WESTIN HOTELS LTD PARTNERSHIP, 10-K405, 1998-03-27

WESTIN HOTELS LTD PARTNERSHIP
10-K405, 1998-03-27
HOTELS & MOTELS

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<PAGE>

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10K

(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1997
-----------------

___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
-------------- ---------------

Commission file number 0-15097.
-------

WESTIN HOTELS LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charters)

<TABLE>
<S> <C>
Delaware 91-1328985
----------------------------------------------------------- -----------------------------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)

2001 Sixth Avenue, Seattle, Washington 98121
- ----------------------------------------------------------- -----------------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (206) 443-5000
-----------------------------------------------------------
</TABLE>

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Units of limited partnership interests
- --------------------------------------------------------------------------------
(Title of Class)

There is no public market for Units of limited partnership interests in the
Westin Hotels Limited Partnership.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or X any amendment to
this Form 10-K. X
-----

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----

Indicate the number of shares (Units) outstanding of each of the issuer's
classes of common stock (Units), as of the latest practicable date (applicable
only to corporate issuers).

135,600 limited partnership Units issued and outstanding

DOCUMENTS INCORPORATED BY REFERENCE

None.
<PAGE>

PART I

ITEM 1. BUSINESS.
- -----------------

GENERAL DEVELOPMENT OF BUSINESS

Westin Hotels Limited Partnership (the "Partnership") and its
subsidiary limited partnerships, The Westin St. Francis Limited Partnership (the
"St. Francis Partnership") and The Westin Chicago Limited Partnership (the
"Chicago Partnership"), each a Delaware limited partnership (collectively the
"Hotel Partnerships"), were formed on April 25, 1986, for the purpose of
acquiring two hotels, The Westin St. Francis in San Francisco, California and
The Westin Hotel, Chicago in downtown Chicago, Illinois (individually a "Hotel",
collectively the "Hotels"). In January 1997 The Westin Hotel, Chicago was
renamed The Westin Michigan Avenue, Chicago to distinguish it from The Westin
River North, Chicago also located in downtown Chicago. (See the discussion under
Item 2 - "Properties"). The Westin St. Francis and The Westin Michigan Avenue,
Chicago had been owned by subsidiaries of Westin Hotel Company ("Westin") and
have been managed by Westin as part of Westin's international hotel system since
1945 and 1964, respectively.

Westin Realty Corp. ("Westin Realty") is the sole general partner of
the Partnership, St. Francis Hotel Corporation ("St. Francis Corp.") is the sole
general partner of the St. Francis Partnership, and 909 North Michigan Avenue
Corporation ("909 Corp.") is the sole general partner of the Chicago
Partnership. As of January 2, 1998, each general partner (individually a
"General Partner," collectively the "General Partners") is a subsidiary of
Starwood Hotels & Resorts Worldwide, Inc. (See "Description of Business" below).

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Partnerships, which commenced operations on August 28, 1986, are
engaged solely in the business of owning and operating the Hotels. Therefore,
the Partnerships are engaged in only one industry segment.

DESCRIPTION OF BUSINESS

The Hotels are operated as part of the full-service, upscale Westin
hotel chain which manages and franchises hotels throughout the world. The
inclusion of hotels within a global system provides the benefits of name
recognition, centralized reservations and advertising, system-wide marketing
programs, centralized purchasing, and training and support services. The hotel
business in general is highly competitive. To the extent hotel capacity expands
or demand for hotel accommodations decreases in San Francisco and Chicago, where
the Partnerships operate the Hotels, competition will increase. The demand for
particular accommodations and related services are subject to various factors
including, but not limited to, seasonal variance, changes in economic
conditions, and changes in travel patterns and preferences (which may be
affected by airline schedules, weather conditions or availability). Specific
information regarding competitive conditions at each of the Hotels is set forth
in Item 2 - "Properties" below.

On January 2, 1998, Starwood Hotels & Resorts Trust (the "Trust"), a
real estate investment trust, whose shares are paired and trade together as a
unit with Starwood Hotels & Resorts Worldwide, Inc. (the "Corporation"), a hotel
management and operating company, completed the merger of Westin Hotels &
Resorts Worldwide, Inc. ("Westin Worldwide"). Effective upon closing of the
Westin Worldwide merger, the Trust's and Corporation's names were changed to
Starwood Hotels & Resorts Trust and Starwood Hotels & Resorts Worldwide, Inc.,
respectively. The Trust was renamed Starwood Hotels & Resorts on February 24,
1998. The Trust and Corporation together are referred to as "Starwood". This
transaction was pursuant to the Transaction Agreement, dated as of September 8,
1997, among WHWE L.L.C., a Delaware limited liability company, Woodstar Investor
Partnership, a Delaware general partnership, Nomura Asset Capital Corporation, a
Delaware corporation, Juergen Bartels, W&S Hotel L.L.C., a Delaware limited
liability company, Westin Hotels & Resorts Worldwide, Inc., a Delaware
corporation, W&S Lauderdale Corp., a Delaware corporation, W&S Seattle Corp., a
Delaware corporation, Westin St. John Hotel Company, Inc., a United States
Virgin Islands corporation, W&S Denver Corp., a Delaware corporation, W&S
Atlanta Corp., a Delaware corporation, Starwood Lodging Trust, a Maryland real
estate investment trust, SLT Realty Limited Partnership, a Delaware limited
partnership, Starwood Lodging Corporation, a Maryland corporation and SLC
Operating Limited Partnership, a Delaware limited partnership ("Transaction
Agreement").

Pursuant to the Transaction Agreement, Westin Worldwide, including its
wholly owned subsidiary Westin Hotel Company, were merged with and into the
Trust and the separate corporate existence of Westin Worldwide and Westin Hotel
Company thereupon ceased. Westin Realty, St. Francis Corp., and 909 Corp., each
formerly wholly owned subsidiaries of Westin Hotel Company, are now wholly owned
subsidiaries of the Corporation. The merger does not change the structure of the
General Partners' and limited partners' ownership interest in either the
Partnership or the Hotel Partnerships. Moreover, none of the owners of Starwood
have any beneficial ownership in the Partnership as a limited partner.

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<PAGE>

In conjunction with the merger, Westin Hotel Company assigned the
management agreements for The Westin St. Francis Hotel to St. Francis Corp. and
for The Westin Michigan Avenue, Chicago to 909 Corp. The Hotels continue to be
managed as full-service Westin hotels and operated as part of the Westin
international hotel system.

On February 24, 1998, the Corporation acquired ITT Corporation,
creating a preeminent global hotel company with 650 hotels in 70 countries. This
transaction was pursuant to the Amended and Restated Agreement and Plan of
Merger dated as of November 12, 1997, among Starwood Lodging Corporation, a
Maryland corporation ("Parent"), Chess Acquisition Corp., a Nevada corporation
and a controlled subsidiary of Parent, Starwood Lodging Trust, a Maryland real
estate investment trust and ITT Corporation, a Nevada corporation. Because the
Corporation and its affiliates own and/or operate hotels other than those owned
by the Partnership, potential conflicts of interest exist. While the Corporation
and its officers have the right to compete with the Hotels, including the right
to own, operate and develop competing hotels, the General Partners are under a
fiduciary duty to conduct the affairs of the Partnership and consequently must
exercise good faith and integrity in handling Partnership affairs.

Neither the Partnership nor the Hotel Partnerships have any employees.
Administrative and Hotel personnel are employees of either the Corporation or
the Hotels' respective General Partners. The Partnerships reimburse the
Corporation and the General Partners for the costs of such employees. However,
neither the Partnership nor the Hotel Partnerships are directly responsible for
the payment of executive compensation to the officers of the General Partners.

Statements contained in this report which are not historical may be
deemed forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the General Partner believes the
expectations reflected in any forward-looking statements are based on reasonable
assumptions, it can give no assurance that its expectations will be attained.
Factors that could cause actual results to differ materially from the General
Partner's expectations include performance of hotel operations, financial
performance, changes in local or national economic conditions and other risks.

ITEM 2. PROPERTIES.
- -------------------

The Partnerships' properties consist of The Westin St. Francis in San
Francisco, California, and The Westin Michigan Avenue, Chicago (formerly The
Westin Hotel, Chicago) in Chicago, Illinois. Each is a first-class hotel bearing
the Westin name and located in a premier central urban location, providing
guests with convenient access to business districts, shopping areas and
convention facilities.

THE WESTIN ST. FRANCIS

Description. The Westin St. Francis has 1,189 guest rooms, including
-----------
83 suites, with 610 rooms in the main building and 579 rooms in the 32-story
tower, and 31 meeting and banquet rooms. The Hotel has a full service restaurant
- - The St. Francis Cafe, a lounge - the Compass Rose, a pub - Dewey's, and a
night club - Club Oz. The Hotel offers concierge services and has a business
center and complimentary health and fitness center. Jewelry and gift boutiques,
clothing shops, specialty stores, an art gallery, a florist and a hair salon are
all available within the Hotel, as well as an underground valet parking garage
with 250 spaces.

Location. The Westin St. Francis is located on historic Union Square,
--------
a premier shopping district, in downtown San Francisco, approximately 12 miles
north of the San Francisco International Airport and within easy walking
distance of the George R. Moscone Convention Center, Chinatown, numerous
theaters and restaurants, and the central business and financial district of San
Francisco. The world-famous San Francisco cable cars stop directly in front of
the Hotel.

Capital Improvements. During 1997 the Hotel completed the major
--------------------
renovation program it embarked on in 1995. The Hotel spent $5.1 million on
capital improvements in 1997. Of this amount, $2.5 million was spent on the main
building facade restoration, $0.6 million on renovations to food and beverage
facilities, $0.5 million on guest room renovations, and the remaining $1.5
million on other projects, such as EDP equipment and ADA compliance.

The Hotel has budgeted $7.0 million for capital improvements in 1998,
of which $2.0 million is to be spent on guest room renovations, $2.4 million on
food and beverage facilities, $1.1 million on other areas, such as lobby carpet
and stone work, and $1.5 million on the facade project. For further discussion
regarding

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<PAGE>

the funding of these capital expenditures, see Item 7 - "Management's Discussion
and Analysis of Financial Condition and Results of Operations -Liquidity and
Capital Resources."

Competitive Conditions. The competition in San Francisco's hospitality
----------------------
industry remained strong during 1997. No new hotels have been added to this
competitive segment since 1991, although two new hotels, one 423-rooms and the
other 360-rooms, are planned and due to open in early 2000. Most competing
hotels have completed renovations or are in the process of renovating their
facilities. Since strong demand is expected to continue, the Hotel plans to take
advantage of the upswings in business by effectively managing the market mix.

There is another Westin hotel at the San Francisco International
Airport, but it is not in direct competition with The Westin St. Francis. The
Corporation will own the new 423-room hotel scheduled to be completed in early
2000. Due to its location near the convention center, the General Partner does
not consider the hotel to be a direct competitor. While another Corporation
managed hotel, The Sheraton Palace, is a direct competitor, the General Partner
believes that as affiliates of the Corporation, both The Westin St. Francis and
The Sheraton Palace can sustain their market share due to the strength of the
market in San Francisco. In addition, both hotels will benefit from cross
selling and cross marketing.

THE WESTIN MICHIGAN AVENUE, CHICAGO

Description. The Westin Michigan Avenue, Chicago has 739 guest rooms,
-----------
including 26 suites, and 19 meeting rooms. The Hotel operates the Chelsea
Restaurant and Bar, an all-purpose food and beverage facility, and Cafe A La
Carte, a free-standing quick-service coffee and snack kiosk. The Hotel has a
fitness center and a business center, provides retail space for several
specialty stores and a gift shop, and has an underground parking garage with 209
spaces.

Location. The Westin Michigan Avenue, Chicago is located on a prime
--------
site in downtown Chicago at the north end of the famous "Magnificent Mile",
known for its first-class retail shopping, fine restaurants and cultural
attractions. The Hancock Center is situated directly south of The Westin
Michigan Avenue, Chicago, as is the Water Tower Place, offering a variety of
shopping and entertainment possibilities. The Hotel is 18 miles from O'Hare
International Airport and 12 miles from the Midway Airport.

Capital Improvements. In 1997 the Hotel spent $4.9 million for capital
--------------------
expenditures. Of this amount, $0.6 million was spent on sidewalks and planters,
$1.0 million on food and beverage facilities, $1.0 million on various other
projects, such as EDP and engineering equipment, and $2.3 million on rooms
renovations, as the Hotel commenced extensive renovation of the tower rooms.

The Hotel has budgeted $8.3 million for capital improvements during
1998. The Hotel is expecting to spend $7.3 million on room renovations,
including completion of the extensive renovation to the tower rooms. In
addition, $0.3 million will be spent on roof repair, $0.4 million on updating
EDP and engineering systems, and $0.3 million on food and beverage equipment.
For discussion regarding the funding of these capital expenditures see Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

Competitive Conditions. Chicago's hospitality industry continued to
----------------------
experience strong competition during 1997. Several new hotel projects are
expected to enter the market in the near future. Two new hotels, one 800-rooms
and the other 418-rooms, are expected to open in late 1998 and another new 192-
room hotel is expected to open in late 1999. A number of the competing hotels
have just completed renovations. For 1998 the Hotel believes that it can
maintain its share of the market by emphasizing its premier "Magnificent Mile"
location and its new and improved rooms product. There is another Westin hotel
located at the O'Hare International Airport near Chicago and another in the
financial district of downtown Chicago. The General Partner believes that
neither is in direct competition with The Westin Michigan Avenue, Chicago, and
that their close proximity allows for efficiencies in both staffing and
productivity. There is a Sheraton Chicago Hotel and Towers in downtown Chicago
and the Corporation owns three hotels in downtown Chicago. The Sheraton Chicago
Hotel and Towers is not considered to be primarily competitive and the
Corporation's hotels are not considered to be competitive due to differences in
their locations, orientations or facilities.

-4-
<PAGE>

MORTGAGE LOANS

On August 21, 1986, mortgage loans in the amount of $83,325,000 with
respect to The Westin St. Francis and $32,825,000 with respect to The Westin
Michigan Avenue, Chicago (collectively the "Mortgage Loans") were refinanced by
Teacher Retirement System of Texas ("Lender"). The Hotels were acquired subject
to the Mortgage Loans. The Mortgage Loans require that the Hotel Partnerships
not further encumber the Hotels without prior consent of the Lender. On June 2,
1994, the General Partner, on behalf of Westin Hotels Limited Partnership,
successfully completed a restructuring of the Mortgage Loans and entered into a
restructuring agreement ("Restructuring Agreement") with the Lender. On May 27,
1997 a second restructuring agreement modifying the existing mortgage loans on
the Partnership's Hotels (The Westin St. Francis and The Westin Michigan Avenue,
Chicago) was completed. The modifications to the Mortgage Loans consist
primarily of a reduction of the effective interest rates, an extension of the
maturity dates, and revisions of prepayment penalties. See Note (5) to the
Consolidated Financial Statements.

INSURANCE

Each Hotel is covered by comprehensive general liability insurance,
fire and extended property insurance (including earthquake coverage), business
interruption, workers' compensation, employer's liability insurance, and such
other insurance as is customarily obtained for similar properties.

The Hotels currently participate in the Corporation's insurance
program whereby general liability and workers' compensation insurance coverage
premiums are paid through the Corporation to Aetna Casualty and Surety Company
and Westel Insurance Company, the latter being a wholly owned subsidiary of the
Corporation.

ITEM 3. LEGAL PROCEEDINGS.
- --------------------------

On January 15, 1997, Equity Resources Group, Inc., a limited partner
of the Partnership ("Claimant"), filed a demand for arbitration with the
American Arbitration Association in Seattle, Washington, claiming that the
Partnership and its General Partner, Westin Realty Corp., unlawfully refused to
provide Claimant with a list of, and other information concerning, the limited
partners in order to enable Claimant to make offers to acquire Units, thereby
damaging Claimant in an unspecified amount. The Partnership and Westin Realty
Corp. settled this matter for an immaterial amount in February 1998.

Because of the nature of the hotel business, the Hotel Partnerships
are subject to various claims and legal actions incidental to the ordinary
course of their operations, including such matters as contract and lease
disputes and complaints alleging personal injury, property damage and employment
discrimination. The General Partner believes that the outcome of any such
pending claims or proceedings, individually or in the aggregate, will not have a
material adverse effect upon the business, financial condition, or results of
operations of the Partnership.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------

None.

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<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED UNITHOLDER MATTERS.
- -----------------------------------------------------------------------------

As of March 25, 1998, there were 8,248 holders of record of the
135,600 Units.

There is no public market for the Units, and it is not anticipated
that a public market for the Units will develop. The transfer of Units, or any
interest therein, is subject to a variety of restrictions. Limited Partners may
not transfer their interests in the Partnership if, in the opinion of the
Partnership's counsel, such transfers might violate the registration
requirements of the Securities Act of 1933, as amended, or the laws of any other
jurisdiction or agency applicable to the transfers, cause the Partnership to be
regarded as an association taxable as a corporation, result in the dissolution
or termination of the Partnership or result in a Hotel Partnership's not being
able to obtain or continue in effect any license permitting the service or sale
of alcoholic beverages in its Hotel. The assignee must also meet certain other
requirements set forth in the Amended and Restated Agreement of Limited
Partnership of Westin Hotels Limited Partnership before it may be recognized as
a substituted Limited Partner, including the payment of all reasonable expenses
connected with the transfer of any interest. The limited partners or their
representatives must furnish, as to voluntary transfers, sufficient information
to counsel to permit the foregoing determination to be made.

The General Partner is aware of certain transfers of Units between
unrelated parties, some of which do occur through certain secondary markets that
specialize in trading limited partnership interests ("Limited Partnership
Exchanges"). Initially, because these transactions were limited and sporadic in
number and volume, it had been the General Partner's policy not to disclose the
prices at which Units were transferred. Around July 1996, in response to direct
requests for Unit sales price and value estimates, the General Partner began
advising individuals that Unit exchange sales were occurring on Limited
Partnership Exchanges and providing those individuals with the names of Limited
Partnership Exchanges and other sources to contact for exchange trading price
information.

In 1996, 1997, and more recently, in 1998, the General Partner became
aware of offers to purchase Units, which were mailed to limited partners, that
have ranged from $185 to $700 per Unit. The General Partner responded, without
recommending either an acceptance or rejection of any offer, by providing the
limited partners with certain information concerning reported Unit sales. The
following information reflects the Partnership's records of the average and
range of Unit sale prices to date:

Average per Unit Range of per Unit Sale
Sales Price Sales Price
---------------- ----------------------
<S> <C> <C>

1996: First Quarter $201.63 $120.00 to $215.34
Second Quarter $242.32 $150.12 to $269.00
Third Quarter $315.81 $204.50 to $347.00
Fourth Quarter $363.84 $340.00 to $387.60

1997: First Quarter $505.93 $320.00 to $624.75
Second Quarter $530.37 $400.00 to $590.00
(through April 21, 1997,
when sales were suspended)

1998: First Quarter $733.01 $545.00 to $890.00
(through March 21, 1998)
</TABLE>

In October 1996 the General Partner determined it to be in the best
interest of the Partnership to implement a Unit transfer policy that relies on
the protections of the 5% safe harbor, promulgated by the Internal Revenue
Service, to prevent the Partnership from being deemed a "publicly traded
partnership" pursuant to Section 7704 of the Internal Revenue Code. The 5% safe
harbor applies if the sum of the percentage interests in partnership capital or
profits represented by Units traded during any calendar year does not exceed 5%
of the total Partnership interests. On April 21, 1997, upon reaching 1997 Unit
sales

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<PAGE>

aggregating 6,848, the General Partner suspended its approval of any Unit sales
transfer requests in order to comply with the 5% safe harbor. The Partnership
has already received transfer requests for 6,514 Unit sales for the first
quarter of 1998. When the Partnership reaches 1998 Unit sales aggregating 6,848,
the General Partner will suspend its approval of any Unit sales transfer
requests for the remainder of 1998.

A cash distribution in the amount of $47.50 per Unit was paid to the
limited partners on September 15, 1997 and another in the amount of $47.50 per
Unit was paid on December 15, 1997, from Net Cash Flow. Based on the expectation
that the Hotels' strong operating results will continue, the General Partner
believes that the Partnership will be in a position to continue cash
distributions at an annual rate of $95 per Unit to the limited partners in 1998.
These and any other future distributions of Net Cash Flow will be determined in
accordance with Section 7.02 of the Partnership agreement. A cash distribution
of $23.75 per Unit was paid to the limited partners on March 13, 1998. The
General Partner currently anticipates total cash distributions to the limited
partners of $95.00 per Unit in 1998.

ITEM 6. SELECTED FINANCIAL DATA.
- --------------------------------

The following table sets forth selected financial information for the
Partnership.

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995 1994 1993
--------- --------- --------------- -------------- ---------------
(In Thousands of Dollars Except per Unit Amounts)
<S> <C> <C> <C> <C> <C>
Operating Revenues:
Rooms $ 83,600 $ 73,375 $ 60,963 $ 60,251 $ 58,373
Food and beverage 32,793 27,477 27,124 30,611 27,954
Other operating departments 10,660 10,098 9,157 8,526 7,899
-------- -------- -------- -------- --------
Total Operating Revenues 127,053 110,950 97,244 99,388 94,226
-------- -------- -------- -------- --------

Operating Expenses:
Rooms 22,162 19,631 17,931 18,511 17,693
Food and beverage 24,866 21,963 22,842 25,637 24,410
Administrative, general and
marketing 18,022 16,265 15,079 15,082 15,305
Management fees 8,554 5,672 2,188 5,309 4,992
Other 30,990 27,520 25,210 22,393 27,467
-------- -------- -------- -------- --------

Total Operating Expenses 104,594 91,051 83,250 86,932 89,867
-------- -------- -------- -------- --------

Operating Profit $ 22,459 $ 19,899 $ 13,994 $ 12,456 $ 4,359
-------- -------- -------- -------- --------

Net Income (Loss) $ 9,691 $ 6,978 $ 1,713 $ 1,444 $ (8,675)
-------- -------- -------- -------- --------

Net Income (Loss) per Unit $ 71.47 $ 51.46 $ 12.63 $ 10.65 $ (63.97)

Total Assets $269,785 $263,148 $246,698 $234,293 $214,217

Long-term Obligations $162,989 $157,880 $153,760 $141,659 $125,855

Deferred Incentive
Management Fees $ 22,281 $ 19,425 $ 16,249 $ 16,249 $ 13,089

Distributions Paid per Unit $ 95.00 $ - $ - $ - $ -
</TABLE>

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<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS.
--------------

GENERAL

The Hotels' primary market focus is on business travelers, conventions
and other groups and, in the case of The Westin St. Francis, tourism. The
Hotels' business activities generally follow national economic trends. The level
of tourist business is influenced by the general global economic environment and
political climate and, to a lesser extent, by the strength of the US dollar in
relation to foreign currencies. Current trends in the hotel industry indicate
that the outlook for the lodging industry remains positive due to the increase
in demand, limited growth of full-service hotels and an improved economic
environment. Both The Westin St. Francis and The Westin Michigan Avenue, Chicago
continue to experience seasonal trends, with the lowest occupancy levels
occurring during the first quarter, followed by higher occupancies during the
last three quarters of the year. See Note (9) of the Notes to Consolidated
Financial Statements, included under Item 8 - "Financial Statements and
Supplementary Data" below, for additional quarterly information.

RESULTS OF OPERATIONS

This section analyzes significant fluctuations in items affecting the
consolidated statements of operations for the years ended December 31, 1997,
1996 and 1995. The table below presents key statistics used in the analysis:

<TABLE>
<CAPTION>
Years Ended December 31,
Consolidated 1997 1996 1995
------------ ---- ---- ----
<S> <C> <C> <C>
REVPAR (Revenue per Available Room) $118.74 $103.77 $ 86.26
Operating Profit as a Percentage of Revenues:
Rooms 73.5% 73.2% 70.6%
Food and beverage 24.2% 20.1% 15.8%
EBITDA (In Thousands) $32,776 $28,689 $21,747
</TABLE>

EBITDA is net earnings before interest expense, depreciation and
amortization, and minority interests. The General Partner considers EBITDA to be
a measure of the Partnership's operating performance due to the significance of
the Partnership's long-lived assets and because such data can be used to measure
the Partnership's ability to service debt, fund capital expenditures and pay
cash distributions. EBITDA is not intended to represent cash flow from
operations as defined by generally accepted accounting principles and such
information should not be considered as an alternative to net income, cash flow
from operations or any other performance measure prescribed by generally
accepted accounting principles.

1997 Compared with 1996.
------------------------

The Partnership had net income of $9.7 million for the year ended
December 31, 1997, a 38.9%, or $2.7 million, increase over 1996. EBITDA for the
year of $32.8 million represents a 14.2% increase over 1996. Rooms and food and
beverage revenues grew at a faster rate than expenses, resulting in increased
profitability. This can be attributed to both a strong national economy and the
high quality, improved rooms product and food and beverage facilities that are a
result of recent renovations at both Hotels, along with effective operating
efficiencies.

Consolidated rooms revenues for the year ended December 31, 1997 were
$83.6 million which is a $10.2 million or 13.9% improvement over the prior year.
1997 consolidated REVPAR increased 14.4% to $118.74. The Westin St. Francis
reported rooms revenues of $55.9 million for the year ended December 31, 1997, a
14.6% increase over the prior year. The average room rate increased 12.6% to
$164.71 and the occupancy rate increased 1.8 percentage points to 78.2% for a
REVPAR gain of 15.2% to $128.88. The Westin Michigan Avenue, Chicago, reported a
12.6% increase in rooms revenues for 1997 over 1996 for a total of $27.7
million, in spite of some rooms being out of service for renovations the last
two weeks of December. Its average room rate increased 8.2% to $140.85 and its
occupancy rate improved 3.0 percentage points to 72.7% for a 1997 REVPAR gain of
12.9% over 1996 to $102.45. Both Hotels

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<PAGE>

experienced increases in both the occupancy levels and the average rate for the
group segment, resulting in significantly increased rooms revenues. Both Hotels
achieved higher average rate in the individual segment which more than offset
the decline in individual segment occupancy resulting in a positive gain to
rooms revenues. The strength in demand allowed management to pursue higher-rated
business and to displace lower-rated business.

Consolidated rooms costs for 1997 were 12.9% higher than in 1996 due
to the greater business levels. The resulting consolidated rooms profit margin
increased slightly (less than one percentage point) to 73.5% with a less than
one percentage point gain at The Westin St. Francis offsetting a less than one
percentage point decline at The Westin Michigan Avenue, Chicago. The
consolidated rooms profit of $61.4 million for the year ended December 31, 1997
is $7.7 million or 14.3% greater than that of the prior year.

Consolidated food and beverage revenues for 1997 of $32.8 million was
$5.3 million, or 19.3%, better than 1996. A major portion of this increase was
due to increased banquet revenues which are directly attributable to an increase
in the group meeting market mix. The Westin St. Francis reported $4.3 million
higher food and beverage revenues in 1997 than in 1996. This 22.6% gain resulted
in total food and beverage revenues of $23.3 million. All of its outlets, with
the exception of the Compass Rose, reported greater revenues for 1997 compared
to 1996; however, the most substantial portion of the increase, $3.7 million,
came from banquets. The Westin Michigan Avenue, Chicago's 1997 food and beverage
revenues of $9.5 million represents a 12.5% or $1.0 million improvement over
1996. The Westin Michigan Avenue, Chicago also experienced a strong increase in
banquet revenues, $0.6 million, offsetting a slight decline in outlet revenues
for 1997 compared to 1996. The numerous dining options in the downtown Chicago
area places substantial competitive pressure on the Hotel's main restaurant.

The 1997 consolidated food and beverage costs increased $2.9 million
over 1996 which, when subtracted from the $5.3 million increase in food and
beverage revenues, leaves a $2.4 million improvement in consolidated food and
beverage profits. The Westin St. Francis' portion of these profits was $5.1
million and The Westin Michigan Avenue, Chicago's portion was $2.8 million. The
Westin St. Francis attributes this to savings realized by converting the St.
Francis Grill and Victor's from restaurants to banquet rooms in mid-1996. The
Westin St. Francis also credits the success of ongoing cost containment efforts,
as does The Westin Michigan Avenue, Chicago.

Other operating departments had consolidated revenues for the year
ended December 31, 1997 of $10.7 million, a $0.6 million increase over 1996. The
greatest contribution, $0.3 million, to this increase was telephone usage
revenue, followed by a $0.2 million increase in sub-rentals.

The major increases in other operating expenses for 1997 compared to
1996 are as follows: management fees, $2.9 million, the majority of which was
attributable to incentive management fees which increased as a result of
improved Net Operating Cash Flow, as defined in the Partnership agreement; local
taxes and insurance, $1.7 million, of which $0.9 million is attributed to an
additional assessment in property taxes upon re-appraisal of The Westin St.
Francis for the tax years 1995 through 1997, payable over five years (see Note
(5) of the Notes to Consolidated Financial Statements included under Item 8 -
"Financial Statements and Supplementary Data" below); $1.2 million in
depreciation and amortization due to the increase in property and equipment; and
$1.1 million for advertising and business promotion due primarily to increased
national advertising expenses and marketing fees.

1996 Compared with 1995.
------------------------

For the year ended December 31, 1996, the Partnership had net income
of $7.0 million, an increase of $5.3 million over 1995. This improvement is
primarily the result of a 14.1% increase in operating revenues offset by a 9.4%
increase in operating expenses over the year ended December 31, 1995.

Consolidated rooms revenues for the year 1996 increased to $73.4
million compared to $61.0 million for 1995, a 20.4% improvement. Each Hotel
increased both their occupancy rates and their average room rates over the prior
year. REVPAR, revenue per available room, on a combined basis, increased 20.3%
to $103.77 for 1996 from $86.26 for 1995. The Westin St. Francis reported an
increase in occupancy of 5.2 percentage points to 76.4% and The Westin Michigan
Avenue, Chicago reported a 4.4 percentage point increase to

-9-
<PAGE>

69.7%. The Westin Michigan Avenue, Chicago achieved a percentage increase in
average room rate of 13.5%; The Westin St. Francis, 11.7%. The average room rate
at The Westin St. Francis in 1996 was $146.33 compared to $131.06 in 1995. At
The Westin St. Francis, the occupancy percentage and average room rate was up
for both the group and individual segments. These improvements can be directly
attributed to an improved product and to strong occupancies and room rate
increases buoyed by the robust demand in the San Francisco market. The Westin
Michigan Avenue, Chicago increased its average room rate to $130.11 in 1996 from
$114.62 in 1995. At this Hotel, both the occupancy rate and the average room
rate improved for the group segment. However, its occupancy rate for the
individual segment was down but was offset by an increase in the group rate
resulting in an overall increase. The Westin Michigan Avenue, Chicago also
benefited from the improved room product.

In 1996 both Hotels controlled increases in room costs. Specifically,
at The Westin St. Francis, the cost per occupied room increased only $1.01 to
$42.18 in 1996 or 2.5% over 1995. The Westin Michigan Avenue, Chicago reported a
slight increase of 1.3% in cost per occupied room over 1995 to $29.09. As a
result, the consolidated rooms profit margin increased to 73.2% for 1996
compared to 70.6% for 1995.

Consolidated food and beverage profits for the year 1996 increased
28.8% over 1995 to $5.5 million. The most significant difference in food and
beverage profit over 1995 was reported by The Westin Michigan Avenue, Chicago.
The Westin Michigan Avenue, Chicago, on total food and beverage revenues of $8.5
million, achieved an 11.8% improvement over 1995, or $0.9 million. By keeping
cost increases to less than 1.0%, this resulted in a net contribution to profits
of $2.2 million. This result was due to increases in prices, higher business
levels and the negative impact in 1995 of the renovations to banquet space. Food
and beverage profits at The Westin St. Francis increased $0.4 million. This was
the result of a $0.5 million decline in food and beverage revenues offset by a
$0.9 million decrease in food and beverage costs. Both differences in revenues
and costs at The Westin St. Francis were due primarily to the temporary closures
in 1996 of food and beverage outlets for renovating or reconfiguring the banquet
rooms. The 1996 consolidated food and beverage profit margin increased 4.3
percentage points over 1995.

Other operating departments were responsible for $0.9 million of the
increase in operating revenues with only a small (5.4%) increase in costs. In
1996 management implemented a policy to charge for cancellations, early
departure, late arrivals and no shows. This resulted in additional revenues of
$0.7 million over 1995. The rest of the increase is primarily the result of the
increased occupancies and an increase in rates in other departments, such as
telephone and garage, at both Hotels.

Management fees increased $3.5 million primarily because incentive
management fees were earned in 1996. These fees, which are calculated based on a
percentage of Net Operating Cash Flow, were not earned in 1995. The $1.2 million
increase in depreciation is due to the addition of depreciable assets in 1996.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1997, the Partnership had cash and cash equivalents
of $15.8 million, a $1.0 million increase from December 31, 1996. During 1997
total net cash provided by operating activities equaled $26.0 million.

In 1997 a total of $10.8 million was deposited into the FF&E Reserve
Accounts as required by the Restructuring Agreement. This amount, plus interest,
less $9.3 million expended in capital expenditures is included in Restricted
Cash on the Consolidated Balance Sheets. In 1997 a total of $5.4 million was
deposited into the Tax Escrow Accounts for payment of real and personal property
taxes as required by the Restructuring Agreement. This amount, plus interest,
less payments of $5.4 million for real and personal property taxes is included
in Restricted Cash on the Consolidated Balance Sheets.

A total of $10.0 million was spent for capital improvements in 1997
for both Hotels. The Westin St. Francis spent $5.1 million in 1997 for capital
improvements, of which $2.5 million was spent on the main building facade
restoration, $0.6 million on renovations to food and beverage facilities, $0.5
million on guest rooms, and the remaining $1.5 million in other areas including
EDP equipment and ADA compliance. The Westin Michigan Avenue, Chicago spent $4.9
million for capital improvements in 1997. Of this amount, $2.3 million was spent
on rooms (the Hotel commenced its extensive renovations of the tower rooms in
mid-

-10-
<PAGE>

December), $1.0 million on food and beverage facilities and renovating public
areas, $0.6 million on sidewalks and planters to improve the curb appeal of the
Hotel, and the remaining $1.0 million on various other projects including EDP
equipment, elevator modernization and updating engineering equipment. As
stipulated by the Restructuring Agreement, variances from the original estimated
amounts reflect timing adjustments and were either approved by the Lender or
were within the limits required by the Restructuring Agreement.

Expenditures in 1998 will total approximately $15.3 million. The
Westin St. Francis will spend approximately $7.0 million on capital improvements
in 1998. Approximately $2.0 million is to be spent on guest room renovations,
particularly the main building bathrooms; $2.4 million on food and beverage
facilities, particularly the conversion of Club Oz to a banquet room; $1.1
million on other areas, such as lobby carpet and stone work, the men's room, and
engineering equipment repairs, and $1.5 million on the facade project. The
facade restoration is now scheduled to be completed in 1999. The Westin Michigan
Avenue, Chicago expects to spend $8.3 million for capital improvements during
1998. In 1998 the Hotel is scheduled to complete the extensive renovations to
the tower rooms, started in mid-December 1997, which is intended to completely
update and raise the caliber of the rooms. During 1998, the Hotels will commence
the conversion of 18 parlor suites into rentable guest rooms, which will
increase the guest room inventory, and replace all carpet, vinyl, paint and
light fixtures in all hallways, for a total cost of $7.3 million. In addition,
$0.3 million will be spent on partial roof replacement, $0.4 million on other
areas, such as updating EDP and engineering systems, and $0.3 million for
minibars and other food and beverage equipment. All capital projects have been
approved by the Lender.

The Mortgage Loans, as restructured, provide for the suspension of
principal payments through December 1, 1999. Under the terms of the Mortgage
Loans, the Partnership made scheduled interest payments of $9.2 million in 1997
and is scheduled to make interest payments of $10.8 million in 1998.

Per the terms of the Restructuring Agreement, the Partnership was
prohibited from making cash distributions to the limited partners in 1994 and
1995. Distributions in 1996 were contingent upon satisfying certain conditions
as outlined in the Restructuring Agreement. After that, cash distributions from
Net Cash Flow could be resumed. Due to improved Net Cash Flow, cash
distributions in the amount of $47.50 per Unit each were paid to the limited
partners on September 15, 1997, and December 15, 1997, resulting in total 1997
distributions of $95.00 per Unit. The distributions were paid to the limited
partners of record as of each quarter end date. As discussed in Note (8) to the
Consolidated Financial Statements, 1997 incentive management fees totaling $2.8
million were paid to Westin.

At this time, the General Partner anticipates that the cash flow from
operations and the contributions to the FF&E Reserve Accounts will provide
adequate funding for 1998 capital expenditures and interest payments on the
Mortgage Loans. In addition, barring any unforeseen adverse occurrence, the
General Partner anticipates that the Partnership will be in a position to
continue distributions to the limited partners at an annual level of $95.00 per
Unit in 1998 and thereafter. Future distributions will be based on available Net
Cash Flow and are dependent upon the Net Cash Flow generated by the Hotels and
the adequacy of cash reserves. The amount of each distribution will be
determined by the General Partner at the end of each calendar quarter according
to the terms of the Partnership agreement and will be distributed to the limited
partners within 75 days of the end of the quarter.

When the Partnership was formed in 1986, it was anticipated that a
sale or refinancing of the Hotels would be explored after eight years of
Partnership operations. Beginning with 1994, the Partnership agreement directed
the General Partner to actively review opportunities to sell or refinance the
Hotel properties on behalf of the Partnership. During 1994 the General Partner
emphasized restructuring the debt to stabilize both Hotels and to allow them to
remain competitive in their respective markets. The General Partner will review
the opportunities to sell or refinance the Hotel properties when it reasonably
believes that such action is in the best interest of the Partnership. As the
real estate market for upscale hotel properties continues to improve, the
General Partner will monitor the market conditions for appropriate opportunities
to sell or refinance the properties. By the end of 2001, the General Partner
must use its best efforts to sell or refinance the Hotel properties.

-11-
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------

The following documents are filed as part of this report:

<TABLE>
<S> <C>
Report of Independent Public Accountants................ 14
Consolidated Balance Sheets............................. 15 - 16
Consolidated Statements of Operations................... 17
Consolidated Statements of Partners' Equity (Deficit)... 18
Consolidated Statements of Cash Flows................... 19
Notes to Consolidated Financial Statements.............. 20 - 25
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -----------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- ---------------------

None.

-12-
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Westin Hotels Limited Partnership:

We have audited the accompanying consolidated balance sheets of Westin
Hotels Limited Partnership and subsidiaries (a Delaware limited partnership) as
of December 31, 1997 and 1996, and the related consolidated statements of
operations, partners' equity (deficit) and cash flows for the years ended
December 31, 1997, 1996 and 1995. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Westin Hotels
Limited Partnership and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the years ended December
31, 1997, 1996 and 1995 in conformity with generally accepted accounting
principles.

/s/ Arthur Andersen LLP

Seattle, Washington,
March 11, 1998

-13-
<PAGE>

WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1997 AND 1996
(In Thousands)

ASSETS

<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash
of $561 in 1997 and $540 in 1996 $ 15,750 $ 14,752
Guest and trade accounts receivable, less allowance for
doubtful accounts of $278 in 1997 and $232 in 1996 8,408 6,511
Other receivables 745 450
Inventories 641 516
Prepaid expenses and other current assets 1,640 1,281
-------- --------

TOTAL CURRENT ASSETS 27,184 23,510

PROPERTY AND EQUIPMENT, at cost:
Buildings and improvements 177,438 173,392
Furniture, fixtures and equipment 95,648 91,214
Expendable supplies 2,031 2,031
-------- --------

275,117 266,637

Less accumulated depreciation and amortization 106,092 97,355
-------- --------

169,025 169,282

Construction in progress 2,330 1,376
Land 62,599 62,599
-------- --------

PROPERTY AND EQUIPMENT, net 233,954 233,257

RESTRICTED CASH 7,960 6,018

OTHER ASSETS 687 363
-------- --------

TOTAL ASSETS $269,785 $263,148
======== ========
</TABLE>

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

-14-
<PAGE>

WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1997 AND 1996
(In Thousands)

LIABILITIES AND PARTNERS' EQUITY

1997 1996
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable:
Trade and other $ 2,147 $ 1,937
Westin and affiliates 1,998 1,171
--------- ---------
Total accounts payable 4,145 3,108
Accrued expenses 9,587 9,274
Current maturities of long-term obligations 564 159
Other current liabilities 1,296 1,353
--------- ---------

TOTAL CURRENT LIABILITIES 15,592 13,894

LONG-TERM OBLIGATIONS 129,180 127,085

LONG-TERM OBLIGATION TO GENERAL PARTNER 33,809 30,795

DEFERRED INCENTIVE MANAGEMENT FEES
PAYABLE TO WESTIN 22,281 19,425
--------- ---------

TOTAL LIABILITIES 200,862 191,199

COMMITMENTS AND CONTINGENCIES

MINORITY INTERESTS 3,733 3,568

PARTNERS' EQUITY (DEFICIT):
General Partner (2,307) (2,026)
Limited Partners (135,600 Units issued and outstanding) 67,497 70,407
--------- ---------

TOTAL PARTNERS' EQUITY 65,190 68,381
--------- ---------

TOTAL LIABILITIES AND PARTNERS' EQUITY $ 269,785 $ 263,148
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

-15-
<PAGE>

WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

(In Thousands Except Units and per Unit Data)

1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUES:
Rooms $ 83,600 $ 73,375 $ 60,963
Food and beverage 32,793 27,477 27,124
Other operating 10,660 10,098 9,157
departments -------- -------- --------

TOTAL OPERATING REVENUES 127,053 110,950 97,244
-------- -------- --------

OPERATING EXPENSES:
Rooms 22,162 19,631 17,931
Food and beverage 24,866 21,963 22,842
Other operating
departments 3,241 2,933 2,782
Administrative and general 9,509 8,840 8,260
Management fees 8,554 5,672 2,188
Advertising and business
promotion 8,513 7,425 6,819
Property maintenance and
energy 8,495 8,273 7,994
Local taxes and insurance 9,170 7,466 6,809
Rent 802 778 789
Depreciation and
amortization 9,282 8,070 6,836
-------- -------- --------
TOTAL OPERATING EXPENSES 104,594 91,051 83,250
-------- -------- --------

OPERATING PROFIT 22,459 19,899 13,994
-------- -------- --------

OTHER INCOME (EXPENSE):
Interest income 1,103 787 919
Interest expense (10,624) (10,812) (10,665)
Interest expense on
long-term obligation
to General Partner (3,014) (2,697) (2,456)
Other, net (68) (67) (2)
-------- -------- --------

NET OTHER EXPENSE (12,603) (12,789) (12,204)
-------- -------- --------

INCOME BEFORE MINORITY
INTERESTS 9,856 7,110 1,790

MINORITY INTERESTS (165) (132) (77)
-------- -------- --------

NET INCOME $ 9,691 $ 6,978 $ 1,713
======== ======== ========

NET INCOME PER UNIT $ 71.47 $ 51.46 $ 12.63
======== ======== ========
(135,600 Units issued and outstanding)
</TABLE>

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

-16-
<PAGE>

WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(In Thousands)

General Limited
Partner Partners
--------- --------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1994 $(1,590) $ 61,280

Net income (loss) (205) 1,918
--------- --------

BALANCE AT DECEMBER 31, 1995 (1,795) 63,198

Net income (loss) (231) 7,209
--------- --------

BALANCE AT DECEMBER 31, 1996 (2,026) 70,407

Cash distribution - (12,882)

Net income (loss) (281) 9,972
--------- --------

BALANCE AT DECEMBER 31, 1997 $(2,307) $ 67,497
========= ========
</TABLE>

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

-17-
<PAGE>

WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(In Thousands)

1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 9,691 $ 6,978 $ 1,713
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization
of property and equipment 9,282 8,070 6,836
Amortization of loan fees 90 - -
Interest on long-term obligations not
currently payable 4,436 4,277 4,498
Interest earned on restricted cash (382) (220) (512)
(Increase) decrease in receivables (2,192) (2,107) 745
(Increase) decrease in inventories (125) - 123
(Increase) decrease in prepaid expenses and
other current assets (359) 396 (124)
Increase (decrease) in accounts payable 1,037 4 (543)
Increase (decrease) in accrued expenses and
other current liabilities 256 2,053 (954)
Increase in other long-term obligations 1,238 - -
Incentive management fees 2,856 3,176 -
Minority interests 165 132 77
Other 15 13 23
-------- -------- --------
Net cash provided by operating activities 26,008 22,772 11,882
-------- -------- --------

INVESTING ACTIVITIES:
Proceeds from sales of equipment 14 13 83
Acquisition of property and equipment (9,993) (15,985) (27,393)
Increase in restricted cash (10,836) (17,927) (16,234)
Decrease in restricted cash to fund acquisition of
property and equipment 9,261 15,671 27,520
(Increase) decrease in other assets (120) 33 (366)
-------- -------- --------
Net cash used in investing activities (11,674) (18,195) (16,390)
-------- -------- --------

FINANCING ACTIVITIES:
Dividends paid (12,882) - -
Loan restructuring costs (294) - -
Increase in long-term obligation to General Partner - - 7,500
Repayment of long-term obligations (160) (170) (249)
-------- -------- --------
Net cash (used in) provided by financing
activities (13,336) (170) 7,251
-------- -------- --------

NET INCREASE IN CASH AND
CASH EQUIVALENTS 998 4,407 2,743

CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 14,752 10,345 7,602
-------- -------- --------

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 15,750 $ 14,752 $ 10,345
======== ======== ========
</TABLE>

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

-18-
<PAGE>

WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------

(A) BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
Westin Hotels Limited Partnership, a Delaware limited partnership (the
"Partnership"), and its subsidiary limited partnerships, The Westin St. Francis
Limited Partnership and The Westin Chicago Limited Partnership (the "Hotel
Partnerships"). The Westin St. Francis Limited Partnership owns and operates The
Westin St. Francis in downtown San Francisco, California, and The Westin Chicago
Limited Partnership owns and operates The Westin Michigan Avenue, Chicago
(formerly The Westin Hotel, Chicago) in downtown Chicago, Illinois (individually
a "Hotel", collectively the "Hotels"). All significant intercompany transactions
and accounts have been eliminated. Certain of the prior years' amounts have been
reclassified to conform with the 1997 presentation.

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

(B) CASH EQUIVALENTS AND RESTRICTED CASH

Cash equivalents consist of highly liquid debt instruments bearing floating
interest rates and other short-term investments purchased with original
maturities of three months or less. Restricted cash consists of amounts
deposited in interest-bearing money market accounts. The Partnership's carrying
amount approximates the fair value of cash equivalents and restricted cash.

Inventories, principally food and beverage and supplies, are valued at the
lower of cost (first-in, first-out) or replacement market.

(D) PROPERTY AND EQUIPMENT

Depreciation of property and equipment is provided principally on the
straight-line method over the assets' estimated useful lives as follows:

<S> <C>
Buildings 40 years
Building improvements Remaining life of building
Furniture, fixtures and equipment 7 to 12 years
Expendable supplies 5 years
</TABLE>

An annual group method of depreciation is used, under which individual
assets are not specifically identified for purposes of determining retirements,
and fully depreciated asset groups are written off when evidence indicates they
are no longer in use. Proceeds from miscellaneous sales of property and
equipment are credited to accumulated depreciation.

Expendable supplies (linens, china, silverware and glassware) have been
depreciated to 50% of the cost of initial stock. Replacements are expensed when
purchased.

Amortization of capitalized lease property and equipment is provided on the
straight-line method over the shorter of the assets' estimated useful lives or
the lease terms.

-19-
<PAGE>

Maintenance and repairs, including the cost of minor replacements, are
charged to property maintenance expense accounts. Costs of additions and
betterment of property are capitalized in property and equipment accounts.

(E) ADVERTISING COSTS

The Partnership expenses the production costs of advertising the first
time the advertising takes place.

(F) INCOME TAXES

The Partnership does not record any provision for Federal and state
income taxes in its consolidated financial statements. All items of income,
gain, loss, deduction or credit for Federal and state income tax purposes are
allocated to the partners of the Partnership for inclusion in their individual
income tax returns. The reported amounts of the Partnership's net assets and
liabilities exceeded the related tax bases by approximately $53,061,000 and
$50,141,000 at December 31, 1997 and 1996, respectively.

(2) ORGANIZATION
------------

The Partnership was formed on April 25, 1986, to invest in hotel
properties by acquiring limited partnership interests in the Hotel Partnerships.
The Partnership will continue until December 31, 2036, unless terminated sooner
under the provisions of the Partnership agreement.

Westin Realty Corp. ("Westin Realty"), formerly a wholly owned
subsidiary of Westin Hotel Company ("Westin"), now a wholly owned subsidiary of
Starwood Hotels & Resorts Worldwide, Inc., is the sole General Partner of the
Partnership. On August 28, 1986, Westin Realty acquired all of the limited
partnership interests in the Hotel Partnerships (which represented 91.62% of the
fair value of the Hotel Partnerships' net assets) and contributed these
interests, valued at $135,600,000, to the Partnership in exchange for all of the
limited partnership interests in the Partnership. Westin Realty then sold these
limited partnership interests in a public offering. The remaining 8.38% interest
in the Hotel Partnerships was retained by the predecessor owners, subsidiaries
of Westin. See Note (7) for an update due to a Subsequent Event.

In January 1997 The Westin Hotel, Chicago was renamed The Westin
Michigan Avenue, Chicago to distinguish it from The Westin River North, Chicago,
also located in downtown Chicago.

The Hotel Partnerships' profits and losses are generally allocated 99%
to the Hotel Partnership and 1% to minority interests. Partnership profits and
losses are further allocated 99% to the limited partners and 1% to the General
Partner, with the exception of depreciation expense, which is allocated 92.55%
to the limited partners and 7.45% to the General Partner. Because of the
allocation of depreciation expense, the General Partner's share of profits and
losses since inception is a net loss, resulting in a deficit balance in the
General Partner equity account. The Partnership agreement specifies that if a
deficit balance exists after liquidation of the Hotel Partnerships' assets, the
General Partner would be obligated to contribute cash to the Partnership equal
to the lesser of (i) the deficit balance in such capital account, or (ii) 1.01%
of the capital contributions of the limited partners reduced by all capital
contributions of the General Partner to, but not including, such specified time.

Except for the following restrictions outlined in the restructuring of
the Mortgage Loans in June 1994 ("Restructuring Agreement"), Net Cash Flow of
the Partnership as defined in the Partnership agreement is distributed first to
the limited partners until certain preferential distributions are achieved and
then allocated to both the General Partners and limited partners depending on
factors related to the source of the Net Cash Flow and cash distributions as
specified in the Partnership agreement. The Restructuring Agreement permitted
cash distributions to the limited partners in 1996 subject to the Hotels
achieving certain performance levels in the two years prior to 1996. However,
the Hotels did not achieve these performance levels. Distributions were
permitted in 1997 subject to the Hotels achieving certain performance levels in
the three years prior to 1997. The Hotels achieved these performance levels and
a distribution of $12,882,000 was made to the limited partners. Distributions at
an annual rate of $95 per Unit are anticipated for 1998.

-20-
<PAGE>

(3) RESTRICTED CASH
---------------

Deposits to the Furniture, Fixture and Equipment ("FF&E") Reserve Accounts
for 1997 totaled $10,836,000. As defined in the Restructuring Agreement, this
total consists of a $6,200,000 million deposit of Available Net Cash Flow from
operations for the fourth quarter of 1996, and quarterly deposits for 1997,
totaling $4,636,000. On February 14, 1998, $1,736,000 was deposited into the
FF&E Reserve Accounts for the fourth quarter of 1997. In 1996, $17,927,000 of
Available Net Cash Flow from operations was deposited in the FF&E Reserve
Accounts. During 1995 the remaining $7,500,000 of the $25,000,000 subordinated
loan from Westin Realty was funded to the Partnership. In 1995 these proceeds,
along with $8,734,000 of Available Net Cash Flow from operations was deposited
to the FF&E Reserve Accounts.

As required by the Restructuring Agreement $5,424,000 and $540,000 were
deposited to the Tax Escrow Accounts in 1997 and 1996 respectively. This account
is used to pay real and personal property taxes as they become due.

(4) ACCRUED EXPENSES
----------------

Accrued expenses include the following at December 31:

<TABLE>
<CAPTION>
1997 1996
-------- --------
(In Thousands of Dollars)
<S> <C> <C>
Salaries and wages $3,851 $3,670
Estimated property and other taxes 4,209 4,072
Accrued interest 893 901
Other 634 631
------ ------
Total $9,587 $9,274
====== ======
</TABLE>

(5) LONG-TERM OBLIGATIONS
---------------------

Long-term obligations include the following at December 31:

<TABLE>
<CAPTION>
1997 1996
-------- --------
(In Thousands of Dollars)

<S> <C> <C>
Mortgage loans, plus accrued interest of $5,960,000
in 1997 and $4,538,000 in 1996, bearing effective
interest at 8.06% and 8.55%, respectively $128,442 $127,020
Capital lease obligations 64 224
Other 1,238 -
-------- --------
129,744 127,244
Less current maturities 564 159
-------- --------
Total $129,180 $127,085
======== ========

Subordinated note, payable to the General Partner,
bearing interest at prime plus 1% (9.5% at
December 31, 1997 and 9.25% at December 31, 1996) $ 33,809 $ 30,795
======== ========
</TABLE>

On May 27, 1997 an agreement to restructure the existing mortgage loans on
The Westin St. Francis and The Westin Michigan Avenue, Chicago was completed.
The parties to this restructuring agreement are The Teacher Retirement System of
Texas (the lender), The Westin St. Francis Limited Partnership, The Westin
Chicago Limited Partnership, Westin Hotels Limited Partnership, St. Francis
Hotel Corporation (general partner of The Westin St. Francis Limited
Partnership), 909 North Michigan Avenue Hotel Corporation (general partner of
The Westin Chicago Limited Partnership), Westin Realty Corp. (general partner of
Westin Hotels Limited Partnership) and Westin Hotel Company (the management
company).

The agreement provides for an extension of the maturity date for each of
the Hotel's existing mortgage loans from August 31, 2001 to November 30, 2006.
The interest rates on the principal balances of the original mortgage loans will
be reduced to 8.85% per annum from 10.0% per annum for the period from December
1,

-21-
<PAGE>

1997 through November 30, 1998 and to 8.85% per annum from 10.25% per annum from
December 1, 1998 through maturity. The restructuring resulted in a decrease in
the effective interest rate on the mortgage loans from 8.55% per annum to 8.06%
per annum from the date of the agreement through maturity.

Through November 30, 1999, the restructured loans require the payment
of interest only each quarter in arrears. From December 1, 1999 to November 30,
2006 the loans require blended payments of principal and interest each quarter
in arrears in such amount necessary to repay the principal balance of each note
(together with interest at the fixed interest rate) on the basis of a 25 year
amortization schedule. On the maturity date, the entire principal balance plus
all accrued and unpaid interest will be due and payable.

The prepayment provisions of the Mortgage loans have been amended.
Under the terms and conditions of this restructuring, the prepayment penalty for
The Westin Michigan Avenue, Chicago loan has been reinstated except in the case
of a repayment resulting from a sale to a third party. The termination date for
the prepayment penalty for The Westin St. Francis loan generally has been
extended to the year 2006 from the year 2001. With respect to a hotel sale to a
third party, however, there will be no prepayment penalty if the sale occurs
after August 31, 2001.

Aggregate quarterly payments on the Mortgage Loans are as follows
$10,840,000 for 1998 and 1999, and $12,208,000 through December 1, 2006, at
which time the remaining outstanding principal balance is due.

In July 1997, The Westin St. Francis received notification of a
property tax assessment totaling $1,189,000 for the tax years ended June 30,
1997 and 1996. The assessment qualifies for a five year payment plan, which the
Partnership has elected, and is as follows: principal and interest payments of
$285,000 for 1999 through 2002, with no payment required in 1998. Interest is
calculated at 8.55% per annum. Payment in 1997 totaled $285,000.

Scheduled principal payments on long-term obligations are $564,000 in
1998, $1,058,000 in 1999, $2,218,000 in 2000, $2,404,000 in 2001, $2,604,000 in
2002 and $154,705,000 thereafter.

Interest paid by the Partnership totaled $9,210,000 in 1997,
$9,216,000 in 1996 and $8,615,000 in 1995.

No new capital lease agreements were entered into in 1997.

The carrying values of the Partnership's Mortgage Loans and
subordinated note approximate fair values.

(6) OPERATING LEASES
----------------

Minimum annual rental expense for operating leases in effect at
December 31, 1997, are as follows (in thousands of dollars):

<TABLE>

<S> <C>
1998 $ 608
1999 373
2000 314
2001 253
2002 190
Thereafter -
-------
$ 1,738
=======
</TABLE>

(7) CONTINGENCIES AND SUBSEQUENT EVENTS
-----------------------------------

-22-
<PAGE>

"Corporation"), a hotel management and operating company, completed the merger
of Westin Hotels & Resorts Worldwide, Inc. ("Westin Worldwide"). Effective upon
closing of the Westin Worldwide merger, the Trust's and Corporation's names were
changed to Starwood Hotels & Resorts Trust and Starwood Hotels & Resorts
Worldwide, Inc., respectively. The Trust was renamed Starwood Hotels & Resorts
on February 24, 1998. The Trust and Corporation together are referred to as
"Starwood".

Because of the nature of the hotel business, the Hotel Partnerships
are subject to various claims and legal actions incidental to the ordinary
course of their operations, including such matters as contract and lease
disputes and complaints alleging personal injury, property damage and employment
discrimination. The General Partner believes that the outcome of any such
pending claims for proceedings, individually or in the aggregate, will not have
a material adverse effect upon the business, financial condition, or results of
operations of the Partnership.

(8) RELATED PARTY TRANSACTIONS
--------------------------

Westin Realty is responsible for the management and administration of
the Partnership. In accordance with the Partnership agreement, the Partnership
reimburses Westin Realty for expenses in connection with such services, which
totaled $607,000 in 1997, $583,000 in 1996 and $482,000 in 1995.

Prior to the merger of Westin and Starwood discussed in Note (7),
Westin, as manager of the Hotels, received a base management fee equal to 2.25%
of Hotel gross operating revenues. In conjunction with the Restructuring
Agreement, Westin agreed to reduce its base management fee from 3.5% to 2.25% of
the Hotels' gross revenues through December 31, 1998. Base management fees
totaled $2,859,000 in 1997, $2,496,000 in 1996 and $2,188,000 in 1995. Westin
also earned an incentive management fee of 20% of annual Net Operating Cash
Flow. Incentive management fees totaled $5,695,000 in 1997 and $3,176,000 in
1996. Incentive management fee payments are subordinate to the limited partners
receiving certain preferential returns. As a result, incentive management fees
totaling approximately $2,800,000 were paid to Westin in 1997. No incentive
management fee was earned in 1995. Any incentive management fee not currently
payable bears no interest and is deferred and subsequently payable from the
proceeds of a sale or refinancing of the Hotels or Net Cash Flow after 1997.
Therefore, determining the fair value of the liability is not practicable due to
uncertainty as to when the liability will be paid. In any event, the fair value
of the liability does not exceed the carrying amount.

Prior to the merger of Westin and Starwood discussed in Note (7),
Westin and an affiliate also received marketing fees, representing the
Partnership's share of the aggregate costs and expenses incurred by Westin in
providing advertising, public relations, sales and reservation services to all
Westin hotels. The marketing fee totaled $2,414,000 in 1997, $2,108,000 in 1996
and $1,848,000 in 1995. The Partnership also reimbursed Westin for the services
of certain full-time Hotel employees. All costs incurred for services provided
to the Hotel Partnerships by Hotel employees have been recognized as an expense
of the Partnership.

As disclosed in Note (5), at December 31, 1997, the subordinated loan
from Westin Realty to the Partnership totals $33,809,000, which includes
$8,809,000 of accrued interest. At December 31, 1996, the balance was
$30,795,000 and included $5,795,000 of accrued interest.

-23-
<PAGE>

(9) SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
----------------------------------------------
Summarized quarterly financial data is as follows:

<TABLE>
<CAPTION>
First Second Third Fourth Total
----- ------ ----- ------ -----
(In Thousands of Dollars Except per Unit Amounts)
<S> <C> <C> <C> <C> <C>
1997 Quarters:
Operating revenue $26,394 $32,184 $33,757 $34,718 $127,053
Operating profit $ 1,863 $ 6,578 $ 7,536 $ 6,482 $ 22,459
Net income (loss) $(1,363) $ 3,388 $ 4,431 $ 3,235 $ 9,691
Net income (loss) per Unit $(10.05) $ 24.99 $ 32.68 $ 23.85 $ 71.47

1996 Quarters:
Operating revenue $21,754 $28,377 $28,799 $32,020 $110,950
Operating profit $ 1,116 $ 6,366 $ 6,013 $ 6,404 $ 19,899
Net income (loss) $(2,050) $ 3,022 $ 2,781 $ 3,225 $ 6,978
Net income (loss) per Unit $(15.12) $ 22.29 $ 20.51 $ 23.78 $ 51.46
</TABLE>

-24-
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- ------------------------------------------------------------

The Partnerships have no directors or officers. Business policy-making
functions of the Partnerships are carried out through the directors and officers
of the General Partners.

Westin Realty's directors and officers and their current positions
are:

<TABLE>

<S> <C>
Frederick Kleisner Chairman, Chief Executive Officer and President
Richard Mahoney Director, Vice President, Chief Financial Officer and Treasurer
Douglas C. Sutten Director and Vice President
Marc Pujalet Director
Hud Hinton Vice President
Kevin Hylton Vice President and Assistant Treasurer
Calder Mackay Vice President and Secretary
Ruth E. Valine Assistant Secretary
</TABLE>

Douglas C. Sutten, currently Vice President, and Marc Pujalet became
Directors in January 1998, replacing Merrick Kleeman and Stuart Rothenberg. Hud
Hinton and Calder Mackay became Officers in February 1998, replacing John
Ceriale and Catherine Walker, respectively. Other Officers assumed their current
offices at the following times: Mr. Mahoney, October 1995; Mr. Kleisner,
September, 1995; Mr. Sutten, May 1986; Mr. Hylton, February 1988; and Ms.
Valine, May 1989.

Frederick Kleisner, 53, joined Westin in August 1995 and currently
serves as President and Chief Operating Officer. Prior to joining Westin, Mr.
Kleisner served as Group President, Operations, for Interstate Hotels
Corporation, North America's largest franchisee of hotels, from 1990 to 1995.

Richard Mahoney, 46, joined Westin in September 1995 and served as
Executive Vice President and Chief Financial Officer until February 1998. In
February 1998 he became the President and Chief Operation Officer of Caesars
World Inc., a wholly owned subsidiary of the Corporation. Prior to joining
Westin, Mr. Mahoney was Senior Vice President and Chief Financial Officer of
Premier Cruise Lines from 1993 to 1995. From 1989 to 1993, he served as Senior
Vice President and Controller of The Continental Companies.

Marc Pujalet, 42, was named Director of Westin Realty in February
1998. He joined Westin in 1977 and was named Senior Vice President of Sales and
Marketing of Westin in 1993. He came to the corporate offices in 1989 as
Regional Director of Sales and Marketing and was Vice President of Sales and
Marketing from 1991 to 1993.

Hud Hinton, 44, was named Vice President of Westin Realty in February
1998. He joined Westin in 1983 and was named Senior Vice President of Operations
in 1993.

Calder Mackay, 44, was named Vice President and Secretary of Westin
Realty in February 1998. He is Associate General Counsel of Westin Hotel Company
and joined Westin in 1990.

Douglas C. Sutten, 44, was named Director of Westin Realty in February
1998. He was named Vice President of Finance of Westin in 1989. From 1985, when
he joined Westin, until 1989, Mr. Sutten was Westin's Director of Taxation.

Kevin Hylton, 41, has been Vice President and Corporate Controller of
Westin since 1988. From 1984, when he joined Westin, until 1988, Mr. Hylton was
Financial Reporting Controller of Westin.

Ruth E. Valine, 47, was named Legal Administrator of Westin in
February 1989. Upon joining Westin in 1979 until February 1989, she held the
title of Legal Assistant.

-25-
<PAGE>

The following persons are directors and/or officers of both Hotel
General Partners, as indicated:

<TABLE>

<S> <C>
Frederick Kleisner President, Director
Richard Mahoney Vice President, Treasurer and Director
Douglas C. Sutten Director and Vice President
Marc Pujalet Director
Hud Hinton Vice President
Kevin Hylton Vice President and Assistant Treasurer
Calder Mackay Vice President and Secretary
Ruth E. Valine Assistant Secretary
</TABLE>

ITEM 11. EXECUTIVE COMPENSATION.
- --------------------------------

As noted in Item 10 above, the Partnerships have no directors,
officers or other employees. However, under the respective Agreements of Limited
Partnership for the Partnerships, Westin Realty, as General Partner of the
Partnership, is responsible for the administration and management of the
Partnership, and St. Francis Corp. and 909 Corp., as General Partners of the
Hotel Partnerships, are responsible for the administration and management of the
Hotel Partnerships. The General Partners, however, receive no fees for providing
these services to the Partnership. Moreover, neither the Partnership nor the
Hotel Partnerships are directly responsible for the payment of any executive
compensation to the officers of the General Partners.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------------------------------------------------------------------------
As of December 31, 1997, no person owned of record, or to the
Partnership's knowledge owned beneficially, more than 5% of the total number of
Units.

The officers and directors of the General Partners, as a group,
beneficially own no Units. Two affiliates of Westin Realty own a total of 279
limited partnership Units, representing less than a 1% ownership interest.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------

All of the directors and principal officers of Westin Realty, except
Ms. Valine, were directors and/or principal officers of Westin prior to the
merger of Westin and Starwood on January 2, 1998. See Note (7) of the Notes to
Consolidated Financial Statements included under Item 8 - "Financial Statements
and Supplementary Data." The Partnership has engaged various subsidiaries of
Westin to provide services to the Hotels. See Note (8) of the Notes to
Consolidated Financial Statements included under Item 8 - "Financial Statements
and Supplementary Data."

-26-
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
- ------------------------------------------------------------------------

(a) 1. FINANCIAL STATEMENTS.

The following documents are filed as part of this report:

Report of Independent Public Accountant................... 14
Consolidated Balance Sheets............................... 15 - 16
Consolidated Statements of Operations..................... 17
Consolidated Statements of Partners' Equity (Deficit)..... 18
Consolidated Statements of Cash Flows..................... 19
Notes to Consolidated Financial Statements................ 20 - 25

(a) 2. FINANCIAL STATEMENT SCHEDULES.

Financial statement schedules are omitted for the reason that they are not
required, or because the required information is shown in the consolidated
financial statements or notes thereto.

(a) 3. EXHIBITS.

4. Instruments defining the rights of security holders.

4.1 Amended and Restated Agreement of Limited Partnership of Westin
Hotels Limited Partnership. (1)

4.2 Amended and Restated Agreement of Limited Partnership of The
Westin St. Francis Limited Partnership. (1)

4.3 First Amendment to Amended and Restated Agreement of Limited
Partnership of TheWestin St. Francis Limited Partnership. (3)

4.4 Amended and Restated Agreement of Limited Partnership of The
Westin Chicago Limited Partnership. (1)

4.5 First Amendment to Amended and Restated Agreement of Limited
Partnership of The Westin Chicago Limited Partnership. (3)

10. Material contracts.

10.1 Restructuring Agreement dated as of June 2, 1994. (3)

10.2 Second Restructuring Agreement dated as of May 27, 1997. (4)

10.3 Amended and Restated Management Agreements between The Westin St.
Francis Limited Partnership and Westin Hotel Company, and between
The Westin Chicago Limited Partnership and Westin Hotel Company,
for property management services. (2)

10.4 First Amendments to Amended and Restated Management Agreements of
The Westin St. Francis Limited Partnership and of The Westin
Chicago Limited Partnership. (3)

10.5 Assignment and Assumption of Agreements between Westin Hotel
Company and St. Francis Hotel Corporation.

10.6 Assignment and Assumption of Agreements between Westin Hotel
Company and North Michigan Avenue Corporation

10.7 Contribution Agreement between St. Francis Hotel Corporation and
The Westin St. Francis Limited Partnership, and between 909 North
Michigan Avenue Corporation and The Westin Chicago Limited
Partnership, for contribution of Hotel assets and the transfer of
limited partnership interests. (2)

10.8 Promissory Note of St. Francis Hotel Corporation dated August 21,
1986 to TeacherRetirement System of Texas. (1)

-27-
<PAGE>

10.9 First Amendment to Promissory Note of St. Francis Hotel Corporation
dated as of June 2,1994. (3)

10.10 Second Amendment to Promissory Note of St. Francis Hotel Corporation
dated as of May 27, 1997. (5)

10.11 Deed of Trust, Financing Statement, Security Agreement and Fixture
filing dated August 21, 1986 respecting The Westin St. Francis. (1)

10.12 First Amendment to Deed of Trust, Financing Statement, Security
Agreement and Fixture Filing dated as of June 2, 1994. (3)

10.13 Second Amendment to Deed of Trust, Financing Statement, Security
Agreement and Fixture Filing (With Assignment of Rents and Leases)
dated as of May 27, 1997. (5)

10.14 Promissory Note of 909 North Michigan Avenue Corporation dated August
21, 1986 to Teacher Retirement System of Texas. (1)

10.15 First Amendment to Promissory Note of 909 North Michigan Avenue
Corporation dated as of June 2, 1994. (3)

10.16 Second Amendment to Promissory Note of 909 North Michigan Avenue
Corporation dated as of May 27, 1997. (5)

10.17 Mortgage and Security Agreement dated August 21, 1986 for The Westin
Hotel, Chicago. (1)

10.18 First Amendment to Mortgage and Security Agreement dated as of June 2,
1994. (3)

10.19 Second Amendment to Mortgage and Security Agreement dated as of May
27, 1997. (5)

10.20 St. Francis FF&E Escrow Agreement dated as of June 2, 1994. (3)

10.21 Chicago FF&E Escrow Agreement dated as of June 2, 1994. (3)

10.22 Promissory Note dated June 2, 1994 in favor of Westin Realty Corp. by
Westin Hotels Limited Partnership. (3)

10.23 Loan Agreement dated as of June 2, 1994 between Westin Hotels Limited
Partnership and Westin Realty Corp. (3)

27. Financial Data Schedule.
____________________
(1) Incorporated by reference to Exhibits 4.1, 4.2, 4.3, 10.3, 10.4, 10.5 and
10.6, respectively, to the Partnership's 1986 Annual Report on Form 10-K.

(2) Incorporated by reference to Exhibits 10.1 and 10.2, respectively, of the
Partnership's Registration Statement on Form S-11 (No. 33-3918).

(3) Incorporated by reference to Exhibits 4.3, 4.5, 10.1, 10.3, 10.6, 10.8,
10.10, 10.12, 10.13, 10.14, 10.15 and 10.16, respectively, to the
Partnership's Form 10-Q for the period ending June 30, 1994.

(4) Incorporated by reference to Exhibit 10. to the Partnership's Form 8-K
dated May 27, 1997.

(5) Incorporated by reference to Exhibits 10.8, 10.11, 10.14 and 10.17,
respectively, to the Partnership's Form 10-Q for the period ending June
30, 1997.

(b) REPORTS ON FORM 8-K.

None.

-28-
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 25, 1998.

WESTIN HOTELS LIMITED PARTNERSHIP
(a Delaware limited partnership)

By: WESTIN REALTY CORP.,
Its sole General Partner

By: /s/ Richard Mahoney
----------------------------------
Richard Mahoney, Director,
Vice President, Chief Financial
Officer and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>

/s/ Frederick Kleisner
- ---------------------------- Chairman, Chief Executive March 25, 1998
Frederick Kleisner Officer and President

/s/ Richard Mahoney
- ---------------------------- Director, Vice President, March 25, 1998
Richard Mahoney Chief Financial Officer and
Treasurer (Chief Accounting
Officer)

/s/ Douglas C. Sutten
- ---------------------------- Director and Vice President March 25, 1998
Douglas C. Sutten

/s/ Marc Pujalet
- ---------------------------- Director March 25, 1998
Marc Pujalet
</TABLE>

-29-
<PAGE>

SIGNATURES

THE WESTIN ST. FRANCIS LIMITED PARTNERSHIP
(a Delaware limited partnership)

By: ST. FRANCIS HOTEL CORPORATION,
Its sole General Partner

By: /s/ Richard Mahoney
------------------------------------
Richard Mahoney, Director,
Vice President and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:

Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Frederick Kleisner
- --------------------------- President and Director March 25, 1998
Frederick Kleisner

/s/ Richard Mahoney
- --------------------------- Director, Vice President March 25, 1998
Richard Mahoney and Treasurer

/s/ Douglas C. Sutten
- --------------------------- Director and Vice President March 25, 1998
Douglas C. Sutten

/s/ Marc Pujalet
- --------------------------- Director March 25, 1998
Marc Pujalet
</TABLE>

-30-
<PAGE>

SIGNATURES

THE WESTIN CHICAGO LIMITED PARTNERSHIP
(a Delaware limited partnership)

By: 909 NORTH MICHIGAN AVENUE CORPORATION,
Its sole General Partner

By: /s/ Richard Mahoney
-----------------------------------
Richard Mahoney, Director,
Vice President and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:

Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Frederick Kleisner
- ---------------------------------- President and Director March 25, 1998
Frederick Kleisner

/s/ Richard Mahoney
- ---------------------------------- Director, Vice President March 25, 1998
Richard Mahoney and Treasurer

/s/ Douglas C. Sutten
- ---------------------------------- Director and Vice President March 25, 1998
Douglas C. Sutten

/s/ Marc Pujalet
- ---------------------------------- Director March 25, 1997
Marc Pujalet
</TABLE>

-31-
<PAGE>

EXHIBIT INDEX

4. Instruments defining the rights of security holders.

4.1 Amended and Restated Agreement of Limited Partnership of Westin Hotels
Limited Partnership. (1)

4.2 Amended and Restated Agreement of Limited Partnership of The Westin
St. Francis Limited Partnership. (1)

4.3 First Amendment to Amended and Restated Agreement of Limited
Partnership of TheWestin St. Francis Limited Partnership. (3)

4.4 Amended and Restated Agreement of Limited Partnership of The Westin
Chicago Limited Partnership. (1)

4.5 First Amendment to Amended and Restated Agreement of Limited
Partnership of The Westin Chicago Limited Partnership. (3)

10. Material contracts.

10.1 Restructuring Agreement dated as of June 2, 1994. (3)

10.2 Second Restructuring Agreement dated as of May 27, 1997. (4)

10.3 Amended and Restated Management Agreements between The Westin St.
Francis Limited Partnership and Westin Hotel Company, and between The
Westin Chicago Limited Partnership and Westin Hotel Company, for
property management services. (2)

10.4 First Amendments to Amended and Restated Management Agreements of The
Westin St. Francis Limited Partnership and of The Westin Chicago
Limited Partnership. (3)

10.5 Assignment and Assumption of Agreements between Westin Hotel Company
and St. Francis Hotel Corporation .

10.6 Assignment and Assumption of Agreements between Westin Hotel Company
and North Michigan Avenue Corporation

10.7 Contribution Agreement between St. Francis Hotel Corporation and The
Westin St. Francis Limited Partnership, and between 909 North Michigan
Avenue Corporation and The Westin Chicago Limited Partnership, for
contribution of Hotel assets and the transfer of limited partnership
interests. (2)

10.8 Promissory Note of St. Francis Hotel Corporation dated August 21, 1986
to TeacherRetirement System of Texas. (1)