INNKEEPERS USA TRUST/FL
S-3, 1999-12-23
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>   1
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1999
                                               REGISTRATION NO. 333- __________
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM S-3

                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

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

                              INNKEEPERS USA TRUST
             (Exact name of registrant as specified in its charter)

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

           MARYLAND                                        65-0503831
 (State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                         Identification No.)


                                                       MARK A. MURPHY
                                               GENERAL COUNSEL AND SECRETARY
                                                    INNKEEPERS USA TRUST
        306 ROYAL POINCIANA WAY                    306 ROYAL POINCIANA WAY
       PALM BEACH, FLORIDA 33480                  PALM BEACH, FLORIDA 33480
            (561) 835-1800                             (561) 835-1800
(Address, including zip code, and telephone  (Name, address, including zip code,
     number, including area code, of          and telephone, number, including
registrant's principal executive offices)     area code, of agent for service)

                         ------------------------------
                                    Copy to:

                              DAVID C. WRIGHT, ESQ.
                                HUNTON & WILLIAMS
                          RIVERFRONT PLAZA, EAST TOWER
                              951 EAST BYRD STREET
                          RICHMOND, VIRGINIA 23219-4074
                                 (804) 788-8200

         APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement in light of
market conditions and other factors.

         IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING
BOX: [ ]

         IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE
OFFERED ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE
SECURITIES ACT OF 1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH
DIVIDEND OR INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING BOX: [X]

         IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 426(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING: [ ]

         IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE
462(C) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES
ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION
STATEMENT FOR THE SAME OFFERING: [ ]

         IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO
RULE 434 UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX: [ ]

<TABLE>
<CAPTION>

- ----------------------------------------------------------------------------------------------------------
    Title of Each                                   Proposed             Proposed
      Class of           Aggregate Amount To        Maximum              Maximum               Amount of
    Securities To            Be Registered       Offering Price          Aggregate            Registration
    Be Registered                                  Per Unit (1)        Offering Price (1)         Fee(1)
- ----------------------------------------------------------------------------------------------------------
   <S>                   <C>                      <C>                  <C>                    <C>
   Common Shares,               218,307             $7.875               $1,719,168              $453.86
   $.01 par value
- ----------------------------------------------------------------------------------------------------------
</TABLE>


         (1) Calculated pursuant to Rule 457(c) under the Securities Act of
             1933, as amended.

         THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>   2



         Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any state.



                 SUBJECT TO COMPLETION, DATED DECEMBER 23, 1999

PRELIMINARY PROSPECTUS

                                 218,307 SHARES
                              INNKEEPERS USA TRUST
                                  COMMON SHARES

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


           Our common shares trade on the New York Stock Exchange under the
symbol "KPA".

         Our wholly-owned subsidiary is the general partner of Innkeepers USA
Limited Partnership. Innkeepers USA Limited Partnership issued 218,307 units of
limited partnership interest to certain sellers of hotel properties. The
unitholders have the option of redeeming all or a portion of those partnership
units. When a unitholder redeems units, we determine whether to redeem the units
for cash or in exchange for our common shares. If we choose to acquire those
units in exchange for common shares rather than cash, then the unitholder will
receive one of our common shares for each unit redeemed. This prospectus relates
to the issuance of 60,794 common shares to certain of these sellers in
connection with a redemption of units and to resales of 157,513 common shares by
one of the sellers who is a trustee of our company.

         Shares resold under this prospectus may be offered and sold from time
to time in open-market or privately-negotiated transactions that may involve
underwriters, brokers or dealers.

         We will not receive any of the cash proceeds from the issuance or sale
of the shares covered by this prospectus, and the registration of the shares
does not necessarily mean that any of them will be issued by us, or offered or
sold by a shareholder.

         In part so that we can continue to qualify as a "real estate investment
trust" under the federal income tax laws, our Declaration of Trust generally
does not permit anyone to own more than 9.8% of our outstanding common shares.
This limitation and other limits on who can own our common shares are described
in this prospectus under "Restrictions on Ownership and Transfer."

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

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

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

              The date of this prospectus is December _____, 1999.


<PAGE>   3


                                TABLE OF CONTENTS


<TABLE>
<CAPTION>

<S>                                                                        <C>
A WARNING ABOUT FORWARD-LOOKING STATEMENTS.................................2

SECURITIES TO BE OFFERED...................................................3

DESCRIPTION OF CAPITAL SHARES..............................................3-4

RESTRICTIONS ON OWNERSHIP AND TRANSFER.....................................4

REDEMPTION OF UNITS........................................................4-7

COMPARISON OF OWNERSHIP OF UNITS AND COMMON SHARES.........................8-17

FEDERAL INCOME TAX CONSIDERATIONS.........................................18-40

PLAN OF DISTRIBUTION......................................................42

EXPERTS...................................................................43

LEGAL MATTERS.............................................................43

WHERE YOU CAN FIND MORE INFORMATION.......................................43-44

</TABLE>

<PAGE>   4


                   A WARNING ABOUT FORWARD-LOOKING STATEMENTS

         This prospectus, and the documents incorporated by reference, may
contain "forward-looking" statements as described in Section 27A of the
Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements usually include words like "believes,"
"anticipates" and "expects" and describe our expectations for the future. Of
course, these expectations may not be met in important ways for a variety of
reasons. We have described these reasons in our most recent Annual Report on
Form 10-K under the heading "Risk Factors" and the other reports we file with
the SEC, and you should review them before you make any investment decision. We
are not required to update any forward-looking statements we make and we may not
make any updates.

                              INNKEEPERS USA TRUST

         Innkeepers USA Trust (the "Company") is a self-managed, self-advised
real estate investment trust ("REIT") that owns hotel properties. We generally
do business through Innkeepers USA Limited Partnership (the "Partnership"), of
which a wholly-owned subsidiary of the Company is the sole general partner and
owned an approximate 85% interest as of September 30, 1999, and various other
subsidiaries. The Company currently owns 67 hotels containing an aggregate of
8,138 rooms and suites located in 23 states. The hotels include (i) 51 upscale
and one mid-priced extended-stay hotels, including 44 Residence Inn hotels, six
Summerfield Suites hotels, one Sunrise Suites hotel and one TownePlace Suites by
Marriott hotel, and (ii) one upscale and 14 mid-priced limited service hotels,
including 12 Hampton Inn hotels, one Comfort Inn hotel, one Holiday Inn Express
hotel and one Courtyard by Marriott hotel.

         The Company has a strategy of using multiple lessees and hotel
management companies for its hotels. The Company leases 60 of the hotels to
Innkeepers Hospitality, Inc. and its affiliates (collectively, the "IH Lessee"),
and leases the six Summerfield Suites hotels and one Sunrise Suites hotel
(collectively, the "Summerfield Hotels") to affiliates of Wyndham International,
Inc. (the "Summerfield Lessee" and, together with the IH Lessee, the "Lessees")
under percentage leases. The percentage leases allow the Company to participate
in revenue from its hotels by providing for the payment of rent based on
percentages of room revenues. The IH Lessee has entered into management
contracts with a subsidiaries of Marriott International, Inc., to manage 27 of
the Residence Inn hotels. The Summerfield Lessee has entered into management
contracts with its affiliate to manage the seven Summerfield Hotels.

         Jeffrey H. Fisher is the majority shareholder and Frederic M. Shaw
is the other shareholder of the IH Lessee. Mr. Fisher is the Chairman of the
Board, Chief Executive Officer and President of the Company. Mr. Shaw is the
Executive Vice President and Chief Operating Officer of the Company. Rolf E.
Ruhfus, a trustee of the Company, serves on the Board of Directors of Wyndham
International, Inc. and serves as the non-executive chairman of Wyndham's
all-suites division.

         We are a Maryland real estate investment trust. Our executive offices
are located at 306 Royal Poinciana Way, Palm Beach, Florida 33480, and our
telephone number is (561) 835-1800. Our common shares are traded under the New
York Stock Exchange ("NYSE") under the symbol




                                       2
<PAGE>   5


"KPA" and our Series A Cumulative Convertible Preferred Shares are traded on the
NYSE under the symbol KPA pa.

                            SECURITIES TO BE OFFERED

         This prospectus relates to (i) the possible issuance by the Company of
up to 60,794 of our common shares if, and to the extent that, certain current
limited partners of the Partnership tender units of limited partnership interest
in the Partnership ("Units") for redemption and the Company acquires the Units
in exchange for common shares and (ii) the offer and sale from time to time of
up to 157,513 common shares that may be issued to one of our limited partners -
Rolf E. Ruhfus - if and when he tenders Units for redemption. The Partnership
issued 157,513 Units beneficially owned by Mr. Ruhfus in connection with the
acquisition of the Summerfield Hotels and 60,794 Units in connection with the
acquisition of its TownePlace Suites by Marriott hotel in Horsham, Pennsylvania.

                          DESCRIPTION OF CAPITAL SHARES

         Innkeepers USA Trust is authorized to issue 100,000,000 common shares
of beneficial interest, par value $.01 per share, and 20,000,000 preferred
shares of beneficial interest, $.01 par value per share. As of September 30,
1999, there were 34,676,586 common shares outstanding and 4,630,000 Series A
Cumulative Convertible Preferred Shares outstanding. The following is only a
summary of some of the rights of shareholders that might be important to you.
You should refer to our Declaration of Trust and Bylaws for a complete statement
of your rights as a shareholder. Both the Declaration of Trust and the Bylaws
are filed with the SEC as exhibits to the registration statement of which this
prospectus is a part.

         COMMON SHARES. As a holder of common shares, you will have one vote per
share on all matters voted on by shareholders, including elections of trustees.
The Declaration of Trust does not provide for cumulative voting in the election
of trustees or for preemptive rights to acquire new shares issued by the
Company. Common shareholders will receive dividends if the Board declares them
out of available funds, after payment of or provision for full cumulative
dividends on and any required redemptions of preferred shares then-outstanding.
In the event of any liquidation or dissolution of the Company, holders of common
shares are entitled to share ratably in the distributable assets of the Company
remaining after satisfaction of the prior preferential rights of the preferred
shares and all other debts and liabilities of the Company.

         PREFERRED SHARES. Under the Declaration of Trust, the Board of Trustees
is authorized, without further stockholder action, to issue up to 20,000,000
preferred shares. The Board may issue preferred shares in series, with different
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or other provisions. The Company has
issued 4,630,000 Preferred Shares as 8.625% Series A Cumulative Convertible
Preferred Shares. Each Series A Preferred Share is convertible into 1.4811
common shares at any time and, therefore, the Company has reserved 6,857,493
common shares for issuance upon conversion. The Series A Preferred Shares may be
redeemed by the Company after May 18, 2003 and have no stated maturity or
sinking fund requirements. Each Series A Preferred Share has a liquidation
preference of $25 and



                                       3

<PAGE>   6

is entitled to annual dividends equal to the greater of (i) $2.15624 ($0.53906
payable quarterly) or (ii) the cash dividend paid or payable on the number of
common shares into which a Series A Preferred Share is then convertible. The
Series A Preferred Shares are described in more detail in the Company's
registration statement on Form 8-A, which was filed with the SEC on September 4,
1998.

         The Transfer Agent for the common shares and the Series A Preferred
Shares is Harris Trust and Savings Bank, Chicago, Illinois.

                     RESTRICTIONS ON OWNERSHIP AND TRANSFER

         In order for the Company to maintain its qualification as a REIT, not
more than 50% in value of its outstanding shares of beneficial interest may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
federal income tax laws to include certain entities) during the last half of any
taxable year. Furthermore, if any shareholder or group of shareholders of a
Lessee owns, actually or constructively, 10% or more of the shares of beneficial
interest of the Company, such Lessee could become a related-party tenant of the
Company, which likely would result in loss of REIT status for the Company. The
Company's Declaration of Trust prohibits direct or indirect ownership (taking
into account applicable ownership provisions of the Internal Revenue Code) of
more than 9.8% of the number of outstanding shares of each class of shares of
beneficial interest the Company (the "Ownership Limitation"). Generally, the
shares of beneficial interest owned by related or affiliated owners will be
aggregated for purposes of the Ownership Limitation. Any transfer of shares of
beneficial interest that would violate the Ownership Limitation will be void,
the intended transferee of such shares will be deemed never to have had an
interest in such shares, and such shares will be designated "shares-in-trust."
Further, the Company shall be deemed to have been offered shares-in-trust for
purchase at the lesser of (i) the market price (as defined in the Declaration of
Trust) on the date the Company accepts the offer or (ii) the price per share in
the transaction that created such shares-in-trust (or in certain other cases
specified in the Declaration of Trust, such as a gift, the market price on the
date of such event). Therefore, the record holder of shares of beneficial
interest in excess of the Ownership Limitation will experience a financial loss
when such shares are redeemed, if the market price falls between the date of
purchase and the date of redemption. The Board of Trustees may grant an
exemption from the Ownership Limitation to any person so requesting, so long as
(a) the Board has determined that such exemption will not result in the Company
being "closely held" within the meaning of the federal income tax laws, and (b)
such person provides to the Board such representations and undertakings as the
Board may require.

                               REDEMPTION OF UNITS

         Each limited partner may, subject to certain limitations, require that
the Partnership redeem all or a portion of his Units at any time after a
specified period following the date he acquired the Units, by delivering a
redemption notice to the Partnership. When a limited partner redeems his Units,
the Partnership or the Company can choose to exchange the Units for either:

(1)      a number of Common Shares equal to the number of Units redeemed
         (subject to certain adjustments), or



                                       4

<PAGE>   7

(2)      cash in an amount equal to the market value of the number of common
         shares he would have received pursuant to clause (1) above.

         To determine the amount of cash that the Partnership will pay under
clause (2), the Partnership will assume that the market value of the common
shares is equal to the average of the closing trading prices of the common
shares on the NYSE for a specified number of consecutive trading days
(typically, ten) before the day on which the redemption notice was received by
the Company. The limited partner will not receive common shares for his Units if
the issuance of common shares to him would:

- -        result in any person owning, directly or indirectly, common shares in
         excess of the Ownership Limitation,

- -        result in common shares being owned by fewer than 100 persons
         (determined without reference to any rules of attribution),

- -        result in the Company being "closely held" within the meaning of the
         federal income tax laws,

- -        cause the Company to own, actually or constructively, 10% or more of
         the ownership interests in a tenant of the Company's real property,
         within the meaning of federal income tax laws, or

- -        cause the acquisition of common shares by the redeeming limited partner
         to be "integrated" with any other distribution of common shares for
         purposes of complying with the registration provisions of the
         Securities Act, as amended.

         Instead of the Partnership redeeming the Units, the Company may, in its
sole discretion, elect to purchase the Units directly from the limited partner
for either common shares or cash, as described above. The Company anticipates
that it generally will elect to exchange the Units for common shares. After a
limited partner redeems Units, he will no longer have a right to receive
distributions with respect to those Units.

TAX CONSEQUENCES OF REDEMPTION

         THE FOLLOWING DISCUSSION SUMMARIZES CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS THAT MAY BE RELEVANT TO A LIMITED PARTNER WHO EXERCISES HIS RIGHT
TO REQUIRE THE REDEMPTION OF HIS UNITS. EACH LIMITED PARTNER SHOULD CONSULT HIS
OWN TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE
REDEMPTION AND OWNERSHIP OF HIS UNITS, OF THE OWNERSHIP AND SALE OF THE COMMON
SHARES AND OF THE COMPANY'S ELECTION TO BE TAXED AS A REIT, INCLUDING THE STATE,
LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH REDEMPTION, OWNERSHIP, SALE,
AND ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.



                                       5

<PAGE>   8


         Tax Treatment of Redemption of Units. If the Company assumes and
performs the redemption obligation, the redemption will be treated by the
Company, the Partnership, and the redeeming limited partner as a sale of Units
by the limited partner to the Company at the time of the redemption. The sale
will be fully taxable to the redeeming limited partner. The redeeming limited
partner will be treated as realizing for tax purposes an amount equal to the sum
of (1) the cash or the value of the common shares received in connection with
the redemption plus (2) the amount of any liabilities of the Partnership that
are allocable to the redeemed Units at the time of the redemption (the "amount
realized").

         If the Company does not elect to assume the obligation to redeem a
limited partner's Units and the Partnership instead redeems such Units for cash
or common shares that the Company contributes to the Partnership to effect such
redemption, the redemption likely would be treated for tax purposes as a sale of
such Units in a fully taxable transaction, although the matter is not free from
doubt. In that event, the amount realized by the redeeming partner would be
determined in the same manner as in the preceding paragraph. The determination
of the amount of gain or loss in the event of sale treatment is discussed more
fully below.

         If the Partnership chooses to redeem a limited partner's Units for cash
that is not contributed by the Company to effect the redemption, the tax
consequences would be the same as described in the previous paragraph, except
that if the Partnership redeems less than all of the Units held by a limited
partner, the limited partner would not be permitted to recognize any loss
occurring on the transaction. In addition, the limited partner would recognize
taxable gain only to the extent that the cash, plus the amount of any
liabilities of the Partnership allocable to the redeemed units, exceeded the
limited partner's adjusted basis in all of his Units immediately before the
redemption.

         Tax Treatment of Disposition of Units by Limited Partner Generally. If
a Unit is redeemed in a manner that is treated as a sale of the Unit, or a
limited partner otherwise disposes of a Unit, other than in a transaction that
is treated as a redemption for tax purposes, the gain or loss recognized upon
such sale or disposition will be equal to the excess of the amount realized for
tax purposes over the adjusted tax basis in such Unit. See "-- Basis of Units."
To the extent that the amount realized exceeds the limited partner's basis in
the Unit disposed of, the limited partner will recognize gain. It is possible
that the amount of gain recognized or even the tax liability resulting from such
gain could exceed the amount of cash and the value of any other property (e.g.,
common shares) received upon such disposition.

         Except as described below, any gain recognized upon a sale or other
disposition of Units will be treated as capital gain. To the extent, however,
that the amount realized upon the sale of a Unit that is attributable to a
limited partner's share of "unrealized receivables" (as defined in the federal
income tax laws) of the Partnership exceeds the basis attributable to those
assets, such excess will be treated as ordinary income. Unrealized receivables
include, to the extent not previously included in the Partnership's income, any
rights to payment for services rendered or to be rendered. Unrealized
receivables also include amounts that would be subject to recapture as ordinary
income if the Partnership had sold its assets at their fair market value at the
time of the transfer of a Unit.


                                       6
<PAGE>   9


         Basis of Units. A limited partner's tax basis in his Units will be
determined as follows:

         -     In general, a limited partner who was deemed to have received his
               Units upon the liquidation of a partnership will have an initial
               tax basis in his Units equal to his basis in his partnership
               interest at the time of such liquidation.

         -     In general, a limited partner who contributed a partnership
               interest or other property to the Partnership in exchange for
               Units will have an initial tax basis in the Units equal to his
               basis in the contributed partnership interest or other property.

         -     A limited partner's initial tax basis in his Units generally is
               increased by (1) his share of the Partnership's taxable income
               and (2) increases in his share of the Partnership's liabilities,
               including any increase occurring in connection with the
               transactions resulting in the issuance of the Units. Generally,
               such limited partner's basis in his Units is decreased, but not
               below zero, by (1) his share of distributions from the
               Partnership, (2) decreases in his share of the Partnership's
               liabilities, including any decrease occurring in connection with
               the transactions resulting in the issuance of the Units, (3) his
               share of the Partnership's losses, and (4) his share of
               nondeductible expenditures of the Partnership that are not
               chargeable to capital, such as organization and syndication
               expenses.

         Potential Application of Disguised Sale Rules to a Redemption of Units.
There is a risk that a redemption of Units may cause the limited partner's
original transfer of property to the Partnership in exchange for Units to be
treated as a "disguised sale" of property. The disguised sale rules of the
federal income tax laws generally provide that, unless an exception is
applicable, a partner's contribution of property to a partnership and a
simultaneous or subsequent transfer of money or other consideration, including
the assumption of or taking subject to a liability, from the partnership to the
partner will be presumed to be a sale, in whole or in part, of such property by
the partner to the partnership. In the absence of an applicable exception, if a
partnership transfers money or other consideration to a partner within two years
of the partner's contribution of property to the partnership, the transactions
will be, when viewed together, presumed to be a sale of the contributed property
unless the facts and circumstances clearly establish otherwise. If two years
have passed between the partnership's transfer of money or other consideration
to the partner and the contribution of property, the transactions will be
presumed not to be a sale unless the facts and circumstances clearly establish
that the transfers constitute a sale.

         Accordingly, if a Unit is redeemed by the Partnership, the Internal
Revenue Service could contend that the disguised sale rules apply because the
redeeming limited partner will receive cash or common shares subsequent to his
previous contribution of property to the Partnership. If the Internal Revenue
Service were to make such an assertion, the transactions in connection with the
issuance of the Units themselves could be taxable as a disguised sale. Any gain
recognized thereby may be eligible for installment reporting under the federal
income tax laws, subject to limitations.



                                       7

<PAGE>   10


               COMPARISON OF OWNERSHIP OF UNITS AND COMMON SHARES

         Generally, the nature of an investment in common shares of the Company
is substantially equivalent economically to an investment in Units in the
Partnership. Since the Partnership makes distributions to its partners on a per
Unit basis and the Company, through its wholly-owned subsidiary, owns one Unit
for each outstanding common share, a holder of a common share generally receives
the same distribution that a holder of a Unit receives. In addition,
shareholders and Unit holders (i.e. limited partners of the Partnership)
generally share in the risks and rewards of ownership in the enterprise being
conducted by the Company (through the Partnership and its subsidiaries).
However, there are some differences between ownership of Units and ownership of
Common Shares, some of which may be material to investors.

         The information below highlights a number of the significant
differences between the Partnership and the Company relating to, among other
things, form of organization, permitted investments, policies and restrictions,
management structure, compensation and fees, investor rights and federal income
taxation, and compares certain legal rights associated with the ownership of
Units and common shares, respectively. These comparisons are intended to assist
Limited Partners of the Partnership in understanding how their investment will
be changed if their Units are redeemed for common shares. This discussion is
summary in nature and does not constitute a complete discussion of these
matters. Holders of Units should carefully review the balance of this prospectus
and the registration statement of which this prospectus is a part for additional
important information about the Company.

         Form of Organization and Assets Owned. The Partnership is organized as
a Virginia limited partnership. The Company is organized as a Maryland REIT. The
Company elected to be taxed as a REIT under the Internal Revenue Code commencing
with its taxable year ended December 31, 1994 and intends to maintain its
qualification as a REIT. The Company owns an interest in its hotels through the
approximately 85% ownership interest in the Partnership held by its wholly-owned
subsidiary (the "General Partner"). The Partnership and its subsidiary
partnerships generally own the hotels in fee simple.

         Length of Investment. The Partnership has a stated termination date of
December 31, 2050, although it may be terminated earlier under certain
circumstances. The Company has a perpetual term and intends to continue its
operations for an indefinite time period.

         Additional Equity. The Partnership is authorized to issue Units and
other partnership interests to the partners or to other persons for such
consideration and on such terms and conditions as the General Partner, in its
sole discretion, may deem appropriate. In addition, the General Partner may
cause the Partnership to issue additional Units to the General Partner, or other
partnership interests in one or more different series or classes which may be
senior to the Units, in conjunction with the offering of securities of the
Company having substantially similar rights, for which the General Partner shall
make a capital contribution to the Partnership in an amount equal to the
proceeds of such offering. Consideration for additional partnership interests
may be cash or other property or other assets permitted by Virginia law.

         Under the Declaration of Trust, the total number of shares of all
classes that the Company has the authority to issue is 120,000,000, consisting
of 100,000,000 common shares and 20,000,000 preferred shares. As long as the
Partnership is in existence, all equity capital raised by the Company




                                       8
<PAGE>   11

will be contributed to the Partnership, through the General Partner, in exchange
for Units or other interests in the Partnership.

         Borrowing Policies. The Company's Declaration of Trust limits
consolidated indebtedness to 50% of the Company's investment in hotel
properties, at cost, after giving effect to the Company's use of proceeds from
any indebtedness. For purposes of calculating the Company's consolidated
indebtedness, any indebtedness incurred by the Partnership is included.

         Management and Control. All management and control over the business of
the Partnership is vested in the General Partner, and no limited partner of the
Partnership has any right to participate in or exercise management or control
over the business of the Partnership. The partnership agreement does not provide
for annual meetings of the limited partners. Upon the occurrence of an event of
bankruptcy or the dissolution of the General Partner, the General Partner shall
be deemed to be removed automatically; otherwise, generally the General Partner
may not be removed by the limited partners with or without cause.

         The Board of Trustees has exclusive control over the Company's business
and affairs subject to the restrictions in the Declaration of Trust and Bylaws.
The policies adopted by the Board of Trustees generally may be altered or
eliminated without a vote of the shareholders. Accordingly, except for their
vote in the elections or removals of trustees, shareholders have no control over
the ordinary business policies of the Company. The Board of Trustees cannot take
action to disqualify the Company as a REIT or revoke the Company's election to
qualify as a REIT, however, without the consent of the holders of two-thirds of
the outstanding common shares. The Declaration of Trust provides that a Trustee
may be removed with or without cause only by the affirmative vote of at least
two-thirds of the votes entitled to be cast in the election of Trustees.

         Fiduciary Duties. Under Virginia law, the General Partner of the
Partnership is accountable to the Partnership as a fiduciary and, consequently,
is required to exercise good faith in all of its dealings with respect to
partnership affairs. However, under the partnership agreement, the General
Partner is under no obligation to take into account the tax consequences to any
limited partner of any action taken by it, and the General Partner will have no
liability to a limited partner as a result of any liabilities or damages
incurred or suffered by or benefits not derived by a limited partner as a result
of an action or inaction of the General Partner so long as the General Partner
acted in good faith.

         Under Maryland law, the Company's trustees must perform their duties in
good faith, in a manner that they believe to be in the best interests of the
Company and with the care an ordinarily prudent person would exercise under
similar circumstances. Trustees of the Company who act in such a manner
generally will not be liable to the Company for monetary damages arising from
their activities.

         Management Limitation of Liability and Indemnification. The partnership
agreement generally provides that the General Partner will incur no liability
for monetary damages to the Partnership or any limited partner for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission if the General Partner acted in good faith. In addition, the
General Partner is not responsible for any misconduct or negligence on the part
of its agents provided the General Partner appointed such agents in good faith.
The General Partner may consult



                                       9
<PAGE>   12

with legal counsel, accountants, consultants, real estate brokers and such other
persons and any action it takes or omits to take in reliance upon the opinion of
such persons, as to matters which the General Partner reasonably believes to be
within their professional or expert competence, shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.
The partnership agreement also provides for indemnification of the General
Partner, the directors and officers of the General Partner, and such other
persons as the General Partner may from time to time designate, against any and
all losses, claims, damages, liabilities (joint or several), expenses (including
reasonable legal fees and expenses), judgments, fines, settlements, and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
whether civil, criminal, administrative or investigative, that relate to the
operations of the Partnership in which such person may be involved, or is
threatened to be involved, provided that the Partnership shall not indemnify any
such person (i) for an act or omission of such person that was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty, (ii) such person actually
received an improper benefit in money, property or services or (iii) in the case
of any criminal proceeding, such person had reasonable cause to believe that the
act or omission was unlawful.

         Maryland law permits a Maryland REIT to include in its Declaration of
Trust a provision limiting the liability of its trustees and officers to the
trust and its shareholders for money damages except for liability resulting from
(a) actual receipt of an improper benefit or profit in money, property or
services or (b) active and deliberate dishonesty established by a final judgment
as being material to the cause of action. The Declaration of Trust of the
Company contains such a provision which eliminates such liability to the maximum
extent permitted by Maryland law.

         The Declaration of Trust of the Company obligates the Company, to the
maximum extent permitted by Maryland law, to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former shareholder, trustee, or officer or (b) any individual who,
while a trustee of the Company and at the request of the Company, serves or has
served another corporation, partnership, joint venture, trust, employee benefit
plan or any other enterprise as a trustee, director, officer, partner, employee
or agent of such a corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise from or against any claim or liability to which
such person may become subject or which such person may incur by reason of such
service. The Bylaws of the Company obligate it, to the maximum extent permitted
by Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
trustee or officer who is made a party to the proceeding by reason of his
service in that capacity, (b) any individual who, while a shareholder, trustee
or officer of the Company and at the request of the Company, serves or has
served another corporation, partnership, joint venture, trust, employee benefit
plan or any other enterprise as a trustee, director, officer or partner of such
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise and who is made a party to the proceeding by reason of his service in
that capacity and (c) each shareholder or former shareholder for any claim or
liability to which he may become subject by reason of such status. The
Declaration of Trust and Bylaws also permit the Company to indemnify and advance
expenses to any person who served a predecessor of the Company in any of the
capacities described above and to any employee or agent of the Company or a
predecessor of the Company. The Bylaws require the Company to indemnify any
present or former shareholder, trustee



                                       10
<PAGE>   13

or officer who has been successful, on the merits or otherwise, in the defense
of any proceeding to which he is made a party by reason of his service in that
capacity.

         Maryland law applicable to REITs permits a Maryland REIT to indemnify
and advance expenses to its trustees, officers, employees and agents to the same
extent as permitted by Maryland corporate law for directors and officers of
Maryland corporations. Maryland corporate law permits a corporation to indemnify
its present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation. The Bylaws of the Company require it, as a condition
to advancing expenses, to obtain (a) a written affirmation by the trustee,
director of officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Company as authorized by the Bylaws
and (b) a written statement by or on his behalf to repay the amount paid or
reimbursed by the Company if it shall ultimately be determined that the standard
of conduct was not met.

         Anti-Takeover Provisions. Except in limited circumstances, the General
Partner of the Partnership has exclusive management power over the business and
affairs of the Partnership. The General Partner generally may not be removed by
the limited partners with or without cause. Under the partnership agreement, the
General Partner may, in its sole discretion, prevent a limited partner from
transferring his interest or any rights as a limited partner except in certain
limited, specified circumstances. The General Partner may exercise this right of
approval to deter, delay or hamper attempts by persons to acquire a controlling
interest in the Partnership.

         The "business combination" provisions and, if the applicable provision
in the Bylaws is rescinded, the "control share acquisition" provisions of
Maryland law (each of which is described below), the provisions of the
Declaration of Trust on classification of the Board of Trustees and removal of
trustees and the advance notice provisions of the Bylaws could delay, defer or
prevent a transaction or a change in the control of the Company that might
involve a premium price for holders of Common Shares or otherwise be in their
best interests.

         Business Combinations. Under Maryland corporate law, as applicable to
Maryland real estate investment trusts, certain "business combinations"
(including a merger, consolidation, share exchange or, in certain circumstances,
an asset transfer or issuance or reclassification of equity securities) between
a Maryland REIT and any person who beneficially owns ten percent or more of the
voting power of the trust's shares or an affiliate of the trust who, at any time
within the two-year period prior to the date in question, was the beneficial
owner of ten percent or more of the voting power of the then-outstanding voting
shares of beneficial interest of the trust (an "Interested Shareholder") or an
affiliate thereof becomes prohibited for five years after the most recent date
on which the Interested Shareholder is an Interested Shareholder. Thereafter,
any such business



                                       11
<PAGE>   14

combination must be recommended by the Board of Trustees of the trust and
approved by the affirmative vote of at least (a) 80% of the votes entitled to be
cast by holders of outstanding voting shares of beneficial interest of the trust
and (b) two-thirds of the votes entitled to be cast by holders of voting shares
of the trust other than shares held by the Interested Shareholder with whom (or
with whose affiliate) the business combination is to be effected, unless, among
other conditions, the trust's common shareholders receive a minimum price (as
defined in the law) for their shares and the consideration is received in cash
or in the same form as previously paid by the Interested Shareholders for its
shares. These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the Board of Trustees of the trust
prior to the time that the Interested Shareholder becomes an Interested
Shareholder.

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

         A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the Board of Trustees of the trust to call a special
meeting of shareholders to be held within 50 days of demand to consider the
voting rights of the shares. If no request for a meeting is made, the trust may
itself present the question at any shareholders meeting. If voting rights are
not approved at the meeting or if the acquiring person does not deliver an
"acquiring person statement" as required by the statute, then, subject to
certain conditions and limitations, the trust may redeem any or all of the
control shares (except those for which voting rights have previously been
approved) for fair value determined, without regard to the absence of voting
rights for the control shares, as of the date of the last control share
acquisition by the acquiror or of any meeting of shareholders at which the
voting rights of such shares are considered and not approved. If voting rights
for control shares are approved at a shareholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to vote, all other
shareholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition.

         The control share acquisition statute does not apply (a) to shares
acquired in a merger, consolidation or share exchange if the trust is a party to
the transaction or (b) to acquisitions approved or exempted by the Declaration
of Trust or Bylaws of the trust.



                                       12
<PAGE>   15


         The Bylaws of the Company contain a provision exempting from the
control share acquisition statute any and all acquisitions by any person of the
Company's common shares or preferred shares. There can be no assurance that such
provision will not be amended or eliminated at any time in the future.

         Voting Rights. Under the partnership agreement, the limited partners
have voting rights only as to the dissolution of the Partnership and certain
amendments of the partnership agreement. Otherwise, all decisions relating to
the operation and management of the Partnership are made by the General Partner.
The Company, through the General Partner, currently owns approximately 85% of
the outstanding Units. As Units held by limited partners are redeemed, the
Company's percentage ownership of the Units will increase. If additional Units
are issued to third parties, the Company's percentage ownership of the Units
will decrease.

         Shareholders of the Company have the right to vote on, among other
things, elections of trustees, a merger or sale of substantially all of the
assets of the Company, certain amendments to the Declaration of Trust,
termination of the status of the Company as a REIT, and dissolution of the
Company. All common shares have one vote per share, and the Declaration of Trust
permits the Board of Trustees to classify and issue preferred shares in one or
more series having voting power which may differ from that of the common shares.
See "Description of Shares of Beneficial Interest."

         Amendment of the Partnership Agreement or the Declaration of Trust. The
partnership agreement may be amended by the General Partner without the consent
of the limited partners in any respect, except that the consent of limited
partners holding more than 66 2/3% of the Units held by the limited partners is
required for any amendment that would (i) affect, the rights of limited partners
to redeem Units, (ii) adversely affect the rights of limited partners to receive
distributions payable to them under the partnership agreement, (iii) alter the
Partnership's profit and loss allocations, or (iv) impose any obligation upon
the limited partners to make additional capital contributions to the
Partnership.

         The Declaration of Trust may be amended by the affirmative vote of the
holders of at least a majority of all of the votes entitled to be cast on the
matter; provided that certain provisions of the Declaration of Trust regarding
(i) disqualification of the company as a REIT, (ii) Independent Trustees or the
removal of Trustees, (iii) the restrictions on transfer of the common shares and
the preferred shares, and (iv) the debt limitation described in "Comparison of
Ownership of Units and Common Shares", may not be amended, altered, changed or
repealed without the approval of two-thirds of all of the votes entitled to be
cast on the matter. The Company's Bylaws may be amended or altered exclusively
by the Board of Trustees or a committee thereof, except for provisions of the
Bylaws relating to the sales of certain hotels and transactions involving the
Company in which an advisor, Trustee or officer has an interest, which may be
altered or repealed upon the vote of shareholders holding at least two-thirds of
the shares of the Company entitled to vote generally in the election of
Trustees.

         Vote Required to Dissolve the Partnership or the Company. At any time
prior to December 31, 2050 (upon which date the Partnership shall terminate),
the General Partner may elect



                                       13
<PAGE>   16

to dissolve the Partnership in its sole discretion. Such dissolution shall also
occur upon (i) the bankruptcy, dissolution or withdrawal of the General Partner
(unless the limited partners elect to continue the Partnership and select a
substitute general partner by unanimous consent), (ii) the passage of 90 days
after the sale or other disposition of all or substantially all the assets of
the Partnership or (iii) the redemption of all limited partnership interests in
the Partnership (other than those held by the General Partner, if any).

         Pursuant to the Company's Declaration of Trust, the Board of Trustees
must obtain approval of two-thirds of all of the votes entitled to be cast upon
such proposal in order to dissolve the Company.

         Vote Required to Sell Assets or Merge. Under the partnership agreement,
the sale, exchange, transfer or other disposition of all or substantially all of
the Partnership's assets or merger or consolidation of the Partnership requires
only the consent of the General Partner. Pursuant to Maryland law applicable to
REITs, a REIT generally cannot merge, unless approved by its Board of Trustees
and the affirmative vote or written consent of shareholders holding at least
two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be case
on the matter) is set forth in the REIT's Declaration of Trust. The Company's
Declaration of Trust does not provide for a lesser percentage in such
situations. Under the Declaration of Trust, Board of Trustees approval and such
two-thirds affirmative vote of the Company's shareholders is required for any
proposed merger or consolidation of the Company or for the sale, lease, exchange
or transfer of substantially all of the Company's assets. No approval of the
shareholders is required for the sale of the Company's assets in the usual and
regular course of business.

         Operations. In addition to the administrative and operating costs and
expenses incurred by the Partnership, the Partnership will pay all
administrative costs and expenses of the Company and the General Partner
(collectively, the "Company Expenses") and the Company Expenses will be treated
as expenses of the Partnership. The Company Expenses generally will include (i)
all expenses relating to the formation and continuity of existence of the
Company and the General Partner, (ii) all expenses relating to the public
offering and registration of securities by the Company, (iii) all expenses
associated with the preparation and filing of any period reports by the Company
under federal, state or local laws or regulations, (iv) all expenses associated
with compliance by the Company and the General Partner with laws, rules and
regulations promulgated by any regulatory body and (v) all other operating or
administrative costs of the General Partner incurred in the ordinary course of
its business on behalf of the Partnership. The Company Expenses, however, will
not include any administrative and operating costs and expenses incurred by the
Company that are attributable to hotel properties owned the Company directly or
to partnership interests in any subsidiary partnership directly owned by the
Company.

         Compensation, Fees and Distributions. The General Partner does not
receive any compensation for its services as General Partner of the Partnership.
As a partner in the Partnership, however, the General Partner has the same right
to allocations and distributions as other partners of the Partnership. In
addition, the Partnership will reimburse the General Partner and the Company



                                       14

<PAGE>   17

for all expenses incurred relating to the ongoing operation of the Partnership
and any offering of partnership interests in the Partnership or securities of
the Company.

         Liability of Investors. Under the partnership agreement and applicable
state law, the liability of the limited partners for the Partnership's debts and
obligations is generally limited to the amount of their investment in the
Partnership and limited partners generally are not liable for any debts,
liabilities, contracts or obligations of the Partnership.

         Under Maryland law, the Company's shareholders are not personally
liable for the debts or obligations of the Company.

         Nature of Investments. The Units constitute equity interests entitling
each limited partner to his pro rata share of cash distributions made to the
limited partners of the Partnership. The Partnership generally intends to retain
and reinvest proceeds of the sale of property or excess refinancing proceeds in
its business.

         The common shares constitute equity interests in the Company. The
Company is entitled to receive its pro rata shares of distributions made by the
Partnership with respect to the Units, and each shareholder will be entitled to
his pro rata share of any dividends or distributions paid with respect to the
common shares. The dividends payable to the shareholders are not fixed in amount
and are only paid if, when and as declared by the Board of Trustees. In order to
qualify as a REIT, the Company must distribute at least 95% of its taxable
income (excluding capital gains), and any taxable income (including capital
gains) not distributed will be subject to corporate income tax.

         Potential Dilution of Rights. The General Partner of the Partnership is
authorized, in its sole discretion and without the consent of the limited
partners, to cause the Partnership to issue additional limited partnership
interests and other equity securities for any partnership purpose at any time to
the limited partners or to other persons on terms and conditions established by
the General Partner.

         The Board of Trustees of the Company may issue, in its discretion,
additional common shares and may have the authority to issue from the authorized
capital stock a variety of other equity securities of the Company with such
powers, preferences and rights as the Board of Trustees may designate at the
time. The issuance of additional common shares or other equity securities may
result in the dilution of the interests of the shareholders.

         Liquidity. Subject to certain exceptions, a limited partner may not
transfer all or any portion of his Units without (i) obtaining the prior written
consent of the General Partner, which consent may be withheld in the sole and
absolute discretion of the General Partner, and (ii) meeting certain other
requirements set forth in the partnership agreement. Notwithstanding the
foregoing, subject to certain restrictions and more expansive rights in certain
cases, a limited partner may transfer his Units to (a) an immediate family
member (defined in the Partnership Agreement as an individual limited partner's
spouse, children and grandchildren) of an individual limited partner or any
trust in which the individual limited partner or his immediate family members
own, collectively, 100% of the beneficial interests or (b) for a corporation or
other business entity to any of such limited partner's affiliates, subsidiaries
or any successor-in-interest of such limited partner, provided that, in either
case, such transferee is an "accredited investor" within the meaning of
Regulation D


                                       15

<PAGE>   18

promulgated under the Securities Act of 1933. Limited partners should expect to
hold their Units until they redeem them for cash or common shares, or until the
Partnership terminates. The right of a transferee in a donative transfer to
become a substituted limited partner also is subject to the consent of the
General Partner, which consent may be withheld in its sole and absolute
discretion. If the General Partner does not consent to the admission of a
transferee in a donative transfer, the transferee will succeed to all economic
rights and benefits attributable to such Units (including the right of
redemption) but will not become a limited partner or possess any other rights of
limited partners (including the right to vote on or consent to actions of the
Partnership). The General Partner may require, as a condition of any transfer,
that the transferring limited partner assume all costs incurred by the
Partnership in connection with such transfer.

         The common shares are listed on the NYSE under the symbol "KPA." The
breadth and strength of the secondary market for the common shares at any time
depends on, among other things, upon the number of shares outstanding, the
Company's financial results and prospects, the general interest in the Company's
and other real estate investments, and the Company's dividend yield compared to
that of other debt and equity securities.

         Federal Income Taxation. The Partnership is not subject to federal
income taxes. Instead, each holder of an interest in the Partnership takes into
account its allocable share of the Partnership's taxable income or loss in
determining its federal income tax liability.

         Income and loss from the Partnership generally are subject to the
"passive activity" limitations. Under the "passive activity" rules, income or
loss from the Partnership that is considered "passive" income or loss generally
can be offset against income or loss, including passive loss carry-forwards from
prior years, from other investments that constitute "passive activities."
However, if the Partnership is considered a "publicly traded partnership," then
income and loss from the Partnership can only be offset against other income and
loss from the Partnership. Income of the Partnership that is attributable to
dividends or interest does not qualify as passive income and cannot be offset
with losses and deductions from a "passive activity."

         Cash distributions from the Partnership are not taxable to a holder of
Units except to the extent they exceed the holder's basis in its Units, which
will include such holder's allocable share of the Partnership's debt. Each year,
holders of Units will receive a Schedule K-1 tax form containing detailed tax
information for inclusion in preparing their federal income tax returns. Holders
of Units are required in some cases to file state income tax returns and/or pay
state income taxes in the states where the Partnership owns property, even if
they are not residents of those states, and in some such states the Partnership
is required to remit a withholding tax with respect to distributions to such
nonresidents.

         The Company has elected to be taxed as a REIT for federal income tax
purposes effective for its taxable year ended December 31, 1994. So long as it
qualifies as a REIT, the Company generally will not be subject to federal income
tax on the taxable income that it distributes to its shareholders. The Company,
however, will be subject to federal income tax on income that is not distributed
and also may be subject to federal income and excise taxes in particular
circumstances.



                                       16

<PAGE>   19

The maximum federal income tax rate for corporations currently is 35% and for
individuals is 39.6%.

         Dividends paid by the Company to its shareholders will be treated as
"portfolio" income and cannot be offset with losses from "passive activities."
Distributions made by the Company to its taxable domestic shareholders out of
its current or accumulated earnings and profits will be taken into account by
them as ordinary income. Distributions that are designated as capital gain
dividends generally will be taxed as long-term capital gain, subject to
limitations. Distributions in excess of the Company's current and accumulated
earnings and profits will be treated as a non-taxable return of capital to the
extent of a shareholder's adjusted basis in its common shares, and the excess
over a shareholder's adjusted basis will be taxed as capital gain. Each year,
the Company's shareholders, other than some institutional investors, will
receive IRS Form 1099, which is used by corporations to report dividends paid to
their shareholders. Shareholders who are individuals generally should not be
required to file state income tax returns and/or pay state income taxes outside
of their state of residence with respect to the Company's operations and
distributions. The Company may be required to pay state income and/or franchise
taxes in some states.




                                       17

<PAGE>   20
                FEDERAL INCOME TAX CONSEQUENCES OF THE COMPANY'S
                                STATUS AS A REIT

         This section summarizes the federal income tax issues that you, as a
shareholder, may consider relevant. Because this section is a summary, it does
not address all of the tax issues that may be important to you. In addition,
this section does not address the tax issues that may be important to
shareholders that are subject to special treatment under the federal income tax
laws, such as insurance companies, tax-exempt organizations, except to the
extent discussed in "--Taxation of Tax-Exempt Shareholders" below, financial
institutions or broker-dealers, and non-U.S. individuals and foreign
corporations, except to the extent discussed in "--Taxation of Non-U.S.
Shareholders" below.

         The statements in this section are based on the current federal income
tax laws governing qualification as a REIT. We cannot assure you that new laws,
interpretations thereof, or court decisions, any of which may take effect
retroactively, will not cause any statement in this section to be inaccurate.

- --------------------------------------------------------------------------------
         We urge you to consult your own tax advisor regarding the specific tax
consequences to you of owning the common shares and of the Company's election to
be taxed as a REIT. Specifically, you should consult your own tax advisor
regarding the federal, state, local, foreign, and other tax consequences of such
ownership and election, and regarding potential changes in applicable tax laws.
- --------------------------------------------------------------------------------

TAXATION OF THE COMPANY

         The Company elected to be taxed as a REIT under the federal income tax
laws commencing with its short taxable year ended December 31, 1994. We believe
that the Company has operated in a manner intended to qualify as a REIT since
its election to be a REIT and the Company intends to continue to so operate.
This section discusses the laws governing the federal income tax treatment of a
REIT and its shareholders. These laws are highly technical and complex.

         The Company's qualification as a REIT depends on its ability to meet on
a continuing basis qualification tests set forth in the federal tax laws. Those
qualification tests involve the percentage of income that the Company earns from
specified sources, the percentage of its assets that fall within specified
categories, the diversity of its share ownership, and the percentage of its
earnings that it distributes. We describe the REIT qualification tests in more
detail below. For a discussion of the tax treatment of the Company and its
shareholders if it fails to qualify as a REIT, see "--Failure to Qualify."

         If the Company qualifies as a REIT, it generally will not be subject to
federal income tax on the taxable income that it distributes to its
shareholders. The benefit of that tax treatment is that the Company avoids the
"double taxation," or taxation at both the corporate and shareholder levels,
that generally results from owning stock in a corporation. However, the Company
will be subject to federal tax in the following circumstances:


                                       18
<PAGE>   21

- -    The Company will pay federal income tax on taxable income, including net
     capital gain, that it does not distribute to its shareholders during, or
     within a specified time period after, the calendar year in which the income
     is earned.

- -    The Company may be subject to the "alternative minimum tax" on any items of
     tax preference that it does not distribute or allocate to its shareholders.

- -    The Company will pay income tax at the highest corporate rate on (1) net
     income from the sale or other disposition of property acquired through
     foreclosure ("foreclosure property") that it holds primarily for sale to
     customers in the ordinary course of business and (2) other nonqualifying
     income from foreclosure property.

- -    The Company will pay a 100% tax on net income from sales or other
     dispositions of property, other than foreclosure property, that it holds
     primarily for sale to customers in the ordinary course of business.

- -    If the Company fails to satisfy the 75% gross income test or the 95% gross
     income test, as described below under "--Requirements for
     Qualification--Income Tests," and nonetheless continues to qualify as a
     REIT because it meets other requirements, it will pay a 100% tax on (1) the
     gross income attributable to the greater of the amounts by which it fails
     the 75% and 95% gross income tests, multiplied by (2) a fraction intended
     to reflect its profitability.

- -    If the Company fails to distribute during a calendar year at least the sum
     of (1) 85% of its REIT ordinary income for such year, (2) 95% of its REIT
     capital gain net income for such year, and (3) any undistributed taxable
     income from prior periods, it will pay a 4% excise tax on the excess of
     such required distribution over the amount it actually distributed.

- -    The Company may elect to retain and pay income tax on its net long-term
     capital gain.

- -    If the Company acquires any asset from a C corporation, or a corporation
     generally subject to full corporate-level tax, in a merger or other
     transaction in which the Company acquires a basis in the asset that is
     determined by reference to the C corporation's basis in the asset, or
     another asset, the Company will pay tax at the highest regular corporate
     rate applicable if it recognizes gain on the sale or disposition of such
     asset during the 10-year period after it acquires such asset. The amount of
     gain on which the Company will pay tax is the lesser of (1) the amount of
     gain that it recognizes at the time of the sale or disposition and (2) the
     amount of gain that it would have recognized if it had sold the asset at
     the time it acquired the asset. The rule described in this paragraph will
     apply assuming that the Company makes an election under IRS Notice 88-19
     upon its acquisition of an asset from a C corporation.



                                       19
<PAGE>   22

REQUIREMENTS FOR QUALIFICATION

         A REIT is a corporation, trust, or association that meets the following
requirements:

         1. it is managed by one or more trustees or directors;

         2. its beneficial ownership is evidenced by transferable shares, or by
            transferable certificates of beneficial interest;

         3. it would be taxable as a domestic corporation, but for the REIT
            provisions of the federal income tax laws;

         4. it is neither a financial institution nor an insurance company
            subject to special provisions of the federal income tax laws;

         5. at least 100 persons are beneficial owners of its shares or
            ownership certificates;

         6. not more than 50% in value of its outstanding shares or ownership
            certificates is owned, directly or indirectly, by five or fewer
            individuals, as defined in the federal income tax laws to include
            specified entities, during the last half of any taxable year;

         7. it elects to be a REIT, or has made such election for a previous
            taxable year, and satisfies all relevant filing and other
            administrative requirements established by the Internal Revenue
            Service that must be met to elect and maintain REIT status;

         8. it uses a calendar year for federal income tax purposes and complies
            with the recordkeeping requirements of the federal income tax laws;
            and

         9. it meets other qualification tests, described below, regarding the
            nature of its income and assets.

         The Company must meet requirements 1 through 4 during its entire
taxable year and must meet requirement 5 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. If the Company complies with all the requirements for ascertaining
the ownership of its outstanding shares in a taxable year and has no reason to
know that it violated requirement 6, it will be deemed to have satisfied
requirement 6 for such taxable year. For purposes of determining share ownership
under requirement 6, an "individual" generally includes a supplemental
unemployment compensation benefits plan, a private foundation, or a portion of a
trust permanently set aside or used exclusively for charitable purposes. An
"individual," however, generally does not include a trust that is a qualified
employee pension or profit sharing trust under the federal income tax laws, and
beneficiaries of such a trust will be treated as holding the Company's shares in
proportion to their actuarial interests in the trust for purposes of
requirement 6.

         The Company believes that it has issued sufficient shares of beneficial
interest with sufficient diversity of ownership to satisfy requirements 5 and 6
set forth above. In addition, the Company's Declaration of Trust restricts the
ownership and transfer of its outstanding shares of beneficial interest so that
it should continue to satisfy requirements 5 and 6. The provisions of the
Declaration


                                       20
<PAGE>   23

of Trust restricting the ownership and transfer of the common shares are
described in "Restrictions on Ownership of Shares of Beneficial Interest."

         The Company currently has a significant number of wholly-owned
corporate subsidiaries and may have additional corporate subsidiaries in the
future. A corporation that is a "qualified REIT subsidiary" is not treated as a
corporation separate from its parent REIT. All assets, liabilities, and items of
income, deduction, and credit of a "qualified REIT subsidiary" are treated as
assets, liabilities, and items of income, deduction, and credit of the REIT. A
"qualified REIT subsidiary" is a corporation, all of the capital stock of which
is owned by the REIT. The Company's current corporate subsidiaries are
"qualified REIT subsidiaries." Thus, in applying the requirements described
herein, those subsidiaries and any other "qualified REIT subsidiary" that the
Company acquires or forms will be ignored, and all assets, liabilities, and
items of income, deduction, and credit of each such subsidiary will be treated
as assets, liabilities, and items of income, deduction, and credit of the
Company.

         In the case of a REIT that is a partner in a partnership, the REIT is
treated as owning its proportionate share of the assets of the partnership and
as earning its allocable share of the gross income of the partnership for
purposes of the applicable REIT qualification tests. Thus, the Company's
proportionate share of the assets, liabilities, and items of income of the
Partnership, its subsidiary partnerships, and any other partnership in which the
Company acquires an interest are treated as assets and gross income of the
Company for purposes of applying the various REIT qualification requirements.

         INCOME TESTS

         The Company must satisfy two gross income tests annually to maintain
its qualification as a REIT. First, at least 75% of its gross income for each
taxable year must consist of defined types of income that it derives, directly
or indirectly, from investments relating to real property or mortgages on real
property or temporary investment income. Qualifying income for purposes of the
75% gross income test includes:

          -    rents from real property;

          -    interest on debt secured by mortgages on real property or on
               interests in real property; and

          -    dividends or other distributions on and gain from the sale of
               shares in other REITs.

         Second, in general, at least 95% of the Company's gross income for each
taxable year must consist of income that is qualifying income for purposes of
the 75% gross income test, dividends, other types of interest, gain from the
sale or disposition of stock or securities, or any combination of the foregoing.
Gross income from the sale of property that the Company holds primarily for sale
to customers in the ordinary course of business is excluded from both income
tests. The following paragraphs discuss the specific application of these tests
to the Company.



                                       21
<PAGE>   24

         Rents. Pursuant to percentage leases, the Lessees lease from the
Partnership and the subsidiary partnerships (together, the "Innkeepers
Partnerships") the land, buildings, improvements, furnishings and equipment
comprising the hotels for up to a 13-year period. The percentage leases provide
that the Lessees are obligated to pay (1) the greater of a base rent or
percentage rent and (2) other additional charges. The percentage rent is
calculated by multiplying fixed percentages by the gross room revenues above and
below established thresholds for each of the hotels. The base rent accrues and
is required to be paid monthly. Percentage rent is due monthly or quarterly.

         In order for the base rent, the percentage rent, and the additional
charges to constitute "rents from real property," the percentage 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 percentage leases are true leases depends on an
analysis of all the surrounding facts and circumstances. In making such a
determination, courts have considered a variety of factors, including the
following:

         -     the intent of the parties;
         -     the form of the agreement;
         -     the degree of control over the property that is retained by the
               property owner, such as whether the lessee has substantial
               control over the operation of the property or whether the lessee
               is required simply to use its best efforts to perform its
               obligations under the agreement; and
         -     the extent to which the property owner retains the risk of loss
               with respect to the property, such as whether the lessee bears
               the risk of increases in operating expenses or the risk of damage
               to the property.

         In addition, federal income tax law provides that a contract that
purports to be a service contract or a partnership agreement is treated instead
as a lease of property if the contract is properly treated as such, taking into
account all relevant factors, including whether:

         -     the service recipient is in physical possession of the property;
         -     the service recipient controls the property;
         -     the service recipient has a significant economic or possessory
               interest in the property - such as whether the property's use is
               likely to be dedicated to the service recipient for a substantial
               portion of the useful life of the property - the recipient shares
               the risk that the property will decline in value, the recipient
               shares in any appreciation in the value of the property, the
               recipient shares in savings in the property's operating costs, or
               the recipient bears the risk of damage to or loss of the
               property;
         -     the service provider does not bear any risk of substantially
               diminished receipts or substantially increased expenditures if
               there is nonperformance under the contract;
         -     the service provider does not use the property concurrently to
               provide significant services to entities unrelated to the service
               recipient; and
         -     the total contract price does not substantially exceed the rental
               value of the property for the contract period.


                                       22
<PAGE>   25

Since the determination of whether a service contract should be treated as a
lease is inherently factual, the presence or absence of any single factor may
not be dispositive in every case.

         The Company believes that the percentage leases will be treated as true
leases for federal income tax purposes. Such belief is based, in part, on the
following facts:

         -    the Innkeepers Partnerships and the Lessees intend for their
              relationship to be that of a lessor and lessee and such
              relationship is documented by lease agreements;
         -    the Lessees have the right to the exclusive possession, use, and
              quiet enjoyment of the hotels during the term of the percentage
              leases;
         -    the Lessees bear the cost of, and are responsible for, day-to-day
              maintenance and repair of the hotels, other than the cost of
              maintaining underground utilities and structural elements and the
              cost of certain capital improvements, and dictate how the hotels
              are operated, maintained, and improved;
         -    the Lessees bear all of the costs and expenses of operating the
              hotels, including the cost of any inventory used in their
              operation, during the term of the percentage leases, other than
              real and personal property taxes, property and casualty insurance
              premiums (other than with respect to the Summerfield Hotels, where
              the Summerfield Lessee is responsible for such premiums), the cost
              of replacement or refurbishment of furniture, fixtures and
              equipment, and certain capital expenditures;
         -    the Lessees benefit from any savings in the costs of operating the
              hotels during the term of the percentage leases;
         -    in the event of damage to or destruction of a hotel, generally the
              applicable Lessee is at economic risk because it is obligated
              either (A) to restore the property to its prior condition, in
              which event it will bear all costs of such restoration in excess
              of any insurance proceeds, or (B) to purchase the hotel for an
              amount generally equal to the fair market value of the property,
              less any insurance proceeds;
         -    each Lessee has indemnified the applicable Innkeepers Partnership
              against all liabilities imposed on the Innkeepers Partnerships
              during the term of the percentage leases by reason of (A) injury
              to persons or damage to property occurring at the hotels, (B) its
              use, management, maintenance, or repair of the hotels, (C) any
              environmental liability caused by acts or grossly negligent
              failures to act of the Lessee, (D) taxes and assessments in
              respect of the hotels that are the obligation of the Lessee, or
              (E) any breach of the percentage leases or of any sublease of a
              hotel by the Lessee;
         -    the Lessees are obligated to pay substantial fixed rent for the
              period of use of the hotels;
         -    the Lessees stand to incur substantial losses or reap substantial
              gains depending on how successfully they operate the hotels;
         -    the Innkeepers Partnerships cannot use the hotels concurrently to
              provide significant services to entities unrelated to the Lessees;
              and
         -    the total contract price under the percentage leases does not
              substantially exceed the rental value of the hotels for the term
              of the percentage leases.

         If the percentage leases are characterized as service contracts or
partnership agreements, rather than as true leases, part or all of the payments
that the Innkeepers Partnerships receive from



                                       23
<PAGE>   26

the Lessees may not be considered rent or may not otherwise satisfy the various
requirements for qualification as "rents from real property." In that case, the
Company likely would not be able to satisfy either the 75% or 95% gross income
test and, as a result, would lose its REIT status.

         In order for the base rent, the percentage rent, and the additional
charges to constitute "rents from real property," the following conditions must
be met:

         -  First, the rent must not be based, in whole or in part, on the
            income or profits of any person, but may be based on a fixed
            percentage or percentages of receipts or sales.

         -  Second, neither the Company nor a direct or indirect owner of 10%
            or more of its shares of beneficial interest may own, actually or
            constructively, 10% or more of a tenant from whom the Company
            receives rent.

         -  Third, all of the rent received under a lease of real property
            will not qualify as "rents from real property" unless the rent
            attributable to the personal property leased in connection with
            such lease is no more than 15% of the total rent received under the
            lease.

         -  Finally, the Company generally must not operate or manage its real
            property or furnish or render services to its tenants, other than
            through an "independent contractor" who is adequately compensated
            and from whom the Company does not derive revenue. However, the
            Company need not provide services through an "independent
            contractor," but instead may provide services directly, if the
            services are "usually or customarily rendered" in connection with
            the rental of space for occupancy only and are not considered to
            be provided for the tenants' convenience. In addition, the
            Company may provide a minimal amount of "noncustomary" services
            to the tenants of a property, other than through an independent
            contractor, as long as its income from the services does not
            exceed 1% of its income from the related property.

         As stated above, the percentage rent must not be based in whole or in
part on the income or profits of any person. Percentage rent, however, will
qualify as "rents from real property" if it is based on percentages of receipts
or sales and the percentages:

         -  are fixed at the time the percentage leases are entered into;
         -  are not renegotiated during the term of the percentage leases in a
            manner that has the effect of basing percentage rent on income or
            profits; and
         -  conform with normal business practice.

More generally, the percentage rent will not qualify as "rents from real
property" if, considering the percentage 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. Because the percentage rent is based on fixed percentages of the gross
room revenues from the hotels that are established in the percentage leases, and
the Company has represented that the percentages (1) will not be renegotiated
during the term of the percentage leases in a manner that


                                       24
<PAGE>   27

has the effect of basing the percentage rent on income or profits and (2)
conform with normal business practice, the percentage rent should not be
considered based in whole or in part on the income or profits of any person.
Furthermore, the Company has represented that, with respect to other hotel
properties that it acquires in the future, it will not charge rent for any
property that is based in whole or in part on the income or profits of any
person, except by reason of being based on a fixed percentage of gross revenues,
as described above.

         Second, the Company must not own, actually or constructively, 10% or
more of any lessee (a "related party tenant"). The constructive ownership rules
of the federal income tax laws generally provide that, if 10% or more in value
of the Company's shares of beneficial interest is owned, directly or indirectly,
by or for any person, the Company is considered as owning the stock owned,
directly or indirectly, by or for such person. The Company does not own directly
any stock in any Lessee. The Company's Declaration of Trust prohibits any
shareholder from transferring common and preferred shares if the transfer would
cause the Company to own, actually or constructively, 10% or more of the
ownership interests in a tenant of its real property. Thus, the Company should
never own, actually or constructively, 10% or more of any lessee. Furthermore,
the Company has represented that, with respect to other hotel properties that it
acquires in the future, it will not lease any property to a "related party
tenant." However, because the constructive ownership rules are broad and it is
not possible to monitor continually direct and indirect transfers of the shares
of beneficial interest, the Company cannot guarantee that such transfers or
other events of which it has no knowledge will not cause it to own
constructively own 10% or more of a lessee at some future date.

         Third, the Company's rent attributable to personal property leased in
connection with a hotel must not exceed 15% of the rent received under the
lease. The rent attributable to the personal property in a hotel is the amount
that bears the same ratio to total rent for the taxable year as:

         -  the average of the adjusted bases of the personal property in the
            hotel at the beginning and at the end of the taxable year bears to
         -  the average of the aggregate adjusted bases of both the real and
            personal property comprising the hotel at the beginning and at the
            end of such taxable year (the "adjusted basis ratio").

With respect to certain of the Company's hotels, the adjusted basis ratio has
exceeded 15% for certain taxable years. As a consequence, the portion of the
rent received with respect to those hotels in those taxable years that is
attributable to personal property did not and does not qualify as rents from
real property. The amount of disqualified income from those hotels, however, did
not and will not prevent the Company from qualifying as a REIT or subject it to
any federal income taxation. With respect to the Company's other hotels, if the
adjusted basis ratio for any hotel exceeds 15% and the income attributable to
excess personal property would prevent the Company from qualifying as a REIT or
would subject it to any federal income taxation, a portion of the personal
property at that hotel will be acquired or leased (other than from the Company
or an Innkeepers Partnership) by the Lessee and the lease payments under the
percentage lease will be adjusted appropriately. Further, the Company
anticipates that any additional personal property that it acquires will not
cause it to lose


                                       25
<PAGE>   28

its REIT status or subject it to any federal income taxation. There can be no
assurance, however, that the Internal Revenue Service will not assert that the
personal property that the Company acquires has a value in excess of its
appraised value, or that a court will not uphold such assertion.

         Finally, neither the Company nor the Innkeepers Partnerships can
furnish or render noncustomary services to the tenants of the hotels, or manage
or operate the hotels, other than through an independent contractor who is
adequately compensated and from whom they do not derive or receive any income.
However, the Company may provide a minimal amount of noncustomary services to
the tenants of a property, other than through an independent contractor, as long
as its income from the services does not exceed 1% of its income from the
related property. Provided that the percentage leases are respected as true
leases, the Company should satisfy that requirement because neither the Company
nor any Innkeepers Partnership performs, nor will it perform, any services other
than customary ones for the Lessees. Furthermore, the Company has represented
that, with respect to each other hotel property that it acquires in the future,
it will not perform noncustomary services with respect to the tenant of the
property. As described above, however, if the percentage leases are
recharacterized as service contracts or partnership agreements, the rent likely
would be disqualified as "rents from real property" because the Innkeepers
Partnerships would be considered to furnish or render services to the occupants
of the hotels and to manage or operate the hotels other than through an
independent contractor.

         Additional Charges. In addition to the rent, the Lessees are required
to pay the additional charges to the Innkeepers Partnerships. To the extent that
the additional charges represent either (1) reimbursements of amounts that the
Lessees are obligated to pay to third parties or (2) penalties for nonpayment or
late payment of such amounts, the additional charges should qualify as "rents
from real property." To the extent, however, that the additional charges
represent interest accrued on the late payment of the rent or the additional
charges, the additional charges should not qualify as "rents from real
property," but instead should be treated as interest that qualifies for the 95%
gross income test.

         Interest. The term "interest" generally does not include any amount
received or accrued 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.

         Foreclosure Property. The Company will incur a 100% tax on the net
income derived from any sale or other disposition of property, other than
foreclosure property, that the Company holds primarily for sale to customers in
the ordinary course of a trade or business. The Company believes that none of
its assets is held for sale to customers and that a sale of any such asset would
not be in the ordinary course of business. Whether a REIT holds an asset
"primarily for sale to customers in the ordinary course of a trade or business"
depends, however, on the facts and circumstances in effect from time to time,
including those related to a particular asset. Nevertheless, the Company will
attempt to comply with the terms of safe-harbor provisions in the federal income
tax laws prescribing when an asset sale will not be characterized as a
prohibited transaction. The Company cannot assure investors, however, that it
can comply with such safe-harbor provisions or that it will


                                       26
<PAGE>   29

avoid owning property that may be characterized as property that is held
"primarily for sale to customers in the ordinary course of a trade or business."

         Hedging Activities. In the future, the Company and/or an Innkeepers
Partnership may enter into hedging transactions with respect to one or more of
its assets or liabilities. Those hedging activities may include entering into
interest rate swaps, caps, and floors, options to purchase such items, and
futures and forward contracts. To the extent that the Company or an Innkeepers
Partnership enters into an interest rate swap or cap contract, option, futures
contract, forward rate agreement, or any similar financial instrument to hedge
indebtedness incurred to acquire or carry "real estate assets," any periodic
income or gain from the disposition of such contract should be qualifying income
for purposes of the 95% gross income test, but not the 75% gross income test. To
the extent that the Company or an Innkeepers Partnership hedges with other types
of financial instruments, or in other situations, it is not entirely clear how
the income from those transactions will be treated for purposes of the gross
income tests. The Company intends to structure any hedging transactions in a
manner that does not jeopardize its status as a REIT.

         Failure to Satisfy Income Tests. The Company's investment, through the
Innkeepers Partnerships, in the hotels in major part gives rise to income that
is qualifying income for purposes of both gross income tests. The Company
believes that, other than the late charges attributable to rent, which are
treated as interest that qualifies for the 95% gross income test but not the 75%
gross income test, those revenues qualify as rents from real property for
purposes of both gross income tests. Gains on sales of the hotels or a sale of
the Company's interest in the Partnership generally will be qualifying income
for purposes of both gross income tests. The Company anticipates that income on
its other investments will not result in its failing either gross income test
for any year.

         If, however, the Company fails to satisfy one or both of the gross
income tests for any taxable year, the Company nevertheless may qualify as a
REIT for such year if it qualifies for relief under the federal income tax laws.
Those relief provisions generally will be available if:

         -  its failure to meet such tests is due to reasonable cause and not
            due to willful neglect;

         -  it attaches a schedule of the sources of its income to its tax
            return; and

         -  any incorrect information on the schedule was not due to fraud with
            intent to evade tax.

         The Company cannot predict, however, whether in all circumstances it
would qualify for the relief provisions. In addition, as discussed above in
"--Taxation of the Company," even if the relief provisions apply, the Company
would incur a 100% tax on the gross income attributable to the greater of the
amounts by which it fails the 75% and 95% gross income tests, multiplied by a
fraction intended to reflect its profitability.


                                       27
<PAGE>   30

         ASSET TESTS

         To maintain its qualification as a REIT, the Company also must satisfy
two asset tests at the close of each quarter of each taxable year. First, at
least 75% of the value of its total assets must consist of:

         -  cash or cash items, including receivables;

         -  government securities;

         -  interests in real property, including leaseholds and options to
            acquire real property and leaseholds;

         -  interests in mortgages on real property;

         -  stock in other REITs; and

         -  investments in stock or debt instruments during the one-year
            period following the receipt of new capital that the Company
            raises through equity offerings or offerings of debt with at least
            a five-year term.

The second asset test has two components:

         -  First, of the Company's investments not included in the 75% asset
            class, the value of its interest in any one issuer's securities
            may not exceed 5% of the value of its total assets; and

         -  Second, the Company may not own more than 10% of any one issuer's
            outstanding voting securities.

For purposes of both components of the second asset test, the term "securities"
does not include the Company's stock in any qualified REIT subsidiary or its
interest in any Innkeepers Partnership.

         If the Company should fail to satisfy the asset tests at the end of a
calendar quarter, it would not lose its REIT status if (1) it satisfied the
asset tests at the close of the preceding calendar quarter and (2) the
discrepancy between the value of its assets and the asset test requirements
arose from changes in the market values of its assets and was not wholly or
partly caused by the acquisition of one or more nonqualifying assets. If the
Company did not satisfy the condition described in clause (2) of the preceding
sentence, it still could avoid disqualification as a REIT by eliminating any
discrepancy within 30 days after the close of the calendar quarter in which the
discrepancy arose.

         The U.S. House and Senate recently passed legislation (the "Extender
Bill") that would allow the Company to own up to 100% of the stock of taxable
REIT subsidiaries ("TRSs"), which could perform activities unrelated to the
Company's tenants, such as third-party management, development, and other
independent business activities, as well as provide services to the Company's
tenants. The Company and a subsidiary would elect for the subsidiary to be
treated as a TRS. The Extender Bill also would prevent the Company from owning
more than 10% of the voting power or value of the stock of a taxable subsidiary
that is not treated as a TRS. Current law


                                       28
<PAGE>   31

only prevents the Company from owning more than 10% of the voting stock of a
taxable subsidiary. Overall, no more than 20% of the Company's assets could
consist of securities of TRSs under the Extender Bill. President Clinton is
expected to sign the Extender Bill, in which case the TRS provisions of the
Extender Bill would apply for taxable years beginning after December 31, 2000.
There can be no assurance that the Extender Bill will be enacted into law.

         DISTRIBUTION REQUIREMENTS

         Each taxable year, the Company must distribute dividends, other than
capital gain dividends and deemed distributions of retained capital gain, to its
shareholders in an aggregate amount at least equal to:

         -    the sum of (1) 95% of its "REIT taxable income," computed without
              regard to the dividends paid deduction and its net capital gain or
              loss, and (2) 95% of its after-tax net income, if any, from
              foreclosure property; minus

         -    the sum of specified items of noncash income.

The Company must pay such distributions in the taxable year to which they
relate, or in the following taxable year if it declares the distribution before
it timely files its federal income tax return for such year and pays the
distribution on or before the first regular dividend payment date after such
declaration. Under the Extender Bill, the 95% distribution requirement discussed
above would be reduced to 90%. If enacted, that provision of the Extender Bill
would apply for taxable years beginning after December 31, 2000. Again, there
can be no assurance that the Extender Bill will be enacted into law.

         The Company will pay federal income tax on taxable income, including
net capital gain, that it does not distribute to its shareholders. Furthermore,
if (a) the Company fails to distribute during a calendar year, or by the end of
January following such calendar year in the case of distributions with
declaration and record dates falling in the last three months of the calendar
year, at least the sum of:

         -    85% of its REIT ordinary income for such year;

         -    95% of its REIT capital gain income for such year; and

         -    any undistributed taxable income from prior periods,

then (b) the Company will incur a 4% nondeductible excise tax on the excess of
such required distribution over the amount it actually distributed.

         The Company may elect to retain and pay income tax on the net long-term
capital gain it receives in a taxable year. See "--Taxation of Taxable U.S.
Shareholders." If the Company so elects, it will be treated as having
distributed any such retained amount for purposes of the 4% excise


                                       29
<PAGE>   32

tax described above. The Company has made, and intends to continue to make,
timely distributions sufficient to satisfy the annual distribution requirements.

         It is possible that, from time to time, the Company may experience
timing differences between (1) the actual receipt of income and actual payment
of deductible expenses and (2) the inclusion of that income and deduction of
such expenses in arriving at its REIT taxable income. For example, under some of
the percentage leases, the percentage rent is not due until 30 days after the
end of the calendar quarter. In that case, the applicable Innkeepers Partnership
still would be required to recognize as income the excess of the percentage rent
over the base rent paid by the Lessee in the calendar quarter to which such
excess relates. In addition, the Company may not deduct recognized capital
losses from its "REIT taxable income." Further, it is possible that, from time
to time, the Company may be allocated a share of net capital gain attributable
to the sale of depreciated property that exceeds its allocable share of cash
attributable to that sale. As a result of the foregoing, the Company may have
less cash than is necessary to distribute all of its taxable income and thereby
avoid corporate income tax and the 4% excise tax. In such a situation, the
Company may need to borrow funds or issue additional shares of beneficial
interest.

         The Company may be able to correct a failure to meet the 95%
distribution requirement for a year by paying "deficiency dividends" to its
shareholders in a later year. The Company may include such deficiency dividends
in its deduction for dividends paid for the earlier year. Although the Company
may be able to avoid income tax on amounts distributed as deficiency dividends,
it will be required to pay interest to the Internal Revenue Service based upon
the amount of any deduction it takes for deficiency dividends.

         RECORDKEEPING REQUIREMENTS

         The Company must maintain records in order to qualify as a REIT. In
addition, to avoid a monetary penalty, it must request on an annual basis
information from its shareholders designed to disclose the actual ownership of
its outstanding shares of beneficial interest. The Company has complied, and
intends to continue to comply, with such requirements.

FAILURE TO QUALIFY

         If the Company fails to qualify as a REIT in any taxable year, and no
relief provision applies, it would be subject to federal income tax and any
applicable alternative minimum tax on its taxable income at regular corporate
rates. In calculating its taxable income in a year in which it fails to qualify
as a REIT, the Company would not be able to deduct amounts paid out to
shareholders. In fact, it would not be required to distribute any amounts to
shareholders in such year. In such event, to the extent of its current and
accumulated earnings and profits, all distributions to shareholders would be
taxable as ordinary income. Subject to limitations, corporate shareholders might
be eligible for the dividends received deduction. Unless the Company qualified
for relief under specific statutory provisions, it also would be disqualified
from taxation as a REIT for the four taxable years following the year during
which it ceased to qualify as a REIT. The Company cannot predict whether in all
circumstances it would qualify for such statutory relief.



                                       30
<PAGE>   33

TAXATION OF TAXABLE U.S. SHAREHOLDERS

         As long as the Company qualifies as a REIT, a taxable "U.S.
shareholder" must take into account as ordinary income distributions made out of
the Company's current or accumulated earnings and profits that the Company does
not designate as capital gain dividends or retained long-term capital gain. A
U.S. shareholder will not qualify for the dividends received deduction generally
available to corporations. As used herein, the term "U.S. shareholder" means a
holder of shares of beneficial interest that for U.S. federal income tax
purposes is:

         -    a citizen or resident of the United States;

         -    a corporation, partnership, or other entity created or organized
              in or under the laws of the United States or of a political
              subdivision thereof;

         -    an estate whose income from sources outside the United States is
              includible in gross income for U.S. federal income tax purposes
              regardless of its connection with the conduct of a trade or
              business within the United States; or

         -    any trust with respect to which (1) a U.S. court is able to
              exercise primary supervision over the administration of such trust
              and (2) one or more U.S. persons have the authority to control all
              substantial decisions of the trust.

         A U.S. shareholder generally will recognize distributions that the
Company designates as capital gain dividends as long-term capital gain without
regard to the period for which the U.S. shareholder has held its common shares.
The Company generally will designate capital gain dividends as either 20% or 25%
rate distributions. A corporate U.S. shareholder, however, may be required to
treat up to 20% of capital gain dividends as ordinary income.

         The Company may elect to retain and pay income tax on the net long-term
capital gain that it receives in a taxable year. In that case, a U.S.
shareholder would be taxed on its proportionate share of the Company's
undistributed long-term capital gain. The U.S. shareholder would receive a
credit or refund for its proportionate share of the tax the Company paid. The
U.S. shareholder would increase the basis in its common shares by the amount of
its proportionate share of the Company's undistributed long-term capital gain,
minus its share of the tax the Company paid.

         A U.S. shareholder will not incur tax on a distribution in excess of
the Company's current and accumulated earnings and profits if such distribution
does not exceed the adjusted basis of the U.S. shareholder's common shares.
Instead, such distribution will reduce the adjusted basis of such common shares.
A U.S. shareholder will recognize a distribution in excess of both the Company's
current and accumulated earnings and profits and the U.S. shareholder's adjusted
basis in its common shares as long-term capital gain, or short-term capital gain
if the common shares have been held for one year or less, assuming the common
shares are a capital asset in the hands of the U.S. shareholder. In addition, if
the Company declares a distribution in October, November, or December of any
year that is payable to a U.S. shareholder of record on a specified date in any
such month, such distribution shall be treated as both paid by the Company and
received by the U.S. shareholder on December 31 of such year, provided that the
Company actually pays the distribution during January of the following calendar
year.


                                       31
<PAGE>   34

         Shareholders may not include in their individual income tax returns any
of the Company's net operating losses or capital losses. Instead, the Company
generally would carry over such losses for potential offset against its future
income. Taxable distributions from the Company and gain from the disposition of
the common shares will not be treated as passive activity income and, therefore,
shareholders generally will not be able to apply any "passive activity losses,"
such as losses from some types of limited partnerships in which the shareholder
is a limited partner, against such income. In addition, taxable distributions
from the Company and gain from the disposition of common shares generally will
be treated as investment income for purposes of the investment interest
limitations. The Company will notify shareholders after the close of its taxable
year as to the portions of the distributions attributable to that year that
constitute ordinary income, return of capital, and capital gain.

         TAXATION OF U.S. SHAREHOLDERS ON THE DISPOSITION OF THE COMMON SHARES

         In general, a U.S. shareholder who is not a dealer in securities must
treat any gain or loss realized upon a taxable disposition of the common shares
as long-term capital gain or loss if the U.S. shareholder has held the common
shares for more than one year and otherwise as short-term capital gain or loss.
However, a U.S. shareholder must treat any loss upon a sale or exchange of
common shares held by such shareholder for six months or less as a long-term
capital loss to the extent of capital gain dividends and other distributions
from the Company that the U.S. shareholder treats as long-term capital gain. All
or a portion of any loss that a U.S. shareholder realizes upon a taxable
disposition of the common shares may be disallowed if the U.S. shareholder
purchases other common shares within 30 days before or after the disposition.

         CAPITAL GAINS AND LOSSES

         A taxpayer generally must hold a capital asset for more than one year
for gain or loss derived from its sale or exchange to be treated as long-term
capital gain or loss. The highest marginal individual income tax rate is 39.6%.
The maximum tax rate on long-term capital gain applicable to noncorporate
taxpayers is 20% for sales and exchanges of assets held for more than one year.
The maximum tax rate on long-term capital gain from the sale or exchange of
"section 1250 property," or depreciable real property, is 25% to the extent that
such gain would have been treated as ordinary income if the property were
"section 1245 property." With respect to distributions that the Company
designates as capital gain dividends and any retained capital gain that it is
deemed to distribute, the Company generally may designate whether such a
distribution is taxable to its noncorporate shareholders at a 20% or 25% rate.
Thus, the tax rate differential between capital gain and ordinary income for
noncorporate taxpayers may be significant. In addition, the characterization of
income as capital gain or ordinary income may affect the deductibility of
capital losses. A noncorporate taxpayer may deduct capital losses not offset by
capital gains against its ordinary income only up to a maximum annual amount of
$3,000. A noncorporate taxpayer may carry forward unused capital losses
indefinitely. A corporate taxpayer must pay tax on its net capital gain at
ordinary corporate rates. A corporate taxpayer can deduct capital losses only to
the extent of capital gains, with unused losses being carried back three years
and forward five years.



                                       32
<PAGE>   35

         INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

         The Company will report to its shareholders and to the Internal Revenue
Service the amount of distributions it pays during each calendar year and the
amount of tax it withholds, if any. Under the backup withholding rules, a
shareholder may be subject to backup withholding at the rate of 31% with respect
to distributions unless such holder (1) is a corporation or comes within another
exempt category and, when required, demonstrates this fact or (2) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with the applicable requirements of the
backup withholding rules. A shareholder who does not provide the Company with
its correct taxpayer identification number also may be subject to penalties
imposed by the Internal Revenue Service. Any amount paid as backup withholding
will be creditable against the shareholder's income tax liability. In addition,
the Company may be required to withhold a portion of capital gain distributions
to any shareholders who fail to certify their nonforeign status to the Company.
The Treasury Department has issued final regulations regarding the backup
withholding rules as applied to non-U.S. shareholders. Those regulations alter
the procedural aspects of backup withholding compliance and are effective for
distributions made after December 31, 2000.

TAXATION OF TAX-EXEMPT SHAREHOLDERS

         Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts and annuities, generally are
exempt from federal income taxation. However, they are subject to tax on their
unrelated business taxable income. While many investments in real estate
generate unrelated business taxable income, the Internal Revenue Service has
issued a published ruling that dividend distributions from a REIT to an exempt
employee pension trust do not constitute unrelated business taxable income,
provided that the exempt employee pension trust does not otherwise use the
shares of the REIT in an unrelated trade or business of the pension trust. Based
on that ruling, amounts that the Company distributes to tax-exempt shareholders
generally should not constitute unrelated business taxable income.

         If, however, a tax-exempt shareholder were to finance its acquisition
of the common shares with debt, a portion of the income that it receives from
the Company would constitute unrelated business taxable income pursuant to the
"debt-financed property" rules. Furthermore, social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans that are exempt from taxation under special
provisions of the federal income tax laws are subject to different unrelated
business taxable income rules, which generally will require them to characterize
distributions that they receive from the Company as unrelated business taxable
income. Finally, a qualified employee pension or profit sharing trust that owns
more than 10% of the Company's shares of beneficial interest may be required to
treat a percentage of the dividends that it receives from the Company as
unrelated business taxable income. Such percentage is equal to the gross income
that the Company derives from an unrelated trade or business, determined as if
it were a pension trust, divided by its total gross income for the year in which
it pays the dividends. That rule applies to a pension trust holding more than
10% of the Company's shares of beneficial interest only if:


                                       33
<PAGE>   36

         -    the percentage of the Company's dividends that the tax-exempt
              trust must treat as unrelated business taxable income is at least
              5%;

         -    the Company qualifies as a REIT by reason of the modification of
              the rule requiring that no more than 50% of its shares be owned by
              five or fewer individuals, which modification allows the
              beneficiaries of the pension trust to be treated as holding its
              shares of beneficial interest in proportion to their actuarial
              interests in the pension trust; and

         -    either (1) one pension trust owns more than 25% of the value of
              the Company's shares of beneficial interest or (2) a group of
              pension trusts individually holding more than 10% of the value of
              its shares of beneficial interest collectively owns more than 50%
              of the value of its shares of beneficial interest.

TAXATION OF NON-U.S. SHAREHOLDERS

         The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
shareholders (collectively, "non-U.S. shareholders") are complex. This section
is only a summary of such rules. WE URGE NON-U.S. SHAREHOLDERS TO CONSULT THEIR
OWN TAX ADVISORS TO DETERMINE THE IMPACT OF FEDERAL, STATE, AND LOCAL INCOME TAX
LAWS ON OWNERSHIP OF THE COMMON SHARES, INCLUDING ANY REPORTING REQUIREMENTS.

         A non-U.S. shareholder that receives a distribution that is not
attributable to gain from the Company's sale or exchange of U.S. real property
interests, as defined below, and that the Company does not designate as a
capital gain dividend or retained capital gain will recognize ordinary income to
the extent that the Company pays such distribution out of its current or
accumulated earnings and profits. A withholding tax equal to 30% of the gross
amount of the distribution ordinarily will apply to such distribution unless an
applicable tax treaty reduces or eliminates the tax. However, if a distribution
is treated as effectively connected with the non-U.S. shareholder's conduct of a
U.S. trade or business, the non-U.S. shareholder generally will be subject to
federal income tax on the distribution at graduated rates, in the same manner as
U.S. shareholders are taxed with respect to such distributions. The non-U.S.
shareholder also may be subject to the 30% branch profits tax if it is a
non-U.S. corporation. The Company plans to withhold U.S. income tax at the rate
of 30% on the gross amount of any such distribution paid to a non-U.S.
shareholder unless either:

         -    a lower treaty rate applies and the non-U.S. shareholder files the
              required form evidencing eligibility for that reduced rate with
              the Company; or

         -    the non-U.S. shareholder files an IRS Form 4224 with the Company
              claiming that the distribution is effectively connected income.

         The Treasury Department has issued final regulations that modify the
manner in which the Company will comply with the withholding requirements. Those
regulations are effective for distributions made after December 31, 2000.


                                       34
<PAGE>   37

         A non-U.S. shareholder will not incur tax on a distribution in excess
of the Company's current and accumulated earnings and profits if such
distribution does not exceed the adjusted basis of the shareholder's common
shares. Instead, the distribution will reduce the adjusted basis of the
shareholder's common shares. A non-U.S. shareholder will be subject to tax on a
distribution that exceeds both the Company's current and accumulated earnings
and profits and the adjusted basis of its common shares, if the non-U.S.
shareholder otherwise would be subject to tax on gain from the sale or
disposition of its common shares, as described below. Because the Company
generally cannot determine at the time it makes a distribution whether the
distribution will exceed its current and accumulated earnings and profits, it
normally will withhold tax on the entire amount of any distribution at the same
rate as it would withhold on a dividend. However, a non-U.S. shareholder may
obtain a refund of amounts that the Company withholds if it is later determined
that a distribution in fact exceeded the Company's current and accumulated
earnings and profits.

         The Company must withhold 10% of any distribution that exceeds its
current and accumulated earnings and profits. Consequently, although the Company
intends to withhold at a rate of 30% on the entire amount of any distribution,
to the extent that it does not do so, it will withhold at a rate of 10% on any
portion of a distribution not subject to withholding at a rate of 30%.

         For any year in which the Company qualifies as a REIT, a non-U.S.
shareholder will incur tax on distributions that are attributable to gain from
its sale or exchange of "U.S. real property interests" under special provisions
of the federal income tax laws ("FIRPTA"). The term "U.S. real property
interests" includes interests in real property and stock in corporations at
least 50% of whose assets consists of interests in real property. Under those
rules, a non-U.S. shareholder is taxed on distributions attributable to gain
from sales of U.S. real property interests as if such gain were effectively
connected with a U.S. business of the non-U.S. shareholder. A non-U.S.
shareholder thus would be taxed on a distribution attributable to gain from
sales of U.S. real property interests at the normal capital gain rates
applicable to U.S. shareholders, subject to applicable alternative minimum tax
and a special alternative minimum tax in the case of a nonresident alien
individual. A non-U.S. corporate shareholder not entitled to treaty relief or
exemption also may be subject to the 30% branch profits tax on such a
distribution. The Company must withhold 35% of any distribution that it could
designate as a capital gain dividend. A non-U.S. shareholder may receive a
credit against its tax liability for the amount withheld.

         A non-U.S. shareholder generally will not incur tax under FIRPTA as
long as at all times non-U.S. persons hold, directly or indirectly, less than
50% in value of the Company's outstanding shares of beneficial interest. The
Company cannot assure you that test will be met. However, a non-U.S. shareholder
that owned, actually or constructively, 5% or less of the common shares at all
times during a specified testing period will not incur tax under FIRPTA if the
common shares are "regularly traded" on an established securities market. If the
gain on the sale of the common shares were taxed under FIRPTA, a non-U.S.
shareholder would be taxed in the same manner as U.S. shareholders with respect
to such gain, subject to applicable alternative minimum tax, a special
alternative minimum tax in the case of nonresident alien individuals, and the
possible application of the 30% branch profits tax in the case of non-U.S.
corporations. Furthermore, a non-U.S. shareholder will incur tax on gain not
subject to FIRPTA if:


                                       35
<PAGE>   38

         -    the gain is effectively connected with the non-U.S. shareholder's
              U.S. trade or business, in which case the non-U.S. shareholder
              will be subject to the same treatment as U.S. shareholders with
              respect to such gain; or

         -    the non-U.S. shareholder is a nonresident alien individual who was
              present in the U.S. for 183 days or more during the taxable year
              and has a "tax home" in the United States, in which case the
              non-U.S. shareholder will incur a 30% tax on his capital gains.

OTHER TAX CONSEQUENCES

         STATE AND LOCAL TAXES

         The Company, the Innkeepers Partnerships, and you may be subject to
state and local tax in various states and localities, including those states and
localities in which the Company or you transact business, own property, or
reside. The state and local tax treatment in such jurisdictions may differ from
the federal income tax treatment described above. Consequently, you should
consult your own tax advisor regarding the effect of state and local tax laws
upon the ownership of the common shares.

TAX ASPECTS OF THE COMPANY'S INVESTMENT IN THE INNKEEPERS PARTNERSHIPS

         The following discussion summarizes the federal income tax
considerations applicable to the Company's direct or indirect investments in the
Innkeepers Partnerships. The discussion does not cover state or local tax laws
or any federal tax laws other than income tax laws.

         CLASSIFICATION AS A PARTNERSHIP

         The Company is entitled to include in its income its distributive share
of an Innkeepers Partnership's income and to deduct its distributive share of a
hotel partnership's losses only if the partnership is classified for federal
income tax purposes as a partnership rather than as a corporation or an
association taxable as a corporation. An organization will be classified as a
partnership, rather than as a corporation, for federal income tax purposes if
it:

         -    is treated as a partnership under Treasury regulations, effective
              January 1, 1997, relating to entity classification (the
              "check-the-box regulations"); and

         -    is not a "publicly traded" partnership.

         Under the check-the-box regulations, an unincorporated entity with at
least two members may elect to be classified either as an association taxable as
a corporation or as a partnership. If such an entity fails to make an election,
it generally will be treated as a partnership for federal income tax purposes.
The federal income tax classification of an entity that was in existence prior
to January 1, 1997, such as the Partnership (and certain other Innkeepers
Partnerships), will be respected for all periods prior to January 1, 1997 if:



                                       36
<PAGE>   39

         -    the entity had a reasonable basis for its claimed classification;

         -    the entity and all members of the entity recognized the federal
              tax consequences of any changes in the entity's classification
              within the 60 months prior to January 1, 1997; and

         -    neither the entity nor any member of the entity was notified in
              writing by a taxing authority on or before May 8, 1996 that the
              classification of the entity was under examination.

         Each Innkeepers Partnership in existence prior to January 1, 1997
reasonably claimed partnership classification under the Treasury regulations
relating to entity classification in effect prior to January 1, 1997. In
addition, each Innkeepers Partnership intends to continue to be classified as a
partnership for federal income tax purposes and will not elect to be treated as
an association taxable as a corporation under the check-the-box regulations.

         A publicly traded partnership is a partnership whose interests are
traded on an established securities market or are readily tradable on a
secondary market or the substantial equivalent thereof. A publicly traded
partnership will not, however, be treated as a corporation for any taxable year
if 90% or more of the partnership's gross income for such year consists of
passive-type income, including real property rents, gains from the sale or other
disposition of real property, interest, and dividends (the "90% passive income
exception").

         Treasury regulations provide limited safe harbors from the definition
of a publicly traded partnership. Pursuant to one of those safe harbors (the
"private placement exclusion"), interests in a partnership will not be treated
as readily tradable on a secondary market or the substantial equivalent thereof
if:

         -    all interests in the partnership were issued in a transaction or
              transactions that were not required to be registered under the
              Securities Act of 1933, as amended; and

         -    the partnership does not have more than 100 partners at any time
              during the partnership's taxable year.

In determining the number of partners in a partnership, a person owning an
interest in a partnership, grantor trust, or S corporation that owns an interest
in the partnership is treated as a partner in the partnership only if:

         -    substantially all of the value of the owner's interest in the
              entity is attributable to the entity's direct or indirect interest
              in the partnership; and

         -    a principal purpose of the use of the entity is to permit the
              partnership to satisfy the 100-partner limitation.

Each Innkeepers Partnership qualifies for the private placement exclusion.


                                       37
<PAGE>   40

         If an Innkeepers Partnership is considered a publicly traded
partnership because it is deemed to have more than 100 partners, it should not
be treated as a corporation because it should be eligible for the 90% passive
income exception. If, however, for any reason an Innkeepers Partnership were
taxable as a corporation, rather than as a partnership, for federal income tax
purposes, the Company would not be able to qualify as a REIT. See "Federal
Income Tax Consequences of the Company's Status as a REIT -- Requirements for
Qualification -- Income Tests" and "-- Requirements for Qualification -- Asset
Tests." In addition, any change in the Innkeepers Partnership's status for tax
purposes might be treated as a taxable event, in which case the Company might
incur tax liability without any related cash distribution. See "Federal Income
Tax Consequences of the Company's Status as a REIT -- Requirements for
Qualification -- Distribution Requirements." Further, items of income and
deduction of the Innkeepers Partnership would not pass through to its partners,
and its partners would be treated as shareholders for tax purposes.
Consequently, the Innkeepers Partnership would be required to pay income tax at
corporate tax rates on its net income, and distributions to its partners would
constitute dividends that would not be deductible in computing the Innkeepers
Partnership's taxable income.

         INCOME TAXATION OF THE INNKEEPERS PARTNERSHIPS AND THEIR PARTNERS

         Partners, Not Partnership, Subject to Tax. A partnership is not a
taxable entity for federal income tax purposes. Rather, the Company is required
to take into account its allocable share of each Innkeepers Partnership's
income, gains, losses, deductions, and credits for any taxable year of such
Innkeepers Partnership ending within or with its taxable year, without regard to
whether the Company has received or will receive any distribution from the
partnership.

         Partnership Allocations. Although a partnership agreement generally
will determine the allocation of income and losses among partners, such
allocations will be disregarded for tax purposes if they do not comply with the
provisions of the federal income tax laws governing partnership allocations. If
an allocation is not recognized for federal income tax purposes, the item
subject to the allocation will be reallocated in accordance with the partners'
interests in the partnership, which will be determined by taking into account
all of the facts and circumstances relating to the economic arrangement of the
partners with respect to such item. Each Innkeepers Partnership's allocations of
taxable income, gain, and loss are intended to comply with the requirements of
the federal income tax laws governing partnership allocations.

         Tax Allocations With Respect to Contributed Properties. Income, gain,
loss, and deduction attributable to appreciated or depreciated property that is
contributed to a partnership in exchange for an interest in the partnership must
be allocated in a manner such that the contributing partner is charged with, or
benefits from, respectively, the unrealized gain or unrealized loss associated
with the property at the time of the contribution. The amount of such unrealized
gain or unrealized loss is generally equal to the difference between the fair
market value of contributed property at the time of contribution and the
adjusted tax basis of such property at the time of contribution. Such
allocations are solely for federal income tax purposes and do not affect the
book capital accounts or other economic or legal arrangements among the
partners.


                                       38
<PAGE>   41

         The Partnership was formed by way of contributions of appreciated
property and has received contributions of appreciated property since the
Company's initial public offering. The partnership agreement governing the
Partnership requires such allocations to be made in a manner consistent with the
federal income tax laws governing partnership allocations.

         Under the partnership agreement for the Partnership, depreciation or
amortization deductions of the Partnership generally are allocated among the
partners in accordance with their respective interests in the Partnership,
except to the extent that the Partnership is required under the federal income
tax laws governing partnership allocations to use a method for allocating tax
depreciation deductions attributable to contributed properties that results in
the Company receiving a disproportionate share of such deductions. In addition,
gain on the sale of a contributed hotel will be specially allocated to the
contributing partners to the extent of any "built-in" gain with respect to such
hotel for federal income tax purposes.

         Basis in Partnership Interest. The Company's adjusted tax basis in the
Partnership (through its wholly-owned subsidiary) generally is equal to the
following:

         -  the amount of cash and the basis of any other property the Company
            has contributed to the Partnership;

         -  increased by (1) its allocable share of the Partnership's income and
            (2) its allocable share of the Partnership's indebtedness; and

         -  reduced, but not below zero, by (1) its allocable share of the
            Partnership's loss and (2) the amount of cash distributed to the
            Company, including constructive distributions resulting from a
            reduction in its share of the Partnership's indebtedness.

If the allocation of the Company's distributive share of the Partnership's loss
would reduce its adjusted tax basis in its partnership interest below zero, the
recognition of such loss will be deferred until such time as the recognition of
such loss would not reduce its adjusted tax basis below zero. To the extent that
the Partnership's distributions, or any decrease in the Company's share of the
indebtedness of the Partnership, which is considered a constructive cash
distribution, would reduce its adjusted tax basis below zero, such distributions
would constitute taxable income to the Company. Such distributions and
constructive distributions normally will be characterized as capital gain, and,
if the Company's partnership interest in the Partnership has been held for
longer than one year, the distributions and constructive distributions will
constitute long-term capital gain.

         Depreciation Deductions Available to the Innkeepers Partnerships. To
the extent that an Innkeepers Partnership has acquired a hotel for cash, its
initial basis in such hotel for federal income tax purposes generally was equal
to the purchase price paid by the Innkeepers Partnership. The Innkeepers
Partnerships depreciate such depreciable hotel property under either the
modified accelerated cost recovery system of depreciation ("MACRS") or the
alternative depreciation system of depreciation ("ADS"). The Innkeepers
Partnerships use MACRS for furnishings and equipment. Under MACRS, the
Innkeepers Partnerships generally depreciate such furnishings and equipment over
a seven-year recovery period using a 200% declining balance method and a
half-year



                                       39
<PAGE>   42

convention. If, however, the Innkeepers Partnerships place more than 40% of
their furnishings and equipment in service during the last three months of a
taxable year, a mid-quarter depreciation convention must be used for the
furnishings and equipment placed in service during that year. The Innkeepers
Partnerships use ADS for buildings and improvements. Under ADS, the Innkeepers
Partnerships generally depreciate such buildings and improvements over a 40-year
recovery period using a straight line method and a mid-month convention.

         To the extent that the Partnership has acquired hotels in exchange for
Units, its initial basis in each hotel for federal income tax purposes should be
the same as the transferor's basis in that hotel on the date of acquisition.
Although the law is not entirely clear, the Partnership generally depreciates
such depreciable property for federal income tax purposes over the same
remaining useful lives and under the same methods used by the transferors. The
Partnership's tax depreciation deductions are allocated among the partners in
accordance with their respective interests in the Partnership, except to the
extent that the Partnership is required under the federal income tax laws to use
a method for allocating depreciation deductions attributable to the hotels or
other contributed properties that results in the Company receiving a
disproportionately large share of such deductions.

         SALE OF AN INNKEEPERS PARTNERSHIP'S PROPERTY

         Generally, any gain realized by an Innkeepers Partnership on the sale
of property held for more than one year will be long-term capital gain, except
for any portion of such gain that is treated as depreciation or cost recovery
recapture. Any gain recognized on the disposition of contributed properties will
be allocated first to the partners of an Innkeepers Partnership to the extent of
their "built-in gain" on those properties for federal income tax purposes. The
partners' "built-in gain" on the contributed properties sold will equal the
excess of the partners' proportionate share of the book value of those
properties over the partners' tax basis allocable to those properties at the
time of the sale. Any remaining gain recognized by an Innkeepers Partnership on
the disposition of the contributed properties, and any gain recognized by an
Innkeepers Partnership or the disposition of the other properties, will be
allocated among the partners in accordance with their respective percentage
interests in the partnership.

         The Company's share of any gain realized by an Innkeepers Partnership
on the sale of any property held by the partnership as inventory or other
property held primarily for sale to customers in the ordinary course of the
partnership's trade or business will be treated as income from a prohibited
transaction that is subject to a 100% penalty tax. Such prohibited transaction
income also may have an adverse effect upon the Company's ability to satisfy the
income tests for REIT status. See "Federal Income Tax Consequences of the
Company's Status as a REIT -- Requirements for Qualification -- Income Tests."
The Company, however, does not presently intend to allow any Innkeepers
Partnership to acquire or hold any property that represents inventory or other
property held primarily for sale to customers in the ordinary course of the
Company's or any Innkeepers Partnership's trade or business.



                                       40
<PAGE>   43

                               SELLING SHAREHOLDER

         The "Selling Shareholder" named below may receive common shares upon
redemption of Units and, as a trustee of the Company, is an affiliate of the
Company. Persons who receive common shares upon redemption of Units and who are
not now or at the time of redemption affiliates of the Company are not
considered "Selling Shareholders" because resale by them of any common shares
received upon redemption of Units will not be restricted under the Securities
Act of 1933. Because the Selling Shareholder may redeem all, some or none of his
Units, and may receive, at the Company's option, cash rather than common shares
upon such redemptions, no estimate can be made of the aggregate number of common
shares which may be offered and sold by the Selling Shareholder pursuant to this
prospectus. The Selling Shareholder may transfer his Units to a transferee prior
to tendering the Units for redemption. In the table below, the Selling
Shareholder is assumed to have redeemed 157,513 of his Units and received common
shares therefor, and to be selling all such common shares pursuant to this
prospectus. The table sets forth as of September 30, 1999, and as adjusted to
reflect the sale of all 157,513 common shares, certain information regarding the
Selling Shareholder's beneficial ownership of common shares.

<TABLE>
<CAPTION>
                                    Prior to Offering                  After Offering
                         ----------------------------------------      ---------------
                                                Common Shares
Selling Shareholder      Shares Owned(1)     Registered Hereunder      Shares Owned(2)
- -------------------      ---------------     --------------------      ---------------
<S>                      <C>                 <C>                       <C>
Rolf E. Ruhfus               746,546               157,513                 589,033
</TABLE>
- -----------------------------
(1)  Includes 729,874 shares issuable upon redemption of Units, 7,500 Series A
     Preferred Shares, 5,172 common shares which are subject to vesting
     requirements and 4,000 common shares issuable upon the exercise of vested
     options granted under the Company's Trustees Share Incentive Plan.
(3)  Assuming all 157,513 common shares offered hereunder are sold. Reflects the
     common shares and Units described in footnote (1) above, less the 157,513
     common shares offered hereunder. The Selling Shareholder's holdings will
     represent approximately 1.7% of all outstanding common shares of the
     Company (based on common shares outstanding at September 30, 1999, assuming
     no other unitholder redeems Units and receives common shares therefor, no
     exercise of outstanding options and no conversion of outstanding
     convertible preferred shares).


                                       41
<PAGE>   44

                              PLAN OF DISTRIBUTION

         This prospectus relates to (i) the possible issuance by the Company
from time to time of common shares if, and to the extent that, certain holders
of Units tender such Units for redemption and the Company elects to redeem the
Units for common shares and (ii) the offer and sale from time to time of common
shares by a Unit holder that is a trustee of the Company if, and to the extent
that, (A) he tenders Units for redemption and the Company elects to redeem the
Units for common shares and (B) he thereafter seeks to sell such common shares.
The Company is registering the common shares to which this prospectus relates to
provide the holders thereof with freely tradeable securities, but registration
of such shares does not necessarily mean that any of such shares will be issued
by the Company or offered or sold by the holders thereof.

         The Company will not receive any cash proceeds from the issuance, offer
or sale of common shares to which this prospectus relates, although the Company,
if it so elects, will acquire up to 60,794 Units tendered for redemption by
limited partners in exchange for the issuance of up to 60,794 of the common
shares offered hereby.

         Common shares may be offered and sold under this prospectus from time
to time to purchasers directly by the Selling Shareholder or his pledgees,
donees, transferees or successors in interest. Alternatively, the Selling
Shareholder or his pledgees, donees, transferees or other successors in interest
may from time to time offer and sell common shares under this prospectus through
brokers, dealers or agents. These offers and sales may be made from time to time
in one or more transactions (which may involve crosses or block trade
transactions, with a broker or dealer acting as principal, agent, or both) (i)
on any exchange or in the over-the-counter market, (ii) other than in the
over-the-counter market, including privately negotiated transactions, or (iii)
in settlement of short sales of the common shares, puts, calls and other
transactions in securities of the Company or derivatives thereof (whether listed
on an exchange or not). The price(s) at which such common shares are offered or
sold may be stipulated by the Selling Shareholder, negotiated by the parties or
at the then-prevailing market price(s). Any brokers, dealers or agents involved
in such transactions may receive compensation in the form of commissions from
the Selling Shareholder or his transferees and/or the purchasers of common
shares for whom they may act as agent. The Selling Shareholder or his
transferees and any brokers, dealers or agents that participate in the
distribution of common shares under this prospectus may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, and any profit
on the sale of common shares by them and any commissions received by any such
brokers, dealers or agents may be deemed to be underwriting commissions under
the Securities Act of 1933.

         At a time a particular offer of common shares is made under this
prospectus by the Selling Shareholder or his pledgees, donees or transferees, a
prospectus supplement, if required, may be distributed which will set forth the
name of any transferees of the Units or common shares, any broker-dealers or
agents and any commissions and other terms constituting compensation from the
Selling Shareholder and any other required information. Common shares may be
sold under this prospectus from time to time at varying prices determined at the
time of sale or at negotiated prices.

         In certain states common shares may be sold only through registered or
licensed brokers or dealers. In addition, in certain states, common shares may
not be sold unless they have been registered or qualified for sale in such state
or an exemption from such registration or qualification requirement is available
and is complied with.



                                       42
<PAGE>   45

                                     EXPERTS

         The consolidated financial statements and related financial statement
schedule of Innkeepers USA Trust, as of December 31, 1998 and 1997, and for each
of the three years in the period ended December 31, 1998 and the combined
financial statements of the IH Lessee as of December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998 incorporated by
reference in this prospectus have been so incorporated in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in accounting and auditing.

                                  LEGAL MATTERS

         The validity of the issuance of the common shares offered pursuant to
this prospectus will be passed upon for the Company by Hunton & Williams,
Richmond, Virginia.

                       WHERE YOU CAN FIND MORE INFORMATION

         We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the SEC=s public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available on the SEC's Website at "http://www.sec.gov."

         The SEC allows us to "incorporate by reference" into this prospectus
certain information from other documents that we file with them, which means
that we can disclose important information by referring to those documents. The
information incorporated by reference is considered to be 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 we make with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the sale of
all the shares covered by this prospectus:

         -  Annual Report on Form 10-K for the year ended December 31, 1998;

         -  Quarterly Reports on Form 10-Q for the three months ended March 31,
            1999, the six months ended June 30, 1999 and the nine months ended
            September 30, 1999; and

         -  The descriptions of the common shares and Series A Preferred
            Shares contained in our Registration Statements on Form 8-A, filed
            with the SEC on September 19, 1996 and September 4, 1998.

         You may request a copy of these filings, at no cost, by writing or
telephoning:
                              Innkeepers USA Trust
                             306 Royal Poinciana Way
                            Palm Beach, Florida 33480
                          Attention: Investor Relations
                            Telephone: (561) 835-1800



                                       43
<PAGE>   46

         As you read the above documents, you may find some inconsistencies in
information from one document to another. If you find inconsistencies between
the documents, or between a document and this prospectus, you should rely on the
statements made in the most recent document.

         You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. We will not make an offer of
these shares in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any supplement is accurate as
of any date other than the date on the front of those documents.



                                       44
<PAGE>   47
================================================================================

         NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING SHAREHOLDER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE COMMON STOCK, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.


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

                                TABLE OF CONTENTS

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

<TABLE>
<CAPTION>
                                                                       PAGE
                                                                       ----
<S>                                                                    <C>
SECURITIES AND EXCHANGE COMMISSION.......................................1
A WARNING ABOUT FORWARD-LOOKING STATEMENTS...............................2
INNKEEPERS USA TRUST.....................................................2
SECURITIES TO BE OFFERED.................................................3
DESCRIPTION OF CAPITAL SHARES............................................3
RESTRICTIONS ON OWNERSHIP AND TRANSFER...................................4
REDEMPTION OF UNITS......................................................4
FEDERAL INCOME TAX CONSEQUENCES OF THE COMPANY'S STATUS AS A REIT.......18
SELLING SHAREHOLDER.....................................................41
PLAN OF DISTRIBUTION....................................................42
EXPERTS.................................................................43
LEGAL MATTERS...........................................................43
WHERE YOU CAN FIND MORE INFORMATION.....................................43
</TABLE>


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





================================================================================






================================================================================

                              INNKEEPERS USA TRUST



                                 218,307 SHARES




                                  COMMON SHARES








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

                                   PROSPECTUS

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




                                ___________, 1999





================================================================================

<PAGE>   48

                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

         The estimated expenses in connection with the offering are as follows:

         Securities and Exchange Commission registration fee     $   478
         Accounting fees and expenses                             10,000
         Blue Sky fees and expenses                                1,000
         Legal fees and expenses                                  10,000
         Printing                                                  5,000
         Miscellaneous                                             5,000
                                                                 -------
                  TOTAL                                          $31,478

ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

         Maryland law applicable to REITs permits a Maryland REIT to include in
its Declaration of Trust a provision limiting the liability of its trustees and
officers to the trust and its shareholders for money damages except for
liability resulting from (a) actual receipt of an improper benefit or profit in
money, property or services or (b) active and deliberate dishonesty established
by a final judgment as being material to the cause of action. The Declaration of
Trust of the Company contains such a provision which eliminates such liability
to the maximum extent permitted by Maryland law.

         The Declaration of Trust of the Company authorizes it, to the maximum
extent permitted by Maryland law, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former Trustee or officer or (b) any individual who, while a
Trustee of the Company and at the request of the Company, serves or has served
another REIT, corporation, partnership, joint venture, trust, employee benefit
plan or any other enterprise as a trustee, director, officer or partner of such
REIT, corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise. The Bylaws of the Company obligate it, to the maximum extent
permitted by Maryland law, to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former Trustee or officer who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a Trustee of the
Company and at the request of the Company, serves or has served another REIT,
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a trustee, director, officer or partner of such REIT,
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise and who is made a party to the proceeding by reason of his service in
that capacity. The Declaration of Trust and Bylaws also permit the Company to
indemnify and advance expenses to any person who served a predecessor of the
Company in any of the capacities described above and to any employee or agent





                                      II-1
<PAGE>   49
of the Company or a predecessor of the Company. The Bylaws require the
Company to indemnify a Trustee or officer who has been successful, on the
merits or otherwise, in the defense of any proceeding to which he is made
a party by reason of his service in that capacity.

         Maryland law applicable to REITs permits a Maryland REIT to indemnify
and advance expenses to its trustees, officers, employees and agents to the same
extent as is permitted by Maryland law for directors and officers of Maryland
corporations. Maryland law permits a corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation. The Bylaws of the Company require it, as a condition
to advancing expenses, to obtain (a) a written affirmation by the Trustee or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by the Company as authorized by the Bylaws and (b)
a written statement by or on his behalf to repay the amount paid or reimbursed
by the Company if it shall ultimately be determined that the standard of conduct
was not met.

ITEM 16. EXHIBITS.

  3.1     -  Amended and Restated Declaration of Trust of the Registrant
             (previously filed as Exhibit 3.1 to the Company's Registration
             Statement on Form S-11 (Registration No. 33-81362) and incorporated
             by reference herein)

  3.1(a)  -  Amendment of Declaration of Trust of the Registrant (previously
             filed as Exhibit 3.1 to Registration Statement on Form S-11
             (Registration No. 33-81362) and incorporated by reference herein)

  3.1(b)  -  Articles Supplementary to the Declaration of Trust of the
             Registrant (previously filed as Exhibit 3.1(b) to the Company's
             Registration Statement on Form S-3 (Registration No. 333-58811)
             and incorporated by reference herein)

  3.2     -  Bylaws of the Registrant (previously filed as Exhibit 3.2 to the
             Company's Registration Statement on Form S-11 (Registration No.
             33-81362) and incorporated by reference herein)

  4.1     -  Form of Common Share Certificate (previously filed as Exhibit 4.1
             to the Company's Registration Statement on Form S-11 (Registration
             No. 33-81362) and incorporated by reference herein)





                                      II-2
<PAGE>   50

  5.1*    -  Opinion of Hunton & Williams

  8.1*    -  Opinion of Hunton & Williams with respect to certain tax matters.

  10.1    -  Second Amended and Restated Agreement of Limited Partnership of
             Innkeepers USA Limited Partnership (previously filed as Exhibit 4.2
             to Registration Statement on Form S-3 (Registration No. 333-12809)
             and incorporated by reference herein)

  23.1*   -  Consent of PricewaterhouseCoopers LLP

  23.2*   -  Consent of Hunton & Williams (included in Exhibit 5.1)

  24.1*   -  Power of Attorney (located on the signature page of this
             Registration Statement)

- -------------
*Filed herewith

ITEM 17. UNDERTAKINGS.

         The undersigned registrant hereby undertakes:

         (1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
registration statement (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective Registration
Statement; and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement; provided,
however, that the undertakings set forth in subparagraphs (i) and (ii) above do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement;





                                      II-3
<PAGE>   51

         (2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;

         (3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

         The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

         The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.

         The undersigned registrant hereby undertakes that:

         (1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

         (2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.



                                      II-4
<PAGE>   52
                                   SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the Town of Palm Beach, State of Florida, on the 22nd day of
December, 1999.


                                         INNKEEPERS USA TRUST,
                                         a Maryland real estate investment trust
                                         (Registrant)



                                         By: /s/ Jeffrey H. Fisher
                                             -----------------------------------
                                             Jeffrey H. Fisher
                                             Chairman of the Board, President
                                             and Chief Executive Officer






                                      S-1
<PAGE>   53

                                POWER OF ATTORNEY

         Each person whose signature appears below hereby constitutes and
appoints Jeffrey H. Fisher and Mark A. Murphy, and each or either of them, his
true and lawful attorney-in-fact with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and any registration statement that is to be
effective upon filing pursuant to Rule 462 under the Securities Act of 1933, as
amended, and to cause the same to be filed with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby granting to said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite or desirable to be done in and about the premises, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all acts and things that said attorneys-in-fact and
agents, or either of them, or their substitutes or substitute, may lawfully do
or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below on the 22nd day of December, 1999
by the following persons in the capacities indicated.


SIGNATURE                          TITLE
- ---------                          -----



 /s/ Jeffrey H. Fisher             Chairman of the Board, President and
- ------------------------------     Chief Executive Officer
      Jeffrey H. Fisher            (Principal Executive Officer)


 /s/ Bruce Zenkel                  Trustee
- ------------------------------
      Bruce Zenkel



 /s/ Miles Berger                  Trustee
- ------------------------------
      Miles Berger



 /s/ C. Gerald Goldsmith           Trustee
- ------------------------------
      C. Gerald Goldsmith



 /s/ Rolf E. Ruhfus                Trustee
- ------------------------------
      Rolf E. Ruhfus



 /s/ Jack P. DeBoer                Trustee
- ------------------------------
      Jack P. DeBoer



 /s/ Thomas J. Crocker             Trustee
- ------------------------------
      Thomas J. Crocker



 /s/ David Bulger                  Chief Financial Officer and Treasurer
- ------------------------------     (Principal Financial Officer)
      David Bulger



 /s/ Gregory M. Fay                Vice President of Accounting
- ------------------------------     (Principal Accounting Officer)
      Gregory  M. Fay




                                      S-2
<PAGE>   54



EXHIBITS

  3.1     -  Amended and Restated Declaration of Trust of the Registrant
             (previously filed as Exhibit 3.1 to the Company's Registration
             Statement on Form S-11 (Registration No. 33-81362) and incorporated
             by reference herein)

  3.1(a)  -  Amendment of Declaration of Trust of the Registrant (previously
             filed as Exhibit 3.1 to Registration Statement on Form S-11
             (Registration No. 33-81362) and incorporated by reference herein)

  3.1(b)  -  Articles Supplementary to the Declaration of Trust of the
             Registrant (previously filed as Exhibit 3.1(b) to the Company's
             Registration Statement on Form S-3 (Registration No. 333-58811)
             and incorporated by referecne herein).

  3.2     -  Bylaws of the Registrant (previously filed as Exhibit 3.2 to the
             Company's Registration Statement on Form S-11 (Registration No.
             33-81362) and incorporated by reference herein)

  4.1     -  Form of Common Share Certificate (previously filed as Exhibit 4.1
             to the Company's Registration Statement on Form S-11 (Registration
             No. 33-81362) and incorporated by reference herein)

  5.1*    -  Opinion of Hunton & Williams

  8.1*    -  Opinion of Hunton & Williams with respect to certain tax matters.

  10.1    -  Second Amended and Restated Agreement of Limited Partnership of
             Innkeepers USA Limited Partnership (previously filed as Exhibit 4.2
             to Registration Statement on Form S-3 (Registration No. 333-12809)
             and incorporated by reference herein)

  23.1*   -  Consent of PricewaterhouseCoopers LLP

  23.2*   -  Consent of Hunton & Williams (included in Exhibit 5.1)

  24.1*   -  Power of Attorney (located on the signature page of this
             Registration Statement)

- -------------
*Filed herewith




<PAGE>   1


                                                                    EXHIBIT 5.1


                                December 21, 1999


Innkeepers USA Trust
306 Royal Poinciana Way
Palm Beach, Florida  33480

Gentlemen:

         We have acted as counsel for Innkeepers USA Trust, a Maryland real
estate investment trust (the "Company"), in connection with the Registration
Statement on Form S-3 (the "Registration Statement"), filed under the Securities
Act of 1933, as amended, with respect to the registration of 218,307 shares of
beneficial interest, $0.01 par value (the "Shares"), as described in the
Registration Statement.

         In connection therewith, we have relied upon, among other things, our
examination of such documents, records of the Company, certificates of its
officers and public officials, as we have deemed necessary for purposes of the
opinion expressed below.

         Based upon the foregoing, and having regard for such legal
considerations as we have deemed relevant, we are of the opinion that the
issuance of the Shares as described in the Registration Statement has been
validly authorized and, upon issuance of the Shares as described in the
Registration Statement, the Shares will be legally issued, fully paid and
nonassessable.

         We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" therein.



                                               Very truly yours,

                                               HUNTON & WILLIAMS



<PAGE>   1

                                                                     EXHIBIT 8.1



                                December 21, 1999


Board of Trustees
Innkeepers USA Trust
306 Royal Poinciana Way
Palm Beach, Florida  33480


                              INNKEEPERS USA TRUST
                                QUALIFICATION AS
                          REAL ESTATE INVESTMENT TRUST


Gentlemen:

         We have acted as counsel to Innkeepers USA Trust, a Maryland real
estate investment trust (the "Company"), in connection with the preparation of a
Form S-3 registration statement filed with the Securities and Exchange
Commission ("SEC") on December 23, 1999 (No. 333-_____), as amended through the
date hereof (the "Registration Statement"), with respect to (i) the possible
issuance by the Company of up to 60,794 Common Shares (the "Redemption Shares")
of beneficial interest, par value $0.01 per share, of the Company ("Common
Shares") if, and to the extent that, the current holders of 60,794 units of
limited partnership interest ("Units") in Innkeepers USA Limited Partnership
(the "Operating Partnership") tender such Units for redemption and the Company
elects to redeem the Units for Common Shares, and (ii) the offer and sale from
time to time in open-market or privately-negotiated transactions that may
involve underwriters, brokers or dealers of up to 157,513 Common Shares (the
"Secondary Shares") by the selling shareholders named in the prospectus
contained as a part of the Registration Statement (the "Prospectus"). You have
requested our opinion regarding certain U.S. federal income tax matters.

         The Company, through the Operating Partnership and its subsidiary
partnerships (the "Subsidiary Partnerships"), currently owns 67 hotels and
associated personal property (the "Current Hotels"). The Company, or a
wholly-owned subsidiary of the Company, owns a 1% general partnership interest,
and the Operating Partnership owns a 99% limited partnership interest, in each
Subsidiary Partnership. The Operating Partnership and Subsidiary Partnerships
lease (i) 60 of the Current Hotels to Innkeepers Hospitality, Inc., a Virginia
corporation, and its affiliated sister corporations (collectively, the "IH
Lessee") pursuant to substantially similar operating leases (the "IH Leases")
and (ii) seven of the Current Hotels to an affiliate of Wyndham International,
Inc. (the "Summerfield Lessee") pursuant to substantially similar operating
leases (the "Summerfield Leases" and, together with the IH Leases, the
"Leases"). The IH Lessee operates 33 of the Current Hotels. A wholly-owned
subsidiary of Marriott International, Inc., a Delaware corporation, operates and

<PAGE>   2
Board of Trustees
Innkeepers USA Trust
December 21, 1999
Page 2


manages 27 of the Current Hotels on behalf of the IH Lessee pursuant to
substantially similar management agreements (the "Marriott Management
Agreements") with the IH Lessee. TMH Hotels, Inc., a Kansas corporation,
operates and manages two of the Current Hotels on behalf of the IH Lessee
pursuant to substantially similar management agreements (the "TMH Management
Agreements"). An affiliate of Wyndham International, Inc. operates and manages
nine of the Current Hotels on behalf of the Summerfield Lessee pursuant to
substantially similar management agreements (the "Summerfield Management
Agreements" and, together with the Marriott Management Agreements and the TMH
Management Agreements, the "Management Agreements") with the Summerfield Lessee.

         In giving the opinions set forth herein, we have examined the
following:

1.       the Company's Amended and Restated Declaration of Trust, as filed with
         the Department of Assessments and Taxation of the State of Maryland on
         September 21, 1994, as amended on October 4, 1995, September 18, 1996,
         May 14, 1999 and the Articles Supplementary to the Declaration of Trust
         filed on May 15, 1998;
2.       the Company's Amended and Restated By-Laws;
3.       the prospectus contained as part of the Registration Statement (the
         "Prospectus");
4.       the Second Amended and Restated Agreement of Limited Partnership of the
         Operating Partnership, dated as of November 1, 1996 (the "Operating
         Partnership Agreement"), among the Company, Innkeepers Financial
         Corporation, as general partner ("IFC"), and several limited partners;
5.       the partnership agreements of the Subsidiary Partnerships, which are
         listed on EXHIBIT A attached hereto;
6.       the Leases;
7.       the Management Agreements; and
8.       such other documents as we have deemed necessary or appropriate for
         purposes of this opinion.

         In connection with the opinions rendered below, we have assumed, with
your consent, that:

1.       each of the documents referred to above has been duly authorized,
         executed, and delivered; is authentic, if an original, or is accurate,
         if a copy; and has not been amended;
2.       during its taxable year ending December 31, 1999 and subsequent taxable
         years, the Company has operated and will continue to operate in such a
         manner that makes and will continue to make the representations
         contained in a certificate, dated the date hereof and executed by a
         duly appointed officer of the Company (the "Officer's Certificate"),
         true for such years;
3.       the Company will not make any amendments to its organizational
         documents, the Operating



                                       2




<PAGE>   3
Board of Trustees
Innkeepers USA Trust
December 21, 1999
Page 3


         Partnership Agreement, or the partnership agreement of any Subsidiary
         Partnership after the date of this opinion that would affect its
         qualification as a real estate investment trust (a "REIT") for any
         taxable year;
4.       each partner (each, a "Partner") of the Operating Partnership, other
         than IFC, that is a corporation or other entity has a valid legal
         existence;
5.       each Partner, other than IFC, has full power, authority, and legal
         right to enter into and to perform the terms of the Operating
         Partnership Agreement and the transactions contemplated thereby; and
6.       no action will be taken by the Company, the Operating Partnership, the
         Subsidiary Partnerships, or the Partners after the date hereof that
         would have the effect of altering the facts upon which the opinions set
         forth below are based.

         In connection with the opinions rendered below, we also have relied
upon the correctness of the representations contained in the Officer's
Certificate.

         Based on the factual matters in the documents and assumptions set forth
above, the representations set forth in the Officer's Certificate, the
discussions in the Prospectus under the caption "Federal Income Tax Consequences
of the Company's Status as a REIT" (which are incorporated herein by reference),
and without further investigation as to such factual matters, we are of the
opinion that:

         (a)      the Company qualified to be taxed as a REIT pursuant to
                  sections 856 through 860 of the Internal Revenue Code of 1986,
                  as amended (the "Code"), for its taxable years ended December
                  31, 1994 through December 31, 1998, and the Company's
                  organization and current and proposed method of operation will
                  enable it to continue to qualify as a REIT for its taxable
                  year ended December 31, 1999, and in the future; and

         (b)      the descriptions of the law contained in the Prospectus under
                  the caption "Federal Income Tax Consequences of the Company's
                  status as a REIT" are correct in all material respects, and
                  the discussions thereunder fairly summarize the federal income
                  tax considerations that are likely to be material to a holder
                  of the Redemption Shares or the Secondary Shares.

         We have performed no due diligence and have made no efforts to verify
the accuracy and genuineness of the documents and assumptions set forth above,
and the representations set forth in the Officer's Certificate. We will not
review on a continuing basis the Company's compliance with such documents,
assumptions or representations. Accordingly, no assurance can be given that the
actual results of the Company's operations will satisfy the requirements for
qualification and taxation as a REIT.






                                       3
<PAGE>   4
Board of Trustees
Innkeepers USA Trust
December 21, 1999
Page 4


         The foregoing opinions are based on current provisions of the Code and
the Treasury regulations thereunder (the "Regulations"), published
administrative interpretations thereof, and published court decisions. The
Internal Revenue Service has not issued Regulations or administrative
interpretations with respect to various provisions of the Code relating to REIT
qualification. No assurance can be given that the law will not change in a way
that will prevent the Company from qualifying as a REIT.

         We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required by Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations promulgated thereunder by
the SEC.

         The foregoing opinions are limited to the U.S. federal income tax
matters addressed herein, and no other opinions are rendered with respect to
other federal tax matters or to any issues arising under the tax laws of any
other country, or any state or locality. We undertake no obligation to update
the opinions expressed herein after the date of this letter. This opinion letter
is solely for the information and use of the addressee, and it may not be
distributed, relied upon for any purpose by any other person, quoted in whole or
in part or otherwise reproduced in any document, or filed with any governmental
agency without our express written consent.




                                                     Very truly yours,

                                                     Hunton & Williams







                                       4
<PAGE>   5



                                    EXHIBIT A

                        SUBSIDIARY PARTNERSHIP AGREEMENTS

1. the Limited Partnership Agreement of Innkeepers Financing Partnership, L.P.,
a Virginia limited partnership, dated March 20, 1995, between Innkeepers USA
Trust, as general partner, and Innkeepers USA Limited Partnership (the
"Operating Partnership"), as limited partner;

2. the Limited Partnership Agreement of Innkeepers Financing Partnership II,
L.P., a Virginia limited partnership, dated October 6, 1995, between Innkeepers
Financial Corporation II, as general partner, and the Operating Partnership, as
limited partner;

3. the Limited Partnership Agreement of Innkeepers Financing Partnership III,
L.P., a Virginia limited partnership, dated March 6, 1997, between Innkeepers
Financial Corporation III, as general partner, and the Operating Partnership, as
limited partner;

4. the Limited Partnership Agreement of Innkeepers Residence San Mateo, L.P., a
Virginia limited partnership, dated October 25, 1996, between Innkeepers
Residence San Mateo, Inc., as general partner, and the Operating Partnership, as
limited partner;

5. the Limited Partnership Agreement of Innkeepers Residence Sili I, L.P., a
Virginia limited partnership, dated October 25, 1996, between Innkeepers
Residence Sili I, Inc., as general partner, and the Operating Partnership, as
limited partner;

6. the Limited Partnership Agreement of Innkeepers Residence Sili II, L.P., a
Virginia limited partnership, dated October 25, 1996, between Innkeepers
Residence Sili II, Inc., as general partner, and the Operating Partnership, as
limited partner;

7. the Limited Partnership Agreement of Innkeepers Residence Denver-Downtown,
L.P., a Virginia limited partnership, dated October 25, 1996, between Innkeepers
Residence Denver-Downtown, Inc., as general partner, and the Operating
Partnership, as limited partner;

8. the Limited Partnership Agreement of Innkeepers Residence Atlanta-Downtown,
L.P., a Virginia limited partnership, dated October 25, 1996, between Innkeepers
Residence Atlanta-Downtown, Inc., as general partner, and the Operating
Partnership, as limited partner;

9. the Limited Partnership Agreement of Innkeepers Residence Wichita East, L.P.,
a Virginia limited partnership, dated October 25, 1996, between Innkeepers
Residence Wichita East, Inc., as general partner, and the Operating Partnership,
as limited partner;

10. the Limited Partnership Agreement of Innkeepers Residence East Lansing,
L.P., a Virginia limited partnership, dated October 25, 1996, between Innkeepers
Residence East Lansing, Inc., as general partner, and the Operating Partnership,
as limited partner;



                                       5
<PAGE>   6

11. the Limited Partnership Agreement of Innkeepers Residence Portland, L.P., a
Virginia limited partnership, dated October 25, 1996, between Innkeepers
Residence Portland, Inc., as general partner, and the Operating Partnership, as
limited partner;

12. the Limited Partnership Agreement of Innkeepers Residence Grand Rapids,
L.P., a Virginia limited partnership, dated October 25, 1996, between Innkeepers
Residence Grand Rapids, Inc., as general partner, and the Operating Partnership,
as limited partner;

13. the Limited Partnership Agreement of Innkeepers Hampton Norcross, L.P., a
Virginia limited partnership, dated October 25, 1996, between Innkeepers Hampton
Norcross, Inc., as general partner, and the Operating Partnership, as limited
partner;

14. the Limited Partnership Agreement of Innkeepers Residence Eden Prairie,
L.P., a Virginia limited partnership, dated January 1, 1997, between Innkeepers
Residence Eden Prairie, Inc., as general partner, and the Operating Partnership,
as limited partner;

15. the Limited Partnership Agreement of Innkeepers Residence Arlington (TX),
L.P., a Virginia limited partnership, dated January 24, 1997, between Innkeepers
Residence Arlington, Inc., as general partner, and the Operating Partnership, as
limited partner;

16. the Limited Partnership Agreement of Innkeepers Residence Addison (TX),
L.P., a Virginia limited partnership, dated January 24, 1997, between Innkeepers
Residence Addison, Inc., as general partner, and the Operating Partnership, as
limited partner;

17. the Limited Partnership Agreement of Innkeepers Schaumburg, L.P., dated as
of June 26, 1997, between Innkeepers Hampton Schaumburg, Inc., as general
partner, and the Operating Partnership, as limited partner;

18. the Limited Partnership Agreement of Innkeepers Financing Partnership IV,
L.P., dated as of June 26, 1997, between Innkeepers Hampton Lombard, Inc., as
general partner, and the Operating Partnership, as limited partner;

19. the Limited Partnership Agreement of Innkeepers Westchester, L.P., dated as
of June 26, 1997, between Innkeepers Hampton Westchester, Inc., as general
partner, and the Operating Partnership, as limited partner;

20. the Limited Partnership Agreement of Innkeepers Summerfield General, L.P.,
dated as of September 24, 1999, between Innkeepers Financial Corporation IV, as
general partner, and the Operating Partnership, as limited partner;

21. the Limited Partnership Agreement of Innkeepers Sunrise Tinton Falls, L.P.,
dated as of July 2, 1997, between Innkeepers Financial Corporation IV, as
general partner, and the Operating Partnership, as limited partner;




                                       6
<PAGE>   7

22. the Limited Partnership Agreement of Innkeepers Summerfield General II,
L.P., dated as of July 2, 1997, between Innkeepers Financial Corporation IV, as
general partner, and the Operating Partnership, as limited partner;

23. the Limited Partnership Agreement of Innkeepers RI Northwest, L.P., dated as
of September 24, 1999, between Innkeepers RI Northwest, Inc., as general
partner, and the Operating Partnership, as limited partner;

24. the Limited Partnership Agreement of Innkeepers Residence Shelton, L.P.,
dated as of October 7, 1997, between Innkeepers Residence Shelton, Inc., as
general partner, and the Operating Partnership, as limited partner;

25. the Limited Partnership Agreement of Innkeepers RI Altamonte, L.P., dated as
of December 30, 1997, between Innkeepers RI Altamonte, Inc., as general partner,
and the Operating Partnership, as limited partner;

26. the Limited Partnership Agreement of Innkeepers RI General, L.P., dated as
of December 30, 1997, between Innkeepers RI General, Inc., as general partner,
and the Operating Partnership, as limited partner;






                                       7

<PAGE>   1
                                                                    EXHIBIT 23.1



                       CONSENT OF INDEPENDENT ACCOUNTANTS

         We hereby consent to the incorporation by reference in this
registration statement on Form S-3 of Innkeepers USA Trust of our report dated
February 19, 1999, except Note 8 as to which the date is March 1, 1999, relating
to the consolidated financial statements, which appears in the 1998 Annual
Report to Shareholders on Innkeepers USA Trust, which is incorporated by
reference in Innkeepers USA Trust's Annual Report on Form 10-K for the year
ended December 31, 1998. We also consent to the incorporation by reference of
our report dated February 19, 1999, relating to the financial statement
schedule, which appears in such Annual Report on Form 10-K. We also consent to
the incorporation by reference of our report dated March 19, 1999, relating to
the combined financial statements of Innkeepers Hospitality, which also appears
in such Annual Report on Form 10-K. We also consent to the reference to us our
firm under the heading "Experts" in such Registration Statement.




                                      PricewaterhouseCoopers LLP


Dallas, Texas
December 22, 1999















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