1012967--3/16/2006--MERISTAR_HOSPITALITY

related topics

{investment, property, distribution}

{debt, indebtedness, cash}

{cost, operation, labor}

{operation, natural, condition}

{loan, real, estate}

{stock, price, share}

{condition, economic, financial}

{competitive, industry, competition}

{tax, income, asset}

{capital, credit, financial}

{cost, regulation, environmental}

{personnel, key, retain}

{regulation, change, law}

We are highly leveraged; our significant amount of debt could limit our operational flexibility or otherwise adversely affect our financial condition. We may be required to refinance our indebtedness, and the failure to refinance our indebtedness would have an adverse effect on us. Some of our debt instruments have restrictive covenants that could affect our financial condition. We may be able to incur substantially more debt, which would increase the risks associated with our substantial leverage. Rising interest rates could have an adverse effect on our cash flow and interest expense. Declines in our corporate credit ratings could have an adverse effect on us. The possibility of future acts of terrorism and the actual outbreak or escalation of hostilities and international political instability could have a negative effect on our industry and our results of operations. Our hotel assets, revenues and operating results, and liquidity could be negatively affected by weather conditions generally and natural disasters. If our revenues are negatively affected by one or more particular risks, our operating margins could suffer. The insurance market has been adversely affected. We may not receive reimbursements from insurers for our outstanding hurricane claims. We have significant operational relationships with Interstate, and Interstate s operating or financial difficulties could adversely affect our hotels operations or our financial position. We invest in a single industry. We own investments in hotels of which we are not the controlling entity. We have a high concentration of hotels in the upper upscale, full-service segment, which may increase our susceptibility to an economic downturn. The lodging business is seasonal. We may be adversely affected by the requirements contained in our franchise and licensing agreements. The lodging industry is highly competitive. We rely on the knowledge and experience of some key personnel, and the loss of these personnel may have a material adverse effect on our operations. Costs of compliance with environmental laws could adversely affect our operating results. Aspects of our operations are subject to government regulation, and changes in that regulation may have significant effects on our business. We may be adversely affected by the limited availability of labor and by union contract requirements. General risks related to the real estate industry. We have some potential conflicts of interest with Interstate. We may have conflicts relating to the sale of hotels subject to management agreements. We lack control over management and operations of our hotels. Our relationship with Interstate could limit our acquisition opportunities in the future. Requirements imposed on us relating to our REIT status could cause us to operate in a manner that might be disadvantageous to noteholders. If we fail to qualify as a REIT, we will be subject to federal income tax at corporate rates which could adversely affect our operations and our ability to satisfy our obligations. Risks Relating to Common Stock Our ability to pay dividends on our common stock is limited, and we expect this to continue for the foreseeable future. Furthermore, we may be required to pay dividends in order to maintain REIT status, and the amount of those dividends may exceed our available cash. Risks Related to the Blackstone Merger Transaction If the merger transactions with affiliates of The Blackstone Group do not close, there could be a negative impact on the value of our securities. While the merger agreement is in effect, we are subject to significant restrictions on our business activities, and activities relating to the merger may divert the attention of our employees.

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1012967--3/16/2006--MERISTAR_HOSPITALITY_CORP