HOSPITALITY PROPERTIES TRUST, S-11/A, 1995-08-14

HOSPITALITY PROPERTIES TRUST
S-11/A, 1995-08-14
REAL ESTATE INVESTMENT TRUSTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14, 1995

REGISTRATION NO. 33-92330
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------

AMENDMENT NO. 2 TO

FORM S-11

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN
REAL ESTATE COMPANIES
------------------------

HOSPITALITY PROPERTIES TRUST
(Exact name of registrant as specified in its governing instruments)
------------------------
400 CENTRE STREET
NEWTON, MASSACHUSETTS 02158
(617) 964-8389
(Address of principal executive offices)
------------------------
JOHN G. MURRAY
HOSPITALITY PROPERTIES TRUST
400 CENTRE STREET
NEWTON, MASSACHUSETTS 02158
(617) 964-8389
(Name and address of agent for service)
------------------------
COPIES TO:

<TABLE>
<S> <C>
Lena G. Goldberg, Esq. Charles S. Whitman, III, Esq.
Sullivan & Worcester Davis Polk & Wardwell
One Post Office Square 450 Lexington Avenue
Boston, Massachusetts 02109 New York, New York 10017
(617) 338-2800 (212) 450-4000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
<TABLE>
<CAPTION>

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TITLE OF
SECURITIES AMOUNT PROPOSED PROPOSED MAXIMUM AMOUNT OF
BEING BEING MAXIMUM OFFERING AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PRICE PER UNIT OFFERING PRICE FEE(2)

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<S> <C> <C> <C> <C>
Common Shares of Beneficial
Interest, $0.01 par value per
share........................... 8,625,000 $26.00 $224,250,000 $77,327.59
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</TABLE>

(1) By this Amendment No. 2, the Registrant is removing from registration
4,210,000 shares previously registered for offering and sale.

(2) Previously paid.

------------------------
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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--------------------------------------------------------------------------------
<PAGE> 2

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION OR HEADING IN PROSPECTUS
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page.
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page and Outside Back
Cover Page of Prospectus.
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges........ Outside Front Cover Page; "Prospectus
Summary;" "Risk Factors;" "The Company."
4. Determination of Offering Price........... Outside Front Cover Page; "Underwriting."
5. Dilution.................................. "Dilution."
6. Selling Security Holders.................. Not applicable.
7. Plan of Distribution...................... Outside Front Cover Page; "Underwriting."
8. Use of Proceeds........................... "Prospectus Summary;" "Use of Proceeds."
9. Selected Financial Data................... "Pro Forma and Selected Financial and
Operating Data."
10. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ "Management's Discussion and Analysis of
Financial Condition and Results of
Operations."
11. General Information as to Registrant...... "Prospectus Summary;" "The Company;"
"Business;" "Management;" "Policies with
Respect to Certain Activities;" "Summary
of the Declaration of Trust;" "Additional
Information."
12. Policy with Respect to Certain
Activities................................ "Prospectus Summary;" "The Company;"
"Business;" "Policies with Respect to
Certain Activities;" "Additional
Information."
13. Investment Policies of Registrant......... "Prospectus Summary;" "Business;"
"Policies with Respect to Certain
Activities;" "Summary of the Declaration
of Trust."
14. Description of Real Estate................ "Prospectus Summary;" "The Initial
Hotels;" "Business;" "The Initial Lessee;"
"The Initial Leases;" "Policies with
Respect to Certain Activities."
15. Operating Data............................ "Prospectus Summary;" "Pro Forma and
Selected Financial and Operating Data;"
"The Initial Hotels;" "Business;" "The
Initial Lessee;" "The Initial Leases;"
"Federal Income Tax Considerations."
16. Tax Treatment of Registrant and its
Security Holders.......................... "Prospectus Summary;" "Federal Income Tax
Considerations;" "Certain United States
Tax Considerations for Non-U.S. Holders of
Shares;" "ERISA Plans, KEOGH Plans and
Individual Retirement Accounts."
17. Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters....................... "Risk Factors;" "Distribution Policy;"
"Business;" "Shares Eligible for Future
Sale."
18. Description of Registrant's Securities.... "Distribution Policy;" "Description of the
Shares;" "Summary of the Declaration of
Trust."
19. Legal Proceedings......................... "Business."
</TABLE>

<PAGE> 3

<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION OR HEADING IN PROSPECTUS
<C> <S> <C>
20. Security Ownership of Certain Beneficial
Owners and Management..................... "Principal Shareholders."
21. Directors and Executive Officers.......... "Management;" "Advisors and the Advisory
Agreement."
22. Executive Compensation.................... "Management;" "Advisors and the Advisory
Agreement."
23. Certain Relationships and Related
Transactions.............................. "Business;" "Management;" "Advisors and
the Advisory Agreement."
24. Selection, Management and Custody of
Registrant's Investments.................. Outside Front Cover Page; "Prospectus Sum-
mary;" "Business;" "The Initial Lessee;"
"The Initial Leases;" "The Manager;" "The
Management Agreements;" "Management;"
"Advisors and the Advisory Agreement."
25. Policies with Respect to Certain
Transactions.............................. "Policies with Respect to Certain
Activities."
26. Limitations of Liability.................. "Management;" "Summary of the Declaration
of Trust."
27. Financial Statements and Information...... "Prospectus Summary;" "Pro Forma and Se-
lected Financial and Operating Data;"
"Financial Statements."
28. Interests of Named Experts and Counsel.... "Experts;" "Legal Matters."
29. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... "Summary of the Declaration of Trust."
</TABLE>
<PAGE> 4

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 SUCH STATE.

SUBJECT TO COMPLETION, DATED AUGUST 14, 1995

PROSPECTUS
, 1995

7,500,000 SHARES

HOSPITALITY PROPERTIES TRUST
COMMON SHARES OF BENEFICIAL INTEREST

All of the Common Shares of Beneficial Interest (the "Shares") offered
hereby (this "Offering") are being offered for sale by Hospitality Properties
Trust (the "Company"). The Company is currently a wholly owned subsidiary of
Health and Retirement Properties Trust, a New York Stock Exchange listed REIT
("HRP"). In a separate placement, the Company is offering for sale 3,960,000
Shares to HRP and 250,000 Shares to HRPT Advisors, Inc. ("Advisors"). Both HRP
and Advisors will pay $25.00 per Share. Upon completion of this Offering, the
public shareholders will own 63.8% of the Company.

Upon completion of this Offering, the Company will operate as a REIT and
will own 37 Courtyard by Marriott(R) hotels with 5,286 guest rooms (the "Initial
Hotels"). All of the Initial Hotels will be leased to a subsidiary of Host
Marriott Corporation and managed by a subsidiary of Marriott International, Inc.

Prior to this Offering, there has been no public market for the Shares. It
is currently estimated that the initial public offering price will be between
$24.00 and $26.00 per Share. See "Underwriting" for the factors considered in
determining the initial public offering price. The Company intends to pay
regular quarterly dividends at a rate of $0.55 per Share ($2.20 per Share per
annum), commencing with the quarter ending September 30, 1995.

An investment in the Shares offered hereby is not an investment in HRP,
Host Marriott Corporation, Marriott International, Inc., HMH HPT Courtyard, Inc.
or Courtyard Management Corporation. An investment in the Shares is not an
investment in the operations of the Initial Hotels.

The Shares have been approved for listing on the New York Stock Exchange
(the "NYSE") under the symbol "HPT", subject to official notice of issuance.

SEE "RISK FACTORS" ON PAGE 14, INCLUDING:

- INITIAL DEPENDENCE ON SINGLE LESSEE, SINGLE MANAGER AND SINGLE BRAND
NAME;

- INABILITY OF THE COMPANY AS A REIT TO OPERATE ITS HOTEL PROPERTIES;

- LIMITED OPERATING HISTORY AND DEPENDENCE ON KEY PERSONNEL;

- POTENTIAL CONFLICTS OF INTEREST AND BENEFITS TO HRP AND ADVISORS;

- CONCENTRATION OF OWNERSHIP BY HRP AND ADVISORS;

- ADVERSE TAX CONSEQUENCES IF THE COMPANY FAILS TO QUALIFY AS A REIT;

- LACK OF PRIOR MARKET FOR THE SHARES AND EFFECT OF INTEREST RATES ON THE
PRICE OF THE SHARES;

- ASSET VALUES MAY NOT REFLECT MARKET VALUES;
- OWNERSHIP LIMITATIONS AND ANTITAKEOVER PROVISIONS; AND
- RISKS OF FUTURE LEVERAGE AND LACK OF ESCROW OF SECURITY DEPOSIT.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total(3)...................................... $ $ $
--------------------------------------------------------------------------------------------------------
</TABLE>

(1) See "Underwriting" for indemnification arrangements with the Underwriters.

(2) Before deducting expenses estimated at $ , which will be paid by
the Company.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 1,125,000 additional Shares at the price to the Public less Underwriting
Discounts and Commissions, solely to cover overallotments, if any. If such
option is exercised in full, the total price to the Public, Underwriting
Discounts and Commissions and Proceeds to the Company will be $ ,
$ and $ , respectively. See "Underwriting."

The Shares are being offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters and subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of the Share certificates will be made in New York, New
York on or about , 1995.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEAN WITTER REYNOLDS INC.
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
<PAGE> 5
<PAGE> 6

[Map of United States showing locations of 37 properties and
photograph of Milford, MA property.]

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE> 6

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUMMARY........................ 1
The Company............................. 1
Risk Factors............................ 2
Growth Strategy......................... 5
The Initial Hotels...................... 6
The Initial Leases and
Management Agreements................ 7
Formation of the Company................ 9
Benefits to HRP and Advisors............ 9
The Offering............................ 10
Distribution Policy..................... 10
Tax Status.............................. 10
Summary Pro Forma and Selected Financial
and Operating Data................... 11
RISK FACTORS.............................. 14
Risks Relating to the Company's
Operations and the Initial Hotels.... 14
Tax Risks............................... 17
Share Ownership Risks and Effects of
Various Factors on Share Price....... 18
Hotel Industry Risks.................... 20
Real Estate Investment Risks............ 22
THE COMPANY............................... 25
USE OF PROCEEDS........................... 26
DISTRIBUTION POLICY....................... 27
CAPITALIZATION............................ 29
DILUTION.................................. 30
PRO FORMA AND SELECTED FINANCIAL AND
OPERATING DATA.......................... 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.............................. 34
Overview................................ 34
Pro Forma Results of Operations -- The
Company.............................. 34
Pro Forma Results of
Operations -- Host................... 35
Results of Operations -- Initial
Hotels............................... 35
Liquidity and Capital Resources......... 37
Seasonality............................. 38
Inflation............................... 38
THE INITIAL HOTELS........................ 39
BUSINESS.................................. 44
The Hotel Industry...................... 44
Growth Strategy......................... 44
Formation of the Company................ 46
Purchase Agreement...................... 46
Purchase Options........................ 47
Environmental Matters................... 47
Legal Proceedings....................... 48
Insurance............................... 49
Competition............................. 49
Regulatory Matters...................... 49
THE INITIAL LESSEE........................ 50

<CAPTION>
PAGE
<S> <C>
THE INITIAL LEASES........................ 50
General................................. 50
Rent.................................... 50
Maintenance and Alterations............. 50
FF&E Reserve............................ 51
Assignment.............................. 51
Lease Term.............................. 51
Ground Lease Terms...................... 51
Security Deposit........................ 52
Environmental Matters................... 52
Financial Covenants of Host............. 52
Insurance and Indemnification........... 52
Damage, Destruction or Condemnation..... 53
Other Material Covenants of Host........ 54
Events of Default....................... 54
Remedies................................ 54
THE MANAGER............................... 55
THE MANAGEMENT AGREEMENTS................. 55
General................................. 55
Fees.................................... 55
Term.................................... 56
Early Termination....................... 56
FF&E Reserve............................ 56
Maintenance and Repairs................. 56
Other Material Covenants of Marriott.... 57
Insurance and Indemnification........... 57
Damage, Destruction or Condemnation..... 57
Events of Default....................... 57
Limitation on Secured Borrowings........ 58
MANAGEMENT................................ 59
Trustees and Executive Officers......... 59
Committees of the Board of Trustees..... 60
Compensation of Trustees and Officers... 60
Employees............................... 60
Incentive Share Award Plan.............. 60
Trustees' and Officers'
Indemnification...................... 61
Benefits to HRP and Advisors............ 61
ADVISORS AND THE ADVISORY AGREEMENT....... 61
Advisors................................ 61
The Advisory Agreement.................. 62
Compensation to Advisors................ 63
POLICIES WITH RESPECT TO CERTAIN
ACTIVITIES.............................. 64
Investment Policies..................... 64
Disposition Policies.................... 65
Financing Policies...................... 65
Conflict of Interest Policies........... 65
Policies with Respect to Other
Activities........................... 66
DESCRIPTION OF THE SHARES................. 66
General................................. 66
Common Shares........................... 66
Preferred Shares........................ 67
Transfer Agent.......................... 67
</TABLE>

(ii)
<PAGE> 7

<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY OF THE DECLARATION OF TRUST....... 67
Trustees................................ 67
Liability of Trustees................... 67
Limitation of Liability; Shareholder
Liability............................ 68
Duration and Termination................ 68
Prohibited Investments and Activities... 68
Transactions with Affiliates, Trustees,
Employees, Officers or Agents........ 69
Restrictions on Transfer................ 69
Shareholder Proposals................... 70
Business Combinations................... 71
Control Share Acquisitions.............. 71
Amendment; Meetings..................... 71
Antitakeover Provisions................. 71
PRINCIPAL SHAREHOLDERS.................... 72
SHARES ELIGIBLE FOR FUTURE SALE........... 73
FEDERAL INCOME TAX CONSIDERATIONS......... 74
Taxation of the Company................. 75

<CAPTION>
PAGE
<S> <C>
Taxation of Shareholders................ 80
Other Tax Considerations................ 81
CERTAIN UNITED STATES TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF SHARES.......... 82
Federal Estate Tax...................... 83
Backup Withholding and Information
Reporting Requirements............... 83
ERISA PLANS, KEOGH PLANS AND INDIVIDUAL
RETIREMENT ACCOUNTS..................... 84
General Fiduciary Obligations........... 84
Prohibited Transactions................. 85
Special Fiduciary and Prohibited
Transactions Considerations.......... 85
UNDERWRITING.............................. 87
EXPERTS................................... 88
LEGAL MATTERS............................. 88
ADDITIONAL INFORMATION.................... 88
GLOSSARY.................................. 90
INDEX TO FINANCIAL STATEMENTS............. F-1
</TABLE>

(iii)
<PAGE> 8

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and the notes thereto, appearing elsewhere
in this Prospectus. Unless otherwise indicated, the information contained in
this Prospectus assumes that (i) the initial public offering price per Share
will be $25.00, (ii) the Underwriters' overallotment option will not be
exercised and (iii) the placement of 3,960,000 Shares to HRP and 250,000 Shares
to Advisors will be consummated. Capitalized terms which are used in this
Prospectus without definition have the meanings specified in the Glossary to
this Prospectus.

An investment in the Shares offered hereby is not an investment in Health
and Retirement Properties Trust, Host Marriott Corporation, Marriott
International, Inc., HMH HPT Courtyard, Inc. ("Host"), or Courtyard Management
Corporation ("Marriott"). An investment in the Shares is not an investment in
the operations of the Initial Hotels.

THE COMPANY

The Company is a REIT formed to acquire, own and lease hotel properties
throughout the United States. The Company currently owns 21 and upon completion
of this Offering will acquire an additional 16 Courtyard by Marriott(R) hotels.
The Initial Hotels have 5,286 guest rooms, are located in 20 states and will be
acquired for $329.0 million ($62,240 per guest room). The Initial Hotels are
among the newest in the Courtyard by Marriott(R) system and have an average age
of five years. In 1994, the Initial Hotels had an average occupancy of 81.1% and
an average daily rate ("ADR") of $66.65.

The Company's strategy for increasing Cash Available for Distribution (as
defined herein) per Share is to provide capital to unaffiliated operators of
hotel properties who wish to divest their properties while remaining in the
hotel business as lessees. Most other public hotel REITs seek to control the
operations of the hotel properties in which they invest by leasing the
properties to affiliated tenants. The Company believes that it will have a
competitive advantage over other public hotel REITs because of this difference
in operating philosophy. To achieve its objectives, the Company expects to
operate as follows: start with a strong capital base of shareholders' equity;
invest in high quality properties operated by unaffiliated hotel operating
companies; use moderate leverage to fund additional investments which increase
Cash Available for Distribution per Share because of positive spreads between
the Company's cost of funds and the rent yields; design leases which provide for
base rents and an opportunity for the Company to participate in a percentage of
gross revenues; as Cash Available for Distribution increases, periodically raise
dividends; when market conditions permit, refinance debt with additional equity
or long term debt; and, over time, pursue diversification so that the Company's
Cash Available for Distribution to shareholders will be received from diverse
properties and operators.

The Company may not manage the Initial Hotels because it is a REIT, has
leased the Initial Hotels to Host and is party to management agreements with
Marriott (the "Management Agreements"). All of the Initial Hotels will be leased
by the Company to Host, a limited purpose wholly owned subsidiary of Host
Marriott Corporation, and will be managed for Host by Marriott, a wholly owned
subsidiary of Marriott International, Inc. The Company's leases with Host (the
"Initial Leases") are for approximately 12 years with renewal options for an
additional 37 years. All of the Initial Leases are subject to cross default
covenants and renewal options may only be exercised by Host on an all or none
basis. A security deposit equal to one year's base rent (the "Security Deposit")
has been retained by the Company as security for all of Host's obligations under
the Initial Leases. As owner and lessor of the Initial Hotels, the Company has
no interest in the sales and operations of the Initial Hotels and is entitled
only to base rent and percentage rent under the Initial Leases. The annual rent
payable to the Company under the Initial Leases totals $32.9 million in base
rent plus percentage rent equal to 5% of Total Hotel Sales (as defined herein,
or "Gross Revenues" as defined in the Initial Leases) at the Initial Hotels in
excess of Total Hotel Sales during 1994. In addition to base rent and percentage
rent, the Initial Leases require that 5% of Total Hotel Sales (initially
approximately $1,172 per guest room per year) be escrowed as a reserve for
renovations and refurbishment (the "FF&E Reserve"). The Company believes that
the FF&E Reserve, which exceeds industry averages for similar properties, will
be adequate to maintain the competitiveness of the Initial Hotels. The
Management Agreements entered into

1
<PAGE> 9

between Marriott and Host Marriott Corporation and its affiliates with respect
to the Initial Hotels prior to the Company's purchase of the Initial Hotels have
been assigned to the Company. Under the Initial Leases, Host has agreed to
perform all of the Company's obligations under the Management Agreements. The
Management Agreements provide that base and incentive management fees are
effectively subordinated to base rent payable to the Company. For the 52 week
period ended June 16, 1995, Host's pro forma income before income taxes, rent,
subordinated management fees and the FF&E Reserve covered pro forma base rent
under the Initial Leases by 1.55 times; Host's pro forma income before income
taxes, rent and subordinated management fees and after deduction of the FF&E
Reserve covered pro forma base rent by 1.37 times.

The Company is currently a wholly owned subsidiary of HRP, a NYSE listed
REIT which primarily owns and leases retirement communities, nursing homes and
other health care related real estate. The Company acquired the 21 Initial
Hotels in March 1995. HRP has determined not to change its strategy of focusing
on retirement and nursing facilities. This Offering has been designed to provide
a vehicle whereby both public investors and HRP, consistent with HRP's principal
investment focus, can take advantage of investment opportunities in the hotel
industry.

The Company's principal place of business is located at 400 Centre Street,
Newton, Massachusetts and its telephone number is (617) 964-8389.

RISK FACTORS

An investment in the Shares involves various risks, and investors should
carefully consider the matters discussed under "Risk Factors." These risks
include, among others:

- Initial Dependence on Single Lessee and Single Manager. All of the
Initial Hotels are leased to Host and managed by Marriott. As owner and
lessor, the Company has no interest in the sales and operations of the
Initial Hotels and is entitled only to receive base and percentage rent
under the Initial Leases. In order to generate cash sufficient to make
distributions to shareholders, the Company will rely on timely receipt of
rent payments from Host. Host and the Company will rely on Marriott to
manage the Initial Hotels. The failure or delay by Host in making rental
payments under the Initial Leases could adversely affect the ability of
the Company to make distributions to shareholders. In addition, each
Initial Lease is cross-defaulted with all other Initial Leases. The
Management Agreements are not, however, cross-defaulted. Termination of
an Initial Lease after default will not terminate the Management
Agreement with respect to the applicable Initial Hotel unless there are
also defaults under such Management Agreement. If an Initial Lease is
terminated, and the corresponding Management Agreement is not, Marriott
will continue to manage the applicable Initial Hotel. After termination
of an Initial Lease, the Company may re-lease or sell the applicable
Initial Hotel, subject to the applicable Management Agreement, and seek
recovery of damages from Host. Host is a limited purpose entity which has
been recently formed for the purpose of leasing the Initial Hotels and
there can be no assurance that the Company will be able to recover
damages from Host.

- Initial Dependence on Single Brand Name. Each of the Initial Hotels is a
Courtyard by Marriott(R) hotel. The Courtyard by Marriott(R) brand name
is owned by affiliates of Marriott. Any degradation or adverse market
developments relating to the Courtyard by Marriott(R) brand name could
adversely affect the results of operations of the Initial Hotels and the
ability of Host to make rent payments.

- Inability to Operate the Hotel Properties. As a REIT, the Company is
restricted in its ability to operate the Initial Hotels and hotel
properties owned or acquired by the Company in the future (such
properties, together with the Initial Hotels, the "Hotel Properties").
Moreover, the Management Agreements restrict the Company's ability to
manage the Initial Hotels because under the Management Agreements,
Marriott has the exclusive right to manage the Initial Hotels. The
Company will rely on Host and any additional lessees of the Hotel
Properties (collectively, the "Lessees") and Marriott and additional
future managers (collectively, the "Managers") to operate the Hotel
Properties. No assurance can be given that Host or any additional Lessees
or Marriott or any additional

2
<PAGE> 10

Managers will operate the Initial Hotels or other Hotel Properties in a
manner to generate sufficient funds to pay base rent and maximize
percentage rent.

- Limited Operating History. The Company has only a limited operating
history and, as of the completion of this Offering, will have had no
experience operating as an independent company.

- Dependence on Key Personnel. The Company is an advised REIT and will be
highly dependent on the efforts of Advisors and the Company's Managing
Trustees and officers, all of whom have extensive experience operating a
REIT. Advisors' experience in evaluating and selecting hotels for
investment, however, has been limited to the evaluation and selection of
the Initial Hotels and only one of the Company's Trustees has extensive
hotel industry experience.

- Conflicts of Interest. Actual or potential conflicts of interest exist
between the Company, its Managing Trustees and Advisors. Advisors is a
Delaware corporation of which Messrs. Barry M. Portnoy and Gerard M.
Martin are each 50% owners. Messrs. Portnoy and Martin are each Managing
Trustees of the Company, Managing Trustees of HRP and Directors of
Advisors. Advisors has been engaged by the Company to perform management
and advisory services, including serving as the Company's investment
advisor, investigating and evaluating investment opportunities and
administering day-to-day operations of the Company. See "Advisors and the
Advisory Agreement -- The Advisory Agreement." These actual or potential
conflicts of interest could result in decisions that do not fully
represent the interests of the Company or all of its shareholders. The
terms of the Advisory Agreement (as defined herein) were not determined
by arms' length negotiations. During the term of the Advisory Agreement,
Advisors and Messrs. Portnoy and Martin have agreed not to provide
advisory services to, or serve as Directors or officers of, any other
REIT which is principally engaged in the business of ownership of hotel
properties or to make competitive direct investments in hotel facilities
without, in each case, the consent of Trustees of the Company who are not
officers of the Company or otherwise affiliated with the Company, HRP or
Advisors (the "Independent Trustees"). In addition, although the Company
does not expect its rights or obligations under the Initial Leases or
Management Agreements to be affected, the Company is also aware of
various financial and contractual relationships between Host Marriott
Corporation and Marriott International, Inc. and their respective
affiliates which may give rise to conflicts of interest between such
parties. See "The Initial Lessee" and "The Initial Manager."

- Benefits to HRP and Advisors. In connection with this Offering, HRP will
receive $64.3 million in cash in partial repayment of a demand loan made
by HRP to the Company which enabled it to purchase 21 of the Initial
Hotels. Amounts repaid to HRP will not be available to the Company. In
addition, Advisors will enter into the Advisory Agreement which provides
for payment by the Company of advisory fees to Advisors. The fee payable
to Advisors during the initial term of the Advisory Agreement through
December 31, 1995 (assuming no new investments by the Company during that
period) will be approximately $806,000.

- Security Deposit. The Security Deposit (one year's base rent) has not
been escrowed by the Company. Accordingly, in the event of a default
under the Initial Leases, these funds will not be available to make
distributions to shareholders.

- FF&E Reserve. Periodic payments into the FF&E Reserve will be restricted
cash rent to the Company. Although the Company anticipates that it will
have sufficient depreciation expense to offset this restricted cash
income for the foreseeable future, the existence of restricted cash
income could make it necessary for the Company to make distributions in
excess of Cash Available for Distribution in order to maintain its REIT
status under the Internal Revenue Code of 1986, as amended (the "Code").

- Ground Leases. Rights to use the land underlying five of the Initial
Hotels will be acquired by an assignment of the leasehold interests of
the sellers of the Initial Hotels (the "Sellers") under long term ground
leases. Under the Initial Leases, Host must pay all rents due and comply
with substantially all

3
<PAGE> 11

other obligations under the ground leases. If Host does not perform these
obligations, the Company must perform such obligations to protect its
investment in these Initial Hotels.

- Asset Values May Not Reflect Market Values. Although they were
determined by arm's length negotiations between the Company and Host
Marriott Corporation, the purchase prices paid by the Company for the
Initial Hotels may not accurately reflect the value of those assets.

- Insufficient Cash Available for Distributions. Either significant
unanticipated cash expenditures by the Company or reductions in
anticipated rent payments to the Company could adversely affect the
ability of the Company to make distributions to shareholders.

- Failure to Qualify as a REIT. If the Company failed to qualify as a
REIT, it would be taxed as a corporation, which would reduce the Cash
Available for Distribution to shareholders.

- Concentration of Ownership. Upon completion of this Offering, HRP and
Advisors will collectively own 36.2% of the Shares which will enable them
to have a significant influence on the Company.

- Risk of Leverage. The organizational documents of the Company do not
limit the level of debt the Company may incur. The Company could become
highly leveraged, which could adversely affect the ability of the Company
to make distributions to shareholders and increase the risk of default
under its indebtedness. The Company's current policy is not to have debt
for borrowed money in excess of 50% of its total market capitalization.

- Lack of Prior Market for Shares. The market price of the Shares may be
adversely affected if no active trading market for the Shares develops or
if interest rates increase.

- Ownership Limitations and Antitakeover Provisions. The restriction on
ownership of more than 9.8% of the Shares by any person except HRP,
Advisors and certain other entities, as set forth in the Company's
Declaration of Trust (the "Declaration"), may have the effect of
inhibiting a change of control of the Company.

- Change in Policies Without Shareholder Approval. The Board of Trustees
has the ability to change the policies of the Company, including its
investment, financing and distribution policies, without a vote of
shareholders, which could result in policies that do not reflect the
interests of all shareholders.

- Insurance. Certain potential losses, including losses resulting from
earthquakes, hurricanes, floods or other acts of God, may not be
insurable or insurable on economically viable terms. Any uninsured loss
suffered by the Company could adversely affect its ability to make
distributions to shareholders. Four of the Initial Hotels are located in
California where earthquake insurance is not currently available at
economically viable rates.

- Acquisition Risks. In connection with the acquisition of the Initial
Hotels, the Company will be subject to certain risks inherent in
acquiring real property, including uncertainty as to recourse for future
liabilities attributable to actions of, or breaches of representations
and warranties by, Host Marriott Corporation and its affiliates as the
Sellers. The Sellers are not required to retain any proceeds from the
sale of the Initial Hotels or to maintain any minimum levels of net
worth. The Company may be subject to similar risks in connection with
future acquisitions.

- Hotel Industry Risks. Investments in the hotel industry involve certain
risks, such as renewal of leases, the need for regular replacements and
improvements, competition and the cyclical and seasonal nature of the
industry.

- Real Estate Investment Risks. Investments in real estate involve certain
risks, such as the volatile and cyclical nature of the real estate
market, dependence on national and local economic conditions, the
relative illiquidity of real estate, potential liabilities for unknown or
future environmental liabilities and the need for regular capital
expenditures.

4
<PAGE> 12

GROWTH STRATEGY

The Company's business objectives are to increase Cash Available for
Distribution per Share and enhance shareholder value. The Company will seek to
(i) acquire additional Hotel Properties that meet the Company's investment
criteria and (ii) participate in growth in revenues at the Hotel Properties
through percentage rents.

ACQUISITION STRATEGY

The Company believes there are opportunities to acquire well located hotels
in the moderately priced segment of the hotel industry that are or potentially
could be affiliated with nationally recognized hotel companies. The Company
intends to focus on acquisitions of relatively new properties or older
properties where extensive renovations have been or are committed to be
undertaken at the time of the Company's investment. The Company intends to
require an appropriate reserve or other mechanism in its Leases to insure that
funding is available to maintain the quality of its Hotel Properties.

The Company has retained Advisors to provide management services and
investment advice to the Company in accordance with the terms of an advisory
agreement (the "Advisory Agreement"). For such services, Advisors will receive
an advisory fee based upon gross assets of the Company and may receive an
incentive fee based upon increases in the Company's Cash Available for
Distribution per Share. The initial term of the Advisory Agreement expires on
December 31, 1995 and renewals or extensions will be subject to the periodic
approval of the Independent Trustees. See "Policies With Respect to Certain
Activities -- Conflict of Interest Policies."

Advisors has significant experience in acquiring real estate and
structuring net lease transactions. Advisors' experience in evaluating and
selecting hotels for investment, however, has been limited to the evaluation and
selection of the Initial Hotels. Since its inception, HRP, which invests in
retirement and nursing facilities, has been advised by Advisors under the
supervision of Messrs. Portnoy and Martin. The Company and Advisors believe that
there are significant similarities between the business of purchasing and net
leasing retirement and nursing facilities and the business of purchasing and net
leasing hotel properties.

The Company has purchased from Host Marriott Corporation certain options,
rights of first refusal and rights of first offer covering substantially all
remaining ownership interests of Host Marriott Corporation and its affiliates in
Courtyard by Marriott(R) hotels and Residence Inns by Marriott(R). The rights of
first offer extended through February 29, 2000 and were purchased for $3.0
million; their terms will be extended to August 31, 2002 at the closing of this
Offering in exchange for an additional $1.5 million. For other material terms of
these rights, see "Business -- Purchase Options." Although the Company has not
determined whether or when to exercise any of these rights, the Company believes
these rights have significant value and will afford it opportunities to invest
in high quality hospitality properties operated by one of the world's most
successful hotel operating teams.

In addition to potential future investments in properties owned by Host
Marriott Corporation, the Company expects to seek investments in other hotel
properties owned and operated by companies other than Host Marriott Corporation
and Marriott International, Inc. Most other public hotel REITs seek to control
the operations of the hotel properties in which they invest by leasing the
properties to affiliated tenants. The Company neither intends to seek control
over its tenants' operations nor to lease or provide financing to affiliates.
Because of this difference in operating philosophy, the Company believes it will
have a competitive advantage over other public hotel REITs in dealing with hotel
operating companies which want to divest their real estate while remaining in
the hotel business as lessees.

INTERNAL GROWTH STRATEGY

Based upon recent increases in occupancy and ADR in the United States
lodging industry, the Company believes that the industry is experiencing
cyclical growth and improved fundamentals due to the more favorable balance
between demand and supply for overnight accommodations. The Company believes
that the Initial Hotels offer opportunities for internal growth through
increases in percentage rent. The Initial Leases

5
<PAGE> 13

require payment of base rent plus percentage rent equal to 5% of increases in
Total Hotel Sales at the Initial Hotels over Total Hotel Sales in 1994. The
Company intends in future Leases to require both base rent and percentage rent
based on gross revenues.

FINANCING POLICIES

The Company currently intends to employ conservative financial policies in
pursuing its growth strategy. In order to capitalize on hotel acquisition
opportunities, the Company has entered into a credit agreement with DLJ Mortgage
Capital, Inc. ("DLJMC") for a $200.0 million credit line (the "Acquisition
Line"). Upon completion of this Offering, the Company's only outstanding
indebtedness for borrowed money will be approximately $23.4 million. The Company
will have no indebtedness for borrowed money outstanding upon completion of this
Offering if the Underwriters' overallotment option is exercised in full.
Although there are no limitations in the Company's Declaration on the amount of
indebtedness it may incur, the Company currently intends not to have debt for
borrowed money in excess of 50% of its total market capitalization; however, the
Trustees may in their discretion change this policy at any time. See "Risk
Factors -- Share Ownership Risks and Effects of Various Factors on Share
Price -- Risks of Leverage."

THE INITIAL HOTELS

Courtyard by Marriott(R) hotels are designed to attract both business and
leisure travelers. A typical Courtyard by Marriott(R) hotel has an average of
145 guest rooms. The guest rooms are larger than those in most other moderately
priced hotels and predominately offer king sized beds. Most Courtyard by
Marriott(R) hotels are situated on well landscaped grounds and typically are
built around a courtyard containing a patio, pool and socializing area that may
be glass enclosed depending upon location. Most of the hotels have lounges or
lobbies, meeting rooms, an exercise room, a small laundry room available to
guests and a restaurant or coffee shop. Generally, the guest rooms are similar
in size and furnishings to guest rooms in full service Marriott hotels. In
addition, many of the same amenities as would be available in full service
Marriott hotels are available in Courtyard by Marriott(R) hotels, except that
restaurants may be open only for breakfast buffets or serve limited menus, room
service is generally not available and meeting and function rooms are limited in
size and number. The Company believes that the structural design and operating
systems developed by affiliates of Host and Marriott for these hotels allow
Courtyard by Marriott(R) hotels to be priced competitively with, and provide
better customer value than, most other moderately priced hotels.

The Company believes the superior design, operating systems and locations
of the Initial Hotels have caused their operating performance to exceed United
States hotel industry averages in recent years. The following table sets forth
for the three years during which all 37 Initial Hotels were open, the occupancy,
ADR and revenue per available room ("REVPAR") of the Initial Hotels as compared
with those averages for all United States hotels, as reported by Smith Travel
Research in Lodging Outlook:

<TABLE>
<CAPTION>
1992 1993 1994
------ ------ ------
<S> <C> <C> <C>
INITIAL HOTELS:
Occupancy................................... 76.2% 80.1% 81.1%
ADR......................................... $58.41 $62.07 $66.65
REVPAR...................................... $44.53 $49.70 $54.05
AVERAGES FOR U.S. HOTELS:
Occupancy................................... 61.8% 63.1% 65.2%
ADR......................................... $59.30 $61.17 $63.63
REVPAR...................................... $36.65 $38.60 $41.49
</TABLE>

6
<PAGE> 14

THE INITIAL LEASES AND MANAGEMENT AGREEMENTS

The principal features of the Initial Leases and the Management Agreements
are as follows:

- All of the Initial Leases are subject to cross default provisions.

- The term of the Initial Leases expires in December 2006. Thereafter, Host
has the option to renew for one seven year term and three consecutive ten
year terms. Renewal options may only be exercised on an all or none basis
for all of the Initial Hotels.

- The Initial Leases require the payment of both base and percentage rent.
The base rent for the Initial Hotels is $32.9 million per annum.
Percentage rent payable to the Company is 5% of Total Hotel Sales from
combined operations of the Initial Hotels in excess of Total Hotel Sales
during 1994. Total Hotel Sales for the 37 Initial Hotels were $120.9
million in 1994 compared with $113.4 million in 1993, a 6.7% increase.

- Both the Initial Leases and the Management Agreements require that the
FF&E Reserve be set aside for replacements and refurbishments of the
Initial Hotels. The FF&E Reserve belongs to the Company, is funded at 5%
of Total Hotel Sales of the Initial Hotels and is in addition to base
rent and percentage rent; it may only be spent by Host or Marriott for
capitalized improvements to, and replacements and refurbishments of, the
Initial Hotels. Based on Total Hotel Sales of the Initial Hotels for the
52 week period ending June 16, 1995, the annual contribution to the FF&E
Reserve would have been $1,172 per guest room. The Company believes this
level of available funding will be sufficient to maintain the quality,
appearance and market competitiveness of the Initial Hotels.

- A Security Deposit equal to a full year's base rent, $32.9 million, has
been retained by the Company as security for Host's obligations under the
Initial Leases. Provided that Host does not default under the Initial
Leases, the Company will repay the Security Deposit to Host at the
expiration of the term of the Initial Leases, including renewal terms. No
interest will be paid by the Company on the Security Deposit.

- The Initial Leases are net leases requiring Host to pay all operating
expenses, including taxes and insurance. Under the Management Agreements,
substantially all of Host's operating responsibilities have been
delegated to Marriott. The Management Agreements require Marriott to
maintain and repair the Initial Hotels, establish room rates, prices and
charges, arrange for and supervise advertising, obtain permits and
licenses, recruit, supervise and direct employees and cause Courtyard by
Marriott(R) chain services to be provided to the Initial Hotels.

- The Management Agreements may be canceled by Host (with the consent of
the Company) on a hotel by hotel basis if specified performance levels
are not achieved by Marriott. The Management Agreements are not cross
defaulted with each other or with the Initial Leases and, accordingly, a
default under one Management Agreement is not a default under any other
Management Agreement or under any Initial Lease. As a result, the
termination of one Management Agreement upon default will not result in
termination of the other Management Agreements or of any Initial Leases.
See "The Initial Leases -- Events of Default." If a Management Agreement
were terminated, the Initial Lease relating to the applicable Initial
Hotel would continue in effect, Host's obligations to pay rent to the
Company and otherwise perform under the Initial Lease would not be
affected by termination of such Management Agreement and Host would be
obligated to manage or find a substitute manager for such Initial Hotel.
The Company believes that the fees payable under the Management
Agreements would be sufficient to attract a successor Manager but no
assurance can be given that an acceptable successor Manager could be
engaged. As a REIT, the Company is restricted in its ability to manage
the Initial Hotels. See "Federal Income Tax Considerations -- Taxation of
the Company -- Foreclosure Property." Use of the "Courtyard by
Marriott(R)" brand name would not be available to Host or to a substitute
manager of an Initial Hotel with respect to which a Management Agreement
had been terminated unless Host or a successor Manager obtained a
franchise for such Initial Hotel from Marriott. Use of the brand name
with respect to Initial Hotels for which Management Agreements remained
in effect would not be affected thereby.

7
<PAGE> 15

- The Management Agreements expire in December 2013. Thereafter, they may
be renewed by Marriott for three consecutive ten year terms. All such
renewals may only be exercised on an all or none basis for all of the
Initial Hotels.

- Management fees will be paid to Marriott by Host for operation of the
Initial Hotels and include a base fee equal to 2% of Total Hotel Sales
and an incentive fee calculated based on a percentage of Available Cash
Flow (as defined in the Management Agreements). Under the terms of the
Management Agreements, both base and incentive management fees are
effectively subordinated to base rent due under the Initial Leases
because base management fees (which are payable for each Initial Hotel on
an individual basis) are deferred in any year in which Operating Profit
(as defined in the Management Agreements) is not sufficient to pay base
rent for such Initial Hotel in full and incentive management fees (which
are payable for all Initial Hotels on a combined basis) are payable only
after base rent obligations under the Initial Leases have been paid in
full. Based on the pro forma Total Hotel Sales and Available Cash Flow at
the Initial Hotels for the year ended December 30, 1994, the base fee and
incentive fee payable to Marriott for the operation of the Initial Hotels
under the Management Agreements would have been $2.4 million and $3.4
million, respectively. Prior to the Company's acquisition of the Initial
Hotels, base fees payable by Host to Marriott under the Management
Agreements were waived by Marriott. See Note 5 to the Combined Financial
Statements of the Initial Hotels.

- As owner and lessor of the Initial Hotels, the Company has no interest in
the sales and operations of the Initial Hotels and is entitled only to
base rent and percentage rent under the Initial Leases. For the 52 week
period ended June 16, 1995, Host's pro forma income before income taxes,
rent, subordinated management fees and the FF&E Reserve exceeded pro
forma base rent due to the Company by $18.2 million, or coverage of 1.55
times the base rent; Host's pro forma income before income taxes, rent
and subordinated management fees and after deduction of the FF&E Reserve
exceeded pro forma base rent due to the Company by $12.0 million, or
coverage of 1.37 times.

8
<PAGE> 16

FORMATION OF THE COMPANY

The Company is currently a wholly owned subsidiary of HRP. In March 1995,
the Company acquired 21 of the Initial Hotels for $179.4 million. Substantially
all of the funding for this acquisition, including start up, closing and option
costs, was provided to the Company by HRP as a demand loan (the "HRP Loan"). In
addition to the HRP Loan, HRP purchased 40,000 Shares for $1.0 million ($25.00
per Share). Upon completion of this Offering, the additional 16 Initial Hotels
will be purchased by the Company for $149.6 million, HRP will purchase directly
from the Company an additional 3,960,000 Shares at $25.00 per Share by
cancelling $99.0 million of the HRP Loan and Advisors will purchase directly
from the Company 250,000 Shares at $25.00 per Share. The Company has entered
into the Acquisition Line which will be available upon the completion of this
Offering. The net proceeds of this Offering, the sale of Shares to Advisors and
amounts drawn under the Acquisition Line will be used to purchase the additional
16 Initial Hotels and to repay the remaining balance on the HRP Loan. At the
conclusion of these transactions, the ownership structure of the Company will be
as follows:

<TABLE>
<S> <C>
------------------------------------------------
Public Shareholders 7,500,000 Shares
(63.8%)
HRP 4,000,000 Shares
(34.1%)
Advisors 250,000 Shares
(2.1%)
------------------------------------------------
------------------------------------------------
The Company
------------------------------------------------
------------------------------------------------
Ownership of 37 Courtyard by Marriott(R) Hotels
------------------------------------------------

------------- -------------
Leased Managed
to by
Host Marriott
------------- -------------
</TABLE>

BENEFITS TO HRP AND ADVISORS

In connection with the completion of this Offering and the other
transactions to be consummated in connection with the completion of this
Offering, HRP and Advisors will receive the following benefits:

- HRP will receive $64.3 million in cash in partial repayment of the HRP
Loan.

- HRP will purchase 3,960,000 Shares by cancelling $99.0 million of the HRP
Loan (a purchase price of $25.00 per Share).

- Advisors will purchase 250,000 Shares at $25.00 per Share in cash.

- Advisors will enter into the Advisory Agreement with the Company under
which it will earn advisory fees. The fee payable to Advisors during the
initial term of the Advisory Agreement through December 31, 1995 (assuming
no new investments by the Company during that period) will be
approximately $806,000. Messrs. Portnoy and Martin are Managing Trustees
of the Company, Managing Trustees of HRP and each is a Director and a 50%
owner of Advisors. See "Advisors and the Advisory Agreement."

9
<PAGE> 17

THE OFFERING

All of the Shares offered hereby are being sold by the Company.

<TABLE>
<S> <C>
Shares offered................................. 7,500,000 Shares
Concurrent placement to HRP and Advisors....... 4,210,000 Shares
Shares to be outstanding after this Offering
and the concurrent placement(1).............. 11,750,000 Shares
Use of proceeds................................ Acquisition of the additional 16 Initial
Hotels, repayment of a portion of the HRP
Loan, payment of certain expenses associated
with this Offering and for working capital
and other general purposes, including future
acquisitions.
NYSE symbol.................................... HPT
</TABLE>

------------------------------
(1) Includes 40,000 Shares owned by HRP prior to this Offering.

DISTRIBUTION POLICY

The Company intends to make regular quarterly distributions beginning with
the quarter ended September 30, 1995 at the initial rate of $0.55 per Share, or
$2.20 per annum. Based upon the range of estimated public offering prices set
forth on the cover of this Prospectus, the initial distribution yield will be
between 8.46% and 9.17% per annum. The first distribution, for the period from
the completion of this Offering through September 30, 1995, is expected to be
$ per Share. The Company does not intend to reduce the initial distribution
rate if the Underwriters' overallotment option is exercised. The initial annual
distribution represents approximately 89.8% of the Company's pro forma Cash
Available for Distribution for the twelve months ended June 30, 1995. See
"Distribution Policy."

TAX STATUS

The Company will elect to be taxed as a REIT under the Code beginning with
its taxable year ending December 31, 1995. If the Company qualifies for taxation
as a REIT, then under current federal income tax law the Company generally will
not be taxed on income it distributes to its shareholders so long as it
distributes at least 95% of its annual net taxable income and satisfies a number
of organizational and operational requirements to which REITs are subject. Even
if the Company qualifies for taxation as a REIT, the Company will be subject to
certain state and local taxes on its income and property. See "Federal Income
Tax Considerations."

10
<PAGE> 18

SUMMARY PRO FORMA AND SELECTED FINANCIAL AND OPERATING DATA

The following table sets forth summary selected financial and operating
data on a pro forma basis for the Company for the six months ended June 30, 1994
and June 30, 1995 and as of and for the 12 months ended June 30, 1995 and for
the year ended December 31, 1994. The pro forma data are unaudited and are
presented as if: (i) this Offering and the concurrent placement; (ii) the
acquisition of the Initial Hotels; (iii) the repayment of the HRP Loan; (iv) the
initial borrowing under the Acquisition Line; (v) the commencement of the
Initial Leases; and (vi) certain other transactions described in the notes to
the pro forma financial statements included elsewhere in this Prospectus have
been consummated as of the date or for the periods presented. The pro forma data
are not necessarily indicative of what the actual financial position or results
of operations would have been as of the dates or for the periods indicated, nor
do they purport to represent the financial position or results of operations for
future periods. The following summary selected financial and operating data
should be read in conjunction with the financial statements and the notes
thereto included elsewhere in this Prospectus. Historical data are not presented
because the Company was recently formed and the information is not material.

HOSPITALITY PROPERTIES TRUST
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
-------------------------------------------------------------------------
YEAR ENDED 12 MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1994 JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1995
----------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Base rent..................... $32,900 $32,900 $ 16,450 $ 16,450
Percentage rent............... -- 166 -- 166
FF&E Reserve.................. 6,045 6,211 3,037 3,203
Expenses:
Interest...................... 1,882 1,882 941 941
Depreciation.................. 9,011 9,011 4,506 4,506
General, administrative and
advisory................... 2,549 2,549 1,275 1,275
----------------- --------------- ---------------- ----------------
Net income................. $25,503 $25,835 $ 12,765 $ 13,097
============= ============= ============= =============
Net income per Share(1).... $ 2.17 $ 2.20 $ 1.09 $ 1.11
============= ============= ============= =============
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA
AS OF
JUNE 30, 1995
----------------
<S> <C>
BALANCE SHEET DATA:
Real estate properties, net............................................. $328,256
Total assets............................................................ 335,915
Total debt.............................................................. 23,400
Shareholders' equity.................................................... 278,350
</TABLE>

11
<PAGE> 19

------------------------------
(1) All per Share calculations are based on 11,750,000 Shares outstanding.

(2) Management considers Funds From Operations (as defined herein) to be a
measure of the financial performance of an equity REIT that provides a
relevant basis for comparison among REITs and Funds From Operations is
presented to assist investors in analyzing the performance of the Company.
The Company's Funds From Operations represents net income (computed in
accordance with GAAP), before real estate depreciation and amortization
(excluding deferred financing costs). Funds From Operations does not
represent cash flows from operating activities (as determined in accordance
with GAAP) and should not be considered an alternative to net income as an
indicator of the Company's financial performance or to cash flows from
operating activities as a measure of liquidity. Funds From Operations does
not include cash expenditures that will be required in future periods for
FF&E Reserve funding. See "The Management Agreements -- FF&E Reserve."

(3) Amounts are computed on a pro forma basis in accordance with GAAP, except
that cash provided by (used in) operating activities excludes the effect on
cash resulting from changes in current assets and current liabilities. The
Company does not believe that these excluded items are material to net cash

provided by operating activities.

12
<PAGE> 20

The following table sets forth summary selected historical financial and
operating data of the 37 Initial Hotels for the fiscal years 1992, 1993 and 1994
which have been derived from audited financial statements included elsewhere in
this Prospectus. The following table also sets forth summary selected financial
and operating data on a pro forma basis for Host for the fiscal year ended
December 30, 1994, the 52 weeks ended June 16, 1995 and the 24 weeks ended June
17, 1994 and June 16, 1995. The pro forma data are unaudited and are presented
as if: (i) this Offering and the concurrent placement; (ii) the acquisition of
the Initial Hotels; (iii) the commencement of the Initial Leases; and (iv)
certain other transactions described in the notes to the pro forma financial
statements included elsewhere in this Prospectus have been consummated as of
January 1, 1994. The pro forma data are not necessarily indicative of what the
actual results of operations would have been for the periods indicated, nor do
they purport to represent the results of operations for future periods. The
following summary selected financial information should be read in conjunction
with the financial statements and notes thereto included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
COMBINED INITIAL HOTELS/HOST
-----------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
PRO FORMA
--------------------------------------------
FISCAL YEARS FISCAL YEAR 52 WEEKS 24 WEEKS 24 WEEKS
------------------------------ ENDED ENDED ENDED ENDED
1992 1993 1994 12/30/94 6/16/95 6/17/94 6/16/95
-------- -------- -------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................................. $ 41,969 $ 49,850 $ 58,186 $ 58,186 $60,634 $27,339 $30,025
Expenses:
Depreciation and amortization.......... 15,548 13,775 13,729 -- -- -- --
Base rent.............................. -- -- -- 32,900 32,900 16,450 16,450
Percentage rent........................ -- -- -- -- 154 -- 154
FF&E contribution expense.............. -- -- -- 6,045 6,199 2,803 2,957
Base management fee.................... -- -- -- 2,418 2,480 1,121 1,183
Incentive management fee............... -- -- 2,825 3,384 4,775 507 1,907
Other, net............................. 9,529 10,405 9,672 8,298 8,125 4,719 4,528
-------- -------- -------- ----------- -------- -------- --------
Revenues over expenses excluding income
taxes before cumulative effect of
change in accounting principle......... 16,892 25,670 31,960 5,141 6,001 1,739 2,846
Cumulative effect of change in accounting
for assets held for sale............... -- 14,500 -- -- -- -- --
-------- -------- -------- ----------- -------- -------- --------
Revenues over expenses excluding income
taxes.................................. $ 16,892 $ 11,170 $ 31,960 $ 5,141 $ 6,001 $ 1,739 $ 2,846
======== ======== ======== ========== ========= ========= =========
Pro forma income tax expense............. $ 6,757 $ 4,468 $ 13,104 $ 2,108 $ 2,460 $ 713 $ 1,167
======== ======== ======== ========== ========= ========= =========
Pro forma net income after taxes......... $ 10,135 $ 6,702 $ 18,856 $ 3,033 $ 3,541 $ 1,026 $ 1,679
======== ======== ======== ========== ========= ========= =========
OTHER DATA:
Total Hotel Sales(1)..................... $103,744 $113,356 $120,897 $ 120,897 $123,976 $56,068 $59,147
======== ======== ======== ========== ========= ========= =========
</TABLE>

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

(1) Total Hotel Sales are presented above for the purpose of providing
supplemental information regarding the gross sales volume of the Initial
Hotels which is used for purposes of calculating percentage rent and the
FF&E Reserve under the Initial Leases and Management Agreements,
respectively. As owner and lessor of the Initial Hotels, the Company has no
interest in the sales and operations of the Initial Hotels.

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<PAGE> 21

RISK FACTORS

Prospective investors should carefully consider the following information
in conjunction with the other information contained in this Prospectus before
purchasing Shares in this Offering.

RISKS RELATING TO THE COMPANY'S OPERATIONS AND THE INITIAL HOTELS

INITIAL DEPENDENCE ON SINGLE LESSEE AND SINGLE MANAGER

All of the Initial Hotels are leased to Host and managed by Marriott. The
Company has no interest in the sales and operations of the Initial Hotels and is
entitled only to receive base and percentage rents under the Initial Leases. In
order to generate revenues to enable it to make distributions to shareholders,
the Company will rely on the ability of Host to make rent payments and perform
(or cause Marriott to perform) its other obligations under the Initial Leases.
Any inability of Host to make timely rent payments or of Host or Marriott (as
the Initial Manager of the Initial Hotels) to otherwise perform obligations
arising under the Initial Leases could have a material adverse effect on the
Company's ability to make distributions to shareholders. In addition, each
Initial Lease is cross defaulted with all other Initial Leases. Termination of
an Initial Lease after default will not terminate the Management Agreement with
respect to the applicable Initial Hotel and Marriott will continue to manage the
applicable Initial Hotel unless there are also defaults under such Management
Agreement. After termination of an Initial Lease, the Company may re-lease or
sell the applicable Initial Hotel, subject to the applicable Management
Agreement, and seek recovery of damages from Host. Host is a limited purpose
entity which has been recently formed for the purpose of leasing the Initial
Hotels and there can be no assurance that the Company will be able to recover
damages from Host. Although Host is required to maintain a minimum net worth
(defined to exclude deferred gains) equal to one year's base rent under the
Initial Leases, the Security Deposit will be counted toward satisfaction of this
net worth requirement and there is no requirement that Host maintain any
specified amount of liquid assets. Host is also permitted to pay dividends at
any time provided no default exists or would be created under the Initial
Leases. As a result, there can be no assurance that the Company would be able to
obtain recoveries (other than reductions in the Security Deposit) against Host
in the event of a default under the Initial Leases.

INITIAL DEPENDENCE ON SINGLE BRAND NAME

Each of the Initial Hotels is marketed as a Courtyard by Marriott(R) hotel.
The Courtyard by Marriott(R) brand name is owned by affiliates of Marriott
International, Inc. and as of December 31, 1994 there were 227 Courtyard by
Marriott(R) hotels (including the Initial Hotels) located throughout the United
States. Although the Company intends to seek diversification of its lodging
properties, any degradation or adverse market developments relating to the
Courtyard by Marriott(R) brand name could adversely affect the results of
operations of the Company's Initial Hotels and the ability of Host to make rent
payments. In the event of a termination of a Management Agreement, the Company
would no longer have access to the Courtyard by Marriott(R) brand name and
Marriott's hotel reservation network and other marketing programs with respect
to the applicable Initial Hotel.

INABILITY TO OPERATE THE HOTEL PROPERTIES

Consistent with its status as a REIT, the Company will not be able to
operate the Hotel Properties directly. In addition, the Management Agreements
restrict the Company's ability to manage the Initial Hotels because under the
Management Agreements Marriott has the exclusive right to manage the Initial
Hotels. As a result, the Company will be unable to make and implement strategic
business decisions with respect to the Hotel Properties, such as decisions with
respect to the repositioning of the franchise or license of a Hotel Property,
the redevelopment of a Hotel Property's food and beverage operations and other
similar decisions, even if such decisions were in the best interests of the
Company. Any inability of Marriott or any future Managers properly to manage the
Initial Hotels could have a material adverse effect on the Company's ability to
make distributions to its shareholders. Moreover, Marriott and its affiliates
are not restricted from operating branded hotels (except other Courtyard by
Marriott(R) hotels until September 25, 1999) in the market areas of the Initial
Hotels. In addition, upon termination of a Lease, the effect of the tax rules
may be to limit the period during which the Company could operate (whether
directly or through an independent contractor)

14
<PAGE> 22

consistent with its REIT status. This restriction might cause the Company to
enter into a Lease with a new Lessee on terms and conditions which are less
favorable to it than if the Company were not subject to this restriction. See
"Federal Income Tax Considerations -- Taxation of the Company -- Foreclosure
Property."

LIMITED OPERATING HISTORY

The Company has been recently organized and has a limited operating
history. Although HRP and Advisors have extensive experience operating a REIT,
they have only limited experience in operating a hotel properties REIT and no
experience in the hotel industry. Prior to the acquisition of the Initial
Hotels, neither Advisors nor, with one exception, the Company's Trustees has had
experience with the ownership of real estate used by the hotel industry.
Accordingly, there can be no assurance that the Company will be able to generate
sufficient revenues from operations to make distributions to shareholders and
the Company will be subject to all risks generally associated with the formation
of a new business.

DEPENDENCE ON KEY PERSONNEL

The Company is an advised REIT and the success of the Company is highly
dependent on the efforts and abilities of its Managing Trustees, its officers
and Advisors. The loss of their services could have a material adverse effect on
the Company's business and results of operations, including its ability to
implement its business strategy. Although these individuals and Advisors have
extensive experience operating a REIT, their experience in evaluating and
selecting hotels has been limited to the evaluation and selection of the Initial
Hotels and only one of the Company's Trustees has extensive hotel industry
experience. Although Mr. John G. Murray, the Company's Treasurer and Chief
Financial Officer, is expected to devote substantially all of his business time
to the Company, neither Advisors nor the Managing Trustees will devote all of
their business time to the Company.

CONFLICTS OF INTEREST

Advisors acts as the investment advisor to the Company and to HRP and also
has other business interests. Advisors will not be able to devote all of its
business time and resources to the Company and conflicts could arise with
respect to the allocation of its business time and resources. Advisors will
perform management and advisory services for the Company including evaluating
investment opportunities and administering the day-to-day operations of the
Company. See "Advisors and the Advisory Agreement -- The Advisory Agreement."
Although HRP has stated that it has no current intention to purchase or finance
any additional hotel properties, a conflict could develop should HRP change its
investment policies and determine to increase its investments in hotel
properties. Messrs. Portnoy and Martin are Managing Trustees of HRP, Managing
Trustees of the Company and each is a Director and 50% shareholder of Advisors.
Mr. Portnoy is a partner in the firm of Sullivan & Worcester, which acts as
counsel to the Company, HRP, Advisors and affiliates of each of the foregoing.
To address the foregoing potential conflicts of interest and competing time
demands, the Declaration provides that a majority of the Company's Trustees will
be Independent Trustees. Advisors intends that Mr. Murray and certain other
employees of Advisors will devote substantially all of their business time to
the Company. In addition, pursuant to the Advisory Agreement, Advisors and
Messrs. Portnoy and Martin have agreed not to provide advisory services to, or
serve as directors or officers of, any other REIT which is principally engaged
in the business of ownership of hotel properties or to make competitive direct
investments in hotel facilities without, in each case, the consent of the
Independent Trustees. The terms of the Advisory Agreement were not determined by
arms' length negotiations. Finally, Advisors and Messrs. Portnoy and Martin will
be required by applicable law to act in accordance with their fiduciary
responsibilities to the Company. The Company is also aware of various financial
and contractual relationships between Host Marriott Corporation and Marriott
International, Inc. and their respective affiliates which may give rise to
conflicts of interest between such parties. The Company understands that these
relationships include a line of credit, guarantees and a significant number of
management and services agreements. The Company does not expect any such
potential conflicts materially to affect its rights or obligations under the
Initial Leases with Host or the Management Agreements with Marriott. See
"Policies with Respect to Certain Activities -- Conflict of Interest Policies."

15
<PAGE> 23

BENEFITS TO HRP AND ADVISORS

- HRP will receive $64.3 million in cash in partial repayment of the HRP
Loan.

- HRP will purchase 3,960,000 Shares by cancelling $99.0 million of the HRP
Loan (a purchase price of $25.00 per Share).

- Advisors will purchase 250,000 Shares at $25.00 per Share in cash.

- Advisors will enter into the Advisory Agreement with the Company under
which it will earn advisory fees. The fee payable to Advisors during the
initial term of the Advisory Agreement through December 31, 1995
(assuming no new investments by the Company during that period) will be
approximately $806,000. Messrs. Portnoy and Martin are Managing Trustees
of the Company, Managing Trustees of HRP and each is a Director and a 50%
owner of Advisors. See "Advisors and the Advisory Agreement."

SECURITY DEPOSIT

The $32.9 million Security Deposit retained by the Company as security for
Host's obligations under the Initial Leases will not be escrowed and will be
used by the Company for general purposes. Provided Host does not default under
the Initial Leases, the Security Deposit will be repayable by the Company to
Host upon the expiration of the Initial Leases, including renewal terms. The
Company will record any reductions to the Security Deposit resulting from
failure by Host to make rent payments as non-cash income of the Company for REIT
qualification purposes. Accordingly, funds represented by the Security Deposit
may not be available to the Company when they are required to be repaid to Host
or to satisfy Host's obligations in the event of a default under the Initial
Leases. Moreover, the Company may be required to borrow to make required
distributions to shareholders with respect to non-cash rental income to the
extent necessary to maintain its REIT status under the Code.

FF&E RESERVE

Pursuant to the Initial Leases, periodic payments into the FF&E Reserve
will be deemed to be restricted cash rent to the Company. Although the Company
anticipates that it will have sufficient cash available to make distributions
required under the REIT rules, the existence of non-cash income could make it
necessary for the Company to make distributions in excess of Cash Available for
Distribution in order to maintain its REIT status under the Code. See "-- Tax
Risks -- Distributions to Shareholders."

GROUND LEASES

Rights to use the land underlying five of the Initial Hotels will be leased
under long term ground leases. Under the Initial Leases, Host will be
responsible for paying directly to the ground lessors all rents due under the
ground leases and for complying with substantially all other obligations under
the ground leases. The terms of the ground leases expire between 2039 and 2067,
including renewal terms; however, one ground lease may be terminated by the
ground lessor at any time after January 1, 1999, provided certain conditions are
satisfied including compliance with the Company's right of first refusal and
payment to the Company of the fair market value of the Company's interest under
the ground lease. If a ground lease terminates, the Initial Lease with respect
to the Initial Hotels on such ground leased land will also terminate. Rent
payable under the ground leases is generally calculated as a percentage of hotel
revenues. Four of the five ground leases require minimum annual rent ranging
from approximately $90,000 to $500,000 per year. If Host (or any successor
Lessee) does not perform the Company's obligations under or elects not to renew
the ground leases, the Company must perform such obligations or renew such
ground leases in order to protect its investments in the Initial Hotels. Any
pledge of the Company's interests in a ground lease may also require the consent
of the applicable ground lessor and the lenders thereto. See "The Initial
Leases -- Ground Lease Terms."

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<PAGE> 24

ASSET VALUES MAY NOT REFLECT MARKET VALUES

The purchase prices for the Initial Hotels have been determined by arms'
length negotiation between the Company and Host Marriott Corporation. There can
be no assurance, however, that the purchase prices paid by the Company for the
Initial Hotels reflects the fair market value of such assets or that such
amounts could be realized upon any disposition of one or more of the Initial
Hotels.

INSUFFICIENT CASH AVAILABLE FOR DISTRIBUTIONS

The Company's distributions to shareholders during the 12 months following
the completion of this Offering are expected to be $2.20 per Share, which
represents approximately 89.8% of the Company's pro forma Cash Available for
Distribution for the 12 months ended June 30, 1995. See "Distribution Policy."
If the Company were to incur significant unanticipated cash expenditures or
experience reductions in cash revenues, it might not be able to make expected
distributions or may be required to borrow funds to make distributions
sufficient to fulfill applicable requirements to maintain its REIT status. Any
failure to make, or any reduction in, expected distributions could result in a
decrease in the market price of the Shares.

TAX RISKS

REIT QUALIFICATION

The Company intends to operate so as to qualify as a REIT under the Code,
commencing with its taxable year ending December 31, 1995. The Company has not
requested, and does not expect to request, a ruling from the Internal Revenue
Service (the "Service") regarding its status as a REIT. Qualification as a REIT
involves the application of technical and complex provisions of the Code for
which there are only limited judicial or administrative interpretations. The
determination of various factual matters and circumstances not entirely within
the Company's control may affect its ability to qualify as a REIT, including
default by a Lessee under, and a termination of, a Lease. In addition, no
assurance can be given that legislation, regulations, administrative
interpretations or court decisions will not significantly change the rules
applicable to the Company with respect to its qualification as a REIT or the
federal income tax consequences of such qualification.

The Company has received an opinion of Sullivan & Worcester that, based on
the assumptions that the Leases, the Company's Declaration and Bylaws and all
other documents to which the Company is a party will be complied with by all
parties thereto, and upon certain representations of the Company, the Company
will qualify as a REIT under the Code. Investors should be aware, however, that
opinions of counsel are not binding on the Service or a court. The continued
qualification of the Company as a REIT will depend on the Company's continuing
ability to meet various requirements concerning, among other things, the
ownership of its outstanding stock, the nature of its assets, the sources of its
income and the amount of its distributions to shareholders.

If the Company were to fail to qualify as a REIT in any taxable year, the
Company would not be allowed a deduction for distributions to shareholders in
computing its taxable income and would be subject to federal income tax
(including any applicable minimum tax) on its taxable income at regular
corporate rates. Unless entitled to relief under certain Code provisions, the
Company also would be disqualified from treatment as a REIT for the four taxable
years following the year during which qualification was lost. As a result,
distributions to shareholders could be materially adversely affected for each of
the years involved. Although the Company currently intends to operate in a
manner designed to qualify as a REIT, it is possible that future economic,
market, legal, tax or other considerations may cause the Board of Trustees, with
the consent of two thirds of the shareholders, to revoke the REIT election. See
"Federal Income Tax Considerations" and "Summary of the Declaration of Trust."

LOSS OF REIT QUALIFICATION UNDER CERTAIN CIRCUMSTANCES

If Host were to default on its obligations under any Initial Lease for an
Initial Hotel, Marriott was not available to manage the Initial Hotel upon
termination of Host's leasehold interest therein, or the Company was unable to
find a replacement Lessee within 90 days of such termination or was unable to
find an

17
<PAGE> 25

independent contractor to manage such Initial Hotel, the gross income from hotel
operations conducted by the Company from such Initial Hotel would not qualify as
gross income necessary to maintain REIT status. In the event that the Company
did not generate qualifying gross income from other sources sufficient to enable
it to meet the REIT requirements, the Company would fail to qualify as a REIT.

DISTRIBUTIONS TO SHAREHOLDERS

In order to qualify as a REIT, the Company generally will be required each
year to distribute to its shareholders at least 95% of its net taxable income
(excluding any net capital gains). The Company intends to make distributions to
its shareholders to comply with the 95% distribution requirement. Differences in
timing between taxable income and the receipt of amounts available for
distribution could require the Company to borrow funds to meet the 95%
distribution requirement. See "Federal Income Tax Considerations -- Taxation of
the Company -- Annual Distribution Requirements." For example, the Company could
recognize non-cash taxable income for REIT purposes in circumstances where it
determined to exercise offset rights against the Security Deposit in response to
delays in payment of rent by Host under the Initial Leases. For more information
relating to such offset rights and the Security Deposit, see "-- Security
Deposit" and "The Initial Leases -- Security Deposit." In addition, funds
allocated to the FF&E Reserve under the Initial Leases will be deemed to be
taxable income of the Company for REIT purposes even though the funds will be
used to finance capital expenditures relating to the Initial Hotels and will be
escrowed.

SHARE OWNERSHIP RISKS AND EFFECTS OF VARIOUS FACTORS ON SHARE PRICE

CONCENTRATION OF OWNERSHIP

Upon completion of this Offering and the concurrent offering to HRP and
Advisors, HRP will own 34.1% and Advisors will own 2.1% of the Company's
outstanding Shares. Accordingly, HRP alone, and HRP and Advisors collectively,
will have significant influence over the Company, including the power to control
the outcome of certain corporate transactions or other matters submitted to the
shareholders for approval, including mergers, consolidations or the sales of all
or substantially all of the Company's assets, and to prevent or cause a change
in control of the Company. Such influence may result in Company decisions which
may not fully serve the best interests of all shareholders. See "Principal
Shareholders."

RISKS OF LEVERAGE

The Company currently intends not to have debt for borrowed money in excess
of 50% of its total market capitalization (i.e., market value of outstanding
equity plus total debt). The organizational documents of the Company, however,
do not contain any limitation on the amount of indebtedness the Company may
incur. Accordingly, the Board of Trustees could alter or eliminate the current
policy on borrowing at any time. If this policy were changed, the Company could
become more highly leveraged, resulting in an increase in debt service that
could adversely affect the Company's ability to make distributions to
shareholders and in an increased risk of default on the Company's obligations.
Upon completion of this Offering, the Company expects to have indebtedness for
borrowed money in the amount of $23.4 million under the Acquisition Line and
$176.6 million available to be drawn under the Acquisition Line for future
investments (there will be no debt for borrowed money outstanding if the
Underwriters' overallotment option is exercised in full).

LACK OF PRIOR MARKET FOR THE SHARES

Prior to this Offering there has been no public market for the Shares.
Although the Shares have been approved for listing on the NYSE subject to
official notice of issuance, there can be no assurance that an active trading
market for the Shares will develop. In addition, the initial public offering
price may not be indicative of the market price of the Shares after this
Offering. See "Underwriting" for a discussion of factors considered in
establishing the initial public offering price.

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<PAGE> 26

OWNERSHIP LIMITATION AND ANTITAKEOVER PROVISIONS

The Declaration prohibits ownership of more than 9.8% of the Shares by any
shareholder or affiliated group of shareholders, except HRP, Advisors and
certain other entities (the "Ownership Limitation"). The Ownership Limitation
may (i) have the effect of precluding acquisition of control of the Company by a
third party without the consent of the Board of Trustees even if a change in
control were in the interests of shareholders and (ii) limit the opportunity for
shareholders to receive a premium for their Shares that might otherwise exist if
an investor were attempting to assemble a block of Shares in excess of 9.8% of
the outstanding Shares or otherwise to effect a change in control of the
Company. A transfer of Shares to a person who, as a result of the transfer,
violates the Ownership Limitation may be void under some circumstances. The
Ownership Limitation will help the Company to maintain its REIT qualification
under the Code which prohibits 50% or more ownership of a REIT by five or fewer
individuals or certain entities. See "Summary of the Declaration of
Trust -- Restrictions on Transfer."

The Company's Declaration and Bylaws each also contain provisions that may
make it difficult to acquire control of the Company by means of a tender offer,
an open market purchase, a proxy fight, or otherwise, if such acquisition is not
approved by the Company's Board of Trustees. In addition to the Ownership
Limitation, provisions that may have an antitakeover effect include: (i) a
staggered Board of Trustees with three separate classes; (ii) the availability
of preferred shares of beneficial interest which may be issued by the Board of
Trustees and the terms of which may be established by the Board of Trustees;
(iii) the inability of the shareholders to act by written consent; and (iv)
advance notice procedures with respect to shareholder nominations of Trustees
and shareholder proposals. See "Summary of the Declaration of
Trust -- Antitakeover Provisions."

CHANGE IN POLICIES WITHOUT SHAREHOLDER APPROVAL

The major policies of the Company, including its policies with respect to
acquisitions, investments, financing, growth, operations, dispositions,
capitalization and distributions, will be determined by its Board of Trustees.
The Board of Trustees may amend or revise these and other policies from time to
time without a vote of the shareholders of the Company. Accordingly,
shareholders will have limited ability to effect changes in policies of the
Company (other than its policy of maintaining qualification as a REIT and
certain extraordinary transactions) and changes in the Company's policies may
not fully serve the interests of all shareholders. See "Policies with Respect to
Certain Activities."

INCREASES IN INTEREST RATES

The annual yield from distributions by the Company on the Shares likely
will influence the market price of the Shares. Accordingly, increases in market
interest rates, which may result in higher yields on other financial
instruments, could adversely affect the market price of the Shares. In addition,
increases in market interest rates could adversely affect the Company's ability
to finance additional investments in Hotel Properties at positive spreads
between its cost of funds and rent yields.

SHARES AVAILABLE FOR FUTURE SALE

Sales of a substantial number of Shares or the perception that such sales
could occur could adversely affect the market price of the Shares. Prior to this
Offering, HRP owned 40,000 Shares. Concurrently with this Offering, HRP will
acquire an additional 3,960,000 Shares and Advisors will acquire 250,000 Shares.
For information relating to certain "lock up" agreements relating to these
Shares, see "Shares Eligible for Future Sale." There are no restrictions on the
Company's ability to issue or sell Shares subsequent to completion of this
Offering. In addition pursuant to the Company's Incentive Share Award Plan, up
to 100,000 Shares have been reserved for issuance to Independent Trustees,
officers of the Company and consultants (other than Advisors) following the
completion of this Offering. See "Management -- Incentive Share Award Plan."

19
<PAGE> 27

HOTEL INDUSTRY RISKS

INSURANCE

Each of the Initial Leases specifies that comprehensive insurance is to be
maintained, at the expense of Host (except to the extent maintained by Marriott
pursuant to the Management Agreements), including liability and commercial
property insurance of the types and amounts customarily obtained by owners of
comparable hotel properties. The Management Agreements also provide for the
maintenance of certain insurance as an operating expense of the Initial Hotels.
In the event of a substantial insured casualty or loss, however, the insurance
proceeds may not be sufficient to pay the full current market value or current
replacement cost of the insured Hotel Property. In such event, unless Host
elects to fund the amount of the deficiency, in order to prevent termination of
the applicable Initial Lease, the Company will be required to advance funds to
finance the deficiency and base rent will increase at a rate of 10% per annum of
the amount advanced.

The property underlying five of the Initial Hotels will be leased under
long term ground leases, the terms of which obligate the Company to maintain
insurance, to restore the premises following a casualty or taking and to apply
in a specified manner any proceeds received by the Company in connection
therewith. Although each Initial Lease generally provides that Host is to
perform these obligations, the Company may have to restore the premises if a
material casualty occurs prior to the last five years of the ground lease term
and Host has terminated the Initial Lease by reason of such casualty, even if
insufficient proceeds have been received to effect such restoration. See "The
Initial Leases -- Damage, Destruction or Condemnation."

There are certain types of losses, such as earthquakes, hurricanes, floods
and other acts of God, that may not be insurable or insurable on economically
viable terms. For example, four of the Initial Hotels are located in California
where earthquake insurance currently is not available at economically viable
rates. The Company and Host have agreed that if the Initial Hotels located in
California sustain earthquake related losses, Host will repair nonmaterial
losses and Host may elect to repair or abandon any property with a material
loss; if Host repairs and requests financing for such repairs, the Company will
finance all such repairs made by Host to such properties and base rent will
increase at the rate of 10% per annum of the amount financed; if Host elects to
abandon a property with a material loss, it must pay to the Company an amount
equal to the lesser of: (i) the base rent for the applicable Initial Hotel for
the balance of the lease term; (ii) the then outstanding amount of the Security
Deposit; and (iii) $16.5 million.

ACQUISITION RISKS

In connection with the acquisition of the Initial Hotels, the Sellers have
made certain representations, warranties and covenants to the Company with
respect to the Initial Hotels and have agreed to indemnify the Company against
losses resulting from breaches of such representations and warranties for a one
year period. The obligations of the Sellers under the Purchase Agreement are
guaranteed by Host Marriott Corporation. The Purchase-Sale and Option Agreement
among the Sellers and the Company (the "Purchase Agreement"), however, does not
require Host Marriott Corporation or the Sellers to retain any proceeds of the
sale of the Initial Hotels or maintain a specified level of minimum net worth.
As a result, there can be no assurance that the Company would be able to obtain
recoveries against Host Marriott Corporation or the Sellers in the event an
indemnifiable event were to occur.

As is customary in comparable real estate transactions, the Company will
obtain title insurance against losses from certain defects in title relating to
the Initial Hotels. If there were a defect in title to an Initial Hotel,
however, there could be no assurance that the Company would be able to obtain
recoveries under the title insurance policies or that any proceeds so recovered
or replacement properties that may be acquired with any such proceeds would
provide returns at the level of the Initial Hotel they were intended to replace.

RENEWAL OF INITIAL LEASES AND RELETTING OF HOTEL PROPERTIES

The Company will be subject to the risk that, upon expiration or
termination of Leases for the Hotel Properties, the Leases may not be renewed,
the Hotel Properties may not be relet or the terms of renewal or reletting
(including the cost of required renovations or concessions to Lessees) may be
less favorable than

20
<PAGE> 28

previous lease terms. The Initial Leases have all or none renewal provisions
which may make it more likely that the Initial Leases will be renewed but if,
for any reason, the Initial Leases are not renewed, the adverse consequences to
the Company may be more severe as a result of the all or none renewal feature.
Although Advisors may be able directly to operate the Hotel Properties for up to
two years in certain circumstances, as a result of the restrictions imposed on
the Company under the REIT provisions of the Code, the Company would likely not
be able to operate directly any Hotel Property without thereby failing to
qualify as a REIT for federal income tax purposes. See "Federal Income Tax
Considerations -- Taxation of the Company -- Gross Income Tests" and
"-- Foreclosure Property." In addition, a default by a Lessee under the terms of
its Lease with the Company may result in the termination of such Lease. If the
Company were unable promptly to enter into a new Lease for a Hotel Property to
replace a defaulted Lease or if the rental rates upon such renewal or reletting
were significantly lower than expected due to market conditions or other
factors, then the Company's ability to make distributions to shareholders could
be adversely affected.

OPERATING RISKS

The Company's results of operations will be affected by factors such as
changes in general economic conditions, the level of demand for guest rooms and
related services at the Hotel Properties, cyclical overbuilding in the hotel
industry, the ability of Lessees to maintain and increase gross revenues at the
Hotel Properties and other factors relating to the operation of the Hotel
Properties. Other operating factors include: (i) competition; (ii) changes in
regional and local population and disposable income composition; (iii) the
recurring need for renovations, refurbishment and improvements of the Hotel
Properties; (iv) restrictive changes in zoning and similar land use laws, or in
health, safety and environmental laws; (v) changes in the characteristics of the
locales in which the Hotel Properties are located by reason of relocation of
nearby attractions, academic institutions or businesses; (vi) the cost and
availability of property and liability insurance; (vii) seasonality; (viii)
changes or cancellations in local tourist, athletic or cultural events; and (ix)
changes in travel patterns which may be affected by increases in transportation
costs or gasoline prices, changes in airline schedules and fares, strikes,
weather patterns or relocation or construction of highways. Inflationary
pressures could increase operating expenses of the Hotel Properties above
expected levels. Additionally, to remain competitive, continuing expenditures
must be made for modernizing, refurbishing and maintaining the Hotel Properties.
If necessary expenditures with respect to the Initial Hotels exceed the amounts
available in the FF&E Reserve and Host or Marriott fails to make such
expenditures or request funding from the Company to make such expenditures,
defaults under the Initial Leases could result and the value of, and operating
revenues from, the Initial Hotels may diminish. Moreover, Leases negotiated
subsequent to completion of this Offering may not contain reserve provisions
comparable to the FF&E Reserve. See "The Initial Leases" and "The Management
Agreements."

COMPETITION

The hotel industry is highly competitive. The success of a Hotel Property
in its market will be dependent, in large part, upon its ability to compete with
respect to access, location, quality of accommodations, room rates and, to a
lesser extent, the quality and scope of other amenities such as food and
beverage facilities. The Initial Hotels will compete with existing hotel
facilities in their geographic markets as well as future hotels that may be
developed in those geographic markets. Competition in the future may be affected
by periodic overbuilding which can adversely affect occupancy, changes in local
market conditions, changes in regional and local populations, changes in
disposable income characteristics and changes in travel patterns and
preferences. The Company expects to compete for hotel acquisition and financing
opportunities with entities which may have substantially greater financial
resources than the Company, including, without limitation, other publicly owned
REITs, banks, insurance companies, pension plans and public and private
partnerships. These entities may be able to accept more risk than the Company
can prudently manage, including risks with respect to the creditworthiness of a
hotel operator. Such competition may reduce the number of suitable hotel
acquisition or financing opportunities offered to the Company and increase the
bargaining power of property owners seeking to sell or finance their properties.

The Management Agreements restrict the right of Marriott and its
affiliates, until September 25, 1999, to own, build, operate, franchise or
manage any other Courtyard by Marriott(R) hotels within a certain limited

21
<PAGE> 29

radius of the Initial Hotels. Marriott and its affiliates are not restricted
from operating other branded hotels in the market areas of the Initial Hotels
and, subsequent to September 25, 1999, Marriott and its affiliates could also
open or manage additional Courtyard by Marriott(R) hotels in direct competition
with the Initial Hotels. See "Business -- Competition."

SEASONAL NATURE

The hotel industry is seasonal in nature. The seasonality of the industry
may, from time to time, affect the ability of Lessees to make timely rent
payments under the Leases. Any inability of Lessees to make timely rent payments
could adversely affect the Company's ability to make distributions to the
Company's shareholders.

FRANCHISE AGREEMENT RISKS

Although there are no existing franchise or license agreements which
currently affect the Initial Hotels, additional Hotel Properties acquired by the
Company may be operated by Managers or Lessees under franchise agreements.
Franchise agreements generally contain specific standards for, and restrictions
and limitations on, the operation and maintenance of a hotel property in order
to maintain uniformity in the system created by the franchisor. Such standards
are often subject to change over time, in some cases at the discretion of the
franchisor, and may restrict a franchisee's ability to make improvements or
modifications to a hotel property without the consent of the franchisor. In
addition, compliance with such standards could require a franchisee to incur
significant expenses or capital expenditures.

REAL ESTATE INVESTMENT RISKS

PROPERTY TAX

Pursuant to the Initial Leases, the real property taxes applicable to the
Initial Hotels will be the responsibility of Host. In addition, the Company
expects that future Leases for the Hotel Properties will require the Lessees to
pay all real property taxes. Real property taxes may increase or decrease as
property tax rates change and as the properties are assessed or reassessed by
taxing authorities. The Lessees, however, may be unable to pass through such
increased taxes to their customers and substantial increases in expenses arising
as a result of any such increased taxes could adversely affect the ability of
the relevant Lessees to pay rent and the Company's ability to make distributions
to shareholders.

AMERICANS WITH DISABILITIES ACT

Under Title III of the Americans with Disabilities Act of 1990, as amended
("ADA"), a hotel with more than five rooms for rent is considered both a "public
accommodation" and a "commercial facility." Under the public accommodations
provisions of the ADA, the Company, as owner of the Hotel Properties, will be
obligated to make reasonable accommodations to patrons who have physical, mental
or other disabilities. This will include the obligation to remove architectural
and communication barriers at the Hotel Properties when doing so is "readily
achievable" to ensure that alterations to the Hotel Properties performed after
January 26, 1992 conform to the specific requirements of the ADA implementing
regulations. The Initial Leases require Host to comply with the ADA. Host will
generally be obligated to remedy any ADA compliance matters from the FF&E
Reserve, its own funds, financing by third parties or financing provided by the
Company (which will increase base rent under the Initial Leases) and the Company
anticipates that future Leases will contain comparable provisions. However, any
required changes involving significant expenditures could adversely affect the
ability of the relevant Lessees to pay rent and the Company's ability to make
distributions to shareholders.

ACQUISITIONS

The Company intends to pursue acquisitions of additional Hotel Properties.
Acquisitions entail risks that investments will fail to perform in accordance
with expectations, as well as general risks associated with any new real estate
investment. In addition, the fact that the Company must distribute 95% of its
net taxable income in order to maintain its qualification as a REIT will limit
its ability to rely upon lease income from the

22
<PAGE> 30

Hotel Properties to finance acquisitions. As a result, if long term debt or
equity financing were not available on acceptable terms to refinance
acquisitions made with short term debt, further acquisitions may be curtailed or
the Company's ability to make distributions to shareholders may be adversely
affected.

ENVIRONMENTAL MATTERS

Under various environmental laws, a current or previous owner or operator
of real property may be liable for the costs of removal or remediation of
hazardous or toxic substances on, under, in or emanating from such property.
Such laws often impose liability whether or not the owner or operator knew of,
or was responsible for, the presence of such hazardous or toxic substances, and
liability under such laws has been interpreted to be strict, meaning that
liability is imposed without regard to fault. Liability under such laws has also
been interpreted to be joint and several, meaning that any current or previous
owner or operator or other responsible party might be liable for the entire
amount of the cleanup and remediation costs for a contaminated site. In
addition, the presence of hazardous or toxic substances, or the failure to
remediate such property properly, may adversely affect the market value of the
property, as well as the owner's ability to sell or lease the property or to
borrow using such property as collateral. Persons who arrange for the disposal
or treatment of hazardous or toxic substances may also be liable for the costs
of removal or remediation of such substances at the disposal or treatment
facility, whether or not such facility is or ever was owned or operated by such
person. In addition, certain environmental laws and common law principles govern
the responsibility for the removal, encapsulation or disturbance of asbestos
containing materials ("ACMs") when these ACMs are in poor condition or when a
property with ACMs is undergoing renovation or demolition. Such laws could be
used to impose liability upon owners or operators of real properties for release
of ACMs into the air that cause personal injury or other damage.

Pursuant to the terms of the Purchase Agreement, the Company received a
Phase I environmental assessment report from an independent environmental
consultant for each of the 37 Initial Hotels. The purpose of these reports is to
identify, to the extent reasonably possible and based on reasonably available
information, any existing and potential conditions resulting from hazardous or
toxic substances, including petroleum products and ACMs, at the Initial Hotels.
See "Business -- Environmental Matters."

The Company is aware of contaminated groundwater and soil at the Mahwah,
New Jersey Initial Hotel and contaminated groundwater at the Spartanburg, South
Carolina, Fountain Valley, California and Dallas, Texas Initial Hotels. In each
case, the contamination appears to be associated with activities at adjacent or
nearby gasoline stations. In each case, the owner or operator of the property
which is the source of the contamination is conducting investigatory and
remedial activities under the supervision of governmental authorities, and no
such activities are presently being required of the owners or operators of the
Initial Hotels. The Mahwah, New Jersey and Philadelphia, Pennsylvania Initial
Hotels may have been constructed on sites at which fill materials containing
hazardous substances were used, and the Woburn, Massachusetts Initial Hotel is
constructed on the site of a former automobile junk yard. The Los Angeles
Airport Initial Hotel has been constructed over abandoned oil and gas wells.
These historical activities do not appear to adversely impact the use of these
various properties, and no environmental regulatory actions are pending with
regard to these properties.

The Phoenix, Arizona Initial Hotel is located near a state Superfund area
and may be adversely affected by the contamination at this site. The Los Angeles
Airport Initial Hotel is located in an area of regional groundwater
contamination and may be adversely affected by the regional contamination.
However, the Company does not believe that activities at either the Phoenix,
Arizona or Los Angeles Airport Initial Hotel Properties are a source of the
contamination in their respective areas. Adjacent to the Milford, Massachusetts
Initial Hotel, there are quarries that have been used historically for dumping.
Although the Company is not aware of any adverse effect on its property from
this historical use of the adjacent site, it is possible that previous and
future, if any, dumping of hazardous materials at the adjacent site may
adversely impact the property at the Milford, Massachusetts Initial Hotel.

23
<PAGE> 31

operations. However, the Company cannot predict whether modifications of
existing laws or regulations or the adoption of new laws or regulations or
changes in the conditions of the above-mentioned or other Initial Hotels may
have a material adverse effect on the Company's business or results of
operations in the future.

Except as described above, based upon the Phase I environmental assessments
and the representations of the Sellers in the Purchase Agreement, the Company is
not aware of any environmental condition with respect to the Initial Hotels that
could have a material adverse effect on the Company's business or results of
operations. No assurances can be given, however, that the Phase I environmental
assessments undertaken with respect to the Initial Hotels have revealed all
potential environmental liabilities, that any prior owner or operator of the
real property on which the Initial Hotels are located did not create any
material environmental condition not known to the Company, or that a material
environmental condition does not otherwise exist as to any one or more of the
Initial Hotels.

ILLIQUIDITY OF REAL ESTATE

Real estate investments are relatively illiquid. The ability of the Company
to vary its portfolio in response to changes in economic and other conditions
will be limited. There can be no assurance that the Company will be able to
dispose of an investment when it finds disposition advantageous or necessary or
that the sale price of any disposition will recoup or exceed the amount of the
Company's investment.

GENERAL RISKS

The Company's investments will be subject to risks generally incident to
the ownership of real property. The underlying value of the Company's real
estate investments and the Company's income and ability to make distributions to
shareholders will depend on the ability of the Lessees, directly or through the
Managers, to operate the Hotel Properties in a manner adequate to maintain or
increase revenues and to generate sufficient income in excess of operating
expenses to make rent payments due under the Leases. Income from the Hotel
Properties may be adversely affected by various factors, including: adverse
changes in national economic conditions, local market conditions, interest
rates, real estate tax rates and other operating expenses, zoning and land use
laws, other governmental rules and policies, and the availability, cost and
terms of borrowings; competition; the impact of present or future environmental
laws; the ongoing need for capital improvements; civil unrest, acts of war, acts
of God, including earthquakes, hurricanes and other natural disasters (which may
result in uninsured losses); and other factors which are beyond the control of
the Lessees or the Company.

24
<PAGE> 32

THE COMPANY

The Company's strategy for increasing Cash Available for Distribution per
Share is to provide capital to unaffiliated operators of hotel properties who
wish to divest their properties while remaining in the hotel business as
lessees. Most other public hotel REITs seek to control the operations of the
hotel properties in which they invest by leasing the properties to affiliated
tenants. The Company believes that it will have a competitive advantage over
other public hotel REITs because of this difference in operating philosophy. To
achieve its objectives, the Company expects to operate as follows: start with a
strong capital base of shareholders' equity; invest in high quality properties
operated by unaffiliated hotel operating companies; use moderate leverage to
fund additional investments which increase Cash Available for Distribution per
Share because of positive spreads between the Company's cost of funds and the
rent yields; design leases which provide for base rents and an opportunity for
the Company to participate in a percentage of gross revenues; as Cash Available
for Distribution increases, periodically raise dividends; when market conditions
permit, refinance debt with additional equity or long term debt; and, over time,
pursue diversification so that the Company's Cash Available for Distribution to
shareholders will be received from diverse properties and operators.

The Company may not manage the Initial Hotels because it is a REIT, has
leased the Initial Hotels to Host and is a party to the Management Agreements.
All of the Initial Hotels will be leased by the Company to Host, a limited
purpose wholly owned subsidiary of Host Marriott Corporation, and will be
managed for Host by Marriott, a wholly owned subsidiary of Marriott
International, Inc. The Initial Leases are for approximately 12 years with
renewal options for an additional 37 years. All of the Initial Leases are
subject to cross default covenants and renewal options may only be exercised by
Host on an all or none basis. The Security Deposit (one year's base rent) has
been retained by the Company as security for all of Host's obligations under the
Initial Leases. As owner and lessor of the Initial Hotels, the Company has no
interest in the sales and operations of the Initial Hotels and is entitled only
to base rent and percentage rent under the Initial Leases. The annual rent
payable to the Company under the Initial Leases totals $32.9 million in base
rent plus percentage rent equal to 5% of Total Hotel Sales at the Initial Hotels
in excess of Total Hotel Sales during 1994. In addition to base rent and
percentage rent, the Initial Leases require that 5% of Total Hotel Sales
(initially approximately $1,172 per guest room per year) be escrowed as the FF&E
Reserve. The Company believes that the FF&E Reserve, which exceeds industry
averages for similar properties, will be adequate to maintain the
competitiveness of the Initial Hotels. The Management Agreements entered into
between Marriott and Host Marriott Corporation and its affiliates with respect
to the Initial Hotels prior to the purchase of the Initial Hotels have been
assigned to the Company. Under the Initial Leases, Host has agreed to perform
all of the Company's obligations under the Management Agreements. The Management
Agreements provide that base and incentive management fees are effectively
subordinated to base rent payable to the Company. For the 52 week period ended
June 16, 1995, Host's pro forma income before income taxes, rent, subordinated
management fees and the FF&E Reserve covered pro forma base rent under the
Initial Leases by 1.55 times; Host's pro forma income before income taxes, rent
and subordinated management fees and after deduction of the FF&E Reserve covered
pro forma base rent by 1.37 times.

25
<PAGE> 33

The Company is a Maryland real estate investment trust which is the
successor by merger to a Delaware corporation formed on February 7, 1995. The
Company's principal place of business is located at 400 Centre Street, Newton,
Massachusetts and its telephone number is (617) 964-8389.

An investment in the Shares is not an investment in HRP, Host Marriott
Corporation, Marriott International, Inc., Host or Marriott. An investment in
the Shares is not an investment in the operations of the Initial Hotels.

USE OF PROCEEDS

The net proceeds to the Company from this Offering are expected to be
approximately $172.1 million (or $198.0 million if the Underwriters'
overallotment option is exercised in full). In addition, the Company will
receive $6.3 million in cash proceeds from the concurrent placement of 250,000
Shares to Advisors. The Company will use the proceeds of this Offering and the
concurrent placement as follows:

<TABLE>
<S> <C>
Purchase of 16 additional Initial Hotels (net of Security Deposit)... $ 134.6 million
Repayment of a portion of the HRP Loan............................... 40.9 million
Payment of option extension fee and closing costs.................... 2.3 million
Working capital...................................................... 0.6 million
----------------
$ 178.4 million
</TABLE>

If the Underwriters' overallotment option to purchase Shares is exercised
in full, the Company will use $23.4 million of the proceeds of the Underwriters'
overallotment option to repay the remaining balance on the HRP Loan and may use
the remaining $2.5 million to fund future acquisitions of Hotel Properties and
for working capital or other general purposes. If the Underwriters'
overallotment option to purchase Shares is not exercised, the Company will repay
the remaining balance on the HRP Loan with borrowings of approximately $23.4
million under the Acquisition Line. The HRP Loan is a demand loan in the
original principal amount of $163.3 million which bears interest at
approximately 7.1%, and was made by HRP to the Company to enable the Company to
acquire 21 of the Initial Hotels. In exchange for the issuance of 3,960,000
Shares to HRP, HRP will cancel $99.0 million of principal of the HRP Loan at the
closing of the concurrent placement. For information about the Acquisition Line,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- The Company."

26
<PAGE> 34

DISTRIBUTION POLICY

The Company intends to make regular quarterly distributions to its
shareholders at the initial rate of $0.55 per Share, or $2.20 per Share per
annum. Based upon the range of estimated public offering prices set forth on the
cover of this Prospectus, the initial distribution yield will be between 8.46%
and 9.17% per annum. The first distribution will be paid with respect to the
period from the completion of this Offering through September 30, 1995 and will
be $ per Share, representing a pro rata adjustment to take account of the
number of days in the period. The Company does not intend to reduce the initial
distribution rate if the Underwriters' overallotment option is exercised.

The Company established its initial distribution rate based upon its
estimates of pro forma Cash Available for Distribution for the 12 months ended
June 30, 1995. The Company estimates that its pro forma Cash Available for
Distribution for the 12 months ended June 30, 1995 is $2.45 per Share, and that
the initial annual distribution represents a payout ratio of approximately 89.8%
of pro forma Cash Available for Distribution.

The Company intends to maintain at least the initial distribution rate
unless and until actual results of operations, economic conditions or other
factors differ materially from the assumptions used in its pro forma estimates.
No assurance can be given that the pro forma estimate of Cash Available for
Distribution will be achieved in the future and actual distributions to
shareholders may differ significantly from anticipated distributions.
Distributions will be set at the discretion of the Board of Trustees and likely
will depend on a number of factors, including the Company's actual Cash
Available for Distribution, the Company's financial condition and capital
requirements, the federal income tax requirement that a REIT distribute annually
at least 95% of its net taxable income and such other factors as the Board of
Trustees deems relevant. Based on pro forma historical results for the 12 month
period ended June 30, 1995, and assuming 11,750,000 Shares outstanding, the pro
forma distribution would have been $25.9 million and the Company would have been
required to distribute $25.0 million during such period to maintain its REIT
status.

The following table sets forth the Company's calculations of pro forma
Funds From Operations and pro forma Cash Available for Distribution for the 12
months ended June 30, 1995.

<TABLE>
<CAPTION>
DOLLARS IN
THOUSANDS, EXCEPT
PER SHARE DATA
-----------------
<S> <C>
Base rent............................................................. $32,900
Percentage rent (1/1/95 - 6/30/95 only)............................... 166
FF&E Reserve(1)....................................................... 6,211
------------
Total rent....................................................... 39,277
Operating expenses(2)................................................. 13,442
------------
Net income............................................................ 25,835
Add back depreciation............................................ 9,011
------------
Funds From Operations(3).............................................. 34,846
Add back amortization(4)......................................... 156
------------
Cash provided by operating activities(5).............................. 35,002
Cash used in investing activities(5).................................. (6,211)
------------
Cash Available for Distribution....................................... $28,791
============
Initial annual distribution(6)........................................ $25,850
============
Shares outstanding (in thousands)..................................... 11,750
Cash Available for Distribution per Share............................. $ 2.45
Initial annual distribution per Share................................. $ 2.20
Cash Available for Distribution payout ratio(7)....................... 89.8%
</TABLE>

------------------------------
(1) The FF&E Reserve is recorded by the Company as rental income. During the
term of the Initial Lease, including renewal terms, if exercised, the FF&E
Reserve will be held in escrow and may be drawn upon by Host or Marriott to
fund renovations and refurbishment to the Initial Hotels.

27
<PAGE> 35

(2) Operating expenses include depreciation of $9,011, interest expense of
$1,882 (including amortization of deferred financing costs of $156),
advisory fees of $2,149 and general and administrative expenses of $400. See
the Company's pro forma financial statements and notes thereto included at
pages F-2 through F-8 of this Prospectus.

(3) Management considers Funds From Operations to be a measure of the financial
performance of an equity REIT that provides a relevant basis for comparison
among REITs and Funds From Operations is presented to assist investors in
analyzing the performance of the Company. The Company's Funds From
Operations represents net income (computed in accordance with GAAP), before
real estate depreciation and amortization (excluding deferred financing
costs). Funds From Operations does not represent cash flows from operating
activities (as determined in accordance with GAAP) and should not be
considered an alternative to net income as an indicator of the Company's
performance or to cash flows from operating activities as a measure of
liquidity. Funds From Operations does not include cash expenditures that
will be required in future periods for FF&E Reserve funding. See "The
Management Agreements -- FF&E Reserve."

(4) Represents amortization of deferred financing costs which is a non-cash
charge.

(5) Amounts are computed on a pro forma basis in accordance with GAAP, except
that cash provided by (used in) operating activities excludes the effect on
cash resulting from changes in current assets and current liabilities. The
Company does not believe that these excluded items are material to estimated
cash provided by operating activities.

(6) Represents pro forma distributions to be paid based upon the estimated
initial annual distribution of $2.20 per Share and 11,750,000 Shares
outstanding. No scheduled principal payments are required under the
Acquisition Line until its maturity 18 months after the completion of this
Offering.

(7) The Funds From Operations payout ratio for the 12 months ended June 30, 1995
is 74.2%.

28
<PAGE> 36

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1995, and as adjusted to give effect to the completion of this Offering
(assuming no exercise of the Underwriters' overallotment option), the completion
of the concurrent placement of Shares to HRP and Advisors, the initial borrowing
under the Acquisition Line, the repayment of the HRP Loan and the payment of a
dividend to HRP equal to the Company's retained earnings prior to the completion
of this Offering.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1995
------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Debt:
HRP Loan............................................................ $ 163,259 $ --
Acquisition Line(1)................................................. -- 23,400
--------- -----------
Total debt(2)............................................... 163,259 23,400
--------- -----------
Shareholders' equity:
Common Shares par value $.01 per Share; 100,000,000 Shares
authorized; 40,000 Shares issued and outstanding; and 11,750,000
Shares, as adjusted.............................................. -- 118
Additional paid in capital.......................................... 1,000 278,232
Retained earnings................................................... 879 --
--------- -----------
Total shareholders' equity.................................. 1,879 278,350
--------- -----------
Total capitalization.................................................. $ 165,138 $ 301,750
======== =========
<FN>

------------------------------
(1) If the Underwriters' overallotment option is exercised in full there will be
no borrowings outstanding under the Acquisition Line.

(2) Excludes the Company's obligation to refund the Security Deposit upon
expiration of the Initial Leases. See Note 3 of Notes to Financial
Statements of the Company.

</TABLE>
29
<PAGE> 37

DILUTION

The Company expects there will be no substantial difference between the
initial public offering price per Share and the effective cash cost per Share
paid by HRP and Advisors in connection with the initial capitalization of the
Company and the concurrent placement of Shares to HRP and Advisors. Accordingly,
the Company expects there will be no material dilution to new investors
purchasing Shares in this Offering, except for the payment of Underwriters'
discounts and commissions and other expenses of this Offering.

The following table sets forth, on a pro forma basis as of June 30, 1995,
the number of Shares issued by the Company, the total consideration paid and the
price per Share paid by HRP, Advisors and by purchasers in this Offering (based
on an initial public offering price of $25.00 per Share before deduction of
Underwriters' discounts and commissions and estimated expenses of this Offering
and assuming the Underwriters' overallotment option is not exercised).

<TABLE>
<CAPTION>
SHARES ISSUED TOTAL CONSIDERATION
-------------------- --------------------
NUMBER PERCENT AMOUNT PERCENT PRICE PER SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
HRP.................................. 4,000,000 34.1% $100,000 34.1% $ 25.00
Advisors............................. 250,000 2.1 6,250 2.1 25.00
Public............................... 7,500,000 63.8 187,500 63.8 25.00
---------- ----- -------- -------
Total........................... 11,750,000 100.0% $293,750 100.0%
========= ===== ======== =====
</TABLE>

30
<PAGE> 38

PRO FORMA AND SELECTED FINANCIAL AND OPERATING DATA

The following table sets forth selected financial and operating data on a
pro forma basis for the Company for the six months ended June 30, 1994 and June
30, 1995 and as of and for the 12 months ended June 30, 1995 and for the year
ended December 31, 1994. The pro forma data are unaudited and are presented as
if: (i) this Offering and the concurrent placement; (ii) the acquisition of the
Initial Hotels; (iii) the repayment of the HRP Loan; (iv) the initial borrowing
under the Acquisition Line; (v) the commencement of the Initial Leases; and (vi)
certain other transactions described in the notes to the pro forma financial
statements included elsewhere in this Prospectus have been consummated as of the
date or for the periods presented. The pro forma data are not necessarily
indicative of what the actual financial position or results of operations would
have been as of the dates or for the periods indicated, nor do they purport to
represent the financial position or results of operations for future periods.
The following selected financial and operating data should be read in
conjunction with the financial statements and the notes thereto included
elsewhere in this Prospectus. Historical data are not presented because the
Company was recently formed and the information is not material.

HOSPITALITY PROPERTIES TRUST
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
-------------------------------------------------------------------
SIX MONTHS SIX MONTHS
YEAR ENDED 12 MONTHS ENDED ENDED ENDED
DECEMBER 31, 1994 JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1995
----------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Base rent............................ $32,900 $32,900 $16,450 $16,450
Percentage rent...................... -- 166 -- 166
FF&E Reserve......................... 6,045 6,211 3,037 3,203
Expenses:
Interest............................. 1,882 1,882 941 941
Depreciation......................... 9,011 9,011 4,506 4,506
General, administrative and
advisory.......................... 2,549 2,549 1,275 1,275
----------------- --------------- ------------- -------------
Net income............................. $25,503 $25,835 $12,765 $13,097
============= ============= ========== ==========
Net income per Share(1)................ $ 2.17 $ 2.20 $ 1.09 $ 1.11
============= ============= ========== ==========
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA
AS OF JUNE 30,
1995
--------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate properties, net............................................................... $328,256
Total assets.............................................................................. 335,915
Total debt................................................................................ 23,400
Total other long term obligations......................................................... 32,900
Shareholders' equity...................................................................... 278,350
</TABLE>

31
<PAGE> 39

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

(1) All per Share calculations are based on 11,750,000 Shares outstanding.

(2) Management considers Funds From Operations to be a measure of the financial
performance of an equity REIT that provides a relevant basis for comparison
among REITs and Funds from Operations is presented to assist investors in
analyzing the performance of the Company. The Company's Funds From
Operations represents net income (computed in accordance with GAAP), before
real estate depreciation and amortization (excluding deferred financing
costs). Funds From Operations does not represent cash flows from operating
activities (as determined in accordance with GAAP) and should not be
considered an alternative to net income as an indicator of the Company's
financial performance or to cash flows from operating activities as a
measure of liquidity. Funds From Operations does not include cash
expenditures that will be required in future periods for FF&E Reserve
funding. See "The Management Agreements -- FF&E Reserve."

32
<PAGE> 40

The following table sets forth selected historical financial and operating
data of the Initial Hotels for fiscal years 1992, 1993 and 1994 which have been
derived from the audited financial statements included elsewhere in this
Prospectus. The historical financial and operating data for fiscal years 1990
and 1991 and for the 24 week periods ended June 17, 1994 and June 16, 1995
(described in footnote (3) to the following table) have been derived from the
unaudited financial statements of the Initial Hotels. In the opinion of
management, the financial and operating data derived from the unaudited
financial statements include all adjustments necessary to present fairly the
information set forth therein and are set forth on a basis consistent with prior
periods. The following table also sets forth selected pro forma financial and
operating data for Host for the fiscal year ended December 30, 1994, the 52
weeks ended June 16, 1995 and the 24 weeks ended June 17, 1994 and June 16,
1995. The pro forma data are unaudited and are presented as if: (i) this
Offering and the concurrent placement; (ii) the acquisition of the Initial
Hotels; (iii) the commencement of the Initial Leases; and (iv) certain other
transactions described in the notes to the pro forma financial statements
included elsewhere in this Prospectus have been consummated as of January 1,
1994. The pro forma data are not necessarily indicative of what the actual
results of operation would have been for the periods indicated, nor do they
purport to represent the results of operations for future periods. The following
selected financial information should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
COMBINED INITIAL HOTELS/HOST
-------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
PRO FORMA
-------------------------------------------
FISCAL YEARS 52 WEEKS 52 WEEKS 24 WEEKS 24 WEEKS
---------------------------------------------- ENDED ENDED ENDED ENDED
1990 1991 1992 1993 1994 12/30/94 6/16/95 6/17/94 6/16/95
------- ------- -------- -------- -------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues........................... $13,589 $34,208 $ 41,969 $ 49,850 $ 58,186 $ 58,186 $ 60,634 $27,339 $30,025
Expenses:
Depreciation and amortization.... 4,520 14,357 15,548 13,775 13,729 -- -- -- --
Base rent........................ -- -- -- -- -- 32,900 32,900 16,450 16,450
Percentage rent.................. -- -- -- -- -- -- 154 -- 154
FF&E contribution expense........ -- -- -- -- -- 6,045 6,199 2,803 2,957
Base management fee.............. -- -- -- -- -- 2,418 2,480 1,121 1,183
Incentive management fee......... -- -- -- -- 2,825 3,384 4,775 507 1,907
Other, net....................... 2,570 6,083 9,529 10,405 9,672 8,298 8,125 4,719 4,528
------- ------- -------- -------- -------- --------- ----------- -------- ---------
Revenues over expenses excluding
income taxes before cumulative
effect of change in accounting
principles(1).................... 6,499 13,768 16,892 25,670 31,960 5,141 6,001 1,739 2,846
Cumulative effect of change in
accounting for assets held for
sale............................. -- -- -- 14,500 -- -- -- -- --
------- ------- -------- -------- -------- --------- ----------- -------- ---------
Revenues over expenses excluding
income taxes..................... $ 6,499 $13,768 $ 16,892 $ 11,170 $ 31,960 $ 5,141 $ 6,001 $ 1,739 $ 2,846
======= ======= ======== ======== ======== ========== =========== ========= ==========
Pro forma income tax expense....... $ 2,600 $ 5,507 $ 6,757 $ 4,468 $ 13,104 $ 2,108 $ 2,460 $ 713 $ 1,167
------- ------- -------- -------- -------- --------- ----------- -------- ---------
Pro forma net income after taxes... $ 3,899 $ 8,261 $ 10,135 $ 6,702 $ 18,856 $ 3,033 $ 3,541 $ 1,026 $ 1,679
======= ======= ======== ======== ======== ========== =========== ========= ==========

OTHER DATA:
Total Hotel Sales(2)............... $31,740 $77,684 $103,744 $113,356 $120,897 $120,897 $ 123,976 $56,068 $59,147
======= ======= ======== ======== ======== ========== =========== ========= ==========
Number of hotels,
end of period.................... 25 36 37 37 37 37 37 37 37
</TABLE>

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

(1) For the 24 weeks ended June 17, 1994 and June 16, 1995, historical Total
Hotel Sales of the Initial Hotels were $56,068 and $42,071, respectively,
revenues were $27,339 and $21,389, respectively, revenues over expenses
excluding income taxes were $14,551 and $8,966, respectively, and pro forma
net income after tax was $8,585 and $5,290, respectively. The historical
financial data for the 1994 period include information for all 37 Initial
Hotels. The historical financial data for the 1995 period include (i)
information for all 37 Initial Hotels for the 12 weeks ended March 24, 1995
and (ii) information on 16 Initial Hotels for the 12 weeks ended June 16,
1995 (because the real estate associated with the remaining 21 Initial
Hotels was owned by the Company and leased to Host during such period). See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Pro Forma Results of Operations -- Host" for information
regarding the pro forma results of operations of Host for both periods.

(2) Total Hotel Sales are presented above for the purpose of providing
supplemental information regarding the gross sales volume of the Initial
Hotels, which is used for purposes of calculating percentage rent and the
FF&E Reserve under the Initial Leases and Management Agreements,
respectively. As owner and lessor of the Initial Hotels, the Company has no
interest in the services and operations of the Initial Hotels.

33
<PAGE> 41

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company will own the Initial Hotels upon completion of this Offering.
The Company will lease all the Initial Hotels to Host for an initial term of 12
years with renewal options for an additional 37 years. The Initial Hotels will
be managed by Marriott. As owner and lessor of the Initial Hotels, the Company
has no interest in the sales and operations of the Initial Hotels and is
entitled only to base rent and percentage rent under the Initial Leases. The
annual rent payable to the Company under the Initial Leases totals $32.9 million
in base rent plus percentage rent equal to 5% of Total Hotel Sales at the
Initial Hotels in excess of Total Hotel Sales during 1994. In addition, the
Initial Leases require that 5% of Total Hotel Sales be escrowed periodically by
Host or Marriott as a reserve for renovations and refurbishments. The Initial
Hotels are all Courtyard by Marriott(R) hotels, have a total of 5,286 guest
rooms, are located in 20 states, have an average age of five years and, in 1994,
had average occupancy and an ADR of 81.1% and $66.65, respectively. The Initial
Hotels will be acquired for $329.0 million.

The Company believes that it has significant opportunities for growth in
the moderately priced segment of the hotel industry. The Company will seek to
acquire additional Hotel Properties that meet the Company's investment criteria
and participate in growth in revenue at its Hotel Properties through percentage
rents. The Company, unlike other public hotel REITs, does not seek to control
the operations of the Hotel Properties in which it invests nor does it intend to
lease or provide financing to affiliates. Because of this difference in
operating philosophy, the Company believes it will have a competitive advantage
over other public hotel REITs in dealing with operating companies which want to
divest their real estate while remaining in the hotel business as lessees.

In addition to external growth opportunities, the Company believes that
recent occupancy and ADR increases in the United States lodging industry are
representative of improving fundamentals and cyclical growth and that the
Initial Hotels offer opportunities for internal growth through increases in
percentage rent. As a result of the quality reputation and brand name
recognition of the Courtyard by Marriott(R) chain, as evidenced by the high
occupancy (81.1%) and above industry average ADR ($66.65) of the Initial Hotels
in 1994, the Company believes that the Initial Hotels are well positioned to
benefit from improvements in the industry.

As described elsewhere in this Prospectus the Company has been recently
formed and therefore has only limited historical financial data available.
Accordingly, management believes that it is more meaningful and relevant to an
understanding of the present and ongoing Company operations to discuss pro forma
data. The following discussion should be read in conjunction with "Pro Forma and
Selected Financial and Operating Data," and the financial statements and the
notes thereto included elsewhere in this Prospectus. Historical results and
percentage relationships set forth in the "Pro Forma and Selected Financial and
Operating Data" and such financial statements should not be considered to be
indicative of the future operations of the Company.

PRO FORMA RESULTS OF OPERATIONS -- THE COMPANY

SIX MONTHS ENDED JUNE 30, 1995 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1994

Pro forma total revenues for the six months ended June 30, 1995 would have
been $19.8 million, an increase of $0.3 million over the pro forma total
revenues for the comparable period in 1994. The increase was primarily due to
percentage rent and increased FF&E Reserve revenue resulting from increased
Total Hotel Sales at the Initial Hotels. Total pro forma expenses for the six
months ended June 30, 1995 and June 30, 1994 would have been $6.7 million and
would have been comprised of interest of $0.9 million, depreciation of $4.5
million and general administrative and advisory fees of $1.3 million. Pro forma
net income for the six months ended June 30, 1995 would have been $13.1 million,
an increase of $0.3 million over pro forma net

34
<PAGE> 42

income for the comparable 1994 period. The increase in net income is
attributable to the increased pro forma total revenues described above.

TWELVE MONTHS ENDED JUNE 30, 1995

On a pro forma basis, for the 12 months ended June 30, 1995, the Company
would have recognized base rent of $32.9 million, percentage rent of $166,000
and FF&E Reserve revenue of $6.2 million from the Initial Hotels. Total pro
forma expenses would have been $13.4 million and would have been comprised of
interest of $1.9 million, depreciation of $9.0 million and general,
administrative and advisory fees of $2.5 million. General, administrative and
advisory fees are primarily comprised of costs related to legal and accounting
fees, state and local income taxes, Independent Trustees' fees, investor
relations and advisory fees. The largest component represents fees payable to
Advisors. Advisory fees consist of an advisory fee based upon the gross assets
of the Company and an incentive fee based upon increases in the Company's Cash
Available for Distribution per Share. Net income on a pro forma basis would have
been $25.8 million or $2.20 per Share.

YEAR ENDED DECEMBER 31, 1994

On a pro forma basis, for the year ended December 31, 1994, the Company
would have recognized base rent of $32.9 million and FF&E Reserve revenue of
$6.0 million from the Initial Hotels. Total pro forma expenses would have been
$13.4 million and would have been comprised of interest of $1.9 million,
depreciation of $9.0 million and general, administrative and advisory fees of
$2.5 million. Net income on a pro forma basis would have been $25.5 million or
$2.17 per Share.

PRO FORMA RESULTS OF OPERATIONS -- HOST

TWENTY-FOUR WEEKS ENDED JUNE 16, 1995 COMPARED WITH TWENTY-FOUR WEEKS ENDED
JUNE 17, 1994

On a pro forma basis, Total Hotel Sales for the 24 weeks ended June 16,
1995 was $59.1 million, a $3.1 million or 5.5% increase over the comparable
period in 1994. The increase was principally attributable to a $5.86 increase in
ADR to $72.71 and stable occupancy of 80.5% for the 24 weeks ended June 30,
1995, as compared with the 1994 period.

On a pro forma basis, revenues (Total Hotel Sales less hotel level
expenses) for the 24 weeks ended June 16, 1995 was $30.0 million, a $2.7 million
or 9.9% increase over the comparable period in 1994. The increase was
principally attributable to the improvement in ADR, programs to improve weekend
stays, deemphasis of food and beverage services and other successful cost
containment programs including the refocusing of staff to reduce management
level costs and improved usage of central supplies and services for volume
efficiencies in the 24 weeks ended June 16, 1995.

On a proforma basis, base fees (equal to 2% of Total Hotel Sales) were $3.0
million, a $0.2 million or 5.5% increase over the comparable period in 1994.
This increase was due to the increase in Total Hotel Sales discussed above. As
discussed in Note 5 to the Combined Financial Statements of the Initial Hotels,
such base fees had been waived during the historical periods when the Initial
Hotels were owned by Host.

On a pro forma basis, net income was $1.7 million for the 24 weeks ended
June 16, 1995, a $0.7 million or 64% increase over the comparable 1994 period.
The increase represents the net effect of increased revenues, as noted above,
offset by an increase of $1.6 million in expenses, including a $1.4 million
increase in incentive management fees.

RESULTS OF OPERATIONS -- INITIAL HOTELS

TWENTY-FOUR WEEKS ENDED JUNE 16, 1995 COMPARED WITH TWENTY-FOUR WEEKS ENDED
JUNE 17, 1994

The historical financial statements for the Initial Hotels for the 24 weeks
ended June 17, 1994 include information for all 37 Initial Hotels. The
historical financial statements for the Initial Hotels for the 24 weeks

35
<PAGE> 43

ended June 16, 1995 include (i) information for all 37 Initial Hotels for the 12
weeks ended March 24, 1995 and (ii) information for 16 Initial Hotels for the 12
weeks ended June 16, 1995 (because the real estate associated with the remaining
21 Initial Hotels was owned by the Company and leased to Host during such
period). Accordingly, the Company believes that the appropriate comparison of
results of operations for these periods is between the pro forma results of
operations of all 37 Initial Hotels for the 24 weeks ended June 17, 1994 and
June 16, 1995. Such pro forma results of operations are included in the pro
forma financial statements of Host. See "-- Pro Forma Results of
Operations -- Host."

During the 24 weeks ended June 16, 1995 the carrying value of one property
included in the Initial Hotels was adjusted by $3 million to reflect such
property's net realizable value based on sales price to the Company.

FISCAL YEAR 1994 COMPARED WITH FISCAL YEAR 1993

Total Hotel Sales for the fiscal year ended December 30, 1994 was $120.9
million, a $7.5 million or 6.7% increase over the fiscal year ended December 31,
1993. The increase was principally attributable to a $4.58 increase in ADR to
$66.65 and a slight increase in occupancy to 81.1% for the fiscal year ended
December 30, 1994, as compared to the prior fiscal year.

Revenues (Total Hotel Sales less hotel level expenses) for the fiscal year
ended December 30, 1994 was $58.2 million, an $8.3 million or 16.7% increase
over the prior fiscal year. The increase was principally attributable to the
improvement in ADR, increased occupancy attributable to weekend stay promotions
and the first Courtyard by Marriott(R) television advertising campaign and
implementation of other successful cost containment programs including the
refocusing of staff to reduce management level costs, improved usage of central
supplies and services to make use of volume driven efficiencies in the fiscal
year ended December 30, 1994 and, to a lesser extent, de-emphasis of food and
beverage services which have margin contribution percentages below those of room
sales.

Revenues over expenses excluding income taxes (Revenues less depreciation,
amortization, Courtyard by Marriott(R) system fee, property taxes, incentive
management fee and other expenses) before cumulative effect of change in
accounting principle for the fiscal year ended December 30, 1994 was $32.0
million, a $6.3 million or 23.5% increase over the prior fiscal year. The
increase was principally attributable to improvements in ADR, occupancy and
operating margins in the fiscal year ended December 30, 1994. The most
significant factor affecting operating margins was the deemphasis of food and
beverage services.

Following discussions with the Commission, in the second quarter of 1993,
Host Marriott Corporation changed its method of determining the net realizable
value of its assets held for sale. Host Marriott Corporation previously
determined the net realizable value of such assets on an aggregate basis in the
case of Courtyard by Marriott(R) hotels. Beginning in the second quarter of
1993, under Host Marriott Corporation's new accounting policy, the net
realizable value of all assets held for sale is determined on a property by
property basis. The cumulative pretax effect of this change in accounting policy
on periods prior to the second quarter of 1993 of $14.5 million was accounted
for as a cumulative effect of a change in accounting for assets held for sale.
The reduction in annual depreciation charge resulting from this change is
approximately $0.3 million.

FISCAL YEAR 1993 COMPARED WITH FISCAL YEAR 1992

Total Hotel Sales for the fiscal year ended December 31, 1993 was $113.4
million, a $9.6 million or 9.3% increase over the fiscal year ended January 1,
1993. The increase was principally attributable to a $3.66 increase in ADR to
$62.07, an increase in occupancy from 76.2% to 80.1% and inclusion of a full
year of operations in 1993 of the Boca Raton Initial Hotel which opened in April
1992.

Revenues (Total Hotel Sales less hotel level expenses) for the fiscal year
ended December 31, 1993 was $49.9 million, a $7.9 million or 18.8% increase over
the prior fiscal year. The increase was principally attributable to improvements
in ADR and occupancy in the fiscal year ended January 1, 1993.

36
<PAGE> 44

Revenues over expenses excluding income taxes (Revenues less depreciation,
amortization, Courtyard by Marriott(R) system fee, property taxes, incentive
management fee and other expenses) for the fiscal year ended January 1, 1993 was
$25.7 million, a $6.8 million or 40.1% increase over the prior fiscal year. The
increase was principally attributable to improvements in ADR and occupancy in
the fiscal year ended January 1, 1993.

LIQUIDITY AND CAPITAL RESOURCES

THE COMPANY

In order to maintain its status as a REIT, the Company will be required to
make distributions to its shareholders of a least 95% of its net taxable income,
which is expected to consist principally of rent payments under the Initial
Leases. Differences in timing between the recognition of net taxable income and
receipt of cash which would be available for distribution could require the
Company to borrow to meet the 95% distribution requirement, although the Company
does not anticipate the need to borrow as a result of any such differences in
timing. Apart from such distributions, the Company believes that its cash needs
should generally be limited to general, administrative and advisory expenses
(including expenses arising under the Advisory Agreement), acquisition expenses
and interest and principal payments attributable to borrowings.

Pursuant to the terms of the Initial Leases and the Management Agreements,
Host or Marriott is required to fund the FF&E Reserve account in amounts equal
to 5% of Total Hotel Sales from the Initial Hotels at the end of each four week
accounting period. Funds escrowed in the FF&E Reserve account will be used by
Marriott for capitalized improvements, replacements and refurbishments of the
Initial Hotels. The Company believes that the FF&E Reserve will be adequate to
maintain the competitiveness of the Initial Hotels. As of June 30, 1995, the
amount of the FF&E Reserve for the Initial Hotels was approximately $3.9
million. For a description of historical contributions to the FF&E Reserve, see
Note 4 of Notes to Combined Financial Statements of the Initial Hotels.

The Company's primary source of revenues to fund its cash needs will be
base and percentage rent payments under the Initial Leases. Pursuant to the
Initial Leases, base rent payments are due in advance on the first day of each
four week accounting period and percentage rent payments are due quarterly in
arrears. Accordingly, before the Company is required to make any distributions
to its shareholders (the first such payment expected to be paid in the fourth
quarter of 1995 for the quarter ending September 30, 1995), the Company expects
to receive a minimum of three months' base rent payments. Based on the
foregoing, the Company believes that its initial working capital and the
revenues generated from the Initial Leases will provide it with adequate funds
to meet its short term liquidity requirements.

Following the completion of this Offering and application of the proceeds
as described under "Use of Proceeds" and assuming no exercise of the
Underwriters' overallotment option, the Company expects to have approximately
$4.9 million in cash ($3.9 million of which will be held in a restricted escrow
in the FF&E Reserve account) and $23.4 million in indebtedness for borrowed
money under the Acquisition Line.

Under the Management Agreements for each of the Initial Hotels, secured
borrowings in respect of each Initial Hotel are limited pursuant to a formula.
This limit may never be less than 70% of the allocable purchase price of the
applicable Initial Hotel. The Company does not expect this restriction will
materially affect its ability to finance acquisitions or other activities.

The Company has entered into the Acquisition Line with DLJMC. The
Acquisition Line provides for availability of up to $200.0 million in borrowings
at a spread above one month LIBOR (a total of approximately 7.38% as of July 24,
1995) on an unsecured basis; provided, however, that if the loan amount exceeds
$100.0 million or is outstanding after December 31, 1995, the total outstanding
obligation shall be secured by mortgages on the Initial Hotels. There are no
required principal repayments until maturity and amounts drawn and repaid may be
subsequently reborrowed. The Acquisition Line has a term of up to 18 months and
is subject to other customary representations, covenants and conditions. In
connection with borrowings under the Acquisition Line, the Company will be
required to enter into interest rate protection arrangements. For a complete
description of the terms of the Acquisition Line, reference is made to the form
of Credit Agreement filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.

37
<PAGE> 45

The Company intends actively to pursue acquisition opportunities to achieve
growth in its portfolio of Hotel Properties and expects to utilize undistributed
cash generated from operations and funds available under its Acquisition Line or
other borrowings, if any, to complete such acquisitions. Upon completion of this
Offering, the Company expects to have $23.4 million in outstanding indebtedness
for borrowed money and an equity market capitalization of approximately $293.8
million. As a result, the Company believes it will have access to various types
of financing in addition to or in replacement of the Acquisition Line, including
debt or equity securities offerings with which to finance acquisitions and to
otherwise meet its long term funding requirements.

HOST

Host is a limited purpose entity which has been organized to lease and
operate the Initial Hotels. Upon completion of this Offering, Host is expected
to have a net worth (excluding deferred gains resulting from sale and lease of
the Initial Hotels) of approximately $38.6 million which is expected to consist
principally of the Security Deposit.

Host is expected to fund its cash needs, including monthly payments of base
rent and percentage rent (if any), with cash generated from operations at the
Initial Hotels. In 1994, the Initial Hotels generated cash from (used by)
operating, investing and financing activities of $44.6 million, ($3.5) million
and ($41.1) million, respectively. Although the Company believes that Host will
have adequate funds to meet its short term liquidity requirements, decreases in
revenues at the Initial Hotels may adversely affect Host's ability to pay the
rent under the Initial Leases.

SEASONALITY

The Initial Hotels have historically experienced seasonal differences
typical of the hotel industry with higher revenues in the second and third
quarters of calendar years compared with the first and fourth quarters. This
seasonality is not expected to cause fluctuations in the Company's rental income
because the Company believes that the revenues generated by the Initial Hotels
will be sufficient for Host to pay rents on a regular basis notwithstanding
seasonal fluctuations.

INFLATION

The Company believes that inflation should not have a material adverse
effect on the Company. Although increases in the rate of inflation may tend to
increase interest rates which the Company may be required to pay on borrowed
funds, the Company intends to implement a policy of obtaining interest rate caps
in appropriate circumstances to protect it from interest rate increases. In
addition, the Initial Leases provide for the payment of percentage rent to the
Company based on increases in Total Hotel Sales of the Initial Hotels and such
rent should increase with inflation.

38
<PAGE> 46

THE INITIAL HOTELS

The Initial Hotels are among the newest in the Courtyard by Marriott(R)
system with an average age of five years. Thirty-two of the 37 Initial Hotels
were designed and purpose built for affiliates of Host and Marriott. The Initial
Hotels are located in 20 states throughout the United States, generally in
convenient locations close to business facilities, major transportation routes,
airports, public attractions or academic institutions. The Company believes that
the Initial Hotels are in good operating condition. All but two of the Initial
Hotels were first opened after 1988. The Company believes that the FF&E Reserve,
which exceeds industry averages for similar properties, will be adequate to
maintain the competitiveness of the Initial Hotels.

39
<PAGE> 47

The following charts set forth for the three years during which all 37
Initial Hotels were open, the occupancy, ADR and REVPAR of the Initial Hotels as
compared with those averages for all United States hotels, as reported by Smith
Travel Research in Lodging Outlook:

AVERAGE OCCUPANCY
[BAR GRAPH SHOWING THE FOLLOWING DATA POINTS]
<TABLE>
<CAPTION>

ALL US HOTELS THE INITIAL HOTELS
------------- ------------------
<S> <C> <C>
1992 61.8% 76.2%
1993 63.1% 80.1%
1994 65.2% 81.1%

</TABLE>

AVERAGE DAILY ROOM RATES
[BAR GRAPH SHOWING THE FOLLOWING DATA POINTS]
<TABLE>
<CAPTION>

ALL US HOTELS THE INITIAL HOTELS
------------- ------------------
<S> <C> <C>
1992 $59.30 $58.41
1993 $61.17 $62.07
1994 $63.63 $66.65

</TABLE>

REVENUE PER AVAILABLE ROOM
[BAR GRAPH SHOWING THE FOLLOWING DATA POINTS]
<TABLE>
<CAPTION>

ALL US HOTELS THE INITIAL HOTELS
------------- ------------------
<S> <C> <C>
1992 $36.65 $44.53
1993 $38.60 $49.70
1994 $41.49 $54.05

</TABLE>

40
<PAGE> 48

The table below is derived principally from information published by
Marriott International, Inc. in the Courtyard by Marriott(R) directory and
presents certain information for each of the Initial Hotels.

<TABLE>
<S> <C> <C> <C> <C>
CALIFORNIA
Camarillo............. 130 10/90 Oxnard (5), Ventura Mission (12), State Unisys, Vitesse, Amgen, Siemens Solar,
Beaches (10), Getty Museum (20), Six Flags Technicolor, 3M Company, Teledyne, Blue
Magic Mountain (45), Ronald Reagan Cross
Presidential Library (15)
Huntington Beach/
Fountain Valley..... 150 3/91 Orange County Airport (6), Orange County McDonnell Douglas, Safeco Insurance,
Fairgrounds (4), Pacific Amphitheater (4), Rockwell, Hyundai, ASICS Tiger
Huntington Beach (3)
Los Angeles Airport... 146 3/87 Los Angeles Airport (1), Universal Studios Chevron, AT&T, Xerox, TRW, Mattel, GTE
(18), Disneyland (28), Hollywood (15),
Marina del Rey (5), UCLA (10)
San Jose Airport...... 151 1/91 San Jose Airport ( 1/2), San Jose IBM, FMC Corp., Ford Aerospace,
Convention Center (3 1/2), San Jose State General Electric, Hewlett-Packard,
University (4), Great America (5), Santa Kodak, Digital, Novell, AT&T
Clara University (2), San Jose Arena (3)
DELAWARE
Wilmington............ 152 1/91 Christiana Mall ( 1/2), University of Flight Safety International
Delaware (5), Delaware Park Race Track
(2), Winterthur Museum & Gardens (15),
Longwood Gardens (20), Historic New Castle
(5), Hagley Museum (7), Brandywine Valley
Museum (12)
FLORIDA
Boca Raton............ 152 4/92 Palm Beach Airport (22), Ft. Lauderdale IBM, Sony, WR Grace, Unisys, Office
Airport (25), Florida Atlantic University Depot (headquarters)
( 1/2), Lynn University ( 1/2)
GEORGIA
Atlanta Airport
North............... 152 8/90 Fulton County Stadium (6), Hartsfield Ford, Pratt & Whitney, General
Airport (1), Six Flags (13) Electric, Delta Air Lines
(headquarters)
Atlanta-Cumberland
Center.............. 182 3/89 Downtown Atlanta (10), Hartsfield Airport IBM, AT&T, Sprint, UPS, Worldspan
(20), Six Flags (12), Stone Mountain
Park (20)
Atlanta-Jimmy Carter
Blvd................ 122 5/88 Stone Mountain Park (7), Malibu Grand Prix AT&T, UPS, American Express, Lanier,
(3), Delta Peachtree Airport (5), Gwinnett GM, BASF, Whirlpool
Airport (8)
Atlanta-Midtown....... 168 7/91 Olympic Village and Olympic Venues ( 1/2), BellSouth, AT&T
Woodruff Art Center ( 1/2), Georgia World
Congress Center (2), Fox Theatre ( 1/2),
Atlanta Stadium (4), Georgia Dome (2),
Georgia Tech (2)
Macon................. 108 5/91 Macon Airport (15), Warner-Robbins Air Georgia Farm Bureaus, Brown and
Force Base (20), Mercer University (8), Williamson, YKK, Geico, GE Capital
Wesleyan College (4)
</TABLE>

41
<PAGE> 49

<TABLE>
<CAPTION>
NUMBER DATE TOURIST ATTRACTIONS/ACADEMIC INSTITUTIONS/ BUSINESSES WITH FACILITIES
PROPERTY LOCATION OF ROOMS OPENED LANDMARKS (DISTANCE IN MILES) WITHIN A FIVE MILE RADIUS
----------------------- -------- ------ ------------------------------------------ ---------------------------------------
<S> <C> <C> <C> <C>
INDIANA
Indianapolis.......... 149 3/90 Downtown Indianapolis (12), Indianapolis Charles Schwab, AT&T, Delta Peerless,
Airport (17), Indianapolis Zoo (15), GTE, Hewlett-Packard, Integrated
Children's Museum (10), Butler University Information Services, MacMillan
(7), Indianapolis Motor Speedway (17), Publishing, NCR
Indiana State Fairgrounds (7)
MARYLAND
Columbia.............. 152 7/91 Dobbin Center ( 1/10), Merriweather Post General Physics, S-3 Technologies
Pavilion (4), Baltimore-Washington (adjacent), Sun Micro Systems, AT&T,
International Airport (12), Baltimore Baxter Health Care
Inner Harbor (15), Oriole Park at Camden
Yards (15), National Aquarium (15)
MASSACHUSETTS
Danvers............... 121 3/90 Fenway Park (18), Logan Airport (18), General Electric, NYNEX, Eaton
Downtown Boston (15), Historic Salem (3)
Foxborough............ 149 6/89 Foxboro Stadium (5), Great Woods Texas Instruments, Forbes, Codex
Performing Arts Center (3), Logan Airport
(35), Downtown Boston (33), Wheaton
College (5), Plymouth Plantation (25)
Lowell................ 121 3/90 Downtown Boston (30), Logan Airport (30), Wang, Sun Microsystems,
Lexington/Concord (15), University of Hewlett-Packard, Raytheon
Massachusetts at Lowell (3)
Milford............... 152 10/90 Logan Airport (43), Downtown Boston (43) EMC, Dennison, Boston Digital
Norwood............... 148 9/90 Logan Airport (20), Downtown Boston (20), Analog Devices, LTX Corporation,
Foxboro Stadium (10), Great Woods Microcom, Polaroid, GM, Ciba Corning,
Performing Arts Center (15) Merck
Stoughton............. 152 10/90 Logan Airport (18), Stonehill College (7), Reebok International (adjacent)
Downtown Boston (16), Fenway Park (17),
Foxboro Stadium (20), Great Woods
Performing Arts Center (20)
Woburn................ 120 3/90 Logan Airport (12), Downtown Boston (12), Hewlett-Packard, Alpha Industries
Cambridge (12)
MICHIGAN
Detroit/Auburn
Hills............... 148 10/89 Pontiac Silverdome ( 1/2), The Palace of Chrysler, ITT Automotive, General
Auburn Hills (3), Oakland University (2) Motors, Volkswagen (headquarters)
MINNESOTA
Minneapolis/
Eden Prairie........ 149 2/89 Minneapolis/St. Paul International Airport Best Buy, General Electric, Super Valu,
(11), Metrodome/Downtown Minneapolis (12), Rosemount, MTS Systems
Met Center (8), Minnesota Zoo (15), Mystic
Lake Casino (15)
MISSOURI
Kansas City Airport... 149 9/90 Kansas City Airport (4), Downtown Kansas Farmland Foods, Worldspan, Midland
City (10), Truman Sports Complex (25),
American Royal/Kemper Arena (10)
South Kansas City..... 149 9/90 Kansas City Airport (42), Downtown Kansas Sprint, Marion Merrell Dow, Yellow
City (20), Truman Sports Complex (10), Freight, John Deere, Allied Signal
Worlds of Fun (15), New Dinner Theatre (7)
NEW JERSEY
Mahwah................ 146 4/91 Meadowlands (20), New York City (33) Sharp Electronics, UPS, Phillips, IBM,
Jaguar, Meldisco
</TABLE>

42
<PAGE> 50

<TABLE>
<CAPTION>
NUMBER DATE TOURIST ATTRACTIONS/ACADEMIC INSTITUTIONS/ BUSINESSES WITH FACILITIES
PROPERTY LOCATION OF ROOMS OPENED LANDMARKS (DISTANCE IN MILES) WITHIN A FIVE MILE RADIUS
----------------------- -------- ------ ------------------------------------------ ---------------------------------------
<S> <C> <C> <C> <C>
NORTH CAROLINA
Charlotte - University
Research Park....... 152 8/90 Charlotte Motor Speedway (4), UNCC (1), IBM, Allstate Insurance, Phillip
University Place ( 1/4), Downtown Morris, Southern Bell
Charlotte (7), Airport (10), Blockbuster
Pavilion (4)
Fayetteville.......... 108 1/91 Cape Fear Regional Theatre (5), Museum Fort Bragg
of Art (6), Market House (2), Arts
Counsel (12)
Raleigh/Durham
Airport............. 152 11/90 Research Triangle Park (1), Raleigh/Durham IBM, Northern Telecom, SAS Institute,
Airport (1), Downtown Raleigh (15), NC GTE
State (15), Durham/Duke University (15),
Chapel Hill/University of NC (18)
PENNSYLVANIA
Philadelphia
Airport............. 152 12/91 Downtown Philadelphia (10), Philadelphia Boeing, UPS, Penn Navy Yard
Airport (1), Veterans Stadium (4),
Spectrum (4), Penns Landing (8), Civic
Center (15)
SOUTH CAROLINA
Spartanburg........... 108 6/90 USCS (1), Greenville-Spartanburg Airport Milliken, Michelin
(17), Wofford College (3), Converse
College (3), Spartanburg Auditorium (3)
TENNESSEE
Chattanooga........... 109 4/91 Chattanooga Riverboat (18), Ruby Falls Brach's Candy
(15), Rock City (18), Metropolitan Airport
(4), Tennessee Aquarium (10)
TEXAS
Dallas/Northpark...... 160 7/90 Dallas/Fort Worth Airport (25), Love Field Dr. Pepper, Texas Instruments,
Airport (7), Downtown Dallas (5), SMU (3) Prudential
VIRGINIA
Fairfax............... 149 9/90 Fairfax County Offices (3), Washington, DC AT&T, TRW, Mobil (training center)
(15), Dulles Airport (11), National
Airport (18), George Mason University (4)
WASHINGTON
Bellevue.............. 152 9/90 Bellevue City Center (4), Seattle City Microsoft, Allied Signal, Digital,
Centre (8), University of Washington (6) Eddie Bauer, Safeco
WISCONSIN
Milwaukee/Brookfield... 147 5/91 Milwaukee County Zoo (5), Milwaukee County Digital, Ameritech, Xerox, Prudential
Stadium (12), Bradley Center (12),
Wisconsin State Fair (6), Airport (18)
</TABLE>

43
<PAGE> 51

BUSINESS

THE HOTEL INDUSTRY

According to Smith Travel Research, the United States hotel industry had
approximately 29,649 hotels with approximately 3.2 million guest rooms as of
December 31, 1994. Of these guest rooms, approximately 1.9 million were
affiliated with a "brand" either through a franchise or license agreement or
through ownership or management by a national or regional hotel chain. The
remainder were independent operators not affiliated with hotel chains of more
than five hotel properties. The Company believes that there are many advantages
to owning hotels which are "brand" affiliated, including access to reservation
systems, quality standards, training programs and enhanced customer recognition.
Moreover, the Company believes that the Courtyard by Marriott(R) brand name
represents one of the strongest brand affiliations available in the moderately
priced segment of the hotel industry.

The United States hotel industry generally is comprised of two segments:
full service hotels and limited service hotels. Full service hotels generally
offer restaurant and lounge facilities and meeting spaces, as well as a wide
range of services typically including bell service and room service. Limited
service hotels generally offer accommodations with limited or no services and
amenities. The Initial Hotels compete effectively with both full service and
limited service hotels in their respective markets by providing streamlined
services and amenities exceeding typical limited service offerings at prices
that compare favorably with full service hotels.

The Company believes that the United States hotel industry is experiencing
cyclical growth. Since 1992, the hotel industry has experienced improved
fundamentals as the annual rates of growth in demand for hotel guest rooms have
exceeded the annual rates of growth in supply of hotel guest rooms and annual
ADR have increased each year. According to Smith Travel Research, total United
States room demand (average daily rooms rented for the year) in 1994 increased
4.7% over room demand in 1993 while total United States room supply (average
daily rooms available for the year) in 1994 increased by only 1.4% over 1993.
The average hotel occupancy in the United States increased from 63.1% in 1993 to
65.2% in 1994 while the ADR increased from $61.17 to $63.63, an increase of
4.0%.

As reported by Smith Travel Research in Lodging Outlook, for the five year
period ended December 31, 1994, the United States hotel industry demonstrated
the following operating characteristics:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Average hotel occupancy............... 62.4% 60.8% 61.8% 63.1% 65.2%
ADR................................... $58.16 $58.47 $59.30 $61.17 $63.63
Percentage change in ADR.............. -- 0.5% 1.4% 3.2% 4.0%
REVPAR................................ $36.29 $35.55 $36.65 $38.60 $41.49
Percentage change in REVPAR........... -- (2.0)% 3.1% 5.3% 7.5%
Growth in room supply................. 3.4% 2.5% 1.3% 1.0% 1.4%
Growth in room demand................. 1.9% 0.0% 3.8% 4.0% 4.7%
</TABLE>

The Company believes that improvements in performance in the United States
hotel industry since 1992 are primarily due to an improved economic environment
and a low rate of growth in guest room supply. The Company attributes the low
rate of growth in guest room supply to constraints on the availability of
financing for new hotel development from traditional sources and an excess
supply of hotel guest rooms resulting from high levels of hotel construction
activity in prior years. The Company anticipates that growth in guest room
supply will continue to be limited, except in certain select markets
experiencing rapid economic growth, due to the continued decline in the
availability of institutional funds for hotel construction.

GROWTH STRATEGY

44
<PAGE> 52

percentage rents. To achieve its objectives, the Company expects to operate as
follows: start with a strong capital base of shareholders' equity; invest in
high quality properties operated by unaffiliated hotel operating companies; use
moderate leverage to fund additional investments which increase the Company's
Cash Available for Distribution per Share because of positive spreads between
the Company's cost of funds and the rent yields; design leases which provide for
base rents and an opportunity for the Company to participate in a percentage of
gross revenues; as Cash Available for Distribution increases, periodically raise
dividends; when market conditions permit, refinance debt with additional equity
or long term debt; and, over time, pursue diversification so that the Company's
Cash Available for Distribution to shareholders will be received from diverse
properties and operators.

ACQUISITION STRATEGY

Advisors has significant experience in acquiring real estate and
structuring net lease transactions. Advisors' experience in evaluating and
selecting hotels for investment, however, is limited to the evaluation and
selection of the Initial Hotels and only one of the Company's Trustees has had
experience with the ownership of real estate used by the hotel industry. Since
its inception, HRP, which invests in retirement and nursing facilities, has been
advised by Advisors under the supervision of Messrs. Portnoy and Martin. The
Company will be advised by Advisors under the supervision of Messrs. Portnoy and
Martin. The Company and Advisors believe that there are significant similarities
between the business of purchasing and net leasing retirement and nursing
facilities and the business of purchasing and net leasing hotel properties.

The Company has purchased from Host Marriott Corporation certain options,
rights of first refusal and rights of first offer covering substantially all
remaining ownership interests of Host Marriott Corporation and its affiliates in
Courtyard by Marriott(R) hotels and Residence Inns by Marriott(R). The rights of
first offer extended through February 29, 2000 and were purchased for $3.0
million; their term will be extended to August 31, 2002 at the closing of this
Offering in exchange for an additional $1.5 million. For other material terms of
these rights see "Business -- Purchase Options." Although the Company has not
determined whether or when to exercise any of these rights, the Company believes
these rights have significant value and will afford it opportunities to invest
in high quality hospitality properties operated by one of the world's most
successful hotel operating teams.

In addition to possible future investments in properties owned by Host
Marriott Corporation, the Company expects to seek investments in other hotel
properties owned and operated by companies other than Host Marriott Corporation
and Marriott International, Inc. Most other public hotel REITs seek to control
the operations of the hotel properties in which they invest by leasing the
properties to affiliated tenants. The Company neither intends to seek control
over its tenants' operations nor to lease or provide financing to affiliates.
Because of this difference in operating philosophy, the Company believes it will
have a competitive advantage over other public hotel REITs in dealing with hotel
operating companies which want to divest their real estate while remaining in
the hotel business as lessees.

INTERNAL GROWTH STRATEGY

45
<PAGE> 53

Hotels over Total Hotel Sales in 1994. The Company intends in future Leases to
require both base rent and percentage rent based on gross revenues.

FORMATION OF THE COMPANY

The Company is currently a wholly owned subsidiary of HRP. In March 1995,
the Company acquired 21 of the Initial Hotels for $179.4 million. Substantially
all of the funding for this acquisition, including start up, closing and option
costs, was provided to the Company through the HRP Loan. In addition to the HRP
Loan, HRP purchased 40,000 Shares for $1.0 million ($25.00 per Share). Upon
completion of this Offering, the additional 16 Initial Hotels will be purchased
by the Company for $149.6 million, HRP will purchase directly from the Company
an additional 3,960,000 Shares at $25.00 per Share by cancelling $99.0 million
of the HRP Loan, and Advisors will purchase directly from the Company 250,000
Shares at $25.00 per Share. The Company has entered into the Acquisition Line
which will be available for drawings upon completion of this Offering. The net
proceeds of this Offering, the sale of Shares to Advisors and amounts drawn
under the Acquisition Line will be used to purchase the additional 16 Initial
Hotels and to repay the remaining balance on the HRP Loan. Upon completion of
this Offering and the concurrent placement to HRP and Advisors, public
shareholders, HRP and Advisors will own 63.8%, 34.1% and 2.1%, respectively, of
the Company's Shares.

PURCHASE AGREEMENT

The Initial Hotels will be purchased from the Sellers pursuant to the
Purchase Agreement. Reference is made to the Purchase Agreement which has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part and the following summary is qualified in its entirety by such reference.

Under the Purchase Agreement, the Sellers are entitled to receive the
purchase price in cash at closing in exchange for title to the Initial Hotels.
The closing with respect to the 21 Initial Hotels currently owned by the Company
occurred on March 24, 1995. It is anticipated that the closing under the
Purchase Agreement for the additional 16 Initial Hotels will occur concurrently
with the completion of this Offering. The purchase of each additional Initial
Hotel is contingent upon the satisfactory completion of the Company's due
diligence investigation.

The Purchase Agreement generally contains representations and warranties
with respect to the Initial Hotels which are typical in commercial real estate
acquisitions, including, among other things, that: (i) the properties and the
use and operation thereof do not violate applicable laws; (ii) the Sellers have
not placed any hazardous substances on the properties; and (iii) the Management
Agreements and, if applicable, the ground leases, are in full force and effect.
In addition, the Sellers have agreed, for the period ending one year after
closing, to indemnify and hold the Company harmless from and against losses that
may arise as a result of the breach of any representations and warranties by the
Sellers.

In connection with the Purchase Agreement, the Company has engaged in a due
diligence investigation with respect to each Initial Hotel, including review of
title documents, zoning restrictions, surveys, Phase I environmental reports,
engineering reports, historical financial statements and copies of governmental
permits, franchise or license agreements, leases and other material contracts
with respect to the Initial Hotels. The Company has received an owner's policy
of title insurance for each of the 21 Initial Hotels it currently owns and the
Company will receive an owner's policy of title insurance for each of the
additional 16 Initial Hotels to be acquired with proceeds of this Offering.

The land underlying three of the 21 Initial Hotels currently owned by the
Company, the Phoenix, Stoughton and Scottsdale Initial Hotels, was acquired by
an assignment of the Sellers' interest under long term ground leases. The land
underlying two of the additional 16 Initial Hotels to be acquired, the Norwood
and the Los Angeles Airport Initial Hotels, will also be acquired by an
assignment of the Sellers' leasehold interest under long term ground leases. In
each case, the remaining term of the ground lease (including renewal options) is
in excess of 40 years, and the ground lessors are unrelated to the Sellers and
the Company. As a condition to closing with respect to such Initial Hotels, the
Company has obtained or will obtain a consent and estoppel agreement from each
ground lessor, pursuant to which such ground lessor will consent to the
assignment by the Sellers to the Company of the Seller's interest in the ground
lease and the sublease to

46
<PAGE> 54

Host of such interest and will represent to the Company that the ground lease is
in full force and effect. Under the Initial Leases, Host will acknowledge that
the provisions of the relevant Initial Leases are subject to the terms of the
underlying ground leases.

PURCHASE OPTIONS

The Company currently holds an option pursuant to the Purchase Agreement to
acquire 17 additional Courtyard by Marriott(R) hotels for $202.5 million and to
lease them to Host on terms similar to the Initial Leases. This option expires
on June 30, 1996. The Company has also been granted rights of first refusal
during this option period regarding the 17 option properties. In addition, at
the closing of the purchase of the 21 Initial Hotels, the Company acquired for
$3.0 million a right of first offer, for the period expiring February 29, 2000,
with respect to substantially all of the interests of Host Marriott Corporation
or its subsidiaries in Courtyard by Marriott(R) hotels and certain of Host
Marriott Corporation's or its subsidiaries' interests in Residence Inn by
Marriott(R) properties. At the closing of the purchase of the additional 16
Initial Hotels, the Company will pay the Sellers an additional $1.5 million to
extend the effective period of the foregoing right of first offer until August
31, 2002. The Company has not determined whether or when to exercise the
foregoing option or any of the foregoing rights.

ENVIRONMENTAL MATTERS

Under various environmental laws, a current or previous owner or operator
of real property may be liable for the costs of removal or remediation of
hazardous or toxic substances on, under, in or emanating from such property.
Such laws often impose liability whether or not the owner or operator knew of,
or was responsible for, the presence of such hazardous or toxic substances, and
the liability under such laws has been interpreted to be strict, meaning that
liability is imposed without regard to fault. Liability under such laws has also
been interpreted to be joint and several, meaning that any current or previous
owner or operator or other responsible party might be liable for the entire
amount of the cleanup and remediation costs for a contaminated site. In
addition, the presence of hazardous or toxic substances, or the failure to
remediate such property properly, may adversely affect the market value of the
property, as well as the owner's ability to sell or lease the property or to
borrow using such property as collateral. Persons who arrange for the disposal
or treatment of hazardous or toxic substances may also be liable for the costs
of removal or remediation of such substances at the disposal or treatment
facility, whether or not such facility is or ever was owned or operated by such
person. In addition, certain environmental laws and common law principles govern
the responsibility for the removal, encapsulation or disturbance of ACMs when
these ACMs are in poor condition or when a property with ACMs is undergoing
renovation or demolition. Such laws could also be used to impose liability upon
owners or operators of real properties for release of ACMs into the air that
cause personal injury or other damage.

Pursuant to the terms of the Purchase Agreement, the Company received a
Phase I environmental assessment report for each of the 37 Initial Hotels. The
purpose of these reports is to identify, to the extent reasonably possible and
based on reasonably available information, any existing and potential conditions
resulting from hazardous or toxic substances, including petroleum products and
ACMs, at the Initial Hotels. The scope of the Phase I environmental assessment
for each Initial Hotel generally included: (i) a review of available maps,
aerial photographs and past and present uses of the site; (ii) an inspection of
appropriate public records; and (iii) in certain cases, limited inquiries of
governmental agencies having jurisdiction over certain environmental matters.
Each Phase I environmental assessment also included an on site visual inspection
of the Initial Hotels to assess visual evidence of past or present on site waste
disposal, visible surface contamination, potential sources of soil and
groundwater contamination, above surface and subsurface storage tanks, visible
drums, barrels and other storage containers, current waste streams and
management practices, ACMs and polychlorinated biphenyl transformers. In
addition, as part of the Phase I environmental assessment, abutting properties
and nearby sources of potential contamination were identified through publicly
available information and evaluated for potential impact on the Initial Hotels,
to the extent reasonably possible. In some instances, the Company also caused
additional investigations to be conducted with respect to the Initial Hotels.

47
<PAGE> 55

The Phoenix, Arizona Initial Hotel is located near a state Superfund area
and may be adversely affected by the contamination at this site. The Los Angeles
Airport Initial Hotel is located in an area of regional groundwater
contamination and may be adversely affected by the regional contamination.
However, the Company does not believe that activities at either the Phoenix,
Arizona or Los Angeles Airport Initial Hotel properties are a source of the
contamination in their respective areas. Adjacent to the Milford, Massachusetts
Initial Hotel, there are quarries that have been used historically for dumping.
Although the Company is not aware of any adverse effect on its property from
this historical use of the adjacent site, it is possible that previous and
future, if any, dumping of hazardous materials at the adjacent site may
adversely impact the property at the Milford, Massachusetts Initial Hotel.

The Company does not believe that these instances of on-site contamination
and historical activities at the above-mentioned Initial Hotels will have a
material adverse effect on the Company's business or results of operations.
However, the Company cannot predict whether modifications of existing laws or
regulations or the adoption of new laws or regulations or changes in the
conditions at the above-mentioned or other Initial Hotels may have a material
adverse effect on the Company's business or results of operations in the future.

LEGAL PROCEEDINGS

The Company has a limited operating history and is not currently a party to
any legal proceedings. Under the Purchase Agreement, each of the Sellers has
represented to the Company that there are no pending condemnation, eminent
domain or other actions, suits or proceedings involving the Initial Hotels,
except for certain real estate taxation disputes, certain matters covered by
insurance maintained by the Sellers and certain immaterial matters not covered
by such insurance. The Company is not aware of any legal proceeding affecting
the Initial Hotels for which it might become liable.

In the ordinary course of their business Advisors and HRP are occasionally
involved in litigation. Early in 1995, HRP commenced a foreclosure action to
enforce indemnities given in connection with the surrender of certain leaseholds
to, and the purchase of certain properties by, HRP in 1992. In May 1995, the
defendants in the foreclosure action and parties related to HRP's former tenants
and sellers asserted cross claims against HRP, Advisors, Messrs. Portnoy and
Martin and others, including Sullivan & Worcester, counsel to HRP, Advisors and
the Company. The cross claims allege, among other things, fraud, conflicts of
interest, breach of fiduciary duties, legal malpractice and civil conspiracy in
connection with the leasehold surrenders, the sales and the indemnities which
underlie the foreclosure action and that the foreclosure defendants and third
party

48
<PAGE> 56

plaintiffs suffered substantial damages as a result. Although the outcome of
this litigation is currently indeterminable, each of the third party defendants
believes the claims against it are without merit and intends to defend and deny
the allegations in these cross claims and HRP intends to pursue the original
foreclosure action. The Company is not a party to this litigation.

INSURANCE

The Company intends in future Leases to require Lessees to maintain
insurance on Hotel Properties leased from the Company. Under the Initial Leases,
Host is obligated to maintain or cause Marriott to maintain insurance. See "The
Initial Leases -- Insurance and Indemnification" and "The Management
Agreements -- Insurance and Indemnification" for a description of the levels of
insurance required to be maintained by Host and Marriott and "Risk
Factors -- Hotel Industry Risks -- Insurance" for a discussion of certain risks
for which insurance is not currently available at economically viable rates.

COMPETITION

The hotel industry is highly competitive. Each of the Initial Hotels is
located in an area that includes other hotel properties. Increases in the number
of competitive hotel properties in a particular area could have a material
adverse effect on occupancy rates and ADR of the Initial Hotels located in such
area. The Management Agreements restrict the right of Marriott and its
affiliates, until September 25, 1999, to own, build, operate, franchise or
manage any other Courtyard by Marriott(R) hotel within a specified limited
radius of the Initial Hotels. Marriott and its affiliates are not restricted
from operating other branded hotels in the market areas of the Initial Hotels,
and after September 25, 1999, Marriott and its affiliates may also compete with
the Initial Hotels by opening, managing or franchising additional Courtyard by
Marriott(R) hotels in direct competition with the Initial Hotels. See "Risk
Factors -- Hotel Industry Risks -- Competition."

The Company expects to compete for hotel acquisition and financing
opportunities with entities which may have substantially greater financial
resources than the Company, including, without limitation, other publicly owned
REITs, banks, insurance companies, pension plans and public and private
partnerships. These entities may be able to accept more risk than the Company
can prudently manage, including risks with respect to the creditworthiness of a
hotel operator. Such competition may reduce the number of suitable hotel
acquisition or financing opportunities offered to the Company and increase the
bargaining power of property owners seeking to sell or finance their properties.

REGULATORY MATTERS

Hotel properties are subject to various laws, ordinances and regulations,
including regulations relating to restaurants and other food and beverage
operations and recreational facilities such as swimming pools, activity centers
and other common areas. The Company believes that each Initial Hotel has the
necessary permits and approvals required to enable Host and Marriott to operate
the Initial Hotels in the manner contemplated by the Initial Leases and the
Management Agreements. The Company intends in future Leases to require the
Lessee to comply with all laws, ordinances and regulations applicable to the
operation of the Hotel Properties.

Under Title III of the ADA, a hotel with more than five rooms for rent is
considered both a "public accommodation" and a "commercial facility." Under the
public accommodations provisions of the ADA, the Company, as owner of the Hotel
Properties, will be obligated to make reasonable accommodations to patrons who
have physical, mental or other disabilities. This will include the obligation to
remove architectural and communication barriers at the Hotel Properties when
doing so is "readily achievable" to ensure that alterations to the Hotel
Properties performed after January 26, 1992 conform to the specific requirements
of the ADA implementing regulations. The Initial Leases require Host to comply
with the ADA. Host will also generally be obligated to remedy any ADA compliance
matters from the FF&E Reserve, its own funds, financing by third parties or
financing provided by the Company (which will increase base rent under the
Initial Leases).

49
<PAGE> 57

THE INITIAL LESSEE

Host, the Initial Lessee, is a limited purpose wholly owned subsidiary
formed by Host Marriott Corporation to lease and operate the Initial Hotels. The
Initial Leases require that Host remain a subsidiary of Host Marriott
Corporation throughout the term of the Initial Leases. Host Marriott Corporation
is not liable on the Initial Leases and an investment in the Shares offered
hereby is not an investment in Host Marriott Corporation or in Host.

As of December 30, 1994, Host Marriott Corporation owned 119 lodging
properties (including the Initial Hotels) generally operated under proprietary
brand names and managed by Marriott International, Inc. As of such date, Host
Marriott Corporation also held minority interests in various partnerships that
own, in the aggregate, over 260 additional properties operated by Marriott
International, Inc. Host Marriott Corporation's properties span several market
segments of the hotel industry, including full service (primarily Marriott
Hotels, Resorts and Suites(R)), moderately priced (Courtyard by Marriott(R)),
extended stay (Residence Inn by Marriott(R)) and economy (Fairfield Inn by
Marriott(R)).

THE INITIAL LEASES

The following summary of the Initial Leases is qualified in its entirety by
reference to the form of the Initial Lease which is attached to the Purchase
Agreement filed as an exhibit to the Registration Statement of which this
Prospectus is a part.

GENERAL

In March 1995, the Company acquired 21 of the Initial Hotels and entered
into related Initial Leases. In connection with the consummation of this
Offering, the Company will enter into Initial Leases with respect to the
remaining 16 Initial Hotels. Although there will be a separate Initial Lease for
each Initial Hotel, all of the Initial Leases contain cross default covenants
and renewal options may be exercised only on an all or none basis.

RENT

The Initial Leases provide for the payment by Host of annual base rent
payable in advance on the first day of each four week accounting period, in
equal installments, beginning on the date of the closing with respect to the
applicable Initial Hotel. Percentage rent equal to 5% of Total Hotel Sales (or
"Gross Revenues" as defined in the Initial Leases) at the Initial Hotels in any
year in excess of Total Hotel Sales during the fiscal year 1994 (calculated on
an aggregate basis for all of the Initial Hotels) is payable to the Company
quarterly subject to adjustment annually based upon actual results. The Company
has the right to examine the records of Host and Marriott for the purpose of
verifying the level of Total Hotel Sales disclosed to the Company from time to
time.

Each Initial Lease is a net lease requiring Host to pay all operating
expenses, taxes and other impositions, utilities, insurance premiums and ground
rents, if any, of the applicable Initial Hotel, to comply with all legal
requirements applicable to such Initial Hotel and to perform the obligations of
"owner" under the applicable Management Agreement. It is anticipated that all
capitalized costs and expenses associated with maintenance and repair of
furniture, fixtures and equipment with respect to each Initial Hotel (other than
in the event of casualty or condemnation) will be funded from the FF&E Reserve.

MAINTENANCE AND ALTERATIONS

Host is required to maintain each Initial Hotel in good order and repair,
and make structural and nonstructural, interior and exterior repairs which are
necessary to keep each Initial Hotel in good condition and repair. Capital
alterations and additions to any Initial Hotel may only be made with the prior
written consent of the Company. Any alterations or improvements made to any
Initial Hotel during the term of the Initial Lease are the property of the
Company. On the last day of the term of the Initial Leases, Host is required to
surrender the Initial Hotels to the Company in substantially the same condition
as existed on the

50
<PAGE> 58

commencement date of the Initial Leases, subject to any permitted alterations
and subject to ordinary wear and tear. Certain expenditures in connection with
the maintenance and repair of any Initial Hotel may be made from funds available
in the FF&E Reserve. See "-- FF&E Reserve."

FF&E RESERVE

The FF&E Reserve, which is equal to 5% of Total Hotel Sales (initially
approximately $1,172 per guest room per year), has been established to cover the
capitalized cost of replacements and refurbishment of the furniture, fixtures
and equipment in the Initial Hotels and the cost of certain routine repairs and
maintenance to the Initial Hotels, such as exterior and interior repainting,
resurfacing building walls, floors, roofs and parking areas and replacing
folding walls. The FF&E Reserve is funded at the end of each four week
accounting period based on Total Hotel Sales for such accounting period.
Expenditures in excess of the FF&E Reserve balance require the Company's
consent, except in extenuating circumstances. Major repairs, alterations,
improvements, renewals or replacements to the structure, roof or exterior facade
or mechanical systems of the Initial Hotels are not expected to be funded from
the FF&E Reserve unless Marriott, Host and the Company otherwise agree. Although
Host has the primary responsibility to maintain and make major and structural
repairs to the Hotel Properties, Host may require the Company to fund the cost
of such repairs, in which event the annual base rent will increase by 10% of the
amount funded. See "-- Maintenance and Alterations."

ASSIGNMENT

The Company has agreed not unreasonably to withhold its consent to an
assignment of the Initial Leases by Host to a third party. Assignment is,
however, subject to a right of the Company to substitute a Lessee selected by
the Company and certain other conditions, including that Host assign its rights
under all of the Initial Leases, that the Manager grants its consent, that any
proposed assignee have sufficient financial resources and liquidity to fulfill
the Lessees' obligations under the Initial Leases and that Host remain jointly
and severally liable with any assignee under the Initial Leases.

LEASE TERM

The Initial Leases have an initial term which expires on December 31, 2006.
The Initial Leases with respect to the 21 Initial Hotels commenced on March 24,
1995. The Initial Leases with respect to the additional 16 Initial Hotels to be
acquired with proceeds of this Offering will commence upon the completion of
this Offering. Provided that the terms of all of the other Initial Leases are
concurrently extended, the term of each Initial Lease may be extended for four
consecutive renewal terms, the first of which is for a period of seven years and
the last three of which are for a period of ten years each. Three of the Initial
Leases may, however, be subject to early termination. See "-- Ground Lease
Terms." Assuming the exercise of all renewal terms and no early termination, the
Initial Leases will expire in 2043. Extension of the term of any Initial Lease
is automatic unless Host gives the Company written notice of Host's election not
to extend the initial or any renewal term at least 16 months prior to the
expiration of the applicable term.

GROUND LEASE TERMS

The land underlying five of the Initial Hotels is subject to ground leases.
The Initial Leases with respect to the ground leased Initial Hotels are subject
to early termination if the applicable ground lease terminates. Assuming the
exercise of all renewal options, one ground lease will expire in 2067, one in
2066, two in 2041 and one in 2039. The ground leases expiring in 2041 and 2039
will expire approximately two years and four years, respectively, prior to the
date the applicable Initial Lease would otherwise expire if fully renewed.
Moreover, the landlord under the ground lease which expires in 2039 has the
right to terminate the ground lease at any time after January 1, 1999 provided
it agrees not to use the premises as a commercial lodging facility, complies
with a right of first refusal granted to the Company and pays to the Company an
amount equal to the fair market value of the Company's interest under the ground
lease. The landlords under the ground leases which expire in 2041 have the right
to purchase the Company's leasehold interest in the event that the Company
changes the use of the premises from a hotel use or in the event that Host
Marriott

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Corporation, its affiliates or another agreed upon suitable operator ceases to
lease or manage the applicable Initial Hotel. Any pledge of the Company's
interests in a ground lease may also require the consent of the applicable
ground lessor and the lenders thereto. The ground leased land underlying three
of the Initial Hotels is encumbered by mortgages securing loans in the original
principal amounts of $12.5 million, $37.7 million and $18.0 million. Subject to
the Company's satisfaction of certain conditions, the foreclosure of such
mortgages will not result in the termination of the applicable ground lease.

SECURITY DEPOSIT

Pursuant to the Initial Leases, the Security Deposit of $32.9 million has
been retained by the Company as security for payment and performance of Host's
obligations under the Initial Leases. The Company is not required to escrow the
Security Deposit and will pay no interest on the Security Deposit. The amount of
the Security Deposit will be reduced by the amount of unpaid or defaulted
obligations of Host under any Initial Lease or all of the Initial Leases.

ENVIRONMENTAL MATTERS

The Initial Leases prohibit the maintenance of any hazardous substance at
the Initial Hotels and require Host to remove and dispose of, at its sole cost
and expense, any hazardous substance it caused or permitted to exist on any
Initial Hotel in compliance with applicable environmental laws and regulations
or to pay the Company any costs incurred in connection with such removal and
disposal. Host has indemnified the Company for any claims, causes of action or
other costs and expenses asserted against the Company as a result of the
presence of hazardous substances at the Initial Hotels or from a violation or
alleged violation of any applicable environmental law or regulation.

FINANCIAL COVENANTS OF HOST

LIMITATIONS ON DISTRIBUTIONS BY HOST

Host has agreed it will not pay any fees to a related party outside the
ordinary course of business or distribute any of its earnings to its affiliates
if, at the time of such proposed action or immediately after giving effect
thereto, any event of default under the Initial Leases exists.

MAINTENANCE OF NET WORTH

Host has agreed that it will maintain, at all times during the term of the
Initial Leases, a "tangible net worth" (as defined in the Initial Leases) equal
to one year's fixed rent, which Host is expected initially to satisfy
principally through the Security Deposit. See "Risk Factors -- Risks Relating to
the Company's Operations and the Initial Hotels -- Security Deposit" and
"-- Security Deposit."

LIMITATIONS ON INCURRENCE OF ADDITIONAL DEBT

In general, Host has agreed not to incur any indebtedness other than: (i)
liabilities incurred in the ordinary course of business; (ii) debt to the
Company; (iii) unsecured debt to an affiliate which is expressly subordinate to
Host's obligations under the Initial Leases; (iv) judgments as to which an
appeal is pending, which are fully covered by insurance or which aggregate less
than $250,000; and (v) with certain limitations, equipment purchase money
financing.

INSURANCE AND INDEMNIFICATION

Pursuant to the Initial Leases, except to the extent maintained by the
Manager pursuant to the Management Agreements, Host will be obligated at its
cost to maintain insurance on the Initial Hotels covering: (i) comprehensive
general liability for damage to property or bodily injury arising out of the
ownership, use, occupancy or maintenance of the Initial Hotels (primary coverage
of $2.0 million per occurrence and an additional $23.0 million of umbrella
coverage); (ii) commercial property "all risk" liability for damage to
improvements, merchandise, trade fixtures, furnishings, equipment and personal
property;

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(iii) workers' compensation benefits liability; (iv) business interruption loss
(providing coverage of not less than 12 months of rent and other business
income); and (v) other losses customarily insured by businesses similar to the
business conducted at the Initial Hotels. The Company believes that the
coverages specified in the Initial Leases are consistent with industry practice.
The Company is an additional named insured under these policies. See "Risk
Factors -- Hotel Industry Risks -- Insurance" for a discussion of certain risks
for which insurance is not currently economically viable. See "The Management
Agreements -- Insurance and Indemnification" for a description of additional
insurance maintained by Marriott to provide coverage for these risks.

Host has also agreed to indemnify and hold harmless the Company from and
against any and all claims arising from Host's use of the Initial Hotels or from
the conduct of Host's business or from any activities, work done or permitted to
be done by Host on any Initial Hotel or elsewhere, or from any claim arising
from Host's default under any Initial Lease, or from any negligence of Host or
its subleases, agents, customers, invitees, contractors, occupants or employees.

DAMAGE, DESTRUCTION OR CONDEMNATION

In the event any Initial Hotel is damaged by fire, explosion or other
casualty as a result of which such Initial Hotel cannot be operated in the good
faith judgment of Host or Marriott on a commercially practicable basis for its
permitted use and it cannot reasonably be expected to be restored to
substantially the same condition as existed immediately before such damage or
destruction, within six months following such damage (or such shorter period of
time as to which business interruption insurance is available), either the
Company or Host may terminate the Initial Lease. If either (i) the damage is not
extensive enough to give rise to an option to terminate the Initial Lease or
(ii) neither the Company nor Host elects to terminate the Initial Lease, Host is
obligated promptly to repair and replace the improvements existing immediately
prior to such fire, explosion or other casualty to the extent of available
insurance proceeds. During any period of reconstruction or repair of any Initial
Hotel, Host will operate its business at such Initial Hotel to the extent
practicable. Rent payable under the Initial Leases by Host is not abated during
the period of such repair and restoration. In the event that there are
inadequate insurance proceeds to pay for the cost of restoration and Host elects
not to fund the deficiency, the Company may, at its option, finance the
shortfall for all such repairs and base rent will increase at the rate of 10%
per annum of the amount financed.

In the event that any Initial Hotel or any substantial portion thereof is
taken or condemned for a public or quasi public use or purpose by a competent
authority or sold by the Company in lieu thereof, the Initial Lease will
terminate upon delivery of possession to the condemning authority or its
assignee, and any Award will be paid to the Company, Host or Marriott as
appropriate. Host will have no claim against the Company by reason of such
taking or termination and will have no claim or right to any portion of the
Award paid to the Company. Host will continue to pay rent and other charges
until the Initial Lease is terminated. In the event only a part of any Initial
Hotel is taken or condemned but such Initial Hotel or the part remaining can
still be used for the same purpose as immediately prior to such taking, the
Initial Lease will not terminate and Host will repair and restore the remaining
improvements, provided the cost of such repair and restoration does not exceed
the amount of the Award. If the cost of such repair exceeds the amount of the
Award and Host is unwilling to pay the amount of such deficiency, Host may
request that the Company fund the amount of the deficiency in which event base
rent increases by 10% per annum of the amount so funded. If neither Host nor the
Company elects to fund the deficiencies, either party may terminate the Initial
Lease. If the Initial Hotel is repaired, there will be no abatement or reduction
in any rent payable by Host.

The ground leases for five of the Initial Hotels contain provisions
relating to the obligation of the Company to maintain insurance, restore the
premises following a casualty or a taking and apply in a specified manner
proceeds received by the Company in connection with a casualty or a taking, all
of which obligations are to be performed by Host pursuant to the Initial Leases.
In instances where a material casualty has occurred prior to the last five years
of a ground lease, however, the Company may be obligated under such ground lease
to restore the property although Host has terminated the applicable Initial
Lease as a result of a casualty and regardless of whether the proceeds received
are adequate to effect restoration. In addition, in certain limited
circumstances the lenders holding mortgages on the land underlying two of such
ground leased

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Initial Hotels may have the right to require that insurance proceeds and
condemnation Awards be applied in repayment of the debt secured by such
mortgages.

OTHER MATERIAL COVENANTS OF HOST

Host has also covenanted to the Company with respect to each of the Initial
Hotels as follows: (i) that it will continuously use and occupy the Initial
Hotel as a Courtyard by Marriott(R) hotel unless no longer economically
practicable; (ii) that it will obtain and maintain, at its own cost and expense,
all permits and licenses necessary for the operation of the Initial Hotel; (iii)
that it will not engage in any activity, other than the operation of the Initial
Hotels and other Hotel Properties, if any, owned by the Company and leased to
Host; and (iv) that, subject to the Company's obligation to fund certain
repairs, it will perform all of the obligations of the Company under the
Management Agreements.

EVENTS OF DEFAULT

Events of default under each Initial Lease include the following: (i) the
failure of Host to make payments under the Initial Lease as and when due where
such failure continues for ten days after written notice thereof by the Company;
(ii) the failure of Host to perform certain of the terms, covenants or
conditions of any Initial Lease where such failure continues for a specified
period after written notice thereof by the Company; (iii) the occurrence of
certain events of bankruptcy or insolvency with respect to Host; (iv) the
failure of Host to maintain the insurance coverages required under any Initial
Lease; (v) the revocation or limitation of any material license requiring the
cessation of operations at the applicable Initial Hotel; (vi) the existence of
any event of default under any other Initial Lease or the Purchase Agreement;
(vii) the existence of any event of default by Host with respect to the
Management Agreements; or (viii) the failure of Host to be a direct or indirect
subsidiary of Host Marriott Corporation. The Initial Leases are cross defaulted
and, accordingly, a default under one Initial Lease will constitute a default
under all other Initial Leases. The Company may enforce cross default provisions
with respect to all, some or none of the Initial Leases. Any Initial Lease with
respect to which the Company does not enforce cross default provisions will
remain in full force and effect. An event of default by Host under an Initial
Lease will not constitute a default under any Management Agreements. If the
Company terminates any Initial Lease or all of the Initial Leases as a result of
a default, the Management Agreements would remain in effect. In such
circumstances, the Company would not be able to select a new manager and a
subsequent Lessee would be required to retain Marriott as a manager until the
expiration or permitted termination of the Management Agreements. See "The
Management Agreements -- Events of Default."

REMEDIES

Upon the occurrence of an event of default under any Initial Lease, the
Company will, in addition to all other rights or remedies provided at law or in
equity, at its option, be entitled to do one or more of the following: (i)
terminate such Initial Lease and/or all Initial Leases by delivery of written
notice of termination to Host and accelerate the rent; (ii) terminate Host's
right to possession of the applicable Initial Hotel or as to all Initial Hotels,
without terminating the Initial Lease or all Initial Leases and Host's
obligation to pay rent; (iii) relet all or any part of the applicable Initial
Hotel or all Initial Hotels for such rent and upon such terms as will be
satisfactory to the Company and recover from Host the difference between the
amount of rent which would have been due under the applicable Initial Lease or
all Initial Leases and the rent received under such reletting; (iv) exercise and
enforce any or all rights and remedies available upon default to a secured party
under the Uniform Commercial Code with respect to personal property of Host at
the Initial Hotels; and (v) after notice to Host (or without notice if immediate
action is necessary to protect person or property), make any payment or perform
any act required to be performed by Host under the Initial Lease. Host will be
obligated to reimburse the Company for all payments made and all costs and
expenses incurred in connection with any exercise of the foregoing remedies and
the Company has the right to apply the Security Deposit to any defaulted amounts
under the Initial Leases. See "-- Security Deposit."

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THE MANAGER

Marriott is a wholly owned subsidiary of Marriott International, Inc. and
manages Courtyard by Marriott(R) hotels, including the Initial Hotels. The
Management Agreements restrict the right of Marriott to assign its interest
under the Management Agreements without the consent of the Company (except to
affiliates). Marriott International, Inc. is not liable on, or a guarantor of
performance by Marriott under, the Management Agreements and an investment in
the Shares offered hereby is not an investment in Marriott International, Inc.
or in Marriott.

As of December 30, 1994, Marriott International, Inc.'s hotel business
included operation or franchise of 851 hotels with approximately 180,000 guest
rooms serving four market segments of the hotel industry including: Marriott
Hotels, Resorts and Suites(R) (full service), Courtyard by Marriott(R)
(moderately priced), Residence Inn by Marriott(R) (extended stay) and Fairfield
Inn by Marriott(R) (economy). Marriott International, Inc. is also a leading
developer and operator of vacation time sharing properties (Marriott Ownership
Resorts(R)) and operates conference centers (Marriott Conference Centers(R))
throughout the United States. Through its contract services business, Marriott
International, Inc. provides food service and facilities management to more than
3,000 business, education and health care clients; develops and operates
retirement communities offering independent living, assisted living and skilled
nursing care for seniors; and supplies food and related products to customers
throughout the United States.

Until October 1993, Marriott International, Inc. was a wholly owned
subsidiary of Host Marriott Corporation (then known as Marriott Corporation). In
October 1993, the common stock of Marriott International, Inc. was distributed
to shareholders of Marriott Corporation (whose name was changed to Host Marriott
Corporation) and Marriott International, Inc. became a separate public company.

THE MANAGEMENT AGREEMENTS

The following summary of the Management Agreements is qualified in its
entirety by reference to the form of Management Agreement filed as an exhibit to
the Registration Statement of which this Prospectus is a part.

GENERAL

At the time the Company acquired the Initial Hotels and entered into the
Initial Leases with Host, each of the Initial Hotels was managed by Marriott
pursuant to the Management Agreements between Marriott and Host Marriott
Corporation and its affiliates. The Company has acquired 21 of the Initial
Hotels and will acquire the remaining 16 Initial Hotels subject to the
Management Agreements, and such Management Agreements have been assigned to the
Company. Pursuant to the Initial Leases, Host has agreed to perform all of the
Company's obligations arising under the Management Agreements. Although there is
a separate Management Agreement for each Initial Hotel, the FF&E Reserve on all
the Initial Hotels is calculated and may be used and the incentive management
fee is calculated on a combined basis and renewal options may be exercised only
on an all or none basis.

FEES

The Management Agreements provide for the payment to Marriott of management
fees consisting of: (i) a base management fee equal to 2% of Total Hotel Sales
(payment of which may be deferred as provided below); and (ii) an incentive
management fee equal to 50% of Available Cash Flow (after allocation of base
rent and other operating expenses under the applicable Initial Lease). Base
management fees will be paid every four weeks and incentive management fees will
be paid quarterly in arrears and will be reconciled annually. If Operating
Profit, after allocation of the base rent and other operating expenses payable
under the Initial Lease for an Initial Hotel, is insufficient to pay the base
management fee, payment of the base management fee with respect to such Initial
Hotel will be deferred until there is sufficient Operating Profit at that
Initial Hotel. Any such payment obligation will be an unsecured obligation of
the Company and the calculation of Operating Profit will be reconciled annually
for payment thereof. The foregoing provisions result

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in the effective subordination of base management fees to the prior payment of
base rent under each Initial Lease. In addition, because Available Cash Flow is
calculated after payments of base rent on all the Initial Hotels, no incentive
management fee will have been paid unless base rent has been paid under all of
the Initial Leases.

The Management Agreements also provide for payment to Marriott at the end
of each four week accounting period of a Courtyard by Marriott(R) system fee
equal to 3% of Total Hotel Sales. The Courtyard by Marriott(R) system fee
compensates Marriott for system services which benefit the Courtyard by
Marriott(R) system, such as divisional executive management, financial planning
and market planning and services of Marriott's technical and operational experts
making periodic inspections and consultation visits to the Initial Hotels.
Various costs and expenses of participating in the Courtyard by Marriott(R)
system are charged to each of the Initial Hotels as an operating expense. See
Note 4 and Note 5 to Combined Financial Statements of the Initial Hotels.

TERM

The Management Agreements have an initial term which expires in December
2013. Provided that the terms of all of the other Management Agreements are
simultaneously extended, the term of each Management Agreement may be extended
for three consecutive renewal terms of ten years each. Extension of the term is
automatic unless Marriott gives written notice of its election not to extend the
term within 18 months prior to the expiration of the then applicable term. With
respect to the five Initial Hotels that are subject to long term ground leases,
upon any renewal of the ground lease which is approved by Marriott, the term of
the applicable Management Agreement will be automatically extended until the
later of the expiration of the then current term of the ground lease or the date
on which the Management Agreement would have otherwise expired.

EARLY TERMINATION

Each Management Agreement is subject to early termination by Host (with the
consent of the Company, which consent shall not be unreasonably withheld) in the
event that (i) Operating Profit less the amount of ground lease rental, if any,
with respect to any two consecutive full fiscal years after 1995 is less than a
designated threshold amount (initially approximately equal to base rent) in the
applicable Management Agreement; and (ii) the revenue per guest room for the
Initial Hotel divided by the average revenue per guest room for the hotels in
such Initial Hotel's competitive set during each of such two consecutive fiscal
years after 1995 is less than a designated threshold in the applicable
Management Agreement; provided that the foregoing circumstances do not result
from a force majeure or any major renovation. Marriott has the right to prevent
such termination by making a curative payment in respect of any year.

FF&E RESERVE

As of June 30, 1995, the FF&E Reserve for the Initial Hotels was
approximately $3.9 million. For a description of historical contributions to the
FF&E Reserve, see Note 4 to Combined Financial Statements of the Initial Hotels.
The amount on deposit in the FF&E Reserve will decrease during each fiscal year
by amounts expended for maintenance or repair of the Initial Hotels and will
increase by 5% of Total Hotel Sales through deposits made at the end of each
four week accounting period. In certain circumstances, at the election of
Marriott, the FF&E Reserve may be increased to 6% of Total Hotel Sales if
determined to be necessary. The FF&E Reserve is intended to ensure that adequate
funds are on hand for Marriott to make capital replacements of furniture,
furnishings and equipment at the Initial Hotels. The FF&E Reserve will remain
the property of the Company upon termination or expiration of the Management
Agreements.

MAINTENANCE AND REPAIRS

Marriott is required to maintain each Initial Hotel in good order, repair
and appearance in conformance with law, Courtyard by Marriott(R) system
standards and standards comparable with competitive hotels. The

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cost of routine maintenance and repair of most items which can be capitalized
may be paid from the FF&E Reserve and those that are expensed will be paid as an
operating expense.

OTHER MATERIAL COVENANTS OF MARRIOTT

Marriott has also covenanted with respect to each Initial Hotel that it
will: (i) establish room rates and prices, rates and charges for other services;
(ii) arrange for and supervise public relations and advertising; (iii) make
required contributions to the FF&E Reserve and allowable expenditures therefrom;
(iv) obtain and maintain all permits and licenses necessary for operation of the
Initial Hotel; (v) recruit, employ, supervise and direct all employees of the
Initial Hotel; (vi) at all times manage and operate the Initial Hotel; and (vii)
cause Courtyard by Marriott(R) chain services to be furnished to the Initial
Hotel.

INSURANCE AND INDEMNIFICATION

Pursuant to the Management Agreements, Marriott is required to maintain, as
an operating expense of each Initial Hotel, insurance covering: (i)
comprehensive general liability for injury to property or persons or loss of
life arising out of the business of such Initial Hotel (in an amount of $100.0
million per occurrence); (ii) liability for damage to improvements, merchandise,
trade fixtures, furnishings, equipment and personal property; (iii) workers'
compensation benefits liability; (iv) business interruption loss (providing
coverage of not less than 12 months of rent and other business income); and (v)
other business losses customarily insured by businesses conducting similar
activities or required by any applicable legal requirement to be carried or
maintained by Marriott. In addition, Marriott is permitted to self insure the
required coverage in a manner consistent with its self insurance for similar
hotels operated under Marriott brand names.

Marriott has also agreed to indemnify and hold harmless the Company from
and against any and all claims arising from Marriott's bad faith or willful
misconduct in the performance of its obligations under the Management
Agreements.

DAMAGE, DESTRUCTION OR CONDEMNATION

In the event any Initial Hotel is damaged by fire, explosion or other
casualty, the "owner" under the Management Agreement is obligated promptly to
repair and replace the improvements existing immediately preceding such fire,
explosion or other casualty to the extent of available insurance proceeds. In
the event the "owner" fails so to restore on a timely basis, Marriott may, upon
120 days' prior written notice, terminate the Management Agreement. Pursuant to
the Initial Leases, subject to the Company's obligation to fund certain repairs,
Host is responsible for performing all the Company's obligations as "owner"
under the Management Agreements.

In the event any Initial Hotel or any substantial portion thereof is taken
or condemned for a public or quasi-public use or purpose by a competent
authority or sold by the Company in lieu thereof, the Management Agreement will
terminate upon delivery of possession to the condemning authority or its
assignee, and any Award will be paid to the Company, Host or Marriott as
appropriate. In the event only a part of any Initial Hotel is taken or condemned
and the Initial Hotel or the part remaining can still be used for the same
purpose and with substantially the same utility as immediately prior to such
taking, the Management Agreement will not terminate and the "owner" thereunder
is required to repair and restore the remaining improvements, provided the cost
of such repair and restoration does not exceed the amount of the Award. See "The
Initial Leases -- Damage, Destruction or Condemnation."

EVENTS OF DEFAULT

Events of default under each Management Agreement include the following:
(i) the failure of Marriott to make payments under the Management Agreement as
and when due; (ii) the failure of Marriott after notice to perform certain of
the terms, covenants or conditions of the Management Agreement where such
failure continues for a specified period after written notice thereof; or (iii)
the occurrence of certain events of bankruptcy or insolvency of Marriott. Upon
the occurrence of an event of default under any Management Agreement, in
addition to all other rights or remedies provided by law or equity, such
Management

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Agreement may be terminated by Host, with the consent of the Company (which will
not be unreasonably withheld). The Management Agreements are not cross defaulted
with each other or with the Initial Leases and, accordingly, a default under one
Management Agreement is not a default under any other Management Agreement or
under any Initial Lease. As a result, the termination of one Management
Agreement upon default will not result in termination of the other Management
Agreements or of any Initial Lease. See "The Initial Leases -- Events of
Default." If a Management Agreement were terminated, the Initial Lease relating
to the applicable Initial Hotel would continue in effect, Host's obligations to
pay rent to the Company and otherwise perform under the Initial Lease would not
be affected by termination of such Management Agreement and Host would be
obligated to manage or find a substitute manager for such Initial Hotel. The
Company believes that the fees payable under the Management Agreements would be
sufficient to attract a successor Manager but no assurance can be given that an
acceptable successor Manager could be engaged. As a REIT, the Company is
restricted in its ability to manage the Initial Hotels. See "Federal Income Tax
Considerations -- Taxation of the Company -- Foreclosure Property." Use of the
"Courtyard by Marriott(R)" brand name would not be available to Host or to a
substitute manager of an Initial Hotel with respect to which a Management
Agreement had been terminated unless Host or a successor Manager obtained a
franchise for such Initial Hotel from Marriott. Use of the brand name with
respect to Initial Hotels for which Management Agreements remained in effect
would not be affected thereby.

LIMITATION ON SECURED BORROWINGS

Secured borrowings in respect of each Initial Hotel are limited in
accordance with a formula set forth in the applicable Management Agreements.
This limit may never be less than 70% of the allocable purchase price of the
Initial Hotel. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."

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MANAGEMENT

TRUSTEES AND EXECUTIVE OFFICERS

The Declaration provides that a majority of the Board of Trustees will be
Independent Trustees. An Independent Trustee is a Trustee who is not an officer
of or otherwise affiliated with the Company, HRP or Advisors. Upon completion of
this Offering, the Company will have five Trustees, including three Independent
Trustees.

The following table sets forth certain information with respect to the
persons who will be Trustees and officers of the Company immediately after
completion of this Offering.

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Barry M. Portnoy............. 49 Managing Trustee (term will expire in 1996)
Gerard M. Martin............. 60 President and Managing Trustee (term will expire in
1997)
John G. Murray............... 34 Treasurer, Secretary and Chief Financial Officer
John L. Harrington........... 59 Independent Trustee (term will expire in 1996)
William J. Sheehan........... 51 Independent Trustee (term will expire in 1997)
Arthur G. Koumantzelis....... 64 Independent Trustee (term will expire in 1998)
</TABLE>

The following is a biographical summary of the experience of the Trustees
and officers of the Company.

Barry M. Portnoy has been a partner in the law firm of Sullivan & Worcester
since 1978. Mr. Portnoy has been a Managing Trustee of HRP since its
organization in 1986. From 1985 until the merger of Greenery Rehabilitation
Group, Inc. ("Greenery") into Horizon Healthcare Corporation ("Horizon") in
February 1994 (the "Horizon/Greenery Merger"), Mr. Portnoy served as a Director
of Greenery. Mr. Portnoy is currently a Director of Horizon and a Director and
50% shareholder of Advisors. Mr. Portnoy has been actively involved in real
estate and real estate finance activities for approximately 20 years.

Gerard M. Martin is a private investor in real estate. Mr. Martin has been
a Managing Trustee of HRP since its organization in 1986. From 1985 until the
Horizon/Greenery Merger, Mr. Martin served as the Chief Executive Officer and
Chairman of the Board of Directors of Greenery. Mr. Martin is currently a
Director of Horizon and a Director and 50% shareholder of Advisors. Mr. Martin
has been active in the real estate industry for more than 30 years. Mr. Martin
is currently acting as an interim President of the Company. The Company is
currently interviewing candidates to serve as President and expects to fill the
position by the end of 1995. When a full time President is appointed, Mr. Martin
intends to resign the position but to remain a Managing Trustee of the Company.

John G. Murray will be Treasurer, Secretary and Chief Financial Officer of
the Company. Mr. Murray has served in various capacities for HRP and Advisors
since 1993, most recently as Executive Vice President and Chief Financial
Officer. Mr. Murray served as Director of Finance, Business Analysis and
Planning at Fidelity Brokerage Services, Inc. from 1992 to 1993 and as Director
of Acquisitions from 1990 through 1991. Prior to 1990, Mr. Murray was a senior
manager at the accounting firm of Arthur Young & Company (now Ernst & Young
LLP). Upon completion of this Offering, Mr. Murray will resign as an officer of
HRP and thereafter will devote substantially all of his business time to the
Company's business. Mr. Murray is a certified public accountant.

John L. Harrington has been the Chief Executive Officer of the Boston Red
Sox Baseball Club for at least five years and is Executive Director and Trustee
of the Yawkey Foundation and a Trustee of the JRY Trust. Mr. Harrington is also
a Director of Shawmut Bank, N.A. Mr. Harrington has been a Trustee of HRP since
1991. Upon completion of this Offering, Mr. Harrington will resign as a Trustee
of HRP.

William J. Sheehan has been the Chief Financial Officer of Ian Schrager
Hotels, Inc. since May 1995. From 1993 through May 1995, Mr. Sheehan was a self
employed consultant on financial and operating matters to companies in the hotel
industry. From 1982 until 1993 he was employed by Omni Hotels, most recently as
Vice Chairman (1992 to 1993) and President and Chief Executive Officer (1988 to
1992). Prior to

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that time, he was a partner at Arthur Andersen & Co. Mr. Sheehan is a certified
hotel administrator, a Fellow of the Educational Institute of the American Hotel
and Motel Association and has been a speaker at various hotel industry
conferences.

Arthur G. Koumantzelis has been Senior Vice President and Chief Financial
Officer of Cumberland Farms, Inc., since July 1990. Cumberland Farms, Inc. is a
private company engaged in the convenience store business in the northeastern
United States and Florida and in the distribution and retail sale of gasoline in
the northeastern United States. Cumberland Farms, Inc. filed a voluntary
petition under Chapter 11 of the United States Bankruptcy Code in May 1992 and
subsequently emerged from bankruptcy proceedings in December 1993. Mr.
Koumantzelis has been a Trustee of HRP since 1992. Upon completion of this
Offering, Mr. Koumantzelis will resign as a Trustee of HRP.

COMMITTEES OF THE BOARD OF TRUSTEES

Promptly following completion of this Offering, the Board of Trustees of
the Company will establish an Audit Committee that will consist of the three
Independent Trustees. The Audit Committee will make recommendations concerning
the engagement of independent public accountants, review with the independent
public accountants the plans and results of the audit engagement, approve
professional services provided by the independent public accountants, consider
the appropriateness of audit and nonaudit fees charged and review the adequacy
of the Company's internal accounting controls.

The entire Board of Trustees will function as an Executive Compensation
Committee to implement the Company's Incentive Share Award Plan. A subcommittee
of the Executive Compensation Committee composed of the initial Independent
Trustees will review the performance of Advisors under the Advisory Agreement.
See "Advisors and the Advisory Agreement -- Compensation to Advisors."

COMPENSATION OF TRUSTEES AND OFFICERS

The Company intends to pay its Independent Trustees an annual fee of
$20,000 plus a fee of $500 for each meeting attended and will reimburse expenses
incurred by its Independent Trustees for attending meetings. Each Independent
Trustee of the Company will automatically receive an annual grant of 300 Shares
(i) after the completion of this Offering and (ii) at the first meeting of the
Board of Trustees following each annual meeting of shareholders commencing in
1996. See "-- Incentive Share Award Plan" and "Advisors and the Advisory
Agreement." In addition, the Independent Trustee serving as Chairman of the
Audit Committee, which position is expected to rotate annually among the
Independent Trustees, will be paid $2,000 per year for such service.

EMPLOYEES

The Company is an advised REIT and has no employees. Services which would
otherwise be provided by employees will be provided by Advisors pursuant to the
Advisory Agreement and by Managing Trustees and officers of the Company.
Although officers of the Company will not receive any cash compensation from the
Company, they may be entitled to incentive share awards under the Company's
Incentive Share Award Plan. See "-- Incentive Share Award Plan."

INCENTIVE SHARE AWARD PLAN

The Company has adopted an Incentive Share Award Plan and has reserved
100,000 Shares for grant thereunder to Independent Trustees and officers of, and
consultants (other than Advisors) to, the Company. The officers of the Company
are employees of Advisors and not of the Company and will therefore receive
their salary compensation from Advisors. The Company has established its
Incentive Share Award Plan in order to provide it with a vehicle with which to
foster a continuing identity of interest among the Company's officers and
Independent Trustees and the Company's shareholders. In addition, the Incentive
Share Award Plan will permit the Company to compensate its officers for the
performance of certain duties which fall outside the scope of services covered
by the Advisory Agreement.

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The Independent Trustees will automatically receive grants of 300 Shares
per year as part of their annual compensation. In granting other incentive share
awards, the Board of Trustees intends to consider a range of factors, including
the complexity and duration of tasks performed by grantees on behalf of the
Company and the amount and terms of Shares previously granted. The vesting
schedule of each incentive share award will be determined at the time of grant.
In the event that an officer who has been granted an incentive share award
resigns during the vesting period of such award, the grantee generally will be
entitled to receive only the number of Shares which will have vested prior to
the date of resignation. No awards will be granted under the Incentive Share
Award Plan prior to completion of this Offering.

TRUSTEES' AND OFFICERS' INDEMNIFICATION

The Declaration provides that Trustees, officers, employees and agents
shall be indemnified by the Company against any losses, judgments, liabilities,
expenses and amounts paid in settlement of any claims asserted against them by
reason of such status, provided that such claims were not the result of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Company shall have the right but shall not be required to obtain insurance
including general liability, securities liability, Trustee and officer liability
and other insurance in such amounts and with such carriers as the Company
reasonably deems appropriate in order to support this indemnity.

BENEFITS TO HRP AND ADVISORS

In connection with completion of this Offering and the other transactions
to be consummated in connection with completion of this Offering, HRP and
Advisors will receive the following benefits:

- HRP will receive $64.3 million in cash in partial repayment of the HRP
Loan.

- HRP will purchase 3,960,000 Shares by cancelling $99.0 million of the HRP
Loan (a purchase price of $25.00 per Share).

- Advisors will purchase 250,000 Shares at $25.00 per Share in cash.

- Advisors will enter into the Advisory Agreement with the Company under
which it will earn advisory fees. The fee payable to Advisors during the
initial term of the Advisory Agreement through December 31, 1995
(assuming no new investments by the Company during that period) will be
approximately $806,000. Messrs. Portnoy and Martin are Managing Trustees
of the Company, Managing Trustees of HRP and each is a Director and 50%
owner of Advisors. See "Advisors and the Advisory Agreement."

ADVISORS AND THE ADVISORY AGREEMENT

ADVISORS

Advisors is a Delaware corporation owned by Barry M. Portnoy and Gerard M.
Martin. Advisors' principal place of business is 400 Centre Street, Newton,
Massachusetts and its telephone number is (617) 332-3990. Advisors will provide
management services and investment advice to the Company. Advisors also acts as
the investment advisor to HRP. The Directors of Advisors are Gerard M. Martin,
Barry M. Portnoy and David J. Hegarty. The officers of Advisors are David J.
Hegarty, President and Secretary, John G. Murray, Executive Vice President and
Ajay Saini, Treasurer. The following is a biographical summary of the experience
of the Directors and officers of Advisors who are not described under the
caption "Management."

David J. Hegarty, age 38, is the President, Chief Operating Officer and
Secretary of HRP and President and Secretary of Advisors. Mr. Hegarty has been
employed by HRP and Advisors in various capacities since 1987 and prior to that
he was an audit manager with Arthur Young & Company (now Ernst & Young LLP). Mr.
Hegarty is a certified public accountant.

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Ajay Saini, age 34, is the Treasurer of HRP and Advisors. Mr. Saini has
been employed by Advisors in various capacities since June 1990 and prior to
that he was a senior accountant at Arthur Young & Company (now Ernst & Young,
LLP). Mr. Saini is a certified public accountant.

THE ADVISORY AGREEMENT

The following summary of the Advisory Agreement is qualified in its
entirety by reference to the copy of such agreement filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

Under the Advisory Agreement, Advisors is obligated to use its best efforts
to present to the Company a continuing and suitable investment program
consistent with the investment policies and objectives of the Company. See
"Policies with Respect to Certain Activities -- Investment Policies." Subject to
its duty of overall management and supervision, the Board of Trustees has
delegated to Advisors the power and duty to, among other things:

(i) serve as the Company's investment advisor, with its obligations to
include providing research and economic and statistical data in connection
with the Company's investments and recommending changes in the Company's
investment policies when appropriate;

(ii) investigate and evaluate investment opportunities and recommend
them to the Trustees;

(iii) manage the Company's short term investments, including the
acquisition and sale of money market instruments in accordance with the
Company's policies;

(iv) administer the day to day operations of the Company;

(v) investigate, select and conduct business and enter into
appropriate leases and other contracts on behalf of the Company in
furtherance of the investment activities of the Company;

(vi) upon request by the Trustees, act as attorney in fact or agent in
acquiring and disposing of investments and funds of the Company and in
handling, prosecuting and settling any claims of the Company;

(vii) upon request by the Trustees, invest and reinvest any money of
the Company;

(viii) obtain for the Company, when appropriate, the services of
property managers or management firms to perform customary property
management services with regard to the real estate properties owned by or
in the possession of the Company, and perform such supervisory or
monitoring services on behalf of the Company with respect to the activities
of such property managers or management firms as would be performed by a
prudent owner;

(ix) obtain for the Company such services as may be required for other
activities relating to the investment portfolio of the Company;

(x) administer such day to day bookkeeping and accounting functions as
are required for the proper management of the assets of the Company,
contract for audits and prepare or cause to be prepared such reports as may
be required by any governmental authority in connection with the ordinary
conduct of the Company's business;

(xi) provide office space, office equipment and the use of accounting
or computing equipment when required, and provide personnel necessary for
the performance of the foregoing services; and

(xii) upon request by the Trustees, make reports thereto of its
performance of the foregoing services to the Company.

In performing its services under the Advisory Agreement, Advisors may utilize
facilities, personnel and support services of various of its affiliates.

Under the Advisory Agreement, Advisors assumes no responsibility other than
to render the services described therein in good faith and is not responsible
for any action of the Board of Trustees in following or declining to follow any
advice or recommendation of Advisors. In addition, the Company has agreed to

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indemnify Advisors, its shareholders, Directors, officers, employees and
affiliates against liabilities relating to certain acts or omissions of Advisors
undertaken in good faith.

The initial term of the Advisory Agreement expires on December 31, 1995 and
renewal or extension of the term thereof will be subject to the periodic
approval of a majority of the Independent Trustees. See "Policies with Respect
to Certain Activities -- Conflict of Interest Policies." Pursuant to the
Advisory Agreement, Advisors and Messrs. Portnoy and Martin have agreed not to
provide advisory services to, or serve as a Director or officer of, any other
REIT which is principally engaged in the business of ownership of hotel
properties or to make competitive direct investments in hotel facilities, in
each case, without the consent of the Company's Independent Trustees.

COMPENSATION TO ADVISORS

It is intended that the Board of Trustees, including a majority of the
Independent Trustees, will determine the amount of compensation which the
Company contracts to pay to Advisors and any renewal, extension or amendment of
the Advisory Agreement, based on such factors as it deems appropriate. Such
factors may include the size of the advisory fee in relation to the size,
composition, quality and profitability of the investment portfolio of the
Company, the success of Advisors in generating opportunities that meet the
Company's investment objectives, the quality and extent of services and advice
furnished by Advisors, the rates charged by other investment advisors performing
comparable services and the costs of similar services incurred by self advised
REITs.

The Advisory Agreement currently provides for (i) an annual advisory fee,
payable monthly and reconciled annually, and (ii) an annual incentive fee. The
annual advisory fee is equal to the product of 0.70% and the daily weighted
average of the total book value of the Company's real estate assets (before
reserves for depreciation or bad debts or other similar non-cash reserves)
invested, directly or indirectly, in equity interests in and loans secured by
real estate and personal property owned in connection with such real estate (the
"Average Invested Capital") up to $250.0 million and 0.50% of Average Invested
Capital exceeding $250.0 million. The annual incentive fee is calculated on the
basis of annual increases in the amount of Cash Available for Distribution per
Share. No incentive fees will be payable for the initial term of the Advisory
Agreement. Assuming that the Advisory Agreement is renewed on its current terms,
starting in 1996 the incentive fee payable to Advisors will be 15% of annual
increases in Cash Available for Distribution per Share times the weighted
average number of Shares outstanding in each year, but in no event more than
$0.02 per Share times the weighted average number of Shares outstanding in each
year. Any incentive fee earned by Advisors will be paid in Shares.

Assuming that this Offering closes on or about August 15, 1995, the fee
payable to Advisors during the initial term of the Advisory Agreement through
December 31, 1995 (assuming no new investments by the Company during that
period) will be approximately $806,000. The advisory agreement currently in
effect between Advisors and HRP is substantially similar to the Advisory
Agreement between Advisors and the Company. Upon the completion of this
Offering, Advisors' contract with HRP will be amended so that amounts invested
by HRP in the Company will not be counted for purposes of determining the
advisory fees payable by HRP to Advisors.

The Company is not expected to have any employees nor to have
administrative officers separate from Advisors. Services which might otherwise
be provided by employees will be provided to the Company by employees of
Advisors. Similarly, office space will be provided to the Company by Advisors.
Although the Company does not expect to have significant general and
administrative operating expenses, in addition to fees payable to Advisors, the
Company will be required to pay various other expenses relating to its
activities, including the costs and expenses of acquiring, owning and disposing
of the Company's real estate interests (including appraisal, reporting, audit
and legal fees), its costs of borrowing money and its costs of securities
listing, transfer, registration and compliance with reporting requirements.
Also, the fees and expenses of the Company's Independent Trustees will be paid
by the Company.

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POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

The following is a discussion of the Company's policies with respect to
investments, dispositions, financings, conflicts of interest and certain other
activities. These policies have been determined by the Board of Trustees of the
Company and, although there is no current intention to do so, these policies may
be amended or revised from time to time at the discretion of the Board of
Trustees without a vote of the Company's shareholders, except that the Company
cannot change its policy of seeking to maintain its qualification as a REIT nor
can it enter into certain extraordinary transactions (such as a merger or the
sale of all or substantially all of its assets) without the approval of two
thirds of the shareholders. Upon completion of this Offering, HRP will own 34.1%
of the Shares and any such transaction would likely require the approval of HRP.
See "Risk Factors -- Share Ownership Risks and Effects of Various Factors on
Share Price -- Concentration of Ownership."

INVESTMENT POLICIES

ACQUISITIONS

The Company is committed to pursuing growth through the acquisition of
additional Hotel Properties and intends to pursue acquisition opportunities
after completion of this Offering. In implementing its acquisition strategy, the
Company will consider a range of factors relating to each proposed Hotel
Property including: (i) its historical and projected cash flows; (ii) the
competitive market environment and the current or potential market position of
each proposed Hotel Property; (iii) the availability of a qualified Lessee; (iv)
the physical condition of the proposed Hotel Property and its potential for
redevelopment or expansion; (v) the estimated replacement cost and proposed
acquisition price of the proposed Hotel Property; (vi) the price segment in
which the proposed Hotel Property is operated; and (vii) the strength of the
particular national hotel organization, if any, with which the proposed Hotel
Property is or may become affiliated. In determining the competitive position of
a prospective Hotel Property, the Company will examine the proximity of the
proposed Hotel Property to business, retail, academic and tourist attractions
and transportation routes, the number and characteristics of competitive hotels
within the proposed Hotel Property's market and the existence of any barriers to
entry within that market, including zoning restrictions and financing
constraints. While the Company intends to focus on the acquisition of moderately
priced hotel properties, it may in the future consider acquisitions in all
segments of the hotel industry. The Company believes that its capital position
after completion of this Offering will enhance its ability to pursue attractive
acquisition opportunities.

An important part of the Company's acquisition strategy is to identify and
select Lessees and Managers whose management has experience in hotel operations.
Over time, the Company intends to select Hotel Properties which will enhance the
diversity of its portfolio in respect to location, brand name, Lessees and
Managers. However, the Company has no policies which would limit the purchase
price or the percentage of its assets which may be invested in any individual
Hotel Property or invested in Hotel Properties leased to a single Lessee or
managed by a single Manager or operated with a single franchise affiliation.

OTHER INVESTMENTS IN REAL ESTATE

Although the Company will emphasize direct wholly owned investments in its
Hotel Properties, it may, in its discretion, invest in joint ventures, mortgages
and other real estate interests, consistent with its qualification as a REIT.
The Company may invest in real estate joint ventures if it concludes that by
doing so it may benefit from the participation of coventurers or that the
opportunity of the Company to participate in the investment is contingent on the
use of a joint venture structure. The Company may invest in participating,
convertible or other types of mortgages if it concludes that by doing so it may
benefit from the cash flow or any appreciation in the value of the subject
property. Convertible mortgages are similar to equity participations because
they permit the lender to either participate in increasing revenues from the
property or convert some or all of that mortgage into equity ownership
interests. At all times, the Company intends to make its investments in such a
manner as to be consistent with the requirements of the Code to qualify as a
REIT.

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DISPOSITION POLICIES

The Company has no current intention to dispose of any of the Initial
Hotels or other Hotel Properties which it may acquire, although it reserves the
right to do so. The Company currently anticipates that disposition decisions, if
any, will be made by the Company based on (but not limited to) factors such as
the following: (i) potential opportunities to increase revenues and property
values by reinvesting sale proceeds; (ii) the proposed sale price; (iii) the
strategic fit of the Hotel Property with the rest of the Company's portfolio;
(iv) the potential for, or the existence of, any environmental or regulatory
problems; (v) the existence of alternative uses or needs for capital; and (vi)
the maintenance of the Company's qualification as a REIT. For a description of
certain tax consequences arising from disposition of Hotel Properties, see
"Federal Income Tax Considerations -- Taxation of the Company."

FINANCING POLICIES

The Company has entered into the Acquisition Line, which will be available
for drawing upon completion of this Offering. Upon completion of this Offering,
the Company expects to have $23.4 million in indebtedness for borrowed money and
will have $176.6 million available under the Acquisition Line to fund future
acquisitions of Hotel Properties. There will be no indebtedness outstanding and
$200.0 million available under the Acquisition Line if the Underwriters'
overallotment option is exercised in full. The Company currently intends to
employ conservative financial policies in pursuit of its growth strategies.
Although there are no limitations in the Company's organizational documents on
the amount of indebtedness it may incur, the Company currently intends to pursue
its growth strategies while maintaining a capital structure whereby its debt
will not exceed 50% of its total market capitalization. The Company may from
time to time re-evaluate and modify its current borrowing policies in light of
then current economic conditions, relative costs of debt and equity capital,
market values of properties, growth and acquisition opportunities and other
factors and may increase or decrease its ratio of debt to total market
capitalization accordingly. See "Risk Factors -- Share Ownership Risks and
Effects of Various Factors on Share Price -- Risks of Leverage."

To the extent that the Board of Trustees of the Company determines to
obtain a replacement for the Acquisition Line or additional capital, the Company
may raise such capital through additional equity offerings, debt financings,
retention of cash flow (subject to satisfying the Company's distribution
requirements under the REIT rules) or a combination of these methods. To the
extent that the Board of Trustees decides to obtain additional debt financings,
the Company may do so through mortgages on its properties. These mortgages may
be recourse, non-recourse or cross collateralized and may contain cross default
provisions. The Company has not established any limit on the number or amount of
mortgages that may be placed on any single property or on its portfolio as a
whole. The Company may also seek to obtain other lines of credit (both secured
or unsecured) or to issue securities senior to the Shares, including preferred
shares of beneficial interest and debt securities (either of which may be
convertible into Shares or be accompanied by warrants to purchase Shares). The
Company may also finance acquisitions through an exchange of properties or
through the issuance of additional Shares or other securities. The proceeds from
any financings by the Company may be used to pay distributions, to provide
working capital, to refinance existing indebtedness or to finance acquisitions
and expansions of existing or new properties.

CONFLICT OF INTEREST POLICIES

The Declaration provides that a majority of the Company's Trustees shall be
comprised of Independent Trustees. In addition, the Company has adopted certain
policies designed to eliminate or minimize potential conflicts of interest, as
described below. However, there can be no assurance that these policies always
will be successful in eliminating the influences of such conflicts, and if they
are not successful, decisions could be made that might not fully serve the
interests of all shareholders.

Advisors acts as the investment advisor to the Company and HRP and also has
other business interests. Advisors will not be able to devote all of its
business time and resources to the Company and conflicts could arise with
respect to the allocation of its business time and resources. Although HRP has
stated that it has no current intention to purchase or finance any additional
hotel properties, a conflict could develop should HRP change its investment
policies and determine to increase its investments in hotel properties. Messrs.
Portnoy

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and Martin are Managing Trustees of HRP, Managing Trustees of the Company and
each is a Director and 50% shareholder of Advisors. Mr. Portnoy is a partner in
the firm of Sullivan & Worcester, which acts as counsel to the Company, HRP,
Advisors and affiliates of each of the foregoing.

The Company has taken certain measures to address the foregoing potential
conflicts of interest and competing time demands. The Declaration provides that
a majority of its Trustees will be Independent Trustees. In addition, certain
employees of Advisors, including Mr. Murray, will devote substantially all of
their business time to the Company. Pursuant to the Advisory Agreement, Advisors
and Messrs. Portnoy and Martin have agreed not to provide advisory services to,
or serve as directors or officers of, any other REIT which is principally
engaged in the business of ownership of hotel properties or to make competitive
direct investments in hotel facilities, in each case, without the consent of the
Independent Trustees. Finally, Advisors and Messrs. Portnoy and Martin will be
required by applicable law to act in accordance with their fiduciary
responsibilities to the Company.

POLICIES WITH RESPECT TO OTHER ACTIVITIES

The Company intends to operate in a manner that will not subject it to
regulation under the Investment Company Act of 1940. The Company does not
currently intend: (i) to invest in the securities of other issuers for the
purpose of exercising control over such issuer; (ii) to underwrite securities of
other issuers; or (iii) to trade actively in loans or other investments.

The Company may make investments other than as previously described,
although it does not currently intend to do so. The Company has authority to
repurchase or otherwise reacquire Shares or any other securities it may issue
and may engage in such activities in the future. The Board of Trustees has no
current intention of causing the Company to repurchase any of the Shares and any
such action would be taken only in conformity with applicable federal and state
laws and the requirements for qualifying as a REIT under the Code and the
Treasury Regulations. Although it may do so in the future, (other than in
respect of the repayment of a portion of the HRP Loan), the Company has not
issued Shares or any other securities in exchange for property, nor has it
reacquired any of its Shares or any other securities. Also, although it has no
current intention to do so, the Company may make loans to third parties,
including to its officers and joint ventures in which it decides to participate.

DESCRIPTION OF THE SHARES

GENERAL

The authorized capital stock of the Company consists of 100,000,000 Shares,
$0.01 par value per share, and 100,000,000 preferred shares of beneficial
interest (the "Preferred Shares"). Upon the completion of this Offering,
11,750,000 Shares will be issued and outstanding and there will be no Preferred
Shares outstanding. Except as otherwise may be determined by the Trustees with
respect to any class or series of Preferred Shares, no shares will have
preference, conversion, exchange, sinking fund, redemption or preemptive rights.

COMMON SHARES

Subject to the provisions described in "Summary of the Declaration of
Trust -- Restrictions on Transfer," each outstanding Share will entitle the
holder thereof to one vote on all matters voted on by shareholders, including
the election of Trustees, and there will be no cumulative voting rights. All
Shares issued will be duly authorized and nonassessable. Distributions will be
made to the holders of Shares if and when declared by the Trustees out of funds
legally available therefor and all Shares will participate equally in
distributions declared with respect to the Shares. The Company intends to make
quarterly distributions, beginning with a distribution for the period from the
completion of this Offering through September 30, 1995. See "Distribution
Policy." If the Company is liquidated, each outstanding Share will be entitled
to participate pro rata in the assets remaining after payment of, or adequate
provision for, all known debts and liabilities of the Company and the rights of
holders of any Preferred Shares.

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PREFERRED SHARES

Preferred Shares, if and when issued, will entitle holders to such rights
and be subject to such restrictions as may be established by the Trustees at the
time of issuance.

TRANSFER AGENT

State Street Bank and Trust Company has been appointed as transfer agent
and registrar for the Shares.

SUMMARY OF THE DECLARATION OF TRUST

The following summary of the material provisions of the Declaration does
not purport to be complete, and is qualified in its entirety by reference to the
Declaration and Bylaws, copies of which have been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

TRUSTEES

Under the Declaration, the number of Trustees may be fixed from time to
time by two thirds of the Trustees or by amendment of the Declaration duly
adopted by holders of two thirds of the outstanding Shares entitled to vote
thereon, with a minimum of three and a maximum of seven Trustees. The
Declaration provides that a majority of the Trustees must be Independent
Trustees. The terms of the Trustees are staggered. See "Management." As the
Trustees' terms expire, replacements are elected by a plurality of the votes
cast. The Declaration provides that only a majority of the Trustees then in
office shall have the authority to fill any vacancies on the Board, including
vacancies created by an increase in the number of Trustees. In addition, the
Declaration provides that a new Trustee elected to fill a vacancy will serve for
the remainder of the full term of his or her class and that no decrease in the
number of Trustees shall shorten the term of an incumbent. Moreover, the
Declaration provides that Trustees may be removed with or without cause only by
the affirmative vote of all the remaining Trustees or by holders of at least two
thirds of the voting power of the Shares entitled to vote at the election of
Trustees, voting as a single class.

The Company's Bylaws establish an advance notice procedure with regard to
the nomination, other than by the Board, of candidates for election as Trustees
(the "Nomination Procedure") which are not included in the Company's proxy
statement. The Nomination Procedure provides that only persons who are nominated
by or at the direction of the Board of Trustees, or by a shareholder of record
on the date of the giving of the notice who has given timely prior written
notice to the Secretary of the Company prior to the meeting at which Trustees
are to be elected, will be eligible for election as Trustees. To be timely,
notice of a shareholder proposal in the case of an annual meeting, other than a
proposal to be included in the Company's proxy, must be received by the Company
not less than 90 days nor more than 120 days prior to the anniversary date of
the immediately preceding annual meeting. Nothing in the Nomination Procedure
will preclude discussion by any shareholder of any nomination properly made or
brought before an annual or special meeting in accordance with the above
mentioned procedures.

LIABILITY OF TRUSTEES

The Declaration provides that, to the fullest extent permitted by Maryland
law, no Trustee, officer, employee or agent will be personally liable to the
Company or its shareholders for any act or omission. The Company has been
advised that under current Maryland law, such persons will remain liable for
their own willful misfeasance, bad faith, gross negligence or reckless disregard
of duty. The Trustees are fiduciaries of the Company and must at all times
exercise care and loyalty in handling Company affairs. The general legal
principle for evaluating Trustee conduct is the business judgment rule. This
rule is a mechanism developed by courts which presumes that Trustees are acting
properly if they act on an informed basis, in good faith, in a manner they
reasonably believe to be in the best interests of shareholders and without fraud
or self dealing. This is a rapidly developing and changing area of the law and
potential shareholders who have questions concerning the duties of the Trustees
should consult with their own counsel.

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The Declaration also limits the liability of Trustees and officers of the
Company to the Company or its shareholders for money damages to the fullest
extent permitted by Maryland law.

The Declaration obligates the Company to indemnify (i) its Trustees and
officers to the full extent permitted by Maryland law, including in respect of
the advancement of expenses and (ii) other employees and agents to such extent
as shall be authorized by the Trustees and permitted by Maryland law. Maryland
law permits a real estate investment trust to indemnify its present and former
trustees 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 (i) the act or omission
of the trustee or officer was material to the matter giving rise to the
proceeding and (x) was committed in bad faith or (y) was the result of active
and deliberate dishonesty, (ii) the trustee or officer actually received an
improper personal benefit in money, property or services or (iii) in the case of
any criminal proceeding, the trustee or officer had reasonable cause to believe
that the act or omission was unlawful. The Company shall have the right but
shall not be required to obtain insurance including general liability,
securities liability, Trustee and officer liability and other insurance in such
amounts and with such carriers as the Company reasonably deems appropriate in
order to support the indemnity set forth above.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Trustees, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.

LIMITATION OF LIABILITY; SHAREHOLDER LIABILITY

Maryland law permits a REIT to provide, and the Declaration provides, that
no Trustee, officer, shareholder, employee or agent of the Company shall be held
to any personal liability, jointly or severally, for any obligation of or claim
against the Company, and that, as far as practicable, each written agreement of
the Company is to contain a provision to that effect. Despite these facts,
counsel has advised the Company that in some jurisdictions the possibility
exists that shareholders of a non-corporate entity such as the Company may be
held liable for acts or obligations of the Company. Counsel has advised the
Company that the State of Texas may not give effect to the limitation of
shareholder liability afforded by Maryland law, but that Texas law would likely
recognize contractual limitations of liability such as those discussed above.
The Company intends to conduct its business in a manner designed to minimize
potential shareholder liability by, among other things, inserting appropriate
provisions in written agreements of the Company. No assurance can be given,
however, that shareholders can avoid liability in all instances in all
jurisdictions.

The Declaration provides that, upon payment by a shareholder of any such
liability, the shareholder will be entitled to indemnification by the Company.
There can be no assurance that, at the time any such liability arises, there
will be assets of the Company sufficient to satisfy the Company's
indemnification obligation. The Trustees intend to conduct the operations of the
Company, with the advice of counsel, in such a way as to minimize or avoid, to
the extent practicable, any liability of the shareholders of the Company for
actions of the Company. The Trustees do not intend to provide insurance covering
such risks to the shareholders.

DURATION AND TERMINATION

The Declaration provides that the duration of the Company shall be
perpetual. However, the Declaration also permits the holders of two thirds of
the then outstanding Shares entitled to vote thereon to terminate and dissolve
the Company at any time.

PROHIBITED INVESTMENTS AND ACTIVITIES

The Declaration prohibits the Company from undertaking any activity that
would disqualify the Company as a REIT under the provisions of the Code as long
as a REIT is accorded substantially the same treatment or benefits under the
United States tax laws from time to time in effect as under Sections 856-860 of
the Code as in effect at the date of adoption of the Declaration; or using or
applying land for farming,

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agriculture, horticulture or similar purposes in violation of Section 8-302(b)
of the Corporations and Associations Article of the Annotated Code of Maryland.

TRANSACTIONS WITH AFFILIATES, TRUSTEES, EMPLOYEES, OFFICERS OR AGENTS

Except as otherwise provided by the Declaration and in the absence of
fraud, any contract or other transaction between the Company and any other
Persons, as defined in the Declaration, in which the Company is interested,
shall be valid, and no Trustee or officer, employee or agent of the Company
shall have any liability as a result of entering into any such contract, act or
transaction, even though (a) one or more of the Trustees or officers, employees
or agents of the Company are directly or indirectly interested in or connected
with or are trustees, partners, directors, employees, officers or agents of such
other Person, or (b) one or more of the Trustees or officers, employees or
agents of the Company individually or jointly with others, is a party or are
parties to, or are directly or indirectly interested in or connected with, such
contract, act or transaction; provided that in each such case (i) such interest
or connection is disclosed or known to the Trustees and thereafter the Trustees
authorize or ratify such contract, act or other transaction by affirmative vote
of a majority of the Trustees who are not so interested or (ii) such interest or
connection is disclosed or known to the shareholders, and thereafter such
contract, act or transaction is approved by shareholders holding a majority of
the Shares then outstanding and entitled to vote thereon. The Trustees are not
restricted by the Declaration from forming a corporation, partnership, trust or
other business association owned by any Trustee, officer, employee or agent or
by their nominees for the purpose of holding title to property of the Company or
managing property of the Company, provided that the Trustees make a
determination that the creation of such entity for such purpose is in the best
interests of the Company.

RESTRICTIONS ON TRANSFER

The Declaration contains certain restrictions on the number of Shares that
individual shareholders may own. These restrictions are intended to assist the
Company in complying with REIT ownership restrictions of the Code and otherwise
to promote orderly corporate governance. For the Company to qualify as a REIT
under the Code, no more than 50% in value of its capital stock (after taking
into account options to acquire Shares) may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities
and constructive ownership among specified family members) during the last half
of a taxable year (other than the first taxable year) or during a proportionate
part of a shorter taxable year. The Shares must also be beneficially owned
(other than during the first taxable year) by 100 or more persons during at
least 335 days of a taxable year or during a proportionate part of a shorter
taxable year. Because the Company expects to qualify as a REIT, the Declaration
contains restrictions on the acquisition of Shares intended to ensure compliance
with these requirements. See "Federal Income Tax Considerations -- Taxation of
the Company -- Share Ownership Tests."

Subject to certain exceptions specified in the Declaration, no holder may
own, directly or indirectly, more than 9.8% of the number or value of the issued
and outstanding Shares of the Company other than HRP, Advisors and their
affiliates, including persons who are deemed to have beneficial ownership of the
Shares directly owned by HRP and Advisors pursuant to the attribution provisions
of the Code, and other shareholders exempted by majority vote of the Trustees
(the "Exempted Persons"). As a condition of the exemption of any person, such
person must give written notice to the Company no later than the 15th day prior
to any proposed transfer which, if consummated, would result in such person
owning Shares in excess of the Ownership Limitation, provided, however, that the
Trustees may waive the prior notice requirement upon determination that such
waiver is in the best interests of the Company. In deciding whether to grant an
exemption or waive the prior notice requirement, the Board of Trustees may
consider, among other factors, the general reputation and moral character of the
person requesting an exemption, whether ownership of Shares would be direct or
through ownership attributed to such person, whether such person's ownership of
Shares would adversely affect the Company's ability to acquire additional Hotel
Properties or engage in other transactions and whether granting an exemption for
the person requesting an exemption would adversely affect any existing
contractual arrangement of the Company. In addition, the Board of Trustees may
require such

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opinions of counsel, affidavits, undertakings or agreements as it may deem
necessary or advisable in order to determine or ensure the Company's status as a
REIT or otherwise.

The Declaration contains provisions designed to ensure that a transferee
attempting to acquire Shares in violation of the Ownership Limitation will not
acquire rights or economic interests in the Shares purportedly transferred. The
Declaration defines a transfer as any sale, transfer, gift, assignment, devise
or other disposition of Shares, whether voluntary or involuntary, whether of
record or beneficial ownership and whether constructively, by operation of law
or otherwise. Under the Declaration, any transfer of Shares that is in violation
of the Ownership Limitation, that causes the Company to be treated as "closely
held" under Section 856(h) of the Code or that causes the Shares to be held by
fewer than 100 persons, and that is not otherwise permitted under the
Declaration will result in the designation of excess shares ("Excess Shares")
which shares will be transferred by operation of law to a person that is
unaffiliated with the Company and unaffiliated with the intended transferee as
trustee of a trust for the exclusive benefit of one or more organizations
described in sections 170(b)(1)(a) and 170(c) of the Code ("Charitable
Beneficiary") designated by the Company. The trustee of the trust will be deemed
to own these Excess Shares for the benefit of the Charitable Beneficiary on the
day prior to the date of the violative transfer. Any dividends or distributions
paid prior to the Company discovering that such Excess Shares were held in trust
must be repaid by the intended transferee to the Company and any dividend
declared but unpaid will be rescinded as void ab initio with respect to the
intended transferee. Any dividends so disgorged or rescinded will then be paid
over to the trustee and held in trust for the Charitable Beneficiary. Any vote
taken by an intended transferee prior to the discovery by the Company that the
Shares were held in trust will be rescinded as void ab initio. The owner of the
Shares will be deemed to have given an irrevocable proxy to the trustee to vote
the Shares for the benefit of the Charitable Beneficiary. At the direction of
the Company, the trustee of the trust shall transfer the Shares held in the
trust to a person whose ownership of the Shares will not violate the Ownership
Limitation. If such a transfer is made, the interest of the Charitable
Beneficiary would terminate and proceeds of the sale would be payable to the
intended transferee and to the Charitable Beneficiary. The intended transferee
would receive the lesser of (i) the price paid by the intended transferee for
the Shares or, if the intended transferee did not give value for the Shares, the
market price of the Shares on the day of the event causing the Shares to be held
in trust and (ii) the price per Share received by the trustee from the sale or
other disposition of the Shares held in trust. Any proceeds in excess of the
amount payable to the intended transferee will be payable to the Charitable
Beneficiary. The Declaration also provides that all Shares held in trust for the
benefit of the Charitable Beneficiary will be offered for sale to the Company or
its designee for a 90 day period, at the lesser of the price paid for the Shares
by the intended transferee and the market price of the Shares on the date that
the Company accepts the offer. This period will commence on the date the Company
receives notice of the event causing the Shares to be held in trust. All
certificates representing Shares will bear a legend referring to the
restrictions described above. All persons who own, directly or by virtue of the
attribution provisions of the Code, 5% or more (or such other percentage between
1/2 of 1% and 5%, as provided in the rules and regulations promulgated under
the Code) of the number or value of the outstanding Shares must give written
notice thereof to the Company by January 31 of each year. In addition, each
shareholder shall upon demand be required to disclose to the Company in writing
such information with respect to the ownership of Shares as the Board of
Trustees deems reasonably necessary to comply with the provisions of the Code
applicable to a REIT, to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.

These restrictions will not preclude settlement of transactions through the
NYSE.

SHAREHOLDER PROPOSALS

The Company's Bylaws establish an advance notice procedure with regard to
shareholder proposals to be brought before an annual meeting of shareholders
(the "Business Procedure"). The Business Procedure provides that shareholder
proposals, other than proposals timely submitted for inclusion in the Company's
proxy statement, must be submitted in writing in a timely manner in order to be
considered at any annual meeting. To be timely, such notice must be received by
the Company not less than 90 days nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting. Nothing in the
Business

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Procedure will preclude discussion by any shareholder of any proposal properly
made or brought before an annual meeting in accordance with the above mentioned
procedure.

BUSINESS COMBINATIONS

Under the Maryland General Corporation Law (the "MGCL"), 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 real estate investment trust and any person who
beneficially owns 10% or more of the voting power of the Company's shares are
prohibited or restricted unless exempted. The Declaration provides that the
Company has elected not to be governed by the business combination provisions of
the MGCL.

CONTROL SHARE ACQUISITIONS

The MGCL imposes limitations on the voting rights of Shares above certain
percentage thresholds acquired in a "control share acquisition" relating to a
Maryland real estate investment trust. The Declaration provides that the Company
has elected not to be governed by the control share acquisition provisions of
the MGCL.

AMENDMENT; MEETINGS

The Declaration may be amended by the vote of the holders of a majority of
the outstanding Shares entitled to vote thereon, except that the holders of two
thirds of the outstanding Shares entitled to vote thereon must approve any
amendments to those provisions of the Declaration that set forth the procedures
for the Company's investment policies, policies with respect to certain
distributions to shareholders, the number, term and qualifications of the
Trustees, as well as certain provisions regarding the duration of the Trust, the
amendment process, restrictions on transfer of Shares and the ability of the
Trustees to designate and issue a series of Preferred Shares. The approval of
two thirds of the Trustees is also required for any such amendment. In addition,
two thirds of the Trustees, may, without the approval or consent of the
shareholders, adopt any amendment that they in good faith determine to be
necessary to permit the Company to qualify as a REIT under the Code.

The Declaration permits the Trustees, without the approval of the
shareholders, to alter the Company's investment policies if the Trustees
determine in the future that such a change is in the best interests of the
Company and its shareholders. The Company's investment policies and the methods
of implementing its investment policies may, therefore, vary as new investment
opportunities and financing techniques are developed.

Under the Declaration, annual meetings of shareholders are required to be
held within six months after the end of each fiscal year. Special meetings of
the shareholders may only be called by a majority of the Trustees and the
shareholders may not act by written consent.

ANTITAKEOVER PROVISIONS

The Company's Declaration and Bylaws contains several provisions that will
make it difficult to acquire control of the Company by means of a tender offer,
open market purchases, a proxy fight or otherwise, if the acquisition is not
approved by the Board of Trustees, or to change the composition of the Board of
Trustees in a relatively short period of time. The provisions are designed to
reduce the vulnerability of the Company to an unsolicited proposal for a
takeover or an unsolicited proposal for the restructuring or sale of the Company
and to encourage persons seeking to acquire control of the Company to consult
first with the Board of Trustees to negotiate the terms of any proposed business
combination or offer. These provisions may have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain control
of the Company, even though such an attempt might be beneficial to the Company
and its shareholders. These provisions are described above and include: the
Ownership Limitation; the classified Board of Trustees; the Nomination Procedure
and the Business Procedure; the ability of the Board of Trustees to designate
and issue series of Preferred Shares and designate the dividend, voting and
other rights of each series; provisions

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concerning special meetings and shareholder actions by written consent; and
provisions concerning amendment of the Declaration. The Company has, however,
elected not to be governed by the provisions of Maryland law concerning control
share acquisitions and business combinations.

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Shares (which constitutes the only class of voting shares of
the Company) by (i) each person known by the Company to own beneficially more
than 5% of the outstanding Shares, (ii) each of the Company's Trustees and (iii)
all Trustees and executive officers of the Company as a group. Unless otherwise
indicated, each person or entity named below has sole voting and investment
power with respect to all Shares shown to the beneficially owned by such person
or entity, subject to the matters set forth in the footnotes to the table below.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
--------------------- ------------------------
NUMBER NUMBER
NAME AND ADDRESS(1) OF SHARES PERCENT OF SHARES PERCENT(2)
<S> <C> <C> <C> <C>
Health and Retirement Properties Trust............ 40,000 100% 4,000,000 34.1%
HRPT Advisors, Inc................................ -- -- 4,250,000 36.2
Barry M. Portnoy(3)............................. -- -- 4,250,000 36.2
Gerard M. Martin(3)............................. -- -- 4,250,000 36.2
John L. Harrington.............................. -- -- (4) *
William J. Sheehan.............................. -- -- (4) *
Arthur G. Koumantzelis.......................... -- -- (4) *
All Trustees and executive officers as a group
(seven persons)(3)........................... -- -- 4,250,000 36.2%
<FN>

------------------------------
* Less than 1%.

(1) The address of HRP is 400 Centre Street, Newton, MA 02158. The address of
each other named person or entity is c/o Hospitality Properties Trust, 400
Centre Street, Newton, MA 02158.

(2) Assumes no exercise of the Underwriters' overallotment option.

(3) Neither Mr. Portnoy nor Mr. Martin owns Shares directly. HRP, of which
Messrs. Portnoy and Martin are Managing Trustees, will own 4,000,000 Shares
and Advisors, which is wholly owned by Messrs. Portnoy and Martin, will own
250,000 Shares. Messrs. Portnoy and Martin may be deemed to have beneficial
ownership of these Shares.

(4) Each of the Independent Trustees is expected to receive 300 Shares per annum
as part of their annual compensation. See "Management -- Incentive Share
Award Plan."

</TABLE>

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SHARES ELIGIBLE FOR FUTURE SALE

Upon the completion of this Offering, the Company will have 11,750,000
Shares issued and outstanding (12,875,000 Shares if the Underwriters'
overallotment option is exercised in full). The Shares issued or sold by the
Company in this Offering will be freely tradeable except with respect to the
Ownership Limitation set forth in the Company's Declaration. The 4,210,000
Shares to be issued and sold by the Company in the concurrent placement to HRP
and Advisors will be, and the 40,000 Shares previously acquired by HRP were,
acquired in a transaction exempt from the registration requirements of the
Securities Act and may not be resold without registration or exemption
therefrom. These Shares also will not be freely tradeable as a result of
restrictions on sales of Shares by affiliates of the Company arising under the
Securities Act "lock-up" agreements described below. HRP and Advisors do not
have registration rights with respect to these Shares.

HRP and Advisors may, in limited circumstances, be able to sell their
Shares without registration in accordance with the exemptions provided by Rule
144. In general, under Rule 144 as currently in effect, a person (or persons
whose Shares are aggregated in accordance with Rule 144) who has beneficially
owned his or her Shares for at least two years, including any such persons who
may be deemed an "affiliate" of the Company (as defined below), would be
entitled to sell within any three month period a number of Shares that does not
exceed the greater of 1% of the then outstanding number of Shares or the average
weekly trading volume of the Shares during the four calendar weeks preceding
each such sale. After Shares have been held for three years, a person who is not
deemed an affiliate of the Company will generally be entitled to sell such
Shares under Rule 144 without regard to the volume limitations described above,
although sales of such Shares by affiliates will continue to be subject to the
volume limitations. As defined in Rule 144, an "affiliate" of an issuer is
generally a person that directly, or indirectly, through the use of one or more
intermediaries, controls, or is controlled by, or is under common control with,
such issuer. Upon completion of this Offering, HRP and Advisors will be
affiliates of the Company for purposes of Rule 144.

Each of HRP and Advisors has agreed not to, and has agreed to cause its
officers, Trustees and Directors, as applicable, not to, directly or indirectly,
offer, sell, contract to sell, grant any option to purchase or otherwise dispose
of any Shares or any securities convertible into or exercisable or exchangeable
for such Shares or, in any manner, transfer all or a portion of the economic
consequences associated with the ownership of Shares, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), for a
period of two years from the date of this Prospectus. The Company has not agreed
to restrictions on the issuance or disposition of Shares.

Prior to the date of this Prospectus, there has been no public market for
the Shares. Trading of Shares is expected to commence, following the completion
of this Offering, on the NYSE. No prediction can be made as to the effect, if
any, that future sales of Shares or the availability of Shares for future sale,
will have on the market price prevailing from time to time. Sales of substantial
amounts of Shares, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Shares.

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<PAGE> 81

FEDERAL INCOME TAX CONSIDERATIONS

EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP AND SALE OF SHARES IN AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE
INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.

The Company intends to operate in a manner that permits it to satisfy the
requirements for taxation as a REIT under the applicable provisions of the Code.
No assurance can be given, however, that such requirements will be met. The
following is a summary of the federal income tax considerations for the Company
and its shareholders with respect to the treatment of the Company as a REIT.
Since these provisions are highly technical and complex, each prospective
purchaser of the Company's Shares is urged to consult his own tax advisor with
respect to the federal, state, local, foreign and other tax consequences of the
purchase, ownership and disposition of the Shares.

Based upon certain representations described below, in the opinion of
Sullivan & Worcester, counsel to the Company ("Company Counsel"), the Company
has been organized in conformity with the requirements for qualification as a
REIT beginning with its taxable year ending December 31, 1995, and its proposed
method of operation described in this Prospectus and as represented by the
Company will enable it to satisfy the requirements for such qualification. This
opinion is conditioned upon the assumption that the Initial Leases, the
Company's Declaration and Bylaws and all other legal documents to which the
Company is a party will be complied with by all parties thereto and upon certain
representations made by the Company as to certain factual matters relating to
the Company's organization and intended or expected manner of operation. In
addition, this opinion is based on the law existing and in effect on the date
hereof. The Company's qualification and taxation as a REIT will depend upon the
Company's ability to meet on a continuing basis, through actual operating
results, asset composition, distribution levels and diversity of stock
ownership, the various qualification tests imposed under the Code discussed
below. While the Company has represented that it will operate in a manner so as
to satisfy on a continuing basis the various REIT qualification tests, Company
Counsel will not review compliance with these tests on a continuing basis and no
assurance can be given that the Company will satisfy such tests on a continuing
basis.

In brief, if certain detailed conditions imposed by the REIT provisions of
the Code are met, entities, such as the Company, that invest primarily in real
estate and that otherwise would be treated for federal income tax purposes as
corporations, are generally not taxed at the corporate level on their "REIT
taxable income" that is currently distributed to shareholders. This treatment
substantially eliminates the "double taxation" that generally results from the
use of corporations.

If the Company fails to qualify as a REIT in any year, however, it will be
subject to federal income taxation as if it were a domestic corporation, and its
shareholders will be taxed in the same manner as shareholders of ordinary
corporations. In such an event, the Company could be subject to potentially
significant tax liabilities, and therefore the amount of cash available for
distribution to its shareholders would be reduced or eliminated.

The Board of Trustees of the Company currently expects that the Company
will operate in a manner that permits it to elect, and that it will elect, REIT
status for the taxable year ending December 31, 1995, and in each taxable year
thereafter. There can be no assurance, however, that this expectation will be
fulfilled, since qualification as a REIT depends on the Company continuing to
satisfy numerous asset, income and distribution tests described below, which in
turn will be dependent in part on the Company's operating results.

The following summary is based on existing law, is not exhaustive of all
possible tax considerations and does not give a detailed discussion of any
state, local, or foreign tax considerations, nor does it discuss all of the
aspects of federal income taxation that may be relevant to a prospective
shareholder in light of his or her particular circumstances or to certain types
of shareholders (including insurance companies, tax-exempt

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entities, financial institutions, broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) subject to
special treatment under the federal income tax laws.

TAXATION OF THE COMPANY

GENERAL

In any year in which the Company qualifies as a REIT, in general it will
not be subject to federal income tax on that portion of its REIT taxable income
or capital gain which is distributed to shareholders. The Company may, however,
be subject to tax at normal corporate rates upon any taxable income or capital
gain not distributed.

Notwithstanding its qualification as a REIT, the Company may also be
subject to taxation in certain other circumstances. If the Company should fail
to satisfy either the 75% or the 95% gross income test (as discussed below), and
nonetheless maintains its qualification as a REIT because certain other
requirements are met, it will be subject to a 100% tax on the greater of the
amount by which the Company fails either the 75% or the 95% gross income test,
multiplied by a fraction intended to reflect the Company's profitability. The
Company will also be subject to a tax of 100% on net income from any "prohibited
transaction" as described below, and if the Company has (i) net income from the
sale or other disposition of "foreclosure property" which is held for sale to
customers in the ordinary course of business or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax on such income from
foreclosure property at the highest corporate rate. In addition, if the Company
should fail to distribute during each calendar year at least the sum of (i) 85%
of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net
income for such year, and (iii) any undistributed taxable income from prior
years, the Company would be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. The Company may
also be subject to tax in certain circumstances if it disposes within ten years
of their acquisition of assets acquired in a tax-free reorganization (although
no such transaction is currently contemplated). The Company may also be subject
to the corporate alternative minimum tax. The Company will use the calendar year
both for federal income tax purposes, as is required of a newly organized REIT,
and for financial reporting purposes.

In order to qualify as a REIT, the Company must meet, among others, the
following requirements:

SHARE OWNERSHIP TESTS

The Company's Shares must be held by a minimum of 100 persons for at least
335 days in each taxable year (or a proportional number of days in any short
taxable year). In addition, at all times during the second half of each taxable
year, no more than 50% in value of the outstanding Shares of the Company may be
owned, directly or indirectly and by applying certain constructive ownership
rules, by five or fewer individuals, which for this purpose includes certain
tax-exempt entities. However, for purposes of this test, any Shares held by a
qualified domestic pension or other retirement trust will be treated as held
directly by its beneficiaries in proportion to their actuarial interest in such
trust rather than by such trust. These share ownership requirements need not be
met until the second taxable year of the Company for which a REIT election is
made.

In order to ensure compliance with the foregoing share ownership tests, the
Company has placed certain restrictions on the transfer of its Shares to prevent
additional concentration of Share ownership. Moreover, to evidence compliance
with these requirements, under Treasury regulations the Company must maintain
records which disclose the actual ownership of its outstanding Shares. In
fulfilling its obligations to maintain records, the Company must and will demand
written statements each year from the record holders of designated percentages
of its capital stock disclosing the actual owners of such Shares (as prescribed
by the Treasury Regulations). A list of those persons failing or refusing to
comply with such demand must be maintained as a part of the Company's records. A
shareholder failing or refusing to comply with the Company's written demand must
submit with his tax return a similar statement disclosing the actual ownership
of Shares of the Company and certain other information. In addition, the
Company's Declaration provides restrictions regarding the transfer of its Shares
that are intended to assist the Company in continuing

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to satisfy the share ownership requirements. See "Summary of the Declaration of
Trust -- Restrictions on Transfer."

ASSET TESTS

At the close of each quarter of the Company's taxable year, the Company
must satisfy two tests relating to the nature of its assets (determined in
accordance with generally accepted accounting principles). First, at least 75%
of the value of the Company's total assets must be represented by interests in
real property, interests in mortgages on real property, shares in other REITs,
cash, cash items, government securities and qualified temporary investments.
Second, although the remaining 25% of the Company's assets generally may be
invested without restriction, securities in this class may not exceed (i) in the
case of securities of any one non-government issuer, 5% of the value of the
Company's total assets or (ii) 10% of the outstanding voting securities of any
one such issuer.

Where a failure to satisfy the 25% asset test results from an acquisition
of securities or other property during a quarter, the failure can be cured by
disposition of sufficient non-qualifying assets within 30 days after the close
of such quarter. The Company intends to maintain adequate records of the value
of its assets to maintain compliance with the 25% asset test, and to take such
action as may be required to cure any failure to satisfy the test within 30 days
after the close of any quarter.

GROSS INCOME TESTS

The Company must satisfy three source of income tests in each taxable year.
The three tests are as follows:

The 75% Test. At least 75% of the Company's gross income for the taxable
year must be "qualifying income." Qualifying income generally includes (i) rents
from real property (as defined below); (ii) interest on obligations secured by
mortgages on, or interests in, real property; (iii) gains from the sale or other
disposition of interests in real property and real estate mortgages, other than
gain from property held primarily for sale to customers in the ordinary course
of the Company's trade or business ("dealer property"); (iv) dividends or other
distributions on shares in other REITs, as well as gain from the sale of such
shares; (v) abatements and refunds of real property taxes; (vi) income from the
operation, and gain from the sale, of property acquired at or in lieu of a
foreclosure of the mortgage secured by such property ("foreclosure property");
(vii) commitment fees received for agreeing to make loans secured by mortgages
on real property or to purchase or lease real property; and (viii) qualified
temporary investment income. When the Company receives new capital in exchange
for its Shares (other than dividend reinvestment amounts) or in a public
offering of five-year or longer debt instruments, income attributable to the
temporary investment of such new capital in Shares or a debt instrument, if
received or accrued within one year of the Company's receipt of the new capital,
is qualifying temporary investment income.

Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements only if several conditions are met.
Rents received from a tenant will not qualify as rents from real property if the
Company, or an owner of 10% or more of the Company, directly or constructively
owns 10% or more of such tenant. Thus, in order for gross income from an Initial
Hotel to qualify as rents from real property, the Company must not own, directly
or constructively (applying constructive ownership rules under the Code), 10% or
more of Host (the "10% ownership test"). Such constructive ownership rules
generally provide that, if 10% or more in value of the Shares of the Company is
owned, directly or indirectly, by or for any person, the Company is considered
as owning the Shares owned, directly or indirectly, by or for such Person. With
respect to the 10% ownership test, the Company initially will not own and does
not intend to acquire, directly or constructively, stock of Host. There can be
no assurance, however, that the Company will be able to monitor and enforce such
restrictions, nor will shareholders necessarily be aware of shareholdings
attributed to them under the attribution rules. The Company has represented
(which representation Company Counsel has relied upon in rendering its opinion
herein on REIT qualification) that it will satisfy the 10% ownership test.

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If rent attributable to personal property leased in connection with a lease
of real property is greater than 15% of the total rent for the taxable year
under or in connection with the lease, then the portion of rent attributable to
such personal property will not qualify as rents from real property.
Accordingly, the rents attributable to the Company's personal property leased
under or in connection with a lease of the real property comprising an Initial
Hotel must not be greater than 15% of the rents received under the applicable
Initial Lease. The rent attributable to the Company's personal property for an
Initial Hotel is the amount that bears the same ratio to total rent for the
taxable year as (i) the average of the adjusted bases of the Company's personal
property of the Initial Hotel at the beginning and at the end of the taxable
year bears to (ii) the average of the aggregate adjusted bases of both the
Company's real and personal property of the Initial Hotel at the beginning and
at the end of such taxable year (the "Adjusted Basis Ratio"). The Company has
represented (which representation Company Counsel has relied upon in rendering
its opinion herein on REIT qualification) that the allocation of purchase price
with respect to each Initial Hotel is accurate and that not more than 15% of the
rent for each taxable year with respect to each of the Initial Hotels or any
other Hotel Property will be attributable to the Company's personal property
under the foregoing rules. In addition, the Company intends not to acquire
additional personal property for the Initial Hotels if such acquisition would
cause the Adjusted Basis Ratio for such Initial Hotels to exceed 15%. While the
Company believes that the allocation for tax purposes of the purchase price for
the Initial Hotels to the personal property is accurate, there can be no
assurance that the Service will not assert that a different allocation is
appropriate and that more than 15% of the rents received under an Initial Lease
is attributable to personal property under the foregoing rules, or that a court
would not uphold such assertion. If such a challenge were successfully asserted,
the Company could fail the 15% Adjusted Basis Ratio as to one or more of its
leases, which in turn could cause it to fail to satisfy the 75% or 95% gross
income test and to fail to qualify as a REIT.

An amount received or accrued, directly or indirectly with respect to any
real or personal property, will not qualify as "rents from real property" for
purposes of the 75% or the 95% gross income test if the determination of such
amount depends in whole or in part on the income or profits derived by any
person from such property (except that an amount so derived or accrued generally
will not be excluded from "rents from real property" solely by reason of being
based on a fixed percentage or percentages of receipts or sales).

In addition, the Company must not manage the property or furnish or render
services to the tenants of such property, except through an independent
contractor from whom the company derives no income. There is an exception to
this rule permitting a REIT to perform certain customary tenant services of the
sort which a tax-exempt organization could perform without being considered in
receipt of "unrelated business taxable income."

The 95% Test. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of the Company's gross income for the taxable
year must be derived from the above described qualifying income, dividends,
interest, or gains from the sale or other disposition of stock, securities and
real property that is not dealer property. Dividends and interest on any
obligations not collateralized by an interest in real property are included for
purposes of the 95% gross income test, but not for purposes of the 75% gross
income test.

For purposes of determining whether the Company complies with the 75% and
the 95% gross income tests, gross income does not include income from prohibited
transactions. A "prohibited transaction" is a sale of dealer property (excluding
foreclosure property); however, it does not include a sale of property if such
property is held by the Company for at least four years and certain other
requirements (relating to the number of properties sold in a year, their tax
bases, and the cost of improvements made thereto) are satisfied. See
"-- Taxation of the Company -- General" above. Gain realized by the Company on
the sale of any dealer property generally will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. Under existing
law, whether property is dealer property is a question of fact that depends on
all the facts and circumstances with respect to the particular transaction. The
Company intends to hold the Initial Hotels for investment with a view to
long-term appreciation, to engage in the business of acquiring, owning and
developing the Initial Hotels and other Hotel Properties, and to make such
occasional sales of Hotel Properties as are consistent with the Company's
investment objectives. Based upon the Company's investment

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objectives, the Company believes that overall, the Initial Hotels should not be
considered dealer property and that the amount of income from prohibited
transactions, if any, will not be material.

The Company believes that, for purposes of both the 75% and the 95% gross
income tests, its investment in the Initial Hotels will generally give rise to
qualifying income in the form of rents, and that gains on sales of the Initial
Hotels generally will also constitute qualifying income. The Company also
believes that, for purposes of the 95% gross income test, if the portion of rent
attributable in any case to furniture, furnishings, equipment and operating
equipment were to be recharacterized as payments from a deemed financing of such
items, any gross income attributable to such payments would be qualifying gross
income in the form of interest and such interest income would not cause the
Company to be unable to satisfy the 75% gross income test.

Even if the Company fails to satisfy one or both of the 75% or the 95%
gross income tests for any taxable year, it may still qualify as a REIT for such
year if it is entitled to relief under certain provisions of the Code. These
relief provisions will generally be available if: (i) the Company's failure to
comply was due to reasonable cause and not to willful neglect; (ii) the Company
reports the nature and amount of each item of its income included in the tests
on a schedule attached to its tax return; and (iii) any incorrect information on
such schedule is not due to fraud with intent to evade tax. If these relief
provisions apply, however, the Company will nonetheless be subject to a 100% tax
on the greater of the amount by which it fails either the 75% or the 95% gross
income test, multiplied by a fraction intended to reflect the Company's
profitability.

The 30% Test. The Company must derive less than 30% of its gross income
for each taxable year from the sale or other disposition of (i) real property
held for less than four years (other than foreclosure property and involuntary
conversions); (ii) Shares or securities (including certain interest rate swap or
cap agreements) held for less than one year; and (iii) property in a prohibited
transaction. The Company does not anticipate that it will have difficulty in
complying with this test. However, if extraordinary circumstances were to occur
that gave rise to dispositions of Initial Hotels within four years after the
completion of this Offering, the Company may be unable to satisfy the 30% test.

The Company temporarily invests working capital in short term investments,
including shares in other REITs. Although the Company will use its best efforts
to ensure that its income generated by these investments will be of a type which
satisfies the 75% and 95% gross income tests, there can be no assurance in this
regard (see discussion above of the "new capital" rule under the 75% test).
Moreover, the Company may realize short-term capital gain upon sale or exchange
of such investments, and such short-term capital gain would be subject to the
limitations imposed by the 30% gross income test.

FORECLOSURE PROPERTY

The Company will be subject to tax at the maximum corporate rate (currently
35%) on income from any "foreclosure property," other than income that would be
qualified income under the 75% gross income test, less expenses directly
connected with the production of such income. However, gross income from any
such foreclosure property will qualify under the 75% and the 95% gross income
tests.

Foreclosure property is defined as any real property (including interests
in real property) and any personal property incident to such real property,
acquired by a REIT as the result of a REIT having bid in such property at
foreclosure, or having otherwise reduced such property to ownership or
possession by agreement or process of law, after there was a default (or default
was imminent) on a lease of such property or on an indebtedness which such
property secured and for which the REIT makes a proper election to treat such
property as foreclosure property. However, a REIT will not be considered to have
foreclosed on a property where it takes control of the property as a mortgagee
in possession and cannot receive any profit or sustain any loss except as a
creditor of the mortgagor. Under the Code, property generally ceases to be
foreclosure property with respect to a REIT on the date which is two years after
the date such REIT acquired such property (or longer if an extension is granted
by the Secretary of the Treasury). However, the foregoing grace period is
terminated and foreclosure property ceases to be foreclosure property on the
first day (i) on which a lease is entered into with respect to such property
which, by its terms, will give rise to income which does not qualify under the
75% gross income test or any amount is received or accrued, directly or
indirectly, pursuant to a lease entered into on or after such day which will
give rise to income which does not qualify under the 75%

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gross income test, (ii) on which any construction takes place on such property
(other than completion of a building, or completion of any other improvement,
where more than 10% of the construction of such building or other improvement
was completed before default became imminent), or (iii) which is more than 90
days after the day on which such property was acquired by the REIT and the
property is used in a trade or business which is conducted by the REIT (other
than through an independent contractor from whom the REIT itself does not derive
or receive any income).

As a result of the rules with respect to foreclosure property, if Host
defaults on its obligations under an Initial Lease for an Initial Hotel and
Marriott is not available to manage the Initial Hotel after the Company
terminates Host's leasehold interest therein, and the Company is unable to find
a replacement Lessee for such Initial Hotel within 90 days of such foreclosure
and unable to find an independent contractor to manage it, gross income from
hotel operations conducted by the Company from such property would cease to
qualify for the 75% and the 95% gross income tests. (Advisors should qualify as
an independent contractor which could operate foreclosure property for up to two
years.) In such event, the Company might be unable to satisfy the 75% or the 95%
gross income test, resulting in its failure to qualify as a REIT.

ANNUAL DISTRIBUTION REQUIREMENTS

In order to qualify as a REIT the Company is required to distribute
dividends (other than capital gain dividends) to its shareholders with respect
to each year in an amount at least equal to (A) the sum of (i) 95% of the
Company's REIT taxable income (computed without regard to the dividends paid
deduction and the Company's net capital gain) and (ii) 95% of the net income
(after tax), if any, from foreclosure property, minus (B) the sum of certain
items of noncash income (from certain imputed rental income and income from
transactions inadvertently failing to qualify as like-kind exchanges). Such
distributions must be paid in the taxable year to which they relate, or in the
following taxable year if declared before the Company timely files its tax
return for such year and if paid on or before the first regular dividend payment
after such declaration. To the extent that the Company does not distribute all
of its net capital gain or distributes at least 95%, but less than 100%, of its
REIT taxable income, as adjusted, it will be subject to tax on the undistributed
amount at regular capital gains or ordinary corporate tax rates, as the case may
be. The Company will also be required to distribute currently as a dividend an
amount equal to the earnings and profits of any corporation it may acquire in a
tax-free reorganization (although no such transaction is currently
contemplated).

The Company intends to make timely distributions sufficient to satisfy the
annual distribution requirements described in the first and last sentences of
the preceding paragraph. It is possible that the Company may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement, due to
timing differences between the actual receipt of income and actual payment of
expenses on the one hand, and the inclusion of such income and deduction of such
expenses in computing the Company's REIT taxable income on the other hand. To
avoid any problem with the 95% distribution requirement, the Company will
closely monitor the relationship between its REIT taxable income and cash flow
and intends, if necessary, to borrow funds in order to satisfy the distribution
requirement. However, there can be no assurance that such borrowing would be
available at such time.

If the Company fails to meet the 95% distribution requirement as a result
of an adjustment to the Company's tax return by the Service, the Company may
retroactively cure the failure by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.

FAILURE TO QUALIFY

If the Company fails to qualify for taxation as a REIT in any taxable year
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which the
Company fails to qualify as a REIT will not be deductible by the Company, nor
generally will they be required to be made under the Code. In such event, to the
extent of current and accumulated earnings and profits, all distributions to
shareholders will be taxable as ordinary income, and, subject to certain
limitations in the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific

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statutory provisions, the Company also will be disqualified from reelecting
taxation as a REIT for the four taxable years following the year during which
qualification was lost.

OTHER ISSUES

In the case of certain sale leaseback arrangements, the Service could
assert that the Company realized prepaid rental income in the year of purchase
to the extent that the value of a leased property exceeds the purchase price
paid by the Company for that property. In litigated cases involving sale
leasebacks which have considered this issue, courts have concluded that buyers
have realized prepaid rent where both parties acknowledged that the purported
purchase price for the property was substantially less than fair market value
and the purported rents were substantially less than the fair market rentals.
Because of the lack of clear precedent, complete assurance cannot be given that
the Service could not successfully assert the existence of prepaid rental
income.

DEPRECIATION OF PROPERTIES

For tax purposes, the Company's real property generally is depreciated on a
straight line basis over 40 years and personal property owned by the Company
generally is depreciated over nine years.

TAXATION OF SHAREHOLDERS

TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS

As long as the Company qualifies as a REIT, distributions made to the
Company's taxable domestic shareholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income and will not be eligible for the dividends
received deduction for corporations. Distributions that are designated as
capital gain dividends will be taxed as long-term capital gains (to the extent
they do not exceed the Company's actual net capital gain for the taxable year)
without regard to the period for which the shareholder has held its Shares.
However, corporate shareholders may be required to treat up to 20% of certain
capital gain dividends as ordinary income. To the extent that the Company makes
distributions in excess of current and accumulated earnings and profits, these
distributions are treated first as a tax-free return of capital to the
shareholder, reducing the tax basis of a shareholder's Shares by the amount of
such excess distribution (but not below zero), with distributions in excess of
the shareholder's tax basis being taxed as capital gains (if the Shares are held
as a capital asset). In addition, any dividend declared by the Company in
October, November or December of any year and payable to a shareholder of record
on a specific date in any such month shall be treated as both paid by the
Company and received by the shareholder on December 31 of such year, provided
that the dividend is actually paid by the Company during January of the
following calendar year. Shareholders may not include in their individual income
tax returns any net operating losses or capital losses of the Company. Federal
income tax rules may also require that certain minimum tax adjustments and
preferences be apportioned to Company shareholders.

In general, any loss upon a sale or exchange of Shares by a shareholder who
has held such Shares for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss, to the extent of
distributions from the Company required to be treated by such shareholder as
long-term capital gains.

Investors (other than certain corporations) who borrow funds to finance
their acquisition of Shares in the Company could be limited in the amount of
deductions allowed for the interest paid on the indebtedness incurred in such an
arrangement. Under Section 163(d) of the Code, interest paid or accrued on
indebtedness incurred or continued to purchase or carry property held for
investment is generally deductible only to the extent of the taxpayer's net
investment income. An investor's net investment income will include the dividend
and capital gain dividend distributions he receives from the Company; however,
distributions treated as a nontaxable return of the shareholder's basis will not
enter into the computation of net investment income.

Under Section 469 of the Code, taxpayers (other than certain corporations)
generally will not be entitled to deduct losses from so-called passive
activities except to the extent of their income from passive activities.

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For purposes of these rules, distributions received by a shareholder from the
Company will not be treated as income from a passive activity and thus will not
be available to offset a shareholder's passive activity losses.

TAXATION OF TAX-EXEMPT SHAREHOLDERS

The Service has ruled that amounts distributed by a REIT to a tax-exempt
employees' pension trust do not constitute unrelated business taxable income
("UBTI"). Subject to the discussion below regarding a "pension-held REIT," based
upon such ruling and the statutory framework of the Code, distributions by the
Company to a shareholder that is a tax-exempt entity would not constitute UBTI,
provided that the tax-exempt entity has not financed the acquisition of its
shares with "acquisition indebtedness" within the meaning of the Code, that the
Shares are not otherwise used in an unrelated trade or business of the
tax-exempt entity, and that the Company, consistent with its present intent,
does not hold a residual interest in a REMIC.

If any pension or other retirement trust that qualifies under Section
401(a) of the Code ("qualified pension trust") holds more than 10% by value of
the interests in a "pension-held REIT" at any time during a taxable year, a
portion of the dividends paid to the qualified pension trust by such REIT may
constitute UBTI. For these purposes, a "pension-held REIT" is defined as a REIT
if (i) such REIT would not have qualified as a REIT but for the provisions of
the Code which look through such a qualified pension trust in determining
ownership of shares of the REIT and (ii) at least one qualified pension trust
holds more than 25% by value of the interests of such REIT or one or more
qualified pension trusts (each owning more than a 10% interest by value in the
REIT) hold in the aggregate more than 50% by value of the interests in such
REIT.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

The Company will report to its domestic shareholders and to the Service the
amount of dividends paid for each calendar year, and the amount of tax withheld,
if any, with respect thereto. Under the back-up withholding rules, a shareholder
may be subject to backup withholding at the rate of 31% with respect to
dividends paid unless such shareholder (i) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact or
(ii) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A shareholder that does not
provide the Company with its correct taxpayer identification number may also be
subject to penalties imposed by the Service. Any amount paid as backup
withholding is available as a credit against the shareholder's income tax
liability. In addition, the Company may be required to withhold a portion of
capital gain distributions made to any shareholders who fail to certify their
non-foreign status to the company. See "Certain United States Tax Considerations
for Non-U.S. Holders of Shares."

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained provided that the required information is furnished to the Service.

OTHER TAX CONSIDERATIONS

POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX CONSEQUENCES

Prospective shareholders should recognize that the present federal income
tax treatment of investment in the Company may be modified by legislative,
judicial or administrative action at any time and that any such action may
affect investments and commitments previously made. The rules dealing with
federal income taxation are constantly under review by persons involved in the
legislative process and by the Service and the Treasury Department, resulting in
revisions of regulations and revised interpretations of established concepts as
well as statutory changes. No assurance can be given as to the form or content
(including with respect to effective dates) of any tax legislation which may be
enacted. Revisions in federal tax laws and interpretations thereof could
adversely affect the tax consequences of investment in the Company.

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STATE AND LOCAL TAXES

The Company and its shareholders may be subject to state or local taxation,
and the Company may be subject to state or local tax withholding requirements,
in various jurisdictions, including those in which it or they transact business
or reside. The state and local tax treatment of the Company and its shareholders
may not conform to the federal income tax consequences discussed above.
Consequently, prospective shareholders should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in the Shares.

CERTAIN UNITED STATES TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF SHARES

The following is a discussion of certain anticipated U.S. federal income
and U.S. federal estate tax consequences of the ownership and disposition of
Shares applicable to non-U.S. shareholders of such Shares. The discussion is
based on current law and is for general information only. The discussion does
not address either aspects of U.S. federal taxation other than income and estate
taxation or all aspects of U.S. federal income and estate taxation. The
discussion does not consider any specific facts or circumstances that may apply
to a particular non-U.S. shareholder.

In general, a non-U.S. shareholder will be subject to regular United States
income tax with respect to its investment in the Company if such investment is
"effectively connected" with the non-U.S. shareholder's conduct of a trade or
business in the United States, or if the non-U.S. shareholder is a nonresident
alien individual who is present in the United States for 183 days or more during
the taxable year. A corporate non-U.S. shareholder that receives income that is
(or is treated as) effectively connected with a U.S. trade or business may also
be subject to the branch profits tax under Section 884 of the Code, which is
payable in addition to regular United States corporate income tax. The following
discussion will apply to non-U.S. shareholders whose investment in the Company
is not so effectively connected and who are not individuals present in the U.S.
for 183 days or more during the taxable year.

A distribution by the Company that is not deemed to be attributable to gain
from the sale or exchange by the Company of a United States real property
interest and that is not designated by the Company as a capital gain dividend
will be treated as an ordinary income dividend to the extent that it is made out
of current or accumulated earnings and profits. A distribution by the Company
that is designated as a capital gain dividend will generally not be subject to
withholding except to the extent that such dividend is attributable to the sale
or exchange by the Company of United States real property interests, as
described below. Generally, an ordinary income dividend will be subject to a
United States withholding tax equal to 30% of the gross amount of the dividend
unless such withholding is reduced by an applicable tax treaty. A distribution
of cash in excess of the Company's earnings and profits will be treated first as
a nontaxable return of capital that will reduce a non-U.S. shareholder's basis
in its Shares (but not below zero) and then as gain from the disposition of such
Shares, the tax treatment of which is described under the rules discussed below
with respect to disposition of Shares. A distribution in excess of the Company's
earnings and profits may be subject to 30% dividend withholding if at the time
of the distribution it cannot be determined whether the distribution will be in
an amount in excess of the Company's current and accumulated earnings and
profits. If its subsequently determined that such distribution is, in fact, in
excess of current and accumulated earnings and profits, the non-U.S. shareholder
may seek a refund from the Service. The Company expects to withhold United
States income tax at the rate of 30% on the gross amount of any such
distributions made to a non-U.S. shareholder unless (i) a lower tax treaty
applies and the required form evidencing eligibility for that reduced rate is
filed with the Company or (ii) the non-U.S. shareholder files IRS Form 4224 with
the Company claiming that the distribution is "effectively connected" income.

For any year in which the Company qualifies as a REIT, distributions by the
Company that are attributable to gain from the sale or exchange of a United
States real property interest will be taxed to a non-U.S. shareholder in
accordance with the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, such distributions are taxed to a non-U.S. shareholder
as if such distributions were gains "effectively connected" with a United States
trade or business. Accordingly, a non-U.S. shareholder will be

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taxed at the normal capital gain rates applicable to a U.S. shareholder (subject
to any applicable alternative minimum tax and a special alternative minimum tax
in the case of non-resident alien individuals). Distributions subject to FIRPTA
may also be subject to a 30% branch profits tax in the hands of a foreign
corporate shareholder that is not entitled to treaty exemption. The Company will
be required to withhold from distributions to non-U.S. shareholders, and remit
to the Service, 35% of the amount of any distribution that could be designated
as capital gain dividends to the extent that such dividends are attributable to
the sale or exchange by the Company of United States real property interests.

Tax treaties may reduce the Company's withholding obligations. If the
amount of tax withheld by the Company with respect to a distribution to a
non-U.S. shareholder exceeds the shareholder's United States liability with
respect to such distribution, the non-U.S. shareholder may file for a refund of
such excess from the Service. It should be noted that the 35% withholding tax
rate on capital gain dividends corresponds to the maximum income tax rate
applicable to corporations but is higher than the 28% maximum rate on capital
gains of individuals.

If the Shares fail to constitute a "United States real property interest"
within the meaning of FIRPTA, a sale of the Shares by a non-U.S. shareholder
generally will not be subject to United States taxation unless (i) investment in
the Shares is effectively connected with the non-U.S. shareholder's United
States trade or business, in which case, as discussed above, the non-U.S.
shareholder would be subject to the same treatment as U.S. shareholders on such
gain or (ii) the non-U.S. shareholder is a nonresident alien individual who was
present in the United States for 183 days or more during the taxable year, in
which case the nonresident alien individual will be subject to a 30% tax on the
individual's capital gains.

The Shares will not constitute a United States real property interest if
the Company is a "domestically controlled REIT." A domestically controlled REIT
is a REIT in which at all times during a specified testing period less than 50%
in value of its shares is held directly or indirectly by non-U.S. shareholders.
It is currently anticipated that the Company will be a domestically controlled
REIT, and therefore that the sale of Shares will not be subject to taxation
under FIRPTA. However, because the Shares will be publicly traded, no assurance
can be given that the Company will continue to be a domestically controlled
REIT. If the Company did not constitute a domestically controlled REIT, whether
a non-U.S. shareholder's sale of Shares would be subject to tax under FIRPTA as
a sale of a United States real property interest would depend on whether the
Shares were "regularly traded" (as defined by applicable Treasury regulations)
on an established securities market (e.g., the New York Stock Exchange, on which
the Shares will be listed) and on the size of the selling shareholder's interest
in the Company. If the gain on the sale of the Shares were subject to taxation
under FIRPTA, the non-U.S. shareholder would be subject to the same treatment as
a U.S. shareholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals). In any event, a purchaser of Shares from a non-U.S.
shareholder will not be required under FIRPTA to withhold on the purchase price
if the purchased Shares are "regularly traded" on an established securities
market or if the Company is a domestically controlled REIT. Otherwise, under
FIRPTA, the purchaser of Shares may be required to withhold 10% of the purchase
price and to remit such amount to the Service.

FEDERAL ESTATE TAX

Shares owned or treated as owned by an individual who is not a citizen or
resident (as defined for United States federal estate tax purposes) of the
United States at the time of death will be includible in the individual's gross
estate for United States federal estate tax purposes unless an applicable estate
tax treaty provides otherwise.

BACKUP WITHHOLDING AND INFORMATION REPORTING REQUIREMENTS

The Company must report annually to the Service and to each non-U.S.
shareholder the amount of dividends paid to and the tax withheld with respect to
such holder. These information reporting requirements apply regardless of
whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the

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tax authorities in the country in which the non-U.S. shareholder resides. United
States backup withholding tax (which generally is a withholding tax imposed at
the rate of 31% on certain payments to persons that fail to furnish the
information required under the United States information reporting requirements)
will generally not apply to dividends paid on Shares to a non-U.S. shareholder
at an address outside the United States.

The payment of the proceeds from the disposition of Shares to or through
the United States office of a broker will be subject to information reporting
and backup withholding at a rate of 31% unless the owner, under penalties of
perjury, certifies, among other things, its status as a non-U.S. shareholder, or
otherwise establishes an exemption. The payment of the proceeds from the
disposition of Shares to or through a non-U.S. office of a broker generally will
not be subject to backup withholding and information reporting. In the case of
proceeds from a disposition of Shares paid to or through a non-U.S. office of a
U.S. broker or paid to or through a non-U.S. office of a non-U.S. broker that is
(i) a "controlled foreign corporation" for United States federal income tax
purposes or (ii) a person 50% or more of whose gross income from all sources for
a certain three-year period was effectively connected with a United States trade
or business, (a) backup withholding will not apply unless the broker has actual
knowledge that the owner is not a non-U.S. shareholder, and (b) information
reporting will not apply if the broker has documentary evidence in its files
that the owner is a non-U.S. shareholder (unless the broker has actual knowledge
to the contrary).

Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. shareholder will be refunded (or credited against the non-U.S.
shareholder's United States federal income tax liability, if any), provided that
the required information is furnished to the Service.

OTHER TAX CONSEQUENCES

The Company and its shareholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside.

There may be other federal, state, local or foreign income, or estate and
gift, tax considerations applicable to the circumstances of a particular
investor. Shareholders should consult their own tax advisors with respect to
such matters.

ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS

GENERAL FIDUCIARY OBLIGATIONS

Fiduciaries of a pension, profit-sharing or other employee benefit plan
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plan") must consider whether their investment in the
Company's Shares satisfies the diversification requirements of ERISA, whether
the investment is prudent in light of possible limitations on the marketability
of the Shares, whether such fiduciaries have authority to acquire such Shares
under the appropriate governing instrument and Title I of ERISA, and whether
such investment is otherwise consistent with their fiduciary responsibilities.
Any ERISA Plan fiduciary should also consider ERISA's prohibition on improper
delegation of control over or responsibility for "plan assets." Trustees and
other fiduciaries of an ERISA plan may incur personal liability for any loss
suffered by the plan on account of a violation of their fiduciary
responsibilities. In addition, such fiduciaries may be subject to a civil
penalty of up to 20% of any amount recovered by the plan on account of such a
violation (the "Fiduciary Penalty"). Also, fiduciaries of any Individual
Retirement Account ("IRA"), Keogh Plan or other qualified retirement plan not
subject to Title I of ERISA because it does not cover common law employees
("Non-ERISA Plan") should consider that such an IRA or non-ERISA Plan may only
make investments that are authorized by the appropriate governing instrument.
Fiduciary shareholders should consult their own legal advisers if they have any
concern as to whether the investment is inconsistent with any of the foregoing
criteria.

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PROHIBITED TRANSACTIONS

Fiduciaries of ERISA Plans and persons making the investment decision for
an IRA or other Non-ERISA Plan should also consider the application of the
prohibited transaction provisions of ERISA and the Code in making their
investment decision. Sales and certain other transactions between an ERISA Plan,
IRA, or other Non-ERISA Plan and certain persons related to it are prohibited
transactions. The particular facts concerning the sponsorship, operations and
other investments of an ERISA Plan, IRA, or other Non-ERISA Plan may cause a
wide range of other persons to be treated as disqualified persons or parties in
interest with respect to it. A prohibited transaction, in addition to imposing
potential personal liability upon fiduciaries of ERISA Plans, may also result in
the imposition of an excise tax under the Code or a penalty under ERISA upon the
disqualified person or party in interest with respect to the ERISA or Non-ERISA
Plan or IRA. If the disqualified person who engages in the transaction is the
individual on behalf of whom an IRA is maintained (or his beneficiary), the IRA
may lose its tax-exempt status and its assets may be deemed to have been
distributed to such individual in a taxable distribution (and no excise tax will
be imposed) on account of the prohibited transaction. Fiduciary shareholders
should consult their own legal advisers if they have any concern as to whether
the investment is a prohibited transaction.

SPECIAL FIDUCIARY AND PROHIBITED TRANSACTIONS CONSIDERATIONS

The Department of Labor ("DOL"), which has certain administrative
responsibility over ERISA Plans as well as over IRAs and other Non-ERISA Plans,
has issued a regulation defining "plan assets." The regulation generally
provides that when an ERISA or Non-ERISA Plan or IRA acquires a security that is
an equity interest in an entity and that security is neither a "publicly offered
security" nor a security issued by an investment company registered under the
Investment Company Act of 1940, the ERISA or Non-ERISA Plan's or IRA's assets
include both the equity interest and an undivided interest in each of the
underlying assets of the entity, unless it is established either that the entity
is an operating company or that equity participation in the entity by benefit
plan investors is not significant.

The regulation defines a publicly offered security as a security that is
"widely held," "freely transferable" and either part of a class of securities
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or sold pursuant to an effective registration statement under the
Securities Act (provided the securities are registered under the Exchange Act
within 120 days after the end of the fiscal year of the issuer during which the
offering occurred). The Company's Shares will be registered under the Exchange
Act.

The regulation provides that a security is "widely held" only if it is part
of a class of securities that is owned by 100 or more investors independent of
the issuer and of one another. However, a security will not fail to be "widely
held" because the number of independent investors falls below 100 subsequent to
the initial public offering as a result of events beyond the issuer's control.

The regulation provides that whether a security is "freely transferable" is
a factual question to be determined on the basis of all relevant facts and
circumstances. The regulation further provides that, where a security is part of
an offering in which the minimum investment is $10,000 or less, certain
restrictions ordinarily will not, alone or in combination, affect a finding that
such securities are freely transferable. The restrictions on transfer enumerated
in the regulation as not affecting that finding include: any restriction on or
prohibition against any transfer or assignment which would result in a
termination or reclassification of the Company for federal or state tax
purposes, or would otherwise violate any state or federal law or court order;
any requirement that advance notice of a transfer or assignment be given to the
Company and any requirement that either the transferor or transferee, or both,
execute documentation setting forth representations as to compliance with any
restrictions on transfer which are among those enumerated in the regulation as
not affecting free transferability, including those described in the preceding
clause of this sentence; any administrative procedure which establishes an
effective date, or an event prior to which a transfer or assignment will not be
effective; and any limitation or restriction on transfer or assignment which is
not imposed by the issuer or a person acting on behalf of the issuer. The
Company believes that the restrictions imposed under the Company's Declaration
and Bylaws on the transfer of Shares do not result in the failure of the Shares
to be "freely transferable." Furthermore, the Company believes that at present
there exist no other

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<PAGE> 93

facts or circumstances limiting the transferability of the Shares which are not
included among those enumerated as not affecting their free transferability
under the regulation, and the Company does not expect or intend to impose in the
future (or to permit any person to impose on its behalf) any limitations or
restrictions on transfer which would not be among the enumerated permissible
limitations or restrictions. However, the final regulation only establishes a
presumption in favor of a finding of free transferability, and no guarantee can
be given that the DOL or the Treasury Department will not reach a contrary
conclusion.

Assuming that the Shares will be "widely held" and that no other facts and
circumstances exist which restrict transferability of the Shares, the Company
has received an opinion from Company Counsel that the Shares should not fail to
be "freely transferable" for purposes of the regulation due to the restrictions
on transfer of the Shares under the Company's Declaration and Bylaws and that
under the regulation the Shares are publicly offered securities and the assets
of the Company will not be deemed to be "plan assets" of any ERISA Plan, IRA or
other Non-ERISA Plan that invests in the Shares.

If the assets of the Company are deemed to be plan assets under ERISA: (i)
the prudence standards and other provisions of Part 4 of Title I of ERISA would
be applicable to investments made by the Company; (ii) the person or persons
having investment discretion over the assets of ERISA Plans which invest in the
Company would be liable under the aforementioned Part 4 of Title I of ERISA for
investments made by the Company which do not conform to such ERISA standards
unless Advisors registers as an investment adviser under the Investment Advisers
Act of 1940 and certain other conditions are satisfied; and (iii) certain
transactions that the Company might enter into in the ordinary course of its
business and operation might constitute "prohibited transactions" under ERISA
and the Code.

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<PAGE> 94

UNDERWRITING

Subject to certain conditions contained in the Underwriting Agreement, the
Underwriters named below (the "Underwriters") for whom Donaldson, Lufkin &
Jenrette Securities Corporation, Dean Witter Reynolds Inc., Prudential
Securities Incorporated and Smith Barney Inc. are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company 7,500,000
Shares. The number of Shares that each Underwriter has agreed to purchase is set
forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.......................
Dean Witter Reynolds Inc. ................................................
Prudential Securities Incorporated........................................
Smith Barney Inc. ........................................................

---------
Total........................................................... 7,500,000
========
</TABLE>

The Underwriting Agreement provides that the several Underwriters will be
obligated to purchase all of the Shares offered hereby (other than the Shares
covered by the overallotment option described below) if any are purchased.

The Company has been advised by the Representatives that the Underwriters
propose to offer the Shares to the public initially at the price to the public
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $ per Share; that the Underwriters
may allow, and such dealers may reallow, a discount of not in excess of $
per Share on sales to other dealers; and that the price to the public,
concessions and discounts to dealers may be changed by DLJ after the initial
public offering.

The Underwriters have been granted an option, exercisable for 30 days from
the date of this Prospectus, to purchase up to 1,125,000 additional Shares from
the Company at the initial public offering price less underwriting discounts and
commissions. The Underwriters may exercise such right of purchase only for the
purpose of covering overallotments, if any, incurred in connection with the sale
of Shares offered hereby. To the extent that such Underwriters exercise such
option, each of the Underwriters will become obligated, subject to certain
conditions, to purchase the same proportion of such additional Shares as the
number of other Shares to be purchased by the Underwriter bears to the total
number of Shares being sold in this Offering on the same terms as those on which
all Shares are being sold in this Offering.

In the Underwriting Agreement, the Company and the Underwriters have agreed
to indemnify each other against certain liabilities under the Securities Act.

Each of HRP and Advisors has agreed not to, and has agreed to cause its
officers, Trustees and Directors, as applicable, not to, directly or indirectly,
offer, sell, contract to sell, grant any option to purchase or otherwise dispose
of any Shares or any securities convertible into or exercisable or exchangeable
for Shares or, in any manner, transfer all or a portion of the economic
consequences associated with ownership of the Shares, without the prior written
consent of DLJ, for a period of two years from the date of this Prospectus. See
"Shares Eligible for Future Sale."

Prior to this Offering, there has been no public market for the Shares. The
initial public offering price was determined through negotiations between the
Company and the Representatives. Among the factors considered in such
negotiations, in addition to prevailing market conditions, were the dividend
yields and cash flow multiplies of publicly traded REITs that the Company and
the Representatives believe to be comparable to the Company, the expected
results of operations of the Company (which are based, in part, on the results
or operations of the Initial Hotels in recent periods), estimates of the
business potential and earnings prospects of

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<PAGE> 95

the Company, the present state of the Company's development and the current
state of the hospitality industry and real estate markets in the geographical
areas in which the Company's Initial Hotels are located and the economy as a
whole. The initial public offering price set forth on the cover page of the
Prospectus should not, however, be considered an indication of the actual value
of the Shares. Such price is subject to change as a result of market conditions
and other factors.

The Company will pay to the Representatives an advisory fee equal to
$ from the gross proceeds of this Offering received from the sale of the
Shares offered hereby for financial advisory services rendered in connection
with the Company's formation and initial public offering as a REIT. A portion of
the advisory fee to be paid to DLJ is in consideration of its advisory services
in structuring the Acquisition Line to facilitate this Offering.

The Shares have been approved for listing on the NYSE under the symbol
"HPT". The Underwriters intend to sell the Shares so as to meet the distribution
requirements of such listing.

The consummation of this Offering is contingent on the consummation of the
concurrent placement by the Company of 3,960,000 Shares to HRP and the 250,000
Shares to Advisors.

EXPERTS

The historical financial statements and schedules of the Company, Host and
the Initial Hotels included in this prospectus to the extent and for the periods
indicated in their reports have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports dated July 20, 1995, July 13,
1995 and June 21, 1995 with respect thereto, and are included herein on pages
F-10 through F-16, F-24 through F-31, F-33 through F-42 and F-44 through F-45,
in reliance upon the authority of said firm as experts in giving said reports.

LEGAL MATTERS

Sullivan & Worcester has passed upon the validity of the issuance of the
Shares offered pursuant to this Prospectus and on certain tax matters as
described under "Federal Income Tax Considerations." Certain legal matters
relating to this Offering will be passed upon for the Underwriters by Davis Polk
& Wardwell. Barry M. Portnoy, a partner in the firm of Sullivan & Worcester, is
a Managing Trustee of the Company, a Managing Trustee of HRP and a Director and
50% shareholder of Advisors. Sullivan & Worcester and Davis Polk & Wardwell will
rely on the opinion of Piper & Marbury with respect to all matters involving
Maryland law.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus is a part) on
Form S-11 under the Securities Act with respect to the securities offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. Statements contained in this
Prospectus as to the content of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference and the
exhibits and schedules hereto. For further information regarding the Company and
the Shares offered hereby, reference is hereby made to the Registration
Statement and such exhibits and schedules.

The Registration Statement and the exhibits and schedules forming a part
thereof filed by the Company with the Commission can be inspected and copies
obtained from the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: 7 World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.

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<PAGE> 96

The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by independent certified
public accountants and quarterly reports containing unaudited financial
information for the first three quarters of each fiscal year.

The Company's Declaration of Trust contains the following provision. The
provision should not be construed as a limitation on the ability of shareholders
to assert claims for breaches of fiduciary duties.

THE DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED MAY 12, 1995, A
COPY OF WHICH, TOGETHER WITH ANY AMENDMENTS THERETO, IS DULY FILED IN THE OFFICE
OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES
THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE
DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND
THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE
HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR
CLAIM AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY,
SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.

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<PAGE> 97

GLOSSARY

Unless the context otherwise requires, the following capitalized terms
shall have the meanings set forth below for the purposes of this Prospectus:

"ACMs" means asbestos containing materials.

"Acquisition Line" means the $200.0 million credit line provided by DLJMC
to the Company.

"ADA" means the Americans with Disabilities Act of 1990, as amended.

"Adjusted Basis Ratio" means the ratio of (i) the average of the adjusted
bases of the Company's personal property of the Initial Hotel at the
beginning and at the end of the taxable year to (ii) the average of the
aggregate adjusted bases of both the Company's real and personal property
of the Initial Hotel at the beginning and at the end of such taxable year.

"ADR" means average daily guest room rate.

"Advisors" means HRPT Advisors, Inc., a Delaware corporation.

"Advisory Agreement" means the advisory agreement by and between Advisors
and the Company.

"Audit Committee" means the audit committee of the Company consisting of
the Independent Trustees of the Company.

"Available Cash Flow" means an amount, with respect to each fiscal year
during the term of the Management Agreements, equal to the excess, if any,
of Operating Profit over the sum of: (i) the applicable Owner's Priority in
such fiscal year; plus (ii) the base management fee; plus (iii) any unpaid
base management fees deferred in accordance with the Management Agreements.

"Average Invested Capital" means, for purposes of the Advisory Agreement,
the average of the aggregate book value of the assets of the Company
invested, directly or indirectly, in equity interests in and loans secured
by real estate and personal property owned in connection with such real
estate, before reserves for depreciation or bad debts or other similar
noncash reserves, computed by taking the average of such values at the end
of each month during the period.

"Award" means any award, compensation or damage paid in connection with the
taking or condemnation of an Initial Hotel or any substantial portion
thereof by a public authority for a public or quasi public use.

"Board of Trustees" means the Board of Trustees of the Company.

"Business Procedure" means the advance notice procedure with regard to
shareholder proposals specified in the Company's Bylaws.

"Bylaws" means the Bylaws of the Company.

"Cash Available for Distribution" means Funds From Operations plus
amortization of deferred financing costs less the rental income arising
from amounts periodically escrowed in the FF&E Reserve.

"Charitable Beneficiary" means a qualified trustee of a trust for the
exclusive benefit of one or more organizations described in Section
170(b)(1)(a) and 170(c) of the Code.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commission" means the Securities and Exchange Commission.

"Company" means Hospitality Properties Trust, a Maryland real estate
investment trust.

"Company Counsel" means Sullivan & Worcester, counsel to the Company.

"Declaration" means the Declaration of Trust of the Company.

"Department of Labor" means the United States Department of Labor.

"DLJMC" means DLJ Mortgage Capital, Inc., an affiliate of DLJ.

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<PAGE> 98

"DLJ" means Donaldson, Lufkin & Jenrette Securities Corporation.

"DOL" means United States Department of Labor.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

"ERISA Plan" means a pension, profit sharing or other employee benefit plan
subject to Title I of ERISA.

"Excess Shares" means Shares that are in violation of the Ownership
Limitation or which cause the Company to be treated as "closely held" under
Section 856(h) of the Code, and that are not otherwise permitted by the
Board of Trustees.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exempted Persons" means HRP, Advisors, affiliates, including persons who
are deemed to have beneficial ownership of the Shares directly owned by HRP
and Advisors pursuant to the attribution provisions of the Code, and other
shareholders exempted by majority vote of the Trustees.

"FF&E Reserve" means those funds to be escrowed annually pursuant to the
Initial Leases as a reserve for renovations and refurbishments.

"Fiduciary Penalty" means a civil penalty of up to 20% of any amount
recovered by an ERISA Plan on account of a violation by Trustees and other
fiduciaries of their fiduciary responsibilities.

"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980.

"Funds From Operations" means net income (computed in accordance with
GAAP), before real estate depreciation and amortization (excluding deferred
financing costs). Funds From Operations does not represent cash flows from
operating activities (as determined in accordance with GAAP) and should not
be considered an alternative to net income as an indicator of the Company's
financial performance or to cash flows from operating activities as a
measure of liquidity. Funds From Operations does not include required FF&E
Reserve funding.

"GAAP" means generally accepted accounting principles.

"Host" means HMH HPT Courtyard, Inc., a limited purpose wholly owned
subsidiary of Host Marriott Corporation.

"Hotel Properties" means the Initial Hotels and any other hotel properties
that the Company may acquire after completion of this Offering.

"HRP" means Health and Retirement Properties Trust, a NYSE listed REIT.

"HRP Loan" means the demand loan of the Company payable to HRP in the
aggregate principal amount of $163.3 million as of June 30, 1995.

"Incentive Share Award Plan" means the Company's incentive share award plan
pursuant to which 100,000 Shares have been reserved for issuance to
Independent Trustees and officers of, and consultants to, the Company.

"Independent Trustees" means Trustees of the Company who are not officers
of the Company or otherwise affiliated with the Company, HRP or Advisors.

"Initial Hotels" means the 37 hotel properties with 5,286 guest rooms which
shall comprise the Company's entire portfolio of properties upon completion
of this Offering.

"Initial Leases" means the leases by the Company to Host of all of the
Initial Hotels.

"Initial Lessee" means Host.

"Interested Shareholder" means a person who beneficially owns 10% or more
of the voting power of the Company's Shares.

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<PAGE> 99

"IRA" means Individual Retirement Account.

"Leases" means the Initial Leases and any other leases of Hotel Properties.

"Lessees" means the Initial Lessee and any future lessees of the Hotel
Properties.

"Management Agreements" means the management agreements between the Company
and Marriott.

"Managers" means Marriott and possible future managers.

"Managing Trustees" means Barry M. Portnoy and Gerard M. Martin.

"Marriott" means Courtyard Management Corporation, a wholly owned
subsidiary of Marriott International, Inc.

"MGCL" means the Maryland General Corporation Law.

"Nomination Procedure" means the advance notice procedure with regard to
the nomination, other than by the Board of Trustees, of Trustees specified
in the Company's Bylaws.

"Non-ERISA Plan" means an IRA, Keogh Plan or other qualified retirement
plan not subject to Title I of ERISA because it does not cover common law
employees.

"NYSE" means the New York Stock Exchange, Inc.

"Offering" means the initial public offering of 7,500,000 Shares of the
Company.

"Operating Profit" means, for purposes of any of the Management Agreements
in any fiscal year, the excess of gross revenues of the applicable Initial
Hotels less certain operating costs of Marriott as more particularly
described in the Management Agreements, a form of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.

"Ownership Limitation" means the restriction on ownership of more than 9.8%
of the Shares by any shareholder or affiliated group of shareholders,
except HRP, Advisors and certain other entities.

"Owner's Priority" means 10% of a specified amount for each Initial Hotel
plus any additional capital.

"Preferred Shares" means preferred shares of beneficial interest of the
Company.

"Purchase Agreement" means the Purchase-Sale and Option Agreement, dated as
of February 3, 1995, as amended, among the Company and each of the Sellers
pursuant to which the Company has acquired the Initial Hotels.

"Registration Statement" means the Registration Statement on Form S-11
under the Securities Act of which this Prospectus is a part.

"REIT" means a real estate investment trust.

"REMIC" means a real estate mortgage investment conduit, as defined in the
Code.

"Representatives" means Donaldson, Lufkin & Jenrette Securities
Corporation, Dean Witter Reynolds Inc., Prudential Securities Incorporated
and Smith Barney Inc.

"REVPAR" means room revenues per available hotel guest room.

"Rule 144" means the rule promulgated under the Securities Act that permits
holders of restricted securities as well as affiliates of an issuer of the
securities, pursuant to certain conditions and subject to certain
restrictions, to sell their securities publicly without registration under
the Securities Act.

"Securities Act" means the Securities Act of 1933, as amended.

"Security Deposit" means an amount equal to a full year's base rent, or
$32.9 million which has been retained by the Company as security for Host's
obligations under the Initial Leases.

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<PAGE> 100

"Sellers" means the owners of the Initial Hotels who have contracted to
sell the Initial Hotels to the Company.

"Service" means the U.S. Internal Revenue Service.

"Shares" means the common shares of beneficial interest of the Company.

"Total Hotel Sales" means all revenues and receipts of every kind derived
from guests or customers related to the operation of the Initial Hotels and
has the same meaning as "Gross Revenues" under the Initial Leases.

"Treasury Regulations" means the income tax regulations that have been
promulgated under the Code.

"UBTI" means unrelated business taxable income.

"Underwriters" means the Underwriters named in this Prospectus.

"Underwriting Agreement" means the underwriting agreement between the
Company and the Representatives relating to the purchase of the Shares
offered hereby.

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<PAGE> 101

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Hospitality Properties Trust Financial Statements:
Introduction to Pro Forma Financial Statements...................................... F-2
Unaudited Pro Forma Balance Sheet as of June 30, 1995............................... F-3
Unaudited Pro Forma Statements of Income for the year ended December 31, 1994, the
twelve months ended June 30, 1995 and the six months ended June 30, 1994 and June
30, 1995......................................................................... F-4
Notes to Pro Forma Financial Statements............................................. F-6
Report of Independent Public Accountants............................................ F-9
Balance Sheet as of June 30, 1995................................................... F-10
Statement of Income for the period from February 7, 1995 (inception) to June 30,
1995............................................................................. F-11
Statement of Shareholder's Equity................................................... F-12
Statement of Cash Flows for the period from February 7, 1995 (inception) to
June 30, 1995.................................................................... F-13
Notes to Financial Statements....................................................... F-14
HMH HPT Courtyard, Inc. (Host) Financial Statements:
Introduction to Pro Forma Financial Statements...................................... F-17
Unaudited Pro Forma Balance Sheet as of June 16, 1995............................... F-18
Unaudited Pro Forma Statements of Income for the fiscal year ended December 30,
1994, the 52 weeks ended June 16, 1995 and the 24 weeks ended June 17, 1994 and
June 16, 1995.................................................................... F-19
Notes to Pro Forma Financial Statements............................................. F-21
Report of Independent Public Accountants............................................ F-23
Balance Sheet as of June 16, 1995................................................... F-24
Statement of Income for the twelve weeks ended June 16, 1995........................ F-25
Statement of Shareholder's Equity for the twelve weeks ended June 16, 1995.......... F-26
Statement of Cash Flows for the twelve weeks ended June 16, 1995.................... F-27
Notes to Financial Statements....................................................... F-28
Initial Hotels Combined Financial Statements:
Report of Independent Public Accountants............................................ F-32
Combined Statements of Revenues and Expenses Excluding Income Taxes for the fiscal
years ended January 1, 1993, December 31, 1993 and December 30, 1994 and the
twenty-four weeks ended June 17, 1994 (Unaudited) and June 16, 1995
(Unaudited)...................................................................... F-33
Combined Statements of Assets, Liabilities and Net Investment and Advances as of
December 31, 1993 and December 30, 1994 and as of June 16, 1995 (Unaudited)...... F-34
Combined Statements of Cash Flows for the fiscal years ended January 1, 1993,
December 31, 1993 and December 30, 1994 and for the twenty-four weeks ended June
17, 1994 (Unaudited) and June 16, 1995 (Unaudited)............................... F-35
Notes to Combined Financial Statements.............................................. F-36
Report of Independent Public Accountants............................................ F-43
Schedule III -- Real Estate and Accumulated Depreciation............................ F-44
</TABLE>

F-1
<PAGE> 102

HOSPITALITY PROPERTIES TRUST

PRO FORMA BALANCE SHEET AS OF JUNE 30, 1995 AND PRO FORMA
STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1994,
THE TWELVE MONTHS ENDED JUNE 30, 1995 AND THE SIX MONTHS ENDED JUNE 30, 1994 AND
1995

The following unaudited pro forma balance sheet gives effect to: (i) the
completion of the Offering and the concurrent placement to HRP and Advisors;
(ii) the acquisition of certain of the Initial Hotels to be acquired by the
Company after the completion of the Offering; (iii) repayment of amounts due to
HRP; (iv) the borrowings under the Acquisition Line; (v) the commencement of the
Initial Leases; and (vi) certain other transactions described in the notes
hereto as though such transactions occurred on June 30, 1995.

The following unaudited pro forma statements of income give effect to: (i)
the completion of the Offering and the concurrent placement to HRP and Advisors;
(ii) the acquisition of certain of the Initial Hotels to be acquired by the
Company after the completion of the Offering; (iii) repayment of amounts due to
HRP; (iv) the borrowings under the Acquisition Line; (v) the commencement of the
Initial Leases; and (vi) certain other transactions described in the notes
hereto as though such transactions occurred at January 1, 1994.

The pro forma information is based in part upon the historical statement of
income and historical balance sheet of the Company and the Initial Hotels. Such
information should be read in conjunction with all of the financial statements
and notes thereto included in this Prospectus. In the opinion of management, all
adjustments necessary to reflect the effects of the transactions discussed above
have been reflected in the pro forma data.

The following unaudited pro forma data is not necessarily indicative of
what the actual financial position or results of operations for the Company
would have been as of the date or for the period indicated, nor does it purport
to represent the financial position or results of operations for the Company for
future periods.

F-2
<PAGE> 103

HOSPITALITY PROPERTIES TRUST
PRO FORMA BALANCE SHEET

<TABLE>
<CAPTION>
AS OF JUNE 30, 1995
---------------------------------------------
PRO FORMA PRO
HISTORICAL(A) ADJUSTMENTS FORMA
------------- --------- --------
<S> <C> <C> <C> <C>
(UNAUDITED, IN THOUSANDS)
ASSETS
Real estate properties, net........................ $ 177,235 $ 151,021 (B) $328,256
Rent receivable.................................... 40 -- 40
Other assets....................................... 3,954 (1,454) (C) 2,500
Deferred financing fees............................ -- 234 (D) 234
FF&E Reserve (restricted cash)..................... 2,539 1,329 (E) 3,868
Cash............................................... -- 1,017 (F) 1,017
------------- --------
$ 183,768 $335,915
========== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Acquisition Line................................... $ -- $ 23,400 (G) $ 23,400
HRP Loan........................................... 163,259 (163,259) (H) --
Security Deposit................................... 17,940 14,960 (I) 32,900
Rent received in advance........................... 690 575 (J) 1,265
Shareholder's equity:
Common Shares of Beneficial Interest,
$0.01 par value............................. -- 118 (K) 118
Additional paid in capital.................... 1,000 277,232 (L) 278,232
Retained earnings............................. 879 (879) (M) --
------------- --------
Total shareholder's equity............... 1,879 278,350
------------- --------
$ 183,768 $335,915
========== ========
</TABLE>

See notes to pro forma financial statements.

F-3
<PAGE> 104

HOSPITALITY PROPERTIES TRUST
PRO FORMA STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------ ----------
<S> <C> <C> <C>
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
Revenues:
Base rent................................... $ -- $ 32,900 $ 32,900
FF&E Reserve................................ -- 6,045 6,045
------- ------- -------
Total revenues......................... -- 38,945(N) 38,945
------- ------- -------
Expenses:
Interest.................................... -- 1,882(O) 1,882
Depreciation................................ -- 9,011(P) 9,011
Advisory fees............................... -- 2,149(Q) 2,149
General and administrative.................. 400(R) 400
------- ------- -------
Total expenses......................... -- 13,442 13,442
------- ------- -------
Net income....................................... $ -- $ 25,503 $ 25,503
======= ======= =======
Net income per Share............................. $ 2.17
=======
Weighted average Shares outstanding.............. 11,750
=======
</TABLE>

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED JUNE 30, 1995
--------------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenues:
Base rent................................... $4,834 $28,066 $32,900
Percentage rent............................. 40 126 166
FF&E Reserve................................ 893 5,318 6,211
------ ------- -------
Total rental income.................... 5,767 33,510 39,277
Interest income............................. 23 (23) --
------ ------- -------
Total revenues......................... 5,790 33,487(N) 39,277
------ ------- -------
Expenses:
Interest.................................... 3,196 (1,314)(O) 1,882
Depreciation................................ 1,473 7,538(P) 9,011
Advisory fees............................... 242 1,907(Q) 2,149
General and administrative.................. -- 400(R) 400
------ ------- -------
Total expenses......................... 4,911 8,531 13,442
------ ------- -------
Net income....................................... $ 879 $24,956 $25,835
====== ======= =======
Net income per Share............................. $ 2.20
=======
Weighted average Shares outstanding.............. 11,750
=======
</TABLE>

See notes to pro forma financial statements.

F-4
<PAGE> 105

HOSPITALITY PROPERTIES TRUST

PRO FORMA STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1994
--------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenues:
Base rent.................................... $ -- $16,450 $16,450
Percentage rent.............................. -- -- --
FF&E Reserve................................. -- 3,037 3,037
------ ------- -------
Total rental income..................... -- 19,487 19,487
Interest income.............................. -- -- --
------ ------- -------
Total revenues.......................... -- 19,487(N) 19,487
------ ------- -------
Expenses:
Interest..................................... -- 941(O) 941
Depreciation................................. -- 4,506(P) 4,506
Advisory fees................................ -- 1,075(Q) 1,075
General and administrative................... -- 200(R) 200
------ ------- -------
Total expenses.......................... -- 6,722 6,722
------ ------- -------
Net income........................................ $ -- $12,765 $12,765
====== ======= =======
Net income per Share.............................. $ 1.09
=======
Weighted average Shares outstanding............... 11,750
=======
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
--------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenues:
Base rent.................................... $4,834 $11,616 $16,450
Percentage rent.............................. 40 126 166
FF&E Reserve................................. 893 2,310 3,203
------ ------- -------
Total rental income..................... 5,767 14,052 19,819
Interest income.............................. 23 (23) --
------ ------- -------
Total revenues.......................... 5,790 14,029(N) 19,819
------ ------- -------
Expenses:
Interest..................................... 3,196 (2,255)(O) 941
Depreciation................................. 1,473 3,033(P) 4,506
Advisory fees................................ 242 833(Q) 1,075
General and administrative................... -- 200(R) 200
------ ------- -------
Total expenses.......................... 4,911 1,811 6,722
------ ------- -------
Net income........................................ $ 879 $12,218 $13,097
====== ======= =======
Net income per Share.............................. $ 1.11
=======
Weighted average Shares outstanding............... 11,750
=======
</TABLE>

See notes to pro forma financial statements.

F-5
<PAGE> 106

HOSPITALITY PROPERTIES TRUST

NOTES TO PRO FORMA FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

(A) Represents the historical balance sheet of the Company as of June 30,
1995.

(B) Represents the proposed purchase of 16 Initial Hotels:

<TABLE>
<S> <C>
Cash purchase price.................................. $133,311
Purchase price withheld as Security Deposit.......... 14,960
Closing costs........................................ 750
Option cost capitalized to real estate............... 2,000
--------
Total........................................... $151,021
========
</TABLE>

<TABLE>
<S> <C>
Capitalization of previously paid cost of option to
real estate........................................ $ (2,000)
Payment of option extension fee...................... 1,500
Costs related to Offering incurred prior to June 30,
1995............................................... (954)
--------
Total................................................ $ (1,454)
========
</TABLE>

(D) Represents financing fees of 1% of pro forma borrowings by the Company
on the Acquisition Line. See (G).

(E) Represents FF&E Reserve of $1,329 to be acquired in connection with the
proposed purchase of 16 Initial Hotels.

(F) Net change represents the following proposed transactions:

<TABLE>
<S> <C>
Proceeds from the sale of 7,500,000 Shares in the
Offering........................................... $187,500
Proceeds from the sale of 250,000 Shares to
Advisors........................................... 6,250
Expenses of the Offering (net of amounts paid prior
to June 30, 1995 of $954).......................... (14,446)
Payment to purchase 16 Initial Hotels................ (133,311)
Payment of closing costs............................. (750)
Payment to purchase FF&E Reserve. See (E)............ (1,329)
Payment of option extension fee...................... (1,500)
Prepaid rent received at closing..................... 575
Repayment of HRP Loan................................ (64,259)
Cash dividend to HRP................................. (879)
Borrowings under the Acquisition Line................ 23,400
Payment of financing fees............................ (234)
--------
Net increase in cash............................ $ 1,017
========
</TABLE>

(G) Represents proposed borrowings by the Company on its Acquisition Line.
The Acquisition Line has a term of up to 18 months with no required principal
payments until maturity.

(H) Represents the repayment of the HRP Loan from the following proposed
transactions:

<TABLE>
<S> <C>
Issuance of 3,960,000 Shares to HRP, at $25.00 per
share.............................................. $ 99,000
Repayment with proceeds from the Offering and
Acquisition Line................................... 64,259
--------
$163,259
========
</TABLE>

(I) Represents Security Deposit for Initial Leases for 16 Initial Hotels.

(J) Represents prepaid base rent for Initial Leases for 16 Initial Hotels.

F-6
<PAGE> 107

HOSPITALITY PROPERTIES TRUST

NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

(K) Represents the par value ($0.01) of Shares expected to be issued in the
following transactions:

<TABLE>
<S> <C>
Sale of 7,500,000 Shares in the Offering................. $ 75
Sale of 250,000 Shares to Advisors....................... 3
Issuance of 3,960,000 Shares to HRP...................... 40
----
$118
====
</TABLE>

(L) Represents the following proposed transactions:

<TABLE>
<S> <C>
Proceeds from the Offering........................... $187,500
Proceeds from the sale of 250,000 Shares to
Advisors........................................... 6,250
Issuance of 3,960,000 Shares to HRP in partial
repayment of HRP Loan.............................. 99,000
Expenses of the Offering............................. (15,400)
Par value of Shares issued........................... (118)
--------
$277,232
========
(M) Represents cash dividend to HRP from retained earnings....... $(879)
=====
</TABLE>

(N) Represents the effect of the Initial Leases on revenues. Revenues under
the terms of the Initial Leases are derived from annual base rent of $32,900,
deposits into the FF&E Reserve equal to 5% of Total Hotel Sales and percentage
rent equal to 5% of the excess of Total Hotel Sales over 1994 Total Hotel Sales:

<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1994 1995 1994 1995
------------ ------------- ---------- ----------
<S> <C> <C> <C> <C>
Base rent............................. $ 32,900 $32,900 $ 16,450 $ 16,450
Percentage rent....................... -- 166 -- 166
FF&E Reserve.......................... 6,045 6,211 3,037 3,203
Amounts included in historical
operating results from February 7,
1995 (inception) to June 30, 1995... -- (5,790) -- (5,790)
------- ------- ------- -------
$ 38,945 $33,487 $ 19,487 $ 14,029
======= ======= ======= =======
</TABLE>

(O) Represents the effect of borrowing $23,400 on the Company's Acquisition
Line at LIBOR plus 150 basis points (approximately 7.375% at July 24, 1995) and
the amortization of the deferred financing fees.

<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1994 1995 1994 1995
------------ ------------- ---------- ----------
<S> <C> <C> <C> <C>
Interest expense...................... $ 1,726 $ 1,726 $ 863 $ 863
Amortization of deferred financing
fees................................ 156 156 78 78
Amounts included in historical
operating results from February 7,
1995 (inception) to June 30, 1995... -- (3,196) -- (3,196)
------- ------- ------- --------
$ 1,882 $(1,314) $ 941 $ (2,255)
======= ======= ======= ========
</TABLE>

The pro forma impact on interest expense of a 1/8 percent change in LIBOR
is approximately $29 for the year ended December 31, 1994 and the 12 months
ended June 30, 1995 and approximately $15 for the six months ended June 30,
1995.

F-7
<PAGE> 108

HOSPITALITY PROPERTIES TRUST

NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

(P) Represents the effect of the purchase of the Initial Hotels on
depreciation expense. Depreciation expense is calculated on a straight line
basis over the estimated lives of buildings, improvements and equipment of up to
40 years.

<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1994 1995 1994 1995
------------ ------------- ---------- ----------
<S> <C> <C> <C> <C>
Depreciation................... $9,011 $ 9,011 $4,506 $4,506
Amounts included in historical
operating results from
February 7, 1995 (inception)
to June 30, 1995............. -- (1,473) -- (1,473)
------ ------ ------ ------
$9,011 $ 7,538 $4,506 $3,033
====== ====== ====== ======
</TABLE>

(Q) Under the terms of the Advisory Agreement, Advisors is paid its fee for
providing investment, management and administrative services to the Company. The
advisory fee is calculated as 0.7% of the first $250,000 of invested assets plus
0.5% of invested assets in excess of $250,000.

<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1994 1995 1995 1995
------------ ------------- ---------- ----------
<S> <C> <C> <C> <C>
Advisory fees.................. $2,149 $ 2,149 $1,075 $1,075
Amounts included in historical
operating results from
February 7, 1995 (inception)
to June 30, 1995............. -- (242) -- (242)
------ ------ ------ ------
$2,149 $ 1,907 $1,075 $ 833
====== ====== ====== ======
</TABLE>

(R) Represents estimated expenses of the Company related to state and local
taxes, legal, accounting and investor relations as detailed below.

<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1994 1995 1994 1995
------------ ------------- ---------- ----------
<S> <C> <C> <C> <C>
State and local taxes.......... $140 $ 140 $ 70 $ 70
Independent Trustees Fees...... 100 100 50 50
Legal fees..................... 60 60 30 30
Accounting fees................ 60 60 30 30
Investor relations............. 40 40 20 20
---- ---- ---- ----
$400 $ 400 $200 $200
==== ==== ==== ====
</TABLE>

These amounts have been estimated by the Company, based on its analysis of
pro forma taxable income or other taxable bases, as appropriate in the states in
which the Company does business, in the case of state and local taxes, and based
on management's experience and/or discussions with service providers, in the
case of other items.

F-8
<PAGE> 109

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Trustees of Hospitality Properties Trust:

We have audited the accompanying balance sheet of Hospitality Properties
Trust as of June 30, 1995, and the related statements of income, shareholder's
equity and cash flows for the period from February 7, 1995 (inception) to June
30, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hospitality Properties Trust
as of June 30, 1995, and the results of its operations and its cash flows for
the period from February 7, 1995 (inception) to June 30, 1995 in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Washington, D.C.
July 20, 1995

F-9
<PAGE> 110

HOSPITALITY PROPERTIES TRUST

BALANCE SHEET

<TABLE>
<CAPTION>
AS OF
JUNE 30, 1995
--------------
(IN THOUSANDS)
<S> <C>
ASSETS
Real estate properties, at cost
Land..................................................................... $ 26,704
Buildings and improvements............................................... 152,004
--------
Total............................................................... 178,708
Less accumulated depreciation............................................ (1,473)
--------
Real estate properties, net......................................... 177,235
Rent receivable............................................................... 40
FF&E Reserve (restricted cash)................................................ 2,539
Other assets.................................................................. 3,954
--------
Total assets........................................................ $183,768
========
LIABILITIES AND SHAREHOLDER'S EQUITY
HRP Loan...................................................................... $163,259
Security Deposit.............................................................. 17,940
Rent received in advance...................................................... 690
--------
Total liabilities................................................... 181,889
--------
Commitments and contingencies
Shareholder's equity:
Preferred Shares of Beneficial Interest, 100,000,000 shares authorized,
none issued............................................................. --
Common Shares of Beneficial Interest, $0.01 par value; 100,000,000 Shares
authorized, 40,000 Shares issued and outstanding........................ --
Additional paid in capital.................................................... 1,000
Retained earnings............................................................. 879
--------
Total shareholder's equity.......................................... 1,879
--------
$183,768
========
</TABLE>

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

F-10
<PAGE> 111

HOSPITALITY PROPERTIES TRUST
STATEMENT OF INCOME

<TABLE>
<CAPTION>
FEBRUARY 7, 1995
(INCEPTION) TO
JUNE 30, 1995
------------------
(IN THOUSANDS)
<S> <C>
Revenues:
Base and percentage rental income....................................... $ 4,874
FF&E Reserve income..................................................... 893
Interest income......................................................... 23
-------
Total revenues..................................................... 5,790
-------
Expenses:
Interest payable to HRP................................................. 3,196
Depreciation............................................................ 1,473
Advisory fees........................................................... 242
-------
Total expenses..................................................... 4,911
-------
Net income................................................................... $ 879
=============
</TABLE>

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

F-11
<PAGE> 112

HOSPITALITY PROPERTIES TRUST

STATEMENT OF SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
FEBRUARY 7, 1995 (INCEPTION)
TO JUNE 30, 1995
-------------------------------------
ADDITIONAL
NUMBER OF PAID IN RETAINED
SHARES CAPITAL EARNINGS
--------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Initial capitalization as of February 7, 1995 (inception).... 40,000 $1,000 $ --
Net income................................................... -- -- 879
------ ------ ---
Balance, June 30, 1995....................................... 40,000 $1,000 $879
====== ====== ===
</TABLE>

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

F-12
<PAGE> 113

HOSPITALITY PROPERTIES TRUST
STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
FEBRUARY 7,
1995
(INCEPTION) TO
JUNE 30, 1995
--------------
(IN THOUSANDS)
<S> <C>
Cash flows from operating activities:
Net income............................................................. $ 879
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation...................................................... 1,473
Change in assets and liabilities:
Increase in rent receivable....................................... (40)
Increase in rent received in advance.............................. 690
---------
Cash provided by operating activities............................. 3,002
---------
Cash flows from investing activities:
Real estate acquisitions............................................... (160,768)
Payment of purchase option............................................. (3,000)
Increase in FF&E Reserve (restricted cash)............................. (2,539)
---------
Cash used for investing activities................................ (166,307)
---------
Cash flows from financing activities:
Issuance of Shares..................................................... 1,000
Payment of offering costs.............................................. (954)
Proceeds of HRP Loan................................................... 163,259
---------
Cash provided by financing activities............................. 163,305
---------
Change in cash.............................................................. --
Cash and cash equivalents at beginning of period............................ --
---------
Cash and cash equivalents at end of period.................................. $ --
=========
</TABLE>

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

F-13
<PAGE> 114

HOSPITALITY PROPERTIES TRUST

NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

NOTE 1. ORGANIZATION

Hospitality Properties Trust (the "Company") was originally incorporated in
the state of Delaware on February 7, 1995. Subsequently, the Company became a
Maryland real estate investment trust and effected a 400-for-1 split of its
common shares of beneficial interest (the "Shares").The Company is a 100% owned
subsidiary of Health and Retirement Properties Trust ("HRP"), which invests in
income producing real estate, primarily hotel and lodging related properties.

Subsequent to the balance sheet date, the Company intends to undertake an
offering of Shares (the "Offering") and certain other transactions that are
expected to result in (i) the Company becoming a publicly traded real estate
investment trust; (ii) the Company's acquisition of 16 additional hotel
properties (together with the 21 properties acquired on March 24, 1995, the
"Initial Hotels"); (iii) repayment of all amounts due to HRP; (iv) borrowings
under a credit facility from an unrelated party; and (v) certain other effects
described below.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Real Estate Properties

Real estate properties are recorded at cost. Depreciation is provided for
on a straight line basis over the estimated useful lives of the properties
ranging up to 40 years.

Restricted Cash

Restricted cash is comprised of funds maintained by the hotel manager on
behalf of the Company to be used for the replacement and refurbishment of the
hotel properties (the "FF&E Reserve," see Note 3).

Revenue Recognition

Rental income from operating leases is recognized on a straight line basis
over the life of the lease agreements. Percentage rent and contributions to the
FF&E Reserve are recognized as rental income as earned.

Income Taxes

The Company intends to qualify as a real estate investment trust under the
Internal Revenue Code of 1986, as amended. Accordingly, the Company expects not
to be subject to federal income taxes on amounts distributed to shareholders
provided it distributes at least 95% of its real estate investment trust taxable
income and meets certain other requirements for qualifying as a real estate
investment trust. The Company is subject to certain state and local taxes on its
income and property.

NOTE 3. REAL ESTATE PROPERTIES

On March 24, 1995, the Company acquired 21 of the Initial Hotels and
related FF&E Reserves for an aggregate purchase price of approximately $179,400
from affiliates of Host Marriott Corporation (the "Sellers") of which $17,940
was retained by the Company as a security deposit. The properties are leased to
a subsidiary ("Host") of Host Marriott Corporation and are managed by a
subsidiary ("Marriott") of Marriott International, Inc. This acquisition was
substantially funded by advances from HRP (the "HRP Loan").

The Company's real estate properties are leased pursuant to long term
operating lease arrangements (the "Leases"). The initial term of the Leases
expires December 31, 2006. Thereafter, the Leases automatically renew for one
seven year term and three consecutive ten year terms, unless Host properly
notifies the Company in accordance with the Leases.

F-14
<PAGE> 115

HOSPITALITY PROPERTIES TRUST

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

Future minimum lease payments ("Base Rent") to be received by the Company
during the initial 12 year term of the Leases as of June 30, 1995 are as
follows:

<TABLE>
<S> <C>
July 1, 1995 through December 31, 1995............... $ 8,970
1996................................................. 17,940
1997................................................. 17,940
1998................................................. 17,940
1999................................................. 17,940
2000................................................. 17,940
Thereafter........................................... 107,640
--------
$206,310
========
</TABLE>

In addition to Base Rent, the Company is entitled to additional rent
("Percentage Rent") based on a percentage of increases in Total Hotel Sales.
Total Hotel Sales represents all revenues and receipts of every kind derived
from guests or other customers related to Marriott's operation of any of the
Initial Hotels and Total Hotel Sales has the same meaning as "Gross Revenues"
under the Initial Leases. Host is also required to pay substantially all
operating costs of the properties. Either Marriott or Host is required to
deposit 5% of Total Hotel Sales into the Company's FF&E Reserve. The FF&E
Reserve may be used by Marriott and Host to maintain the properties in good
working order and repair. If the FF&E Reserve is not available to fund such
expenditures, Host may require the Company to fund such expenditures, in which
case Base Rent will be increased by 10% of the amount so funded.

Under the management agreements with Marriott, secured borrowings by the
Company are limited according to a formula to amounts not less than 70% of the
allocable purchase price of the applicable Initial Hotels.

The Company has an agreement with the Sellers to acquire an additional 16
Initial Hotels for approximately $149,600 and lease them to Host on terms
similar to the Leases. This transaction is expected to be funded with proceeds
from the Company's proposed Offering. The Company has also purchased for $3,000
options to purchase and/or rights of first refusal and rights of first
negotiation to acquire certain additional properties from Host Marriott
Corporation or its affiliates. The cost of this option is included in Other
assets in the accompanying balance sheet. The option agreement expires on
February 29, 2000 and may be extended to August 31, 2002 for an additional
$1,500.

NOTE 4. HRP LOAN

Substantially all of the funding for the acquisition of 21 Initial Hotels
plus closing costs and the cost of the option was provided to the Company by
HRP.

The Company and other subsidiaries of HRP are full and unconditional
guarantors of HRP's obligations for payments of interest and principal (at
maturity or upon acceleration by the lenders) under HRP's revolving credit
facility. The facility matures on March 15, 1998, prior to which there are no
scheduled principal payments. Accordingly, the accompanying financial statements
reflect the pushed down effect of HRP's obligations relative to the amount of
the Company's obligations to HRP. It is expected that upon the completion of the
proposed Offering, the Company will be released from such guarantee obligations
and the HRP Loan will be repaid in full. Interest accrues on the HRP Loan at a
floating rate equal to LIBOR plus 1.25% which, as of June 30, 1995 was
approximately 7.13%, and are due upon demand.

NOTE 5. TRANSACTIONS WITH AFFILIATES

HRP has an agreement with HRPT Advisors, Inc. ("Advisors") whereby Advisors
provides investment, management and administrative services to HRP and the
Company. Advisors is owned by Gerard M. Martin

F-15
<PAGE> 116

HOSPITALITY PROPERTIES TRUST

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

and Barry M. Portnoy. Messrs. Martin and Portnoy are Managing Trustees of HRP.
Mr. Portnoy is also a partner in the law firm which provides legal services to
the Company.

Advisors is compensated at an annual rate equal to 0.7% of HRP's (including
the Company's) average real estate investments up to the first $250,000 of such
investments and 0.5% thereafter. Because the Company is a subsidiary of HRP,
management has allocated $242 of advisory fee expense to the Company, equal to
0.5% of the Company's average real estate investments, for the period from
February 7, 1995 (inception) to June 30, 1995.

Concurrent with the Offering, the Company expects to be party to a separate
agreement with Advisors on substantially the same terms except that for purposes
of calculating compensation to Advisors, average real estate investments will
include investments of the Company on a stand alone basis.

Under the provisions of the Company's Incentive Share Award Plan, 100,000
Common Shares have been reserved for issuance to officers of the Company,
consultants to the Company and Independent Trustees of the Company.

F-16
<PAGE> 117

HMH HPT COURTYARD, INC. (HOST)

PRO FORMA BALANCE SHEET AS OF JUNE 16, 1995 AND
PRO FORMA STATEMENTS OF INCOME
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1994, THE 52 WEEKS ENDED
JUNE 16, 1995 AND THE 24 WEEKS ENDED JUNE 17, 1994 AND JUNE 16, 1995

The following unaudited pro forma balance sheet gives effect the transfer
of certain assets to Host related to the acquisition of certain of the Initial
Hotels by the Company as though such transactions occurred on June 16, 1995.

The following unaudited pro forma statements of income give effect at
January 1, 1994 to: (i) the acquisition of 37 Initial Hotels by the Company; and
(ii) the commencement of the Initial Leases.

The pro forma information is based in part upon the historical statements
of revenues and expenses excluding income taxes of the Initial Hotels and the
historical balance sheet of Host. Such information should be read in conjunction
with all of the financial statements and notes thereto included in this
Prospectus. In the opinion of management, all adjustments necessary to reflect
the effects of the transactions discussed above have been reflected in the pro
forma data.

The following unaudited pro forma data is not necessarily indicative of
what the actual financial position or results of operations for Host would have
been as of the date or for the period indicated, nor does it purport to
represent the financial position or results of operations of Host for future
periods.

F-17
<PAGE> 118

HMH HPT COURTYARD, INC. (HOST)

PRO FORMA BALANCE SHEET

<TABLE>
<CAPTION>
AS OF JUNE 16, 1995
-------------------------------------------------
PRO FORMA
HISTORICAL(A) ADJUSTMENTS PRO FORMA
------------- ----------- ---------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Advances to Marriott............................... $ 2,381 $ 1,277(B) $ 3,658
Prepaid rent....................................... 1,380 1,151(B) 2,531
Security Deposit................................... 17,940 14,960(B)(C) 32,900
------------- ---------
$21,701 $39,089
========== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accrued expenses................................... $ 236 $ 182(B) $ 418
Deferred gain...................................... -- 15,800(B) 15,800
Stockholder's equity:
Common stock.................................. -- -- --
Additional paid in capital.................... 21,451 1,406(B) 22,857
Retained earnings............................. 14 -- 14
------------- ---------
$21,701 $39,089
========== ========
</TABLE>

See notes to pro forma financial statements.

F-18
<PAGE> 119

HMH HPT COURTYARD, INC. (HOST)
PRO FORMA STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 30, 1994
-----------------------------------------------------
INITIAL PRO FORMA
HISTORICAL(D) HOTELS(E) ADJUSTMENTS PRO FORMA
------------- --------- ----------- ---------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C> <C>
Total Hotel Sales(F)............................. $ -- $120,897 $ -- $120,897
======== ======== ======== ========
Revenue(G)....................................... $ -- $ 58,186 $ -- $ 58,186
-------- -------- -------- --------
Expenses:
Base rent(H)................................ -- -- 32,900 32,900
Amortization of deferred gain(I)............ -- -- (1,374) (1,374)
Percentage rent(J).......................... -- -- -- --
FF&E contribution expense(K)................ -- -- 6,045 6,045
Base management fee(L)...................... -- -- 2,418 2,418
Incentive management fee(M)................. -- 2,825 559 3,384
Depreciation and amortization(N)............ -- 13,729 (13,729) --
Other expenses(O)........................... -- 9,672 -- 9,672
-------- -------- -------- --------
Total expenses......................... -- 26,226 26,819 53,045
-------- -------- -------- --------
Income before taxes.............................. -- 31,960 (26,819) 5,141
Provision for income taxes(P).................... -- -- 2,108 2,108
-------- -------- -------- --------
Net income............................. $ -- $ 31,960 $(28,927) $ 3,033
======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
52 WEEKS ENDED JUNE 16, 1995
-----------------------------------------------------
INITIAL PRO FORMA
HISTORICAL(D) HOTELS(E) ADJUSTMENTS PRO FORMA
------------- --------- ----------- ---------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C> <C>
Total Hotel Sales(F)............................. $ 17,076 $ 106,900 $ -- $ 123,976
======== ======== ======== ========
Revenue(G)....................................... $ 8,636 $ 51,998 $ -- $ 60,634
-------- -------- -------- --------
Expenses:
Base rent(H)................................ 4,140 -- 28,760 32,900
Amortization of deferred gain(I)............ -- -- (1,374) (1,374)
Percentage rent(J).......................... 36 -- 118 154
FF&E contribution expense(K)................ 854 -- 5,345 6,199
Base management fee(L)...................... 342 -- 2,138 2,480
Incentive management fee(M)................. 1,063 3,342 370 4,775
Depreciation and amortization(N)............ -- 12,293 (12,293) --
Other expenses(O)........................... 1,800 10,699 (3,000) 9,499
-------- -------- -------- --------
Total expenses......................... 8,235 26,334 20,064 54,633
-------- -------- -------- --------
Income before taxes.............................. 401 25,664 (20,064) 6,001
Provision for income taxes(P).................... 164 -- 2,296 2,460
-------- -------- -------- --------
Net income............................. $ 237 $ 25,664 $ (22,360) $ 3,541
======== ======== ======== ========
</TABLE>

See notes to pro forma financial statements.

F-19
<PAGE> 120

HMH HPT COURTYARD, INC. (HOST)
PRO FORMA STATEMENTS OF INCOME

<TABLE>
<CAPTION>
24 WEEKS ENDED JUNE 17, 1994
----------------------------------------------------------
INITIAL PRO FORMA
HISTORICAL(D) HOTELS(E) ADJUSTMENTS PRO FORMA
-------------- --------- ----------- ---------
(UNAUDITED, IN THOUSANDS)

<S> <C> <C> <C> <C>
Total Hotel Sales(F)........................ $ -- $56,068 $ -- $56,068
========= ======= ========= ========
Revenues(G)................................. $ -- $27,339 $ -- $27,339
--------- --------- --------- --------
Expenses:
Base rent(H)........................... -- 16,450 16,450
Amortization of deferred gain(I)....... -- (634) (634)
Percentage rent(J)..................... -- -- -- --
FF&E contribution expense(K)........... -- -- 2,803 2,803
Base management fee(L)................. -- -- 1,121 1,121
Incentive management fee(M)............ -- 881 (374) 507
Depreciation and amortization(N)....... -- 6,554 (6,554) --
Other expenses(O)...................... -- 5,353 -- 5,353
-------- -------- -------- -------
Total expenses.................... -- 12,788 12,812 25,600
-------- -------- --------- -------
Income before taxes......................... -- 14,551 (12,812) 1,739
Provision for income taxes(P)............... -- -- 713 713
-------- -------- ----------- ---------
Net income........................ $ -- $14,551 $ (13,525) $ 1,026
======== ======= ========= ========
</TABLE>

<TABLE>
<CAPTION>
24 WEEKS ENDED JUNE 16, 1995
----------------------------------------------------------
INITIAL PRO FORMA
HISTORICAL(D) HOTELS(E) ADJUSTMENTS PRO FORMA
-------------- --------- ----------- ---------
(UNAUDITED, IN THOUSANDS)

<S> <C> <C> <C> <C>
Total Hotel Sales(F)........................ $ 17,076 $42,071 $ -- $59,147
====== ====== ====== ======
Revenues(G)................................. $ 8,636 $21,389 $ -- $30,025
------ ------ ------ ------
Expenses:
Base rent(H)........................... 4,140 -- 12,310 16,450
Amortization of deferred gain(I)....... -- -- (634) (634)
Percentage rent(J)..................... 36 -- 118 154
FF&E contribution expense(K)........... 854 -- 2,103 2,957
Base management fee(L)................. 342 -- 841 1,183
Incentive management fee(M)............ 1,063 943 (99) 1,907
Depreciation and amortization(N)....... -- 5,118 (5,118) --
Other expenses(O)...................... 1,800 6,362 (3,000) 5,162
------ ------ ------ ------
Total expenses.................... 8,235 12,423 6,521 27,179
------ ------ ------ ------
Income before taxes......................... 401 8,966 (6,521) 2,846
Provision for income taxes(P)............... 164 -- 1,003 1,167
------ ------ ------ ------
Net income........................ $ 237 $ 8,966 $(7,524) $ 1,679
====== ====== ====== ======
</TABLE>

See notes to pro forma financial statements.

F-20
<PAGE> 121

HMH HPT COURTYARD, INC. (HOST)

NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)

(A) Represents the historical balance sheet of Host as of June 16, 1995.

(B) Reflects the effects of the operating assets that are expected to be
contributed to Host by its affiliates as a result of the consummation of the
sale of 16 Initial Hotels to the Company and the related commencement of the
Initial Leases between Host and the Company and the deferred gain arising from
the sale/leaseback transaction between Host and the Company. The deferred gain
represents the excess of the sales price of the hotels over the net book value
of the hotels and related transaction costs. The deferred gain will be amortized
over the initial term (approximately 12 years) of the Initial Leases.

(D) Reflects the historical operating results of Host.

(E) Reflects the combined historical operating results of the Initial
Hotels for periods prior to the commencement date of the Initial Leases.

(F) Total Hotel Sales represents all revenues and receipts of every kind
derived from guests or other customers related to Marriott's operation of the
Initial Hotels and is presented for the purpose of providing supplemental
information regarding the gross sales volume of the Initial Hotels. See notes to
historical financial statements of the Initial Hotels.

(G) Revenues represents house profit from the Initial Hotels. House profit
represents Total Hotel Sales less property level expenses excluding depreciation
and amortization, Courtyard by Marriott(R) system fee, property taxes,
management fees, ground rent and insurance.

(H) Represents the base rent to be paid by Host to the Company under the
Initial Leases. The Initial Leases require Host to pay an aggregate minimum
annual base rent of $32,900, a pro rata portion of which is due and payable in
advance on the first day of thirteen predetermined accounting periods per year.

(I) Amortization of deferred gains represents adjustments to rent expense
to record the effects of the sale/leaseback transaction between Host and the
Company. Amortization is straight-line over the initial term of the Initial
Leases (twelve years).

(J) Represents percentage rent to be paid by Host to the Company under the
Initial Leases. Percentage rent under the Initial Leases is equal to 5% of the
excess of Total Hotel Sales over 1994 Total Hotel Sales.

<TABLE>
<CAPTION>
FISCAL YEAR 52 WEEKS 24 WEEKS 24 WEEKS
ENDED ENDED ENDED ENDED
DECEMBER 30, JUNE 16, JUNE 17, JUNE 16,
1994 1995 1994 1995
------------ -------- --------- --------
<S> <C> <C> <C> <C>
Total Hotel Sales............... $120,897 $123,976 $56,068 $59,147
1994 Total Hotel Sales.......... 120,897 120,897 56,068 56,068
-------- -------- ------- -------
Excess.......................... $ -- $ 3,079 $ -- $ 3,079
======== ======== ======= =======
Percentage rent................. $ -- $ 154 $ -- $ 154
======== ======== ======= =======
</TABLE>

(K) Represents 5% of Total Hotel Sales which the Initial Leases require
Host to deposit into a Company cash account (the FF&E Reserve) to be available
for the cost of replacements and renovations at the Initial Hotels.

(L) Under the terms of the Management Agreements, Marriott is to be paid
base fees of 2% of Total Hotel Sales. On an historical basis, pursuant to the
terms of certain financial arrangements between Host Marriott Corporation and
Marriott International, Inc. and their respective affiliates, base fees were
waived by Marriott International, Inc. in return for Host Marriott Corporation's
agreement to pay certain other fees upon

F-21
<PAGE> 122

HMH HPT COURTYARD, INC. (HOST)

NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED, IN THOUSANDS)

the sale of or certain refinancings of such facilities (see Note 4 and Note 5 to
the Combined Financial Statements of the Initial Hotels).

(M) Under the terms of the Management Agreements, Marriott is to be paid
50% of available cash flow, as defined, as an incentive management fee.
Available cash flow is defined as Revenues, less base management fees, Courtyard
by Marriott(R) system fee, real and personal property taxes, insurance, ground
rent and a priority amount equal to $32.9 million. The adjustment represents the
increase in incentive management fees that results from the calculation of such
fees on a stand-alone basis for the Initial Hotels versus the allocation method
described in Note 4 to the Combined Financial Statements of the Initial Hotels.

(N) Host has no ownership interest (other than as a lessee) in the real
estate related to the Initial Hotels and, as such, there is no depreciation
expense on a pro forma basis.

(O) Represents Courtyard by Marriott(R) system fee, ground rent and other
expenses for which Host will remain obligated under the Initial Leases. The $3.0
million pro forma adjustment in the 52-week period and the 24-week period ended
June 16, 1995 represents Host Marriott Corporation's adjustment to the carrying
value of one property included in the Initial Hotels to such property's sale
price (as discussed in Note 2 of the Combined Financial Statements of the
Initial Hotels) and is eliminated on a pro forma basis as Host has no ownership
interest (other than as a lessee) in the real estate related to the Initial
Hotels.

(P) Adjustment to reflect the impact of federal and state income taxes
related to the pro forma results of operations of Host, at statutory rates. The
historical amounts exclude an income tax provision, as described in Note 1 to
the combined financial statements of the Initial Hotels.

F-22
<PAGE> 123

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of HMH HPT Courtyard, Inc.:

We have audited the accompanying balance sheet of HMH HPT Courtyard, Inc.
(a Delaware Corporation) ("Host") as of June 16, 1995, and the related
statements of income, shareholder's equity and cash flows for the twelve weeks
then ended. These financial statements are the responsibility of the Host's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Host as of June 16, 1995 and
the results of its operations and its cash flows for the twelve weeks then ended
in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Washington, D.C.
July 13, 1995

F-23
<PAGE> 124

HMH HPT COURTYARD, INC.

BALANCE SHEET

<TABLE>
<CAPTION>
AS OF
JUNE 16, 1995
--------------
(IN THOUSANDS)
<S> <C>
ASSETS
Advances to Manager........................................................... $ 2,381
Prepaid rent.................................................................. 1,380
Other assets.................................................................. 17,940
-------
Total assets........................................................ $21,701
=======
LIABILITIES AND SHAREHOLDER'S EQUITY
Accrued expenses.............................................................. $ 236
Commitments and contingencies
Shareholder's equity:
Common Stock, no par value, 100 shares authorized, issued and
outstanding............................................................. --
Additional paid in capital............................................... 21,451
Retained earnings........................................................ 14
-------
Total liabilities and shareholder's equity.......................... $21,701
=======
</TABLE>

The accompanying notes are an integral part of this balance sheet.

F-24
<PAGE> 125

HMH HPT COURTYARD, INC.

STATEMENT OF INCOME

<TABLE>
<CAPTION>
TWELVE WEEKS
ENDED JUNE
16, 1995
-------------
<S> <C>
Total Hotel Sales (Note 1)..................................................... $17,076
=======
Revenues (Note 1).............................................................. $ 8,636
-------
Expenses:
Base rent................................................................. 4,140
Percentage rent........................................................... 36
FF&E contribution expense................................................. 854
Base management fee....................................................... 342
Incentive management fee.................................................. 1,063
Other expenses............................................................ 1,800
-------
Total expenses....................................................... 8,235
-------
Income before taxes............................................................ 401
Provision for income taxes..................................................... 164
-------
Net income........................................................... $ 237
=======
</TABLE>

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

F-25
<PAGE> 126

HMH HPT COURTYARD, INC.

STATEMENT OF SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
TWELVE WEEKS ENDED JUNE 16, 1995
----------------------------------
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
------ ---------- --------
<S> <C> <C> <C>
Initial capitalization........................................ $-- $ 21,451 $--
Cash transferred to Parent.................................... -- -- (223)
Net income.................................................... -- -- 237
------ ------ ---
Balance, June 16, 1995........................................ $-- $ 21,451 $ 14
====== ====== ===
</TABLE>

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

F-26
<PAGE> 127

HMH HPT COURTYARD, INC.

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
TWELVE WEEKS
ENDED
JUNE 16, 1995
--------------
(IN THOUSANDS)
<S> <C>
Cash flows from operating activities:
Net income................................................................... $ 237
Changes in operating accounts:
Accrued expenses.......................................................... (14)
---------
Cash provided by operations............................................. 223
Cash flows from financing activities:
Cash transferred to Parent................................................... (223)
----------
Increase (decrease) in cash and cash equivalents............................... --
Cash and cash equivalents at beginning of year................................. --
----------
Cash and cash equivalents at end of period..................................... $ --
==========
</TABLE>

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

F-27
<PAGE> 128

HMH HPT COURTYARD, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization and Capitalization

HMH HPT Courtyard, Inc. ("Host") was incorporated in Delaware on February
2, 1995 as a wholly owned indirect subsidiary of Host Marriott Corporation. On
February 2, 1995, Host issued 100 shares of no par common stock to its parent
and sole shareholder ("Parent"), a wholly owned indirect subsidiary of Host
Marriott Corporation. Host had no operations prior to March 24, 1995 (the
"Commencement Date") as a result, the accompanying statements of income, cash
flows and shareholder's equity present activity of Host from the Commencement
Date through June 16, 1995.

On the Commencement Date, affiliates of Host Marriott Corporation (the
"Sellers") sold 21 Courtyard by Marriott(R) hotel properties (the "Hotels") to
Hospitality Properties Trust ("HPT") a wholly owned subsidiary of Health and
Retirement Properties Trust. The Sellers contributed to Host its assets and
liabilities related to the operations of such properties, including working
capital advances to the hotel manager, prepaid rent under leasing arrangements
(the "Leases") and rights to other assets as described in Note 3. Such assets
have been accounted for at the Parent's carryover basis.

Fiscal Year

Host operates on a fiscal year which ends on the Friday closest to December
31. The fiscal year is divided into thirteen accounting periods of four weeks
each and Host's first quarter ended on March 24, 1995.

Hotel Sales and Revenues

Total Hotel Sales are presented in the accompanying statement of income for
the purpose of providing supplemental information regarding the gross sales
volume of the Hotels which is used for purposes of calculating Percentage Rent
(as defined below) and the FF&E Reserve under the Leasees and Management
Agreements (as defined below), respectively (See Note 2). As owner and lessor of
the Hotels, HPT has no interest in the sales and operating results of the
Hotels. Total Hotel Sales represents all revenues and receipts of every kind
derived from guests or other customers related to Marriott's operation of the
Hotels.

Revenues in the accompanying statement of income represent house profit
from the Hotels. House profit represents Total Hotel Sales less property level
expenses excluding depreciation and amortization, system fees, real and personal
property taxes, ground rent, insurance and management fees. The system fees and
management fees presented on the accompanying income statement and the expenses
detailed below represent all the costs incurred directly, allocated or charged
by the Manager (as defined below) to the properties. The detail of total hotel
sales and a reconciliation to revenue follows:

<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
JUNE 16, 1995
------------------
(IN THOUSANDS)
<S> <C>
Hotel sales:
Rooms......................................... $ 15,060
Food and beverage............................. 1,343
Other......................................... 673
-------
Total Hotel Sales........................ 17,076
-------
Expenses:
Departmental direct costs
Rooms (A)..................................... 3,249
Food and beverage (B)......................... 1,065
Other operating departments (C)............... 203
General and administrative (D)................ 1,702
Utilities (E)................................. 577
Repairs, maintenance and accidents (F)........ 691
Marketing and sales (G)....................... 296
Chain services (H)............................ 657
-------
Total expenses........................... 8,440
-------
Revenues........................................... $ 8,636
=======
</TABLE>

F-28
<PAGE> 129

HMH HPT COURTYARD, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<S> <C>
(A) Includes expenses for linen, cleaning supplies, laundry, guest supplies, reservations
costs, travel agents commissions, walked guest expenses and wages, benefits and
bonuses for employees for the rooms department.
(B) Includes costs of food and beverages sold, china, glass, silver, paper, and cleaning
supplies and wages, benefits and bonuses for employees of the food and beverage
department.
(C) Includes expenses related to operating the telephone department.
(D) Includes management and hourly wages, benefits and bonus, credit and collection
expenses, employee relations, guest relations, bad debt expenses, office supplies and
miscellaneous other expenses.
(E) Includes electricity, gas and water at the properties.
(F) Includes cost of repairs and maintenance and the cost of accidents at the properties.
(G) Includes management and hourly wages, benefits and bonuses, promotional expense and
local advertising.
(H) Includes charges from the Manager for Chain Services as allowable under the
Management Agreement.
</TABLE>

NOTE 2. COMMITMENTS AND CONTINGENCIES

The Leases

On the Commencement Date, Host entered into the Leases for 21 Courtyard by
Marriott(R) properties. An additional 16 Courtyard by Marriott(R) hotel
properties are expected to be sold by Sellers to HPT under the terms of an
option agreement entered into by Sellers and HPT and leased to Host under long
term lease arrangements.

The initial term of the Leases expires at the end of fiscal 2006.
Thereafter, the Leases automatically renew for one seven year term and three
consecutive ten year terms, unless Host properly notifies HPT in accordance with
the Leases.

The Leases require Host to pay rents equal to aggregate minimum annual rent
of $17,940,000 ("Base Rent"), and percentage rent equal to 5% of the excess of
Total Hotel Sales as defined over 1994 Total Hotel Sales ("Percentage Rent"). A
pro rata portion of Base Rent is due and payable in advance on the first day of
thirteen predetermined accounting periods. Percentage Rent is due and payable
quarterly in arrears.

The Leases also require Host to make payments when due on behalf of HPT for
real estate taxes and other taxes, assessments and similar charges arising from
or related to the Hotels and their operation, utilities, premiums on required
insurance coverage, rents due under ground and equipment leases and all amounts
due under the terms of the Management Agreements described below. Host is also
required to provide the hotel manager with working capital to meet the operating
needs of the Hotels. The Sellers had previously made such advances related to
the Hotels in the amount of $2,381,000 and transferred their interest in such
amounts to Host on the Commencement Date.

The Leases require Host to escrow, or cause the hotel manager to escrow, an
amount equal to 5% of Total Hotel Sales into an HPT owned reserve (the "FF&E
Reserve"), which amount shall be available for the cost of required replacements
and renovation. Any requirements for funds in excess of amounts in the FF&E
Reserve shall be provided by HPT ("HPT Fundings") at the request of Host. In the
event of HPT Fundings, Base Rent shall be adjusted upward by an amount equal to
10% of HPT Fundings.

F-29
<PAGE> 130

HMH HPT COURTYARD, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Leases require Host to maintain a minimum net worth, as defined, equal
to one year's base rent. For purposes of this covenant, deferred gain is
excluded from the calculation of net worth.

Management Agreements

As part of the sale of the Hotels, the Sellers' rights and obligations
under management agreements (the "Management Agreements") with a subsidiary
("Marriott" or the "Manager") of Marriott International, Inc. with an initial
term expiring in 2013, were transferred to HPT, and the Manager has the option
to extend the agreement on all of the Initial Hotels for up to three 10 year
terms.

The Management Agreements provide that Marriott be paid a system fee equal
to 3% of Total Hotel Sales, a base management fee of 2% of Total Hotel Sales
("Base Management Fee") and an incentive management fee equal to 50% of
available cash flow, not to exceed 20% of operating profit, as defined
("Incentive Management Fee"). Total Hotel Sales represents all revenues and
receipts of every kind derived from guests or other customers related to
Marriott's operation of the Hotels. In addition, Marriott is reimbursed for each
Hotel's pro rata share of the actual costs and expenses incurred in providing
certain services on a central or regional basis to all Courtyard by Marriott(R)
hotels operated by Marriott.

Base Rent is to be paid prior to payment of Base Management Fees and
Incentive Management Fees. To the extent Base Management Fees are so deferred,
they must be paid in future periods. If available cash flow is insufficient to
pay Incentive Management Fees, no Incentive Management Fees are earned by
Marriott.

NOTE 3. OTHER ASSETS

Pursuant to the terms of the agreement for the sale of the Hotels, HPT held
$17,940,000 as a security deposit for the obligations of Host under the Leases
(the "Security Deposit"). The Security Deposit is due upon termination of the
Leases, including renewal terms.

NOTE 4. INCOME TAXES

Host and Host Marriott Corporation are members of a consolidated group for
federal income tax purposes and have agreed that Host will not be responsible
for any tax liability associated with the Security Deposit and, accordingly, no
such deferred tax liability has been reflected in the accompanying balance
sheet.

The components of Host's effective income tax rate follow:

<TABLE>
<S> <C>
Statutory Federal tax rate...................................... 35%
State income tax, net of Federal tax benefit.................... 6
---
41%
==
</TABLE>

There is no difference between the basis of assets and liabilities for income
tax and financial reporting purposes other than for the Security Deposit.

F-30
<PAGE> 131

HMH HPT COURTYARD, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5. OPERATING LEASE COMMITMENTS

Future minimum annual rental commitments for the Leases on the Hotels and
other noncancelable leases entered into by Host, or by Marriott on behalf of
Host, including the ground leases described below, are as follows (in
thousands):

<TABLE>
<CAPTION>
OTHER
LEASES OPERATING
FISCAL YEAR (SEE NOTE 2) LEASES
------------------------------------------------------- ------------ ---------
<S> <C> <C>
1995.............................................. $ 9,660 $ 313
1996.............................................. 17,940 581
1997.............................................. 17,940 569
1998.............................................. 17,940 545
1999.............................................. 17,940 545
Thereafter........................................ 125,580 13,518
------------ ---------
Total minimum lease payments........................... $207,000 $16,071
========== =======
</TABLE>

The land under three of the Hotels is leased from third parties. The ground
leases have remaining terms (including all renewal options) expiring between the
years 2039 and 2041. The ground leases provide for rent based on specific
percentages of certain sales categories subject to minimum amounts. The minimum
rentals are adjusted at various anniversary dates throughout the lease terms, as
defined in the agreements.

F-31
<PAGE> 132

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Owners of the Initial Hotels (as defined in Note 1):

We have audited the accompanying combined statements of assets, liabilities
and net investment and advances of the Initial Hotels, as defined in Note 1, as
of December 30, 1994 and December 31, 1993, and the related combined statements
of revenues and expenses excluding income taxes, and cash flows for each of the
three fiscal years in the period ended December 30, 1994. These financial
statements are the responsibility of Host Marriott Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

The accompanying financial statements have been prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission (for inclusion in the registration statement on Form S-11 of
Hospitality Properties Trust) as described in Note 1 and are not intended to be
a complete presentation of the Initial Hotels' assets, liabilities and net
investment and advances, revenues and expenses or cash flows.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets, liabilities and net investment and
advances of the Initial Hotels as of December 30, 1994 and December 31, 1993,
and their revenues and expenses excluding income taxes, and their cash flows for
each of the three fiscal years in the period ended December 30, 1994, in
conformity with generally accepted accounting principles.

As explained in Note 3 to the combined financial statements, in 1993 the
Initial Hotels changed their method of accounting for assets held for sale.

ARTHUR ANDERSEN LLP

Washington, D.C.
June 21, 1995

F-32
<PAGE> 133

INITIAL HOTELS

COMBINED STATEMENTS OF REVENUES AND EXPENSES EXCLUDING INCOME TAXES
FOR THE FISCAL YEARS ENDED JANUARY 1, 1993, DECEMBER 31, 1993, DECEMBER 30,
1994, AND
THE TWENTY-FOUR WEEKS ENDED JUNE 17, 1994 AND JUNE 16, 1995

<TABLE>
<CAPTION>
TWENTY-FOUR WEEKS
ENDED
FISCAL YEARS ENDED --------------------
-------------------------------- JUNE 17, JUNE 16,
1992 1993 1994 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
(IN THOUSANDS)
Total Hotel Sales (Note 1)................ $103,744 $113,356 $120,897 $56,068 $42,071
======== ======== ======== ======= =======
Revenues (Note 1)......................... $ 41,969 $ 49,850 $ 58,186 $27,339 $21,389
Expenses:
Depreciation and amortization........ 15,548 13,775 13,729 6,554 5,118
Courtyard system fee................. 3,115 3,401 3,627 2,195 1,262
Property taxes....................... 4,370 4,701 3,864 2,089 1,350
Incentive management fee............. -- -- 2,825 881 943
Loss on sale of property............. -- -- -- -- 3,000
Other................................ 2,044 2,303 2,181 1,069 750
-------- -------- -------- ------- -------
Total expenses.................. 25,077 24,180 26,226 12,788 12,423
-------- -------- -------- ------- -------
Revenues over expenses excluding income
taxes before cumulative effect of change
in accounting principle................. 16,892 25,670 31,960 14,551 8,966
Cumulative effect of change in accounting
for assets held for sale................ -- 14,500 -- -- --
-------- -------- -------- ------- -------
Revenues over expenses excluding income
taxes................................... $ 16,892 $ 11,170 $ 31,960 $14,551 $ 8,966
======== ======== ======== ======= =======
Unaudited pro forma data:
Pro forma income tax expense......... $ 6,757 $ 4,468 $ 13,104 $ 5,966 $ 3,676
-------- -------- -------- ------- -------
Pro forma net income after taxes..... $ 10,135 $ 6,702 $ 18,856 $ 8,585 $ 5,290
======== ======== ======== ======= =======
</TABLE>

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

F-33
<PAGE> 134

INITIAL HOTELS

COMBINED STATEMENTS OF ASSETS, LIABILITIES
AND NET INVESTMENT AND ADVANCES

<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 30, JUNE 16,
1993 1994 1995
------------ ------------ -----------
<S> <C> <C> <C>
(UNAUDITED)
(IN THOUSANDS)
ASSETS
Property and equipment, net........................... $326,253 $316,736 $ 132,189
Property improvement fund............................. 697 -- --
Due from Marriott..................................... 229 898 866
Advances to Marriott.................................. 3,658 3,658 1,277
-------- -------- --------
$330,837 $321,292 $ 134,332
======== ======== ========
LIABILITIES AND NET INVESTMENT AND ADVANCES
Accrued expenses...................................... $ 1,023 $ 642 $ 182
Net investment and advances........................... 329,814 320,650 134,150
-------- -------- --------
$330,837 $321,292 $ 134,332
======== ======== ========
</TABLE>

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

F-34
<PAGE> 135

INITIAL HOTELS

COMBINED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JANUARY 1, 1993, DECEMBER 31, 1993, DECEMBER 30,
1994,
AND THE TWENTY-FOUR WEEKS ENDED JUNE 17, 1994 AND JUNE 16, 1995

<TABLE>
<CAPTION>
TWENTY-FOUR
FISCAL YEARS ENDED WEEKS ENDED
---------------------------------- ---------------------
JUNE 17, JUNE 16,
1992 1993 1994 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
(IN THOUSANDS)
Cash flows from operating
activities:
Revenues over expenses,
excluding income taxes....... $ 16,892 $ 11,170 $ 31,960 $ 14,551 $ 8,966
Noncash items:
Depreciation and
amortization............ 15,548 13,775 13,729 6,554 5,118
Loss on sale of
property................ -- -- -- -- 3,000
Cumulative effect of
change in accounting for
assets held for sale.... -- 14,500 -- -- --
Changes in operating accounts:
Due from Marriott.... -- (229) (669) 173 (32)
Advances to
Marriott........... -- (3,658) -- -- --
Accrued expenses..... 236 753 (381) (598) (460)
-------- -------- -------- -------- --------
Cash provided by
operations.............. 32,676 36,311 44,639 20,680 16,592
Cash flows from investing
activities:
Additions to property and
equipment.................... (10,038) (1,461) (4,212) (3,316) (4,103)
Change in property improvement
fund......................... -- (697) 697 (922) --
-------- -------- -------- -------- --------
Cash used in investing
activities.............. (10,038) (2,158) (3,515) (4,238) (4,103)
-------- -------- -------- -------- --------
Cash flows from financing
activities:
Changes in net investment and
advances..................... (22,638) (34,153) (41,124) (16,442) (12,489)
-------- -------- -------- -------- --------
Increase (decrease) in cash and cash
equivalents....................... -- -- -- -- --
Cash and cash equivalents at
beginning of year................. -- -- -- -- --
-------- -------- -------- -------- --------
Cash and cash equivalents at end of
period............................ $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ========
</TABLE>

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

F-35
<PAGE> 136

INITIAL HOTELS

NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE 1. PROPOSED INITIAL PUBLIC OFFERING AND BASIS OF PRESENTATION

Organization

Hospitality Properties Trust (the "Company") is a Maryland real estate
investment trust which has been recently established to acquire, own and lease
hotel properties. The Company intends to operate as a real estate investment
trust under the Internal Revenue Code and is currently a wholly owned subsidiary
of Health and Retirement Properties Trust ("HRP"). The Company plans to issue
shares in an initial public offering (the "Offering").

Basis of Presentation

Host Marriott Corporation ("Host Marriott") or a subsidiary thereof
designed, constructed or acquired certain Courtyard by Marriott(R) Hotels,
including the 37 properties listed below (collectively, the "Initial Hotels"
and, individually, the "Hotel" or "Hotels").

<TABLE>
<CAPTION>
GROUP A HOTELS GROUP B HOTELS
<S> <C>
Phoenix, AZ Camarillo, CA
Scottsdale, AZ Huntington Beach/Fountain Valley, CA
Atlanta Airport North, GA Los Angeles Airport, CA
Atlanta-Cumberland Center, GA San Jose Airport, CA
Atlanta-Jimmy Carter Blvd., GA Wilmington, DE
Atlanta-Midtown, GA Boca Raton, FL
Indianapolis, IN Macon, GA
Danvers, MA Columbia, MD
Foxborough, MA Norwood, MA
Milford, MA Woburn, MA
Lowell, MA Kansas City Airport, MO
Stoughton, MA Fayetteville, NC
Detroit/Auburn Hills, MI Charlotte-University Research Park,
Minneapolis/Eden Prairie, MN NC
South Kansas City, MO Chattanooga, TN
Mahwah, NJ Dallas/Northpark, TX
Raleigh/Durham Airport, NC Milwaukee/Brookfield, WI
Philadelphia Airport, PA
Spartanburg, SC
Fairfax, VA
Bellevue, WA
</TABLE>

All of the Initial Hotels are included in the accompanying financial
statements for all periods presented except: (i) information for 21 Initial
Hotels (Group A) is excluded for the period between March 25, 1995 and June 16,
1995; and (ii) information for the Boca Raton, FL Hotel, which opened in April
1992, is included only from its date of opening.

The Group A Hotels were acquired by the Company on March 24, 1995 for
approximately $179.4 million from affiliates of Host Marriott. As a result, as
of March 24, 1995, the ownership of the Group A Hotel assets are reflected in
the financial statements of the Company and the results of operations of the
Group A Hotels are reflected in the financial statements of a subsidiary
("Host") of Host Marriott. The accompanying financial statements include the
results of operations, financial position and cash flows of the Group A Hotels
through March 24, 1995. Substantially all of the funding for this acquisition
was provided to the Company by HRP as a demand loan. The Group B Hotels are
expected to be acquired by the Company from a subsidiary of Host Marriott for
approximately $149.6 million with a portion of the proceeds of the proposed
Offering. The accompanying financial statements include the results of
operations, financial position and cash flows of the Group B Hotels for periods
prior to the intended sale of Group B Hotels to the Company. All of the Initial

F-36
<PAGE> 137

INITIAL HOTELS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Hotels have been or are expected to be leased by the Company to Host, and
managed by a subsidiary ("Marriott" or the "Manager") of Marriott International,
Inc. The management agreements (the "Management Agreements") described in Note 4
between Host Marriott and Marriott related to the Hotels have been or will be
assigned to the Company.

The Initial Hotels include the buildings, improvements and equipment for
each of the Hotels, the land on which 32 of the Hotels are located and the
leasehold interest in the land under five of the Hotels. Assets and liabilities
of the Initial Hotels have been stated at Host Marriott's historical cost basis.

The accompanying combined financial statements have been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the registration statement on Form S-11 of
Hospitality Properties Trust. The Initial Hotels, for the periods presented,
were a lesser component of Host Marriott, and historically operated as an
integral part of Host Marriott. Host Marriott has not historically allocated or
charged individual units for interest on net advances and no such expenses are
reflected in the accompanying financial statements. The accompanying financial
statements also include no provision or assets or liabilities related to federal
or state income taxes because the Initial Hotels did not pay income taxes and
Host Marriott does not allocate or charge these expenses to its individual
units. Accordingly, the accompanying financial statements are not intended to be
a complete presentation of the Initial Hotel's assets, liabilities and net
investment and advances, revenues and expenses or cash flows.

There are no allocations of interest, taxes, overhead, general and
administrative or other corporate costs made by Host Marriott to the Initial
Hotels. Changes in net investment and advances represent the revenues over
expenses excluding income taxes of the Initial Hotels adjusted for cash
transferred between Host Marriott and the Initial Hotels and, for the
twenty-four weeks ended June 16, 1995, the effects of the transfer of net assets
related to the sale of the Group A Hotels to the Company.

An analysis of the activity in this balance for the three fiscal years
ended December 30, 1994 and the twenty-four weeks ended June 16, 1995 is as
follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Balance January 3, 1992................................................ $358,544
Revenues over expenses excluding income taxes.......................... 16,892
Net cash transferred to Host Marriott.................................. (22,638)
--------
Balance January 1, 1993................................................ 352,798
Revenues over expenses excluding income taxes.......................... 11,170
Net cash transferred to Host Marriott.................................. (34,154)
--------
Balance December 31, 1993.............................................. 329,814
Revenues over expenses excluding income taxes.......................... 31,960
Net cash transferred to Host Marriott.................................. (41,124)
--------
Balance December 30, 1994.............................................. $320,650
--------
Revenues over expenses excluding income taxes.......................... 8,921
Net cash transferred to Host Marriott.................................. (12,489)
Transfer of net assets related to the sale of the Group A Hotels....... (182,932)
---------
Balance June 16, 1995.................................................. $134,150
========
</TABLE>

The average net investment and advances for fiscal years 1992, 1993 and
1994 and the twenty-four weeks ended June 16, 1995, was approximately $360
million, $351 million, $327 million and $279 million, respectively.

F-37
<PAGE> 138

INITIAL HOTELS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Hotel Sales and Revenues

Total Hotel Sales are presented in the accompanying statement of revenues
and expenses excluding income taxes for the purpose of providing supplemental
information regarding the gross sales volume of the Initial Hotels which is used
for purposes of calculating percentage rent and the FF&E Reserve (as defined
below) under the Leases with Host and the Management Agreements, respectively.
As owner and lessor of the Initial Hotels, the Company has no interest in the
sales or operating results of the Initial Hotels. Total Hotel Sales represents
all revenues and receipts of every kind derived from guests or other customers
related to Marriott's operation of the Initial Hotels.

Revenues in the accompanying statement of revenues and expenses excluding
income taxes represent house profit from the Initial Hotels. House profit
represents Total Hotel Sales less property level expenses excluding depreciation
and amortization, system fees, real and personal property taxes, ground rent,
insurance and management fees. The system fees and management fees presented on
the accompanying income statement and the expenses detailed below represent all
the costs incurred directly, allocated or charged by the Manager (as defined
below) to the Initial Hotels. The detail of Total Hotel Sales and a
reconciliation to revenue follows:

FISCAL YEARS ENDED TWENTY-FOUR WEEKS ENDED
---------------------------------- -----------------------
JUNE 17, JUNE 16,
1992 1993 1994 1994 1995
-------- -------- -------- -------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Hotel sales:
Rooms.......................... $ 85,905 $ 95,899 $104,293 $48,007 $36,769
Food and beverage.............. 13,593 12,990 11,702 5,784 3,659
Other.......................... 4,246 4,467 4,902 2,277 1,643
-------- -------- ------- ------ -------
Total Hotel Sales......... 103,744 113,356 120,897 56,068 42,071
Expenses:
Departmental direct costs
Rooms(A)....................... 20,020 21,961 23,074 10,490 8,000
Food and beverage(B)........... 10,859 10,054 9,136 4,449 2,904
Other operating
departments(C)............... 1,389 1,481 1,529 738 475
General and
administrative(D)............ 10,401 12,205 12,095 5,107 3,425
Utilities(E)................... 4,824 5,226 5,042 2,433 1,833
Repairs, maintenance and
accidents(F)................. 6,720 5,381 4,882 2,245 1,748
Marketing and sales(G)......... 2,686 2,437 2,292 1,041 677
Chain services(H).............. 4,876 4,761 4,661 2,226 1,620
-------- -------- ------- ------ -------
Total expenses............ 61,775 63,506 62,711 28,729 20,682
-------- -------- ------- ------ -------
Revenues............................ $ 41,969 $ 49,850 $ 58,186 $27,339 $21,389
======== ======== ======= ====== =======
</TABLE>

---------------
(A) Includes expenses for linen, cleaning supplies, laundry, guest supplies,
reservations costs, travel agents commissions, walked guest expenses and
wages, benefits and bonuses for employees of the rooms department.

(B) Includes costs of food and beverages sold, china, glass, silver, paper,
and cleaning supplies and wages, benefits and bonuses for employees of
the food and beverage department.

F-38
<PAGE> 139

INITIAL HOTELS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(D) Includes management and hourly wages, benefits and bonus, credit and
collection expenses, employee relations, guest relations, bad debt
expenses, office supplies and miscellaneous other expenses.

(E) Includes electricity, gas and water at the properties.

(F) Includes cost of repairs and maintenance and the cost of accidents at
the properties.

(G) Includes management and hourly wages, benefits and bonuses, promotional
expense and local advertising.

(H) Includes charges from the Manager for Chain Services as allowable under
the Management Agreement.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Distribution

On October 8, 1993 (the "Distribution Date"), Marriott Corporation's
operations were divided into two separate companies: Host Marriott and Marriott
International, Inc. On the Distribution Date, Marriott and a subsidiary of Host
Marriott entered into a management agreement (See Note 4 and Note 5), under
which Marriott operates the Hotels. Prior to the Distribution Date, all Hotel
operating activities were performed by Marriott Corporation.

Fiscal Year

The Initial Hotels' fiscal year ends on the Friday nearest to December 31.
The fiscal year is divided into 13 accounting periods of four weeks each.

Property and Equipment

Property and equipment is recorded at cost, including interest and real
estate taxes incurred during development and construction. Replacements and
improvements are capitalized.

Depreciation is computed using the straight line method over the estimated
useful lives of the assets, generally 40 years for buildings and improvements
and three to 10 years for furniture and equipment.

In cases where management is holding for sale particular lodging
properties, Host Marriott assesses impairment based on whether the net
realizable value (estimated sales price less costs of disposal) of each
individual property to be sold is less than the net book value. A lodging
property is considered to be held for sale when Host Marriott has made the
decision to dispose of the property. Otherwise, Host Marriott assesses
impairment of its real estate properties based on whether it is probable that
undiscounted future cash flows from each individual property will be less than
its net book value.

Amortization -- Pre-Opening Costs

Costs of an operating nature incurred prior to opening of the Hotels are
deferred and amortized over twelve months. Amortization expense was $1,752,000
and $94,000 for 1992 and 1993, respectively. Pre-opening costs were fully
amortized in 1993.

Cash and Cash Equivalents

The Initial Hotels consider all highly liquid investments with a maturity
of three months or less at date of purchase to be cash equivalents. Cash and
cash equivalents generated by the Hotels is transferred to Host Marriott.
Operating expenses, capital expenditures and other cash requirements of the
Initial Hotels are paid by Host Marriott and charged directly to the Initial
Hotels.

F-39
<PAGE> 140

INITIAL HOTELS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Interim Financial Statements

The accompanying interim period financial statements are unaudited but, in
the opinion of management, reflect all adjustments (consisting principally of
normal recurring adjustments) necessary for a fair presentation of the results
for the interim periods presented. During the twenty-four weeks ended June 16,
1995 Host Marriott adjusted, in accordance with its accounting policy the
carrying value of one property included in the Initial Hotels by $3 million to
reflect such property's net realizable value based on sales price. Such
adjustment has been classified in the accompanying statement of revenues over
expenses excluding income taxes as a loss on the sale of property for the
twenty-four week period ended June 16, 1995. The results for the interim periods
are not necessarily indicative of the results to be obtained for the full fiscal
year due to the seasonal nature of the Initial Hotels' business.

New Statement of Financial Accounting Standards

The Initial Hotels are required to adopt Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of" no later than their fiscal year
ending December 28, 1996. Management anticipates that adoption of SFAS No. 121
will not have a material effect on the Initial Hotels' financial statements.

Unaudited Pro Forma Data

The accompanying statement of revenues and expenses excluding income taxes
and Note 7 present unaudited pro forma income taxes for each period presented
based upon the effective Federal and state tax rates of 40%, 40% and 41% for
fiscal years 1992, 1993, 1994 respectively.

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1993 1994
------------ ------------
<S> <C> <C>
Land and land improvements.......................... $ 70,935 $ 71,014
Buildings and leasehold improvements................ 250,321 251,149
Furniture and equipment............................. 47,912 49,706
Construction in progress............................ 129 666
-------- --------
369,297 372,535
Less accumulated depreciation....................... 43,044 55,799
-------- --------
Property and equipment, net......................... $326,253 $316,736
======== ========
</TABLE>

Most hotels developed by Host Marriott since the early 1980s were reported
as assets held for sale prior to 1992. In early 1992, Host Marriott decided it
was no longer appropriate to view sales of lodging properties, subject to
operating agreements, as a primary means of long term financing. Accordingly,
Host Marriott discontinued classification of these properties as assets held for
sale.

Following discussions with the Staff of the Securities and Exchange
Commission, in the second quarter of 1993 Host Marriott changed its method of
determining net realizable value of assets held for sale. Host Marriott
previously determined net realizable value of such assets on an aggregate basis,
in the case of Courtyard by Marriott(R) hotels. Beginning in the second fiscal
quarter of 1993 and thereafter, under Host Marriott's new accounting policy, net
realizable value of all assets held for sale is determined on a property by
property basis. The cumulative pretax effect of this change on periods prior to
the second quarter of 1993 of $14.5 million is reflected as a cumulative effect
of a change in accounting for assets held for sale in the accompanying combined
statement of revenues and expenses, excluding income taxes, for the fiscal year

F-40
<PAGE> 141

INITIAL HOTELS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

ended December 31, 1993. The reduction in the annual depreciation charge as a
result of this change was approximately $295,000.

NOTE 4. MANAGEMENT AGREEMENTS

Subsequent to the Distribution Date, Marriott operates the Initial Hotels
pursuant to long term management agreements with initial terms expiring in 2013.
The Management Agreements provide for a Courtyard by Marriott(R) system fee
equal to 3% of Total Hotel Sales. In addition, Marriott is reimbursed for each
Hotel's pro rata share of the actual costs and expenses incurred in providing
certain services ("Chain Services") on a central or regional basis to all hotels
operated by Marriott. Chain Services are included in other property level
operating expenses, a reduction in deriving revenues (See Note 1 -- Hotel Sales
and Revenues). These arrangements regarding the Courtyard by Marriott(R) system
fee and Chain Services existed prior to the Distribution Date and as such, for
the three fiscal years ended December 30, 1994, the Initial Hotels paid a
Courtyard by Marriott(R) system fee of $3,115,000, $3,401,000 and $3,627,000 and
reimbursed Marriott for $4,876,000, $4,761,000 and $4,661,000 of Chain Services.

In addition, Marriott is entitled to an incentive management fee equal to
50% of available cash flow, not to exceed 20% of operating profit, as defined,
calculated on a combined basis for all Courtyard by Marriott(R) hotels owned by
Host Marriott. Available cash flow is defined as revenues less base management
fees, Courtyard by Marriott(R) system fee, property taxes, other expenses and a
stated annual priority amount. Incentive management fees were not earned by
Marriott except in fiscal 1994 due to the fact that there was no available cash
flow, as defined. The total incentive management fees paid by Host Marriott in
fiscal 1994 has been allocated to the Initial Hotels in the accompanying
financial statements based on Total Hotel Sales. For the fiscal year ended
December 30, 1994, incentive management fees of $2,825,000 were earned by
Marriott, allocated to the Initial Hotels, and paid in January 1995. No
incentive management fees were earned or paid for the period from the
Distribution Date through December 31, 1993.

The Management Agreements provided that Marriott was to be entitled to a
base fee equal to 2% of Total Hotel Sales. However, this fee has been waived as
more fully described in Note 5, below.

Host Marriott is required to provide Marriott with working capital to meet
the operating needs of the Hotels. Marriott as the manager converts cash
advanced by Host Marriott into other forms of working capital consisting
primarily of operating cash, inventories, and trade receivables and payables
which are maintained and controlled by MII. The individual components of working
capital controlled by Marriott are not reflected in the accompanying combined
statement of assets, liabilities and net investment and advances (see Note 1).
As of December 30, 1994, $3,658,000 has been advanced to Marriott for working
capital.

The Management Agreements provided for the establishment of a property
improvement fund (the "FF&E Reserve") for the Hotels. Contributions to the FF&E
Reserve are 5% of Total Hotel Sales, beginning on the Distribution Date.
Contributions to the FF&E Reserve from the Distribution Date through December
31, 1993 were $1,873,000 and for the fiscal year ended December 30, 1994 were
$6,249,000. For the twenty-four weeks ended June 16, 1995, contributions were
approximately $2,724,000 (unaudited).

During 1994, the Management Agreements were amended and $2,540,000,
representing the entire then remaining balance of the FF&E Reserve, was returned
to Host Marriott. It was also agreed that future contributions (until the time
of sale of any of the Initial Hotels) would be retained by Host Marriott and
advanced to the Initial Hotels at such time as improvements are made to the
properties. Such amounts have been included in the change in net investment and
advances in the accompanying combined statement of cash flows. As of June 16,
1995, the FF&E Reserve balance was approximately $1,329,000 (unaudited).

F-41
<PAGE> 142

INITIAL HOTELS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5. CONSOLIDATION AGREEMENT

The Initial Hotels are subject to the terms of a consolidation agreement
("Consolidation Agreement") between Host Marriott and Marriott International,
Inc. pursuant to which (i) incentive fees payable under the Management
Agreements are determined on a consolidated basis for all lodging facilities of
the same type and (ii) base fees payable under the Management Agreements are
waived in return for payment upon the sale of or certain refinancings of such
facilities and as such, no base management fees expense (equal to 2% of Total
Hotel Sales) is reflected in the accompanying statements of revenues over
expenses excluding income taxes.

After the sale of any of the Initial Hotels, the Consolidation Agreement
will no longer be applicable to the Initial Hotels and as such, base fees equal
to 2% of Total Hotel Sales will be payable under the Management Agreements after
the sale of the Initial Hotels.

NOTE 6. LEASES

Future minimum annual rental commitments for all noncancelable leases
entered into by Host Marriott, or by Marriott on behalf of Host Marriott,
including the ground leases described below, are as follows (in thousands):

<TABLE>
<CAPTION>
OPERATING
FISCAL YEAR LEASES
---------
<S> <C>
1995............................................. $ 1,226
1996............................................. 1,226
1997............................................. 1,199
1998............................................. 972
1999............................................. 972
Thereafter....................................... 23,622
---------
Total minimum lease payments.......................... $29,217
=======
</TABLE>

The Initial Hotels lease the land under three of the Group A Hotels and two
of the Group B Hotels under ground lease agreements with third parties. The
ground leases have remaining terms (including all renewal options) expiring
between the years 2039 and 2067. The ground leases provide for rent based on
specific percentages of certain sales categories subject to minimum amounts. The
percentage are adjusted at various anniversary dates throughout the lease terms,
as defined in the agreements.

NOTE 7. PRO FORMA RESULTS OF OPERATIONS

As discussed in Note 1, all the 21 Group A Hotel assets were acquired by
the Company on March 24, 1995. Assuming that such transaction was consummated as
of January 1, 1994, the pro forma condensed results of operations of the Initial
Hotels (which include 16 Group B Hotels only) are set forth below:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 30, TWENTY-FOUR WEEKS TWENTY-FOUR WEEKS
1994 ENDED JUNE 17, 1994 ENDED JUNE 16, 1995
------------ ------------------- -------------------
<S> <C> <C> <C>
Total hotel sales............................... $ 50,508 $23,743 $25,451
======== ====== ======
Revenues........................................ $ 25,966 $11,933 $12,665
Depreciation expense............................ (6,965) (2,830) (3,618)
Other expenses.................................. (6,321) (2,476) (5,606)
-------- ------ ------
Revenues over expenses excluding income taxes... 12,680 6,627 3,441
Pro forma income tax expense (Note 2)........... (5,199) (2,717) (1,411)
-------- ------ ------
Pro forma net income after tax.................. $ 7,481 $ 3,910 $ 2,030
======== ====== ======
</TABLE>

F-42
<PAGE> 143

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Owners of the Initial Hotels:

We have audited in accordance with generally accepted auditing standards
the financial statements of the Initial Hotels (as defined in Note 1 of those
financial statements) included in this prospectus and have issued our report
thereon dated June 21, 1995. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule on pages F-44 and
F-45 is the responsibility of Host Marriott Corporation's management and is
presented for the purpose of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Washington, D.C.
June 21, 1995

F-43
<PAGE> 144

SCHEDULE III
Page 1 of 2

INITIAL HOTELS
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 30, 1994
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT
INITIAL COSTS DECEMBER 30, 1994
-------------------- SUBSEQUENT --------------------
BUILDINGS & COSTS BUILDINGS &
DESCRIPTION DEBT LAND IMPROVEMENTS CAPITALIZED LAND IMPROVEMENTS TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Courtyard......................... -- $71 $246 $6 $71 $251 $322

DATE OF ACQUISITION
ACCUMULATED OR COMPLETION OF DEPRECIATION
DESCRIPTION DEPRECIATION CONSTRUCTION LIFE
<S> <C> <C> <C>
Courtyard......................... $ (27) 1987-1992 40
</TABLE>

The accompanying notes are an integral part of this schedule.

F-44
<PAGE> 145

SCHEDULE III
Page 2 of 2

INITIAL HOTELS
REAL ESTATE AND ACCUMULATED DEPRECIATION -- NOTES TO SCHEDULE
DECEMBER 30, 1994
(IN THOUSANDS)

NOTES:

(A) The change in total cost of properties for the year ended December 30, 1994
is as follows:

<TABLE>
<S> <C>
Balance at December 31, 1993........................................ $321,256
Additions: Capital expenditures..................................... 1,573
--------
Balance at December 30, 1994........................................ $322,829
========
</TABLE>

(B) The change in accumulated depreciation and amortization for the year ended
December 30, 1994 is as follows:

<TABLE>
<S> <C>
Balance at December 31, 1993........................................ $ 20,536
Depreciation and amortization.................................. 6,528
--------
Balance at December 30, 1994........................................ $ 27,064
========
</TABLE>

F-45
<PAGE> 146

[Six photographs of five different properties and one Marriott Courtyard sign.]

<PAGE> 147

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.............................. 1
Risk Factors.................................... 14
The Company..................................... 25
Use of Proceeds................................. 26
Distribution Policy............................. 27
Capitalization.................................. 29
Dilution........................................ 30
Pro Forma and Selected Financial and Operating
Data.......................................... 31
Management's Discussion and Analysis of
Financial
Condition and Results of Operations............. 34
The Initial Hotels.............................. 39
Business........................................ 44
The Initial Lessee.............................. 50
The Initial Leases.............................. 50
The Manager..................................... 55
The Management Agreements....................... 55
Management...................................... 59
Advisors and the Advisory Agreement............. 61
Policies with Respect to Certain Activities..... 64
Description of the Shares....................... 66
Summary of the Declaration of Trust............. 67
Principal Shareholders.......................... 72
Shares Eligible for Future Sale................. 73
Federal Income Tax Considerations............... 74
Certain United States Tax Considerations for
Non-U.S. Holders of Shares.................... 82
ERISA Plans, KEOGH Plans and Individual
Retirement Accounts........................... 84
Underwriting.................................... 87
Experts......................................... 88
Legal Matters................................... 88
Additional Information.......................... 88
Glossary........................................ 90
Index to Financial Statements................... F-1
------------------
UNTIL , 1995 (25 DAYS AFTER THE
COMMENCEMENT OF THIS OFFERING), ALL DEALERS EFFECTING
TRANSACTIONS IN THE SHARES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
</TABLE>

7,500,000 SHARES

HOSPITALITY PROPERTIES TRUST

COMMON SHARES OF
BENEFICIAL INTEREST
--------------------

PROSPECTUS
--------------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

DEAN WITTER REYNOLDS INC.

PRUDENTIAL SECURITIES INCORPORATED

SMITH BARNEY INC.

, 1995

PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table itemizes the expenses incurred by the Registrant in
connection with the offering of the Shares being registered. All the amounts
shown are estimates except the Securities and Exchange Commission registration
fee, the National Association of Securities Dealers, Inc. fee and the New York
Stock Exchange listing fee.

<TABLE>
<CAPTION>
ITEM AMOUNT
<S> <C>
SEC Registration Fee.............................................. $ 118,776
NASD Fee.......................................................... 30,500
New York Stock Exchange Listing Fee............................... 109,975
Transfer Agent's and Registrar's Fees............................. 40,000
Printing and Engraving Fees....................................... 125,000
Legal Fees and Expenses (other than Blue Sky)..................... 750,000
Accounting Fees and Expenses...................................... 333,000
Blue Sky Fees and Expenses (including fees of counsel)............ 50,000
Miscellaneous Expenses............................................ 24,999
----------
Total................................................... $1,582,250
=========
</TABLE>

ITEM 31. SALES TO SPECIAL PARTIES.

See Item 32.

ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.

On February 7, 1995, the Company was initially capitalized through the
issuance of 100 Shares to HRP for an aggregate cash contribution of $1.0
million. The Company was initially organized as a Delaware corporation and
subsequently merged on May 12, 1995 with a Maryland real estate investment trust
and effected a 400-for-1 stock split for each outstanding Share. HRP is
currently the sole shareholder of the Company. The 40,000 Shares currently
outstanding were purchased for investment for the purpose of organizing the
Company. Concurrently with the offering of Shares pursuant to this Registration
Statement, the Registrant will sell 3,960,000 Shares to HRP in exchange for the
cancellation of $99 million of indebtedness of the Company and 250,000 shares to
Advisors for $6.25 million. The Registrant believes that the issuance and sale
of such securities are exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.

ITEM 33. INDEMNIFICATION OF TRUSTEES AND OFFICERS.

The Trustees and officers of the Company are and will be indemnified
against certain liabilities in accordance with Sections 8-301(15) and 2-418 of
the Corporations and Associations Articles of the Annotated Code of Maryland and
the Company's Declaration of Trust (the "Company Declaration"). Certain
provisions of the Company Declaration permit the Company to indemnify its
Trustees and officers and persons serving in other capacities for or on its
behalf 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 such person serving as a Trustee, officer or in
certain other capacities unless it is established that (i) the act or omission
of the Trustee or officer was material to the matter giving rise to the
proceeding and (x) was committed in bad faith or (y) was the result of active
and deliberate dishonesty, (ii) the Trustee or officer actually received an
improper personal benefit in money, property or services or (iii) in the case of
any criminal proceeding, the Trustee or officer had reasonable cause to believe
that the act or omission was unlawful.

The form of Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement will provide for the reciprocal indemnification by the
Underwriters of the Registrant, and its Trustees, officers and controlling

II-1
<PAGE> 149

persons, and by the Registrant of the Underwriters, and their respective
directors, officers and controlling persons, against certain liabilities under
the Securities Act.

ITEM 34. TREATMENT OF PROCEEDS FROM SHARES BEING REGISTERED.

The consideration to be received by the Company for the Shares registered
will be credited to the appropriate capital stock account.

ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements

Reference is made to Page F-1 of the Prospectus filed as part of this
Registration Statement.

(b) Financial Statement Schedule III (included at Page F-44 and F-45 of the
Prospectus filed as part of this Registration Statement).

All Schedules other than those indicated above have been omitted as the
required information is either not applicable or presented in the financial
statements or related notes thereto.

A list of exhibits included as part of this Registration Statement is set
forth in the Index to Exhibits which immediately precedes such exhibits.

ITEM 36. UNDERTAKINGS.

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, 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 Securities Act of 1933, as amended, 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 Trustee, officer
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Trustee, 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 of whether
such indemnification is against public policy as expressed in the Securities Act
of 1933, as amended, and will be governed by the final adjudication of such
issue.

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, as amended, 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 of 1933, as amended, 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, as amended, 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-2
<PAGE> 150

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-11 and has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, State of California on August 11,
1995.

HOSPITALITY PROPERTIES TRUST

/S/ JOHN G. MURRAY

By: ................................

JOHN G. MURRAY, TREASURER

& CHIEF FINANCIAL OFFICER

(PRINCIPAL ACCOUNTING AND
FINANCIAL OFFICER)

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following person in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
NAME POSITION DATE
<C> <S> <C>
/S/ GERARD M. MARTIN* President and Managing Trustee August 11, 1995
........................................ (Principal Executive Officer)
GERARD M. MARTIN

/S/ JOHN G. MURRAY Treasurer & Chief Financial August 11, 1995
........................................ Officer (Principal Accounting
JOHN G. MURRAY and Financial Officer)

/S/ BARRY M. PORTNOY* Managing Trustee August 11, 1995
........................................
BARRY M. PORTNOY
</TABLE>

/S/ JOHN G. MURRAY

*By ..............................

JOHN G. MURRAY,
ATTORNEY-IN-FACT

II-3
<PAGE> 151

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DOCUMENT DESCRIPTION PAGE NO.
<C> <S> <C> <C>
1.1** -- Form of Underwriting Agreement......................................
3.1** -- Declaration of Trust of the Registrant..............................
3.2** -- Bylaws of the Registrant............................................
4.1 -- Form of Share Certificate...........................................
5.1 -- Opinion of Sullivan & Worcester.....................................
5.2 -- Opinion of Piper & Marbury..........................................
8.1 -- Opinion of Sullivan & Worcester as to certain tax matters...........
10.1** -- Purchase-Sale and Option Agreement dated as of February 3, 1995 by
and among HMH Courtyard Properties, Inc., HMH Properties, Inc. and
Hospitality Properties, Inc., as amended............................
10.2** -- Form of Courtyard Management Agreement between HMH Courtyard
Properties, Inc., d/b/a HMH Properties, Inc. and Courtyard
Management Corporation..............................................
10.3** -- Form of First Amendment to Courtyard Management Agreement between
Courtyard Management Corporation and Hospitality Properties, Inc.
and Consolidation Letter Agreement by and between Courtyard
Management Corporation and Hospitality Properties, Inc..............
10.4** -- Form of Lease Agreement between Hospitality Properties, Inc. and HMH
HPT Courtyard, Inc..................................................
10.5** -- Form of Assignment and Assumption of Leases, Contracts and
Agreements in favor of Hospitality Properties, Inc..................
10.6 -- Form of Advisory Agreement..........................................
10.7 -- Form of Acquisition Line Credit Agreement...........................
10.8 -- Hospitality Properties Trust 1995 Incentive Share Award Plan........
23.1 -- Consent of Arthur Andersen LLP......................................
23.2** -- Consents of Proposed Trustees, Arthur Koumantzelis and John
Harrington..........................................................
23.3** -- Consent of Proposed Trustee, William J. Sheehan.....................
23.4 -- Consent of Sullivan & Worcester (to be included in Exhibit 5.1 to
this Registration Statement)........................................
23.5 -- Consent of Piper & Marbury (to be included in Exhibit 5.2 to this
Registration Statement).............................................
24.1** -- Power of Attorney...................................................
</TABLE>

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

** Previously filed.

<PAGE> 1
EXHIBIT 4.1
[FACE OF CERTIFICATE]

Temporary Certificate-Exchangeable for Definitive Engraved Certificate
When Available for Delivery

HOSPITALITY PROPERTIES TRUST

A MARYLAND REAL ESTATE INVESTMENT TRUST

COMMON SHARES COMMON SHARES
$.01 PAR VALUE $.01 PAR VALUE
THIS CERTIFICATE IS TRANSFERABLE CUSIP 44106M 10 2
IN BOSTON OR IN NEW YORK CITY SEE REVERSE FOR CERTAIN DEFINITIONS

THIS CERTIFIES THAT

IS THE REGISTERED HOLDER OF

FULLY PAID AND NONASSESSABLE COMMON SHARES OF BENEFICIAL INTEREST IN

Hospitality Properties Trust (the "Trust"), a Maryland Real Estate Investment
Trust established by Declaration of Trust made as of May 12, 1995, as amended
from time to time, a copy of which, together with all amendments thereto (the
"Declaration") is on file with the Maryland Department of Assessments and
Taxation. The provisions of the Declaration are hereby incorporated in and made
a part of this certificate as fully as if set forth herein in their entirety, to
all of which provisions the holder and every transferee or assigned hereof by
accepting or holding the same agrees to be bound. See reverse for existence of
trustees' authority to determine rights and preferences of subsequent series of
stock, and of restrictions on transfer provisions governing the shares
represented by this certificate. This certificate and the shares represented
hereby are negotiable and transferable on the books of the Trust by the
registered holder hereof in person or by attorney upon surrender of this
certificate properly endorsed or assigned to the same extent as a stock
certificate and the shares of a Maryland business corporation. This certificate
is issued by the Trustees of Hospitality Properties Trust, acting not
individually but as such Trustees, and is not valid until countersigned by the
Transfer Agent and registered by the Registrar.

Witness the facsimile seal of the Trust and the facsimile signature of
its duly authorized representative.

Dated:

Countersigned and Registered: [SEAL]
STATE STREET BANK AND TRUST COMPANY
(Boston) Transfer Agent
and Registrar
By /s/ Gerard M. Martin
Authorized Signature President

THE DECLARATION OF TRUST PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST"
REFERS TO THE TRUSTEES UNDER THE DECLARATION OF TRUST, COLLECTIVELY, AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND NO TRUSTEE, SHAREHOLDER,
EMPLOYEE OR AGENT OF THE TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY
OR SEVERALLY, IN CONNECTION WITH THIS INSTRUMENT. ALL PERSONS DEALING WITH THE
TRUST IN ANY WAY SHALL LOOK ONLY TO THE ASSETS OF THE TRUST FOR PAYMENT OF ANY
SUM OR PERFORMANCE OF ANY OBLIGATION.

<PAGE> 2
[REVERSE OF CERTIFICATE]
HOSPITALITY PROPERTIES TRUST

REFERENCE IS MADE TO THE DECLARATION OF TRUST OF THE TRUST FOR A FULL STATEMENT
OF ALL THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF EACH
CLASS OR SERIES OF SHARES THAT THE TRUST IS AUTHORIZED TO ISSUE, THE
VARIATIONS IN THE RELATIVE RIGHTS AND PREFERENCES OF ANY PREFERRED OR SPECIAL
CLASS OR SERIES OF SHARES, TO THE EXTENT THEY HAVE BEEN FIXED AND DETERMINED,
AND THE AUTHORITY OF THE TRUSTEES TO FIX AND DETERMINE THE RELATIVE RIGHTS AND
PREFERENCES OF SUBSEQUENT SERIES. ANY SUCH STATEMENT SHALL BE FURNISHED
WITHOUT CHARGE ON REQUEST TO THE TRUST AT ITS PRINCIPAL PLACE OF BUSINESS OR
REGISTERED OFFICE.

IF NECESSARY TO EFFECT COMPLIANCE BY THE TRUST WITH REQUIREMENTS OF THE INTERNAL
REVENUE CODE RELATING TO REAL ESTATE INVESTMENT TRUSTS, OWNERSHIP OF THE SHARES
MAY BE RESTRICTED BY THE TRUST AND/OR THE TRANSFER THEREOF MAY BE PROHIBITED ALL
UPON THE TERMS AND CONDITIONS SET FORTH IN THE DECLARATION OF TRUST. THE TRUST
WILL FURNISH A COPY OF SUCH TERMS AND CONDITIONS TO THE REGISTERED HOLDER OF
THIS CERTIFICATE UPON REQUEST AND WITHOUT CHARGE.

<TABLE>
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - __________Custodian__________
(Cust) (Minor)
under Uniform Gifts to Minors
TEN ENT - as tenants by the entireties

JT TEN - as joint tenants with right Act________________________
of survivorship and not as (State)
tenants in common

Additional abbreviations may also be used though not in the above list.
</TABLE>

For value received_____________________________ hereby sell, assign and
transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF NEW OWNER
--------------------------------------------

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

--------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE.
--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------
Shares of Beneficial Interest represented by the within Certificate, and do
hereby irrevocably constitute and appoint
______________________________________________________Attorney to transfer the
said shares on the books of the within-named Trust with full power of
substitution in the premises.

Dated:_______________________________

(Sign here) ______________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF
THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OF ENLARGEMENT OR ANY CHANGE WHATEVER.

<PAGE> 1
EXHIBIT 5.1

SULLIVAN & WORCESTER
One Post Office Square
Boston, Massachusetts 02109

August 11, 1995

Hospitality Properties Trust
400 Centre Street
Newton, MA 02158

Ladies and Gentlemen:

In connection with the registration by Hospitality Properties Trust, a
Maryland real estate investment trust (the "Company"), of 7,500,000 Common
Shares of Beneficial Interest, $.01 per share, of the Company (the "Shares"),
the following opinion is furnished to you to be filed with the Securities and
Exchange Commission as Exhibit 5.1 to the Company's Registration Statement (the
"Registration Statement") on Form S-11, File No. 33-92330, under the Securities
Act of 1933, as amended (the "Act").

We have acted as counsel for the Company in connection with preparation
of the Registration Statement, and we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Registration
Statement, the draft Underwriting Agreement among the Company and Donaldson,
Lufkin & Jenrette Securities Corporation, Prudential Securities Incorporated,
Dean Witter Reynolds Inc. and Smith Barney Inc., as representatives of the
underwriters, filed as Exhibit 1.1 to the Registration Statement (the
"Underwriting Agreement"), corporate records, certificates and statements of
officers and accountants of the Company and of public officials, and such other
documents as we have considered necessary in order to furnish the opinion
hereinafter set forth. We have further assumed that the Share price will be
determined by the pricing committee of the Board of Trustees of the Company in
accordance with the parameters established by the Board of Trustees.

We are members of the bar of The Commonwealth of Massachusetts.
Accordingly, we do not purport to be expert on or generally familiar with and
we express no opinion with respect to the laws of any state other than The
Commonwealth of Massachusetts or of any country other than The United States of
America. We have, with your consent, rendered our opinions herein in regard to
certain matters of Maryland law relating to the Shares solely in reliance on,
and solely to the extent covered by, the opinion of Piper & Marbury, a copy of
which is attached hereto.

<PAGE> 2

Hospitality Properties Trust
August 11, 1995
Page 2

Based on and subject to the foregoing, we are of the opinion that, when
the Registration Statement has become effective under the Act, upon issuance
and delivery of certificates for the Shares to the underwriters against payment
therefor in accordance with the determination of the pricing committee of the
Board of Trustees and the terms of the Underwriting Agreement, the Shares will
be duly authorized, validly issued, fully paid and non-assessable by the
Company, with no personal liability attaching to the holders of the Shares
except as described in the Registration Statement.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Prospectus
forming a part of the Registration Statement. In giving such consent, we do
not thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Act or under the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.

Very truly yours,

/s/ SULLIVAN & WORCESTER

<PAGE> 1
Exhibit 5.2

PIPER & MARBURY
Charles Center South
36 South Charles Street
Baltimore, MD 21201

August 11, 1995

Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109

Re: Offering of Common Shares of Beneficial
Interest of Hospitality Properties Trust

Ladies and Gentlemen:

Hospitality Properties Trust, a Maryland real estate investment trust (the
"Company"), has filed with the Securities and Exchange Commission a Registration
Statement on Form S-11 (Registration No. 33-92330) and amendments thereto (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"). The Registration Statement relates to the sale by the Company of an
aggregate of 7,500,000 shares of the Company's common shares of beneficial
interest, par value $0.01 per share, plus an additional 1,125,000 common shares
of beneficial interest, par value $0.01 per share, subject to the exercise of an
over-allotment option to be granted by the Company (collectively, the "Shares").

We have acted as special Maryland counsel to the Company in connection with
matters of Maryland law relevant to the preparation of the Registration
Statement and we have examined originals or copies, certified or otherwise
identified to our satisfaction, of (i) the Declaration of Trust of the Company
dated May 12, 1995; (ii) By-laws of the Company, as amended; (iii) copies of
resolutions of the Board of Trustees of the Company authorizing the offering and
issuance of the Shares and related matters; (iv) the form of underwriting
agreement among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Dean Witter Reynolds Inc., Prudential Securities Incorporated and
Smith Barney Inc., as representatives of the underwriters (the "Underwriters"),
filed as Exhibit 1.1 to the Registration Statement (the "Underwriting
Agreement"); (v) the Registration Statement and all exhibits thereto; (vi) the
Certificate of Good Standing issued by the Maryland State Department of
Assessments and Taxation dated August 4, 1995; (vi) the Officer's Certificate of
the Company dated the date hereof (the "Certificate"), and (viii) such other
documents as we have considered necessary in order to furnish the opinion
hereinafter set forth.

In such examination we have assumed, without independent investigation, the
genuineness of all signatures, the legal capacity of all individuals who have
executed any of the aforesaid documents, the authenticity of all documents
submitted to us as originals, and the conformity with originals of all documents
submitted to us as copies (and the authenticity of the originals of such copies)
and the accuracy and completeness of all public records reviewed. We have
assumed that all representations as to factual matters set forth in the
Certificate are true and correct, and we have not independently verified the
matters stated therein.

The opinions expressed below are limited to the law of Maryland, provided,
however, that we express no opinion as to the application of Maryland securities
laws.

Based upon the foregoing, we are of the opinion that the Shares to be
issued by the Company in the offering, as described in the Registration
Statement, have been duly and validly authorized for issuance, and, when the
Registration Statement has become effective under the Act, upon issuance and
delivery of the Shares to the Underwriters against payment therefor in
accordance with the terms of the Underwriting Agreement, the Shares will be
validly issued, fully paid and non-assessable by the Company.
<PAGE> 2

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the prospectus forming part of the Registration Statement. In giving
such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Act under the rules and
regulations of the Securities and Exchange Commission promulgated thereunder. We
further consent to the reliance on this opinion by your firm in rendering its
opinion to the Company.

Very truly yours,

/s/ PIPER & MARBURY

<PAGE> 1

EXHIBIT 8.1

SULLIVAN & WORCESTER
One Post Office Square
Boston, Massachusetts 02109

August 11, 1995

Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts 02158

Ladies and Gentlemen:

In connection with the registration by Hospitality Properties Trust, a
Maryland real estate investment trust (the "Company"), of 7,500,000 Common
Shares of Beneficial Interest, $.01 per share, of the Company (the "Shares"),
the following opinion is furnished to you to be filed with the Securities and
Exchange Commission as Exhibit 8.1 to the Company's Registration Statement on
Form S-11, File No. 33-92330 (the "Registration Statement"), under the
Securities Act of 1933, as amended (the "Act").

We have acted as counsel for the Company in connection with the
Registration Statement and we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Registration Statement, the
draft Underwriting Agreement among the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, Prudential Securities Incorporated, Dean Witter Reynolds
Inc. and Smith Barney Inc., as representatives of the underwriters, filed as
Exhibit 1.1 to the Registration Statement (the "Underwriting Agreement"),
corporate records, certificates and statements of officers and accountants of
the Company and of public officials, and such other documents as we have
considered relevant and necessary in order to furnish the opinion hereinafter
set forth. Specifically, and without limiting the generality of the foregoing,
we have reviewed Amendment No. 2 to the Registration Statement dated August 11,
1995 and the prospectus dated August 11, 1995 (the "Prospectus") which forms a
part of the Registration Statement, the Company's Declaration of Trust and
By-Laws, and the Advisory Agreement (as defined in the Prospectus). We have
reviewed the sections in the Prospectus captioned "Federal Income Tax
Considerations," "Certain United States Tax Considerations for Non-U.S. Holders
of Shares" and "ERISA Plans, Keogh Plans and Individual Retirement Accounts",
and we have prepared the opinions of counsel referred to in such sections. With
respect to all questions of fact on which such opinions are based, we have
assumed the accuracy and completeness of and have relied on the information set
forth in the Prospectus and in the

<PAGE> 2
Hospitality Properties Trust
August 11, 1995
Page 2

documents incorporated therein by reference, and on representations made to us
by the Trustees. We have not independently verified such information;
nothing has come to our attention, however, which would lead us to believe that
we are not entitled to rely on such information.

The opinion set forth below is based upon the Internal Revenue Code of
1986, as amended, the Treasury Regulations issued thereunder, administrative
interpretations thereof and judicial decisions with respect thereto, all as of
the date hereof (collectively the "Tax Laws") and upon the Employee
Retirement Income Security Act of 1974, as amended, the Department of Labor
regulations issued thereunder, administrative interpretations thereof and
judicial decisions with respect thereto, all as of the date hereof
(collectively, the "ERISA Laws"). No assurance can be given that the Tax Laws
or the ERISA Laws will not change.

Based upon and subject to the foregoing, we are of the opinion that the
discussions with respect to federal income tax matters in the sections of the
Prospectus captioned "Federal Income Tax Considerations," "Certain United
States Tax Considerations for Non-U.S. Holders of Shares" and "ERISA Plans,
Keogh Plans and Individual Retirement Accounts", in all material respects are
accurate and fairly summarize the Tax Laws issues and ERISA Laws issues which
are material to an investment in the Shares, and hereby confirm that the
opinions of counsel referred to in said sections represent our opinions on the
subject matter thereof.

Very truly yours,

/s/ SULLIVAN & WORCESTER

<PAGE> 1
EXHIBIT 10.6

ADVISORY AGREEMENT

THIS ADVISORY AGREEMENT (this "Agreement") is entered into as of
_______________, 1995, by and between Hospitality Properties Trust, a Maryland
real estate investment trust (the "Company"), HRPT Advisors, Inc., a Delaware
corporation (the "Advisor") and, solely with respect to Section 15 of this
Agreement with respect to certain non-competition covenants, Barry M. Portnoy
and Gerard M. Martin.

WHEREAS, the Company was organized as a Delaware corporation pursuant
to a Certificate of Incorporation dated February 7, 1995 and reorganized as a
Maryland real estate investment trust pursuant to a Declaration of Trust
effective May 12, 1995 (the "Declaration") for the purpose of buying, selling,
leasing, holding and financing real and personal property and granting and
holding mortgages thereon; and

WHEREAS, the Advisor is a corporation organized for the purpose of
providing management and administrative services with respect to the ownership
of real property; and

WHEREAS, Barry M. Portnoy and Gerard M. Martin are both directors and
50% shareholders of the Advisor; and

WHEREAS, in connection with its investments, the Company desires to
make use of the advice and assistance of the Advisor and certain sources of
information available to the Advisor, and to have the Advisor undertake the
duties and responsibilities hereinafter set forth, on behalf of and subject to
the supervision of the Company's Board of Trustees (the "Trustees"), all as
provided for herein; and

WHEREAS, the Advisor is willing to render such services, subject to the
supervision of the Trustees, on the terms and conditions hereinafter set forth;
and

WHEREAS, the Company intends to qualify as a real estate investment
trust as defined in the Internal Revenue Code of 1986, as amended, (said Code,
as in effect from time to time, together with any regulations and rulings
thereunder, being hereinafter referred to as the "Internal Revenue Code").

NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:

1. GENERAL DUTIES OF THE ADVISOR. The Advisor shall use its best
efforts to present to the Company a continuing and suitable investment program
consistent with the investment policies and objectives of the Company. Subject
to the supervision of the Trustees and upon their direction, and consistent
with the provisions of the Declaration, the Advisor shall:

(a) serve as the Company's investment advisor, with its
obligations to include providing research and economic and statistical data in
connection with the Company's investments and recommending changes in the
Company's investment policies, when appropriate;

(b) investigate and evaluate investment opportunities and make
recommendations concerning such opportunities to the Trustees;

(c) manage the Company's short term investments including the
acquisition and sale of money market instruments in accordance with the
Company's policies;
<PAGE> 2
(d) administer the day to day operations of the Company;

(e) investigate, select and conduct relations and enter into
appropriate contracts on behalf of the Company with other individuals,
corporations and entities in furtherance of the investment activities of the
Company;

(f) upon request of the Trustees, act as attorney in fact or
agent in acquiring and disposing of investments and funds of the Company and in
handling, prosecuting and settling any claims of the Company;

(g) upon request of the Trustees, invest and reinvest any money
of the Company;

(h) obtain for the Company, when appropriate, the services of
property managers or management firms to perform customary property management
services with regard to the real estate properties owned by or in the
possession of the Company, and perform such supervisory or monitoring services
on behalf of the Company with respect to the activities of such property
managers or management firms as would be performed by a prudent owner,
including but not limited to closely supervising the activities of such
property managers or management firms, visiting the properties, participating
in property management budgeting, reviewing the accounting of property income
and expenses, reporting on the financial status of the properties and reviewing
the accounting of property income and expenses, reporting on the financial
status of the properties and reviewing and approving marketing plans, but
excluding the actual on-site property management functions performed by said
property managers or management firms;

(i) obtain for the Company such services as may be required for
other activities relating to the investment portfolio of the Company;

(j) administer such day-to-day bookkeeping and accounting
functions as are required for the proper management of the assets of the
Company, contract for audits and prepare or cause to be prepared such reports
as may be required by any governmental authority in connection with the
ordinary conduct of the Company's business, including without limitation,
periodic reports, returns or statements required under the Securities Exchange
Act of 1934, as amended, the Internal Revenue Code after, the securities and
tax securities of any jurisdiction in which the Company is obligated to file
such reports, or the rules and regulations promulgated under any of the
foregoing;

(k) provide office space, office equipment and the use of
accounting or computing equipment when required, and provide personnel
necessary for the performance of the foregoing services; and

(l) from time to time, or at any time requested by the Trustees,
make reports thereto of its performance of the foregoing services to the
Company.

In performing its services under this Agreement, the Advisor may
utilize facilities, personnel and support services of various of its Affiliates
(as defined below). The Advisor shall be responsible for paying such
Affiliates for their personnel and support services and facilities out of its
own funds. Notwithstanding the above, the Company may request, and will pay
for the direct costs of, services provided by Affiliates of the Advisor
provided that such request is approved by a majority vote of the Directors who
are not Affiliates of the Advisor and who do not perform any services for the
Company except as Trustee (the "Independent Trustees").

As used in this Agreement, the term "Affiliate" means, as to any
Person, (i) any other Person directly or indirectly controlling, controlled by
or under common control with such Person, (ii) any other Person that owns
beneficially, directly or indirectly, five percent (5%) or more of the

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<PAGE> 3
outstanding capital stock, shares or equity interests of such Person, or (iii)
any officer, director, employee, general partner or trustee of such Person or
of any Person controlling, controlled by or under common control with such
Person (excluding Trustees who are not otherwise Affiliates of such Person).
The term "Person" means and includes individuals, corporations, limited
partnerships, general partnerships, joint stock companies or associations,
joint ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts, limited liability companies, and other entities.

2. BANK ACCOUNTS. The Advisor shall establish and maintain one or
more bank accounts in its own name or, at the direction of the Trustees, in the
name of the Company, and shall collect and deposit into such account or
accounts and disburse therefrom any monies on behalf of the Company, provided
that no funds in any such account shall be commingled with any funds of the
Advisor or any other Person. The Advisor shall from time to time render an
appropriate accounting of such collections and payments to the Trustees and to
the auditors of the Company.

3. RECORDS. The Advisor shall maintain appropriate books of account
and records relating to services performed pursuant to this Agreement, which
books of account and records shall be available for inspection by
representatives of the Company upon reasonable notice during ordinary business
hours.

4. INFORMATION FURNISHED ADVISOR. The Trustees shall at all times
keep the Advisor fully informed with regard to the investment policies of the
Company, the capitalization policy of the Company, and generally the Trustees'
then-current intentions as to the future of the Company. In particular, the
Trustees shall notify the Advisor promptly of their intention to sell or
otherwise dispose of any of the Company's investments or to make any new
investment. The Company shall furnish the Advisor with a certified copy of all
financial statements, a signed copy of each report prepared by independent
certified public accountants, and such other information with regard to its
affairs as the Advisor may from time to time reasonably request. The Company
shall retain legal counsel and accountants to provide such legal and accounting
advice and services as the Advisor or the Trustees shall deem necessary or
appropriate to adequately perform the functions of the Company.

5. REIT QUALIFICATION. Anything else in this Agreement to the
contrary notwithstanding, the Advisor shall refrain from any action (including,
without limitation, the furnishing or rendering of services to tenants of
property or managing real property) which, in its judgment made in good faith,
or in the judgement of the Trustees as transmitted to the Advisor in writing,
would (a) adversely affect the status of the Company as a real estate
investment trust as defined and limited in the Internal Revenue Code or which
would make the Company subject to the Investment Company Act of 1940, as
amended, or (b) violate any law, rule, regulation or statement of policy of any
governmental body or agency having jurisdiction over the Company or over its
securities, or (c) otherwise not be permitted by the Declaration or Bylaws of
the Company, except if such action shall be ordered by the Trustees, in which
event the Advisor shall promptly notify the Trustees of the Advisor's judgment
that such action would adversely affect such status or violate any such law,
rule or regulation or the Declaration or Bylaws of the Company and shall
refrain from taking such action pending further clarification or instructions
from the Trustees. In addition, the Advisor shall take such affirmative steps
which, in its judgment made in good faith, or in the judgment of the Trustees
as transmitted to the Advisor in writing, would prevent or cure any action
described in (a), (b) or (c) above.

6. SELF-DEALING. Neither the Advisor nor any Affiliate of the
Advisor shall sell any property or assets to the Company or purchase any
property or assets from the Company, directly or indirectly, except as approved
by a majority of the Independent Trustees. In addition, except as otherwise
provided in Sections 1, 9, or 10 hereof, or except as approved by a majority of
the Independent Trustees, neither the Advisor nor any Affiliate of the Advisor
shall receive any commission or other remuneration, directly or indirectly, in
connection with the activities of the

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<PAGE> 4

Company or any joint venture or partnership in which the Company is a party.
Except for compensation received by the Advisor pursuant to Section 9
hereof, all commissions or other remuneration received by the Advisor or an
Affiliate of the Advisor and not approved by the Independent Trustees under
Sections 1 or 10 hereof or this Section 6 shall be reported to the Company
annually within ninety (90) days following the end of the Company's fiscal
year.

Upon request of any Trustee, the Advisor shall from time to time
promptly furnish the Company with information on a confidential basis as to any
investments within the Company's investment policies made by the Advisor for
its own account.

7. NO PARTNERSHIP OR JOINT VENTURE. The Company and the Advisor are
not partners or joint venturers with each other and neither the terms of this
Agreement nor the fact that the Company and the Advisor have joint interests in
any one or more investments shall be construed so as to make them such partners
or joint venturers or impose any liability as such on either of them.

8. FIDELITY BOND. The Advisor shall not be required to obtain or
maintain a fidelity bond in connection with the performance of its services
hereunder.

9. COMPENSATION. The Advisor shall be paid, for the services
rendered by it to the Company pursuant to this Agreement, an annual advisory
fee (the "Advisory Fee") equal to 0.70 percent of the Average Invested Capital
(as defined below) computed as of the last day of the Company's fiscal year up
to $250,000,000, and 0.50 percent of the Average Invested Capital equal to or
exceeding $250,000,000. In addition, beginning with the Company's fiscal year
ending December 31, 1996, the Advisor shall be paid an annual incentive fee
(the "Incentive Fee"), consisting of a number of shares of the Company's Common
Shares of Beneficial Interest ("Common Shares") with a value (determined as
provided below) equal to 1% of the amount by which "Cash Available for
Distribution to Shareholders" (as defined below) for such fiscal year exceeds
the Threshold Amount (as defined below), but in no event shall the Incentive
Fee payable in respect of any year exceed $.02 multiplied by the weighted
average number of Common Shares outstanding during such year.

For purposes of this Agreement: The "Threshold Amount" in respect of
any year shall mean the product of (a) the weighted average number of shares of
the Company's Common Shares of Beneficial Interest outstanding during such
year, times (b) the Per Share Threshold Amount. The "Per Share Threshold
Amount" shall mean, for the fiscal year ending December 31, 1996, an amount
equal to $_______, and, for any fiscal year subsequent to 1996, the Per Share
Threshold Amount for the prior fiscal year, plus $.05.

Payment of the Incentive Fee shall be made by issuance of shares of
Common Shares, under the Company's 1995 Incentive Share Award Plan or
otherwise. The number of shares to be issued in payment of the Incentive Fee
shall be the whole number of shares (disregarding any fraction) equal to the
value of the Incentive Fee, as provided above, divided by the average closing
price of the Common Shares on the New York Stock Exchange during the month of
December in the year for which the computation is made. (The Advisory Fee and
Incentive Fee are hereinafter collectively referred to as the "Fees".)

For purposes of this Agreement: "Average Invested Capital" of the
Company shall mean the average of the aggregate book value of the assets of the
Company invested, directly or indirectly, in equity interests in and loans
secured by real estate and personal property owned in connection with such real
estate (collectively, "Properties"), before reserves for depreciation or bad
debts or other similar noncash reserves, computed by taking the average of such
values at the end of each month during such period. "Cash Available for
Distribution to Shareholders" shall mean Funds From Operations less the amount,
if any, included in the calculation thereof which represents rental income
recognized by the Company in respect of amounts which, pursuant to leasing
arrangements relating to any of the Properties, the Company is required to
escrow or reserve for renovations and

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<PAGE> 5

refurbishments. "Funds From Operations" shall mean, for any period, the net
cash flow from operations of the Company's investments for such period less
preferred dividends, if any, and such amounts as the Trustees, in their sole
discretion, shall determine are necessary or appropriate to discharge current
debts and liabilities of the Company and to provide reasonable reserves for the
payment of non-current debts and liabilities of the Company and for the
operations of the Company, including reserves for replacements and capital
improvements and reserves, if any, required in connection with the ownership of
the Company's properties and investments. Calculation of Average Invested
Capital and Funds From Operations shall be made annually by the Company, Cash
Available for Distribution to Shareholders' independent certified public
accountants.

The Advisory Fee shall be computed and paid within thirty (30) days
following the end of each fiscal month by the Company, and the Incentive Fee
shall be computed and paid within thirty (30) days following the public
availability of the Company's annual audited financial statements for each
fiscal year. Such computations shall be based upon the Company's monthly or
annual financial statements, as the case may be, and shall be in reasonable
detail. A copy of such computations shall promptly be delivered to the Advisor
accompanied by payment of the Fees shown thereon to be due and payable.

The payment of the aggregate annual Fees paid for any fiscal year shall
be subject to adjustment as of the end of each fiscal year. On or before the
30th day after public availability of the Company's annual audited financial
statements for each fiscal year, the Company shall deliver to the Advisor an
Officer's Certificate (a "Certificate") reasonably acceptable to the Advisor
and certified by an authorized officer of the Company setting forth (i) the
Average Invested Capital and Funds Form Operations for the Company's fiscal
year ended upon the immediately preceding December 31, and (ii) the Company's
computation of the Fees payable for said fiscal year.

If the aggregate annual Fees payable for said fiscal year as shown in
such Certificate exceed the aggregate amounts previously paid with respect
thereto by the Company, the Company shall include its check for such deficit
and deliver the same to the Advisor with such Certificate.

If the aggregate annual Fees payable for said fiscal year as shown in
such Certificate are less than the aggregate amounts previously paid with
respect thereto by the Company, the Company shall specify in such Certificate
whether the Advisor should (i) remit to the Company its check in an amount
equal to such difference or (ii) grant the Company a credit against the Fees
next coming due in the amount of such difference until such amount has been
fully paid or otherwise discharged.

10. COMPENSATION FOR ADDITIONAL SERVICES. If, and to the extent that,
the Company shall request the Advisor to render services on behalf of the
Company other than those required to be rendered by the Advisor in accordance
with the terms of this Agreement, such additional services shall be compensated
separately on terms to be agreed upon between the Advisor and the Company from
time to time.

11. EXPENSES OF THE ADVISOR. Without regard to the compensation
received by the Advisor from the Company pursuant to this Agreement, the
Advisor shall bear the following expenses incurred in connection with the
performance of its duties under this Agreement:

(a) employment expenses of the personnel employed by the Advisor,
including but not limited to, salaries, wages, payroll taxes and the cost of
employee benefit plans;

(b) fees and travel and other expenses paid to directors, officers
and employees of the Advisor, except fees and travel and other expenses of such
persons who are Trustees or officers of the Company incurred in their
capacities as Trustees or officers of the Company;

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<PAGE> 6
(c) rent, telephone, utilities, office furniture, equipment and
machinery and other office expenses of the Advisor, except to the extent such
expenses relate solely to an office maintained by the Company separate from the
office of the Advisor; and

(d) miscellaneous administrative expenses incurred in supervising,
monitoring and inspecting real property and other investments of the Company or
relating to performance by the Advisor of its obligations hereunder.

12. EXPENSES OF THE COMPANY. Except as expressly otherwise provided
in this Agreement, the Company shall pay all its expenses not payable by the
Advisor, and, without limiting the generality of the foregoing, it is
specifically agreed that the following expenses of the Company shall be paid by
the Company and shall not be paid by the Advisor:

(a) the cost of borrowed money;

(b) taxes on income and taxes and assessments on real property, if
any, and all other taxes applicable to the Company;

(c) legal, auditing, accounting, underwriting, brokerage, listing,
reporting, registration and other fees, and printing, engraving and other
expenses and taxes incurred in connection with the issuance, distribution,
transfer, trading, registration and stock exchange listing of the Company's
securities, including transfer agent's, registrar's and indenture trustee's
fees and charges;

(d) expenses of organizing, restructuring, reorganizing or
terminating the Company, or of revising, amending, converting or modifying
the Company's organizational documents;

(e) fees and travel and other expenses paid to Trustees and
officers of the Company in their capacities as such (but not in their
capacities as officers or employees of the Advisor) and fees and travel and
other expenses paid to advisors, contractors, mortgage services, consultants,
and other agents and independent contractors employed by or on behalf of the
Company;

(f) Expenses directly connected with the acquisition, disposition
or ownership of real estate interests or other property (including the costs of
foreclosure, insurance premiums, legal services, brokerage and sales
commissions, maintenance, repair, improvement and local management or
property), other than expenses with respect thereto of employees of the
Advisor, to the extent that such expenses are to be borne by the Advisor
pursuant to Section 11 above;

(g) all insurance costs incurred in connection with the Company
(including officer and trustee liability insurance) or in connection with any
officer and trustee indemnity agreement to which the Company is a party;

(h) expenses connected with payments of dividends or interest or
contributions in cash or any other form made or caused to be made by the
Trustees to holders of securities of the Company;

(i) all expenses connected with communications to holders of
securities of the Company and other bookkeeping and clerical work necessary to
maintaining relations with holders of securities, including the cost of
printing and mailing certificates for securities and proxy solicitation
materials and reports to holders of the Company's securities;

(j) legal, accounting and auditing fees and expenses, other than
those described in subsection (c) above; and

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<PAGE> 7
(k) expenses relating to any office or office facilities
maintained by the Company separate from the office of the Advisor.

13. ANNUAL OPERATING EXPENSES LIMITATION REQUIRING REFUNDS BY THE
ADVISOR. There shall be a limitation (the "Limitation") on Operating Expenses
(as defined below) of the Company for each fiscal year which shall be the lower
of the following:

(a) the greater of (i) 2% of the Average Invested Capital of the
Company for such fiscal year; and (ii) 25% of the Net Income (as defined below)
of the Company for such fiscal year; or

(b) the lowest of any applicable operating expense limitations
that may be imposed by law or regulation in a state in which any securities of
the Company are or will be qualified for sale or by a national securities
exchange on which any securities of the Company are or may be listed, as such
limitations may be altered from time to time.

For purposes of this Agreement, "Operating Expenses" shall be
calculated on the basis of the Company's annual audited financial statements
and shall be deemed to mean the aggregate annual expenses regarded as ordinary
operating expenses in accordance with generally accepted accounting principles
(including the Fees), exclusive of the following:

(i) the expenses set forth in subsections (a) through (d), inclusive,
and (f) of Section 12 hereof;

(ii) non-cash expenditures, including provisions for depreciation,
depletion, bad debt reserve and amortization;

(iii) losses on the disposition of assets and provisions for such
losses;

(iv) options granted to the Advisor; and

(v) other extraordinary charges including, without limitation,
litigation costs.

For purposes of this Agreement, "Net Income" for any period shall be
calculated on the basis of the Company's audited financial statements and shall
be deemed to mean total revenues applicable to such period, less the expenses
applicable to such period, including additions to reserves for depreciation or
bad debts or other similar noncash reserves, determined in accordance with
generally accepted accounting principles.

On or before the 30th day after public availability of the Company's
annual audited financial statements for each fiscal year, the Advisor shall
refund (to the extent of the aggregate Fees it has received with respect to
such year) to the Company the amount, if any, by which the Operating Expenses
exceeded the Limitation; provided however, that unless such action is
prohibited by laws or regulations, the Company may instead permit such refund
to be effected by a reduction in the amount of the Fees to be paid by the
Company during the fiscal years following the fiscal year with respect to which
such refund is to be made until such time as any such refund is fully paid and
provided the Limitation imposed by this Section 13 shall require that only so
much of such excess need be refunded as is conclusively determined by the
Trustees, including a majority of the Independent Trustees, to be unjustified.

14. LIMITS OF ADVISOR RESPONSIBILITY. The Advisor assumes no
responsibility other than to render the services described herein in good faith
and shall not be responsible for any action of the Trustees in following or
declining to follow any advice or recommendation of the Advisor. The Advisor,
its shareholders, directors, officers, employees and Affiliates will not be
liable to the Company, its shareholders, or others, except by reason of acts
constituting bad faith, willful or

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<PAGE> 8

wanton misconduct or gross negligence. The Company shall reimburse, indemnify
and hold harmless the Advisor, its shareholders, directors, officers and
employees and its Affiliates for and from any and all expenses, losses,
damages, liabilities, demands, charges and claims of any nature whatsoever in
respect of or arising from any acts or omissions of the Advisor undertaken in
good faith and in accordance with the standard set forth above pursuant to the
authority granted to it by this Agreement.

15. OTHER ACTIVITIES OF ADVISOR. Neither the Advisor nor Gerard M.
Martin nor Barry M. Portnoy shall, without the consent of the Company's
Independent Trustees, (i) provide advisory services to, or serve as a director
or officer of, any other REIT which is principally engaged in the business of
ownership of hotel properties or (ii) make direct investments in hotel
facilities. Nothing herein shall prevent the Advisor from engaging in other
activities or businesses or from acting as advisor to any other Person
(including other real estate investment trusts) provided that no such activity
shall conflict with the Advisor's obligations under the immediately preceding
sentence; provided, further, however, that the Advisor shall notify the Company
in writing in the event that it does so act as an advisor to another real
estate investment trust. The Advisor shall be free from any obligation to
present to the Company any particular investment opportunity which comes to the
Advisor. Without limiting the foregoing provisions, the Advisor agrees, upon
the request of any Trustee of the Company, to disclose certain investment
information concerning the Advisor or certain of its Affiliates, provided,
however, that such disclosure shall be required only if it does not constitute
a breach of any fiduciary duty or obligation of Advisor.

Directors, officers, employees and agents of the Advisor or of its
Affiliates may serve as Trustees, officers, employees, agents, nominees or
signatories of the Company. When executing documents other otherwise acting in
such capacities for the Company, such persons shall use their respective titles
in the Company. Such persons shall receive no compensation from the Company
for their services to the Company in any such capacities.

16. TERM, TERMINATION. This Agreement shall continue in force and
effect until December 31, 1995 unless extended or sooner terminated in
accordance with the terms of this SECTION 16. The expiration date of the then
current term of this Agreement is referred to herein as the "Termination Date".
The Company shall give written notice to the Advisor prior to the Termination
Date of its intention to renew this Agreement and the period of such extension.
Such renewal shall be determined by a majority of the Independent Trustees of
the Company.

Notwithstanding any other provision of this Agreement to the contrary,
this Agreement, or any extension hereof, may be terminated by either party
hereto upon sixty (60) days' written notice to the other party, pursuant to a
majority vote of the Independent Trustees; or, in the case of a termination by
the Advisor, by a majority vote of the directors of the Advisor.

Paragraph 19 hereof shall govern the rights, liabilities and
obligations of the parties upon termination of this Agreement; and, except as
provided in paragraph 20, such termination shall be without further liability
of either party to the other than for breach or violation of this Agreement
prior to termination.

17. ASSIGNMENT. The Company may terminate this Agreement at any time
in the event of its assignment by the Advisor except an assignment to a
corporation, association, trust, or other successor organization which may take
over the property and carry on the affairs of the Advisor; provided that,
following such assignment, the persons who controlled the operations of the
Advisor immediately prior to the assignment shall control the operation of the
successor organization, including the performance of its duties under this
Agreement, and such successor organization shall be bound by the same
restrictions by which the Advisor was bound prior to such assignment. Such
assignment or any other assignment of this Agreement by the Advisor shall bind
the assignee hereunder in the same manner as the Advisor is bound hereunder.
This Agreement shall not be assignable by the Company without the prior written
consent of the Advisor, except in the case of

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any assignment by the Company to a corporation or other organization which is
the successor to the Company, in which case such successor shall be
bound hereby and by the terms of said assignment in the same manner and to the
same extent as the Company is bound hereby.

18. DEFAULT, BANKRUPTCY, ETC. OF THE ADVISOR. At the sole option of
the Company, this Agreement may be terminated immediately upon written notice
of such termination from the Trustees to the Advisor if any of the following
events shall have occurred:

(a) the Advisor shall have violated any provision of this
Agreement and, after written notice from the Trustees of such violation, shall
have failed to cure such default within thirty (30) days;

(b) a petition shall have been filed against the Advisor for an
involuntary proceeding under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, and such petition shall not have been
dismissed within ninety (90) days of filing; or a court having jurisdiction
shall have appointed a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Advisor for any substantial portion of
its property, or ordered the winding upon or liquidation of its affairs, and
such appointment or order shall not have been rescinded or vacated within
ninety (90) days of such appointment or order; or

(c) the Advisor shall have commenced a voluntary proceeding under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have made any general assignment for the benefit of creditors,
or shall have failed generally to pay its debts as they became due.

The Advisor agrees that, if any of the events specified in Paragraphs
(b) or (c) of this Section 18 shall occur, it will give written notice thereof
to the Trustees within seven (7) days following the occurrence of such event.

19. ACTION UPON TERMINATION. From and after the effective date of any
termination of this Agreement pursuant to Sections 16, 17 or 18 hereof, the
Advisor shall be entitled to no compensation for services rendered hereunder
for the then-current term of this Agreement, but shall be paid, on a pro rata
basis, all compensation due for services performed prior to such termination
(reduced by the amount, if any, of the Fees to be refunded by the Advisor
pursuant to Section 13 hereof, which section shall apply pro rata to the
applicable portion of the fiscal year in which termination occurs in the event
of a termination occurring at other than the end of the Company's fiscal year.
Upon such termination, the Advisor immediately shall:

(a) pay over to the Company all monies collected and held for the
account of the Company by it pursuant to this Agreement, after deducting
therefrom any accrued Fees (reduced by amounts owed by the Advisor to the
Company pursuant to the last paragraph of Section 13 hereof) and reimbursements
for its expenses to which it is then entitled;

(b) deliver to the Trustees a full and complete accounting,
including a statement showing all sums collected by it and a statement of
all sums held by it for the period commencing with the date following the date
on its last accounting to the Trustees; and

The amount of Fees paid to the Advisor upon termination shall be
subject to adjustment pursuant to the following mechanism. On or before the
30th day after public availability of the Company's annual audited financial
statements for the fiscal year in which termination occurs, the Company shall
deliver to the Advisor a Certificate reasonably acceptable to the Advisor and
certified by an authorized officer of the Company setting forth (i) the Average
Invested Real Estate Assets,

-9-
<PAGE> 10

Cash Available for Distribution to Shareholders and Funds From Operations for
the Company's fiscal year ended upon the immediately preceding December 30, and
(ii) the Company's computation of the Fees payable upon the date of termination
(reduced by the aggregate amount of any excess expenses to be refunded
pursuant to Section 13 hereof, which Section shall apply to the applicable
portion of the fiscal year in which termination occurs in the event of a
termination occurring at other than the end of the Company's fiscal year.

If the annual Fees owed upon termination as shown in such Certificate
exceed the Fees paid by the Company upon termination, the Company shall include
its check for such deficit and deliver the same to the Advisor with such
Certificate.

If the Annual Fees owed upon termination as shown in such Certificate
are less than the Fees paid by the Company upon termination, the Advisor shall
remit to the Company its check in an amount equal to such difference.

20. TRUSTEE ACTION. Wherever action on the part of the Trustees is
contemplated by this Agreement, action by a majority of the Trustees, including
a majority of the Independent Trustees, shall constitute the action provided
for herein.

21. NOTICES. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is accepted by the party to
whom it is given, and shall be given by being delivered at the following
addresses to the parties hereto:

If to the Company:

Hospitality Properties Trust
400 Centre Street
Newton, MA 02158
Attention: President

If to the Advisor:

HRPT Advisors, Inc.
400 Centre Street
Newton, MA 02158
Attention: President

Whenever notice is given by either party to the other, notice shall
also be given in the same manner to:

Lena G. Goldberg, Esq.
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109

Such notice shall be effective upon its receipt by the party to whom it
is directed. Either party hereto may at any time given notice to the other
party in writing of a change of its address for purposes of this paragraph 21.

22. AMENDMENTS. The Agreement shall not be amended, changed,
modified, terminated, or discharged in whole or in part except by an instrument
in writing signed by each of the parties hereto, or by their respective
successors or assigns, or otherwise as provided herein.

-10-
<PAGE> 11

23. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon any
successors or permitted assigns of the parties hereto as provided herein.

24. GOVERNING LAW. The provisions of this Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.

25. CAPTIONS. The captions included herein have been inserted for
ease of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.

26. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
and cancels any pre-existing agreements with respect to such subject matter.

27. ATTORNEYS' FEES. If any legal action is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action in
addition to any other relief to which it or they may be entitled.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, under seal, as of the day and year
first above written.

ATTEST: HOSPITALITIES PROPERTIES TRUST

___________________________ By:______________________________
Its

ATTEST: HRPT ADVISORS, INC.

___________________________ By:______________________________
Its

<PAGE> 1
UP TO U.S. $200,000,000

REVOLVING CREDIT AGREEMENT

Dated as of August __, 1995

Between

HOSPITALITY PROPERTIES TRUST

as Borrower

and

DLJ MORTGAGE CAPITAL, INC.

as Lender
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.3. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.4. Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

ARTICLE II

AMOUNTS AND TERMS OF THE LOANS . . . . . . . . . . . . . . . . . . . . 23
2.1. The Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2. Making the Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.3. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.4. Reduction and Termination of the Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.5. Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.6. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.7. Continuation of Loans at the Eurodollar Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.8. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.9. Interest Rate Determination and Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.10. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.11. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.12. Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.13. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.14. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

ARTICLE III

APPROVAL OF PROPOSED HOTEL FACILITIES;
CONVERSION TO SECURED LOANS . . . . . . . . . . . . . . . . . . . . . 31
3.1. Approval of Proposed Hotel Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2. Conversion to Secured Loans; Delivery of Collateralization Documents . . . . . . . . . . . . . . . . . . . . 31
3.3. Preparation and Execution of Collateralization Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.4. Recordation and Enforcement of the Mortgage Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE IV

CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . 35
4.1. Conditions Precedent to the Initial Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>

i
<PAGE> 3

<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
4.2. Conditions Precedent to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.3. Additional Conditions Precedent to Each Loan After a Collateralization Date. . . . . . . . . . . . . . . . . 37

ARTICLE V

REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 38
5.1. Existence; Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2. Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.3. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.4. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.5. Financial Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.7. Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.8. Ownership of Borrower and HRPT Advisors; Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.9. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.10. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.11. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.12. No Burdensome Restrictions; No Defaults; Contractual Obligations . . . . . . . . . . . . . . . . . . . . . 45
5.13. No Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.14. Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.15. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.16. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.17. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.18. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.19. Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.20. Contractual Obligations Concerning Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.21. Status as REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.22. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.23. Operator and Advisor: Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.24. Operating Leases, Management Agreement and Advisory Agreement . . . . . . . . . . . . . . . . . . . . . . . 52
5.25. FF&E Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

ARTICLE VI

FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 53
6.1. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.2. Limitation on Secured Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.3. Interest Expense Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.4. Maintenance of Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

ARTICLE VII
</TABLE>

ii
<PAGE> 4

<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 54
7.1. Compliance with Laws, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.2. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.3. Payment of Taxes, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.4. Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.5. Preservation of Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.6. Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.7. Keeping of Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.8. Maintenance of Properties, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.9. Performance and Compliance with Other Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.10. Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.11. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.12. Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.13. Leases and Operating Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.14. Approved Hotel Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.15. Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.16. Interest Rate Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.17. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.19. Appraisals and other Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.20. REIT Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.21. Maintenance of FF&E Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
7.22. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

ARTICLE VIII

NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 65
8.1. Liens, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.2. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.3. Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.4. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.5. Mergers, Stock Issuances, Asset Sales, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.6. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.7. Change in Nature of Business or in Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.8. Modification of Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.9. Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.10. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.11. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

ARTICLE IX

EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 71
9.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>

iii
<PAGE> 5

<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE X

MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 75
10.1. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.2. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.3. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.4. Costs; Expenses; Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.5. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.6. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.7. Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.8. Governing Law; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.9. Submission to Jurisdiction; Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.10. Section Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.11. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.12. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.13. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
10.14. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
</TABLE>

<PAGE> 6
SCHEDULES

Schedule 1.1 - Initial Hotels

Schedule 5.8(a) - Stock Related Agreements

Schedule 5.8(c) - Subsidiaries

Schedule 5.19 - Environmental Matters

Schedule 5.22(a) - Owned Real Estate

Schedule 5.22(b) - Leased Real Estate

Schedule 5.22(c) - Defects in Improvements

Schedule 8.1 - Existing Liens

v
<PAGE> 7
EXHIBITS

Exhibit A - Form of Note

Exhibit B - Form of Notice of Borrowing

Exhibit C - Form of Negative Pledge Agreement

Exhibit D - Form of Opinion of Counsel for the Loan
Parties

Exhibit E - Form of Mortgage

Exhibit F - Form of Assignment Agreement

Exhibit G - Form of Management Agreement

Exhibit H - Form of Operating Lease

Exhibit I - Form of Security Agreement

Exhibit J - Form of Subordination Agreement

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<PAGE> 8
REVOLVING CREDIT AGREEMENT, dated as of the __ day of August,
1995, between HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment
trust (the "Borrower") and DLJ MORTGAGE CAPITAL, INC. a Delaware corporation
(the "Lender").

W I T N E S S E T H:

WHEREAS, the Borrower has requested that the Lender make
revolving credit advances of up to $200,000,000 in aggregate principal amount
outstanding at any one time, for the purposes hereinafter specified; and

WHEREAS, the Lender is willing to make funds available for
such purposes upon the terms and subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, the parties hereto hereby agree as
follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

1.1. Defined Terms. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):

"Acquired Initial Hotels" means the 21 Initial Hotels listed
in Part I of Schedule 1.1 hereto, currently owned by the Borrower.

"Advisor" means HRPT Advisors or such other Person as shall
act as an advisor to the Borrower, whether pursuant to the Advisory Agreement,
or an agreement analogous to the Advisory Agreement, with the prior written
consent of the Lender.

"Advisory Agreement" means the Advisory Agreement, dated as of
_______________, 1995, between the Borrower and the Advisor, as amended,
supplemented or modified from time

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<PAGE> 9
to time in a manner not inconsistent with the terms hereof or of the
Subordination Agreement.

"Affiliate" means, as to any Person, any Subsidiary of such
Person and any other Person which, directly or indirectly, controls, is
controlled by or is under common control with such Person and includes each
officer or director or trustee or general partner of such Person, and each
Person who is the beneficial owner of 10% or more of any class of voting Stock
of such Person. For the purposes of this definition, "control" means the
possession of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.

"Agreement" means this Revolving Credit Agreement, together
with all Exhibits and Schedules hereto, as the same may be amended,
supplemented or otherwise modified from time to time.

"Appraisal" means an appraisal using methodologies reasonably
acceptable to the Lender at the time such appraisal is or was made and
performed by a Recognized Appraiser.

"Approved Hotel Facility" means any of the Initial Hotels
listed in Part II of Schedule 1.1 hereto, or any Proposed Hotel Facility
approved by the Lender pursuant to Section 3.1 hereof.

"Asset Sale" means any sale, conveyance, transfer, assignment,
lease or other disposition (including, without limitation, by merger or
consolidation and whether by operation of law or otherwise) by the Borrower or
any of its Subsidiaries to any Person of any Stock of any of its Subsidiaries,
any Stock Equivalents of any of its Subsidiaries or any Mortgaged Property or
Hotel Facility but excluding Operating Leases.

"Assignment Agreement" means, with respect to each Mortgaged
Property, an agreement substantially in the form of Exhibit F, executed by the
Borrower, the Lender and the Manager, assigning to the Lender, the Management
Agreement relating thereto,

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<PAGE> 10
"Base Rate" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate per annum shall
be equal at all times to the higher of:

(a) the rate of interest announced publicly by Citibank, N.A.
in New York, New York, from time to time, as such bank's prime rate; and

(b) the sum (adjusted to the nearest 1/4 of one percent or,
if there is no nearest 1/4 of one percent, to the next higher 1/4 of one
percent) of (i) one and one-half percent (1 1/2%) per annum plus (ii) the
Federal Funds Rate.

"Base Rent" means, for any period, the base or fixed rent or
percentage rent during such period payable by an Operating Lessee pursuant to
the terms of an Operating Lease.

"Borrowing Fee" has the meaning specified in Section 2.3(b).

"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and a day on which dealings
are also carried on in the London interbank market.

"Capital Expenditures" means, for any Person for any period,
the aggregate of all expenditures by such Person and its consolidated
Subsidiaries, except interest capitalized during construction, during such
period for property, plant or equipment, including, without limitation,
renewals, improvements, replacements and capitalized repairs, that would be
reflected as additions to property, plant or equipment on a consolidated
balance sheet of such Person and its Subsidiaries prepared in conformity with
GAAP. For the purpose of this definition, the purchase price of equipment
which is acquired simultaneously with the trade-in of existing equipment owned
by such Person or any of its Subsidiaries or with insurance proceeds shall be
included in Capital Expenditures only to the extent of the gross amount of such
purchase price less the credit granted by the seller of such equipment being
traded in at such time or the amount of such proceeds, as the case may be.

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<PAGE> 11
"Capital Financing Indebtedness" means the principal amount of
all Indebtedness incurred or assumed in connection with any Capital
Expenditures, all Capitalized Lease Obligations and all other Indebtedness
(including purchase money Indebtedness) incurred solely for the purpose of
financing or refinancing the acquisition of assets or properties.

"Capitalized Lease" means, as to any Person, any lease of
property by such Person as lessee which would be capitalized on a balance sheet
of such Person prepared in conformity with GAAP.

"Capitalized Lease Obligations" means, as to any Person, the
capitalized amount of all obligations of such Person or any of its Subsidiaries
under Capitalized Leases, as determined on a consolidated basis in conformity
with GAAP.

"Cash Flow" means, for any Person for any period, the Net
Income (Loss) of such Person for such period plus all non-cash charges of such
Person and its consolidated Subsidiaries for such period to the extent included
in the computation of such Net Income (Loss).

"Closing Date" means the first date on which any Loan is made.

"Code" means the Internal Revenue Code of 1986 (or any
successor legislation thereto), as amended from time to time.

"Collateral" means all property and interests in property and
proceeds thereof now owned or hereafter acquired by any Loan Party in or upon
which a Lien is granted under any of the Collateral Documents.

"Collateral Documents" means, the Negative Pledge Agreements,
the Assignment Agreements, the Mortgages, the Security Agreements and any other
document now or hereafter executed and delivered by a Loan Party granting a
Lien on any of its property to secure payment of the Obligations.

"Collateralization Date" has the meaning specified in Section
3.2.

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<PAGE> 12
"Collateralization Documents" has the meaning specified in
Section 3.2.

"Commitment" has the meaning specified in Section 2.1.

"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of such Person with
respect to any Indebtedness or Contractual Obligation of another Person, if the
purpose or intent of such Person in incurring the Contingent Obligation is to
provide assurance to the obligee of such Indebtedness or Contractual Obligation
that such Indebtedness or Contractual Obligation will be paid or discharged, or
that any agreement relating thereto will be complied with, or that any holder
of such Indebtedness or Contractual Obligation will be protected (in whole or
in part) against loss in respect thereof. Contingent Obligations of a Person
include, without limitation, (a) the direct or indirect guarantee, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of an
obligation of another Person, and (b) any liability of such Person for an
obligation of another Person through any agreement (contingent or otherwise)
(i) to purchase, repurchase or otherwise acquire such obligation or any
security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of a loan, advance, stock purchase, capital
contribution or otherwise), (ii) to maintain the solvency or any balance sheet
item, level of income or financial condition of another Person, (iii) to make
take-or-pay or similar payments, if required, regardless of non-performance by
any other party or parties to an agreement, (iv) to purchase, sell or lease (as
lessor or lessee) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such obligation or to assure
the holder of such obligation against loss, or (v) to supply funds to or in any
other manner invest in such other Person (including, without limitation, to pay
for property or services irrespective of whether such property is received or
such services are rendered), if in the case of any agreement described under
subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any

5
<PAGE> 13
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported.

"Contract" means any contract, agreement, undertaking,
indenture, note, bond, loan, instrument, lease, conditional sales contract,
mortgage, deed of trust, license, franchise, insurance policy, commitment or
other arrangement or agreement.

"Contractual Obligation" of any Person means any obligation,
agreement, undertaking or similar provision of any security issued by such
Person or of any Contract (excluding a Loan Document) to which such Person is a
party or by which it or any of its property is bound or to which any of its
properties is subject.

"Default" means any event which with the passing of time or
the giving of notice or both would become an Event of Default.

"DOL" means the United States Department of Labor, or any
successor thereto.

"Dollars" and the sign "$" each mean the lawful money of the
United States of America.

"Environmental Claim" means any accusation, allegation, notice
of violation, action, claim, Environmental Lien, demand, abatement or other
Order or direction (conditional or otherwise) by any Governmental Authority or
any other Person for personal injury (including sickness, disease or death),
tangible or intangible property damage, damage to the environment, nuisance,
pollution, contamination or other adverse effects on the environment, or for
fines, penalties or restriction, resulting from or based upon (i) the
existence, or the continuation of the existence, of a Release (including,
without limitation, sudden or non- sudden accidental or non-accidental
Releases) of, or exposure to, any Hazardous Material or odor, audible noise or
other nuisance, or other Release in, into or onto the environment (including,
without limitation, the air, soil, surface water or groundwater) at, in, by,
from or related to any property owned, operated or leased by the Borrower or
any of its Subsidiaries or any activities or operations thereof; (ii) the
environmental aspects of the transporta-

6
<PAGE> 14
tion, storage, treatment or disposal of Hazardous Materials in connection with
any property owned, operated or leased by the Borrower or any of its
Subsidiaries or their operations or facilities; or (iii) the violation, or
alleged violation, of any Environmental Laws, Orders or Environmental Permits
of or from any Governmental Authority relating to environmental matters
connected with any property owned, leased or operated by the Borrower or any of
its Subsidiaries.

"Environmental Laws" means any federal, state, local or
foreign law (including common law), statute, code, ordinance, rule, regulation
or other requirement relating in any way to the environment, natural resources,
or public or employee health and safety and includes, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 et seq., the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq., the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Clean Air
Act, 42 U.S.C. Section 7401 et seq., the Clean Water Act, 33 U.S.C. Section
1251 et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et
seq., and the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq., as
such laws have been amended or supplemented, and the regulations promulgated
pursuant thereto, and all analogous state and local statutes.

"Environmental Liabilities and Costs" means, as to any Person,
all liabilities, obligations, responsibilities, Remedial Actions, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including, without limitation, all fees, disbursements and expenses
of counsel, experts and consultants and costs of investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of any
Environmental Claim.

"Environmental Lien" means any Lien in favor of any
Governmental Authority arising under any Environmental Law.

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<PAGE> 15
"Environmental Permit" means any Permit required under any
applicable Environmental Laws or Order and all supporting documents associated
therewith.

"ERISA" means the Employee Retirement Income Security Act of
1974 (or any successor legislation thereto), as amended from time to time.

"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control or treated as a single employer with any
Loan Party within the meaning of Section 414 (b), (c), (m) or (o) of the Code.

"ERISA Event" means (i) an event described in Sections
4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA with respect to a Pension
Plan; (ii) the withdrawal of any Loan Party or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (iii)
the complete or partial withdrawal of any Loan Party or any ERISA Affiliate
from any Multiemployer Plan or the insolvency of any Multiemployer Plan; (iv)
the filing of a notice of intent to terminate a Pension Plan or the treatment
of a plan amendment as a termination under Section 4041 of ERISA; (v) the
institution of proceedings by the PBGC to terminate or appoint a trustee to
administer a Pension Plan or Multiemployer Plan; (vi) the failure to make any
required contribution to a Pension Plan; (vii) any other event or condition
which might reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan or Multiemployer Plan; (viii) the imposition of any liability
under Title IV of ERISA, other than for PBGC premiums due but not delinquent
under Section 4007 of ERISA; (ix) a prohibited transaction (as described in
Code Section 4975 or ERISA Section 406) shall occur with respect to any Plan;
or (x) any Loan Party or ERISA Affiliate shall request a minimum funding waiver
from the IRS with respect to any Pension Plan.

"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.

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<PAGE> 16
"Eurodollar Rate" means, for any Interest Period, an interest
rate per annum equal to the sum of (a) the rate per annum obtained by dividing
(i) the rate of interest determined by the Lender to be the average (rounded
upward to the nearest whole multiple of 1/16 of 1% per annum, if such average
is not such a multiple) of the rates for Dollar deposits which appear on the
display designated as page "LIBO" on the Reuter Monitor Money Rates Service (or
such other page as may replace such page or that service for the purpose of
displaying London interbank offered rates for major banks) (the "Reuters
Page"), as of 11:00 A.M. (London time) two Business Days before the first day
of such Interest Period in an amount substantially equal to the Loan during
such Interest Period and for a period equal to such Interest Period by (ii) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such
Interest Period, plus (b) 1.50%. If the Lender is unable to ascertain the
interest rate referred to in (i) above from the Reuters Page, such rate shall
be determined from such financial reporting service or other information as
shall be reasonably determined by the Lender.

"Eurodollar Rate Reserve Percentage" for any Interest Period
means the reserve percentage applicable two Business Days before the first day
of such Interest Period under regulations issued from time to time by the Board
of Governors of the Federal Reserve System for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or
other marginal reserve requirement) for a member bank of the Federal Reserve
System in New York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other category of
liabilities which includes deposits by reference to which the Eurodollar Rate
is determined) having a term equal to such Interest Period.

"Event of Default" has the meaning specified in Section 9.1.

"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business

9
<PAGE> 17
Day) by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by the Lender from three Federal
funds brokers of recognized standing selected by it.

"FF&E Reserve" has the meaning given to such term in the
Management Agreement attached as Exhibit G hereto

"Final Borrowing Date" means August __, 1996.

"Final Maturity Date" means February __, 1997.

"Financial Officer's Certificate" has the meaning specified in
Section 7.11(c).

"First Collateralization Date" has the meaning specified in
Section 3.2.

"Fiscal Quarter" means each of the three month periods ending
on March 31, June 30, September 30 and December 31.

"Fiscal Year" means the twelve month period ending on December
31.

"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, or in such other statements by
such other entity as may be in general use by significant segments of the
accounting profession, which are applicable to the circumstances as of the date
of determination except that, for purposes of Article VI, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited financial
statements referred to in Section 5.5.

"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial,

10
<PAGE> 18
regulatory or administrative functions of or pertaining to government.

"Hazardous Material" means any substance, material or waste
which is regulated by any Governmental Authority of the United States or other
national government, including, without limitation, any material, substance or
waste which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, which includes, but is not limited to, petroleum, petroleum
products, asbestos, urea formaldehyde and polychlorinated biphenyls.

"HMC" means Host Marriott Corporation, a Delaware corporation.

"Hotel Facility" means each of (a) the Acquired Initial
Hotels, and (b) the Approved Hotel Facilities acquired by the Borrower using
the proceeds of a Loan or Loans made by the Lender hereunder.

"HRP" means Health and Retirement Properties Trust, a Maryland
real estate investment trust.

"HRP Loan" means the demand loan made by HRP to the Borrower
in connection with the acquisition by the Borrower of the Acquired Initial
Hotels.

"HRPT Advisors" means HRPT Advisors, Inc., a Delaware
corporation.

"Improvements" has the meaning specified in Section 5.22(c).

"Indebtedness" of any Person means (i) all indebtedness of
such Person for borrowed money (including, without limitation, reimbursement
and all other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured) or for the deferred purchase
price of property or services, (ii) all obligations of such Person evidenced by
notes, bonds, debentures or similar instruments, (iii) all indebtedness of such
Person created or arising under any conditional sale or other title

11
<PAGE> 19
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property),
(iv) all Capitalized Lease Obligations of such Person, (v) all Contingent
Obligations of such Person, (vi) all obligations of such Person to purchase,
redeem, retire, defease or otherwise acquire for value any Stock or Stock
Equivalents of such Person, valued, in the case of redeemable preferred stock,
at the greater of its voluntary or involuntary liquidation preference plus
accrued and unpaid dividends, (vii) all obligations of such Person under
Interest Rate Contracts, and (viii) all Indebtedness referred to in clause (i),
(ii), (iii), (iv), (v), (vi) or (vii) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including, without limitation,
accounts and general intangibles) owned by such Person, even though such Person
has not assumed or become liable for the payment of such Indebtedness, (ix) in
the case of the Borrower, the Obligations, and (x) all liabilities of such
Person that would be shown on a balance sheet of such Person prepared in
conformity with GAAP.

"Indemnitees" has the meaning specified in Section 10.4.

"Initial Hotels" means the Real Estate consisting of 37
Courtyard by Marriott(R) hotels listed in Parts I and II of Schedule 1.1
hereto.

"Interest Period" means, in the case of any Loan, (i)
initially, the period commencing on the date such Loan is made and ending
thirty (30) days thereafter, and (ii) thereafter, a period commencing on the
last day of the immediately preceding Interest Period therefor and ending
thirty (30) days thereafter; provided, however, that:

(a) if any Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day, unless the result of such extension would be to extend
such Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Business Day;

12
<PAGE> 20
(b) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month; and

(c) if the Borrower, by written notice to the Lender given no
later than two (2) Business Days prior to the expiration of an Interest Period
for any Loan, requests a one day interest period for such Loan, the Interest
Period for such Loan shall mean a period of one day (the "1 Day Interest
Period"); provided that in no event shall any Loan have a 1 Day Interest Period
for a period in excess of thirty (30) consecutive days (the "Limited Period"),
and upon the expiration of the Limited Period in respect of any Loan, such Loan
shall automatically be continued at the 30 day Interest Period specified above.

"Interest Rate Contracts" means interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
insurance, and other agreements or arrangements designed to provide protection
against fluctuations in interest rates.

"Investments" has the meaning specified in Section 8.6.

"IRS" means the Internal Revenue Service, or any successor
thereto.

"Leases" means, with respect to the Borrower or any of its
Subsidiaries, all of those leasehold estates in real property owned by the
Borrower or such Subsidiary, as lessee, as such may be amended, supplemented or
otherwise modified from time to time to the extent permitted by this Agreement.

"Legal Proceedings" means any judicial, administrative or
arbitral actions, suits, proceedings (public or private), claims or
governmental proceedings.

"Lending Office" means, with respect to the Lender, the office
located at 140 Broadway, New York, New York 10005- 1285 or such other office of
the Lender as the Lender may from time to time specify to the Borrower.

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<PAGE> 21
"Letter of Intent" means that certain letter agreement
(including the Addendum thereto) between the Lender and the Borrower dated June
9, 1995 and accepted and agreed to by the Borrower on June 12, 1995.

"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), security interest or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever intended to secure
payment of any Indebtedness or other obligation, including, without limitation,
any conditional sale or other title retention agreement, the interest of a
lessor under a Capitalized Lease Obligation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing,
under the Uniform Commercial Code or comparable law of any jurisdiction, of any
financing statement naming the owner of the asset to which such Lien relates as
debtor (excluding precautionary filings.

"Loan" or "Loans" means the revolving credit loan or loans
made or to be made by the Lender to the Borrower pursuant to Article II.

"Loan Documents" means, collectively, this Agreement, the
Note, the Collateral Documents and each certificate, agreement or document
executed by a Loan Party and delivered to the Lender in connection with or
pursuant to any of the foregoing, as such agreements, documents or instruments
may be amended, modified or supplemented from time to time.

"Loan Party" means the Borrower and each Subsidiary and
Affiliate of the Borrower which executes and delivers a Loan Document.

"Management Agreement" means an agreement relating to the
operation and/or management of a Hotel Facility between the Borrower and the
Manager, substantially in the form of the management agreement and amendments
thereto annexed as Exhibit G hereto or such other form as shall be approved by
the Lender, which approval shall not be unreasonably withheld, delayed or
conditioned.

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<PAGE> 22
"Manager" means Courtyard Management Corporation, a wholly
owned subsidiary of Marriott International Inc., or such other manager as shall
be approved by the Lender (which approval shall not be unreasonably withheld,
delayed or conditioned), as manager under the Management Agreement.

"Material Adverse Change" means a material adverse change in
any of (i) the condition (financial or otherwise), business, performance,
prospects, operations or properties of (A) any Loan Party and its Subsidiaries
taken as one enterprise, (B) any Operating Lessee, (C) any Manager, or (D) the
Advisor (ii) the legality, validity or enforceability of any Loan Document or
any Operating Lease, Management Agreement or Advisory Agreement (iii) the
perfection or priority of the Liens granted pursuant to the Collateral
Documents, (iv) the ability of the Borrower to repay the Obligations or of any
Loan Party to perform its material obligations under any Loan Document, (v) the
ability of any Operating Lessee to perform obligations under any Operating
Lease, (vi) the ability of any Manager to perform its obligations under any
Management Agreement; (vii) the ability of the Advisor to perform its
obligations under the Advisory Agreement or (viii) the rights and remedies of
the Lender under the Loan Documents.

"Material Adverse Effect" means an effect that results in or
causes, or has a reasonable likelihood of resulting in or causing, a Material
Adverse Change.

"Mortgages" means the mortgages or deeds of trust made or
required herein to be made by the Borrower or any of its Subsidiaries in
substantially the form of Exhibit E, as such Mortgages may be amended,
supplemented or otherwise modified from time to time.

"Mortgage Documents" means with respect to any Hotel Facility,
a Mortgage and the other documents specified in Section 3.2(a).

"Mortgage Payments" means the payments specified in Section
3.2(a)(vi) .

"Mortgaged Property" means any property subject to a Mortgage
in favor of the Lender.

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<PAGE> 23
"Multiemployer Plan" means, as of any applicable date, a
multiemployer plan, as defined in Section 4001(a)(3) of ERISA, and to which any
Loan Party, any of its Subsidiaries or any ERISA Affiliate is making, is
obligated to make, or within the six-year period ending at such date, has made
or been obligated to make, contributions on behalf of participants who are or
were employed by any of them.

"Negative Pledge Agreement" means, in respect of each Hotel
Facility, an agreement, in substantially the form of Exhibit C, executed by the
Borrower or the Subsidiary owning such Hotel Facility, as such agreement may be
amended, supplemented or modified from time to time.

"Net Income (Loss)" means, for any Person for any period, the
aggregate of net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in conformity with GAAP.

"Net Interest Expense" means, for any Person for any period,
gross interest expense in respect of all Indebtedness of such Person and its
Subsidiaries for such period determined on a consolidated basis in conformity
with GAAP, less the following for such Person and its Subsidiaries determined
on a consolidated basis in conformity with GAAP: (a) the sum of (i) interest
capitalized during construction for such period, (ii) interest income for such
period, and (iii) gains for such period on Interest Rate Contracts (to the
extent not included in interest income above and to the extent not deducted in
the calculation of such gross interest expense), plus the following for such
Person and its Subsidiaries determined on a consolidated basis in conformity
with GAAP: (b) the sum of (i) losses for such period on Interest Rate
Contracts (to the extent not included in such gross interest expense), and (ii)
the amortization of upfront costs or fees for such period associated with
Interest Rate Contracts (to the extent not included in gross interest expense).

"Net Worth" of any Person means at any date the excess of (a)
the total assets of such Person and its Subsidiaries at such date determined on
a consolidated basis in conformity with GAAP over (b) all obligations which in
conformity with GAAP would be included in determining total liabilities as
shown on the liabilities side of a

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<PAGE> 24
consolidated balance sheet of such Person and its Subsidiaries at such date.

"Note" means a promissory note of the Borrower payable to the
order of the Lender in a principal amount equal to the amount of the Commitment
as originally in effect, in substantially the form of Exhibit A, evidencing the
aggregate Indebtedness of the Borrower to the Lender resulting from the Loans
made by the Lender.

"Notice of Borrowing" has the meaning specified in Section
2.2(a).

"Obligations" means the Loans and all other advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to the
Lender, any Affiliate of the Lender or any Indemnitee, of every type and
description, present or future, whether or not evidenced by any note, guaranty
or other instrument, arising under this Agreement or under any other Loan
Document, whether or not for the payment of money, loan, guaranty,
indemnification, foreign exchange transaction or Interest Rate Contract or in
any other manner, whether direct or indirect (including, without limitation,
those acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising and however acquired. The term "Obligations"
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements and any other sum chargeable to the Borrower under this
Agreement or any other Loan Document.

"Operating Lease" means a lease or sublease relating to any
Real Estate or Lease, between the Borrower or any of its Subsidiaries, as
lessor, and the Operating Lessee, as lessee, substantially in the form of the
lease annexed as Exhibit H hereto or such other form as shall be approved by
the Lender, which approval shall not be unreasonably withheld, delayed or
conditioned.

"Operating Lessee" means HMH HPT Courtyard, Inc., a wholly
owned subsidiary of HMC or such other lessee as shall be approved by the Lender
(which approval shall not be unreasonably withheld, delayed or conditioned), as
lessee under the Operating Lease.

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<PAGE> 25
"Operator" means the Operating Lessee and/or the Manager (as
the case may be) responsible for the operation and management of any Real
Estate.

"Order" means any order, injunction, judgment, decree, ruling,
assessment or arbitration award.

"Other Taxes" has the meaning specified in Section 2.14(b).

"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.

"Pension Plan" means a plan, other than a Multiemployer Plan,
which is covered by Title IV of ERISA or Code Section 412 and which any Loan
Party, any of its Subsidiaries or any ERISA Affiliate maintains, contributes to
or has an obligation to contribute to on behalf of participants who are or were
employed by any of them.

"Permit" means any permit, approval, authorization, license,
variance, registration, permission or consent required from a Governmental
Authority under an applicable Requirement of Law.

"Permitted Lien" means any Lien permitted under Section 8.1
hereof.

"Person" means an individual, partnership, corporation
(including, without limitation, a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a Governmental
Authority.

"Plan" means an employee benefit plan, as defined in Section
3(3) of ERISA, which any Loan Party or any of its Subsidiaries maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any of them.

"Preparation Date" has the meaning specified in Section 3.3(a).

"Proposed Hotel Facility" means any Real Estate comprising an
operating facility offering hotel or other

18
<PAGE> 26
lodging services which the Borrower desires to acquire using the proceeds of a
Loan made by the Lender hereunder.

"Proposed Hotel Facility Statement" means a certificate of a
Responsible Officer providing each of the following:

(i) details of the location of the Proposed Hotel Facility
and the real estate interest to be acquired;

(ii) specification of the proposed acquisition costs of the
Borrower in respect of such Proposed Hotel Facility;

(iii) certification (based on information available to the
Borrower after diligent enquiry) as to the ratio of (A) the lesser of
(1) the Cash Flow of the current owner or operator of the Proposed
Hotel Facility (as applicable) over the four most recent financial
quarters attributable to the Proposed Hotel Facility, and (2) the
proposed annual Base Rent under the proposed Operating Lease of the
Proposed Hotel Facility; to (B) projected fixed charges (including the
Net Interest Expense) for such Proposed Hotel Facility for the next
one year period and, further, certification that, to the knowledge of
the Borrower after diligent enquiry, with respect to the Proposed
Hotel Facility the details of Cash Flows of the operator thereof used
by the Borrower in its calculations are current;

(iv) audited balance sheets if available, or pro forma balance
sheets, of the owner or operator of the Proposed Hotel Facility, and
the related consolidated statements of income, retained earnings and
cash flows of such owner or operator for its previous three (3) fiscal
years;

(v) audited balance sheets if available, or pro forma balance
sheets, in respect of the Proposed Hotel Facility and the related
consolidated statements of operations, changes in owner's equity
(deficit) and cash flows in respect of such Proposed Hotel Facility,
for the previous three (3) fiscal years;

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<PAGE> 27
(vi) a written report of an investigation by an environmental
consultant, reasonably acceptable to the Lender, addressing any
significant environmental, health and safety violations, hazards or
liabilities to which the owner or operator of the Proposed Hotel
Facility may be subject, which report shall demonstrate, to the
reasonable satisfaction of the Lender, that the Proposed Hotel
Facility and the operations thereof are in compliance in all material
respects with all applicable Environmental Laws and are not subject to
any material Environmental Liabilities and Costs.

(vii) a copy of the proposed form of Operating Lease and, if
applicable, Management Agreement;

(viii) the names of the proposed Operating Lessee and, if
applicable, Manager;

(ix) a copy of a recent market study in respect of the
Proposed Hotel Facility;

(x) a current title report and survey in respect of the
Proposed Hotel Facility, issued by a title company/surveyor reasonably
acceptable to the Lender; and

(xi) a written report of an investigation by an engineering
consultant reasonably acceptable to the Lender.

"Recognized Appraiser" means a qualified and recognized
professional appraiser as may be selected or approved by the Lender, having at
least five (5) years' prior experience in performing real estate appraisals in
the geographic area where the property being appraised is located, having a
recognized expertise in appraising properties operated as hotel or other
lodging facilities.

"Real Estate" means all of those plots, pieces or parcels of
land now owned or hereafter acquired by the Borrower or any of its Subsidiaries
(the "Land"), including, without limitation, those listed on Schedule 5.22(a)
and described in the Mortgages, together with the right, title and interest of
the Borrower or such Subsidiary, if any, in and to the streets, the land lying
in the bed of any

20
<PAGE> 28
streets, roads or avenues, opened or proposed, in front of, adjoining or
abutting the Land to the center line thereof, the air space and development
rights pertaining to the Land and the right to use such air space and
development rights, all rights of way, privileges, liberties, tenements,
hereditaments and appurtenances belonging or in any way appertaining thereto,
all fixtures, all easements now or hereafter benefiting the Land and all
royalties and rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil
and gas rights, together with all of the buildings and other improvements now
or hereafter erected on the Land, and any fixtures appurtenant thereto.

"Registration Statement" means the Form S-11 Registration
Statement under the Securities Act of 1933 as filed by the Borrower with the
Securities and Exchange Commission on May 15, 1995 (as Registration Number
33-92330) and any filed amendments thereto.

"Release" means any release, spill, emission, leaking,
pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching or migration on or into the indoor or outdoor environment
or into or out of any property.

"Remedial Action" means all actions including, without
limitation, any Capital Expenditures, required or voluntarily undertaken to (i)
clean up, remove, treat or in any other way address any Hazardous Material or
other substance in the indoor or outdoor environment, (ii) prevent the Release
or threat of Release, or minimize the further Release, of any Hazardous
Material or other substance so it does not migrate or endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment, (iii)
perform pre-remedial studies and investigations or post-remedial monitoring and
care, or (iv) bring facilities on any property owned, leased or operated by the
Borrower or any of its Subsidiaries into compliance with all Environmental Laws
and Environmental Permits.

"Requirement of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing documents of
such Person, and all federal, state and local laws, rules and regulations,

21
<PAGE> 29
including, without limitation, federal, state or local securities, antitrust
and licensing laws, all food, health and safety laws, and all applicable trade
laws and requirements, including, without limitation, all disclosure
requirements of Environmental Laws, ERISA and all orders, judgments, decrees or
other determinations of any Governmental Authority or arbitrator, applicable to
or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

"Responsible Officer" means, with respect to any Person, any
of the principal executive officers or general partners of such Person.

"Second Collateralization Date" has the meaning specified in
Section 3.2.

"Secured Indebtedness" of any Person means any Indebtedness of
such Person for which the obligations thereunder are secured by a Lien on any
assets of such Person.

"Security Agreement" means, with respect to each Mortgaged
Property, an agreement in substantially the form of Exhibit I, executed by the
Borrower and the other parties thereto, granting to the Lender a security
interest in the Borrower's interest in the FF&E Reserve.

"Selected Properties" has the meaning specified in Section 3.4.

"Solvent" means, with respect to any Person, that the value of
the assets of such Person (both at fair value and present fair saleable value)
is, on the date of determination, greater than the total amount of liabilities
(including, without limitation, contingent and unliquidated liabilities) of
such Person as of such date and that, as of such date, such Person is able to
pay all liabilities of such Person as such liabilities mature and does not have
unreasonably small capital. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities will be computed at the
amount which, in light of all the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an actual
or matured liability.

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<PAGE> 30
"Stock" means shares of capital stock, beneficial or
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation or equivalent entity, whether voting or
non-voting, and includes, without limitation, common stock and preferred stock.

"Stock Equivalents" means all securities convertible into or
exchangeable for Stock and all warrants, options or other rights to purchase or
subscribe for any stock, whether or not presently convertible, exchangeable or
exercisable.

"Subsidiary" means, with respect to any Person, any
corporation, partnership or other business entity of which an aggregate of 50%
or more of the outstanding Stock having ordinary voting power to elect a
majority of the board of directors, managers, trustees or other controlling
persons, is, at the time, directly or indirectly, owned or controlled by such
Person and/or one or more Subsidiaries of such Person (irrespective of whether,
at the time, Stock of any other class or classes of such entity shall have or
might have voting power by reason of the happening of any contingency).

"Subordination Agreement" means an agreement among the Lender,
the Advisor and the Borrower, substantially in the form annexed as Exhibit J,
as amended, supplemented or modified from time to time in a manner not
inconsistent with the terms thereof and hereof.

"Tangible Net Worth" of any Person means, at any date, the Net
Worth of such Person at such date, excluding, however, from the determination
of the total assets of such Person at such date, (i) all goodwill,
organizational expenses, research and development expenses, trademarks, trade
names, copyrights, patents, patent applications, licenses and rights in any
thereof, and other similar intangibles, (ii) all prepaid expenses, deferred
charges or unamortized debt discount and expense, (iii) all reserves carried
and not deducted from assets, (iv) treasury stock and capital stock,
obligations or other securities of, or capital contributions to, or investments
in, any Subsidiary of such Person, (v) securities which are not readily
marketable, (vi) cash held in a sinking or other analogous

23
<PAGE> 31
fund established for the purpose of redemption, retirement, defeasance or
prepayment of any Stock or Indebtedness, (vii) any write-up in the book value
of any asset resulting from a revaluation thereof, and (viii) any items not
included in clauses (i) through (vii) above which are treated as intangibles in
conformity with GAAP.

"Tax Affiliate" means, as to any Person, (i) any Subsidiary of
such Person, and (ii) any Affiliate of such Person with which such Person files
or is eligible to file consolidated, combined or unitary tax returns.

"Tax Return" has the meaning specified in Section 5.3.

"Taxes" has the meaning specified in Section 2.14(a).

"Termination Date" means the earliest of (i) the Final
Maturity Date and (ii) the date of termination in whole of the Commitment
pursuant to Section 2.4 or 9.2 or any other provision hereof.

"Title Insurance Policies" has the meaning specified in
Section 3.2(a).

"Total Assets" of any Person means, at any date, the aggregate
value of all assets of such Person, determined on the basis of cost of each
such asset to such Person without reduction for depreciation or adjustments
due to asset reappraisals or otherwise.

"Total Base Rents" means, for any period, the aggregate sum of
Base Rents for such period payable under any Operating Leases in effect during
such period, determined on a consolidated basis.

"Underwriters" means the underwriters under the Underwriting
Agreement.

"Underwriting Agreement" means that certain Underwriting
Agreement dated ____________, 1995 between the Borrower, Donaldson, Lufkin &
Jenrette Securities Corporation and the other Underwriters.

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<PAGE> 32
"Unsecured Indebtedness" of any Person means any Indebtedness
of such Person for which the obligations thereunder are not secured by a pledge
of or other encumbrance on any assets of such Person.

1.2. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding" and the word "through" means "to and including".

1.3. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in conformity with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in conformity with GAAP.

1.4. Certain Terms. (a) The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, and not to any particular Article, Section, subsection or clause in this
Agreement. References herein to an Exhibit, Schedule, Article, Section,
subsection or clause refer to the appropriate Exhibit or Schedule to, or
Article, Section, subsection or clause in this Agreement.

(b) The term "Lender" includes its successors and each
assignee of the Lender who becomes a party hereto pursuant to Section 10.7.

ARTICLE II

AMOUNTS AND TERMS OF THE LOANS

2.1. The Loans. On the terms and subject to the conditions
contained in this Agreement, the Lender agrees to make revolving credit loans
(each a "Loan" and collectively, the "Loans") to the Borrower from time to time
on any Business Day during the period from the date hereof to and including the
Final Borrowing Date, and to maintain the Loans outstanding to the Borrower on
the Final Borrowing Date from such date until the Termination Date in an
aggregate outstanding amount not to exceed TWO HUNDRED

25
<PAGE> 33
MILLION DOLLARS ($200,000,000) (the "Commitment") at any time, to be used for
the purposes identified in Section 5.18. Within the limits of the Commitment
and subject to the other terms and conditions hereof, amounts prepaid pursuant
to Section 2.6(b) may be reborrowed under this Section 2.1 up to and including
the Final Borrowing Date. No portion of the Commitment may be borrowed or
reborrowed after the Final Borrowing Date. The Loans shall be evidenced by the
Note. The Lender is authorized to endorse, at any time, the date and amount of
each Loan and the date and amount of each payment of principal with respect to
the Loans on the schedule annexed to and constituting a part of the Note, which
endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed.

2.2. Making the Loans. (a) Each Loan shall be made on
notice, given by the Borrower to the Lender not later than 12:00 noon (New York
City time) on the fifth (5th) Business Day prior to the date of the proposed
Loan. Each such notice (a "Notice of Borrowing") shall be in substantially the
form of Exhibit B, specifying therein (i) the date of such proposed Loan, (ii)
the amount of such proposed Loan, (iii) the account or accounts to which the
Loan should be made, and (iv) that the proceeds of the proposed Loan shall be
used to repay the HRP Loan or details of the Approved Hotel Facility or
Facilities or other permitted use for which the proceeds of the proposed Loan
shall be used.

(b) Upon fulfillment of the applicable conditions set forth
in Article IV, the Lender shall on the date of the proposed Loan, make
available to the Borrower at the account or accounts specified in the Notice of
Borrowing, in immediately available federal funds, the Loan less the Borrowing
Fee applicable thereto.

(d) Each Notice of Borrowing shall be irrevocable and binding
on the Borrower. The Borrower shall indemnify the Lender against any loss,
cost or expense incurred by the Lender as a result of any failure to fulfill on
or before the date specified in any Notice of Borrowing for a proposed Loan the
applicable conditions set forth in Article IV,

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<PAGE> 34
including, without limitation, any loss (including, without limitation, loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by the Lender to fund any Loan
to be made by the Lender when such Loan, as a result of such failure, is not
made on such date.

2.3. Fees. (a) On the first Collateralization Date to
occur, the Borrower agrees to pay to the Lender an additional fee in the sum of
ONE MILLION DOLLARS ($1,000,000).

(b) The Borrower agrees to pay to the Lender a fee (the
"Borrowing Fee") equal to one percent (1%) of the amount of each Loan, payable
at the time such Loan is made to the Borrower.

2.4. Reduction and Termination of the Commitment. (a)
The Borrower may, by written notice to the Lender given no later than the
thirty-fifth (35th) day after the date of execution and delivery hereof, cancel
and terminate this Agreement provided that, no Loans have been previously
advanced to the Borrower hereunder and the Borrower has not previously
submitted any Notice of Borrowing. Upon receipt by the Lender of such written
notice, this Agreement shall automatically terminate subject to survival of
those provisions hereof expressly stated to survive termination of this
Agreement.

(b) The Borrower may, upon at least three Business Days' prior notice
to the Lender, terminate in whole or reduce in part the unused portions of the
Commitment without premium or penalty; provided, however, that each partial
reduction shall be in the aggregate amount of not less than $10,000,000.

2.5. Repayment. The Borrower shall repay the entire unpaid
principal amount of all and any Loans on the Termination Date.

2.6. Prepayments. (a) The Borrower shall have no right to
prepay the principal amount of any Loan other than as provided in this Section
2.6.

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<PAGE> 35
(b) The Borrower may, upon at least ten (10) Business Days'
prior notice to the Lender, stating the proposed date and aggregate principal
amount of the prepayment, prepay the outstanding principal amount of the Loans
in whole or in part, together with accrued interest to the date of such
prepayment on the principal amount prepaid without premium or penalty;
provided, however, that any prepayment of the Loans bearing interest at the
Eurodollar Rate made other than on the last day of an Interest Period for the
Loans shall be subject to payment by the Borrower to the Lender of any costs,
fees or expenses incurred by the Lender in connection with such prepayment
including, without limitation, any costs to unwind any Eurodollar Rate
contracts or Interest Rate Contracts. Upon the giving of such notice of
prepayment, the principal amount of the Loans specified to be prepaid shall
become due and payable on the date specified for such prepayment.

(c) If at any time the aggregate principal amount of Loans
outstanding at such time exceeds the Commitment, the Borrower shall forthwith
prepay the Loans then outstanding in an amount equal to such excess, together
with accrued interest.

2.7. Continuation of Loans at the Eurodollar Rate. At the
end of any Interest Period with respect to the Loans, unless the Borrower has
given notice pursuant to Section 2.6, the Loans will automatically be continued
for an additional Interest Period at the Eurodollar Rate for such Interest
Period.

2.8. Interest. The Borrower shall pay interest on the unpaid
principal amount of each Loan from the date thereof until the principal amount
thereof shall be paid in full, at a rate per annum equal at all times during
the applicable Interest Period for each Loan to the sum of the Eurodollar Rate
for such Interest Period, payable on the last day of such Interest Period and
on the Termination Date; provided, however, that during the continuance of an
Event of Default, all Loans shall bear interest, payable monthly, at a rate per
annum equal at all times to 2% above the Eurodollar Rate in effect until the
maturity of the Loans or the end of such Interest Period, whichever occurs
first, and thereafter at the greater of (x) 2% per annum above the Base Rate in
effect from time to time and (y) 2%

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<PAGE> 36
per annum above the rate per annum required to be paid on the Loans immediately
prior to the date on which such Event of Default occurred.

2.9. Interest Rate Determination and Protection. (a) The
Eurodollar Rate for each Interest Period for Loans shall be determined by the
Lender two Business Days before the first day of such Interest Period.

(b) The Lender shall give prompt notice to the Borrower of
the applicable interest rate determined by the Lender for purposes of Section
2.9.

(c) If, (i) the Lender determines, which determination shall
be conclusive in the absence of manifest error, that quotations of interest
rates for the relevant deposits referred to in the definition of "Eurodollar
Rate" are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining the rates of interest for the Loans as
provided herein, or (ii) the Lender determines, which determination shall be
conclusive in the absence of manifest error, that the Eurodollar Rate for any
Interest Period therefor will not adequately reflect the cost to the Lender of
making the Loans or funding or maintaining the Loans for such Interest Period,
the Lender shall forthwith so notify the Borrower, whereupon

(i) each Loan will automatically, on the last day of the
then existing Interest Period therefor, convert so as to accrue
interest at an interest rate per annum equal to the Base Rate in
effect from time to time; and

(ii) the obligations of the Lender to make Loans at the
Eurodollar Rate shall be suspended until the Lender shall notify the
Borrower that the Lender has determined that the circumstances causing
such suspension no longer exist; provided that, during the period of
such suspension, the obligations of the Lender to make Loans at the
Eurodollar Rate shall convert to obligations to make Loans at the Base
Rate in effect from time to time.

2.10. Increased Costs. If, due to either (i) the
introduction of or any change in or in the interpretation of

29
<PAGE> 37
any law or regulation (other than any change by way of imposition or increase
of reserve requirements included in determining the Eurodollar Rate Reserve
Percentage) or (ii) compliance with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to the Lender of agreeing to make or
making, funding or maintaining any Loans at the Eurodollar Rate, then the
Borrower shall from time to time, upon demand by the Lender, pay to the Lender
additional amounts sufficient to compensate the Lender for such increased cost.
A certificate as to the amount of such increased cost, submitted to the
Borrower by the Lender, shall be conclusive and binding for all purposes,
absent manifest error. If the Borrower so notifies the Lender within five
Business Days after the Lender notifies the Borrower of any increased cost
pursuant to the foregoing provisions of this Section 2.10, the Borrower may
either (A) prepay in full all Loans bearing interest at the Eurodollar Rate
then outstanding in accordance with Section 2.6(b) and, additionally, reimburse
the Lender for such increased cost in accordance with this Section 2.10, or (B)
require the Lender to, and the Lender shall, convert all Loans bearing interest
at the Eurodollar Rate into Loans bearing interest at the Base Rate in effect
from time to time, and additionally, reimburse the Lender for such increased
cost in accordance with this Section 2.10, provided that in the event that the
election in (B) is made by the Borrower, the Lender's obligations to make Loans
hereunder shall thereafter be deemed to be obligations to make Loans at the
Base Rate in effect from time to time.

2.11. Illegality. Notwithstanding any other provision of
this Agreement, if the introduction of or any change in or in the
interpretation of any law or regulation shall make it unlawful, or any central
bank or other Governmental Authority shall assert that it is unlawful, for the
Lender or its Lending Office to make Loans at the Eurodollar Rate or to
continue to fund or maintain Loans at the Eurodollar Rate, then, on notice
thereof and demand therefor by the Lender to the Borrower (i) the obligation of
the Lender to make or to continue the Loans bearing interest at the Eurodollar
Rate shall terminate, (ii) the Borrower shall forthwith prepay in full all
Loans then outstanding, together with interest accrued thereon (and until paid
in full, all such Loans bearing interest at the Eurodollar Rate

30
<PAGE> 38
then outstanding shall accrue interest at an interest rate per annum equal to
the Base Rate in effect from time to time) provided that, the Borrower shall
not be required to prepay such Loans if the Borrower, within five Business Days
of such notice and demand, requires the Lender to convert such Loans to Loans
bearing interest at the Base Rate in effect from time to time.

2.12. Capital Adequacy. If (i) the introduction of or any
change in or in the interpretation of any law or regulation, (ii) compliance
with any law or regulation, or (iii) compliance with any guideline or request
from any central bank or other Governmental Authority (whether or not having
the force of law) affects or would affect the amount of capital required or
expected to be maintained by the Lender or any corporation controlling the
Lender and the Lender reasonably determines that such amount is based upon the
existence of the Lender's Commitment and Loans and its other commitment and
loans of this type, then, upon demand by the Lender, the Borrower shall pay to
the Lender, from time to time as specified by the Lender, additional amounts
sufficient to compensate the Lender in the light of such circumstances, to the
extent that the Lender reasonably determines such increase in capital to be
allocable to the existence of the Lender's Commitment and Loans. A certificate
as to such amounts submitted to the Borrower by the Lender shall be conclusive
and binding for all purposes absent manifest error.

2.13. Payments and Computations. (a) The Borrower shall
make each payment hereunder and under the Note not later than 12:00 noon (New
York City time) on the day when due, in Dollars, to the Lender at its address
referred to in Section 10.2 in immediately available funds without set-off or
counterclaim, to be applied in accordance with the terms of this Agreement.
Payment received by the Lender after 12:00 noon (New York City time) shall be
deemed to be received on the next Business Day.

(b) All computations of interest shall be made by the Lender
on the basis of a year of 360 days for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest is payable. Each determination by the Lender of an interest

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<PAGE> 39
rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.

(c) Whenever any payment hereunder or under the Note shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or fee, as the case
may be; provided, however, that if such extension would cause payment of
interest on or principal of any Loan to be made in the next calendar month,
such payment shall be made on the next preceding Business Day.

2.14. Taxes. (a) Any and all payments by the Borrower under
each Loan Document shall be made free and clear of and without deduction for
any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes
measured by the Lender's net income, and franchise taxes imposed on the Lender,
by the jurisdiction under the laws of which the Lender is organized or any
political subdivision thereof and taxes measured by the Lender's net income,
and franchise taxes imposed on the Lender, by the jurisdiction of the Lender's
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder to the
Lender (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including, without limitation, deductions
applicable to additional sums payable under this Section 2.14) the Lender
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower shall pay the full amount deducted to the relevant taxing authority or
other authority in accordance with applicable law, and (iv) the Borrower shall
deliver to the Lender evidence of such payment to the relevant taxation or
other authority.

(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies of the

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United States or any political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made under any Loan Document or from
the execution, delivery or registration of, or otherwise with respect to, any
Loan Document (collectively, "Other Taxes").

(c) The Borrower will indemnify the Lender for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.14) paid by the Lender and any liability (including, without limitation, for
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be made within 30 days from the date the Lender
makes written demand therefor.

(d) Within 30 days after the date of any payment of Taxes or
Other Taxes, the Borrower will furnish to the Lender, at its address referred
to in Section 10.2, the original or a certified copy of a receipt evidencing
payment thereof.

(e) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.14 shall survive the payment in full of the
Obligations.

ARTICLE III

APPROVAL OF PROPOSED HOTEL FACILITIES;
CONVERSION TO SECURED LOANS

3.1. Approval of Proposed Hotel Facilities. In the event
that the Borrower desires to acquire either itself or through a Subsidiary a
Proposed Hotel Facility using the proceeds of a Loan to be made by the Lender
hereunder, the Borrower shall prior to submitting its Notice of Borrowing in
respect of such Loan request in writing the Lender's consent to the acquisition
thereof, which request shall be accompanied by a Proposed Hotel Facility
Statement (together with all documents referred to therein) in respect of the
Proposed Hotel Facility and such other information as the Lender may reasonably
require. The Lender's consent to such

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<PAGE> 41
acquisition shall not be unreasonably withheld. The Lender shall not withhold
its consent to such acquisition on grounds of insufficient Cash Flow from the
Proposed Hotel Facility if and only if the Cash Flow of the current owner or
operator of the Proposed Hotel Facility (as applicable) attributable to the
Proposed Hotel Facility, over the four most recent financial quarters after
deduction of an FF&E Reserve equal to five percent (5%) of total sales for such
period but before payment of any income taxes or management fees for such
period is not less than 1.0 times the proposed annual Base Rent under the
proposed Operating Lease of the Proposed Hotel Facility. The Lender shall not
approve the acquisition of any Proposed Hotel Facility that will not on the
date the Loan is made be subject to and have the benefit of an Operating Lease.

3.2. Conversion to Secured Loans; Delivery of
Collateralization Documents. Upon the earlier of (i) the date on which the
aggregate outstanding principal balance of the Loans exceeds $100,000,000 (the
"First Collateralization Date"), or (ii) January 1, 1996 if any portion of the
Loans is outstanding as of December 31, 1995 (the "Second Collateralization
Date"; each of the First Collateralization Date and the Second
Collateralization Date, a "Collateralization Date"), the Loans shall become
secured and the Borrower shall, on or before the first Collateralization Date
to occur, deliver to the Lender the following (collectively, the
"Collateralization Documents"), each dated as of such Collateralization Date,
in form and substance reasonably satisfactory to the Lender:

(a) Duly executed and acknowledged Mortgages for each parcel
of Real Estate then owned by the Borrower or any of its Subsidiaries
(including, without limitation each Hotel Facility), in such amounts as shall,
subject to the limitations set forth in any applicable Management Agreement, be
reasonably acceptable to the Lender, together with:

(i) commitments for title insurance policies (the "Title
Insurance Policies") issued by a title company acceptable to the
Lender, in such form and amounts as are reasonably acceptable to the
Lender, insuring that each such Mortgage is a valid first priority
Lien on such Real Estate subject only to such

34
<PAGE> 42
exceptions to title as shall be acceptable to the Lender in its
reasonable discretion and containing such endorsements and affirmative
insurance as the Lender may require and as are obtainable in the
applicable jurisdiction, and true copies of each document, instrument
or certificate required by the terms of each such policy, Mortgage to
be, or have been, filed, recorded, executed or in connection
therewith;

(ii) opinions reasonably satisfactory to the Lender of
local counsel retained by the Borrower with respect to the validity
and enforceability of such Mortgages and such other matters as may be
reasonably required by the Lender; and

(iii) duly executed UCC-1 Financing Statements under the
applicable Uniform Commercial Code to be filed in connection with such
Mortgages in form and substance reasonably satisfactory to the Lender,
to perfect the Lien created by the applicable Mortgages;

(iv) (A) duly executed and acknowledged estoppel
certificates, dated not earlier than 30 days prior to the Closing
Date, from each lessee of an Acquired Initial Hotel, in form and
substance satisfactory to the Lender, and (B) duly executed and
acknowledged subordination, non-disturbance and attornment agreements
(in recordable form) from each lessee of an Acquired Initial Hotel,
unless such lessee's lease, by its terms, is subject and subordinate
to the Lien of the applicable Mortgage;

(v) current ALTA surveys and surveyor's certification as
to all such Real Estate, each in form and substance reasonably
satisfactory to the Lender; and

(vi) payment to the Lender, in escrow, of all title
insurance premiums, documentary, stamp or intangible taxes, recording
fees and mortgage taxes payable in connection with the recording of
any of the Loan Documents or the issuance of the Title Insurance
Policies.

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<PAGE> 43
(b) Assignment Agreements in respect of the Management
Agreements for each Hotel Facility duly executed by the Borrower or its
Subsidiary, as applicable, the Operating Lessee and the Manager.

(c) Security Agreements in respect of the FF&E Reserves for
each Hotel Facility duly executed by the Borrower or its Subsidiary, as
applicable, the Operating Lessee and the Manager.

(d) Financing Statements (Form UCC-1) under the Uniform
Commercial Code of all jurisdictions as may be necessary or, in the reasonable
opinion of the Lender, desirable to perfect the Lien created by the Security
Agreements for each Hotel Facility; copies of Requests for Information or
Copies (Form UCC-11), or equivalent reports, listing all effective financing
statements which name the Borrower or any Subsidiary of the Borrower (under its
present name or any previous name) as debtor and which are filed in the
jurisdictions referred to above, together with copies of such other financing
statements (none of which shall cover the Collateral purported to be covered by
the Security Agreement).

(e) A copy of the Operating Lease and Management Agreement in
respect of each Hotel Facility, each certified by a Responsible Officer.

3.3. Preparation and Execution of Collateralization
Documents. (a) Upon the earlier of (i) such date on which the aggregate
outstanding principal balance of the Loans equals or exceeds $75,000,000 or
(ii) November 15, 1995 if any portion of the Loans is outstanding as of such
date (such earlier date, the "Preparation Date"), the Lender shall commence the
preparation of the Collateralization Documents and the parties shall cooperate
and diligently proceed to prepare the Collateralization Documents (including,
without limitation, ordering commitments for the title insurance policies, ALTA
surveys and UCC-searches, obtaining estoppel certificates and retaining
counsel, including local counsel).

(b) The Borrower, on behalf of itself and each of its
Subsidiaries, hereby appoints the Lender its attorney-in- fact to execute,
acknowledge and deliver for and in the

36
<PAGE> 44
name of the Borrower or any of its Subsidiaries, as applicable, any and all of
the Collateralization Documents which the Borrower or any of its Subsidiaries
fails to execute, acknowledge and/or deliver within three (3) Business Days
after the first Collateralization Date to occur, and this power, being coupled
with an interest, shall be irrevocable as long as any part of the Obligations
remains unpaid.

3.4. Recordation and Enforcement of the Mortgage Documents.
(a) Immediately upon, or at any time after, a Collateralization Date, the
Lender may (i) record and/or file, as appropriate, the Mortgage Documents on
such of the Mortgaged Properties as the Lender shall select in its sole and
absolute discretion (the "Selected Properties"), reasonably determined by the
Lender to provide to the Borrower (A) on the First Collateralization Date,
Total Base Rents from such Mortgaged Properties sufficient to provide a ratio
of Total Base Rents from such Mortgaged Properties for the previous Fiscal
Quarter to Net Interest Expense for such Fiscal Quarter attributable only to
that portion of the Obligations of the Borrower in excess of $100,000,000, of
not less than 2:1, and (B) on the Second Collateralization Date, Total Base
Rents from such Mortgaged Properties sufficient to provide a ratio of Total
Base Rents from such Mortgaged Properties for the previous Fiscal Quarter to
Net Interest Expense for such Fiscal Quarter attributable to the entire
Obligations of not less than 2:1; (ii) obtain a Title Insurance Policy for each
such Mortgaged Property (in connection with which the Borrower covenants and
agrees to take such actions and make such payments as shall be reasonably
required by the Lender or the title company to enable the title company to
insure that the Mortgage is a valid first priority Lien on the Mortgaged
Property subject only to Liens permitted hereunder), and (iii) use the Mortgage
Payments made in respect of such Mortgaged Properties (which shall be
automatically released from escrow on such Collateralization Date), for payment
of the necessary title insurance premiums recording or filing fees and taxes
payable in connection with the recording and/or filing of the Mortgage
Documents and the issuance of the Title Insurance Policy.

(b) From and after any Collatealization Date, the Mortgage
Documents relating to the Selected Properties

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<PAGE> 45
shall be fully enforceable by the Lender and all of the Obligations of the
Borrower shall be effectively secured by the Selected Properties pursuant to
the Mortgage Documents recorded and/or filed under subsection (a) above.

ARTICLE IV

CONDITIONS OF LENDING

4.1. Conditions Precedent to the Initial Loan. The
obligation of the Lender to make the initial Loan is subject to satisfaction of
the conditions precedent that the Lender shall have received, on the Closing
Date, the following, each dated the Closing Date unless otherwise indicated, in
form and substance reasonably satisfactory to the Lender:

(a) The Note to the order of the Lender.

(b) A certificate of the Secretary or an Assistant Secretary
of each Loan Party certifying (i) the resolutions of its Board of Trustees or
Directors, as appropriate, approving each Loan Document to which it is a party,
(ii) all documents evidencing other necessary trust or corporate action, as
appropriate, and required governmental and third party approvals, licenses and
consents with respect to each Loan Document to which it is a party and the
transactions contemplated thereby, (iii) a copy of its and each of its
Subsidiaries' declaration of trust, certificates of incorporation and By-Laws,
as appropriate, as of the Closing Date, and (iv) the names and true signatures
of each of its officers who has been authorized to execute and deliver any Loan
Document or other document required hereunder to be executed and delivered by
or on behalf of such Person.

(c) A copy of the declaration of trust or articles or
certificate of incorporation, as appropriate, of each Loan Party and of each of
its Subsidiaries (if any) which is not a Loan Party certified as of a recent
date by the Secretary of State of the state of formation of such Loan Party or
Subsidiary, together with certificates of such official attesting to the good
standing of each such Loan Party and Subsidiary.

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<PAGE> 46
(d) A favorable opinion of Sullivan & Worcester, counsel to
the Loan Parties, in substantially the form of Exhibit D, and as to such other
matters as the Lender may reasonably request.

(e) A Negative Pledge Agreement in respect of each of the
Acquired Initial Hotels, duly executed and acknowledged by the Borrower.

(f) Evidence that the insurance required by the terms of the
Collateral Documents and by Section 7.4 is in full force and effect.

(g) A written report of an investigation by an environmental
consultant, reasonably acceptable to the Lender, addressing any significant
environmental, health and safety violations, hazards or liabilities to which
the Borrower or any of its Subsidiaries may be subject, which report shall
demonstrate, to the reasonable satisfaction of the Lender, that the Borrower
and its Subsidiaries and their operations are in compliance in all material
respects with all applicable Environmental Laws and are not subject to any
material Environmental Liabilities and Costs.

(h) Such additional documents, information and materials as
the Lender may reasonably request.

(i) The Lender shall have received evidence satisfactory to
it that all costs and accrued and unpaid fees and expenses (including, without
limitation, legal fees and expenses) required to be paid to the Lender on or
before the Closing Date, including, without limitation, those referred to in
Sections 2.3 and 10.4 and any Mortgage Payment, to the extent then due and
payable, have been paid.

(j) A certificate, signed by a Responsible Officer of the
Borrower, stating that the statements set forth in Section 4.2 (a) and (b) are
true and correct on the Closing Date, after giving effect to the Loans being
made on the Closing Date.

(k) The initial public offering of the common stock of the
Borrower, as described in the Registration Statement, has closed.

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<PAGE> 47
(l) A copy of the Operating Lease and Management Agreement in
respect of each of the Acquired Initial Hotels each certified by a Responsible
Officer.

(m) A copy of the Advisory Agreement certified by a
Responsible Officer.

(n) The Subordination Agreement duly executed and
acknowledged by the Borrower and the Advisor.

4.2. Conditions Precedent to Each Loan. The obligation of
the Lender to make any Loan (including the Loan being made by the Lender on the
Closing Date) shall be subject to the further conditions precedent that:

(a) The following statements shall be true on the date of
such Loan, before and after giving effect thereto and to the application of the
proceeds therefrom (and the acceptance by the Borrower of the proceeds of such
Loan shall constitute a representation and warranty by the Borrower that on the
date of such Loan such statements are true):

(i) The representations and warranties of the
Borrower contained in Article V. and of each Loan Party in the other
Loan Documents are correct on and as of such date as though made on
and as of such date; and

(ii) No Default or Event of Default will result from
the Loans being made on such date.

(b) The making of the Loans on such date does not violate any
Requirement of Law and is not enjoined, temporarily, preliminarily or
permanently.

(c) The Lender shall have received, on or before such date, a
Negative Pledge Agreement duly executed and acknowledged by the Borrower or its
Subsidiary, as applicable, in respect of any Hotel Facility for which a
Negative Pledge Agreement has not been delivered pursuant to Section 4.1(e).

(d) The Lender shall have received such additional documents,
information and materials as the Lender may reasonably request.

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<PAGE> 48
4.3. Additional Conditions Precedent to Each Loan After a
Collateralization Date. The obligation to the Lender to make any Loan on or
after the first Collateralization Date to occur (including, without limitation,
any Loan that would cause the First Collateralization Date to occur) shall be
subject to the further conditions precedent that:

(a) The Lender shall have received, on or before the
first Collateralization Date to occur, the Collateralization Documents in
accordance with Section 3.2.

(b) The Lender shall have received, on or before the date of
the Loan, in the forms attached hereto, subject to appropriate revisions for
state or property specific requirements (i) Collateralization Documents, duly
executed and acknowledged where appropriate, in respect of the Approved Hotel
Facility to be acquired using the proceeds of the Loan, (ii) payment to the
Lender, in escrow, of the Mortgage Payments in respect of such Approved Hotel
Facility.

(c) All costs and accrued and unpaid fees and expenses
(including, without limitation, legal fees and expenses) required to be paid to
the Lender on or before the Closing Date, including, without limitation, those
referred to in Sections 2.3 and 10.4 and any Mortgage Payment, to the extent
then due and payable, have been paid.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

To induce the Lender to enter into this Agreement, the
Borrower represents and warrants to the Lender that:

5.1. Existence; Compliance with Law. Each Loan Party and
each of its Subsidiaries (i) is a real estate investment trust or a
corporation, as specified herein, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation; (ii) is duly
qualified or licensed and in good standing under the laws of each jurisdiction
where such qualification is necessary,

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<PAGE> 49
except for failures which in the aggregate have no Material Adverse Effect;
(iii) has all requisite power and authority and the legal right to own, pledge
and mortgage its properties, to lease (as lessee) the properties that it leases
as lessee, to lease or sublease (as lessor) the properties it owns and/or
leases (as lessee) and to conduct its business as now or currently proposed to
be conducted; (iv) is in compliance with its declaration of trust or
certificate of incorporation and by-laws, as appropriate; (v) is in compliance
with all other applicable Requirements of Law except for such non-compliances
as in the aggregate have no Material Adverse Effect; and (vi) has all necessary
licenses, permits, consents or approvals from or by, has made all necessary
filings with, and has given all necessary notices to, each Governmental
Authority having jurisdiction, to the extent required for such ownership,
leasing and conduct, except for licenses, permits, consents or approvals which
can be obtained by the taking of ministerial action to secure the grant or
transfer thereof or failures which in the aggregate have no Material Adverse
Effect.

5.2. Power; Authorization; Enforceable Obligations. (a) The
execution, delivery and performance by each Loan Party of the Loan Documents to
which it is a party and the consummation of the transactions contemplated
hereby:

(i) are within such Loan Party's corporate or trust
powers, as appropriate;

(ii) have been or, at the time of delivery thereof
pursuant to Article III or IV, will have been duly authorized by all
necessary corporate or trust action, as appropriate, including,
without limitation, the consent of any trustees or stockholders where
required;

(iii) do not and will not (A) contravene any Loan Party's
or any of its Subsidiaries' respective declaration of trust,
certificate of incorporation or by-laws or other comparable governing
documents, (B) violate any other applicable Requirement of Law
(including, without limitation, Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System), or any order or decree of
any Governmental

42
<PAGE> 50
Authority or arbitrator, (C) conflict with or result in the breach of,
or constitute a default under, or result in or permit the termination
or acceleration of, any material Contractual Obligation of any Loan
Party or any of its Subsidiaries, or (D) result in the creation or
imposition of any Lien upon any of the property of any Loan Party or
any of its Subsidiaries, other than those in favor of the Lender
pursuant to the Collateral Documents; and

(iv) do not require the consent of, authorization by,
approval of, notice to, or filing or registration with, any
Governmental Authority or any other Person, other than those which
have been or will be, prior to the Closing Date, obtained or made and
copies of which have been or will be delivered to the Lender pursuant
to Section 4.1, and each of which on the Closing Date will be in full
force and effect, and any consents, authorizations, approvals of,
notices to or filings or registrations required to be delivered under
Article III hereof.

(b) This Agreement has been, and each of the other Loan
Documents will have been upon delivery thereof pursuant to Section 4.1 and/or
Article III hereof, duly executed and delivered by each Loan Party party
thereto. This Agreement is, and the other Loan Documents will be, when
delivered hereunder, the legal, valid and binding obligation of each Loan Party
party thereto, enforceable against it in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.

5.3. Taxes. All federal, state, local and foreign tax
returns, reports and statements (collectively, the "Tax Returns") which, to the
best knowledge and belief of the Borrower, are required to be filed by the
Borrower or any of its Tax Affiliates have been filed with the appropriate
governmental agencies in all jurisdictions in which such Tax Returns, are
required to be filed, all such Tax Returns are true and correct in all material
respects, and all taxes, charges and other impositions due and payable have
been timely paid prior to the date on which any fine,

43
<PAGE> 51
penalty, interest, late charge or loss may be added thereto for non-payment
thereof, except where contested in good faith and by appropriate proceedings if
adequate reserves therefor have been established on the books of the Borrower
or such Tax Affiliate in conformity with GAAP. If applicable, proper and
accurate amounts have been withheld by the Borrower and each of its respective
Tax Affiliates from their respective employees (if any) for all periods in full
and complete compliance with the tax, social security and unemployment
withholding provisions of applicable federal, state, local and foreign law and
such withholdings have been timely paid to the respective Governmental
Authorities. None of the Borrower or any of its Tax Affiliates has (i)
executed or filed with the IRS or any other Governmental Authority any
agreement or other document extending, or having the effect of extending, the
period for assessment or collection of any charges other than those that in the
aggregate would have no Material Adverse Effect; (ii) agreed or been requested
to make any adjustment under Section 481(a) of the Code by reason of a change
in accounting method or otherwise other than those that in the aggregate would
have no Material Adverse Effect; or (iii) any obligation under any written tax
sharing agreement.

5.4. Full Disclosure. (a) No written statement prepared or
furnished by or on behalf of any Loan Party or any of its Affiliates in
connection with any of the Loan Documents or the consummation of the
transactions contemplated thereby, and no financial statement delivered
pursuant hereto or thereto, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading. All facts known to the Borrower which are
material to an understanding of the financial condition, business, properties
or prospects of the Borrower and its Subsidiaries taken as one enterprise have
been disclosed to the Lender.

5.5. Financial Matters. (a) The balance sheet of the
Borrower as of March 31, 1995, and the related statement of income, retained
earnings and cash flow of the Borrower for the period from February 7, 1995
(inception) to March 31, 1995, certified by Arthur Andersen, LLP, and the
combined statements of assets, liabilities and net investment and advances of
the Initial Hotels as of

44
<PAGE> 52
December 30, 1994, and the related combined statements of revenues and expenses
excluding income taxes, and cash flows for the fiscal year ended December 30,
1994, certified by Arthur Andersen, LLP, copies of which have been furnished to
the Lender, fairly present the financial condition of the Borrower and the
combined assets, liabilities and net investment and advances of the Initial
Hotels as of such dates and the consolidated results of the operations of the
Borrower and the revenues and expenses excluding income taxes, and cash flows
of the Initial Hotels for the period ended on such dates, all in conformity
with GAAP.

(b) Since March 31, 1995, there has been no Material Adverse
Change and there have been no events or developments that in the aggregate have
had a Material Adverse Effect.

(c) Neither the Borrower nor any of its Subsidiaries had at
March 31, 1995 any material obligation, contingent liability or liability for
taxes, long-term leases or unusual forward or long-term commitment which is not
reflected in the balance sheet at such date referred to in subsection (a) above
or in the notes thereto.

(d) The unaudited pro forma balance sheets of the Borrower
and in respect of the Initial Hotels (the "Pro Forma Balance Sheets"), copies
of which have been delivered to the Lender, have been prepared with respect to
the Borrower as of March 31, 1995, and with respect to the Initial Hotels, as
of March 24, 1995, and reflect as of such dates, the pro forma financial
condition of the Borrower and of the Initial Hotels.

(e) The Borrower is, and on a consolidated basis the Borrower
and its Subsidiaries are, Solvent.

5.6. Litigation. There are no pending or, to the knowledge
of the Borrower, threatened actions, investigations or proceedings affecting
the Borrower or, to the knowledge of the Borrower, any Operator or any of their
respective properties or revenues before any court, Governmental Authority or
arbitrator, other than those that in the aggregate, if adversely determined,
would have no Material Adverse Effect. The performance of any action by (a)
any Loan Party required or contemplated by any of the

45
<PAGE> 53
Loan Documents or (b) any Operator required or contemplated by any Operating
Lease or Management Agreement is not (in the case of (b) only, to the knowledge
of the Borrower) restrained or enjoined (either temporarily, preliminarily or
permanently), and no material adverse condition has been imposed by any
Governmental Authority or arbitrator upon any of the foregoing transactions
contemplated by the aforementioned documents.

5.7. Margin Regulations. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System), and no proceeds of any Loan will be used to
purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.

5.8. Ownership of Borrower and HRPT Advisors; Subsidiaries.
(a) The authorized capital stock of the Borrower consists of 100,000,000
common shares of beneficial interest, $0.01 par value per share, of which
11,750,000 shares will be issued and outstanding upon consummation of the
Initial Public Offering, assuming that the Underwriters' over-allotment option
is not exercised, and 100,000,000 preferred shares of beneficial interest,
$0.01 par value per share, none of which shares will be issued and outstanding
upon the consummation of the Initial Public Offering. Upon consummation of the
Initial Public Offering all of the outstanding capital stock of the Borrower
will be validly issued, fully paid and non-assessable and at least 250,000
shares of such stock will be owned beneficially and of record by HRPT Advisors
free and clear of all Liens as of the date of this Agreement. No authorized
but unissued shares, no treasury shares and, to the best knowledge of the
Borrower, no other outstanding shares of capital stock of the Borrower are
subject to any option, warrant, right of conversion or purchase or any similar
right. Except as set forth on Schedule 5.8(a) hereto, there are no agreements
or understandings with respect to the voting, sale or transfer of any shares of
capital stock of the Borrower, or to the best knowledge of the Borrower, any
agreement restricting the transfer or hypothecation of any such shares.

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<PAGE> 54
(b) The authorized capital stock of HRPT Advisors consists of
100,000 shares of common stock, $0.01 par value per share, of which 1,000
shares are issued and outstanding as of the date hereof. All of the
outstanding capital stock of HRPT Advisors has been validly issued, is fully
paid and non-assessable and at least 51% of such stock is owned, in the
aggregate, beneficially and of record by Barry M. Portnoy and/or Gerard M.
Martin, free and clear of all Liens as of the date of this Agreement. No
authorized but unissued shares, no treasury shares and, to the best knowledge
of the Borrower, no other outstanding shares of capital stock of HRPT Advisors
are subject to any option, warrant, right of conversion or purchase or any
similar right. There are no agreements or understandings with respect to the
voting, sale or transfer of any shares of capital stock of HRPT Advisors, or to
the best knowledge of the Borrower, any agreement restricting the transfer or
hypothecation of any such shares.

(c) Set forth on Schedule 5.8(c) hereto is a complete and
accurate list showing, as of the date hereof, all Subsidiaries of the Borrower
and, as to each such Subsidiary, the jurisdiction of its incorporation, the
number of shares of each class of Stock authorized, the number outstanding on
the date hereof and the percentage of the outstanding shares of each such class
owned (directly or indirectly) by the Borrower. No Stock of any Subsidiary of
the Borrower is subject to any outstanding option, warrant, right of conversion
or purchase or any similar right. All of the outstanding capital Stock of each
such Subsidiary has been validly issued, is fully paid and non-assessable and
is owned by the Borrower, free and clear of all Liens. Neither the Borrower
nor any such Subsidiary is a party to, or has knowledge of, any agreement
restricting the transfer or hypothecation of any shares of Stock of any such
Subsidiary, other than the Loan Documents. The Borrower does not own or hold,
directly or indirectly, any capital stock or equitysecurity of, or any equity
interest in, any Person other than such Subsidiaries.

5.9. ERISA. (a) There are no Multiemployer Plans.

(b) Each Plan and any related trust intended to qualify under
Code Section 401 or 501 has been determined by

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the IRS to be so qualified and to the best knowledge of the Borrower nothing
has occurred which would cause the loss of such qualification.

(c) None of the Borrower, any of its Subsidiaries or any
ERISA Affiliate, with respect to any Pension Plan, has failed to make any
contribution or pay any amount due as required by Section 412 of the Code or
Section 302 of ERISA or the terms of any such plan, and all required
contributions and benefits have been paid in accordance with the provisions of
each such plan.

(d) There are no pending or, to the knowledge of the
Borrower, threatened claims, actions or proceedings (other than claims for
benefits in the normal course), relating to any Plan other than those that in
the aggregate, if adversely determined, would have no Material Adverse Effect.

(e) No Pension Plan has any unfunded accrued benefit
liabilities, as determined by using reasonable actuarial assumptions utilized
by such plan's actuary for funding purposes. Within the last five years none
of the Borrower, any of its Subsidiaries or any ERISA Affiliate has caused a
Pension Plan with any such liabilities to be transferred outside of its
"controlled group" (within the meaning of Section 4001(a)(14) of ERISA).

(f) No Plan provides for continuing health, disability,
accident or death benefits or coverage for any participant or his or her
beneficiary after such participant's termination of employment (except as may
be required by Section 4980B of the Code and at the sole expense of the
participant or the beneficiary) which would result in the aggregate under all
Plans in a liability in an amount which would have a Material Adverse Effect.

5.10. Liens. There are no Liens of any nature whatsoever on
any Hotel Facilities of the Borrower or any of its Subsidiaries other than
those permitted by Section 8.1. The forms of the Collateral Documents attached
hereto are sufficient to grant to the Lender fully perfected first priority
Liens in and to the Collateral subject only to Permitted Liens.

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5.11. [Intentionally Omitted]

5.12. No Burdensome Restrictions; No Defaults; Contractual
Obligations. (a) Neither the Borrower nor any of its Subsidiaries is in
default beyond the expiration of any applicable notice or grace period under or
with respect to any Contractual Obligation owed by it and, to the knowledge of
the Borrower, no other party is in default beyond the expiration of any
applicable notice or grace period under or with respect to any Contractual
Obligation owed to the Borrower or to any of its Subsidiaries, other than those
defaults which in the aggregate have no Material Adverse Effect.

(b) No Event of Default or Default has occurred and is
continuing.

(c) There is no Requirement of Law that has not been complied
with by the Borrower, the compliance with which by the Borrower or any of its
Subsidiaries would have a Material Adverse Effect.

(d) No Subsidiary of the Borrower is subject to any
Contractual Obligation restricting or limiting its ability to transfer its
assets to the Borrower or to declare or make any dividend payment or other
distribution on account of any shares of any class of its Stock or its ability
to purchase, redeem, or otherwise acquire for value or make any payment in
respect of any such shares or any shareholder rights.

5.13. No Investments. Except as permitted by Section 8.6,
none of the Borrower or any of its Subsidiaries is engaged in any joint venture
or partnership with any other Person or maintains any Investment.

5.14. Government Regulation. Neither the Borrower nor any of
its Subsidiaries is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended, or subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, or any other federal or state statute
or regulation such that its ability to incur

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<PAGE> 57
Indebtedness is limited, or its ability to consummate the transactions
contemplated hereby or by any other Loan Document, or the exercise by the
Lender of rights and remedies hereunder or thereunder, is impaired. The making
of the Loans by the Lender, the application of the proceeds and repayment
thereof by the Borrower and the consummation of the transactions contemplated
by the Loan Documents will not violate any provision of any of the foregoing or
any rule, regulation or order issued by the Securities and Exchange Commission
thereunder.

5.15. Insurance. All policies of insurance of any kind or
nature owned by or issued to the Borrower or any of its Subsidiaries, or issued
in respect of any real property owned or leased by the Borrower or any of its
Subsidiaries including, without limitation, policies of life, fire, theft,
product liability, public liability, property damage, other casualty, employee
fidelity, workers' compensation and employee health and welfare insurance, are
in full force and effect and are of a nature and provide such coverage as
(except earthquake coverage) is sufficient and as is customarily carried by
companies of the size and character of such Person. None of the Borrower or
any of its Subsidiaries has been refused insurance for which it applied or had
any policy of insurance terminated (other than at its request). Lender
confirms and agrees that the policies of insurance owned by or issued to the
Operating Lessee in respect of any Hotel Facility shall be sufficient for the
purposes of this representation provided that the same comply with the terms of
the Operating Lease relating thereto.

5.16. Employees. Neither the Borrower nor any of its
Subsidiaries has any employees and none of them has ever engaged employees.

5.17. Force Majeure. Neither the business nor the properties
of the Borrower or any of its Subsidiaries are currently suffering from the
effects of any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (whether or not covered by insurance), other than those
which in the aggregate have no Material Adverse Effect.

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<PAGE> 58
5.18. Use of Proceeds. The proceeds of the Loans are being
used by the Borrower solely as follows: (a) to repay the HRP Loan, (b) to pay
the purchase price of Approved Hotel Facilities and for the payment of related
transaction costs, fees and expenses, or (c) as to an aggregate amount not to
exceed twenty million dollars ($20,000,000), for general business purposes in
the ordinary course.

5.19. Environmental Protection. Except as disclosed on
Schedule 5.19:

(a) all real property leased, owned or operated by the
Borrower or any of its Subsidiaries is free from contamination by any Hazardous
Material which could reasonably be expected to subject the Borrower or any of
its Subsidiaries to Environmental Liabilities and Costs that could in the
aggregate have a Material Adverse Effect;

(b) the operations of the Borrower and each of its
Subsidiaries, and the operations at any real property leased, owned or operated
by the Borrower or any of its Subsidiaries are in material compliance in all
respects with all applicable Environmental Laws;

(c) neither the Borrower nor any of its Subsidiaries have
liabilities with respect to Hazardous Materials, and no facts or circumstances
exist which could give rise to liabilities with respect to Hazardous Materials
which could reasonably be expected to subject the Borrower or any of its
Subsidiaries to Environmental Liabilities and Costs that could in the aggregate
have a Material Adverse Effect;

(d) (i) the Borrower and its Subsidiaries and, to the best
knowledge of the Borrower and its Subsidiaries, the Operators have obtained,
currently maintained and have all Environmental Permits necessary for their
operations and are in material compliance with such Environmental Permits,
except to the extent that the failure to obtain or maintain such Permits or to
be in compliance therewith would not, in the aggregate, have a Material Adverse
Effect, (ii) there are no Legal Proceedings pending nor, to the best knowledge
of the Borrower and its Subsidiaries, threatened to revoke, or alleging the
violation of, such Environmental Permits,

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<PAGE> 59
other than Legal Proceedings which, if adversely determined, would not, in the
aggregate, have a Material Adverse Effect and (iii) neither the Borrower nor
any of its Subsidiaries or, to the best knowledge of the Borrower and its
Subsidiaries, the Operators have received any notice from any Governmental
Authority to the effect that there is lacking any Environmental Permit required
in connection with the current use or operation of any property leased, owned
or operated by the Borrower or any of its Subsidiaries;

(e) neither the Borrower's nor any of its Subsidiaries'
current facilities and operations, nor, to the best knowledge of the Borrower
and its Subsidiaries, any Operator or predecessor of the Borrower or any of its
Subsidiaries, nor any of their past facilities and operations, nor any owner of
premises leased or operated by the Borrower and its Subsidiaries, are subject
to any outstanding written Order or Contract, including Environmental Liens,
with any Governmental Authority or other Person, or to any federal, state,
local, foreign or territorial investigation respecting (i) Environmental Laws,
(ii) Remedial Action, (iii) any Environmental Claim, or (iv) the Release or
threatened Release of any Hazardous Material, the compliance with which, in any
case, is reasonably likely to have a Material Adverse Effect;

(f) neither the Borrower, nor any of its Subsidiaries or, to
the best knowledge of the Borrower and its Subsidiaries, any of the Operators
are subject to any pending Legal Proceeding alleging the violation of any
Environmental Law which, if adversely determined is reasonably likely to have a
Material Adverse Effect, nor, to the best knowledge of the Borrower and its
Subsidiaries, are any such proceedings threatened;

(g) neither the Borrower nor any of its Subsidiaries nor, to
the best knowledge of the Borrower and its Subsidiaries, any Operators or
predecessor of the Borrower or any of its Subsidiaries, nor any owner of
premises leased by the Borrower or any of its Subsidiaries, have filed any
notice under federal, state or local, territorial or foreign law indicating
past or present treatment, storage, or disposal of or reporting a Release of
Hazardous Material into the environment, in the case of any Operator, with
respect to Hotel Facilities only;

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<PAGE> 60

(h) none of the operations of the Borrower or any of its
Subsidiaries or, to the best knowledge of the Borrower and its Subsidiaries, of
any Operators or predecessor of the Borrower or any of its Subsidiaries, or of
any owner of premises leased by the Borrower or any of its Subsidiaries,
involve or previously involved the generation, transportation, treatment,
storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts
260-270 (in effect as of the date of this Agreement) or any state, local,
territorial or foreign equivalent, in the case of any Operator, with respect to
Hotel Facilities only; and

(i) there is not now, nor has there been in the past, on,
in or under any real property leased or owned by the Borrower or any of its
Subsidiaries (i) any underground storage tanks or surface tanks, dikes or
impoundments, (ii) any asbestos- containing materials, (iii) any
polychlorinated biphenyls, or (iv) any radioactive substances, the existence of
which, in any case, is reasonably likely to have a Material Adverse Effect.

5.20. Contractual Obligations Concerning Assets. Except
with respect to the Initial Hotels listed in Part II of Schedule 1.1 hereto, as
of the date of this Agreement, neither the Borrower nor any of its Subsidiaries
owns or holds, or is obligated under or a party to, any option, right of first
refusal, or other contractual right to purchase or acquire, or any Contractual
Obligation to effect an Asset Sale of, any asset or property owned or leased by
the Borrower or any of its Subsidiaries.

5.21. Status as REIT. The Borrower is organized in
conformity with the requirements for qualification as a real estate investment
trust under the Code. Borrower has met all of the requirements for
qualification as a real estate investment trust under the Code for its fiscal
year ended December 31, 1995. The Borrower is in a position to qualify for its
current fiscal year as a real estate investment trust under the Code and its
proposed methods of operation will enable it to so qualify.

5.22. Real Property. (a) The Borrower and its Subsidiaries
own good, clean and marketable fee simple absolute title to all of the Real
Estate purported to be owned by them in fee simple, which Real Estate is at the

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<PAGE> 61

date hereof described in Schedule 5.22(a), and good, clean and marketable title
to, or valid leasehold interests in, all other properties and assets purported
to be owned by the Borrower or any of its Subsidiaries, including, without
limitation, valid leasehold interests pursuant to the Leases and all property
reflected in the latest balance sheet referred to in Section 5.5(a), except for
such property as has been disposed of since that date without violation of any
of the provisions hereof, and none of such properties and assets, including,
without limitation, the Real Estate and the Leases, is subject to any Lien,
except Liens granted to the Lender pursuant to the Loan Documents or permitted
hereunder or thereunder. The Borrower and its Subsidiaries have received all
deeds, assignments, waivers, consents, non-disturbance and recognition or
similar agreements, bills of sale and other documents, and have duly effected
all recordings, filings and other actions reasonably necessary to establish,
protect and perfect the Borrower's and its Subsidiaries' right, title and
interest in and to all such property.

(b) All real property leased at the date hereof by the
Borrower or any of its Subsidiaries, as lessee, is listed on Schedule 5.22(b),
setting forth information regarding the commencement date, termination date,
renewal options (if any) and annual base rents for each year until the Final
Maturity Date, in each case as in effect on the Closing Date. To the best
knowledge of the Borrower, each of such leases is valid and enforceable in
accordance with its terms and is in full force and effect. The Borrower has
delivered to the Lender true and complete copies of each of such leases and all
documents affecting the rights or obligations of the Borrower or any of its
Subsidiaries which is a party thereto, including, without limitation, any
non-disturbance and recognition agreements, subordination agreements,
attornment agreements and agreements regarding the term or rental of any of the
leases.

(c) Except as disclosed on Schedule 5.22(c) and those which
in the aggregate have no Material Adverse Effect, (i) all components of all
improvements included within the real property owned or leased by the Borrower
or any of its Subsidiaries (collectively, "Improvements"), including, without
limitation, the roofs and structural elements thereof and the heating,
ventilation, air

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conditioning, plumbing, electrical, mechanical, sewer, waste water, storm
water, paving and parking equipment, systems and facilities included therein,
are in good working order and repair; (ii) all water, gas, electrical, steam,
compressed air, telecommunication, sanitary and storm sewage lines and systems
and other similar systems serving the real property owned or leased by the
Borrower or any of its Subsidiaries are installed and operating and are
sufficient to enable the real property owned or leased by the Borrower and its
Subsidiaries to continue to be used and operated in the manner currently being
used and operated, and none of the Borrower or any of its Subsidiaries has any
knowledge of any factor or condition that could result in the termination or
material impairment of the furnishing thereof. No Improvement or portion
thereof is dependent for its access, operation or utility on any land, building
or other Improvement not included in the real property owned or leased by the
Borrower or any of its Subsidiaries.

(d) All Permits required to have been issued or appropriate
to enable all real property owned or leased by the Borrower or any of its
Subsidiaries to be lawfully occupied and used for all of the purposes for which
they are currently occupied and used have been lawfully issued and are in full
force and effect, other than those which in the aggregate have no Material
Adverse Effect.

(e) Neither the Borrower nor, to its knowledge, any Operator
has received any notice, or has any knowledge, of (i) any pending, threatened
or contemplated condemnation proceeding affecting any real property owned or
leased by the Borrower or any of its Subsidiaries or any part thereof, or (ii)
any proposed termination or impairment of any parking at any such owned or
leased real property or (iii) any sale or other disposition of any real
property owned or leased by the Borrower or any of its Subsidiaries or any part
thereof in lieu of condemnation, in each case, other than those which in the
aggregate have no Material Adverse Effect.

(f) No material portion of any real property owned or leased
by the Borrower or any of its Subsidiaries has suffered any material damage by
fire or other casualty loss which has not heretofore been completely repaired
and restored to its original condition or which will not be

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completely repaired or restored to its original condition within twelve (12)
months from the date hereof. No portion of any real property, that is not
covered by adequate flood insurance, owned or leased by the Borrower or any of
its Subsidiaries is located in a special flood hazard area as designated by any
Federal Governmental Authorities.

5.23. Operator and Advisor: Compliance with Law.

(a) To the best knowledge of the Borrower and its
Subsidiaries, each Operator (i) has full power and authority and the legal
right to own, lease (or sublease), manage and operate (as applicable) the Hotel
Facilities it operates and to conduct the business in which it is currently
engaged with respect to any real property owned or leased by the Borrower or
any of its Subsidiaries, (ii) is duly qualified or licensed and is in good
standing under the laws of each jurisdiction where its ownership, lease (or
sublease), management or operation of any real property owned or leased by the
Borrower or any of its Subsidiaries requires such qualification, and (iii) is
in compliance with all Requirements of Law applicable to the real property
owned or leased by the Borrower or any of its Subsidiaries operated or managed
by it, or applicable to the operation or management thereof, except to the
extent that the failure to comply therewith is not reasonably likely to have,
in the aggregate, a Material Adverse Effect.

(b) To the best knowledge of Borrower and its
Subsidiaries, the Advisor (i) has full power and authority and legal right to
conduct the business in which it is presently engaged and to perform its
obligations under the Advisory Agreement, (ii) is duly qualified or licensed
and is in good standing under the laws of each jurisdiction where the conduct
of its business requires such qualification, and (iii) is in compliance with
all Requirements of Law except to the extent that the failure to comply
therewith is not reasonably likely to have, in the aggregate, a Material
Adverse Effect.

5.24. Operating Leases, Management Agreement and Advisory
Agreement. Each of the Operating Leases and Management Agreements in respect
of the Hotel Facilities and the Advisory Agreement is in full force and effect
and is a legally valid and binding obligation of the Borrower or its

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Subsidiaries and the other parties thereto, subject to such exceptions which
are not reasonably likely to have, in the aggregate, a Material Adverse Effect.
Neither the Borrower nor any of its Subsidiaries has mortgaged, pledged or
otherwise encumbered any of the Operating Leases, Management Agreements or
Advisory Agreements or its rights thereunder including, without limitation, its
right to obtain rental, interest or other payments under the Operating Leases,
other than by way of such mortgages, pledges or encumbrances in favor of the
Lender. Neither the Borrower nor any of its Subsidiaries has collected any
rents becoming due under any Operating Lease more than 30 days in advance. All
rent and other sums and charges payable by any Operating Lessee under each
Operating Lease to which it is a party are current, no notice of default or
termination under any such Operating Lease is outstanding, to the knowledge of
the Borrower no termination event or condition or uncured default on the part
of the Operating Lessee exists under any Operating Lease, and to the knowledge
of the Borrower no event of default has occurred which, with the giving of
notice or the lapse of time or both, would constitute such a default or
termination event or condition or uncured default on the part of the Borrower
or its Subsidiaries or the Operators (as the case may be), subject to such
exceptions which are not reasonably likely to have, in the aggregate, a
Material Adverse Effect. As to all of the Leases, Borrower and each of its
Subsidiaries has performed all of its repair and maintenance obligations (if
any) and, to the best knowledge and belief of Borrower, each Operating Lessee
under each Operating Lease to which it is a party has performed all of its
repair and maintenance obligations, subject to such exceptions which are not
reasonably likely to have, in the aggregate, a Material Adverse Effect.

5.25. FF&E Reserves. An FF&E Reserve has been established in
respect of each Hotel Facility and is currently funded as required by the terms
of the Operating Lease and/or the Management Agreement relating thereto.

ARTICLE VI

FINANCIAL COVENANTS

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As long as any of the Obligations or Commitment remain
outstanding, unless the Lender otherwise consents in writing the Borrower
agrees with the Lender that:

6.1. Limitation on Indebtedness. The Borrower shall maintain
during each Fiscal Quarter on a consolidated basis, a ratio of (a) the total
Indebtedness for borrowed money (including, without limitation, the Obligations
and all Capitalized Lease Obligations) of the Borrower and its Subsidiaries to
(b) Total Assets of the Borrower and its Subsidiaries not in excess of 1:2

6.2. Limitation on Secured Indebtedness. The Borrower shall
maintain during each Fiscal Quarter on a consolidated basis a ratio of (a)
total Secured Indebtedness (including, without limitation, Obligations and all
Capitalized Lease Obligations) of the Borrower and its Subsidiaries to (b)
Total Assets of the Borrower and its Subsidiaries not in excess of 1:2.

6.3. Interest Expense Coverage. The Borrower shall maintain
at the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending on
September 30, 1995, a ratio of (a) Total Base Rents for such Fiscal Quarter to
(b) Net Interest Expense for such Fiscal Quarter, of not less than 2:1.

6.4. Maintenance of Tangible Net Worth. The Borrower shall
maintain during each Fiscal Quarter a Tangible Net Worth of not less than
$200,000,000.

ARTICLE VII

AFFIRMATIVE COVENANTS

As long as any of the Obligations or the Commitment remain
outstanding, unless the Lender otherwise consents in writing, the Borrower
agrees with the Lender that:

7.1. Compliance with Laws, Etc. The Borrower shall comply,
and shall cause each of its Subsidiaries and, with respect to Hotel Facilities
only, each Operator to comply, in all material respects with all Requirements
of

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Law, Contractual Obligations, commitments, instruments, licenses, permits and
franchises, including, without limitation, all Permits; provided, however, that
the Borrower shall not be deemed in default of this Section 7.1 if all such
non-compliances in the aggregate have no Material Adverse Effect.

7.2. Conduct of Business. The Borrower shall (a) conduct,
and shall cause each of its Subsidiaries to conduct, its business in the
ordinary course and consistent with the description set forth in the
Registration Statement; and (b) perform and observe, and cause each of its
Subsidiaries to perform and observe, all the terms, covenants and conditions
required to be performed and observed by it under its Contractual Obligations
(including, without limitation, to pay all rent and other charges payable under
any lease and all debts and other obligations as the same become due), and do,
and cause its Subsidiaries to do, all things necessary to preserve and to keep
unimpaired its rights under such Contractual Obligations; provided, however,
that, in the case of each of clauses (a) and (b), the Borrower shall not be
deemed in default of this Section 7.2 if all such failures in the aggregate
have no Material Adverse Effect.

7.3. Payment of Taxes, Etc. The Borrower shall pay and
discharge, and shall cause each of its Subsidiaries to pay and discharge,
before the same shall become delinquent, all lawful governmental claims, taxes,
assessments, charges and levies, except where contested in good faith, by
proper proceedings, if adequate reserves therefor have been established on the
books of the Borrower or the appropriate Subsidiary in conformity with GAAP;
provided, however, that the Borrower shall not be deemed in default of this
Section 7.3 if all such uncontested non-payments in the aggregate have no
Material Adverse Effect and, with respect to any Mortgaged Property, the
Borrower and each such Subsidiary otherwise complies with the provisions of the
Mortgage in respect thereof.

7.4. Maintenance of Insurance. The Borrower shall maintain,
or shall cause the Operators to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar

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businesses and owning similar properties in the same general areas in which the
Borrower or such Subsidiary operates and as otherwise satisfactory to the
Lender, in its sole judgment exercised reasonably, and, in any event, all
insurance required by any Collateral Document. All such insurance shall name
the Lender as additional insured or loss payee, as the Lender shall determine.
The Borrower will furnish to the Lender from time to time such information as
may be reasonably requested as to such insurance. The Lender acknowledges that
(i) no earthquake insurance has been obtained with respect to any Hotel
Facilities in California and (ii) insurance maintained by the Operating Lessee
in respect of any Hotel Facility shall be sufficient for the purposes of this
covenant provided that such insurance complies with the terms of the Operating
Lease relating thereto.

7.5. Preservation of Existence, Etc. The Borrower shall
preserve and maintain, and shall cause each of its Subsidiaries to preserve and
maintain, its existence (except as permitted under Section 8.5) and its rights
(charter and statutory) and franchises, except to the extent that the failure
to preserve and maintain such rights and/or franchises would not have a
Material Adverse Effect.

7.6. Access. The Borrower shall upon reasonable advance
notice, at any reasonable time and from time to time, permit the Lender, or any
agents or representatives of the Lender, to (a) examine and make copies of and
abstracts from the records and books of account of the Borrower and each of its
Subsidiaries, (b) visit the properties of the Borrower and each of its
Subsidiaries, (c) discuss the affairs, finances and accounts of the Borrower
and each of its Subsidiaries with any of their respective officers or
directors, and (d) communicate directly with the Borrower's independent
certified public accountants. The Borrower shall authorize its independent
certified public accountants to disclose to the Lender any and all financial
statements and other information of any kind, including, without limitation,
copies of any management letter, or the substance of any oral information that
such accountants may have with respect to the business, financial condition,
results of operations or other affairs of the Borrower or any of its
Subsidiaries.

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7.7. Keeping of Books. The Borrower shall keep, and shall
cause each of its Subsidiaries to keep, proper books of record and account, in
accordance with GAAP, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Borrower and each
such Subsidiary.

7.8. Maintenance of Properties, Etc. The Borrower shall
maintain and preserve, and shall cause each of its Subsidiaries and each
Operator to maintain and preserve, (i) all of its Hotel Facilities in good
working order and condition, and (ii) all rights, permits, licenses, approvals
and privileges (including, without limitation, all Permits) which are used or
useful or necessary in the conduct of its business, in the case of an Operator,
with respect to Hotel Facilities only; provided, however, that the Borrower
shall not be deemed in default of this Section 7.8 if all such failures in the
aggregate have no Material Adverse Effect.

7.9. Performance and Compliance with Other Covenants. The
Borrower shall perform and comply with, and shall cause each of its
Subsidiaries to perform and comply with, each of the covenants and agreements
set forth in any Contractual Obligation to which it or any of its Subsidiaries
is a party; provided, however, that the Borrower shall not be deemed in default
of this Section 7.9 if all such failures in the aggregate have no Material
Adverse Effect.

7.10. Application of Proceeds. The Borrower shall use the
entire amount of the proceeds of the Loans as provided in Section 5.18.

7.11. Financial Statements. The Borrower shall furnish to
the Lender:

(a) as soon as available and in any event within 45 days
after the end of each Fiscal Quarter of each Fiscal Year (other than the last
Fiscal Quarter of such Fiscal Year), consolidated balance sheets of the
Borrower and its Subsidiaries as of the end of such quarter and consolidated
statements of income, retained earnings and cash flow of the Borrower and its
Subsidiaries for the period commencing at the end of the previous Fiscal Year
and ending with the end

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of such Fiscal Quarter, all prepared in conformity with GAAP and certified by
the chief financial officer of the Borrower as fairly presenting the financial
condition and results of operations of the Borrower and its Subsidiaries at
such date and for such period, subject to normal year-end audit adjustments,
together with (i) a certificate of said officer stating that no Default or
Event of Default has occurred and is continuing or, if a Default or an Event of
Default has occurred and is continuing, a statement as to the nature thereof
and the action which the Borrower proposes to take with respect thereto, (ii) a
schedule in form reasonably satisfactory to the Lender of the computations used
by the Borrower in determining compliance with all financial covenants
contained herein, and (iii) a written discussion and analysis by the management
of the Borrower of the financial statements furnished in respect of such Fiscal
Quarter;

(b) as soon as available and in any event within 90 days
after the end of each Fiscal Year, consolidated balance sheets of the Borrower
and its Subsidiaries as of the end of such year and consolidated statements of
income, retained earnings and cash flow of the Borrower and its Subsidiaries
for such Fiscal Year, all prepared in conformity with GAAP and certified, in
the case of such consolidated financial statements, without qualification as to
the scope of the audit or as to the Borrower being a going concern by Arthur
Andersen LLP or other independent public accountants of recognized national
standing, together with (i) a certificate of such accounting firm stating that
in the course of the regular audit of the business of the Borrower and its
Subsidiaries, which audit was conducted by such accounting firm in accordance
with generally accepted auditing standards, such accounting firm has obtained
no knowledge that a Default or Event of Default has occurred and is continuing,
or, if in the opinion of such accounting firm, a Default or Event of Default
has occurred and is continuing, a statement as to the nature thereof, (ii) a
schedule in form reasonably satisfactory to the Lender of the computations used
by such accountants in determining, as of the end of such Fiscal Year, the
Borrower's compliance with all financial covenants contained herein, and (iii)
a written discussion and analysis by the management of the Borrower of the
financial statements furnished in respect of such Fiscal Year;

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(c) as soon as available and in any event within 60 days
after the end of each fiscal quarter of each fiscal year, in each case of any
Operating Lessee (other than the last fiscal quarter of such fiscal year)
consolidated balance sheets and statements of income and cash flow in respect
of such Operating Lessee for such fiscal quarter, all prepared in conformity
with GAAP and certified by the chief financial officer or chief accounting
officer (or such officer's authorized designee) of the Operating Lessee, duly
authorized, as fairly presenting the consolidated financial conditions and
results of operations of such Operating Lessee at such date and for such
period, subject to normal year-end adjustments, together with a certificate of
said officer stating that no Default or Event of Default has occurred and is
continuing under the relevant Operating Lease(s) (said certification, the
"Financial Officer's Certificate");

(d) as soon as available, and in any event within 105 days
after the end of each fiscal year of any Operating Lessee, consolidated balance
sheets and statements of income, retained earnings and cash flow in respect of
such Operating Lessee for such fiscal year, all prepared in conformity with
GAAP and certified without qualification as to the scope of the audit by
independent public accountants of recognized national standing, together with a
Financial Officer's Certificate;

(e) within thirty (30) days after the end of each Accounting
Period (as defined in the Management Agreement) or if there is no Management
Agreement, within thirty (30) days after the end of each calendar month, an
unaudited operating statement in respect of each Hotel Facility, including
occupancy percentages and average rate, accompanied by a Financial Officer's
Certificate;

(f) promptly after the same are received by the Borrower, a
copy of each management letter provided to the Borrower by its independent
certified public accountants which refers in whole or in part to any
inadequacy, defect, problem, qualification or other lack of fully satisfactory
accounting controls utilized by the Borrower or any of its Subsidiaries or any
Operating Lessee.

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7.12. Reporting Requirements. The Borrower shall furnish to
the Lender:

(a) prior to any Asset Sale, a notice (i) describing the
assets being sold and (ii) stating the estimated Asset Sales Proceeds in
respect of such Asset Sale;

(b) as soon as available and in any event within 30 days prior
to the end of each Fiscal Year, an annual budget of the Borrower and its
Subsidiaries for the succeeding Fiscal Year, displaying on a quarterly basis
anticipated balance sheets, forecasted Capital Expenditures, working capital
requirements, rent revenues, contributions by Operating Lessees to any FF&E
Reserves, interest income, net income, cash flow and sales, all on a
consolidated basis;

(c) promptly and in any event within 30 days after the
Borrower, any of its Subsidiaries or any ERISA Affiliate knows or has reason to
know that any ERISA Event has occurred, a written statement of the chief
financial officer or other appropriate officer of the Borrower describing such
ERISA Event or waiver request and the action, if any, which the Borrower, its
Subsidiaries and ERISA Affiliates propose to take with respect thereto and a
copy of any notice filed by or with the PBGC or the IRS pertaining thereto;

(d) promptly and in any event within 10 days after receipt
thereof, a copy of any adverse notice, determination letter, ruling or opinion
the Borrower, any of its Subsidiaries or any ERISA Affiliate receives from the
PBGC, DOL or IRS with respect to any Plan, other than those which, in the
aggregate, do not have any reasonable likelihood of resulting in a Material
Adverse Change;

(e) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any domestic or foreign Governmental
Authority or arbitrator, affecting the Borrower, any of its Subsidiaries or any
Operator (subject to the Borrower having received notice or knowledge thereof),
except those which in the aggregate, if adversely determined, would have no
Material Adverse Effect;

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(f) promptly and in any event within five (5) Business Days
after the Borrower becomes aware of the existence of (i) any Default or Event
of Default, (ii) any breach or non-performance of, or any default under any
Operating Lease, Management Agreement, Advisory Agreement or any Contractual
Obligation which is material to the business, prospects, operations or
financial condition of the Borrower and its Subsidiaries taken as one
enterprise, or (iii) any Material Adverse Change or any event, development or
other circumstance which has reasonable likelihood of causing or resulting in a
Material Adverse Change, telephonic or telecopied notice in reasonable detail
specifying the nature of such Default, Event of Default, breach,
non-performance, default, event, development or circumstance, including,
without limitation, the anticipated effect thereof, which notice (if by
telephone) shall be promptly confirmed in writing within five days;

(g) promptly after the sending or filing thereof, copies of
all reports which the Borrower sends to its security holders generally, and
copies of all reports and registration statements which the Borrower or any of
its Subsidiaries files with the Securities and Exchange Commission or any
national securities exchange or the National Association of Securities Dealers,
Inc.;

(h) upon the request of the Lender copies of all federal,
state and local tax returns and reports filed by the Borrower or any of its
Subsidiaries in respect of taxes measured by income (excluding sales, use and
like taxes);

(i) promptly and in any event within five days of the
Borrower or any Subsidiary learning of any of the following, written notice to
the Lender of any of the following:

(i) the Release or threatened Release of any
Hazardous Material on or from any property owned, operated or leased
by the Borrower of any of its Subsidiaries and any written order,
notice, permit, application or other written communication or report
received by the Borrower, any of its Subsidiaries or any Operator in
connection with or relating to any such Release or

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threatened Release, unless such Release or threatened Release is not
reasonably likely to have a Material Adverse Effect;

(ii) any notice or claim to the effect that the
Borrower, any of its Subsidiaries or any Operator is or may be liable
to any Person as a result of the Release or threatened Release of any
Hazardous Material into the environment that could reasonably be
expected to have a Material Adverse Effect;

(iii) receipt by the Borrower, any of its
Subsidiaries or any Operator of notification that any real or personal
property of the Borrower or any of its Subsidiaries is subject to an
Environmental Lien that could reasonably be expected to have a
Material Adverse Effect;

(iv) any Remedial Action taken by the Borrower,
any of its Subsidiaries or (if known to the Borrower) any Operator or
any other Person in response to any Hazardous Material on, under or
about any real property owned, operated or leased by the Borrower or
any of its Subsidiaries, unless such Remedial Action is not reasonably
likely to have a Material Adverse Effect;

(v) receipt by the Borrower, any of its
Subsidiaries or any Operator of any notice of violation of, or
knowledge by the Borrower, any of its Subsidiaries or any Operator
that there exists a condition which may result in a violation by the
Borrower, any of its Subsidiaries or any Operator of, any
Environmental Law, unless such violation is not reasonably likely to
have a Material Adverse Effect;

(vii) the commencement of any judicial or
administrative proceeding or investigation alleging a violation of any
Environmental Law; or

(viii) any proposed acquisition of stock, assets or
real property, or any proposed leasing of property by the Borrower or
any of its Subsidiaries, unless such action is not reasonably likely
to have a Material Adverse Effect;

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(j) upon written request by the Lender, a report providing an
update of the status of any Environmental Claim, Remedial Action or any other
issue identified in any notice or report required pursuant to this Section
7.12;

(k) promptly, such additional financial and other information
respecting the financial or other condition of any Operators, the Advisor or
the Borrower or any of its Subsidiaries or the status or condition of any real
property owned or leased by the Borrower or its Subsidiaries, or the operation
thereof which the Borrower is entitled to or can otherwise reasonably obtain,
as the Lender from time to time reasonably request; and

(l) such other information respecting the business,
properties, condition, financial or otherwise, or operations of the Borrower,
any of its Subsidiaries or any Operators as the Lender may from time to time
reasonably request.

7.13. Leases and Operating Leases. The Borrower shall
provide the Lender with a copy of each lease of real property to which the
Borrower or any Subsidiary of the Borrower is then a party, whether as lessor
or lessee. The Borrower shall, and shall cause each of its Subsidiaries to,
(i) comply in all material respects with all of their respective obligations
under all of their respective Leases and Operating Leases now or hereafter held
respectively by them with respect to real property, including, without
limitation, the Leases set forth in Schedule 5.22(b); (ii) not modify, amend,
cancel, extend or otherwise change in any materially adverse manner any of the
terms, covenants or conditions of any such Leases or Operating Leases; (iii)
provide the Lender with a copy of each notice of default under any Lease or
Operating Leases received by the Borrower or any Subsidiary of the Borrower
immediately upon receipt thereof and deliver to the Lender a copy of each
notice of default sent by the Borrower or any Subsidiary of the Borrower under
any Operating Lease or Lease simultaneously with its delivery of such notice
under such Operating Lease or Lease; (iv) notify the Lender, not later than 30
days prior to the date of the expiration of the term of any Lease, of the
Borrower's or any Subsidiary of the Borrower's intention either to renew or to
not renew any such Lease, and, if the Borrower or any Subsidiary of the

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Borrower intends to renew such Lease, the terms and conditions of such renewal;
and (v) maintain each Operating Lease in full force and effect in all material
respects and enforce the material obligations of the Operating Lessee
thereunder, in a timely manner.

7.14. Approved Hotel Facility. If, at any time on or after
the first Collateralization Date to occur, the Borrower or any of its
Subsidiaries acquires any Approved Hotel Facility with the proceeds of any Loan
made by the Lender hereunder, the Borrower or such Subsidiary shall on or
before the date such Loan is made execute and deliver to the Lender,
Collateralization Documents in respect of such Approved Hotel Facility and pay
to the Lender in escrow, the Mortgage Payments in respect of such Approved
Hotel Facility.

7.15. Employee Plans. For each Plan and any related trust
hereafter adopted or maintained by a Loan Party or any of its ERISA Affiliates
intended to qualify under Code Section 125, 401 or 501, the Borrower shall (i)
seek, and cause such of its ERISA Affiliates to seek, and receive determination
letters from the IRS to the effect that such plan is so qualified; and (ii)
cause such plan to be so qualified.

7.16. Interest Rate Contracts. The Borrower shall, within
three (3) days after the Closing Date, enter into an Interest Rate Contract or
Contracts, on terms and with counterparties satisfactory to the Lender, to
provide protection against the Eurodollar Rate exceeding, at any time during
which the Loans are outstanding, 8.5% per annum.

7.17. Fiscal Year. The Borrower shall maintain as its Fiscal
Year the twelve month period ending on December 31 of each year.

7.18. Environmental Matters. (a) The Borrower shall comply
and shall cause each of its Subsidiaries and, with respect to Hotel Facilities
only, each Operator to comply in all material respects with all applicable
Environmental Laws currently or hereafter in effect.

(b) If the Lender at any time has a reasonable basis to
believe that there may be a material violation of

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any Environmental Law by Borrower any of its Subsidiaries or any Operator
related to any Hotel Facility, or real property adjacent thereto, then Borrower
agrees, upon request from the Lender, to provide the Lender, at Borrower's
expense, with such reports, certificates, engineering studies or other written
material or data as the Lender may reasonably require so as to reasonably
satisfy the Lender that Borrower or such Subsidiary or Operator is in material
compliance with all applicable Environmental Laws. Furthermore, the Lender
shall have the right upon prior notice (except in the case of an emergency) to
inspect during normal business hours any real property owned, operated or
leased by Borrower or any of its Subsidiaries if at any time the Lender has a
reasonable basis to believe that there may be such a material violation of
Environmental Law.

(c) The Borrower shall, and shall cause each of its
Subsidiaries and, with respect to Hotel Facilities only, each Operator to, take
such Remedial Action or other action as required by Environmental Laws, as any
Governmental Authority requires, except to the extent contested in good faith
and by proper proceedings, or as is appropriate and consistent with good
business practice.

7.19. Appraisals and other Valuations. (a) From time to
time during the term of this Agreement, the Lender may, in its sole discretion,
order an Appraisal of one or more of the Hotel Facilities. Any such Appraisal
shall be at the Borrower's cost if (i) such Appraisal shall be ordered at any
time after the Preparation Date and the Lender shall have obtained a letter
from an expert appraiser or evaluator of real property or hotel or other
lodging facilities to the effect that, or the Lender shall otherwise in good
faith have determined that, facts or circumstances exist, or changes in market
conditions have occurred, as a result of which there exists a reasonable
possibility that Appraisals of the Hotel Facilities, might result in an
aggregate valuation thereof reflecting a material loss of value as compared to
the value thereof indicated in the certificate of a Responsible Officer
delivered to the Lender pursuant to Section 7.12(k), or (ii) an Event of
Default has occurred.

(b) In addition to the Appraisals referred to in subsection
(a) above, from time to time during the term of

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this Agreement, if so requested by the Lender, in its sole discretion, the
Borrower shall furnish to the Lender a certificate of a Responsible Officer
certifying as to the value of one or more of the Hotel Facilities in such
officer's reasonable opinion.

7.20. REIT Requirements. The Borrower shall operate
its business at all times so as to satisfy all requirements necessary to
qualify as a real estate investment trust under Section 856 through 860 of the
Code. The Borrower will maintain adequate records so as to comply with all
record-keeping requirements relating to the qualification of the Borrower as a
real estate investment trust as required by the Code and applicable regulations
of the Department of the Treasury promulgated thereunder and will properly
prepare and timely file with the IRS all returns and reports required thereby.
The Borrower will request from its shareholders all shareholder information
required by the Code and applicable regulations of the Department of Treasury
promulgated thereunder.

7.21. Maintenance of FF&E Reserves. The Borrower shall cause
the Operator to maintain FF&E Reserves in respect of each Hotel Facility,
pursuant to the terms of the Operating Lease and/or Management Agreement
relating thereto and shall direct the Operator to deliver to the Lender
simultaneously with delivery to the Borrower or its Subsidiaries, copies of any
reports, statements or other information required to be supplied to the
Borrower or its Subsidiary under any Operating Lease or Management Agreement
for any Hotel Facility. The Borrower shall not commingle, or permit the
commingling of, other funds with the funds in the FF&E Reserves except to the
extent permitted by the Management Agreement.

7.22. Further Assurances. At any time upon the request of
the Lender, the Borrower will, promptly and at its expense, execute,
acknowledge and deliver such further documents and do such other acts and
things as the Lender may reasonably request to provide for payment of the Loans
made hereunder and interest thereon in accordance with the terms of this
Agreement.

ARTICLE VIII

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NEGATIVE COVENANTS

As long as any of the Obligations or Commitment remain
outstanding, without the written consent of the Lender, the Borrower agrees
with the Lender that:

8.1. Liens, Etc. The Borrower shall not create or suffer to
exist, and shall not permit any of its Subsidiaries to create or suffer to
exist, any Lien upon or with respect to any of its or such Subsidiary's
properties, whether now owned or hereafter acquired, or assign, or permit any
of its Subsidiaries to assign, any right to receive income therefrom, except
for:

(a) Liens created pursuant to the Loan Documents;

(b) Liens arising by operation of law in favor of
materialmen, mechanics, warehousemen, carriers, lessors or other
similar Persons incurred by the Borrower or any of its Subsidiaries in
the ordinary course of business which secure its obligations to such
Person; provided, however, that (i) the Borrower or such Subsidiary is
not in default with respect to such payment obligation to such Person,
(ii) the Borrower or such Subsidiary is in good faith and by
appropriate proceedings diligently contesting such obligation and
adequate provision is made for the payment thereof, or (iii) all such
failures in the aggregate have no Material Adverse Effect;

(c) Liens (excluding Environmental Liens) securing taxes,
assessments or governmental charges or levies; provided, however, that
(i) neither the Borrower nor any of its Subsidiaries is in default in
respect of any payment obligation with respect thereto unless the
Borrower or such Subsidiary is in good faith and by appropriate
proceedings diligently contesting such obligation and adequate
provision is made for the payment thereof, and (ii) all such failures
in the aggregate have no Material Adverse Effect;

(d) Zoning restrictions, easements, licenses, reservations,
restrictions on the use of real property or minor irregularities
incident thereto which do not in the aggregate materially detract from
the value or

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use of the property or assets of the Borrower or any of its
Subsidiaries or impair, in any material manner, the use of such
property for the purposes for which such property is held by the
Borrower or any such Subsidiary;

(e) Liens in favor of landlords securing operating leases
permitted by Section 8.3;

(f) Liens existing on the date of this Agreement and
disclosed on Schedule 8.1;

(g) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);

(h) Any attachment or judgment Lien not constituting an Event
of Default under Section 9.1(f);

(i) Any (i) interest or title of a lessor or sublessor under
any Capitalized Lease or any operating lease not prohibited by this
Agreement, (ii) restriction or encumbrance that the interest or title
of such lessor or sublessor may be subject to, or (iii) subordination
of the interest of the lessee or sublessee under such lease to any
restriction or encumbrance referred to in the preceding clause (ii);

(j) Liens arising from filing UCC financing statements
relating solely to leases permitted by this Agreement;

(k) Deposits in the ordinary course of business to secure
liabilities to insurance carriers, lessors, utilities and other
service providers;

(l) Purchase money security interests (including mortgages,
conditional sales, Capitalized Leases and any other title retention or
deferred purchase devices)

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in personal property of the Borrower or any of its Subsidiaries in an
amount not exceeding $200,000 in respect of each Hotel Facility,
existing or created at the time of acquisition thereof or within 60
days thereafter.

(m) Any Lien securing the renewal, extension or refunding of
any Indebtedness or other Obligation secured by any Lien permitted by
this Section 8.1 provided that such renewal, extension or refunding is
otherwise permitted by this Agreement and the amount of such
Indebtedness or other Obligation secured by such Lien and the assets
subject to such Lien are not increased.

8.2. Indebtedness. (a) The Borrower shall not create, incur
or suffer to exist, or permit any of its Subsidiaries to create, incur or
suffer to exist, any Indebtedness, or incur, assume, endorse, be or become
liable for, or guarantee, directly or indirectly, or permit or suffer to exist,
any Contingent Obligation, except:

(i) Indebtedness and Contingent Obligations in
respect of the Obligations or evidenced by a Loan Document;

(ii) current liabilities in respect of taxes, assessments
and governmental charges or levies incurred, or claims for labor,
materials, inventory, services, supplies and rentals incurred, or for
goods or services purchased, in the ordinary course of business
consistent with the past practice of the Borrower and its
Subsidiaries;

(iii) Indebtedness of the Borrower consisting of fees and
expenses referred to in Section 4.1(i)_;

(iv) Indebtedness of the Borrower or any of its
Subsidiaries under Capital Financing Indebtedness in respect of each
Hotel Facility in an aggregate amount for such Hotel Facility not
exceeding $200,000.00 at any one time outstanding; and

(iv) Indebtedness of the Borrower or any of its
Subsidiaries comprising pre-existing Indebtedness

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secured by Real Estate and any personal property located thereon,
which the Borrower or any of its Subsidiaries assumes in connection
with the acquisition of such Real Estate, in an aggregate amount not
exceeding $25,000,000.

(v) Obligations pursuant to Interest Rate Contracts
referred to in Section 7.16 to the extent such obligations constitute
Indebtedness.

(b) The Borrower shall not cancel, or permit any of its
Subsidiaries to cancel, any claim or Indebtedness owed to it except for
adequate consideration and in the ordinary course of business.

8.3. Lease Obligations. The Borrower shall not, and shall
not permit any of its Subsidiaries to, become or remain liable as lessee or
guarantor or other surety with respect to any lease, whether an operating lease
or a Capitalized Lease, of any property (whether real or personal or mixed),
whether now owned or hereafter acquired, which (i) the Borrower or any of its
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person, or (ii) the Borrower or any of its Subsidiaries intends to use for
substantially the same purposes as any other property which has been or is to
be sold or transferred by that entity to any other Person in connection with
such lease.

8.4. [Intentionally Omitted.]

8.5. Mergers, Stock Issuances, Asset Sales, Etc. (a) The
Borrower shall not sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its assets or properties, and shall not, and shall not
permit any of its Subsidiaries to, (i) merge with any Person, or (ii)
consolidate with any Person other than (A) the merger of a Subsidiary of the
Borrower into a wholly-owned Subsidiary of the Borrower that is a Loan Party,
or (B) the merger of a wholly-owned Subsidiary of the Borrower into the
Borrower.

(b) The Borrower shall not transfer, or permit any of its
Subsidiaries to issue or transfer, any Stock or Stock Equivalents of any
Subsidiary other than any such

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issuance or transfer (i) by a Subsidiary of the Borrower to a wholly-owned
Subsidiary of the Borrower that is a Loan Party or (ii) by a wholly-owned
Subsidiary of the Borrower to the Borrower.

(c) The Borrower shall not and shall not permit any of its
Subsidiaries to effect, enter into, consummate or suffer to exist any Asset
Sale without the prior written consent of the Lender, such consent not to be
unreasonably withheld or delayed.

8.6. Investments. The Borrower shall not, directly or
indirectly, make or maintain, or permit any of its Subsidiaries to make or
maintain, any loan or advance to any Person or own, purchase or otherwise
acquire, or permit any of its Subsidiaries to own, purchase or otherwise
acquire, any Stock, Stock Equivalents, other equity interest, obligations or
other securities of, or all or substantially all of the assets of, any Person
or all or substantially all of the assets constituting the business of a
division, branch or other unit operation of any Person, or enter into any joint
venture or partnership with, or make or maintain, or permit any of its
Subsidiaries to make or maintain, any capital contribution to, or otherwise
invest in, any Person or incorporate or organize any Subsidiary which was not
in existence on the Closing Date (any such transaction being an "Investment"),
except:

(i) Investments consisting of the Stock of Subsidiaries
listed on Schedule 5.8; and

(ii) Investments comprised of Interest Rate Contracts
entered into in accordance with Section 7.16.

8.7. Change in Nature of Business or in Capital Structure.
(a) The Borrower shall not make, and shall not permit any of its Subsidiaries
to make, any material change in the nature or conduct of its business as
carried on at the date hereof.

(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, amend its declaration of trust, certificate of incorporation
or by-laws other than for amendments which in the aggregate have no Material
Adverse Effect.

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8.8. Modification of Material Agreements. The Borrower shall
not, and shall not permit any of its Subsidiaries to, (i) alter, rescind,
terminate, amend, supplement, waive or otherwise modify any provision of or
permit any breach or default to exist under the Advisory Agreement without the
prior written consent of the Lender; or (ii) alter, amend, modify, rescind,
terminate, supplement or waive any of their respective rights under, or fail to
comply in all material respects with, any of its material obligations arising
under any Operating Lease or Management Agreement; provided, however, that,
with respect to any such failure to comply with any such obligations, the
Borrower shall not be deemed in default of this Section 8.8 if all such
failures in the aggregate would have no Material Adverse Effect; and provided,
further, that in the event of any material breach or event of default by a
Person other than the Borrower or any of its Subsidiaries, the Borrower shall
promptly notify the Lender of any such breach or event of default and take all
such action as may be reasonably necessary in order to endeavor to avoid having
such breach or event of default have a Material Adverse Effect.

8.9. Accounting Changes. The Borrower shall not make, nor
permit any of its Subsidiaries to make, any change in accounting treatment and
reporting practices or tax reporting treatment, except as required by GAAP or
law and disclosed to the Lender.

8.10. Transactions with Affiliates. The Borrower shall not,
and shall not permit any of its Subsidiaries, to enter into any transaction
directly or indirectly with or for the benefit of any Affiliate of the Borrower
(including, without limitation, employment contracts or contracts involving the
payment of management or consulting fees, guaranties and assumptions of
obligations of any such Affiliate) except for (A) transactions in the ordinary
course of business on a basis no less favorable to the Borrower or such
Subsidiary as would be obtained in a comparable arm's length transaction with a
Person not an Affiliate, and (B) salaries and other employee compensation and
benefits to officers or directors of the Borrower or any of its Subsidiaries
commensurate with current compensation and benefit levels.

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8.11. Environmental Matters. (a) The Borrower shall not,
and shall not permit any of its Subsidiaries or any Operator, or, to the extent
practicable, any other Person to dispose of any Hazardous Material by placing
it in or on the ground or waters of any property owned, operated or leased by
the Borrower or any of its Subsidiaries, except as in compliance with all
applicable Environmental Laws currently and hereinafter in effect; provided,
however, that the Borrower shall not be deemed in default of this provision if
all such disposals in the aggregate would have no Material Adverse Effect.

(b) The Borrower shall not, and shall not permit any of its
Subsidiaries or any Operator, or, to the extent practicable, any other Person
to, dispose or to arrange for the disposal of any Hazardous Material on any
property owned, operated or leased by any other Person, except as in compliance
with all applicable Environmental Laws currently and hereinafter in effect;
provided, however, that the Borrower shall not be deemed in default of this
provision if all such disposals in the aggregate would have no Material Adverse
Effect.

ARTICLE IX

EVENTS OF DEFAULT

9.1. Events of Default. Each of the following events shall
be an Event of Default:

(a) The Borrower shall fail to pay any principal (including,
without limitation, mandatory prepayments of principal) of, or
interest on, any Loan, any fee, any other amount due hereunder or
under the other Loan Documents or other of the Obligations when the
same becomes due and payable; or

(b) Any representation or warranty made or deemed made by any
Loan Party in any Loan Document or by any Loan Party (or any of its
officers) in writing in connection with any Loan Document shall prove
to have been incorrect in any material respect when made or deemed
made; or

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(c) Any Loan Party shall fail to perform or observe (i) any
term, covenant or agreement contained in Articles VI or VIII or in any
Collateral Document, or (ii) any other term, covenant or agreement
contained in this Agreement or in any other Loan Document if such
failure under this clause (ii) shall remain unremedied for fifteen
(15) days after the date on which written notice thereof shall have
been given to the Borrower by the Lender; or

(d) Any Loan Party or any of its Subsidiaries shall fail to
pay any principal of or premium or interest on any Indebtedness of
such Loan Party or Subsidiary (excluding Indebtedness evidenced by the
Note) beyond the period of grace (not to exceed 30 days), if any, with
respect thereto (whether the same becomes due and payable by scheduled
maturity, required prepayment, acceleration, demand or otherwise); or
any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Indebtedness, if the
effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such
Indebtedness shall become or be declared to be due and payable, or any
Loan Party or any of its Subsidiaries shall be required to repurchase
or offer to repurchase such Indebtedness, prior to the stated maturity
thereof; or

(e) Any Loan Party or any of its Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors, or any proceeding shall be
instituted by or against any Loan Party or any of its Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the
appointment of a custodian, receiver, trustee or other similar
official for it or for any substantial part of its property and, in
the case of any such proceedings instituted against any Loan Party or
any of its Subsidiaries (but not instituted by it),

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either such proceedings shall remain undismissed or unstayed for a
period of sixty (60) days or any of the actions sought in such
proceedings shall occur; or any Loan Party or any of its Subsidiaries
shall take any corporate action to authorize any of the actions set
forth above in this subsection (e); or

(f) One or more judgments or orders for the payment of money
in an aggregate amount in excess of $100,000 to the extent not fully
covered by insurance shall be rendered against any Loan Party or any
of its Subsidiaries and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order, or (ii)
there shall be any period of 30 consecutive days during which a stay
of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or

(g) An ERISA Event shall occur which, in the reasonable
determination of the Lender, is reasonably likely to have a Material
Adverse Effect; or

(h) The Borrower or any of its Subsidiaries shall have
entered into any consent or settlement decree or agreement or similar
arrangement with an Governmental Authority or any judgment, order,
decree or similar action shall have been entered against the Borrower
or any of its Subsidiaries or any Operator, in any case based on or
arising from the violation of or pursuant to any Environmental Law, or
the generation, storage, transportation, treatment, disposal or
Release of any Hazardous Material and such judgment, order, decree or
similar action is reasonably likely to have a Material Adverse Effect;
or

(i) Any material provision of any Collateral Document after
delivery thereof under Article IV shall for any reason cease to be
valid and binding on any Loan Party party thereto, or any Loan Party
shall so state in writing; or

(j) Any Collateral Document after delivery thereof pursuant
to Article IV shall, for any reason, cease to create a valid Lien on
any of the Collateral purported to be covered thereby or such Lien
shall

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cease to be a perfected and first priority Lien, or any Loan Party
shall so state in writing; or

(k) There shall occur a Material Adverse Change or an event
which is reasonable likely to have a Material Adverse Effect; or

(l) The Lender shall have determined in good faith, and shall
have so given notice to the Borrower, that the Borrower has at any
time ceased to be in a position to qualify, or has not qualified, as a
real estate investment trust for any of the purposes of the provisions
of the Code applicable to real estate investment trusts; provided that
no Event of Default under this subsection shall be deemed to have
occurred and be continuing if, within 10 days after notice of any such
determination is given to the Borrower, the Borrower shall have
furnished the Lender with an opinion of the Borrower's tax counsel
(who shall be reasonably satisfactory to the Lender) to the effect
that the Borrower is then in a position to so qualify, or has so
qualified, as the case may be, which opinion shall not contain any
material qualification unsatisfactory to the Lender; or

(m) HRPT Advisors shall cease at any time to (A) hold
beneficially and of record at least 250,000 of the issued and
outstanding common shares and each other class of equity securities of
the Borrower (adjusted for any division, reclassification or stock
dividend in respect of Common Shares), or (B) hold the power to direct
or cause the direction of the management and policies of the Borrower;
or

(n) Barry M. Portnoy and Gerard M. Martin shall cease at any
time to (A) hold beneficially and of record, in the aggregate, at
least 51% of the issued and outstanding common shares and each other
class of equity securities of HRPT Advisors (adjusted for any
division, reclassification or stock dividend in respect of Common
Shares), or (B) hold the power to direct or cause the direction of the
management and policies of the Borrower; or

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<PAGE> 88

(o) HRPT Advisors shall cease to be the sole Advisor to
Borrower pursuant to and in accordance with the Advisory Agreement,
without the Lender's prior written consent or the Advisory Agreement
shall be materially amended, supplemented or modified without the
Lender's prior written consent; or

(p) Advisor shall default in the observance or performance of
any material provision of the Subordination Agreement; or

(q) Any Manager shall default in the observance or performance
of any material provision of a Management Agreement and such defaults,
in the aggregate, are reasonably likely to have a Material Adverse
Effect; or

(r) Any Operating Lessee shall default in the observance or
performance of any material provision of an Operating Lease and such
defaults, in the aggregate, are reasonably likely to have a Material
Adverse Effect; or

(s) The Borrower shall fail to pay any fee under the
Underwriting Agreement when the same becomes due and payable and such
default shall continue beyond the expiration of any applicable notice
or grace period.

9.2. Remedies. If there shall occur and be continuing any
Event of Default, the Lender (i) may by notice to the Borrower, declare the
obligation of the Lender to make Loans to be terminated, whereupon the same
shall forthwith terminate, and (ii) may by notice to the Borrower, declare the
Loans, all interest thereon and all other amounts and Obligations payable under
this Agreement to be forthwith due and payable, whereupon the Note, all such
interest and all such amounts and Obligations shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower; provided,
however, that upon the occurrence of the Event of Default specified in
subparagraph (e) above, (A) the obligation of the Lender to make Loans shall
automatically be terminated and (B) the Loans, all such interest and all such
amounts and Obligations shall automatically become and be due and payable,
without presentment, demand, protest or any notice

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of any kind, all of which are hereby expressly waived by the Borrower. In
addition to the remedies set forth above, the Lender may exercise any remedies
provided for by the Collateral Documents in accordance with the terms thereof
or any other remedies provided by applicable law.

ARTICLE X

MISCELLANEOUS

10.1. Amendments, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

10.2. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including, without limitation,
telegraphic, telex, telecopy or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered by hand:

If to the Borrower, at its address at:

400 Centre Street,
Newton, Massachusetts 02158
Attention: Mr. John G. Murray
(telecopy number: 617-332-2261)
(telephone number: 617-964-8389);

with a copy to:

Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Attention: Lena G. Goldberg, Esq.
(telecopy number: 617-338-2800)
(telephone number: 617-338-2880).

If to the Lender, at its address at

140 Broadway,

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<PAGE> 90
New York, New York 10005-1285
Attention: James W. Roiter, Managing Director
(telecopy number: 212-504-4096)
(telephone number: 212-504-4900)

with a copy to:

Weil Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: J. Philip Rosen, Esq.
(telecopy number: 212-310-8007)
(telephone number: 212-310-8000)

or, as to the Borrower or the Lender, at such other address as shall be
designated by such party in a written notice to the other party. All such
notices and communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be effective three (3) Business Days after
being deposited in the mails, delivered to the telegraph company, confirmed by
telex answerback, telecopied with confirmation of receipt, delivered to the
cable company or delivered by hand to the addressee, respectively, except that
notices and communications to the Lender pursuant to Article II shall not be
effective until received by the Lender.

10.3. No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder or under
any Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.

10.4. Costs; Expenses; Indemnities. (a) The Borrower agrees
to pay on demand (i) all reasonable costs and expenses of the Lender in
connection with the preparation, execution, delivery, modification and
amendment of this Agreement, each of the other Loan Documents and each of the
other documents to be delivered hereunder and thereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel,
accountants, appraisers, consultants or industry experts retained by the Lender
with respect thereto, provided that, the Borrower's

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<PAGE> 91
liability under this subparagraph (i) shall be limited as specified in the
Letter of Intent, and (ii) all costs and expenses of the Lender (including,
without limitation, the fees and out-of-pocket expenses of counsel, retained by
the Lender) in connection with the enforcement (whether through negotiation,
legal proceedings or otherwise) of this Agreement and the other Loan Documents.

(b) The Borrower agrees to indemnify and hold harmless the
Lender and its Affiliates, and the directors, officers, employees, agents,
attorneys, consultants and advisors of or to any of the foregoing (including,
without limitation, those retained in connection with the satisfaction or
attempted satisfaction of any of the conditions set forth in Article IV) (each
of the foregoing being an "Indemnitee") from and against any and all claims,
damages, liabilities, obligations, losses, penalties, actions, judgments,
suits, costs, disbursements and expenses of any kind or nature (including,
without limitation, fees and disbursements of counsel to any such Indemnitee
and experts, engineers and consultants and the costs of investigation and
feasibility studies) which may be imposed on, incurred by or asserted against
any such Indemnitee in connection with or arising out of any investigation,
litigation or proceeding, whether or not any such Indemnitee is a party
thereto, whether direct, indirect, or consequential and whether based on any
federal, state or local law or other statutory regulation, securities or
commercial law or regulation, or under common law or in equity, or on contract,
tort or otherwise, in any manner relating to or arising out of or based upon or
attributable to this Agreement, any other Loan Document, any document delivered
hereunder or thereunder, any Obligation, or any act, event or transaction
related or attendant to any thereof, including, without limitation, (i) arising
from any misrepresentation or breach of warranty under Section 5.19 or any
Environmental Claim or any Environmental Lien or any Remedial Action arising
out of or based upon anything relating to real property owned, leased or
operated by the Borrower or any of its Subsidiaries and the facilities or
operations (collectively, the "Indemnified Matters"); provided, however, that
the Borrower shall not have any obligation under this Section 10.4(b) to an
Indemnitee with respect to any Indemnified Matter caused by or resulting from
the gross negligence or willful misconduct of that

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Indemnitee, as determined by a court of competent jurisdiction in a final
non-appealable judgment or order.

(c) If the Lender receives any payment of principal of any
Loan other than on the last day of an Interest Period relating to such Loan, as
a result of any payment made by the Borrower or acceleration of the maturity of
the Note pursuant to Section 9.2 or for any other reason, the Borrower shall,
upon demand by the Lender, pay to the Lender all amounts required to compensate
the Lender for any additional losses, costs or expenses which it may reasonably
incur as a result of such payment, including, without limitation, any loss
(including, without limitation, loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by the Lender to fund or maintain such Loan.

(d) The Borrower shall indemnify the Lender for, and hold the
Lender harmless from and against, any and all claims for brokerage commissions,
fees and other compensation made against the Lender for any broker, finder or
consultant with respect to any agreement, arrangement or understanding made by
or on behalf of any Loan Party or any of its Subsidiaries in connection with
the transactions contemplated by this Agreement.

(e) The Borrower agrees that any indemnification or other
protection provided to any Indemnitee pursuant to this Agreement (including,
without limitation, pursuant to this Section 10.4) or any other Loan Document
shall (i) survive payment of the Obligations and (ii) inure to the benefit of
any Person who was at any time an Indemnitee under this Agreement or any other
Loan Document.

(f) The provisions of this Section 10.4 shall survive any
termination of this Agreement.

10.5. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default the Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Lender
to or for the credit or the account of the Borrower against any and all of

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the Obligations now or hereafter existing whether or not the Lender shall have
made any demand under this Agreement or any Note or any other Loan Document and
although such Obligations may be unmatured. The Lender agrees promptly to
notify the Borrower after any such set-off and application made by the Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Lender under this
Section are in addition to the other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.

10.6. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Lender and thereafter
shall be binding upon and inure to the benefit of the Borrower and the Lender
and their respective successors and assigns, except that the Borrower shall not
have the right to assign its rights hereunder or any interest herein without
the prior written consent of the Lender.

10.7. Assignments and Participations. (a) The Lender may
sell, transfer, negotiate or assign to one or more other financial institutions
all or a portion of its Commitment, the Loans owing to it and an interest in
the Note held by it and a commensurate portion of its rights and obligations
hereunder and under the other Loan Documents subject to the proviso to
subparagraph (c) below.

(b) The Lender may sell participations to one or more banks
or other Persons in or to all or a portion of its rights and obligations under
the Loan Documents (including, without limitation, all or a portion of the
Commitment, the Loans owing to it and the Note held by it). In the event of
the sale of any participation by the Lender, (i) the Lender's obligations under
the Loan Documents (including, without limitation, the Commitment) shall remain
unchanged, (ii) the Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Lender shall remain
the holder of such Note and Obligations for all purposes of this Agreement, and
(iv) the Borrower shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement.

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<PAGE> 94

(c) Each participant shall be entitled to the benefits of Sections
2.10, 2.12 and 2.14 as if it were a Lender; provided, however, that anything
herein to the contrary notwithstanding, the Borrower shall not, at any time, be
obligated to pay to any participant of any interest of the Lender, under
Section 2.10, 2.12 or 2.14, any sum in excess of the sum which the Borrower
would have been obligated to pay Lender in respect of such interest had such
assignment not been effected or had such participation not been sold.

(d) The Borrower shall cooperate with Lender, at no cost or
expense to the Borrower, and any other party to whom the Lender may assign or
sell participations (or negotiate for such assignment or sale) in all or a
portion of the Commitment, the Loans owing to it and an interest in the Note.
Such cooperation of the part of the Borrower shall include but shall not be
limited to the execution and delivery of (i) amendments, modifications and/or
supplements to one or more Loan Documents, in form and substance as may be
required by Lender, and (ii) the execution and delivery of one or more
additional promissory notes, at no cost or expense to the Borrower; provided
however, that such promissory notes, amendments, modifications and/or
supplements do not materially increase the obligations of the Borrower or
materially diminish the rights of the Borrower under the Loan Documents.

10.8. Governing Law; Severability. This Agreement and the
Note and the rights and obligations of the parties hereto and thereto shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New York. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

10.9. Submission to Jurisdiction; Service of Process. (a)
Any legal action or proceeding with respect to this Agreement or the Note or
any document related thereto may be brought in the courts of the State of New

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<PAGE> 95
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, the Borrower hereby accepts
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably
waive any objection, including, without limitation, any objection to the laying
of venue or based on the grounds of forum non conveniens, which any of them may
now or hereafter have to the bringing of any such action or proceeding in such
respective jurisdictions.

(b) The Borrower irrevocably consents to the service of
process of any of the aforesaid courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the borrower at its address provided herein.

(c) Nothing contained in this Section 10.9 shall affect the
right of the Lender or any holder of the Note to serve process in any other
manner permitted by law or commence legal proceedings or otherwise proceed
against the Borrower in any other jurisdiction.

10.10. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.

10.11. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.

10.12. Entire Agreement. This Agreement, together with all
of the other Loan Documents and all certificates and documents delivered
hereunder or thereunder embody the entire agreement of the parties and
supersedes all prior agreements and understandings relating to the subject
matter hereof.

10.13. Confidentiality. The Lender agrees to keep
information obtained by it pursuant hereto and the other Loan Documents
confidential in accordance with the

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Lender's customary practices and agrees that it will only use such information
in connection with the transactions contemplated by this Agreement and not
disclose any of such information other than (i) to the Lender's employees,
representatives and agents who are or are expected to be involved in the
evaluation of such information in connection with the transactions contemplated
by this Agreement and who are advised of the confidential nature of such
information, (ii) to the extent such information presently is or hereafter
becomes available to the Lender, as the case may be, on a non-confidential
basis from a source other than the Borrower, (iii) to the extent disclosure is
required by law, regulation or judicial order or requested or required by bank
regulators or auditors, or (iv) to assignees or participants or potential
assignees or participants who agree to be bound by the provisions of this
sentence.

10.14. Waiver of Jury Trial. Each of the parties hereto
waives any right it may have to trial by jury in respect of any litigation
based on, or arising out of, under or in connection with this Agreement or any
other Loan Document, or any course of conduct, course of dealing, verbal or
written statement or action of any party hereto.

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<PAGE> 97

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

HOSPITALITY PROPERTIES TRUST

By:
------------------------------
Name:
Title:

DLJ MORTGAGE CAPITAL, INC.

By:
------------------------------
Name:
Title:

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<PAGE> 98
Schedule 1.1

Initial Hotels

91
<PAGE> 99
Schedule 5.8 (a)

Stock Related Agreements

92
<PAGE> 100
Schedule 5.8 (c)

Subsidiaries

93
<PAGE> 101
Schedule 5.19

Environmental Matters

94
<PAGE> 102
Schedule 5.22(a)

Owned Real Estate

95
<PAGE> 103
Schedule 5.22(b)

Leased Real Estate

96
<PAGE> 104
Schedule 5.22(c)

Defects in Improvements

97
<PAGE> 105
Schedule 8.1

Existing Liens

98
<PAGE> 106
Exhibit A

Note

99
<PAGE> 107
Exhibit B

Notice of Borrowing

100
<PAGE> 108
Exhibit C

Form of Negative Pledge Agreement

101
<PAGE> 109
Exhibit D

Form of Opinion of Counsel for the Loan Parties

102
<PAGE> 110
Exhibit E

Form of Mortgage

103
<PAGE> 111
Exhibit F

Form of Assignment Agreement

104
<PAGE> 112
Exhibit G

Form of Management Agreement

105
<PAGE> 113
Exhibit H

Form of Operating Lease

106
<PAGE> 114
Exhibit I

Form of Security Agreement

107
<PAGE> 115
Exhibit J

Form of Subordination Agreement

108

<PAGE> 1
EXHIBIT 10.8

HOSPITALITY PROPERTIES TRUST

1995 INCENTIVE SHARE AWARD PLAN

Hospitality Properties Trust (the "Company") hereby adopts the
Hospitality Properties Trust 1995 Incentive Share Award Plan (the "Plan"),
effective as of the date described in Section IX.

I. PURPOSE

The Plan is intended to advance the interests of the Company by
providing a means of rewarding selected officers and Trustees of the Company,
its investment advisor, and others rendering valuable services to the Company,
through grants of the Company's Common Stock.

II. DEFINITIONS

Terms that are capitalized in the text of the Plan have the meanings
set forth below:

(a) "Advisor" means the person or entity serving as investment
advisor to the Company.

(b) "Board" means the Board of Trustees of the Company.

(c) "Committee" means the committee appointed by the Board of Trustees
of the Company to administer the Plan, pursuant to Article V.

(d) "Company" means Hospitality Properties Trust, a Maryland real
estate investment Trust.

(e) "Trustee" means a member of the Board of Trustees of the Company.

(f) "Independent Trustee" means a Trustee who (i) is neither an
employee of the Company nor a shareholder or other affiliate of the Advisor,
and (ii) otherwise satisfies the criteria established for Independent Trustees
under the Company's Declaration of Trust, as from time to time amended.

(g) "Key Person" means a consultant, advisor, Trustee or other person
providing services to the Company, who is not an employee of the Company or a
Committee member.

(h) "Officer" means the President, Chief Executive Officer, Chief
Financial Officer, Secretary, Treasurer and any other person who is an officer
of the Company within the meaning of Chapter 17, Section 240.16a-1(f) of the
Code of Federal Regulations.

(i) "Participant" means an Officer or Key Person to whom Shares have
been granted, or the beneficiary of such a person who has died.

<PAGE> 2
-2-

(j) "Plan" means the Hospitality Properties Trust 1995 Incentive
Share Award Plan, as amended from time to time.

(k) "Retainer Date" means the date in each year on which the Company
pays the annual fee to the Trustees.

(l) "Section VIII Grant" means a grant of Shares made pursuant to
Section VIII of the Plan.

(m) "Share Agreement" means an agreement between the Company and a
Participant regarding Shares issued to the Participant pursuant to the Plan.

(n) "Shares" means the Company's Common Shares of Beneficial
Interest, par value $.01 per share.

III. SHARES SUBJECT TO THE PLAN

Subject to the provisions of Article VII, the total number of Shares
which may be granted under the Plan is one hundred thousand (100,000) Shares,
from either authorized and unissued or treasury Shares. A holder of Shares
granted under the Plan shall have all of the rights of a shareholder of the
Company, including the right to vote the Shares and the right to receive any
cash dividends, unless the Committee shall otherwise determine. Certificates
representing Shares shall be imprinted with a legend to the effect that the
Shares represented may not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of except in accordance with the terms of
the Securities Act of 1933 and the applicable Share Agreement, if any, and if
the Committee so determines, the holder may be required to deposit the
certificates with an escrow agent designated by the Committee, together with a
stock power or other instrument of transfer appropriately endorsed in blank.

IV. METHOD OF GRANTING SHARES

Subject to Section VIII, grants of Shares to any person shall be made
by action of the Board. Grants of Shares to Independent Trustees shall be made
solely as provided in Section VIII. Grants of Shares to any person who is not
an Independent Trustee shall be made solely in accordance with the instructions
of the Committee as to the selection of persons to whom Shares are to be
granted, the amount and timing of each such grant, and the extent, if any, to
which vesting restrictions or other conditions shall apply to the granted
Shares. If a person to whom such a grant of Shares has been made fails to
execute and deliver to the Company a Share Agreement within ten (10) days
after it is submitted to him, the grant of Shares under the agreement may be
cancelled by the Company at its option without further notice to the
Participant.

<PAGE> 3
-3-

V. ADMINISTRATION OF THE PLAN

The Plan shall be administered by a committee appointed by the Board to
administer the Plan, composed of two or more Independent Trustees who, during
the period of 12 months ending on the earliest date after the commencement of
their membership on the Committee on which the grant of Shares to a Trustee or
an Officer or advisor is considered by the Committee, have not received any
grant or award of an equity security of the Company pursuant to the Plan or any
other plan of the Company or any affiliate of the Company, other than a Section
VIII Grant. The Board may remove a member of the Committee at any time for any
reason or no reason, and a member of the Committee may resign at any time upon
30 days' advance notice in writing delivered to the Secretary of the Company.
The Board may appoint another Trustee to replace any member of the Committee
who is removed or resigns or ceases for any reason to be a Trustee. All
questions of interpretation and application of the Plan and of grants of Shares
to persons other than Committee members shall be determined by the Committee,
and its determination shall be final and binding upon all persons, including
the Company and all Participants. All questions of interpretation and
application of Section VIII of the Plan shall be determined by the members of
the Board other than Committee members. Without limiting the generality of the
foregoing, the Committee is authorized to adopt and approve from time to time
the forms and, subject to the terms of the Plan, the terms and conditions of
any Share Agreement.

VI. ELIGIBLE PERSONS

The persons eligible to receive grants of Shares, other than Section
VIII Grants, shall be those persons selected by the Committee from among the
Key Persons and Officers of the Company who make significant contributions to
the financial success of the Company. Section VIII Grants shall be made solely
in accordance with Section VIII.

VII. CHANGES IN CAPITAL STRUCTURE

In the event that the outstanding Shares are hereafter changed for a
different number or kind of Shares or other securities of the Company, by
reason of a reorganization, recapitalization, exchange of shares, stock split,
combination of shares or dividend payable in Shares or other securities, a
corresponding adjustment shall be made in the number and kind of Shares or
other securities covered by outstanding grants of Shares, and for which Shares
may be granted under the Plan.

VIII. GRANTS TO INDEPENDENT TRUSTEES

In consideration of past service as an Independent Trustee and as part
of each Independent Trustee's annual fee, the Company hereby grants three
hundred (300) Shares, as of each December 31, beginning with December 31, 1996,
to each person serving on the Retainer Date as an Independent Trustee.

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IX. EFFECTIVE DATE, DURATION, AMENDMENT AND
TERMINATION OF PLAN

The Plan shall be effective as of closing date of the Company's initial
public offering of Shares. Shares may be granted under the Plan from time to
time until the close of business on December 31, 2005. The Board hereafter may
at any time amend the Plan; provided, however, that without approval of the
Company's shareholders there shall be no: (i) increase in the total number of
shares covered by the Plan, except by operation of the provisions of Article
VII; (ii) change in the class of persons eligible to receive Shares; or (iii)
material increase of the obligations of the Company or rights of any
Participant under the Plan; and, provided, further, that Section VIII may not
be amended more frequently than once in any period of six months. The Plan may
be terminated at any time by action of the Board.

X. MISCELLANEOUS

A. Nonassignability of Shares. Shares subject to a Share Agreement
shall not be assignable or transferable by a Participant except in accordance
with the terms of the applicable Share Agreement, and by will or the laws of
descent and distribution.

B. No Guarantee of Employment A Share Agreement shall not give an
employee the right to continue in the employment of the Company, or give the
Company the right to require an employee to continue in employment.

C. Tax Withholding. To the extent required by law, the Company shall
withhold or cause to be withheld income and other taxes incurred by a
Participant who is an employee of the Company by reason of a grant of Shares,
and as a condition to the receipt of any grant such a Participant shall agree
that if the amount payable to him by the Company in the ordinary course is
insufficient to pay such taxes, he shall upon request of the Company pay to the
Company an amount sufficient to satisfy its tax withholding obligations.

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EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in this registration
statement.

/s/ ARTHUR ANDERSEN LLP

Washington, D.C.

August 11, 1995