920605--3/16/2007--WINSTON_HOTELS

related topics

{investment, property, distribution}

{loan, real, estate}

{debt, indebtedness, cash}

{tax, income, asset}

{cost, contract, operation}

{cost, operation, labor}

{competitive, industry, competition}

{personnel, key, retain}

{operation, natural, condition}

{stock, price, share}

Our stock price and businesses may be adversely affected if the Merger is not completed. 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. Risks Relating to Our Business Our ability to make distributions to our shareholders depends upon the ability of our hotel managers to operate our hotels effectively. Additional terrorist attacks, such as the events of September 11, 2001 and the threat of additional terrorist attacks could have an adverse effect on our results of operations. We may not have access to financing for acquiring or developing additional hotels, or for providing hotel loans. We have a significant level of debt that may limit our ability to take certain actions. Our indebtedness imposes limitations on our operations and subjects us to risk of default. Rising interest rates could adversely affect our cash flow. We may not be able to complete development of new hotels on time or within budget. Hotels that we develop have no operating history and may not achieve levels of occupancy that result in levels of operating income that provide us with an attractive return on our investment. Property ownership through joint ventures could limit our control of those investments. Our business could be disrupted if we need to find a new manager upon termination of an existing management agreement. If we decide to sell hotels, we may not be able to sell those hotels on favorable terms. If third parties for whom we develop hotels default on their loans, we may be required to complete the development of those hotels at our own expense. We may face conflicts of interest relating to sales of hotels acquired from affiliates. We depend on key personnel, the loss of which could have a material adverse effect on the Company. Risks Related to Hotel Lending Program The hotel mortgage loans that we originate and purchase are subject to the risks of delinquency and foreclosure, which could result in losses to us. The B-Notes in which we invest may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us. Investments in mezzanine loans involve greater risks of loss than senior loans collateralized by income producing properties. Our hotel loan program subjects us to the unique risks of a mezzanine lender. Risks Relating to the Real Estate Industry Our performance and the value of our stock are subject to risks associated with the hotel industry. We must compete with larger entities for acquisition and franchising opportunities. Our performance and value are subject to the condition of the real estate industry. Risks Relating to REIT Status We are subject to tax risks as a result of our REIT status.

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920605--3/16/2007--WINSTON_HOTELS_INC