.

RISKS ASSOCIATED WITH HIGH-END GAMING

The high-end gaming business is more volatile than other forms of gaming.
Variability in high-end gaming could have a positive or negative impact on cash
flow, earnings and other financial measures in any given quarter. In addition, a
substantial portion of our table gaming revenues from our Caesars Palace and
Desert Inn operations is attributable to the play of a relatively small number
of international customers. The loss of, or a reduction in play of, the most
significant of such customers (because of current recessionary conditions in
Asia or otherwise) could have a material adverse effect on our future operating
results.

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<PAGE> 15

FOREIGN OPERATIONS AND CURRENCY FLUCTUATIONS

We have significant international operations. These include, as of December
31, 1998, 31 properties owned or leased in Europe, five properties owned or
leased in Africa/the Middle East, 17 properties owned or leased in Latin America
and five properties owned or leased in the Asia/Pacific region. In addition, we
manage approximately 135 properties in these regions. International operations
generally are subject to various political and other risks that are not present
in U.S. operations. Such risks include, among other things, the risk of war or
civil unrest, expropriation and nationalization. In addition, certain
international jurisdictions restrict the repatriation of non-U.S. earnings.
Various international jurisdictions also have laws limiting the right and
ability of non-U.S. entities to pay dividends and remit earnings to affiliated
companies unless specified conditions have been met.

In addition, sales in international jurisdictions typically are made in
local currencies, which subjects us to risks associated with currency
fluctuations. Currency devaluations and unfavorable changes in international
monetary and tax policies could materially adversely affect our profitability
and financing plans, as could other changes in the international regulatory
climate and international economic conditions. Although we own a relatively
large number premier properties in Italy, generally our properties are
geographically diversified and are not concentrated in any particular region.

EUROPEAN UNION CURRENCY CONVERSIONS

On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and the euro. Following the introduction of the euro, the legacy currencies of
the participating countries will remain legal tender during a transition period
ending on January 1, 2002. During the transition period, both the legacy
currency and the euro will be legal tender in the respective participating
countries. During the transition period, currency conversions will be computed
by a triangulation with reference to conversion rates between the respective
currencies and the euro. We currently operate in 10 of the 11 participating
countries. We are uncertain what effect the adoption of the euro by the
participating countries will have on us. However, it is possible that the euro
adoption will result in increased competition in the European market. In
addition, a number of our information systems are not currently euro compliant.
We are currently evaluating and updating our information systems to make them
euro compliant; however, we cannot assure you that we or our third-party
application vendors will successfully bring all our systems into compliance in
the immediate future. Failure to do so could result in disruptions in the
processing of transactions in euros or computed by reference to the euro.

INFLUENCE BY STARWOOD CAPITAL

Barry S. Sternlicht, the Chairman and Chief Executive Officer of each of
the Corporation and the Trust, together with Jonathan D. Eilian and Madison F.
Grose, are each employed by or affiliated with Starwood Capital Group, L.L.C.
("Starwood Capital"). In addition, Mr. Sternlicht and Mr. Grose are Trustees of
the Trust and Mr. Sternlicht and Mr. Eilian are Directors of the Corporation.
Although our policy requires a majority of our Trustees and Directors to be
"independent" of Starwood Capital, Starwood Capital may be able to exercise some
influence over our affairs.

Mr. Sternlicht is the President and Chief Executive Officer of, and may be
deemed to control, Starwood Capital. Also, Starwood Capital and some of its
officers own limited

15
<PAGE> 16

partnership interests in the Realty Partnership and the Operating Partnership.
These interests are exchangeable for Common Shares.

RISKS INVOLVED IN INVESTMENTS THROUGH PARTNERSHIPS OR JOINT VENTURES

Instead of purchasing hotel properties directly, we may invest as a
co-venturer. Joint venturers often have shared control over the operation of the
joint-venture assets. Therefore, such investments may, under certain
circumstances, involve risks such as the possibility that the co-venturer in an
investment might become bankrupt, or have economic or business interests or
goals that are inconsistent with our business interests or goals, or be in a
position to take action contrary to our instructions or requests or contrary to
our policies or objectives.

Consequently, actions by a co-venturer might subject hotel properties owned
by the joint venture to additional risk. Although we generally seek to maintain
sufficient control of any joint venture, we may be unable to take action without
the approval of our joint-venture partners. Alternatively, our joint-venture
partners could take actions binding on the joint venture without our consent.
Additionally, should a joint-venture partner become bankrupt, we could become
liable for such partner's share of joint-venture liabilities.

RISKS RELATING TO ACTS OF GOD AND WAR

Acts of God, such as natural disasters, either in locations where we own
and/or operate significant properties or in areas of the world where a large
number of customers come from, may adversely affect our financial and operating
performance. Similarly, wars, political unrest and other forms of civil strife
may cause our results to be significantly worse than our expectations.

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of the
Common Shares offered hereby, all of which proceeds will be received by the
Participating Shareholders. See "Participating Shareholders."

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<PAGE> 17

PRICE RANGE OF COMMON SHARES AND DISTRIBUTIONS

The Common Shares are listed on the New York Stock Exchange under the
symbol "HOT." The following table sets forth, for the fiscal periods indicated,
the high and low sales prices per Common Share (or, for periods prior to the
Restructuring, per Paired Share) on the NYSE and distributions to shareholders
for the fiscal periods indicated.

<TABLE>
<CAPTION>
PRICE
----------------
PERIOD HIGH LOW DISTRIBUTIONS(A)
------ ------ ------ ----------------
<S> <C> <C> <C>
1999
First Quarter (through March 22)............. $34.00 $22.69 $ --
1998
Fourth Quarter............................... $31.38 $18.75 $0.15(b)
Third Quarter................................ $49.19 $29.19 $0.52
Second Quarter............................... $54.38 $47.00 $0.52
First Quarter................................ $57.88 $49.50 $0.48
1997
Fourth Quarter............................... $61.50 $51.56 $0.48(c)
Third Quarter................................ $58.13 $41.38 $0.48
Second Quarter............................... $43.25 $33.50 $0.39
First Quarter................................ $46.25 $33.92 $0.39
</TABLE>

- -------------------------
(a) During the fourth quarter of 1996, the Trust and the Corporation each
declared a three-for-two stock split in the form of a 50% stock dividend
payable to shareholders of record on December 30, 1996. The stock dividend
was paid in January 1997. The information set forth in the table has been
adjusted to reflect the stock split.

(b) The Trust declared a distribution for the fourth quarter of 1998 to
shareholders of record on December 31, 1998. The distribution was paid in
January 1999.

(c) The Trust declared a distribution for the fourth quarter of 1997 to
shareholders of record on December 31, 1997. The distribution was paid in
January 1998.

In connection with the Restructuring, the Company reduced its distribution
rate. Although the Corporation Shares and the Class B Shares trade together as a
unit, for periods subsequent to the Restructuring distributions paid represent
distributions on the Class B Shares. Substantially all of the remaining income
of the Trust is paid to the Corporation.

On March 22, 1999, the last reported sales price for the Common Shares on
the NYSE was $30.13 per Common Share. As of March 1, 1999, there were
approximately 37,147 holders of record of Common Shares, including approximately
11,486 holders of record of ITT Shares converted into Common Shares in
connection with the ITT Merger who have not yet surrendered their certificates.

In order to maintain its qualification as a REIT, the Trust must make
annual distributions to its shareholders of at least 95% of its taxable income
(which does not include net capital gains). Thus, the Trust intends to continue
to pay regular quarterly dividends. Under certain circumstances, the Trust may
be required to make distributions to the Corporation in excess of cash available
for distribution in order to meet such distribution requirements. In such event,
the Trust (or the Realty Partnership) would seek to borrow the amount of the
deficiency or sell assets to obtain the cash necessary to make the distributions
necessary to retain the Trust's qualification as a REIT for federal income tax
purposes.

17
<PAGE> 18

Distributions made by the Trust will be determined by its Board of Trustees
and will depend on a number of factors, including the amount of cash flow from
operations, the Trust's financial condition, capital expenditure requirements
for the Company's properties, the annual distribution requirements under the
REIT provisions of the Code and such other factors as the Board of Trustees
deems relevant.

Under the terms of the Company's current credit facilities, the Trust is
generally permitted to make cash distributions to the Trust's shareholders on an
annual basis in an amount equal to the greater of (1) 85% of adjusted funds from
operations (as defined) for any four consecutive calendar quarters, and (2) the
minimum amount necessary to maintain the Trust's tax status as a REIT.

The Corporation has not paid any cash dividends since its organization in
the periods set forth in the table above and does not anticipate that it will
make any such distributions in the foreseeable future.

PARTICIPATING SHAREHOLDERS

The Common Shares offered by this prospectus are offered for the account of
the Participating Shareholders.

Participating Shareholders, including Barry S. Sternlicht, Juergen Bartels,
Starwood Opportunity Fund II, L.P., Madison F. Grose and Frederick J. Kleisner,
that beneficially own approximately 10.61% of the Common Shares offered hereby
have informed the Company that as of the date of this prospectus, they have no
current intent to sell any such Common Shares. However, such Participating
Shareholders have reserved the right to exchange any of their Partnership Units,
Westin Partnership Units or Trust Preferred Shares for Common Shares or to sell
any Common Shares without further notice to the Company or the making of any
change or supplement to this prospectus.

The following table and the notes thereto set forth information, as of the
date of this prospectus, relating to the beneficial ownership (as defined in
Rule 13d-3 of the Exchange Act) of the Company's equity securities by each
Participating Shareholder:

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<PAGE> 19

<TABLE>
<CAPTION>
NUMBER OF
COMMON NUMBER OF PERCENT OF NUMBER OF
SHARES COMMON SHARES COMMON COMMON SHARES
BENEFICIALLY TO BE SHARES TO BE BENEFICIALLY OWNED
NAME OF BENEFICIAL OWNERS OWNED(1) REGISTERED REGISTERED(2) AFTER THE OFFERING(3)
- ------------------------- ------------ ------------- ------------- ---------------------
<S> <C> <C> <C> <C>
Harveywood Hotel
Investors, L.P. ....... 650,338 650,338 * 0
Dover Investment Co. .... 637,871 637,871 * 0
Gary Mendell(9).......... 599,112 599,112 * 0
Star Investors, G.P. .... 594,582 594,582 * 0
Juergen Bartels(10)...... 649,499 566,166 * 83,333
Ellen-Jo Mendell(11)..... 635,612 521,617 * 0
PM Overseas
Investments............ 425,410 425,410 * 0
Burden Direct Investment
Fund I................. 364,868 364,868 * 0
Zapco Holdings, Inc. .... 331,291 331,291 * 0
Judith K. Rushmore....... 298,667 298,667 * 0
Apollo Real Estate
Investment Fund,
L.P. .................. 295,078 295,078 * 0
Starwood Hotel Investors,
II L.P. ............... 288,334 288,334 * 0
First Spring Capital
Partners III Limited... 276,420 276,420 * 0
Meridian Investment
Group.................. 625,422 265,422 * 0
ET Westin LLC(12)........ 257,534 257,534 * 0
The Hermitage L.P. ...... 233,106 233,106 * 0
Paul David Revocable
Trust.................. 212,651 212,651 * 0
Moussekido............... 212,632 212,632 * 0
KJJ Revocable Trust u/a
dated December 31,
1996(6)(13)............ 218,090 150,828 * 67,262
Jack Nash(14)............ 138,116 138,116 * 0
Madison F. Grose(6)(15).. 279,171 134,515 * 144,656
Merrick Kleeman(6)....... 133,239 133,239 * 0
Frederick J.
Kleisner(6)(16)........ 173,186 114,853 * 58,333
Stephen Mendell(17)...... 635,612 113,995 * 0
Daniel H. Stern(18)...... 141,039 112,483 * 28,556
Other Participating
Shareholders (68
persons)............... 1,324,795 1,324,795 * 0
</TABLE>

- -------------------------
* Less than one percent.

(1) Includes an aggregate of 4,358,371 Class A Preferred, 3,844,473 Class B
Preferred, 470,309 Westin Realty Units and 312,741 Westin Operating Units,
in each case exchangeable for a like number of Common Shares.

(2) Based on the number of Common Shares outstanding on March 1, 1999.

(3) Assumes that all Common Shares offered hereby are sold by the Participating
Shareholders.

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<PAGE> 20

(4) PRISA II is a commingled separate account managed by Prudential Real Estate
Investors ("PREI"), a division of The Prudential Insurance Company of
America ("Prudential"). Roger S. Pratt, a Trustee of the Trust from
February 1997 to January 1999, is a Managing Director and Senior Portfolio
Manager of PREI and a Portfolio Manager for PRISA II. As of March 12, 1999,
Prudential, directly or indirectly through one or more subsidiaries,
beneficially owned an additional 2,116,516 Common Shares held by other
accounts and may from time to time have beneficial ownership of additional
Common Shares; PRISA II disclaims beneficial ownership of any such
additional Common Shares because the voting and disposition of any such
shares is not controlled by PRISA II or PREI, and such shares have not been
included in the above table.

(5) Does not include an aggregate of 257,534 Common Shares issuable upon the
exchange of Trust Preferred Shares and Westin Partnership Units currently
held by WHWE L.L.C. which WHWE L.L.C. currently intends to distribute to ET
Westin LLC, a member of WHWE L.L.C.

(6) Participating Shareholder has informed the Company that he, she or it has
no current intent to sell any Common Shares offered hereby.

(7) Includes 74,899 Common Shares not offered hereby.

(8) Mr. Sternlicht serves as Chairman and Chief Executive Officer of each of
the Corporation and the Trust. In addition, Mr. Sternlicht serves as a
Trustee of the Trust and a Director of the Corporation. Mr. Sternlicht is
also the President and Chief Executive Officer of, and may be deemed to
control, Starwood Capital. Includes 255,782 Common Shares not offered
hereby and Partnership Units exchangeable for 508,120 Common Shares held
directly by Mr. Sternlicht or a closely-held entity. Also includes options
to purchase 4,879,500 Common Shares held directly by Mr. Sternlicht, not
offered hereby, of which options to purchase 1,533,333 Common Shares have
not vested to date. Of the unvested options, one-half will vest on December
31, 1999 and the remainder will vest on December 31, 2000. Also includes an
aggregate of 206,287 Common Shares not offered hereby, Partnership Units
exchangeable for 3,116,178 Common Shares and an aggregate of 149,268 Trust
Preferred Shares, in each case held by affiliates of Starwood Capital.

(9) Gary M. Mendell was an officer and a Trustee of the Trust until March 19,
1998. Includes 36,500 Common Shares offered hereby held of record by The
Gary Mendell Family Limited Partnership, of which Mr. Mendell is general
partner, and options to purchase 300,000 Common Shares. Does not include
31,831 Common Shares held of record by Westport Hospitality, Inc., of which
Mr. Mendell is President, as to which shares Mr. Mendell disclaims
beneficial ownership.

(10) Includes options to purchase 83,333 Common Shares not offered hereby. Mr.
Bartels serves as a Director and as Chief Executive Officer, Hotel Group,
of the Corporation.

(11) Includes 113,995 Common Shares held by Stephen Mendell, Ms. Mendell's
spouse, and offered hereby.

(12) Includes 257,534 Common Shares issuable upon the exchange of Trust
Preferred Shares and Westin Partnership Units currently held by WHWE L.L.C.
and offered hereby, which WHWE L.L.C. currently intends to distribute to ET
Westin LLC, a member of WHWE L.L.C.

20
<PAGE> 21

(13) Includes 596 Common Shares and options to purchase 66,666 Common Shares not
offered hereby. Mr. Eilian serves as a Director of the Corporation and is a
beneficiary of the KJJ Revocable Trust u/a dated December 31, 1996.

(14) Includes 27,625 Common Shares offered hereby held by The Nash Family
Partnership.

(15) Includes 20,156 Common Shares and options to purchase 124,500 Common Shares
not offered hereby. Mr. Grose serves as a Trustee of the Trust. Includes
30,133 Common Shares offered hereby held by Honora Ahern, Mr. Grose's wife.
Also includes 30,131 Common Shares held by the Madison F. Grose Irrevocable
Insurance Trust, as to which shares Mr. Grose disclaims beneficial
interest.

(16) Includes options to purchase 58,333 Common Shares not offered hereby. Mr.
Kleisner serves as President, The Americas, of the Hotel Group of the
Corporation.

(17) Includes 521,617 Common Shares held by Ellen-Jo Mendell, Mr. Mendell's
spouse, and offered hereby.

(18) Mr. Stern has served as Director of the Corporation since November 1997.
Mr. Stern served as a Trustee of the Trust from August 1995 to November
1997. Does not include 1,556 Common Shares and options to purchase 27,000
Common Shares not offered hereby.

PLAN OF DISTRIBUTION

The Common Shares included herein are covered by a number of registration
rights agreements to which the Company is a party, and the offer and sale of
these shares by the Participating Shareholders have been registered pursuant to
those agreements.

The Common Shares may be sold from time to time by the Participating
Shareholders. Such sales may be made in one or more of the following
transactions: (i) to underwriters who will acquire the Common Shares for their
own account and resell such shares in one or more transactions, including
negotiated transactions, at a fixed price or at varying prices determined at the
time of sale, with any initial public offering price and any discount or
concession allowed or re-allowed or paid to dealers subject to change from time
to time; (ii) through brokers or dealers, acting as principal or agent, in
transactions (which may involve block transactions) on the New York Stock
Exchange or other stock exchanges in ordinary brokerage transactions, in
negotiated transactions or otherwise, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at negotiated prices
or otherwise (including without limitation sales in transactions that comply
with the volume and manner of sale provisions contained in paragraphs (e) and
(f) of Rule 144 under the Securities Act ("Rule 144")); or (iii) directly or
indirectly through brokers or agents in private sales at negotiated prices, or
in any combination of such methods of sale. This prospectus may be supplemented
or amended from time to time to describe a specific plan of distribution.

In connection with the distribution of the Common Shares or otherwise, a
Participating Shareholder may: (i) enter into hedging transactions with
broker-dealers or other persons, and in connection with such transactions,
broker-dealers or other persons may engage in short sales of Common Shares in
the course of hedging the positions they assume with such Participating
Shareholder, (ii) sell Common Shares short and redeliver the Common Shares to
close out such short positions; (iii) and/or enter into option or other
transactions with broker-dealers or other persons that require the delivery to
such broker-dealer or other

21
<PAGE> 22

persons of the Common Shares, which Common Shares such broker-dealer or other
financial institution may (subject to any applicable transfer restriction
contained in an agreement between such Participating Shareholder and the
Company) resell pursuant to this prospectus as supplemented or amended to
reflect such transaction. In addition to the foregoing, a Participating
Shareholder may, from time to time, enter into other types of hedging
transactions.

A Participating Shareholder may from time to time, after the effective date
of the Registration Statement, transfer shares to a donee, pledgee, successor or
other person other than for value, and such transfers will not be made pursuant
to this prospectus. To the extent permitted by applicable law, this prospectus
shall cover sales by such transferee. To the extent required by the terms of any
agreement between the Company and such Participating Shareholder and applicable
law, the Company may supplement or amend this prospectus to include such
transferee as an additional named selling shareholder.

Underwriters participating in any offering may receive underwriting
discounts and commissions, discounts or concessions may be allowed or re-allowed
or paid to dealers, and brokers or agents participating in such transactions may
receive brokerage or agent's commissions or fees, all in amounts to be
negotiated in connection with sales pursuant hereto. The underwriter, agent or
dealer utilized in the sale of the Common Shares will not confirm sales to
accounts over which such persons exercise discretionary authority. In effecting
sales of the Common Shares, brokers or dealers engaged by a Participating
Shareholder may arrange for other brokers or dealers to participate. Brokers or
dealers may receive compensation in the form of commissions or discounts from a
Participating Shareholder and may receive commission from the purchases of the
Common Shares for whom such broker-dealers may act as agents, all in amounts to
be negotiated, including immediately prior to the sale.

The Participating Shareholders and all underwriters, dealers or agents, if
any, who participate in the distribution of the Common Shares may be deemed to
be "underwriters" within the meaning of the Securities Act in connection with
such sales, and any profit on the sale of such Common Shares by such
Shareholders, and all discounts, commissions or concessions received by such
underwriters, dealers or agents, if any (whether received from a Participating
Shareholder and/or from the purchasers of the Common Shares for whom those
dealers or agents may act as agents), may be deemed to be underwriting discounts
and commissions under the Securities Act.

Certain of the above-described underwriters, dealers, brokers or agents may
engage in transactions with, or perform services for, the Company and its
affiliates in the ordinary course of business.

Upon the Company being notified by a Participating Shareholders that any
agreement or arrangement has been entered into with a broker-dealer for the sale
of Common Shares through a block trade, special offering or secondary
distribution or a purchase by a broker-dealer, to the extent required by
applicable law a supplement to this prospectus will be distributed that will set
forth the name(s) of the participating underwriters, dealers or agents, the
aggregate amount of the Common Shares being so offered and the terms of the
offering, including all underwriting discounts, commissions and other items
constituting compensation from, and the resulting net proceeds to, such
Participating Shareholder, all discounts, commissions or concessions allowed or
re-allowed or paid to dealers, if any, and, if applicable, the purchase price to
be paid by any underwriter for the Common Shares purchased from such
Participating Shareholder.

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<PAGE> 23

The Participating Shareholders and other persons participating in the
distribution of the Common Shares will be subject to applicable provisions of
the Exchange Act and the rules and regulations of the Commission thereunder,
including, without limitation, Regulation M, which provisions may limit the
timing of the purchase and sale of shares by a Participating Shareholder.

Common Shares that qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to this prospectus. In addition, a Participating
Shareholder may devise, gift or otherwise transfer the Common Shares by means
not described herein, in which event such transfer will not be pursuant to this
prospectus.

Under agreements that have been entered into by the Company with the
Participating Shareholders, the Participating Shareholders are entitled to
indemnification by the Company against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act, and to contribution
with respect to payments which the Participating Shareholders may be required to
make in respect thereof. The Company may, in connection with an underwritten
distribution of Common Shares, enter into agreements with underwriters, dealers
and agents who participate in such distribution that provide for similar
indemnification and contribution.

The Company has agreed to bear the expenses of registration of the Common
Shares and other costs and expenses incurred by the Participating Shareholders
in connection with the sale of the Common Shares, except for costs and expenses
of Participating Shareholders counsel and accountants, brokerage commissions and
charges, and income taxes and stock transfer taxes due.

No trustee, director, officer or agent of the Company is expected to be
involved in soliciting offers to purchase the Common Shares offered hereby, and
no such person will be compensated by the Company for the sale of any of such
Common Shares. Certain officers of the Company may assist such representatives
of the Participating Shareholders in such efforts but will not be compensated
therefor.

FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the material federal income tax
considerations that may be relevant to a prospective holder of Common Shares.
This summary is for information purposes only and is not tax advice. Except as
discussed below, no ruling or determination letters from the Internal Revenue
Service (the "IRS") or opinions of counsel have been rendered or will be
requested by the Company on any tax issue connected with this prospectus. This
summary is based upon the Code, as currently in effect, applicable Treasury
Regulations thereunder and judicial and administrative interpretations thereof,
all of which are subject to change, including changes that may be retroactive.
No assurance can be given that the IRS will not challenge the propriety of one
or more of the tax positions described here or that such a challenge will not be
successful.

The tax treatment of a holder of Common Shares will vary depending upon
each holder's particular situation. This summary does not purport to deal with
all aspects of taxation that may be relevant to particular holders of Common
Shares in light of their personal investment or tax circumstances. Sidley &
Austin, special tax counsel for the Company, has opined, as of March 18, 1999,
on certain federal income tax consequences with respect to the Common Shares for
the Company and the shareholders and stockholders of the Company. Such opinion
has been filed as an exhibit to the Registration Statement. Sidley & Austin has
advised the Company that such opinion is not binding on

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<PAGE> 24

the IRS or any court and no assurance can be given that the IRS will not
challenge the propriety of part or all of such opinion or that such a challenge
would not be successful. Such opinion of Sidley & Austin relies upon and is
premised on the accuracy of factual statements and representations of the
Company concerning its business and properties, ownership, organization, sources
of income, future operations, levels of distributions and recordkeeping, and the
judgments of the Company with respect to the fair market value of its real
estate assets, the relative value of the Trust Shares and the Corporation Shares
to the value of the Paired Shares, the relative value of the Class B Shares to
the total shares of beneficial interest of the Trust, the reasonableness of the
guaranty fee paid by the Corporation to the Trust with respect to indebtedness
of the Corporation, and the ability of the Corporation to have arranged for debt
financing for the ITT acquisition without a guaranty of the Trust. Such
statements and representations by the Company are incorporated by reference into
Sidley & Austin's opinion letter. Except as specifically provided, the
discussion below does not address foreign, state, or local tax consequences, nor
does it specifically address the tax consequences to taxpayers subject to
special treatment under the federal income tax laws (including dealers in
securities, foreign persons, life insurance companies, tax-exempt organizations,
financial institutions, and taxpayers subject to the alternative minimum tax).
The discussion below assumes that the Common Shares are or will be held as
"capital assets" within the meaning of Section 1221 of the Code. No assurance
can be given that legislative, judicial or administrative changes will not
affect the opinions contained in the Sidley & Austin opinion letter and/or the
accuracy of any statements in this prospectus with respect to transactions
entered into or contemplated prior to the effective date of such changes.

EACH PROSPECTIVE PURCHASER OF COMMON SHARES IS URGED TO CONSULT HIS, HER OR
ITS OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM, HER OR IT OF
THE PURCHASE, OWNERSHIP AND SALE OF COMMON SHARES INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF
COMMON SHARES AND OF POTENTIAL CHANGES IN THE APPLICABLE TAX LAWS.

FEDERAL INCOME TAXATION OF THE TRUST

Background

In 1980, prior to the establishment of the Corporation and the pairing of
its shares with the shares of the Trust, the IRS issued a Private Letter Ruling
(the "Ruling") to the Trust in which the IRS held that the pairing of the Trust
Shares and the Corporation Shares and the operation of the Corporation would not
preclude the Trust from qualifying as a REIT. The Ruling does not impose any
continuing limitations on the Trust or the Corporation. Subsequent to the
issuance of the Ruling, (i) the IRS announced that it would no longer issue
rulings to the effect that a REIT whose shares are paired with those of a
non-REIT will qualify as a REIT if the activities of the paired entities are
integrated, and (ii) Congress, in 1984, enacted Section 269B(a)(3) of the Code,
which, in certain circumstances, treats a REIT and a non-REIT, the shares of
which were not paired on or before June 30, 1983, as one entity for purposes of
determining whether either company qualifies as a REIT. Section 269B(a)(3) of
the Code has not applied to the Trust and the Corporation (because the Trust
Shares and the Corporation Shares were paired prior to that date), and the
Ruling's conclusions were not adversely affected thereby.

In 1994, the Trust requested and received a determination letter from the
IRS (the "IRS Letter"). The IRS Letter provided that the Trust's failure to send
the shareholder

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demand letters required by the REIT Provisions (defined below) terminated its
election to be taxed as a REIT beginning with the Trust's taxable year ended
December 31, 1991 and permitted the Trust to re-elect to be taxed as a REIT
commencing with its taxable year ended December 31, 1995. The IRS Letter also
directed the Trust to file amended federal income tax returns for its taxable
years ended December 31, 1991 and 1992 as a C corporation (and not as a REIT)
and to file its federal income tax returns for its taxable years ended December
31, 1993 and 1994 as a C corporation. The Trust has filed such returns. Because
the Trust had net losses for federal income tax purposes and did not pay any
dividends during its taxable years ended December 31, 1991, 1992, 1993 and 1994,
the IRS Letter did not result in the Trust owing any federal income tax. The
Trust has instituted REIT compliance controls that are intended to prevent the
reoccurrence of any such failure to comply with the reporting and recordkeeping
requirements for REITs.

Recent Legislation

The Internal Revenue Service Restructuring and Reform Act of 1998 ("H.R.
2676") was enacted on July 22, 1998. H.R. 2676 had the effect of limiting the
grandfathering from the anti-pairing rules of Section 269B(a)(3) of the Code
that the Company had enjoyed the benefits of since 1984. Under H.R. 2676, for
purposes of the gross income tests for qualification as a REIT, the Trust and
the Corporation would be treated as one entity with respect to interests in real
property acquired directly or indirectly after March 26, 1998 by the Trust or
the Corporation, or a subsidiary or partnership in which a 10% or greater
interest is owned by the Trust or the Corporation (collectively, the "REIT
Group"), unless (i) the interests in real property are acquired pursuant to a
written agreement binding on March 26, 1998 and at all times thereafter or (ii)
the acquisition of such interests in real property was described in a public
announcement or in a filing with the SEC on or before March 26, 1998. H.R. 2676
also provides that an interest in real property held by the REIT Group that is
not subject to these rules would become subject to such rules in the event an
improvement to such interest in real property is placed in service after
December 31, 1999 that changes the use of the property and the cost of such
improvement is greater than 200% of (x) the undepreciated cost of the property
(prior to the improvement) or (y) in the case of property acquired where there
is a substituted basis, the fair market value of the property on the date it was
acquired by the REIT Group. There is an exception for improvements placed in
service before January 1, 2004 pursuant to a binding contract in effect as of
December 31, 1999 and at all times thereafter. Prior to the completion of the
Restructuring, the Company monitored the acquisition of interests in real
property by the REIT Group to ensure that such acquisitions did not prevent the
Trust from qualifying for taxation as a REIT.

As a result of the Restructuring, the Trust is no longer grandfathered from
the anti-pairing rules of Section 269B(a)(3) of the Code and the restrictions
that H.R. 2676 placed on grandfathered paired-share REITs no longer apply to the
Company.

General

The Trust has elected to be taxed as a REIT under Sections 856 through 860
of the Code and applicable Treasury Regulations (the "REIT Provisions"),
commencing with its taxable year ended December 31, 1995. The Trust believes
that, commencing with such taxable year, it was organized and has operated in
such a manner so as to qualify for taxation as a REIT and the Trust intends to
continue to operate in such a manner. However, no assurance can be given that
the Trust has qualified as a REIT or will continue to so qualify.

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<PAGE> 26

The REIT Provisions are highly technical and complex. The following sets
forth the material aspects of the REIT Provisions that govern the federal income
tax treatment of a REIT and its shareholders. This summary is qualified in its
entirety by the REIT Provisions and administrative and judicial interpretations
thereof.

Sidley & Austin has rendered an opinion to the effect that, commencing with
the Trust's taxable year ended December 31, 1995, the Trust was organized and
has operated in conformity with the REIT Provisions and its proposed method of
operation will enable it to continue to comply with the REIT Provisions for its
taxable year ending December 31, 1999 and future taxable years. It must be
emphasized that such qualification and taxation as a REIT depend upon the
Trust's ability to meet, through actual annual operating results, certain
distribution levels, specified diversity of stock ownership, and various other
qualification tests imposed under the REIT Provisions, as discussed below. The
Trust's annual operating results will not be reviewed by Sidley & Austin.
Accordingly, no assurance can be given that the actual results of the Trust's
operations for any particular taxable year will satisfy such requirements.
Further, the anticipated federal income tax treatment described in this
prospectus may be changed, perhaps retroactively, by legislative,
administrative, or judicial action at any time. See "Risk Factors -- Tax
Risks -- Adoption of Additional Legislation, Regulations or Interpretations,"
above. For a discussion of the tax consequences of failure to qualify as a REIT,
see "-- Failure to Qualify," below.

As long as the Trust qualifies for taxation as a REIT, it will not be
subject to federal corporate income taxes on net income that it currently
distributes to shareholders except in the circumstances set forth in this
paragraph. The Trust will be subject to federal income or excise tax even if it
qualifies as a REIT in the following circumstances. First, the Trust will be
taxed at regular corporate rates on any undistributed REIT taxable income (as
discussed below), including undistributed net capital gains. Second, under
certain circumstances, the Trust will be subject to the "alternative minimum
tax" on its items of tax preference, if any. Third, if the Trust has (i) net
income from the sale or other disposition of "foreclosure property" (which is,
in general, property acquired on foreclosure or otherwise on default on a loan
secured by such property or a lease of such property) or (ii) other
non-qualifying income from foreclosure property, it will be subject to tax at
the highest corporate rate on such income. Fourth, if the Trust has net income
from "prohibited transactions" (which are, in general, certain sales or other
dispositions of property, other than foreclosure property, held primarily for
sale to customers in the ordinary course of business), such income will be
subject to a 100% tax. Fifth, if the Trust should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below), but nonetheless
maintains its qualification as a REIT because certain other requirements are
met, it will be subject to a 100% tax on the net income attributable to the
greater of the amount by which the Trust fails the 75% or 95% test, multiplied
by a fraction intended to reflect the Trust's profitability. Sixth, if the Trust
should fail to distribute during each calendar year at least the sum of (i) 85%
of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net
income for such year, and (iii) any undistributed taxable income from prior
periods, the Trust will be subject to a 4% excise tax on the excess of such
required distributions over the amounts actually distributed. Seventh, pursuant
to IRS Notice 88-19, if the Trust has a net unrealized built-in gain, with
respect to any asset (a "Built-in Gain Asset") held by the Trust on January 1,
1995 or acquired by the Trust from a corporation that is or has been a C
corporation (i.e., generally a corporation subject to full corporate-level tax)
in certain transactions in which the basis of the Built-in Gain Asset in the
hands of the Trust is

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determined by reference to the basis of the asset in the hands of the C
corporation, and the Trust directly or indirectly recognizes gain on the
disposition of such asset during the 10-year period (the "Recognition Period")
beginning on January 1, 1995 with respect to assets held by the Trust on such
date or, with respect to other assets, the date on which such asset was acquired
by the Trust, then, to the extent of the Built-in Gain (i.e., the excess of (a)
the fair market value of such asset over (b) the Trust's adjusted basis in such
asset, determined as of the beginning of the Recognition Period), such gain will
be subject to tax at the highest regular corporate rate pursuant to Treasury
Regulations that have not yet been promulgated. The results described above with
respect to the recognition of Built-in Gain assume that the Trust will make an
election pursuant to IRS Notice 88-19 with respect to assets acquired by the
Trust from a corporation that is or has been a C corporation. The Trust believes
that it had Built-in Gain Assets as of January 1, 1995 and that it acquired
additional Built-in Gain Assets as a result of the Westin Merger and, thus,
direct or indirect sales of such Built-in Gain Assets by the Trust during the
applicable Recognition Period is likely to result in a federal income tax
liability to the Trust to the extent that, in general, the net Built-in Gain
exceeds available loss carryforwards.

REQUIREMENTS FOR QUALIFICATION

To qualify as a REIT, the Trust must elect to be so treated and must meet
on a continuing basis certain requirements (as discussed below) relating to the
Trust's organization, sources of income, nature of assets, and distribution of
income to shareholders.

The Code defines a REIT as a corporation, trust or association: (i) that is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (iii) that would be taxable as a domestic corporation, but
for the REIT Provisions; (iv) that is neither a financial institution nor an
insurance company subject to certain provisions of the Code; (v) the beneficial
ownership of which is held by 100 or more persons; (vi) during the last half of
each taxable year not more than 50% in value of the outstanding stock of which
is owned, directly or indirectly, by five or fewer individuals (defined in the
Code to include certain entities); (vii) that, as of the close of the taxable
year, has no earnings and profits accumulated in any non-REIT year, (viii) is
not electing to be taxed as a REIT prior to the fifth taxable year which begins
after the first taxable year for which its REIT status terminated or was revoked
or the IRS has waived the applicability of such waiting period; (ix) that has
the calendar year as its taxable year, and (x) that meets certain other tests,
described below, regarding the nature of its income and assets. The REIT
Provisions provide that conditions (i) to (iv), inclusive, must be met during
the entire taxable year and that condition (v) must be met during at least 335
days of a taxable year of 12 months, or during a proportionate part of a taxable
year of less than 12 months. Conditions (v) and (vi) do not apply until after
the first taxable year for which an election is made by the REIT to be taxed as
a REIT.

The Trust believes that it satisfies conditions (i) through (x) described
in the immediately preceding paragraph. The Trust believes that the dividends
paid and to be paid by the Trust and its predecessors will enable the Trust to
satisfy condition (vii) above. In addition, the Declaration of Trust and the
Articles of Incorporation provide for restrictions regarding the transfer and
ownership of shares, which restrictions are intended to assist the Trust in
continuing to satisfy the share ownership requirements

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described in conditions (v) and (vi) above. After the Restructuring, although
the Class A Shares constitute more than 50% in value of the shares of the Trust
and are held by the Corporation, the Trust continues to satisfy condition (vi)
above because, for purposes of such condition, the Class A Shares are considered
as owned by the Corporation's stockholders. With respect to its taxable years
which ended before January 1, 1998, in order to maintain its election to be
taxed as a REIT, the Trust was also required to maintain certain records and
request certain information from its shareholders designed to disclose the
actual ownership of its stock. The Trust believes that it has complied with
these requirements.

If a REIT owns a "Qualified REIT Subsidiary," the Code provides that such
Qualified REIT Subsidiary is disregarded for federal income tax purposes, and
all assets, liabilities and items of income, deduction and credit of the
Qualified REIT Subsidiary are treated as assets, liabilities and such items of
the REIT itself. A Qualified REIT Subsidiary is a corporation all of the capital
stock of which is owned by the REIT and, for taxable years beginning on or
before August 5, 1997, has been owned by the REIT from the commencement of such
corporation's existence. Unless the context otherwise requires, all references
to the Trust in this "Federal Income Tax Considerations" section include the
Trust's Qualified REIT Subsidiaries.

As part of the Westin Merger , the Realty Partnership acquired
substantially all of the stock of certain corporations, which corporations
intend to elect to be taxed as REITs (the "Subsidiary REITs"). The Subsidiary
REITs will not be treated as Qualified REIT Subsidiaries and will be subject to
the REIT Provisions as described in this section. Also, as part of the Westin
Merger, certain of the assets of Westin, including third party management,
franchise and representation agreements and certain trademarks and other
intangible property are held by corporations (the "Management Subsidiaries") of
each of which the Trust owns all of the nonvoting stock and voting stock
comprising less than 10% of the outstanding voting stock. The remainder of the
voting stock of the Management Subsidiaries is owned by the Corporation. The
Management Subsidiaries will not be treated as Qualified REIT Subsidiaries.

In the case of a REIT that is a partner in a partnership, the REIT
Provisions provide that the REIT is deemed to own its proportionate share of the
assets of the partnership based on the REIT's capital interest in the
partnership and is deemed to be entitled to the income of the partnership
attributable to such proportionate share. In addition, the character of the
assets and gross income of the partnership will retain the same character in the
hands of the REIT for purposes of satisfying the gross income tests and the
asset tests, described below. Similar treatment applies with respect to
lower-tier partnerships which the REIT indirectly owns through its interests in
higher-tier partnerships. Thus, the Trust's proportionate share of the assets,
liabilities and items of income of the Realty Partnership and the other
partnerships and limited liability companies in which the Trust owns a direct or
indirect interest (collectively, the "Realty Subsidiary Entities"), will be
treated as assets, liabilities and items of income of the Trust for purposes of
applying the gross income tests and the asset tests described below, provided
that the Realty Partnership and the Realty Subsidiary Entities are treated as
partnerships for federal income tax purposes. Sidley & Austin has advised the
Company, however, that if the gross income tests and the asset tests described
below were applied to partnerships in a manner different from that described in
this paragraph, then the Trust might not be able to satisfy one or more of the
gross income tests or asset tests and, in such a case, the Trust would lose its
REIT status.

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Common Shares. Section 269B(a)(3) of the Code provides that if a REIT and a
non-REIT are "stapled entities," as such term is defined in Section 269B(c)(2),
then the REIT and the non-REIT shall be treated as one entity for purposes of
determining whether either company qualifies as a REIT. The term "stapled
entities" means any group of two or more entities if more than 50% in value of
the beneficial ownership in each of such entities consists of "stapled
interests." If Section 269B(a)(3) applied to the Trust and the Corporation, then
the Trust would not be able to satisfy the gross income tests (described below)
and thus would not be eligible to be taxed as a REIT. Except to the extent
provided in H.R. 2676, Section 269B(a)(3) does not apply, however, if the shares
of a REIT and a non-REIT were paired on or before June 30, 1983 and the REIT was
taxable as a REIT on or before June 30, 1983. This grandfathering rule does not,
by its terms, require that the Trust be taxed as a REIT at all times after June
30, 1983. Therefore, the termination of the Trust's REIT election for the
taxable years ended December 31, 1991 through 1994 did not result in Section
269B(a)(3) becoming applicable to the Trust. Sidley & Austin has rendered an
opinion to the effect that Section 269B(a)(3) did not apply to the Trust prior
to the Restructuring and continues to not apply to the Trust after the
Restructuring because, after the Restructuring, although each Class B Share
trades only as a unit with an attached Corporation Share, the Trust and the
Corporation are not "stapled entities." Sidley & Austin's opinion is based on
the Trust's representation that the value of the Class B Shares has been and
will be at all relevant times less than 50% of the value of the shares of
beneficial interest of the Trust. The Trust's representation is based on its
analysis of the terms of the Class B Shares relative to the terms of the other
shares of the Trust that are outstanding, including that the Class B Shares are
nonvoting (except upon matters materially and adversely affecting the rights of
the holders of Class B Shares disproportionately to the effect on holders of
Class A Shares), may only participate (together with the preferred shares of the
Trust) in 10% of the liquidation proceeds of the Trust after the payment of the
liquidation preference of the Class A Shares, and the dividends paid with
respect to the Class B Shares are expected to be less than the dividends paid
with respect to the Class A Shares.

Sidley & Austin has rendered an opinion to the effect that, because of the
Restructuring, the Trust and the Corporation are no longer "stapled entities"
for purposes of Section 269B(a)(3) of the Code. As a result, the Trust has
ceased to qualify as a "grandfathered paired share REIT." Because the
anti-paired share REIT provisions of H.R. 2676 only apply to grandfathered
paired share REITs, as a result of the Restructuring, the Trust is no longer
subject to such provisions.

Sidley & Austin has advised the Company that, even though Section
269B(a)(3) of the Code does not apply to the Trust and the Corporation, the IRS
could assert that the Trust and the Corporation should be treated as one entity
under general tax principles. In general, such an assertion would only be upheld
if the separate corporate identities of the Trust and the Corporation are a sham
or unreal. Not all of the trustees of the Trust are also directors of the
Corporation. The Trust and the Corporation have represented that they and the
Realty Partnership, the Operating Partnership, and the entities in which they
own a direct or indirect interest will each maintain separate books and records
and all material transactions among them have been and will be negotiated and
structured with the intention of achieving an arm's-length result. Sidley &
Austin has rendered an opinion to the effect that, based on the foregoing, the
separate corporate identities of the Trust and the Corporation will be
respected.

Income Tests. In order to maintain qualification as a REIT, the Trust must
annually satisfy certain gross income requirements (the "gross income tests").
First, at least 75% of

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the Trust's gross income (excluding gross income from prohibited transactions)
for each taxable year must consist of defined types of income derived directly
or indirectly from investments relating to real property or mortgages on real
property (including "rents from real property," as described below, and in
certain circumstances, interest) or from certain types of qualified temporary
investments. Second, at least 95% of the Trust's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived from
the same items which qualify under the 75% income test and from dividends,
interest, and gain from the sale or disposition of stock or securities that do
not constitute dealer property or from any combination of the foregoing.
Pursuant to H.R. 2676, with respect to certain interests in real property
acquired by the Company after March 26, 1998, the Trust and the Corporation will
be treated as a single entity for purposes of the gross income tests until the
effective date of the Restructuring.

Rents received or deemed to be received by the Trust will qualify as "rents
from real property" for purposes of the gross income tests only if several
conditions are met. 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 (or items thereof). Second, the Code provides that rents received from
a tenant will not qualify as "rents from real property" in satisfying the gross
income tests if the REIT, or a direct or indirect owner of 10% or more of the
REIT directly or indirectly, 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 a REIT renders or
furnishes services to its tenants, the income will qualify as "rents from real
property" only if the services are of a type that a tax-exempt organization can
provide to its tenants without causing its rental income to be unrelated
business taxable income under the Code. Services that would give rise to
unrelated business taxable income if provided by a tax-exempt organization
("Prohibited Services") must be rendered or furnished by an "independent
contractor" who is adequately compensated and from whom the REIT does not derive
any income. Payments for services furnished (whether or not rendered by an
independent contractor) that are not customarily rendered or furnished to
tenants in properties of a similar class in the geographic market in which the
REIT's property is located will not qualify as "rents from real property." The
provision of Prohibited Services by a REIT in connection with a lease of real
property will not cause the rent to fail to qualify as "rents from real
property" unless the amount treated as received for the Prohibited Services
exceeds 1% of all amounts received or accrued during the taxable year directly
or indirectly by the REIT with respect to such property.

A substantial portion of the Trust's income will be derived from its
partnership interests in the Realty Partnership and the Realty Subsidiary
Entities and its indirect ownership of the Subsidiary REITs. Prior to the
Restructuring, the Trust, the Realty Partnership, the Realty Subsidiary Entities
and the Subsidiary REITs leased all of their fee and leasehold interests in
their hotels and associated property to the Operating Partnership, the
partnerships, limited liability companies, or corporations owned in whole or in
part by the Operating Partnership (collectively, the "Operating Subsidiary
Entities"), or to unrelated persons (the "Leases"). Pursuant to the
Restructuring, the lessee's interest in substantially all of the Leases were
transferred to the Corporation as of December 31, 1998. The Leases are net
leases which generally provide for payment of rent equal to the greater of a
fixed rent or a percentage rent. The percentage rent is determined by

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calculating a fixed percentage of the gross room revenues and adding, for
certain hotels, fixed percentages of other types of gross revenues in excess of
certain levels.

In order for the rents paid under the Leases to constitute "rents from real
property," the Leases must be respected as true leases for federal income tax
purposes and not treated as service contracts, joint ventures or some other type
of arrangement. The determination of whether the Leases are true leases depends
upon an analysis of all of the surrounding facts and circumstances. In making
such a determination, courts have considered a variety of factors, including the
intent of the parties, the form of the agreement, the degree of control over the
property that is retained by the property owner and the extent to which the
property owner retains the risk of loss with respect to the property.

Sidley & Austin has rendered an opinion to the effect that the Leases will
be treated as true leases for federal income tax purposes, which opinion is
based, in part, on the following facts: (i) the lessors and the lessees intend
for their relationship to be that of lessor and lessee and each such
relationship will be documented by a lease agreement; (ii) the lessees will have
the right to exclusive possession and use and quiet enjoyment of the leased
premises during the term of the Leases; (iii) the lessees will bear the cost of,
and be responsible for, day-to-day maintenance and repair of the leased
premises, other than the cost of certain capital expenditures, and will dictate
how the leased premises are operated and maintained; (iv) the lessees will bear
all of the costs and expenses of operating the leased premises during the term
of the Leases; (v) the term of the Leases is less than the economic life of the
leased premises and the lessees do not have purchase options with respect to the
leased premises; (vi) the lessees are required to pay substantial fixed rent
during the term of the Leases; and (vii) each lessee stands to incur substantial
losses or reap substantial profits depending on how successfully it operates the
leased premises.

Investors should be aware, however, that there are not controlling
authorities involving leases with terms substantially the same as the Leases.
Therefore, the opinion of Sidley & Austin is based upon an analysis of the facts
and circumstances and upon rulings and judicial decisions involving situations
that are analogous. If any significant Lease is recharacterized as a service
contract or a partnership agreement, rather than as a true lease, the Trust
would not be able to satisfy either the 75% or 95% gross income tests or, in the
case of the recharacterization of a Lease of a Subsidiary REIT, one or more of
the asset tests, and, as a result, would lose its REIT status.

In order for rent payments under the Leases to qualify as "rents from real
property," the rent must not be based on the income or profits of any person.
The percentage rent under the Leases will qualify as "rents from real property"
if it is based on percentages of receipts or sales and the percentages (i) are
fixed at the time the Leases are entered into; (ii) are not renegotiated during
the term of the Leases in a manner that has the effect of basing percentage rent
on income or profits; and (iii) conform with normal business practice. More
generally, percentage rent 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, but is in reality used as a
means of basing the percentage rent on income or profits. The Trust and the
Corporation believe that the Leases conform with normal business practice and
the percentage rent will be treated as "rents from real property" under this
requirement. The Trust has represented that, with respect to hotel properties
that it may directly or indirectly acquire in the future, the Trust will not
charge rent that is based in whole or in part on the net income or profits of
any

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person (except by reason of being based on a fixed percentage of receipts or
sales, as described above).

Another requirement for rent payments under a Lease to constitute "rents
from real property" is that the rent attributable to personal property under the
Lease must not be greater than 15% of the rent received under the Lease. For
this purpose, rent attributable to personal property is the amount that bears
the same ratio to the total rent for the taxable year as the average of the
adjusted basis of the personal property at the beginning and at the end of the
taxable year bears to the average of the aggregate adjusted basis of both the
real property and personal property leased under, or in connection with, such
lease. If with respect to a sufficient number of the Leases rent attributable to
personal property is greater than 15% of the total rent, then the Trust would
not be able to satisfy either the 75% or 95% gross income tests, or, in the case
of a Lease of a Subsidiary REIT, one or more of the asset tests, and, as a
result, would lose its REIT status. With respect to both the Leases and future
acquisitions, the Trust has represented that it will monitor the 15% test to
ensure continued qualification as a REIT.

A third requirement for qualification of rent under the Leases as "rents
from real property" is that neither the Trust nor any Subsidiary REIT may own,
directly or constructively, 10% or more of any tenant under a Lease. If the
Trust or any Subsidiary REIT were to own directly or indirectly, 10% or more of
such tenant, the tenant would be a Related Party Tenant and this rent paid by
the tenant with respect to the leased property would not qualify as income of
the type that can be received by a REIT. In order to prevent such a situation,
which would likely result in the disqualification of the Trust as a REIT, the
Declaration of Trust and the Articles of Incorporation contain restrictions on
the amount of Trust Shares and Corporation Shares that any one person can own.
These restrictions generally provide that any attempt by any one person to
actually or constructively acquire 8.0% or more of the outstanding Common Shares
will be ineffective. See "Risk Factors -- Ownership Limitation." Sidley & Austin
has advised the Company, however, that notwithstanding such restrictions,
because the Code's ownership rules for purposes of the 10% ownership limit are
broad and it is not possible to continually monitor direct and indirect
ownership of Common Shares, it is possible for a person to own sufficient Common
Shares to cause the termination of the Trust's REIT status. Sidley & Austin is
of the opinion that, after the Restructuring, the Corporation is not a Related
Party Tenant with respect to the Trust or the Subsidiary REITs.

Finally, rent under the Leases will not qualify as "rents from real
property" if the Trust or any Subsidiary REIT renders or furnishes Prohibited
Services to the occupants of the properties (subject to a de minimis rule) other
than through an independent contractor from whom the Trust or such Subsidiary
REIT does not derive any income. So long as the Leases are treated as true
leases, neither the Trust, nor any Subsidiary REIT will be treated as rendering
or furnishing Prohibited Services to the occupants of the properties as a result
of the Leases. The Trust has represented that neither it, the Realty
Partnership, nor any of the Realty Subsidiary Entities the Subsidiary REITs or
the Management Subsidiaries will render or furnish Prohibited Services to the
Corporation, the Operating Partnership, or any Operating Subsidiary Entity.
Sidley & Austin has advised the Company that if the IRS were to successfully
assert that the Trust, the Realty Partnership, any Realty Subsidiary Entity, any
Subsidiary REIT or any Management Subsidiary was rendering or furnishing
Prohibited Services to the Corporation, the Operating Partnership or any
Operating Subsidiary Entity, or was managing or operating any assets owned
directly or indirectly by the Trust, then, in certain cases, the Trust would not
be able to

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satisfy either the 75% or 95% gross income test, or one or more of the asset
tests, and, as a result, would lose its REIT status.

A corporation cannot qualify as an independent contractor if more than 35%
of the total combined voting power of its stock is owned directly or indirectly
by one or more persons who own 35% or more of the REIT. Therefore, after the
Restructuring, certain entities owned directly or indirectly by the Corporation
do not qualify as independent contractors. Any Prohibited Services to be
provided by any non-independent contractor entity will not be rendered or
furnished by or on behalf of the Trust.

Based on the foregoing, Sidley & Austin has rendered an opinion to the
effect that, except with respect to Leases that, as of December 31, 1998, were
not transferred to the Corporation, the rent payable under the Leases will be
treated as "rents from real property" for purposes of the 75% and 95% gross
income tests. There can, however, be no assurance that the IRS will not
successfully assert a contrary position or that there will not be a change in
circumstances (such as the entering into of new leases) which would result in a
portion of the rent received to fail to qualify as "rents from real property."
If such failures were in sufficient amounts, the Trust or a Subsidiary REIT
would not be able to satisfy either the 75% or 95% gross income test and, as a
result, would lose its REIT status.

For purposes of the gross income tests, the term "interest" generally does
not include any amount received or accrued (directly or indirectly) if the
determination of such amount depends 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 "interest" solely by reason of being based on a fixed
percentage or percentages of receipts or sales. The Trust, the Realty
Partnership and certain of the Realty Subsidiary Entities hold notes and may
advance money from time to time to tenants for the purpose of financing tenant
improvements, making real estate loans or holding or acquiring additional notes.
None of the notes currently held by the Trust, the Realty Partnership or the
Realty Subsidiary Entities provides for the payment of any amount based on the
income or profits of any person other than amounts based, on a fixed percentage
or percentages of receipts or sales. In addition, none of the Trust, the Realty
Partnership or the Realty Subsidiary Entities intends to charge interest that
will depend in whole or in part on the income or profits of any person or to
make loans (not secured in substantial part by real estate mortgages) in amounts
that could jeopardize the Trust's compliance with the 75% and 5% asset tests,
discussed below. Accordingly, to the extent the notes held by the Trust, the
Realty Partnership or the Realty Subsidiary Entities are secured by real
property, the interest received or accrued with respect to such notes will be
treated as qualifying income for both the 75% and the 95% gross income tests.
Certain of the notes held by the Trust and the Realty Partnership are not
secured by real property and, with respect to such notes that are secured by
real property (including notes issued in connection with the ITT Merger), it is
possible that the amount of such notes will exceed the fair market value of the
real property security therefor. To the extent such notes are not secured by
real property, interest received or accrued with respect to such notes will be
treated as qualifying income for the 95% gross income test but will not be
treated as qualifying income for the 75% gross income test. However, the Company
believes that the amount of such interest will not cause the Trust to fail to
satisfy the 75% gross income test.

The Trust has guaranteed certain indebtedness of the Corporation. The fees
paid to the Trust for such guarantee are unlikely to be treated as qualifying
income for either the 75% or the 95% gross income tests. However, the Company
believes that the amount of

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such fees will not cause the Trust to fail to satisfy either the 75% or the 95%
gross income test.

The net income from a prohibited transaction is subject to a 100% tax. The
Trust believes that no asset directly or indirectly owned by it is held for sale
to customers and that the sale of any such property will not be in the ordinary
course of the business of the Trust, the Realty Partnership, any Realty
Subsidiary Entity or any Subsidiary REIT.

If the Trust fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it will nevertheless qualify as a REIT for such year
if it is entitled to and receives relief under certain provisions of the Code.
No assurance can be given that the Trust would be entitled to the benefit of
these relief provisions. Even if these relief provisions apply, a tax would be
imposed with respect to the excess net income.

Asset Tests. In order to maintain qualification as a REIT, a REIT, at the
close of each quarter of its taxable year, must also satisfy three tests
relating to the nature of its assets. First, at least 75% of the value of the
REIT's total assets must be represented by "real estate assets" (including stock
or debt instruments held for not more than one year purchased with the proceeds
of a stock offering or long-term (at least five years) debt offering of the
REIT), cash, cash items, government securities and shares of REITs. Second, not
more than 25% of the REIT'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 the REIT may not
exceed 5% of the value of the REIT's total assets, and the REIT may not own more
than 10% of any one issuer's outstanding voting securities.

The Trust believes that commencing with its taxable year ended December 31,
1995 it has complied with the asset tests. A substantial portion of the Trust's
investments are in properties owned by the Realty Partnership and the Realty
Subsidiary Entities, at least 75% of which represent qualifying real estate
assets. A portion of the indebtedness of the Corporation and the Operating
Partnership to the Trust and the Realty Partnership may not be qualifying assets
under the 75% asset test. However, such portion does not exceed 5% of the value
of the assets of the Trust and, thus, will not cause the Trust to fail the 5%
asset test.

The Trust owns all of the nonvoting stock and less than 10% of the voting
stock of each Management Subsidiary. The Trust also acquired, as a result of the
Westin Merger, certain intangible assets of Westin. The Trust believes that, as
of the end of each calendar quarter commencing with the calendar quarter ending
March 31, 1998, the value of the securities of each Management Subsidiary held
by the Trust will not exceed 5% of the value of the Trust's total assets and
that not more than 25% of the value of the Trust's total assets will consist of
assets other than "real estate assets," cash and cash items (including
receivables), government securities and shares of REITs. The Trust's belief is
based in part upon its analysis of the estimated values of the various
securities and other assets owned by the Trust and the Realty Partnership. There
can be no assurance, however, that the IRS will not successfully assert that
certain securities held by the Trust or the Realty Partnership cause the Trust
to fail either the 5% or 10% asset tests or that less than 75% of the value of
the Trust's total assets consists of "real estate assets," cash and cash items
(including receivables), government securities and shares of REITs.

After meeting the asset tests at the close of any quarter, the Trust will
not lose its status as a REIT for failure to satisfy the asset tests at the end
of a subsequent quarter solely by reason of changes in asset values. If the
failure to satisfy the asset tests results

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from an acquisition of securities or other property during a quarter, the
failure can be cured by disposition of sufficient non-qualifying assets within
30 days after the close of that quarter. The Trust intends to maintain adequate
records of the value of its assets to ensure compliance with the asset tests and
to take such actions within 30 days after the close of any quarter as may be
required to cure any non-compliance.

Annual Distribution Requirements. The Trust, in order to qualify as a REIT,
is required to distribute dividends (other than capital gain dividends) to its
shareholders in an amount at least equal to (i) the sum of (a) 95% of the
Trust's "REIT taxable income" (computed without regard to the dividends paid
deduction and the Trust'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
non-cash income. In addition, if the Trust directly or indirectly disposes of
any Built-in Gain Asset during its Recognition Period, the Trust will be
required, pursuant to Treasury Regulations that 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. Distributions must be paid in the taxable year
to which they relate, or in the following taxable year if declared before the
Trust timely files its tax return for such year and if paid on or before the
first regular dividend payment after such declaration. To the extent that the
Trust 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 will be
subject to tax thereon at regular ordinary and capital gain corporate tax rates.
Furthermore, if the Trust should fail to distribute during each calendar year at
least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of
its REIT capital gain net income for such year, and (iii) any undistributed
taxable income from prior periods, the Trust will be subject to a 4% excise tax
on the excess of such required distribution over the amounts actually
distributed.

The Trust intends to make timely distributions sufficient to satisfy the
annual distribution requirements. It is possible, however, that the Trust, from
time to time may not have sufficient cash or other liquid assets to meet the
distribution requirements described above. In order to meet the distribution
requirements in such cases, the Trust, the Realty Partnership or a Subsidiary
REIT may find it necessary to arrange for short-term or possibly long-term
borrowings.

Under certain circumstances, the Trust will be permitted to rectify a
failure to meet the distribution requirements for a year by paying "deficiency
dividends" to shareholders in a later year, which would be included in the
Trust's deduction for dividends paid for the earlier year. In such case, the
Trust would be able to avoid being taxed on amounts distributed as deficiency
dividends; however, the Trust will be required to pay interest based upon the
amount of any deduction taken for deficiency dividends.

FAILURE TO QUALIFY

If the Trust fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Trust will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates, although the Trust may, in such case, be eligible to
file a consolidated return with the Corporation. Distributions to shareholders
in any year in which the Trust fails to qualify will not be deductible by the
Trust nor will they be required to be made. As a result, the Trust's failure to
qualify as a REIT could reduce the cash available for distribution by the Trust
to its shareholders. In addition, if the Trust fails to qualify as a REIT, all
distributions to shareholders will be taxable as ordinary income to the extent
of the Trust's current and

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accumulated earnings and profits, and, subject to certain limitations of the
Code, corporate distributees (including the Corporation) may be eligible for the
dividends-received deduction. Unless entitled to relief under specific statutory
provisions, the Trust will also 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 the Trust would be entitled
to such statutory relief.

FEDERAL INCOME TAXATION OF THE CORPORATION

The Corporation is subject to federal income tax on its taxable income. A
portion of the interest paid or accrued by the Corporation with respect to its
indebtedness to the Trust or to the Realty Partnership may not be currently
deductible. The amount of any such deferred interest deductions for a taxable
year will depend on the amount and sources of income and expense of the
Corporation and the extent to which the holders of Common Shares are exempt from
federal income tax. No opinion of counsel is being rendered on the deductibility
of such interest expense because no controlling legal authority exists with
respect to the application of the relevant sections of the Code to the
deductibility of such interest expense. The Corporation will be taxable on the
dividends it receives from the Trust and will not be entitled to a
dividends-received deduction with respect to such dividends.

FEDERAL INCOME TAXATION OF HOLDERS OF COMMON SHARES

Federal Income Taxation of Taxable U.S. Holders

As used herein, the term "U.S. Shareholder" means a holder of Common Shares
who is: (i) a citizen or resident of the United States; (ii) a corporation,
partnership, or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof; or (iii) an estate or
trust the income of which is subject to U.S. federal income taxation regardless
of its source. As long as the Trust qualifies as a REIT, distributions made to
the Trust's U.S. Shareholders up to the amount of the Trust's current or
accumulated earnings and profits (and not designated as capital gain dividends)
will be taken into account by such U.S. Shareholders as ordinary income and will
not be eligible for the dividends-received deduction for corporations.
Distributions that are properly designated by the Trust as capital gain
dividends will be taxed as long-term capital gain (to the extent they do not
exceed the Trust's actual net capital gain for the taxable year) without regard
to the period for which the U.S. Shareholder has held its stock. However,
corporate holders will, in certain circumstances, be required to treat up to 20%
of certain capital gain dividends as ordinary income, and capital gains
dividends are not eligible for the dividends-received deduction. Certain capital
gain dividends will be taxed at different rates, depending on the type of gain
recognized by the Trust. Distributions in excess of the Trust's current and
accumulated earnings and profits will not be taxable to a U.S. Shareholder to
the extent that they do not exceed the adjusted basis of the U.S. Shareholder's
Class B Shares, but rather will reduce the adjusted basis of such Class B
Shares. To the extent that such distributions exceed the adjusted basis of a
U.S. Shareholder's Class B Shares they will be included in income as long-term
capital gain (or short-term capital gain if the shares have been held for one
year or less). In addition, any dividend declared by the Trust in October,
November or December of any year payable to a holder of record on a specified
date in any such month will be treated as both paid by the Trust and received by
the holder on December 31 of such year, provided that the dividend is actually
paid by the Trust during January of the following calendar year.

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If the Trust elects to retain and pay tax on its net capital gains, the
U.S. Shareholders will be required to include their proportionate share of the
undistributed long-term capital gains in income and will receive a credit for
their share of the tax paid by the Trust. The basis of the U.S. Shareholders
Class B Shares would be increased by a corresponding amount.

The Trust will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by the Trust up to the amount required to
be distributed in order to avoid imposition of the 4% excise tax discussed
above. In such a case, U.S. Shareholders will be required to treat certain
distributions that would otherwise result in a tax-free return of capital as
taxable distributions. Moreover, any "deficiency dividend" will be treated as a
"dividend" (either as ordinary or capital gain dividend, as the case may be),
regardless of the Trust's earnings and profits.

Distributions from the Trust and gain from the disposition of the Class B
Shares will not be treated as passive activity income and, therefore, U.S.
Shareholders will not be able to apply any "passive losses" against such income.
Dividends from the Trust (to the extent they do not constitute a return of
capital) will generally be treated as investment income for purposes of the
investment interest expense limitation. Gain from the disposition of Common
Shares and capital gains dividends will not be treated as investment income
unless the U.S. Shareholders elect to have the gain taxed at ordinary income
rates.

Distributions from the Corporation up to the amount of the Corporation's
current or accumulated earnings and profits will be taken into account by U.S.
Shareholders as ordinary income and will be eligible for the dividends-received
deduction for corporations. Distributions in excess of the Corporation's current
and accumulated earnings and profits will not be taxable to a U.S. Shareholder
to the extent that they do not exceed the adjusted basis of the U.S.
Shareholder's Corporation Shares, but rather will reduce the adjusted basis of
such Corporation Shares. To the extent that such distributions exceed the
adjusted basis of a U.S. Shareholder's Corporation Shares they will be included
in income as long-term capital gain (or short-term capital gain if the stock has
been held for one year or less).

In general, a U.S. Shareholder will realize capital gain or loss on the
disposition of Common Shares equal to the difference between the amount realized
on such disposition and the U.S. Shareholder's adjusted basis in such Common
Shares. Such gain or loss will generally constitute long-term capital gain or
loss if the U.S. Shareholder held such Common Shares for more than one year.
However, any loss upon a sale or exchange of Class B Shares by a U.S.
Shareholder who has held such shares 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 from the Trust that are treated by such U.S. Shareholder
as long-term capital gain.

For U.S. Shareholders who are individuals, the maximum capital gains tax
rate for sales of Common Shares will be (i) 20%, if such shares have been held
for more than 12 months, or (ii) 18%, if such shares have been held for more
than five years and the holding period for such shares begins after December 31,
2000. The eligibility of capital gains dividends for lower capital gains tax
rates is subject to special rules.

U.S. Shareholders will not be permitted to include in their individual
income tax returns any net operating losses or capital losses of the Trust or
the Corporation.

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Federal Taxation of Tax-Exempt Holders of Common Shares

The IRS has ruled that amounts distributed as dividends by a REIT to a
tax-exempt employees pension trust do not constitute unrelated business taxable
income ("UBTI"). Based on this ruling and the analysis therein, distributions by
the Trust will not, subject to certain exceptions described below, be UBTI to a
qualified plan, IRA or other tax-exempt entity (a "Tax-Exempt Shareholder")
provided the Tax-Exempt Shareholder has not held its shares as "debt financed
property" within the meaning of the Code and the shares are not otherwise used
in an unrelated trade or business of the Tax-Exempt Shareholder. Similarly,
income from the sale of Class B Shares will not, subject to certain exceptions
described below, constitute UBTI unless the Tax-Exempt Shareholder has held such
Class B Shares as a dealer (under Section 512(b)(5)(B) of the Code) or as "debt-
financed property" within the meaning of Section 514 of the Code. Revenue
rulings are interpretive in nature and subject to revocation or modification by
the IRS.

For Tax-Exempt Shareholders that are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans, exempt from federal income taxation under Sections
501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code respectively, income from an
investment in the Trust will constitute UBTI unless the organization is able to
deduct properly amounts set aside or placed in reserve for certain purposes so
as to offset the income generated by its investment in the Trust. Such
prospective investors should consult their tax advisors concerning these
"set-aside" and reserve requirements.

Notwithstanding the above, however, a portion of the dividends paid by a
"pension held REIT" will (subject to a de minimis exception) be treated as UBTI
as to any trust that (i) is described in Section 401(a) of the Code, (ii) is
tax-exempt under Section 501(a) of the Code, and (iii) holds more than 10% (by
value) of the interests in the REIT. The Trust does not expect to be a "pension
held REIT" within the meaning of the Code.

Federal Taxation of Non-U.S. Holders of Common Shares

The rules governing United States federal income taxation of the ownership
and disposition of stock by persons that are, for purposes of such taxation,
non-resident alien individuals, foreign corporations, foreign partnerships, or
foreign estates or trusts (collectively, "Non-U.S. Shareholders") 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 United States
federal income tax and does not address state, local or foreign tax consequences
that may be relevant to a Non-U.S. Shareholder in light of its particular
circumstances. Prospective Non-U.S. Shareholders should consult with their own
tax advisors to determine the effect of federal, state, local, and foreign
income tax laws with regard to an investment in Common Shares, including any
reporting requirements.

Treasury Regulations were issued on October 14, 1997 (the "1997 Final
Regulations") that will affect the United States federal income taxation of
distributions by the Trust or Corporation to Non-U.S. Shareholders. The 1997
Final Regulations are generally effective for payments made after December 31,
1999. In addition, the 1997 Final Regulations provide for the replacement of a
number of current tax certification forms (including IRS Form W-8 and IRS Form
4224) with a single, revised IRS Form W-8 (which, in certain circumstances,
requires more information than previously required). The discussion below does
not include a complete discussion of the 1997 Final Regulations, and prospective
Non-U.S. Shareholders are urged to consult their tax advisors concerning the tax
consequences of their investment in light of the 1997 Final Regulations.

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In general, a Non-U.S. Shareholder will be subject to regular United States
income tax with respect to its investment in Common Shares if the income or gain
attributable to such investment is "effectively connected" with the Non-U.S.
Shareholder's conduct of a trade or business in the United States. A corporate
Non-U.S. Shareholder that receives income that is (or is treated as) effectively
connected with a United States trade or business may also be subject to the
branch profits tax under Section 884 of the Code, which is payable in addition
to regular United States corporate income tax. The following discussion will
apply to Non-U.S. Shareholders whose income or gain attributable to such
investment in Common Shares is not so effectively connected.

Distributions. Distributions by the Trust to a Non-U.S. Shareholder that
are neither attributable to gain from sales or exchanges by the Trust of United
States real property interests nor designated by the Trust as capital gains
dividends and distributions by the Corporation will be treated as dividends of
ordinary income to the extent that they are made out of current or accumulated
earnings and profits of the Trust or the Corporation, as the case may be. Such
distributions ordinarily will be subject to United States withholding tax on a
gross basis at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. Any such amounts withheld should be creditable
against the Non-U.S. Shareholder's United States federal income tax liability.

Distributions in excess of current or accumulated earnings and profits of
the Trust or the Corporation, as the case may be, will not be taxable to a
Non-U.S. Shareholder to the extent that they do not exceed the adjusted basis of
the Non-U.S. Shareholder's Class B Shares or Corporation Shares, as the case may
be, but rather will reduce the adjusted basis of such shares. To the extent that
such distributions exceed the adjusted basis of a Non-U.S. Shareholder's Class B
Shares or Corporation Shares, as the case may be, they will give rise to gain
from the sale or exchange of Non-U.S. Shareholder's Shares if the Non-U.S.
Shareholder otherwise would be subject to tax on any gain from the sale or other
disposition of Shares, as described below. Distributions to Non-U.S.
Shareholders that reduce the adjusted basis of Class B Shares or Corporation
Shares and distributions to Non-U.S. Shareholders that exceed the adjusted basis
of Class B Shares or Corporation Shares will ordinarily be subject to a
withholding tax on a gross basis at a 10% rate, regardless of whether such
distributions result in gain to the Non-U.S. Shareholder. The Trust or the
Corporation, as the case may be, is permitted to apply to the IRS for a
certificate that reduces or eliminates this withholding tax. Any such amounts
withheld will be creditable against the Non-U.S. Shareholder's United States
federal income tax liability.

If it cannot be determined at the time a distribution is made whether or
not such distribution will be in excess of current or accumulated earnings and
profits, the distribution will generally be treated as a dividend for
withholding purposes. However, amounts thus withheld are generally refundable if
it is subsequently determined that such distribution was, in fact, in excess of
current or accumulated earnings and profits of the Trust or the Corporation, as
the case may be. The Trust and the Corporation expect to withhold United States
income tax at the rate of 30% on the gross amount of any such distributions made
to a Non-U.S. Shareholder unless (i) a lower rate is provided for under an
applicable tax treaty and the shareholder files the required form evidencing
eligibility for that reduced rate with the Trust and the Corporation, or (ii)
the Non-U.S. Shareholder files an IRS Form 4224 (or, for payments made after
December 31, 1999, a revised IRS Form W-8) with the Trust and the Corporation
claiming that the distribution is "effectively connected" income.

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Distributions to a Non-U.S. Shareholder that are attributable to gain from
sales or exchanges by the Trust of United States real property interests will
cause the Non-U.S. Shareholder to be treated as recognizing such gain as income
effectively connected with a United States trade or business. Non-U.S.
Shareholders would thus generally be taxed at the same rates applicable to U.S.
Shareholders (subject to any applicable alternative minimum tax and a special
alternative minimum tax in the case of non-resident alien individuals). Also,
such gain would be subject to a 30% branch profits tax in the hands of a
Non-U.S. Shareholder that is a corporation and that is not entitled to an
exemption under a tax treaty. The Trust is required to withhold and remit to the
IRS 35% of any distribution that could be designated a capital gains dividend.
That amount is creditable against the Non-U.S. Shareholder's United States
federal income tax liability.

Sale of Common Shares. Gain recognized by a Non-U.S. Shareholder upon a
sale or other disposition of Common Shares generally will not be subject to
United States federal income tax, if (i) in the case of Class B Shares, the
Trust is a "domestically controlled REIT" or (ii) (a) the Common Shares are
regularly traded on an established securities market (e.g., the NYSE, where the
Common Shares are currently traded) and (b) the selling Non-U.S. Shareholder
held 5% or less of the outstanding Common Shares at all times during the
specified period, unless, in the case of a Non-U.S. Shareholder who is a
non-resident alien individual, such individual is present in the United States
for 183 days or more and certain other conditions apply. A domestically
controlled REIT is defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons. The Trust believes that it qualifies as a
domestically controlled REIT.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

Under certain circumstances, U.S. Shareholders will be subject to backup
withholding at a rate of 31% on payments made with respect to, or on cash
proceeds of a sale or exchange of, Common Shares. Backup withholding will apply
only if the holder: (i) fails to furnish its taxpayer identification number
("TIN") (which, for an individual, would be his or her Social Security number);
(ii) furnishes an incorrect TIN; (iii) is notified by the IRS that the holder
has failed to report properly payments of interest and dividends; or (iv) under
certain circumstances, fails to certify, under penalty of perjury, that the
holder has furnished a correct TIN and has not been notified by the IRS that the
holder is subject to backup withholding for failure to report interest and
dividend payments. Backup withholding will not apply with respect to payments
made to certain exempt recipients, such as corporations and tax-exempt
organizations. In addition, the Trust and the Corporation will be required to
withhold a portion of capital gain distributions made to any holders who fail to
certify their non-foreign status. Additional issues may arise pertaining to
information reporting and withholding with respect to Non-U.S. Shareholders and
each Non-U.S. Shareholder is urged to consult his, her or its tax advisor with
respect to any such information reporting and withholding requirements.

OTHER TAX CONSEQUENCES

The Company and the holders of Common Shares may be subject to state, local
or foreign taxation in various jurisdictions, including those in which it or
they transact business or reside. The state, local or foreign tax treatment of
the Trust, the Corporation and the holders of Common Shares may not conform to
the federal income tax consequences discussed above. CONSEQUENTLY, HOLDERS OF
COMMON SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE

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EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS ON THE PURCHASE, OWNERSHIP AND SALE
OF COMMON SHARES.

LEGAL MATTERS

Sidley & Austin, Los Angeles, California, has passed upon the validity of
the Common Shares offered pursuant to this prospectus. Lawyers at Sidley &
Austin participating in this offering on behalf of such firm own or hold options
to purchase an aggregate of approximately 26,000 Common Shares. Sidley & Austin
has relied upon the opinion of Ballard Spahr Andrews & Ingersoll, LLP,
Baltimore, Maryland, as to certain matters of Maryland law.

EXPERTS

PricewaterhouseCoopers LLP, independent auditors, audited the separate and
combined financial statements and financial statement schedules of the Trust and
the Corporation as of December 31, 1997 and 1996 and for each of the three years
in the period ended December 31, 1997 appearing in the Trust's and the
Corporation's Joint Annual Report on Form 10-K and incorporated by reference in
this prospectus. These documents have been incorporated by reference herein in
reliance upon the authority of PricewaterhouseCoopers, LLP as experts in
accounting and auditing.

Arthur Andersen LLP, independent public accountants, audited the
consolidated financial statements of ITT as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997, the combined
financial statements of Westin Worldwide as of and for the year ended December
31, 1997, and the consolidated financial statements of W&S Hotel L.L.C. as of
and for the year ended December 31, 1996 and for the period from acquisition
(May 12, 1995) through December 31, 1995 incorporated by reference in this
prospectus and elsewhere in the registration statement. These documents are
incorporated by reference herein in reliance upon the authority of Arthur
Andersen LLP as experts in accounting and auditing in giving these reports.

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[STARWOOD HOTELS LOGO]

COMMON SHARES

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

STARWOOD HOTELS & RESORTS

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PROSPECTUS
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