1262415--2/28/2007--HIGHLAND_HOSPITALITY

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Our failure to qualify as a REIT under the federal tax laws would result in adverse tax consequences. The U.S. federal income tax laws governing REITs are complex. Failure to qualify as a REIT would subject us to U.S. federal income tax and would subject us and our stockholders to other adverse consequences. Failure to make required distributions would subject us to U.S. federal income tax. Our taxable REIT subsidiary lessees are subject to federal, state and local income taxes. If our hotel leases are not respected as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT. If HHC TRS Holding Corporation fails to qualify as a taxable REIT subsidiary, we would fail to qualify as a REIT. Despite our REIT status, we remain subject to various taxes. If our Operating Partnership failed to qualify as a partnership for U.S. federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences. Provisions of our charter may limit the ability of a third party to acquire control of our company. Our ownership limitations may restrict or prevent you from engaging in certain transfers of our common stock. Provisions of Maryland law may limit the ability of a third party to acquire control of our company. The ability of our board of directors to change our major corporate policies may not be in your interest. Our success depends on key personnel whose continued service is not guaranteed. We have conflicts of interest that may have affected the terms of our acquisition of our three initial properties and the related management agreements, as well as other management agreements we have subsequently entered into. We will have conflicts going forward with our chairman and one other director with respect to the management of our hotels by Barcel Crestline and the disposition of hotels acquired from Barcel Crestline. Our returns depend on management of our hotels by third parties. Our TRS lessee structure subjects us to the risk of increased hotel operating expenses. Operating our hotels under franchise agreements could adversely affect our distributions to our stockholders. Our ability to make distributions to our stockholders may be affected by factors in the lodging industry. We face competition for the acquisition of hotels, and we may not be able to complete acquisitions that we have identified. Investment concentration in particular segments of single industry. The increasing use of Internet travel intermediaries by consumers may adversely affect our profitability. The threat of terrorism has harmed the hotel industry generally and these harmful effects may continue or worsen, particularly if there are further terrorist events. Uninsured and underinsured losses could adversely affect our operating results and our ability to make distributions to our stockholders. Noncompliance with governmental regulations could adversely affect our operating results. Americans with Disabilities Act and other changes in governmental rules and regulations. Unanticipated expenses and insufficient demand for hotels we open in new geographic markets could adversely affect our profitability and our ability to make distributions to our stockholders. Our ability to maintain distributions to our stockholders is subject to fluctuations in our financial performance, operating results and capital improvements requirements. The hotel business is capital intensive and our inability to obtain financing could limit our growth. Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition. Increases in our property taxes would adversely affect our ability to make distributions to our stockholders. Future debt service obligations could adversely affect our overall operating results and may require us to sell assets to meet our payment obligations. Our ability to pay dividends on our common stock may be limited or prohibited by the terms of our indebtedness. Market interest rates may affect the price of shares of our common stock.

Full 10-K form ▸

1262415--2/28/2007--HIGHLAND_HOSPITALITY_CORP