ASHFORD HOSPITALITY TRUST INC (Form: 10-K, Received: 03/04/2011 17:25:18)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2010
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission file number: 001-31775

ASHFORD HOSPITALITY TRUST, INC.

(Exact name of registrant as specified in its charter)


Maryland		86-1062192
(State or other jurisdiction of incorporation or organization)		(IRS employer identification number)


14185 Dallas Parkway, Suite 1100
Dallas, Texas		75254
(Address of principal executive offices)		(Zip code)

(972) 490-9600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
Common Stock		New York Stock Exchange
Preferred Stock, Series A		New York Stock Exchange
Preferred Stock, Series D		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

o Yes þ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) o Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer þ

Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

As of June 30, 2010, the aggregate market value of 45,803,168 shares of the registrant’s common stock held by non-affiliates was approximately $335,737,000.

As of March 3, 2011, the registrant had 59,419,324 shares of common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement pertaining to the 2011 Annual Meeting of Shareholders are incorporated herein by reference into Part III of this Form 10-K.

ASHFORD HOSPITALITY TRUST, INC.
YEAR ENDED DECEMBER 31, 2010
INDEX TO FORM 10-K


			Page


PART I

	Item 1.	Business		3

	Item 1A.	Risk Factors		13

	Item 1B.	Unresolved Staff Comments		31

	Item 2.	Properties		31

	Item 3.	Legal Proceedings		32

	Item 4.	[RESERVED]		33

PART II

	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		33

	Item 6.	Selected Financial Data		36

	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		37

	Item 7A.	Quantitative and Qualitative Disclosure About Market Risk		56

	Item 8.	Financial Statements and Supplementary Data		57

	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		102

	Item 9A.	Controls and Procedures		102

	Item 9B.	Other Information		104

PART III

	Item 10.	Directors, Executive Officers and Corporate Governance		104

	Item 11.	Executive Compensation		104

	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		104

	Item 13.	Certain Relationships and Related Transactions, and Director Independence		104

	Item 14.	Principal Accounting Fees and Services		104

PART IV

	Item 15.	Exhibits, Financial Statement Schedules		104

SIGNATURES
EX-10.30.7
EX-10.30.8
EX-10.30.9
EX-10.30.10
EX-21.1
EX-21.2
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

This Annual Report is filed by Ashford Hospitality Trust, Inc., a Maryland corporation (the “Company”). Unless the context otherwise requires, all references to the Company include those entities owned or controlled by the Company. In this report, the terms “the Company,” “we,” “us” or “our” mean Ashford Hospitality Trust, Inc. and all entities included in its consolidated financial statements.

FORWARD-LOOKING STATEMENTS

Throughout this Form 10-K and documents incorporated herein by reference, we make forward-looking statements that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition and liquidity, results of operations, plans, and objectives. Statements regarding the following subjects are forward-looking by their nature:


	•	our business and investment strategy;

	•	our projected operating results;

	•	completion of any pending transactions;

	•	our ability to obtain future financing arrangements;

	•	our understanding of our competition;

	•	market trends;

	•	projected capital expenditures; and

	•	the impact of technology on our operations and business.

Such forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. Additionally, the following factors could cause actual results to vary from our forward-looking statements:


	•	factors discussed in this Form 10-K, including those set forth under the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and “Properties;”

	•	general volatility of the capital markets and the market price of our common stock;

	•	changes in our business or investment strategy;

	•	availability, terms, and deployment of capital;

	•	availability of qualified personnel;

	•	changes in our industry and the market in which we operate, interest rates, or the general economy; and

	•	the degree and nature of our competition.

When we use words or phrases such as “will likely result,” “may,” “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” or similar expressions, we intend to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

PART I


Item 1.	*Business*

GENERAL

Ashford Hospitality Trust, Inc., together with its subsidiaries, is a self-administered real estate investment trust (“REIT”) focused on investing in the hospitality industry across all segments and in all methods including direct real estate, securities, equity and debt. Additional information can be found on our website at www.ahtreit.com . We commenced operations in August 2003 with the acquisition of six hotel properties (the “Initial Properties”) in connection with our initial public offering. We own our lodging investments and conduct our business through Ashford Hospitality Limited Partnership, our operating partnership. Ashford OP General Partner LLC, a wholly-owned subsidiary of the Company, serves as the sole general partner of our operating partnership.

During 2004, we acquired 15 hotel properties in seven transactions. In 2005, we closed three purchase transactions, resulting in the acquisition of 43 hotel properties. In 2006, we acquired an additional nine hotel properties in five transactions. In April 2007, we acquired a 51-property hotel portfolio (“CNL Portfolio”) from CNL Hotels and Resorts, Inc. (“CNL”). Pursuant to the purchase agreement, we acquired 100% of 33 properties and interests ranging from 70% to 89% in 18 properties through existing joint ventures. In connection with the CNL transaction, we acquired the 15% remaining joint venture interest in one hotel property not owned by CNL at the acquisition and acquired in May 2007 two other hotel properties previously owned by CNL (collectively, the “CNL Acquisition”). In December 2007, we completed an asset swap with Hilton Hotels Corporation (“Hilton”), whereby we surrendered our majority ownership interest in two hotel properties in exchange for Hilton’s minority ownership interest in nine hotel properties. Net of subsequent sales and the asset swap, 39 and 42 of these hotels were included in our hotel property portfolio at December 31, 2010 and 2009, respectively.

Beginning in March 2008, we entered into various derivative transactions with financial institutions to hedge our debt to improve cash flows and to capitalize on the historical correlation between changes in LIBOR and RevPAR (Revenue Per Available Room). Through December 31, 2010, we recorded cash and accrued income of $125.5 million from the derivative transactions.

In response to the recent financial market crisis, we undertook a series of actions to manage the sources and uses of our funds in an effort to navigate through challenging market conditions while still pursuing opportunities that can create long-term shareholder value. In this effort, we proactively addressed value and cash flow deficits among certain of our mortgaged hotels, with a goal of enhancing shareholder value through loan amendments, or in certain instances, consensual transfers of hotel properties to the lenders in satisfaction of the related debt, some of which have resulted in impairment charges. In 2010, we successfully negotiated a consensual transfer of the Westin O’Hare hotel property in Rosemont, Illinois that collateralized a non-recourse mortgage loan of $101.0 million to the lender. In December 2009, after fully cooperating with the servicer for a judicial foreclosure, we agreed to transfer possession and control of the Hyatt Regency Dearborn to a receiver. In each of these instances, the hotel was not generating sufficient cash flow to cover its debt service and was not expected to generate sufficient cash flow to cover its debt service for the foreseeable future.

As of December 31, 2010, we owned 94 hotel properties directly and six hotel properties through majority-owned investments in joint ventures, which represented 21,734 total rooms, or 21,392 net rooms excluding those attributable to joint venture partners. Our hotels are primarily operated under the widely recognized upper upscale brands of Crowne Plaza, Hilton, Hyatt, Marriott and Sheraton. All these hotels are located in the United States. At December 31, 2010, 97 of the 100 hotels are included in our continuing operations. As of December 31, 2010, we also owned mezzanine or first-mortgage loans receivable with a carrying value of $20.9 million. In addition, at December 31, 2010, we had ownership interests in two joint ventures that own mezzanine loans with a carrying value of $15.0 million, net of valuation allowance. See Notes 4 and 5 of Notes to Consolidated Financial Statements included in Item 8.

management companies to operate the hotels under management contracts. Hotel operating results related to these properties are included in the consolidated statements of operations. As of December 31, 2010, one hotel property was leased on a triple-net lease basis to a third-party tenant who operates the hotel. Rental income from this operating lease is included in the consolidated results of operations.

We do not operate any of our hotels directly; instead we employ hotel management companies to operate them for us under management contracts or operating leases. Remington Lodging & Hospitality, LLC (“Remington Lodging”), our primary property manager, is beneficially wholly owned by Mr. Archie Bennett, Jr., our Chairman, and Mr. Monty J. Bennett, our Chief Executive Officer. As of December 31, 2010, Remington Lodging managed 46 of our 100 hotel properties while third-party management companies managed the remaining 54 hotel properties.

SIGNIFICANT TRANSACTIONS IN 2010 AND RECENT DEVELOPMENTS

Resumption of Common Dividends – In February 2011, the Board of Directors accepted management’s recommendation to resume paying cash dividends on our common shares with an annualized target of $0.40 per share for 2011. The payment of $0.10 for the first quarter of 2011 has been approved and subsequent payments will be reviewed on a quarterly basis.

Reissuance of treasury stock – In December 2010, we reissued 7.5 million shares of our treasury stock at a gross price of $9.65 per share and received net proceeds of approximately $70.4 million. The net proceeds were used to repay a portion of our outstanding borrowings under our senior credit facility. In January 2011, the underwriter purchased an additional 300,000 shares of our common shares through the partial exercise of the underwriter’s 1.125 million share over-allotment option, and we received net proceeds of $2.8 million.

Pending and Completed Sales of Hotel Properties – We have entered into asset sale agreements for the sale of the JW Marriott hotel property in San Francisco, California, the Hilton hotel property in Rye Town, New York, and the Hampton Inn hotel property in Houston, Texas. Based on the selling price, we recorded an impairment charge of $23.6 million on the Hilton Rye Town property in the fourth quarter of 2010, and we expect each of these sales to close in the first quarter of 2011. These hotel properties and related liabilities have been reclassified as assets and liabilities held for sale in the consolidated balance sheet at December 31, 2010, and their operating results, including the impairment charge, for all periods presented have been reported as discontinued operations in the consolidated statements of operations. In February 2011, the sale of the JW Marriott hotel property was completed and we received net cash proceeds of $43.6 million. We used $40.0 million of the net proceeds to reduce the borrowings on our senior credit facility. After the payment, the credit facility has an outstanding balance of $75.0 million.

Impairment of Mezzanine Loans and a Hotel Property – We evaluated the collectability of the mezzanine loan secured by 105 hotel properties maturing in April 2011, and weighted different probabilities of outcome from full payment at maturity to a foreclosure by the senior lender. Based on this analysis, we recorded an impairment charge of $7.8 million on December 31, 2010.

The borrowers of the mezzanine loan tranches 4 and 6 held in our joint venture with PREI related to the JER/Highland Hospitality portfolio stopped making debt service payments in August 2010 and we are currently negotiating a restructuring with their equity holders, senior secured lenders and senior mezzanine lenders. Due to our junior participation status, it is expected the tranche 6 mezzanine loan will be completely extinguished in the restructuring. As a result, we recorded a valuation allowance of $21.6 million for the entire carrying value of our investment in the joint venture on December 31, 2010. We did not record a valuation allowance for the tranche 4 mezzanine loan as the restructuring could result in a conversion of the mezzanine loan into equity with us investing an additional amount.

At December 31, 2010, the Hilton hotel property in Tucson, Arizona had a reasonable probability of being sold in the near future. Based on our assessment of the expected purchase price obtained from potential buyers, we recorded an impairment charge of $39.9 million.

Refinancing of Mortgage Debt – In October 2010, we closed on a $105.0 million refinancing of the Marriott Gateway in Arlington, Virginia. The new loan, which has a 10-year term and fixed interest rate of 6.26%, replaces a $60.8 million loan set to mature in 2012 with an interest rate of LIBOR plus 4.0%. The excess proceeds were used to reduce $40.0 million of the outstanding borrowings on our senior credit facility. In conjunction with the refinance, we incurred prepayment penalties and fees of $3.3 million and wrote off the unamortized loan costs on the refinanced debt of $630,000.

Conversion of Floating Interest Rate Swap into Fixed Rate – In October 2010, we converted our $1.8 billion interest rate swap into a fixed rate of 4.09%, resulting in locked-in annual interest savings of approximately $32 million through March 2013 at no cost to us. Under the previous swap, which we entered into in March 2008 and which expires in March 2013, we received a fixed rate of 5.84% and paid a variable rate of LIBOR plus 2.64%, subject to a LIBOR floor of 1.25%. Under the terms of the new swap transaction, we will continue to receive a fixed rate of 5.84%, but will pay a fixed rate of 4.09%.

Conversion of Series B-1 Preferred Stock – In the fourth quarter of 2010, 200,000 shares of our Series B-1 preferred stock with a carrying value of $2.0 million were converted to common shares, pursuant to the terms of the Series B-1 preferred stock agreement.

Preferred Stock Offering – In September 2010, we completed the offering of 3.3 million shares of our 8.45% Series D Cumulative Preferred Stock at a gross price of $23.178 per share, and we received net proceeds of $72.2 million after underwriting fees and other costs and an accrued dividend of $1.6 million. The proceeds from the offering, together with some corporate funds, were used to pay down $80.0 million of our senior credit facility.

Restructuring of Mezzanine Loans – In July 2010, as a strategic complement to our existing joint venture with Prudential Real Estate Investors (“PREI”) in 2008, we contributed $15 million for an ownership interest in a new joint venture with PREI. The new joint venture acquired a tranche 4 mezzanine loan associated with JER Partner’s 2007 privatization of the JER/Highland Hospitality portfolio. The mezzanine loan is secured by the same 28 hotel properties as our existing joint venture investment in tranche 6 of the mezzanine loan portfolio, which has been fully reserved at December 31, 2010. The borrower of these mezzanine loans stopped making debt service payments in August 2010. We are currently pursuing our remedies under the loan documents, as well as negotiating with the borrowers, their equity holders, senior secured lenders and senior mezzanine lenders and PREI with respect to a possible restructuring of the mezzanine tranches owned by our joint ventures and PREI and of the indebtedness senior to such tranches. As we hold our JER/Highland Hospitality loans in joint ventures, our participation in a possible restructuring, including a conversion of the loans into equity and assumption of senior indebtedness associated with the portfolio, would be through a joint venture with PREI or PREI and a third party.

Settlement of Notes Receivable – In August 2010, we reached an agreement with the borrower of the $7.1 million junior participation note receivable secured by a hotel property in La Jolla, California, to settle the loan which had been in default since March 2009. Pursuant to the settlement agreement, we received total cash payments of $6.2 million in 2010 and recorded a net impairment charge of $836,000.

In May 2010, the senior mortgage lender foreclosed on the loan secured by the Four Seasons hotel property in Nevis in which we had a junior participation interest of $18.2 million. Our entire principal amount was fully reserved in 2009. As a result of the foreclosure, our interest in the senior mortgage was converted to a 14.4% subordinate beneficial interest in the equity of the trust that holds the hotel property. Due to our junior status in the trust, we have not recorded any value for our beneficial interest as of December 31, 2010.

In May 2010, the mezzanine loan secured by the Le Meridien hotel property in Dallas, Texas was settled with a cash payment of $1.1 million. The loan was fully reserved during the second quarter of 2009 as the borrower ceased making debt service payments on the loan. As a result of the settlement, the $1.1 million was recorded as a credit to impairment charges in accordance with authoritative accounting guidance for impaired loans.

In February 2010, the mezzanine loan secured by the Ritz-Carlton hotel property in Key Biscayne, Florida, with a principal amount of $38.0 million and a net carrying value of $23.0 million at December 31, 2009 was restructured. In connection with the restructuring, we received a cash payment of $20.2 million and a $4.0 million note receivable. We recorded a net impairment charge of $10.7 million in 2009 on the original mezzanine loan. The interest payments on the new note are recorded as a reduction of the principal of the note receivable, and the valuation adjustments to the net carrying amount of this note are recorded as a credit to impairment charges.

In February 2010, we and the senior note holder of the participation note receivable formed a joint venture (the “Redus JV”) for the purposes of holding, managing or disposing of the Sheraton hotel property in Dallas, Texas, which collateralized the senior note participation and our $4.0 million junior participating note receivable. The note receivable was fully reserved in 2009. We have an 18% subordinated interest in Redus JV. In March 2010, the foreclosure was completed and the estimated fair value of the property was $14.2 million based on a third-party appraisal. Pursuant to the operating agreement of Redus JV, as a junior lien holder of the original participation note receivable, we are only entitled to receive our share of distributions after the original senior note holder has recovered its original investment of $18.4 million and Redus JV intends to sell the hotel property in the next 12 months. It is unlikely that the senior holder will be able to recover its original investment. Therefore, no cash flows were projected from Redus JV for the projected holding period. Under the applicable authoritative accounting guidance, we recorded a zero value for our 18% subordinated interest in Redus JV.

Debt Modifications, Repayments and Settlement – The $101.0 million non-recourse mortgage loan secured by the Westin O’Hare hotel property in Rosemont, Illinois was settled in September 2010 through a consensual transfer of the underlying hotel property to the lender. We recorded a gain of $56.2 million on the consensual transfer. An impairment charge of $59.3 million was previously recorded on this property in 2009 as we wrote down the hotel property to its estimated fair value. The operating results of the hotel property, including the gain from the disposition, have been reclassified to discontinued operations for all periods presented in the consolidated statements of operations.

With proceeds from the above mentioned equity offerings, sale of hotel properties and debt refinancing we made a net paydown of $135.0 million on our senior credit facility during 2010 to reduce its outstanding balance to $115.0 million at December 31, 2010.

In July 2010, we modified the mortgage loan secured by the JW Marriott hotel property in San Francisco, California, to change the initial maturity date to its fully extended maturity of March 2013 in exchange for a principal payment of $5.0 million. This hotel property was subsequently sold in February 2011 and the related mortgage loan was repaid at closing along with miscellaneous fees of approximately $476,000.

Effective April 1, 2010, we completed the modification of the $156.2 million mortgage loan secured by two hotel properties in Washington D.C. and La Jolla, California. Pursuant to the modified loan agreement, we obtained the full extension of the loan to August 2013 without any extension tests in exchange for a $5.0 million paydown. We paid $2.5 million of the paydown amount at closing, and the remaining $2.5 million is payable quarterly in four consecutive installments of $625,000 each with the last installment due on April 1, 2011. We paid a modification fee of $1.5 million in lieu of the future extension fees. The modification also modifies covenant tests to minimize the likelihood of additional cash being trapped.

In March 2010, we elected to cease making payments on the $5.8 million mortgage note payable maturing in January 2011, secured by a hotel property in Manchester, Connecticut, because the anticipated operating cash flows from the underlying hotel property had been insufficient to cover the principal and interest payments on the note. As of the date of this report, the loan has been transferred to a special servicer. We are currently working with the special servicer for an extension or restructuring of the mortgage note.

Repurchases of Common Shares and Units of Operating Partnership – During 2010, we repurchased 7.2 million shares of our common stock for a total cost of $45.1 million pursuant to a previously announced stock repurchase plan. As of June 2010, we ceased all repurchases under the plan indefinitely. During 2010, 719,000 operating partnership units were redeemed at an average price of $7.39 per unit. We redeemed these operating partnership units for cash rather than electing to satisfy the redemption request through the issuance of common

shares and paid a total redemption cost of $5.3 million to the unit holders during 2010. An additional 455,000 operating partnership units presented for redemption in 2010 were converted to common shares at our election.

BUSINESS STRATEGIES

CURRENT STRATEGIES

The U.S. economy experienced a recession beginning around the fourth quarter of 2007, which was caused by the global credit crisis and declining GDP, employment, business investment, corporate profits and consumer spending. As a result of the dramatic downturn in the economy, lodging demand in the U.S. declined significantly throughout 2008 and 2009. However, beginning in 2010, the lodging industry has been experiencing improvement in fundamentals, specifically occupancy. Room rates, measured by the average daily rate, or ADR, which typically lags occupancy growth in the early stage of a recovery, appear to be showing upward growth. We believe recent improvements in the economy will continue to positively affect the lodging industry and hotel operating results for 2011. Our overall current strategy is to take advantage of the cyclical nature of the hotel industry. We believe that hotel values and cash flows, for the most part, peaked in 2007, and we believe we will not achieve similar cash flows and values in the immediate future. Industry experts have suggested that cash flows within our industry may achieve these previous highs again by 2014 through 2016.

In response to the challenging market conditions, we undertook a series of actions to manage the sources and uses of our funds. Based on our primary business objectives and forecasted operating conditions, our current key priorities and financial strategies include, among other things:


	•	acquisition of hotel properties;

	•	disposition of hotel properties;

	•	restructuring and liquidating positions in mezzanine loans;

	•	pursuing capital market activities to enhance long-term shareholder value;

	•	enhancing liquidity, and continuing current cost saving measures;

	•	implementing selective capital improvements designed to increase profitability;

	•	implementing asset management strategies to minimize operating costs and increase revenues;

	•	financing or refinancing hotels on competitive terms;

	•	utilizing hedges and derivatives to mitigate risks; and

	•	making other investments or divestitures that our Board of Directors deems appropriate.

LONG-TERM STRATEGIES

Our long-term investment strategies continue to focus on the upscale and upper-upscale segments within the lodging industry. We believe that as supply, demand, and capital market cycles change, we will be able to shift our investment strategies to take advantage of new lodging-related investment opportunities as they may develop. Our Board of Directors may change our hotel investment strategies at any time without shareholder approval or notice.

As the business cycle changes and the hotel markets continue to improve, we intend to continue to invest in a variety of lodging-related assets based upon our evaluation of diverse market conditions including our cost of capital and the expected returns from those investments. These investments may include: (i) direct hotel investments; (ii) mezzanine financing through origination or acquisition in secondary markets; (iii) first-lien mortgage financing through origination or acquisition in secondary markets; and (iv) sale-leaseback transactions.

Our strategy is designed to take advantage of lodging industry conditions and adjust to changes in market circumstances over time. Our assessment of market conditions will determine asset reallocation strategies. While we seek to capitalize on favorable market fundamentals, conditions beyond our control may have an impact on overall profitability and our investment returns.

Our strategy of combining lodging-related equity and debt investments seeks, among other things, to:


	•	capitalize on both current yield and price appreciation, while simultaneously offering diversification of types of assets within the hospitality industry; and

	•	vary investments across an array of hospitality assets to take advantage of market cycles for each asset class.

Our long-term investment strategy primarily targets limited and full-service hotels in primary, secondary, and resort markets throughout the United States. To take full advantage of future investment opportunities in the lodging industry, we intend to invest according to the asset allocation strategies described below. However, due to ongoing changes in market conditions, we will continually evaluate the appropriateness of both our current and long-term investment strategies. Our Board of Directors may change any or all of these strategies at any time without notice.

Direct Hotel Investments – In selecting hotels to acquire, we target hotels that offer one or more of the following attributes: a high current return or have the opportunity to increase in value through repositioning, capital investments, market-based recovery, or improved management practices. Our direct hotel acquisition strategy will continue to follow similar investment criteria and will seek to achieve both current income and appreciation. In addition, we will continue to assess our existing hotel portfolio and make strategic decisions to sell certain under-performing or non-strategic hotels that do not fit our investment strategy or criteria due to micro or macro market changes.

Mezzanine Financing – Subordinated loans, or mezzanine loans, that we acquire or originate relate to a diverse segment of hotels that are located across the U.S. These mezzanine loans are secured by junior mortgages on hotels or pledges of equity interests in entities owning hotels. As the global economic environment improves and the hotel industry stabilizes, we may refocus our efforts on the acquisition or origination of mezzanine loans. Given the greater repayment risks of these types of loans, to the extent we acquire or originate them in the future, we will have a more conservative approach in underwriting these assets. Mezzanine loans that we acquire in the future may be secured by individual assets as well as cross-collateralized portfolios of assets.

First Mortgage Financing – From time to time, we may acquire or originate first mortgages. As the dynamics in the capital markets and the hotel industry make first-mortgage investments more attractive, we may acquire, potentially at a discount to par, or originate loans secured by first priority mortgages on hotels. We may be subject to certain state-imposed licensing regulations related to commercial mortgage lenders, with which we intend to comply. However, because we are not a bank or a federally chartered lending institution, we are not subject to state and federal regulatory constraints imposed on such entities.

Sale-Leaseback Transactions – To date, we have not participated in any sale-leaseback transactions. However, if the lodging industry fundamentals shift such that sale-leaseback transactions become more attractive investments, we intend to purchase hotels and lease them back to their existing hotel owners.

BUSINESS SEGMENTS

We currently operate in two business segments within the hotel lodging industry: direct hotel investments and hotel financing. A discussion of each operating segment is incorporated by reference to Note 20 of Notes to Consolidated Financial Statements set forth in Part II, Item 8. Financial Statements and Supplementary Data.

FINANCING STRATEGY

We utilize debt to increase equity returns. When evaluating our future level of indebtedness and making decisions regarding the incurrence of indebtedness, our Board of Directors considers a number of factors, including:


	•	our leverage levels across the portfolio;

	•	the purchase price of our investments to be acquired with debt financing;

	•	impact on financial covenants;

	•	cost of debt;

	•	loan maturity schedule;


	•	the estimated market value of our investments upon refinancing; and

	•	the ability of particular investments, and our Company as a whole, to generate cash flow to cover expected debt service.

We may incur debt in the form of purchase money obligations to the sellers of properties, publicly or privately placed debt instruments, or financing from banks, institutional investors, or other lenders. Any such indebtedness may be secured or unsecured by mortgages or other interests in our properties or mortgage loans. This indebtedness may be recourse, non-recourse, or cross-collateralized. If recourse, such recourse may include our general assets or be limited to the particular investment to which the indebtedness relates. In addition, we may invest in properties or loans subject to existing loans secured by mortgages or similar liens on the properties, or we may refinance properties acquired on a leveraged basis.

We may use the proceeds from any borrowings for working capital to:


	•	purchase interests in partnerships or joint ventures;

	•	refinance existing indebtedness;

	•	finance the origination or purchase of debt investments; or

	•	finance acquisitions, expand, redevelop or improve existing properties, or develop new properties or other uses.

In addition, if we do not have sufficient cash available, we may need to borrow to meet taxable income distribution requirements under the Internal Revenue Code. No assurances can be given that we will obtain additional financings or, if we do, what the amount and terms will be. Our failure to obtain future financing under favorable terms could adversely impact our ability to execute our business strategy. In addition, we may selectively pursue debt financing on our individual properties and debt investments.

DISTRIBUTION POLICY

Distributions are authorized by our Board of Directors and declared by us based upon a variety of factors deemed relevant by our directors. No assurance can be given that our dividend policy will not change in the future. Our ability to pay distributions to our shareholders will depend, in part, upon our receipt of distributions from our operating partnership. This, in turn, may depend upon receipt of lease payments with respect to our properties from indirect, wholly-owned subsidiaries of our operating partnership and the management of our properties by our property managers. Distributions to our shareholders are generally taxable to our shareholders as ordinary income. However, since a portion of our investments are equity ownership interests in hotels, which result in depreciation and non-cash charges against our income, a portion of our distributions may constitute a tax-free return of capital. To the extent that it is consistent with maintaining our REIT status, we may maintain accumulated earnings of Ashford TRS in that entity.

Our charter allows us to issue preferred stock with a preference on distributions, such as our Series A, Series B-1 and Series D preferred stock. The partnership agreement of our operating partnership also allows the operating partnership to issue units with a preference on distributions, such as our class B common units. The issuance of these series of preferred stock and units together with any similar issuance in the future, given the

dividend preference on such stock or units, could limit our ability to make a dividend distribution to our common shareholders.

COMPETITION

The hotel industry is highly competitive and the hotels in which we invest are subject to competition from other hotels for guests. Competition is based on a number of factors, most notably convenience of location, brand affiliation, price, range of services, guest amenities or accommodations offered and quality of customer service. Competition is often specific to the individual markets in which our properties are located and includes competition from existing and new hotels. Increased competition could have a material adverse effect on the occupancy rate, average daily room rate and room revenue per available room of our hotels or may require us to make capital improvements that we otherwise would not have to make, which may result in decreases in our profitability.

Our principal competitors include other hotel operating companies, ownership companies (including hotel REITs) and national and international hotel brands. We face increased competition from providers of less expensive accommodations, such as limited service hotels or independent owner-managed hotels, during periods of economic downturn when leisure and business travelers become more sensitive to room rates.

EMPLOYEES

At December 31, 2010, we had 67 full-time employees. These employees directly or indirectly perform various acquisition, development, asset management, capital markets, accounting, legal, redevelopment, and corporate management functions. None of our corporate employees are unionized. All persons employed in day-to-day hotel operations are employees of the management companies and not the Company, and some of the management company employees are unionized.

ENVIRONMENTAL MATTERS

Under various federal, state, and local laws and regulations, an owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on such property. These laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of hazardous or toxic substances. Furthermore, a person who arranges for the disposal of a hazardous substance or transports a hazardous substance for disposal or treatment from property owned by another may be liable for the costs of removal or remediation of hazardous substances released into the environment at that property. The costs of remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner’s ability to sell the affected property or to borrow using the affected property as collateral. In connection with the ownership and operation of our properties, we, our operating partnership, or Ashford TRS may be potentially liable for any such costs. In addition, the value of any lodging property loan we originate or acquire would be adversely affected if the underlying property contained hazardous or toxic substances.

Phase I environmental assessments, which are intended to identify potential environmental contamination for which our properties may be responsible, have been obtained on substantially all of our properties. Phase I environmental assessments included:


	•	historical reviews of the properties;

	•	reviews of certain public records;

	•	preliminary investigations of the sites and surrounding properties;

	•	screening for the presence of hazardous substances, toxic substances, and underground storage tanks; and

	•	the preparation and issuance of a written report.

Phase I environmental assessments did not include invasive procedures, such as soil sampling or ground water analysis. Phase I environmental assessments have not revealed any environmental liability that we believe would have a material adverse effect on our business, assets, results of operations, or liquidity, and we are not aware of any such liability. To the extent Phase I environmental assessments reveal facts that require further investigation, we

would perform a Phase II environmental assessment. However, it is possible that these environmental assessments will not reveal all environmental liabilities. There may be material environmental liabilities of which we are unaware, including environmental liabilities that may have arisen since the environmental assessments were completed or updated. No assurances can be given that (i) future laws, ordinances, or regulations will not impose any material environmental liability, or (ii) the current environmental condition of our properties will not be affected by the condition of properties in the vicinity (such as the presence of leaking underground storage tanks) or by third parties unrelated to us.

We believe our properties are in compliance in all material respects with all federal, state, and local ordinances and regulations regarding hazardous or toxic substances and other environmental matters. To the best of our knowledge, we have not been notified by any governmental authority of any material noncompliance, liability, or claim relating to hazardous or toxic substances or other environmental matters in connection with any of our properties.

INSURANCE

We maintain comprehensive insurance, including liability, property, workers’ compensation, rental loss, environmental, terrorism, and, when available on commercially reasonable terms, flood and earthquake insurance, with policy specifications, limits, and deductibles customarily carried for similar properties. Certain types of losses (for example, matters of a catastrophic nature such as acts of war or substantial known environmental liabilities) are either uninsurable or require substantial premiums that are not economically feasible to maintain. Certain types of losses, such as those arising from subsidence activity, are insurable only to the extent that certain standard policy exceptions to insurability are waived by agreement with the insurer. We believe, however, that our properties are adequately insured, consistent with industry standards.

FRANCHISE LICENSES

We believe that the public’s perception of quality associated with a franchisor can be an important feature in the operation of a hotel. Franchisors provide a variety of benefits for franchisees, which include national advertising, publicity, and other marketing programs designed to increase brand awareness, training of personnel, continuous review of quality standards, and centralized reservation systems.

As of December 31, 2010, we owned interests in 100 hotels, 99 of which operated under the following franchise licenses or brand management agreements:

Embassy Suites is a registered trademark of Hilton Hospitality, Inc.

Doubletree is a registered trademark of Hilton Hospitality, Inc.

Hilton is a registered trademark of Hilton Hospitality, Inc.

Hilton Garden Inn is a registered trademark of Hilton Hospitality, Inc.

Homewood Suites by Hilton is a registered trademark of Hilton Hospitality, Inc.

Hampton Inn is a registered trademark of Hilton Hospitality, Inc.

Marriott is a registered trademark of Marriott International, Inc.

JW Marriott is a registered trademark of Marriott International, Inc.

SpringHill Suites is a registered trademark of Marriott International, Inc.

Residence Inn by Marriott is a registered trademark of Marriott International, Inc.

Courtyard by Marriott is a registered trademark of Marriott International, Inc.

Fairfield Inn by Marriott is a registered trademark of Marriott International, Inc.

TownePlace Suites is a registered trademark of Marriott International, Inc.

Renaissance is a registered trademark of Marriott International, Inc.

Hyatt Regency is a registered trademark of Hyatt Corporation.

Sheraton is a registered trademark of Sheraton Hotels and Resorts, a division of Starwood Hotels and Resorts Worldwide, Inc.

Crowne Plaza is a registered trademark of InterContinental Hotels Group.

One Ocean is a registered trademark of Remington Hotels LP.

Our management companies, including our affiliate Remington Lodging, must operate each hotel pursuant to the terms of the related franchise or brand management agreement, and must use their best efforts to maintain the right to operate each hotel pursuant to such terms. In the event of termination of a particular franchise or brand management agreement, our management companies must operate any affected hotels under another franchise or brand management agreement, if any, that we enter into. We anticipate that many of the additional hotels we acquire could be operated under franchise licenses or brand management agreements as well.

Our franchise licenses and brand management agreements generally specify certain management, operational, recordkeeping, accounting, reporting, and marketing standards and procedures with which the franchisee or brand operator must comply, including requirements related to:


	•	training of operational personnel;

	•	safety;

	•	maintaining specified insurance;

	•	types of services and products ancillary to guestroom services that may be provided;

	•	display of signage; and

	•	type, quality, and age of furniture, fixtures, and equipment included in guestrooms, lobbies, and other common areas.

SEASONALITY

Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the summer months and some during the winter months. This seasonality pattern can cause fluctuations in our quarterly lease revenue under our percentage leases. We anticipate that our cash flows from the operations of our properties will be sufficient to enable us to make quarterly distributions to maintain our REIT status. To the extent that cash flows from operations are insufficient during any quarter due to temporary or seasonal fluctuations in lease revenue, we expect to utilize other cash on hand or borrowings to fund required distributions. However, we cannot make any assurances that we will make distributions in the future.

ACCESS TO REPORTS AND OTHER INFORMATION

We maintain a website at www.ahtreit.com . On our website, we make available free-of-charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with the Securities and Exchange Commission. In addition, our Code of Business Conduct and Ethics, Code of Ethics for the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, Corporate Governance Guidelines, and Board Committee Charters are also available free-of-charge on our website or can be made available in print upon request.

All reports filed with the Securities and Exchange Commission may also be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E. Washington, DC 20549-1090. Further information regarding the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. In addition, all of our filed reports can be obtained at the SEC’s website at www.sec.gov .


Item 1A.	*Risk Factors*

RISKS RELATED TO OUR BUSINESS

The recent financial crisis and general economic slowdown harmed the operating performance of the hotel industry generally. If these or similar events continue or occur again in the future, our operating and financial results may be harmed by declines in occupancy, average daily room rates and/or other operating revenues.

The performance of the lodging industry has traditionally been closely linked with the performance of the general economy and, specifically, growth in the U.S. gross domestic product. A majority of our hotels are classified as upper upscale. In an economic downturn, these types of hotels may be more susceptible to a decrease in revenue, as compared to hotels in other categories that have lower or higher room rates. This characteristic may result from the fact that upscale and upper upscale hotels generally target business and high-end leisure travelers. In periods of economic difficulties, business and leisure travelers may seek to reduce travel costs by limiting travel or seeking to reduce costs on their trips. Any economic recession will likely have an adverse effect on our business.

Failure of the lodging industry to exhibit sustained improvement or to improve as expected may adversely affect our ability to execute our business plan.

A substantial part of our business plan is based on our belief that the lodging markets in which we invest will experience improving economic fundamentals in the future. In particular, our business strategy is dependent on our expectation that key industry performance indicators, especially RevPAR, will continue to improve. There can be no assurance as to whether or to what extent, lodging industry fundamentals will continue to improve. In the event conditions in the industry do not sustain improvement or improve as we expect, or deteriorate, our ability to execute our business plan may be adversely affected.

We are subject to various risks related to our use of, and dependence on, debt.

As of December 31, 2010, including the borrowings of our discontinued operations, we had aggregated borrowings of approximately $2.6 billion outstanding, including $710.0 million of variable interest rate debt. The interest we pay on variable-rate debt increases as interest rates increase, which may decrease cash available for distribution to shareholders. We are also subject to the risk that we may not be able to meet our debt service obligations or refinance our debt as it becomes due. If we do not meet our debt service obligations, we risk the loss of some or all of our assets to foreclosure. Changes in economic conditions or our financial results or prospects could (i) result in higher interest rates on variable-rate debt, (ii) reduce the availability of debt financing generally or debt financing at favorable rates, (iii) reduce cash available for distribution to shareholders, (iv) increase the risk that we could be forced to liquidate assets or repay debt, any of which could have a material adverse effect on us, and (v) create other hazardous situations for us.

Some of our debt agreements contain financial and other covenants. If we violate covenants in any debt agreements, including as a result of impairments of our hotel or mezzanine loan assets, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. Violations of certain debt covenants may also prohibit us from borrowing unused amounts under our lines of credit, even if repayment of some or all the borrowings is not required. In any event, financial covenants under our current or future debt obligations could impair our planned business strategies by limiting our ability to borrow beyond certain amounts or for certain purposes. Our governing instruments do not contain any limitation on our ability to incur indebtedness.

We voluntarily elected to cease making payments on the mortgages securing three of our hotels during the recent economic down turn, and we may voluntarily elect to cease making payments on additional mortgages in the future, which could reduce the number of hotels we own as well as our revenues and could affect our ability to raise equity or debt financing in the future or violate covenants in our debt agreements.

During the recent economic crisis, we undertook a series of actions to manage the sources and uses of our funds in an effort to navigate through challenging market conditions while still pursuing opportunities to create long-term shareholder value. In this effort, we attempted to proactively address value and cash flow deficits among certain of our mortgaged hotels, with a goal of enhancing shareholder value through loan amendments, or in certain instances,

consensual transfers of hotel properties to the lenders in satisfaction of the related debt, some of which resulted in impairment charges. The loans secured by these hotels, subject to certain customary exceptions, were non-recourse to us. We may continue to proactively address value and cash flow deficits in a similar manner as necessary and appropriate.

We elected to cease making payments on the mortgages securing certain of our hotel properties. In December 2009, after fully cooperating with the servicer for a judicial foreclosure, we agreed to transfer possession and control of the Hyatt Regency Dearborn to a receiver. In March 2010, we elected to cease making payments on a $5.8 million mortgage note payable maturing in January 2011, which is secured by a hotel property in Manchester, Connecticut. Since that date, the loan has been transferred to a special servicer. Additionally, in September 2010, we successfully negotiated a consensual transfer of the Westin O’Hare to the related lender. In each of these instances, the hotel was not generating sufficient cash flow to cover its debt service and was not expected to generate sufficient cash flow to cover its debt service for the foreseeable future. These and any similar transfers reduce our assets and debt, could have an adverse effect on our ability to raise equity or debt capital in the future, could increase the cost of such capital and may violate covenants in other debt agreements.

In addition to the foregoing loans, we had approximately $2.5 billion of mortgage debt (including mortgage loans of our discontinued operations of $50.6 million) outstanding as of December 31, 2010. We may face issues with these loans or with other loans or borrowings that we incur in the future, some of which issues may be beyond our control, including our ability to service payment obligations from the cash flow of the applicable hotel, or the inability to refinance existing debt at the applicable maturity date. In such event, we may elect to default on the applicable loan and, as a result, the lenders would have the right to exercise various remedies under the loan documents, which would include foreclosure on the applicable hotels. Any such defaults, whether voluntary or involuntary, could result in a default under our other debt or otherwise have an adverse effect on our business, results of operations or financial condition.

Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on a co-venturer’s financial condition and disputes between us and our co-venturers.

We have in the past and may continue to co-invest with third parties through partnerships, joint ventures or other entities, acquiring controlling or non-controlling interests in, or sharing responsibility for, managing the affairs of a property, partnership, joint venture or other entity. In such event, we may not be in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity. Investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions. Partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, budgets, or financing, because neither we nor the partner or co-venturer would have full control over the partnership or joint venture. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or trustees from focusing their time and effort on our business. Consequently, actions by, or disputes with, partners or co-venturers might result in subjecting properties owned by the partnership or joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our third-party partners or co-venturers.

Our business strategy depends on our continued growth. We may fail to integrate recent and additional investments into our operations or otherwise manage our planned growth, which may adversely affect our operating results.

Our business plan contemplates a period of growth in the next several years. We cannot assure you that we will be able to adapt our management, administrative, accounting, and operational systems, or hire and retain sufficient operational staff to successfully integrate and manage any future acquisitions of additional assets without operating disruptions or unanticipated costs. Acquisitions of any additional portfolios of properties or mortgages would generate additional operating expenses that we will be required to pay. As we acquire additional assets, we will be subject to the operational risks associated with owning those assets. Our failure to successfully integrate any future

acquisitions into our portfolio could have a material adverse effect on our results of operations and financial condition and our ability to pay dividends to shareholders.

We may be unable to identify additional investments that meet our investment criteria or to acquire the properties we have under contract.

We cannot assure you that we will be able to identify real estate investments that meet our investment criteria, that we will be successful in completing any investment we identify, or that any investment we complete will produce a return on our investment. Moreover, we have broad authority to invest in any real estate investments that we may identify in the future. We also cannot assure you that we will acquire properties we currently have under firm purchase contracts, if any, or that the acquisition terms we have negotiated will not change.

Conflicts of interest could result in our management acting other than in our shareholders’ best interest.

Conflicts of interest in general and specifically relating to Remington Lodging may lead to management decisions that are not in the shareholders’ best interest. The Chairman of our Board of Directors, Mr. Archie Bennett, Jr., serves as the Chairman of the Board of Directors of Remington Lodging, and our Chief Executive Officer, Mr. Monty J. Bennett, serves as the Chief Executive Officer of Remington Lodging. Messrs. Archie and Monty J. Bennett beneficially own 100% of Remington Lodging, which, as of December 31, 2010, manages 46 of our 100 properties and provides related services, including property management services and project management services.

Messrs. Archie and Monty J. Bennett’s ownership interests in and management obligations to Remington Lodging present them with conflicts of interest in making management decisions related to the commercial arrangements between us and Remington Lodging and reduce the time and effort they each spend managing Ashford. Our Board of Directors has adopted a policy that requires all approvals, actions or decisions to which we have the right to make under the management agreements with Remington Lodging be approved by a majority or, in certain circumstances, all of our independent directors. However, given the authority and/or operational latitude to Remington Lodging under the management agreements to which we are a party, Messrs. Archie Bennett and Monty J. Bennett, as officers of Remington Lodging, could take actions or make decisions that are not in the shareholders’ best interest or that are otherwise inconsistent with their obligations under the management agreement or our obligations under the applicable franchise agreements.

Holders of units in our operating partnership, including members of our management team, may suffer adverse tax consequences upon our sale of certain properties. Therefore, holders of units, either directly or indirectly, including Messrs. Archie and Monty J. Bennett, Mr. David Brooks, our Chief Operating Officer and General Counsel, Mr. David Kimichik, our Chief Financial Officer, Mr. Mark Nunneley, our Chief Accounting Officer, and Mr. Martin L. Edelman (or his family members), one of our directors, may have different objectives regarding the appropriate pricing and timing of a particular property’s sale. These officers and directors of ours may influence us to sell, not sell, or refinance certain properties, even if such actions or inactions might be financially advantageous to our shareholders, or to enter into tax deferred exchanges with the proceeds of such sales when such a reinvestment might not otherwise be in our best interest.

In addition, we have agreed to indemnify for a period of time contributors of properties contributed to us in exchange for operating partnership units, including (indirectly) Messrs. Archie and Monty J. Bennett, Brooks, Kimichik, Nunneley, and Edelman (or his family members), against the income tax they may incur if we dispose of the specified contributed properties. Because of this indemnification, our indemnified management team members may make decisions about selling any of these properties that are not in our shareholders’ best interest.

We are a party to a master hotel management agreement and an exclusivity agreement with Remington Lodging, which describes the terms of Remington Lodging’s services to our hotels, as well as any future hotels we may acquire that may or may not be managed by Remington Lodging. If we terminate the management agreement as to any of the remaining four hotels we acquired in connection with our initial public offering, which are all subject to the management agreement, because we elect to sell those hotels, we will be required to pay Remington Lodging a substantial termination fee. Remington Lodging may agree to waive the termination fee if a replacement hotel is substituted but is under no contractual obligation to do so. The exclusivity agreement requires us to engage Remington Lodging, unless our independent directors either (i) unanimously vote to hire a different manager or

developer, or (ii) by a majority vote, elect not to engage Remington Lodging because they have determined that special circumstances exist or that, based on Remington Lodging’s prior performance, another manager or developer could perform the duties materially better. As the sole owners of Remington Lodging, which would receive any development, management, and management termination fees payable by us under the management agreement, Messrs. Archie and Monty J. Bennett may influence our decisions to sell, acquire, or develop hotels when it is not in the best interests of our shareholders to do so.

Tax indemnification obligations that apply in the event that we sell certain properties could limit our operating flexibility.

We have acquired certain of our properties in exchange transactions in which we issued units in our operating partnership in exchange for hotel properties. In certain of these transactions, we agreed to ongoing indemnification obligations in the event we sell or transfer the related property and in some instances in the event we refinance the related property. Accordingly, we may be obligated to indemnify the contributors, including Messrs. Archie and Monty J. Bennett whom have substantial ownership interests, against the tax consequences of the transaction.

In general, our tax indemnities will be equal to the amount of the federal, state, and local income tax liability the contributor or its specified assignee incurs with respect to the gain allocated to the contributor. The terms of the contribution agreements also generally require us to gross up tax indemnity payments for the amount of income taxes due as a result of the tax indemnity and this additional payment.

While the tax indemnities generally do not contractually limit our ability to conduct our business in the way we desire, we are less likely to sell any of the contributed properties for which we have agreed to the tax indemnities described above in a taxable transaction during the applicable indemnity period. Instead, we would likely either hold the property for the entire indemnity period or seek to transfer the property in a tax-deferred like-kind exchange. In addition, a condemnation of one of our properties could trigger our tax indemnification obligations.

Hotel franchise requirements could adversely affect distributions to our shareholders.

We must comply with operating standards, terms, and conditions imposed by the franchisors of the hotel brands under which our hotels operate. Franchisors periodically inspect their licensed hotels to confirm adherence to their operating standards. The failure of a hotel to maintain standards could result in the loss or cancellation of a franchise license. With respect to operational standards, we rely on our property managers to conform to such standards. Franchisors may also require us to make certain capital improvements to maintain the hotel in accordance with system standards, the cost of which can be substantial. It is possible that a franchisor could condition the continuation of a franchise based on the completion of capital improvements that our management or Board of Directors determines is too expensive or otherwise not economically feasible in light of general economic conditions or the operating results or prospects of the affected hotel. In that event, our management or Board of Directors may elect to allow the franchise to lapse or be terminated, which could result in termination charge as well as a change in brand franchising or operation of the hotel as an independent hotel.

In addition, when the term of a franchise expires, the franchisor has no obligation to issue a new franchise. The loss of a franchise could have a material adverse effect on the operations and/or the underlying value of the affected hotel because of the loss of associated name recognition, marketing support, and centralized reservation systems provided by the franchisor. The loss of a franchise could also have a material adverse effect on cash available for distribution to shareholders.

Our investments are concentrated in particular segments of a single industry.

All of our business is hotel related. Our current long-term investment strategy is to acquire or develop upscale to upper-upscale hotels, acquire first mortgages on hotel properties, invest in other mortgage-related instruments such as mezzanine loans to hotel owners and operators, and participate in hotel sale-leaseback transactions. Adverse conditions in the hotel industry will have a material adverse effect on our operating and investment revenues and cash available for distribution to our shareholders.

We rely on third party property managers, including Remington Lodging, to operate our hotels and for a significant majority of our cash flow.

For us to continue to qualify as a REIT, third parties must operate our hotels. A REIT may lease its hotels to taxable REIT subsidiaries in which the REIT can own up to a 100% interest. A taxable REIT subsidiary, or TRS, pays corporate-level income tax and may retain any after-tax income. A REIT must satisfy certain conditions to use the TRS structure. One of those conditions is that the TRS must hire, to manage the hotels, an “eligible independent contractor” (“EIC”) that is actively engaged in the trade or business of managing hotels for parties other than the REIT. An EIC cannot (i) own more than 35% of the REIT, (ii) be owned more than 35% by persons owning more than 35% of the REIT, or (iii) provide any income to the REIT (i.e., the EIC cannot pay fees to the REIT, and the REIT cannot own any debt or equity securities of the EIC).

Accordingly, while we may lease hotels to a TRS that we own, the TRS must engage a third-party operator to manage the hotels. Thus, our ability to direct and control how our hotels are operated is less than if we were able to manage our hotels directly. We have entered into management agreements with Remington Lodging, which is owned 100% by Messrs. Archie and Monty J. Bennett, to manage 46 of our 100 lodging properties owned as of December 31, 2010 and have hired unaffiliated third–party property managers to manage our remaining properties. We do not supervise any of the property managers or their respective personnel on a day-to-day basis, and we cannot assure you that the property managers will manage our properties in a manner that is consistent with their respective obligations under the applicable management agreement or our obligations under our hotel franchise agreements. We also cannot assure you that our property managers will not be negligent in their performance, will not engage in criminal or fraudulent activity, or will not otherwise default on their respective management obligations to us. If any of the foregoing occurs, our relationships with the franchisors may be damaged, we may be in breach of the franchise agreement, and we could incur liabilities resulting from loss or injury to our property or to persons at our properties. Any of these circumstances could have a material adverse effect on our operating results and financial condition, as well as our ability to pay dividends to shareholders.

If we cannot obtain additional financing, our growth will be limited.

We are required to distribute to our shareholders at least 90% of our REIT taxable income, excluding net capital gains, each year to continue to qualify as a REIT. As a result, our retained earnings available to fund acquisitions, development, or other capital expenditures are nominal. As such, we rely upon the availability of additional debt or equity capital to fund these activities. Our long-term ability to grow through acquisitions or development of hotel-related assets will be limited if we cannot obtain additional financing. Market conditions may make it difficult to obtain financing, and we cannot assure you that we will be able to obtain additional debt or equity financing or that we will be able to obtain it on favorable terms. We may elect to pay dividends on our common stock in cash or a combination of cash and shares of securities as permitted under federal income tax laws governing REIT distribution requirements. In certain circumstances, if we are unable to obtain replacement refinancing or loan modifications, we could be forced to raise equity capital at inappropriate times, make unplanned asset sales or face foreclosure on our hotel properties.

We may be unable to generate sufficient revenue from operations to pay our operating expenses and to pay dividends to our shareholders. Currently, our credit facility limits us from paying dividends if we do not meet certain covenants.

As a REIT, we are required to distribute at least 90% of our REIT taxable income each year, excluding net capital gains, to our shareholders. Our ability to make distributions may be adversely affected by the risk factors described herein. We cannot assure you that we will be able to make distributions in the future. In the event of future downturns in our operating results and financial performance, unanticipated capital improvements to our hotels or declines in the value of our mortgage portfolio, we may be unable to declare or pay distributions to our shareholders to the extent required to maintain our REIT qualification. The timing and amount of such distributions will be in the sole discretion of our Board of Directors, which will consider, among other factors, our financial performance, and debt service obligations. We may elect to pay dividends on our common stock in cash or a combination of cash and shares of securities as permitted under federal income tax laws governing REIT distribution requirements.

We compete with other hotels for guests. We also face competition for acquisitions and sales of lodging properties and of desirable debt investments.

The mid, upscale, and upper-upscale segments of the hotel business are competitive. Our hotels compete on the basis of location, room rates, quality, service levels, amenities, reputation, and reservation systems, among many other factors. New hotels may be constructed and these additions to supply create new competitors, in some cases without corresponding increases in demand for hotel rooms. The result in some cases may be lower revenue, which would result in lower cash available to meet debt service obligations, operating expenses, and requisite distributions to shareholders.

We compete for hotel acquisitions with entities that have similar investment objectives as we do. This competition could limit the number of suitable investment opportunities offered to us. It may also increase the bargaining power of property owners seeking to sell to us, making it more difficult for us to acquire new properties on attractive terms or on the terms contemplated in our business plan.

We also compete for mortgage asset investments with numerous public and private real estate investment vehicles, such as mortgage banks, pension funds, other REITs, institutional investors, and individuals. Mortgages and other investments are often obtained through a competitive bidding process. In addition, competitors may seek to establish relationships with the financial institutions and other firms from which we intend to purchase such assets. Competition may result in higher prices for mortgage assets, lower yields, and a narrower spread of yields over our borrowing costs.

Some of our competitors are larger than us, may have access to greater capital, marketing, and other resources, may have personnel with more experience than our officers, may be able to accept higher levels of debt or otherwise may tolerate more risk than us, may have better relations with hotel franchisors, sellers, or lenders, and may have other advantages over us in conducting certain business and providing certain services.

We compete to sell hotel properties. Availability of capital, the number of hotels available for sale and market conditions, all affect prices. We may not be able to sell hotel assets at our targeted price.

We have engaged in and may continue to engage in derivative transactions, which can limit our gains and expose us to losses.

We have entered into and may continue to enter into hedging transactions to (i) attempt to take advantage of changes in prevailing interest rates, (ii) protect our portfolio of mortgage assets from interest rate fluctuations, (iii) protect us from the effects of interest rate fluctuations on floating-rate debt, or (iv) preserve net cash. Our hedging transactions may include entering into interest rate swap agreements, interest rate cap or floor agreements or flooridor and corridor agreements and purchasing or selling futures contracts, purchasing put and call options on securities or securities underlying futures contracts, or entering into forward rate agreements. Hedging activities may not have the desired beneficial impact on our results of operations or financial condition. No hedging activity can completely insulate us from the risks inherent in our business.

Moreover, interest rate hedging could fail to protect us or adversely affect us because, among other things:


	•	Available interest rate hedging may not correspond directly with the interest rate risk for which protections is sought.

	•	The duration of the hedge may not match the duration of the related liability.

	•	The party owing money in the hedging transaction may default on its obligation to pay.

	•	The credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction.

	•	The value of derivatives used for hedging may be adjusted from time to time in accordance with generally accepted accounting rules to reflect changes in fair value; downward adjustments, or “mark-to-market loss,” would reduce our shareholders’ equity.

Hedging involves both risks and costs, including transaction costs, which may reduce our overall returns on our investments. These costs increase as the period covered by the hedging relationship increases and during periods of

rising and volatile interest rates. These costs will also limit the amount of cash available for distributions to shareholders. We generally intend to hedge to the extent management determines it is in our best interest given the cost of such hedging transactions as compared to the potential economic returns or protections offered. The REIT qualification rules may limit our ability to enter into hedging transactions by requiring us to limit our income and assets from hedges. If we are unable to hedge effectively because of the REIT rules, we will face greater interest rate exposure than may be commercially prudent.

If LIBOR rates do not act in the manner or to the extent we have anticipated, we may not generate expected cash flow from our “flooridor” and “corridor” derivative transactions, which may adversely affect us.

In an effort to take advantage of declining LIBOR rates, we entered into a series of interest rate derivatives, referred to as “flooridors” and “corridors” beginning in December 2008. The interest rate flooridor combines two interest rate floors, structured such that the purchaser simultaneously buys an interest rate floor at a strike rate X and sells an interest rate floor at a lower strike rate Y. The purchaser of the flooridor is paid when the underlying interest rate index (for example, LIBOR) resets below strike rate X during the term of the flooridor. Unlike a standard floor, the flooridor limits the benefit the purchaser can receive as the related interest rate index falls. Once the underlying index falls below strike Y, the sold floor partially offsets the purchased floor. The interest rate “corridor” involves purchasing of an interest rate cap at one strike rate X and selling an interest rate cap with a higher strike rate Y. The purchase of the corridor is paid when the underlying interest rate index resets above the strike rate X during the term of the corridor. We are not currently a party to any “corridor” derivative transaction. If LIBOR rates do not change in the manner or to the extent we have anticipated, we may not generate the cash flow we have anticipated from our “flooridor” and “corridor” derivatives, which may adversely affect us, including by impairing our ability to service our debt obligations, comply with financial covenants or make anticipated capital investments in our hotels.

The assets associated with certain of our derivative transactions do not constitute qualified REIT assets and the related income will not constitute qualified REIT income. Significant fluctuations in the value of such assets or the related income could jeopardize our REIT status or result in additional tax liabilities.

We have entered into certain derivative transactions to protect against interest rate risks not specifically associated with debt incurred to acquire qualified REIT assets. The REIT provisions of the Internal Revenue Code limit our income and assets in each year from such derivative transactions. Failure to comply with the asset or income limitation within the REIT provisions of the Internal Revenue could result in penalty taxes or loss of our REIT status. If we elect to contribute the non-qualifying derivatives into a taxable REIT subsidiary to preserve our REIT status, such an action would result in any income from such transactions being subject to federal income taxation.

Future terrorist attacks similar in nature to the events of September 11, 2001 may negatively affect the performance of our properties, the hotel industry in general, and our future results of operations and financial condition.

The terrorist attacks of September 11, 2001, their after-effects, and the resulting U.S.-led military action in Iraq substantially reduced business and leisure travel throughout the United States and hotel industry revenue per available room, or RevPAR, generally during the period following September 11, 2001. We cannot predict the extent to which additional terrorist attacks, acts of war, or similar events may occur in the future or how such events would directly or indirectly impact the hotel industry or our operating results.

Future terrorist attacks, acts of war, or similar events could have further material adverse effects on the hotel industry at large and our operations in particular.

We may not be able to sell any hotel properties we decide to sell on favorable terms.

We may decide to sell one or more of our hotel properties from time to time for a variety of reasons. We cannot assure you that we will be able to sell any of the properties we decide to sell on favorable terms or that any such properties will not be sold at a loss.

RISKS RELATED TO HOTEL INVESTMENTS

We are subject to general risks associated with operating hotels.

Our hotels and hotels underlying our mortgage and mezzanine loans are subject to various operating risks common to the hotel industry, many of which are beyond our control, including the following:


	•	our hotels compete with other hotel properties in their geographic markets and many of our competitors have substantial marketing and financial resources;

	•	over-building in our markets, which adversely affects occupancy and revenues at our hotels;

	•	dependence on business and commercial travelers and tourism; and

	•	adverse effects of general, regional, and local economic conditions and increases in energy costs or labor costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and commercial travelers and tourists.

These factors could adversely affect our hotel revenues and expenses, as well as the hotels underlying our mortgage and mezzanine loans, which in turn would adversely affect our ability to make distributions to our shareholders.

We may have to make significant capital expenditures to maintain our lodging properties.

Our hotels have an ongoing need for renovations and other capital improvements, including replacements of furniture, fixtures, and equipment. Franchisors of our hotels may also require periodic capital improvements as a condition of maintaining franchise licenses. Generally, we are responsible for the cost of these capital improvements, which gives rise to the following risks:


	•	cost overruns and delays;

	•	renovations can be disruptive to operations and can displace revenue at the hotels, including revenue lost while rooms under renovation are out of service;

	•	the cost of funding renovations and the possibility that financing for these renovations may not be available on attractive terms; and

	•	the risk that the return on our investment in these capital improvements will not be what we expect.

If we have insufficient cash flow from operations to fund needed capital expenditures, then we will need to borrow or access equity to fund future capital improvements.

The hotel business is seasonal, which affects our results of operations from quarter to quarter.

The hotel industry is seasonal in nature. This seasonality can cause quarterly fluctuations in our revenues, EBITDA, profitability and shareholder dividend payments.

Our hotel investments may be subject to risks relating to potential terrorist activity.

During 2010, approximately 19.1% of our total hotel revenue was generated from 11 hotels located in the Washington D.C. and Baltimore areas, areas considered vulnerable to terrorist attack. Our financial and operating performance may be adversely affected by potential terrorist activity. Future terrorist activity may cause in the future, our results to differ materially from anticipated results. Other hotels we own may be subject to this risk as well.

Our development activities may be more costly than we have anticipated.

As part of our long-term growth strategy, we may develop hotels. Hotel development involves substantial risks, including that:


	•	actual development costs may exceed our budgeted or contracted amounts;

	•	construction delays may prevent us from opening hotels on schedule;


	•	we may not be able to obtain all necessary zoning, land use, building, occupancy, and construction permits;

	•	our developed properties may not achieve our desired revenue or profit goals; and

	•	we may incur substantial development costs and then have to abandon a development project before completion.

RISKS RELATED TO INVESTMENTS IN MORTGAGES AND MEZZANINE LOANS

If the underlying hotel properties supporting our mezzanine loan portfolio are unable to generate enough cash flows for the scheduled payments, there is a possibility that our remaining mezzanine loan portfolio could be written off in its entirety, which may adversely affect our operating results.

When we implemented our mezzanine loan investment strategy, we generally performed the underwriting stress test based on worst case scenarios similar to what the hotel industry experienced during the downturn following the events of September 11, 2001. However, the magnitude of the recent economic downturn far exceeded our underwriting sensitivity. As a result, we have recorded impairment charges, net of subsequent valuation adjustments, with respect to our mezzanine loan portfolio of approximately $28.1 million and $148.7 million in 2010 and 2009, respectively. The impairment charges for 2010 included $21.6 million for our mezzanine loan investment in a joint venture. We may record additional impairment charges to this portfolio equal to as much as the remaining balance of our mezzanine loan portfolio of $35.9 million (including our interests in two mezzanine loan joint ventures) as of December 31, 2010. Due to the valuation allowance recorded on these loans, we do not expect to recognize any interest income in the future on these investments.

Continued significant impairment charges related to our mezzanine loan portfolio could result in our failure to satisfy certain financial ratios, which could trigger additional rights for the holder of our Series B-1 Preferred Stock.

Our Series B-1 preferred shareholder has certain contractual rights in the event we are unable to satisfy certain financial ratios, and such inability remains uncured for more than 120 days. The end of the 120 day cure period, without a cure or waiver, would severely restrict our ability to operate our company without triggering a covenant violation. Specifically, we would be restricted from issuing preferred securities, incurring additional debt or purchasing or leasing real property without triggering a covenant violation under the articles supplementary governing the Series B-1 preferred stock.

The impairment charges incurred in the second, third and fourth quarter of 2009, and the second and fourth quarter of 2010 resulted in an adjusted EBITDA calculation that could have prevented us from satisfying one financial ratio. As a result, without a cure or waiver, we may have been obligated to restrict operations beginning in the third quarter of 2009 or risk triggering a covenant violation. However, Security Capital Preferred Growth Incorporated, the sole holder of our Series B-1 preferred stock, reviewed the specific impairment charges and agreed to exclude the impairment charges incurred in the second, third and fourth quarters of 2009, and the second and fourth quarters of 2010, as they impacted the financial ratio calculations for the affected periods. If we incur additional impairment charges, there is no assurance that Security Capital will grant a similar waiver in the future.

If a covenant violation does occur, we will be obligated to pay an additional $0.05015 per share quarterly dividend on our Series B-1 preferred stock (approximately $363,000 aggregate increase per quarter), and the Series B-1 preferred shareholder will gain the right to appoint two board members.

Debt investments that are not United States government insured involve risk of loss.

As part of our business strategy, we may originate or acquire lodging-related uninsured and mortgage assets, including mezzanine loans. While holding these interests, we are subject to risks of borrower defaults, bankruptcies, fraud and related losses, and special hazard losses that are not covered by standard hazard insurance. Also, costs of financing the mortgage loans could exceed returns on the mortgage loans. In the event of any default under mortgage loans held by us, we will bear the risk of loss of principal and non-payment of interest and fees to the extent of any deficiency between the value of the mortgage collateral and the principal amount of the mortgage loan. We suffered significant impairment charges with respect to our investments in mortgage loans in 2009 and 2010,

and to the extent we incur similar losses in the future, the value and the price of our securities may be adversely affected.

We invest in non-recourse loans, which will limit our recovery to the value of the mortgaged property.

Our mortgage and mezzanine loan assets are generally non-recourse. With respect to our non-recourse mortgage loan assets, in the event of a borrower default, the specific mortgaged property and other assets, if any, pledged to secure the relevant mortgage loan, may be less than the amount owed under the mortgage loan. As to those mortgage loan assets that provide for recourse against the borrower and its assets generally, we cannot assure you that the recourse will provide a recovery in respect of a defaulted mortgage loan greater than the liquidation value of the mortgaged property securing that mortgage loan.

Investment yields affect our decision whether to originate or purchase investments and the price offered for such investments.

In making any investment, we consider the expected yield of the investment and the factors that may influence the yield actually obtained on such investment. These considerations affect our decision whether to originate or purchase an investment and the price offered for that investment. No assurances can be given that we can make an accurate assessment of the yield to be produced by an investment. Many factors beyond our control are likely to influence the yield on the investments, including, but not limited to, competitive conditions in the local real estate market, local and general economic conditions, and the quality of management of the underlying property. Our inability to accurately assess investment yields may result in our purchasing assets that do not perform as well as expected, which may adversely affect the price of our securities.

Volatility of values of mortgaged properties may adversely affect our mortgage loans.

Lodging property values and net operating income derived from lodging properties are subject to volatility and may be affected adversely by a number of factors, including the risk factors described herein relating to general economic conditions, operating lodging properties, and owning real estate investments. In the event its net operating income decreases, a borrower may have difficulty paying our mortgage loan, which could result in losses to us. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our mortgage loans, which could also cause us to suffer losses.

Mezzanine loans involve greater risks of loss than senior loans secured by income-producing properties.

We may continue to make and acquire mezzanine loans. These types of loans are considered to involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real property due to a variety of factors, including the loan being entirely unsecured or, if secured, becoming unsecured as a result of foreclosure by the senior lender. We may not recover some or all of our investment in these loans. In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans resulting in less equity in the property and increasing the risk of loss of principal.

RISKS RELATED TO THE REAL ESTATE INDUSTRY

Mortgage debt obligations expose us to increased risk of property losses, which could harm our financial condition, cash flow, and ability to satisfy our other debt obligations and pay dividends.

Incurring mortgage debt increases our risk of property losses because defaults on indebtedness secured by properties may result in foreclosure actions initiated by lenders and ultimately our loss of the property securing any loans for which we are in default. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on the foreclosure but would not receive any cash proceeds. As a result, we may be required to identify and utilize other sources of cash for distributions to our shareholders of that income.

In addition, our default under any one of our mortgage debt obligations may result in a default on our other indebtedness. If this occurs, our financial condition, cash flow, and ability to satisfy our other debt obligations or ability to pay dividends may be impaired.

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.

Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties or mortgage loans in our portfolio in response to changing economic, financial, and investment conditions is limited.

The real estate market is affected by many factors that are beyond our control, including:


	•	adverse changes in national and local economic and market conditions;

	•	changes in interest rates and in the availability, cost, and terms of debt financing;

	•	changes in governmental laws and regulations, fiscal policies, and zoning and other ordinances, and costs of compliance with laws and regulations;

	•	the ongoing need for capital improvements, particularly in older structures;

	•	changes in operating expenses; and

	•	civil unrest, acts of war, and natural disasters, including earthquakes and floods, which may result in uninsured and underinsured losses.

We cannot predict whether we will be able to sell any property or loan for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property or loan. Because we intend to offer more flexible terms on our mortgage loans than some providers of commercial mortgage loans, we may have more difficulty selling or participating our loans to secondary purchasers than would these more traditional lenders.

We may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure you that we will have funds available to correct those defects or to make those improvements. In acquiring a property, we may agree to lock-out provisions that materially restrict us from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These factors and any others that would impede our ability to respond to adverse changes in the performance of our properties could have a material adverse effect on our operating results and financial condition, as well as our ability to pay dividends to shareholders.

The costs of compliance with or liabilities under environmental laws may harm our operating results.

Our properties and properties underlying our loan assets may be subject to environmental liabilities. An owner of real property, or a lender with respect to a property that exercises control over the property, can face liability for environmental contamination created by the presence or discharge of hazardous substances on the property. We may face liability regardless of:


	•	our knowledge of the contamination;

	•	the timing of the contamination;

	•	the cause of the contamination; or

	•	the party responsible for the contamination.

There may be environmental problems associated with our properties or properties underlying our loan assets of which we are unaware. Some of our properties or the properties underlying our loan assets use, or may have used in the past, underground tanks for the storage of petroleum-based or waste products that could create a potential for release of hazardous substances. If environmental contamination exists on a property, we could become subject to strict, joint and several liabilities for the contamination if we own the property or if we foreclose on the property or otherwise have control over the property.

The presence of hazardous substances on a property we own or have made a loan with respect to may adversely affect our ability to sell or foreclose on the property, and we may incur substantial remediation costs. The discovery

of environmental liabilities attached to our properties or properties underlying our loan assets could have a material adverse effect on our results of operations, financial condition, and ability to pay dividends to shareholders.

We generally have environmental insurance policies on each of our owned properties, and we intend to obtain environmental insurance for any other properties that we may acquire. However, if environmental liabilities are discovered during the underwriting of the insurance policies for any property that we may acquire in the future, we may be unable to obtain insurance coverage for the liabilities at commercially reasonable rates or at all, and we may experience losses. In addition, we generally do not require our borrowers to obtain environmental insurance on the properties they own that secure their loans from us.

Our properties and the properties underlying our mortgage loans may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold at any of our properties or the properties underlying our loan assets could require us or our borrowers to undertake a costly remediation program to contain or remove the mold from the affected property. In addition, the presence of significant mold could expose us or our borrowers to liability from guests, employees, and others if property damage or health concerns arise.

Compliance with the Americans with Disabilities Act and fire, safety, and other regulations may require us or our borrowers to make unintended expenditures that adversely impact our operating results.

All of our properties and properties underlying our mortgage loans are required to comply with the Americans with Disabilities Act, or the ADA. The ADA requires that “public accommodations” such as hotels be made accessible to people with disabilities. Compliance with the ADA requirements could require removal of access barriers and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both. We or our borrowers may be required to expend funds to comply with the provisions of the ADA at our hotels or hotels underlying our loan assets, which could adversely affect our results of operations and financial condition and our ability to make distributions to shareholders. In addition, we and our borrowers are required to operate our properties in compliance with fire and safety regulations, building codes, and other land use regulations as they may be adopted by governmental agencies and bodies and become applicable to our properties. We and our borrowers may be required to make substantial capital expenditures to comply with those requirements, and these expenditures could have a material adverse effect on our operating results and financial condition as well as our ability to pay dividends to shareholders.

We may experience uninsured or underinsured losses.

We have property and casualty insurance with respect to our properties and other insurance, in each case, with loss limits and coverage thresholds deemed reasonable by our management (and with the intent to satisfy the requirements of lenders and franchisors). In doing so, we have made decisions with respect to what deductibles, policy limits, and terms are reasonable based on management’s experience, our risk profile, the loss history of our property managers and our properties, the nature of our properties and our businesses, our loss prevention efforts, and the cost of insurance.

Various types of catastrophic losses may not be insurable or may not be economically insurable. In the event of a substantial loss, our insurance coverage may not cover the full current market value or replacement cost of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations, and other factors might cause insurance proceeds to be insufficient to fully replace or renovate a hotel after it has been damaged or destroyed. Accordingly, there can be no assurance that (i) the insurance coverage thresholds that we have obtained will fully protect us against insurable losses (i.e., losses may exceed coverage limits); (ii) we will not incur large deductibles that will adversely affect our earnings; (iii) we will not incur losses from risks that are not insurable or that are not economically insurable; or (iv) current coverage thresholds will continue to be available at reasonable

rates. In the future, we may choose not to maintain terrorism insurance on any of our properties. As a result, one or more large uninsured or underinsured losses could have a material adverse affect on us.

Each of our current lenders requires us to maintain certain insurance coverage thresholds, and we anticipate that future lenders will have similar requirements. We believe that we have complied with the insurance maintenance requirements under the current governing loan documents and we intend to comply with any such requirements in any future loan documents. However, a lender may disagree, in which case the lender could obtain additional coverage thresholds and seek payment from us, or declare us in default under the loan documents. In the former case, we could spend more for insurance than we otherwise deem reasonable or necessary or, in the latter case, subject us to a foreclosure on hotels collateralizing one or more loans. In addition, a material casualty to one or more hotels collateralizing loans may result in (i) the insurance company applying to the outstanding loan balance insurance proceeds that otherwise would be available to repair the damage caused by the casualty, which would require us to fund the repairs through other sources, or (ii) the lender foreclosing on the hotels if there is a material loss that is not insured.

RISKS RELATED TO OUR STATUS AS A REIT

If we do not qualify as a REIT, we will be subject to tax as a regular corporation and could face substantial tax liability.

We conduct operations so as to qualify as a REIT under the Internal Revenue Code. However, qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only a limited number of judicial or administrative interpretations exist. Even a technical or inadvertent mistake could jeopardize our REIT status. Furthermore, new tax legislation, administrative guidance, or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify as a REIT. If we fail to qualify as a REIT in any tax year, then:


	•	we would be taxed as a regular domestic corporation, which, among other things, means being unable to deduct distributions to shareholders in computing taxable income and being subject to federal income tax on our taxable income at regular corporate rates;

	•	we would also be subject to federal alternative minimum tax and, possibly, increased state and local taxes;

	•	any resulting tax liability could be substantial and would reduce the amount of cash available for distribution to shareholders; and

	•	unless we were entitled to relief under applicable statutory provisions, we would be disqualified from treatment as a REIT for the subsequent four taxable years following the year that we lost our qualification, and, thus, our cash available for distribution to shareholders could be reduced for each of the years during which we did not qualify as a REIT.

If we fail to qualify as a REIT, we will not be required to make distributions to shareholders to maintain our tax status. As a result of all of these factors, our failure to qualify as a REIT could impair our ability to raise capital, expand our business, and make distributions to our shareholders and could adversely affect the value of our securities.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.

Even if we remain qualified for taxation as a REIT, we may be subject to certain federal, state, and local taxes on our income and assets. For example:


	•	We will be required to pay tax on undistributed REIT taxable income.

	•	We may be required to pay the “alternative minimum tax” on our items of tax preference.

	•	If we have net income from the disposition of foreclosure property held primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, we must pay tax on that income at the highest corporate rate.


	•	If we sell a property in a “prohibited transaction,” our gain from the sale would be subject to a 100% penalty tax.

	•	Our taxable REIT subsidiary, Ashford TRS, is a fully taxable corporation and will be required to pay federal and state taxes on its income.

	•	We may continue to experience increases in our state and local income tax burden. Over the past several years, certain states have significantly changed their income tax regimes in order to raise revenues. The changes enacted that have increased our state and local income tax burden include the taxation of modified gross receipts (as opposed to net taxable income), the suspension of and/or limitation on the use of net operating loss deduction, increases in tax rates and fees, the addition of surcharges, and the taxation of our partnership income at the entity level. Facing mounting budget deficits, more state and local taxing authorities have indicated that they are going to revise their income tax regimes in this fashion and/or eliminate certain federally allowed tax deductions such as the REIT dividends paid deduction.

We may be subject to taxes in the event our leases are held not to be on an arm’s-length basis.

In the event that leases between us and our taxable REIT subsidiaries are held not to be on an arm’s-length basis, we or our taxable REIT subsidiaries could be subject to taxes, and adjustments to the rents could cause us to fail to meet certain REIT income tests. In determining amounts payable by our taxable REIT subsidiaries under our leases, we engaged a third party to prepare a transfer pricing study to ascertain whether the lease terms we established were on an arm’s-length basis. The transfer pricing study concluded that the lease terms were consistent with arm’s-length terms as required by applicable Treasury Regulations. In 2010, the Internal Revenue Service, or the IRS, audited a taxable REIT subsidiary of ours that leases two of our hotel properties, and issued a notice of proposed adjustment that reduced the amount of rent we charged to the taxable REIT subsidiary. We own a 75% interest in the hotel properties and the taxable REIT subsidiary at issue. We disagree with the IRS’ position, and have filed a written protest with the IRS and requested an IRS Appeals Office Conference. If the IRS prevails in its proposed adjustment, however, our taxable REIT subsidiary would owe approximately $1.1 million of additional U.S. federal income taxes plus possible additional state income taxes, or we could be subject to a 100% excise tax on our share of the amount by which the rent is held to be greater than the arm’s-length rate. In addition, if the IRS were to successfully challenge the terms of our leases with any of our taxable REIT subsidiaries for 2007 and later years, we or our taxable REIT subsidiaries could owe additional taxes and we could be required to pay penalty taxes if the effect of such challenges were to cause us to fail to meet certain REIT income tests, which could materially adversely affect us and the value of our securities.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities.

To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our shareholders, and the ownership of our stock. We may be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution. We may elect to pay dividends on our common stock in cash or a combination of cash and shares of securities as permitted under federal income tax laws governing REIT distribution requirements. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

Complying with REIT requirements may limit our ability to hedge effectively.

The REIT provisions of the Internal Revenue Code may limit our ability to hedge mortgage securities and related borrowings by requiring us to limit our income and assets in each year from certain hedges, together with any other income not generated from qualified real estate assets, to no more than 25% of our gross income. In addition, we must limit our aggregate income from nonqualified hedging transactions, from our provision of services, and from other non-qualifying sources to no more than 5% of our annual gross income. As a result, we may have to limit our use of advantageous hedging techniques. This could result in greater risks associated with changes in interest rates than we would otherwise want to incur. However, for transactions occurring after July 30, 2008 that we enter into to protect against interest rate risks on debt incurred to acquire qualified REIT assets and for which we identify as hedges for tax purposes, any associated hedging income is excluded from the 95% income test and the 75%

income test applicable to a REIT. If we were to violate the 25% or 5% limitations, we may have to pay a penalty tax equal to the amount of income in excess of those limitations multiplied by a fraction intended to reflect our profitability. If we fail to satisfy the REIT gross income tests, unless our failure was due to reasonable cause and not due to willful neglect, we could lose our REIT status for federal income tax purposes.

Complying with REIT requirements may force us to liquidate otherwise attractive investments.

To qualify as a REIT, we must also ensure that at the end of each calendar quarter at least 75% of the value of our assets consists of cash, cash items, government securities, and qualified REIT real estate assets. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries. If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days after the end of the calendar quarter to avoid losing our REIT status and suffer adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments.

Complying with REIT requirements may force us to borrow to make distributions to shareholders.

As a REIT, we must distribute at least 90% of our annual REIT taxable income, excluding net capital gains, (subject to certain adjustments) to our shareholders. To the extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our shareholders in a calendar year is less than a minimum amount specified under federal tax laws.

From time to time, we may generate taxable income greater than our net income for financial reporting purposes or our taxable income may be greater than our cash flow available for distribution to shareholders. If we do not have other funds available in these situations, we could be required to borrow funds, sell investments at disadvantageous prices, or find another alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. We may elect to pay dividends on our common stock in cash or a combination of cash and shares of securities as permitted under federal income tax laws governing REIT distribution requirements. In December 2009, the Internal Revenue Service issued Revenue Procedure 2010-12 which provides guidance on a REIT’s payment of dividends in shares of its common stock. For stock distributions declared for a tax year ending on or before December 31, 2011, the distributions will qualify as part of the 90% distribution requirement if certain conditions are met. These include a requirement to provide each shareholder the opportunity to elect to receive its entire distribution in either cash or stock and any limitation imposed on the amount of cash that may be distributed cannot be less than 10% of the aggregate declared distribution.

We may in the future choose to pay dividends in our common shares instead of cash, in which case shareholders may be required to pay income taxes in excess of the cash dividends they receive.

Although we have no current intention to do so, we may, in the future, distribute taxable dividends that are payable in cash and common shares at the election of each shareholder. Under Revenue Procedure 2010-12, up to 90% of any such taxable dividend paid with respect to our 2011 taxable year could be payable in our shares. Taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, shareholders may be required to pay income taxes with respect to such dividends in excess of the cash dividends received. If a U.S. shareholder sells the common shares that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our shares at the time of the sale. Furthermore, with respect to certain non-U.S. shareholders, we may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in common shares. In addition, if a significant number of our shareholders determine

to sell common shares in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our common shares.

Further, while Revenue Procedure 2010-12 applies only to taxable dividends payable by us in cash or shares with respect to our 2011 taxable year, it is unclear whether and to what extent we will be able to pay taxable dividends in cash and common shares in later years. Moreover, various aspects of such a taxable cash/share dividend are uncertain and have not yet been addressed by the IRS. No assurance can be given that the IRS will not impose additional requirements in the future with respect to taxable cash/share dividends, including on a retroactive basis, or assert that the requirements for such taxable cash/share dividends have not been met.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our securities.

At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. Any of those new laws or interpretations may take effect retroactively and could adversely affect us or our shareholders. Effective for taxable years beginning after December 31, 2002, the Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the maximum rate of tax applicable to individuals on dividend income from regular C corporations from 38.6% to 15.0%. This reduced substantially the so-called “double taxation” (that is, taxation at both the corporate and shareholder levels) that has generally applied to corporations that are not taxed as REITs. Generally, dividends from REITs will not qualify for the dividend tax reduction. The implementation of this tax Act could ultimately cause individual investors to view stocks of non-REIT corporations as more attractive relative to shares of REITs because the dividends paid by non-REIT corporations would be subject to lower tax rates. We cannot predict whether in fact this will occur or whether, if it occurs, what the impact will be on the value of our securities. Unless extended, the provision allowing for reduction in the tax rate on dividend income from regular C corporations is scheduled to expire after December 31, 2012.

Your investment in our securities has various federal, state, and local income tax risks that could affect the value of your investment.

Although the provisions of the Internal Revenue Code relevant to your investment in our securities are generally described in “Federal Income Tax Consequences of Our Status as a REIT,” we strongly urge you to consult your own tax advisor concerning the effects of federal, state, and local income tax law on an investment in our securities because of the complex nature of the tax rules applicable to REITs and their shareholders.

RISKS RELATED TO OUR CORPORATE STRUCTURE

There are no assurances of our ability to make distributions in the future.

Effective with the fourth quarter ended December 31, 2008, and in conjunction with an amendment to our credit facility, the Board of Directors suspended the common stock dividend for 2009. In December 2009, the Board of Directors determined, subject to ongoing review, to continue the suspension of the common dividend in 2010, except to the extent required to maintain our REIT status. In February 2011, the Board of Directors accepted management’s recommendation to resume paying cash dividends on our common shares with an annualized target of $0.40 per share for 2011. The payment of $0.10 for the first quarter of 2011 has been approved and subsequent payments will be reviewed on a quarterly basis. However, our ability to pay dividends may be adversely affected by the risk factors described herein. All distributions will be made at the discretion of our Board of Directors and will depend upon our earnings, our financial condition, maintenance of our REIT status and such other factors as our Board of Directors may deem relevant from time to time. There are no assurances of our ability to pay dividends in the future. In addition, some of our distributions may include a return of capital.

Failure to maintain an exemption from the Investment Company Act would adversely affect our results of operations.

We believe that we will conduct our business in a manner that allows us to avoid registration as an investment company under the Investment Company Act of 1940, or the 1940 Act. Under Section 3(c)(5)(C) of the 1940 Act, entities that are primarily engaged in the business of purchasing or otherwise acquiring “mortgages and other liens

on and interests in real estate” are not treated as investment companies. The SEC staff’s position generally requires us to maintain at least 55% of our assets directly in qualifying real estate interests to be able to rely on this exemption. To constitute a qualifying real estate interest under this 55% requirement, a real estate interest must meet various criteria. Mortgage securities that do not represent all of the certificates issued with respect to an underlying pool of mortgages may be treated as securities separate from the underlying mortgage loans and, thus, may not qualify for purposes of the 55% requirement. Our ownership of these mortgage securities, therefore, is limited by the provisions of the 1940 Act and SEC staff interpretive positions. There are no assurances that efforts to pursue our intended investment program will not be adversely affected by operation of these rules.

Our charter does not permit ownership in excess of 9.8% of our capital stock, and attempts to acquire our capital stock in excess of the 9.8% limit without approval from our Board of Directors are void.

For the purpose of preserving our REIT qualification, our charter prohibits direct or constructive ownership by any person of more than 9.8% of the lesser of the total number or value of the outstanding shares of our common stock or more than 9.8% of the lesser of the total number or value of the outstanding shares of our preferred stock unless our Board of Directors grants a waiver. Our charter’s constructive ownership rules are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of less than 9.8% of the outstanding stock by an individual or entity could cause that individual or entity to own constructively in excess of 9.8% of the outstanding stock, and thus be subject to our charter’s ownership limit. Any attempt to own or transfer shares of our common or preferred stock in excess of the ownership limit without the consent of the Board of Directors will be void, and could result in the shares being automatically transferred to a charitable trust.

Because provisions contained in Maryland law and our charter may have an anti-takeover effect, investors may be prevented from receiving a “control premium” for their shares.

Provisions contained in our charter and Maryland general corporation law may have effects that delay, defer, or prevent a takeover attempt, which may prevent shareholders from receiving a “control premium” for their shares. For example, these provisions may defer or prevent tender offers for our common stock or purchases of large blocks of our common stock, thereby limiting the opportunities for our shareholders to receive a premium for their common stock over then-prevailing market prices. These provisions include the following:


	•	Ownership limit: The ownership limit in our charter limits related investors, including, among other things, any voting group, from acquiring over 9.8% of our common stock without our permission.

	•	Classification of preferred stock: Our charter authorizes our Board of Directors to issue preferred stock in one or more classes and to establish the preferences and rights of any class of preferred stock issued. These actions can be taken without soliciting shareholder approval. Our preferred stock issuances could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our shareholders’ best interests.

Maryland statutory law provides that an act of a director relating to or affecting an acquisition or a potential acquisition of control of a corporation may not be subject to a higher duty or greater scrutiny than is applied to any other act of a director. Hence, directors of a Maryland corporation are not required to act in takeover situations under the same standards as apply in Delaware and other corporate jurisdictions.

Offerings of debt securities, which would be senior to our common stock and any preferred stock upon liquidation, or equity securities, which would dilute our existing shareholders’ holdings could be senior to our common stock for the purposes of dividend distributions, may adversely affect the market price of our common stock and any preferred stock.

We may attempt to increase our capital resources by making additional offerings of debt or equity securities, including commercial paper, medium-term notes, senior or subordinated notes, convertible securities, and classes of preferred stock or common stock or classes of preferred units. Upon liquidation, holders of our debt securities or preferred units and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of shares of preferred stock or common stock. Furthermore, holders of our debt securities and preferred stock or preferred units and lenders with respect to other borrowings will receive a distribution of our available

assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing shareholders or reduce the market price of our common or preferred stock or both. Our preferred stock or preferred units could have a preference on liquidating distributions or a preference on dividend payments that could limit our ability to make a dividend distribution to the holders of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of our future offerings. Thus, our shareholders bear the risk of our future offerings reducing the market price of our securities and diluting their securities holdings in us.

Securities eligible for future sale may have adverse effects on the market price of our securities.

We cannot predict the effect, if any, of future sales of securities, or the availability of securities for future sales, on the market price of our outstanding securities. Sales of substantial amounts of common stock, or the perception that these sales could occur, may adversely affect prevailing market prices for our securities.

We also may issue from time to time additional securities or units of our operating partnership in connection with the acquisition of properties and we may grant additional demand or piggyback registration rights in connection with these issuances. Sales of substantial amounts of our securities or the perception that such sales could occur may adversely affect the prevailing market price for our securities or may impair our ability to raise capital through a sale of additional debt or equity securities.

We depend on key personnel with long-standing business relationships. The loss of key personnel could threaten our ability to operate our business successfully.

Our future success depends, to a significant extent, upon the continued services of our management team. In particular, the lodging industry experience of Messrs. Monty J. Bennett, Kessler, Brooks, Kimichik, and Nunneley and the extent and nature of the relationships they have developed with hotel franchisors, operators, and owners and hotel lending and other financial institutions are critically important to the success of our business. We do not maintain key–person life insurance on any of our officers other than in connection with our deferred compensation plan. Although these officers currently have employment agreements with us, we cannot assure their continued employment. The loss of services of one or more members of our corporate management team could harm our business and our prospects.

An increase in market interest rates may have an adverse effect on the market price of our securities.

A factor investors may consider in deciding whether to buy or sell our securities is our dividend rate as a percentage of our share or unit price relative to market interest rates. If market interest rates increase, prospective investors may desire a higher dividend or interest rate on our securities or seek securities paying higher dividends or interest. The market price of our securities is likely based on the earnings and return that we derive from our investments, income with respect to our properties, and our related distributions to shareholders and not from the market value or underlying appraised value of the properties or investments themselves. As a result, interest rate fluctuations and capital market conditions can affect the market price of our securities. For instance, if interest rates rise without an increase in our dividend rate, the market price of our common or preferred stock could decrease because potential investors may require a higher dividend yield on our common or preferred stock as market rates on interest-bearing securities, such as bonds, rise. In addition, rising interest rates would result in increased interest expense on our variable–rate debt, thereby adversely affecting cash flow and our ability to service our indebtedness and pay dividends.

Our major policies, including our policies and practices with respect to investments, financing, growth, debt capitalization, and REIT qualification and distributions, are determined by our Board of Directors. Although we have no present intention to do so, our Board of Directors may amend or revise these and other policies from time to time without a vote of our shareholders. Accordingly, our shareholders will have limited control over changes in our policies and the changes could harm our business, results of operations, and share price.

Changes in our strategy or investment or leverage policy could expose us to greater credit risk and interest rate risk or could result in a more leveraged balance sheet. We cannot predict the effect any changes to our current operating policies and strategies may have on our business, operating results, and stock price. However, the effects may be adverse.


Item 1B.	*Unresolved Staff Comments*

None.


Item 2.	*Properties*

OFFICES. We lease our headquarters located at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254.

HOTEL PROPERTIES. As of December 31, 2010, we had ownership interests in 100 hotel properties, which included direct ownership in 94 hotel properties and between 75-89% in six hotel properties through equity investments with joint venture partners. All these hotel properties are located in the United States. The following table presents certain information related to our hotel properties.


		Total		%			Owned		Year Ended December 31, 2010
Hotel Property	Location	Rooms		Owned			Rooms		Occupancy			ADR		RevPAR

*Fee Simple Properties*
Embassy Suites	Austin, TX		150		100	%		150		76.38	%	$	133.83	$	102.23
Embassy Suites	Dallas, TX		150		100	%		150		64.39	%	$	115.28	$	74.23
Embassy Suites	Herndon, VA		150		100	%		150		72.50	%	$	161.46	$	117.06
Embassy Suites	Las Vegas, NV		220		100	%		220		75.91	%	$	111.39	$	84.55
Embassy Suites	Syracuse, NY		215		100	%		215		74.88	%	$	114.82	$	85.98
Embassy Suites	Flagstaff, AZ		119		100	%		119		80.24	%	$	112.36	$	90.16
Embassy Suites	Houston, TX		150		100	%		150		81.23	%	$	137.32	$	111.54
Embassy Suites	West Palm Beach, FL		160		100	%		160		71.42	%	$	109.40	$	78.13
Embassy Suites	Philadelphia, PA		263		100	%		263		77.70	%	$	123.54	$	95.98
Embassy Suites	Walnut Creek, CA		249		100	%		249		73.45	%	$	114.73	$	84.27
Embassy Suites	Arlington, VA		267		100	%		267		79.12	%	$	200.59	$	158.71
Embassy Suites	Portland, OR		276		100	%		276		79.33	%	$	148.12	$	117.51
Embassy Suites	Santa Clara, CA		257		100	%		257		78.63	%	$	144.18	$	113.37
Embassy Suites	Orlando, FL		174		100	%		174		76.41	%	$	121.75	$	93.03
Hilton Garden Inn	Jacksonville, FL		119		100	%		119		64.62	%	$	99.42	$	64.25
Hilton	Houston, TX		243		100	%		243		64.54	%	$	106.45	$	68.71
Hilton	St. Petersburg, FL		333		100	%		333		60.93	%	$	109.71	$	66.85
Hilton	Santa Fe, NM		157		100	%		157		82.12	%	$	131.19	$	107.72
Hilton	Bloomington, MN		300		100	%		300		85.42	%	$	112.37	$	95.99
Hilton	Washington DC		544		75	%		408		70.82	%	$	210.71	$	149.24
Hilton	Costa Mesa, CA		486		100	%		486		75.87	%	$	109.17	$	82.83
Hilton	Tucson, AZ		428		100	%		428		52.81	%	$	123.64	$	65.29
Hilton	Rye Town, NY		446		100	%		446		52.21	%	$	133.40	$	69.65
Homewood Suites	Mobile, AL		86		100	%		86		89.47	%	$	116.86	$	104.56
Hampton Inn	Lawrenceville, GA		86		100	%		86		55.04	%	$	87.11	$	47.95
Hampton Inn	Evansville, IN		141		100	%		141		69.54	%	$	98.11	$	68.23
Hampton Inn	Terre Haute, IN		112		100	%		112		67.13	%	$	86.27	$	57.92
Hampton Inn	Buford, GA		92		100	%		92		66.30	%	$	99.66	$	66.08
Hampton Inn	Houston, TX		176		85	%		150		62.02	%	$	123.43	$	76.54
Hampton Inn	Jacksonville, FL		118		100	%		118		61.48	%	$	102.12	$	62.78
Marriott	Durham, NC		225		100	%		225		58.60	%	$	135.90	$	79.63
Marriott	Arlington, VA		697		100	%		697		75.93	%	$	188.30	$	142.97
Marriott	Seattle, WA		358		100	%		358		73.35	%	$	178.96	$	131.27
Marriott	Bridgewater, NJ		347		100	%		347		64.50	%	$	173.56	$	111.95
Marriott	Plano, TX		404		100	%		404		61.77	%	$	148.06	$	91.45
Marriott	Dallas, TX		266		100	%		266		65.53	%	$	115.22	$	75.50
SpringHill Suites by Marriott	Jacksonville, FL		102		100	%		102		64.68	%	$	83.07	$	53.73
SpringHill Suites by Marriott	Baltimore, MD		133		100	%		133		77.26	%	$	109.52	$	84.62
SpringHill Suites by Marriott	Kennesaw, GA		90		100	%		90		62.30	%	$	95.24	$	59.34
SpringHill Suites by Marriott	Buford, GA		96		100	%		96		61.08	%	$	90.12	$	55.05
SpringHill Suites by Marriott	Gaithersburg, MD		162		100	%		162		62.93	%	$	117.03	$	73.65
SpringHill Suites by Marriott	Centreville, VA		136		100	%		136		68.31	%	$	91.61	$	62.58
SpringHill Suites by Marriott	Charlotte, NC		136		100	%		136		63.51	%	$	89.38	$	56.77
SpringHill Suites by Marriott	Durham, NC		120		100	%		120		72.32	%	$	80.07	$	57.90
SpringHill Suites by Marriott	Orlando, FL		400		100	%		400		71.94	%	$	82.98	$	59.70
SpringHill Suites by Marriott	Manhattan Beach, CA		164		100	%		164		76.42	%	$	104.64	$	79.97
SpringHill Suites by Marriott	Plymouth Meeting, PA		199		100	%		199		55.06	%	$	111.48	$	61.38
SpringHill Suites by Marriott	Glen Allen, VA		136		100	%		136		48.86	%	$	85.05	$	41.56
Fairfield Inn by Marriott	Kennesaw, GA		87		100	%		87		55.66	%	$	80.19	$	44.64
Fairfield Inn by Marriott	Orlando, FL		388		100	%		388		79.07	%	$	67.73	$	53.55
Courtyard by Marriott	Bloomington, IN		117		100	%		117		69.47	%	$	116.65	$	81.04
Courtyard by Marriott	Columbus, IN		90		100	%		90		59.49	%	$	83.69	$	49.79

(Continued on next page)


		Total		%			Owned		Year Ended December 31, 2010
Hotel Property	Location	Rooms		Owned			Rooms		Occupancy			ADR		RevPAR

Courtyard by Marriott	Louisville, KY		150		100	%		150		61.24	%	$	125.54	$	76.88
Courtyard by Marriott	Crystal City, VA		272		100	%		272		71.04	%	$	162.04	$	115.11
Courtyard by Marriott	Ft. Lauderdale, FL		174		100	%		174		64.43	%	$	99.07	$	63.83
Courtyard by Marriott	Overland Park, KS		168		100	%		168		56.41	%	$	86.73	$	48.92
Courtyard by Marriott	Palm Desert, CA		151		100	%		151		53.68	%	$	88.52	$	47.52
Courtyard by Marriott	Foothill Ranch, CA		156		100	%		156		67.15	%	$	96.09	$	64.53
Courtyard by Marriott	Alpharetta, GA		154		100	%		154		66.94	%	$	81.64	$	54.65
Courtyard by Marriott	Philadelphia, PA		498		89	%		443		75.70	%	$	133.53	$	101.09
Courtyard by Marriott	Seattle, WA		250		100	%		250		66.83	%	$	133.01	$	88.89
Courtyard by Marriott	San Francisco, CA		405		100	%		405		82.92	%	$	160.68	$	133.24
Courtyard by Marriott	Orlando, FL		312		100	%		312		71.10	%	$	85.90	$	61.08
Courtyard by Marriott	Oakland, CA		156		100	%		156		65.99	%	$	98.71	$	65.14
Courtyard by Marriott	Scottsdale, AZ		180		100	%		180		73.43	%	$	87.93	$	64.57
Courtyard by Marriott	Plano, TX		153		100	%		153		63.38	%	$	109.24	$	69.24
Courtyard by Marriott	Edison, NJ		146		100	%		146		64.33	%	$	101.47	$	65.28
Courtyard by Marriott	Newark, CA		181		100	%		181		64.89	%	$	76.65	$	49.73
Courtyard by Marriott	Manchester, CT		90		85	%		77		73.31	%	$	97.79	$	71.68
Courtyard by Marriott	Basking Ridge, NJ		235		100	%		235		65.84	%	$	151.64	$	99.84
Marriott Residence Inn	Lake Buena Vista, FL		210		100	%		210		76.53	%	$	115.67	$	88.53
Marriott Residence Inn	Evansville, IN		78		100	%		78		84.62	%	$	103.07	$	87.22
Marriott Residence Inn	Orlando, FL		350		100	%		350		76.80	%	$	97.90	$	75.19
Marriott Residence Inn	Falls Church, VA		159		100	%		159		78.83	%	$	150.63	$	118.74
Marriott Residence Inn	San Diego, CA		150		100	%		150		77.86	%	$	133.29	$	103.78
Marriott Residence Inn	Salt Lake City, UT		144		100	%		144		66.63	%	$	113.93	$	75.91
Marriott Residence Inn	Palm Desert, CA		130		100	%		130		57.32	%	$	112.20	$	64.31
Marriott Residence Inn	Las Vegas, NV		256		100	%		256		67.06	%	$	99.72	$	66.88
Marriott Residence Inn	Phoenix, AZ		200		100	%		200		78.02	%	$	98.79	$	77.07
Marriott Residence Inn	Plano, TX		126		100	%		126		69.10	%	$	93.90	$	64.89
Marriott Residence Inn	Newark, CA		168		100	%		168		70.51	%	$	88.88	$	62.67
Marriott Residence Inn	Manchester CT		96		85	%		82		82.84	%	$	101.27	$	83.89
Marriott Residence Inn Buckhead	Atlanta, GA		150		100	%		150		78.05	%	$	102.90	$	80.31
Marriott Residence Inn	Jacksonville, FL		120		100	%		120		62.64	%	$	93.73	$	58.71
TownePlace Suites by Marriott	Manhattan Beach, CA		144		100	%		144		68.69	%	$	95.67	$	65.71
One Ocean	Atlantic Beach, FL		193		100	%		193		46.70	%	$	160.19	$	74.81
Sheraton Hotel	Langhorne, PA		187		100	%		187		58.37	%	$	109.47	$	63.90
Sheraton Hotel	Minneapolis, MN		222		100	%		222		68.54	%	$	98.25	$	67.34
Sheraton Hotel	Indianapolis, IN		371		100	%		371		59.72	%	$	104.18	$	62.22
Sheraton Hotel	Anchorage, AK		370		100	%		370		72.24	%	$	110.88	$	80.10
Sheraton Hotel	San Diego, CA		260		100	%		260		63.35	%	$	98.79	$	62.58
Hyatt Regency	Coral Gables, FL		242		100	%		242		77.93	%	$	145.04	$	113.04
Crowne Plaza	Beverly Hills, CA		260		100	%		260		81.62	%	$	140.33	$	114.54
Annapolis Historic Inn	Annapolis, MD		124		100	%		124		62.41	%	$	128.64	$	80.29
*Air Rights/Ground Lease Properties*
Doubletree Guest Suites ^(a)	Columbus, OH		194		100	%		194		67.11	%	$	104.84	$	70.36
Hilton ^(b)	Ft. Worth, TX		294		100	%		294		74.54	%	$	128.36	$	95.68
Hilton ^(c)	La Jolla, CA		394		75	%		296		72.97	%	$	153.44	$	111.96
JW Marriott ^(d)	San Francisco, CA		338		100	%		338		79.16	%	$	207.26	$	164.06
Crowne Plaza ^(e)	Key West, FL		160		100	%		160		86.33	%	$	189.23	$	163.37
Renaissance ^(f)	Tampa, FL		293		100	%		293		73.31	%	$	139.68	$	102.39

Total			21,734					21,392		70.00	%	$	125.94	$	88.12


^(a)		This hotel was built on an air rights lease above the parking garage that expires in 2045.
^(b)		The partial ground lease expires in 2040.
^(c)		The ground lease expires in 2043 (including all extensions).
^(d)		The ground lease expires in 2083.
^(e)		The ground lease expires in 2084.
^(f)		The ground lease expires in 2080.


Item 3.	*Legal Proceedings*

We are currently subject to litigation arising in the normal course of our business. In the opinion of management, none of these lawsuits or claims against us, either individually or in the aggregate, is likely to have a material adverse effect on our business, results of operations, or financial condition. In addition, we believe we have adequate insurance in place to cover such litigation.


Item 4.	*[REMOVED AND RESERVED]*

PART II


Item 5.	*Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities*


(a)	Market Price of and Dividends on, Registrant’s Common Equity and Related Stockholder Matters

Market Price and Dividend Information

Our common stock is listed and traded on the New York Stock Exchange under the symbol “AHT.” On February 25, 2011, there were 112 registered holders of record of our common stock. In order to comply with certain requirements related to our qualification as a REIT, our charter limits the number of shares of capital stock that may be owned by any single person or affiliated group without our permission to 9.8% of the outstanding shares of any class of our capital stock. We are aware of two Section 13G filers that presently each hold in excess of 9.8% of our outstanding common shares, but our Board of Directors has passed waiver requests which grant each of these holders an exception to our ownership restrictions, and which are still in effect.

The following table sets forth, for the indicated periods, the high and low sales prices for our common stock as traded on that exchange and cash distributions declared per common share:


	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter

2010
High	$	7.42	$	9.67	$	9.58	$	10.81
Low	$	4.68	$	6.00	$	6.46	$	9.00
Close	$	7.17	$	7.33	$	9.05	$	9.65
Cash dividends declared per share	$	—	$	—	$	—	$	—

2009
High	$	1.90	$	4.45	$	4.23	$	5.31
Low	$	0.90	$	1.50	$	2.47	$	3.08
Close	$	1.54	$	2.81	$	3.46	$	4.64
Cash dividends declared per share	$	—	$	—	$	—	$	—

Effective with the fourth quarter ended December 31, 2008, and in conjunction with the amendment to our senior credit facility, the Board of Directors suspended the common stock dividend for 2009. In December 2009, the Board of Directors determined, subject to ongoing review, to continue the suspension of the common dividend in 2010, except to the extent required to maintain our REIT status. In February 2011, the Board of Directors accepted management’s recommendation to resume paying cash dividends on our common shares with an annualized target of $0.40 per share for 2011. The payment of $0.10 for the first quarter of 2011 has been approved and subsequent payments will be reviewed on a quarterly basis. We may incur indebtedness to meet distribution requirements imposed on REITs under the Internal Revenue Code to the extent that working capital and cash flow from our investments are insufficient to fund required distributions. Or, we may elect to pay dividends on our common stock in cash or a combination of cash and shares of securities as permitted under federal income tax laws governing REIT distribution requirements. To maintain our qualification as a REIT, we intend to make annual distributions to our shareholders of at least 90% of our REIT taxable income, excluding net capital gains (which does not necessarily equal net income as calculated in accordance with generally accepted accounting principles). Distributions will be authorized by our Board of Directors and declared by us based upon a variety of factors deemed relevant by our Directors. Our ability to pay distributions to our shareholders will depend, in part, upon our receipt of distributions from our operating partnership. This, in turn, may depend upon receipt of lease payments with respect to our properties from indirect, wholly-owned subsidiaries of our operating partnership and the management of our properties by our property managers.

Characterization of Distributions

For income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof. Distributions paid per share were characterized as follows:


	2010						2009					2008
	Amount			%			Amount		%			Amount		%

Common Stock:
Ordinary income	$	—			—	%	$	—		—	%	$	0.51479		61.28	%
Capital gain		—			—			—		—			0.32521		38.72
Return of capital		—			—			—		—			—		—

Total	$	—			—	%	$	—		—	%	$	0.84000		100.00	%

Preferred Stock – Series A:
Ordinary income	$	—				%	$	2.13750		100.00	%	$	1.31001		61.28	%
Capital gain		—			—			—		—			0.82759		38.72
Return of capital		1.6031	⁽¹⁾		100.00			—		—			—		—

Total	$	1.6031			100.00	%	$	2.13750		100.00	%	$	2.13760		100.00	%

Preferred Stock – Series D:
Ordinary income	$	—				%	$	2.11250		100.00	%	$	1.29463		61.28	%
Capital gain		—			—			—		—			0.81787		38.72
Return of capital		1.5844	⁽¹⁾		100.00			—		—			—		—

Total	$	1.5844			100.00	%	$	2.11250		100.00	%	$	2.11250		100.00	%


⁽¹⁾		The fourth quarter 2010 preferred distributions, paid January 14, 2011, are treated as 2011 distributions for tax purposes.

Equity Compensation Plan Information

There are 7,767,117 shares of common stock authorized for issuance under our Amended and Restated 2003 Stock Incentive Plan (the “Amended Plan”). The following table sets forth certain information with respect to securities authorized and available for issuance under the Amended Plan as of December 31, 2010.


	Number of Securities
	to be Issued Upon		Weighted-Average
	Exercise of		Exercise Price
	Outstanding		Of Outstanding		Number of Securities
	Options, Warrants,		Options, Warrants,		Remaining Available
	and Rights		and Rights		for Future Issuance

Equity compensation plans approved by security holders:
Restricted common stock		None		N/A	3,438,222
Equity compensation plans not approved by security holders		None		N/A	None

Performance Graph

The following graph compares the percentage change in the cumulative total shareholder return on our common stock with the cumulative total return of the S&P 500 Stock Index, the FTSE NAREIT Mortgage REITs Index, and the NAREIT Lodging & Resorts Index for the period from December 31, 2005 through December 31, 2010, assuming an initial investment of $100 in stock on December 31, 2005 with reinvestment of dividends. The NAREIT Lodging Resorts Index is not a published index; however, we believe the companies included in this index provide a representative example of enterprises in the lodging resort line of business in which we engage. Shareholders who wish to request a list of companies in the NAREIT Lodging Resorts Index may send written requests to Ashford Hospitality Trust, Inc., Attention: Shareholder Relations, 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254.

The stock price performance shown below on the graph is not necessarily indicative of future price performance.

Purchases of Equity Securities by the Issuer

The following table provides the information with respect to purchases of shares of our common stock during each of the months in the fourth quarter of 2010:


	Total				Total Number of		Maximum Dollar
	Number		Average		Shares Purchased as		Value of Shares That
	of Shares		Price Paid		Part of Publicly		May Yet Be Purchased
Period	Purchased		Per Share		Announced Plan ⁽¹⁾		Under the Plan

Common stock:
October 1 to October 31		—	$	—		—	$	58,449,000
November 1 to November 30		—	$	—		—	$	58,449,000
December 1 to December 31		—	$	—		—	$	58,449,000

Total		—	$	—		—


⁽¹⁾		In November 2007, our Board of Directors authorized a $50 million common stock repurchase plan, which was announced on November 21, 2007. The repurchase plan was increased by $75 million in September 2008, and the program was subsequently amended to include both common and preferred stock. In January 2009, the Board of Directors authorized an additional $200 million for the repurchase plan and expanded the plan to include the prepayment of our outstanding debt obligations. In February 2010, the Board of Directors expanded the repurchase program further to also include the potential repurchase of units of our operating partnership. As of June 2010, we ceased all repurchases under this plan indefinitely.


Item 6.	*Selected Financial Data*

The following sets forth our selected consolidated financial and operating information on a historical basis and should be read together with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto, which are included in “Item 8. Financial Statements and Supplementary Data.”


	Year Ended December 31,
	2010			2009			2008		2007			2006
	(in thousands, except per share amounts)

Statements of Operations Data:
Total revenue	$	841,365		$	840,592		$	1,031,329	$	879,289		$	377,461
Total operating expenses	$	823,342		$	922,241		$	876,098	$	747,073		$	307,978
Operating income (loss)	$	18,023		$	(81,649	)	$	155,231	$	132,216		$	69,483
(Loss) income from continuing operations	$	(71,196	)	$	(188,226	)	$	99,128	$	1,712		$	33,568
Income (loss) from discontinued operations	$	9,404		$	(100,434	)	$	46,543	$	34,726		$	9,505
Net income (loss) attributable to the Company	$	(51,740	)	$	(250,242	)	$	129,194	$	30,160		$	37,796
Net (loss) income attributable to common shareholders	$	(72,934	)	$	(269,564	)	$	102,552	$	6,170		$	26,921
Diluted income (loss) per common share:
(Loss) income from continuing operations attributable to common shareholders	$	(1.59	)	$	(2.66	)	$	0.54	$	(0.23	)	$	0.29
Income (loss) from discontinued operations attributable to common shareholders		0.16			(1.27	)		0.37		0.28			0.13

Net (loss) income attributable to common shareholders	$	(1.43	)	$	(3.93	)	$	0.91	$	0.05		$	0.42

Weighted average diluted common shares		51,159			68,597			111,295		105,787			61,713


	At December 31,
	2010		2009		2008		2007		2006

Balance Sheets Data:
Investments in hotel properties, net	$	3,023,736	$	3,383,759	$	3,568,215	$	3,885,737	$	1,632,946
Cash and cash equivalents	$	217,690	$	165,168	$	241,597	$	92,271	$	73,343
Restricted cash	$	67,666	$	77,566	$	69,806	$	52,872	$	9,413
Notes receivable	$	20,870	$	55,655	$	212,815	$	94,225	$	102,833
Total assets	$	3,716,524	$	3,914,498	$	4,339,682	$	4,380,411	$	2,011,912
Indebtedness of continuing operations	$	2,518,164	$	2,772,396	$	2,790,364	$	2,639,546	$	1,015,555
Series B-1 preferred stock	$	72,986	$	75,000	$	75,000	$	75,000	$	75,000
Total shareholders’ equity of the Company	$	816,808	$	837,976	$	1,212,219	$	1,285,003	$	641,709


	Year Ended December 31,
	2010			2009			2008			2007			2006
	(in thousands, except per share amounts)

Other Data:
Cash provided by operating activities	$	82,647		$	65,614		$	144,995		$	155,727		$	139,691
Cash (used in) provided by investing activities	$	(47,476	)	$	(44,754	)	$	168,455		$	(1,872,900	)	$	(565,473	)
Cash provided by (used in) financing activities	$	17,351		$	(97,289	)	$	(164,124	)	$	1,736,032		$	441,130
Cash dividends declared per common share	$	—		$	—		$	0.63		$	0.84		$	0.80
EBITDA (unaudited) ⁽¹⁾	$	228,266		$	12,459		$	472,836		$	357,151		$	138,757
Funds From Operations (FFO) (unaudited) ⁽¹⁾	$	4,051		$	(154,414	)	$	240,862		$	147,680		$	84,748


⁽¹⁾		A more detailed description and computation of FFO and EBITDA is contained in the “Non-GAAP Financial Measures” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7.


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

EXECUTIVE OVERVIEW

General

The U.S. economy experienced a recession beginning around the fourth quarter of 2007, which was caused by the global credit crisis and declining GDP, employment, business investment, corporate profits and consumer spending. As a result of the dramatic downturn in the economy, lodging demand in the U.S. declined significantly throughout 2008 and 2009. However, beginning in 2010, the lodging industry has been experiencing improvement in fundamentals, specifically occupancy. Room rates, measured by the average daily rate, or ADR, which typically lags occupancy growth in the early stage of a recovery, appear to be showing upward growth. We believe recent improvements in the economy will continue to positively affect the lodging industry and hotel operating results for 2011. Our overall current strategy is to take advantage of the cyclical nature of the hotel industry. We believe that in the current cycle, hotel values and cash flows, for the most part, peaked in 2007, and we believe we will not achieve similar cash flows and values in the immediate future. Industry experts have suggested that cash flows within our industry may achieve these previous highs again 2014 through 2016.

In response to the challenging market conditions, we undertook a series of actions to manage the sources and uses of our funds in an effort to navigate through challenging market conditions while still pursuing opportunities that can create long-term shareholder value. In this effort, we have attempted to proactively address value and cash flow deficits among certain of our mortgaged hotels, with a goal of enhancing shareholder value through loan amendments or in certain instances, consensual transfers of hotel properties to the lenders in satisfaction of the related debt.

As of December 31, 2010, we owned 94 hotel properties directly and six hotel properties through majority-owned investments in joint ventures, which represented 21,734 total rooms, or 21,392 net rooms excluding those attributable to joint venture partners. Our hotels are primarily operated under the widely recognized upper upscale brands of Crown Plaza, Hilton, Hyatt, Marriott and Sheraton. All these hotels are located in the United States. At December 31, 2010, 97 of the 100 hotels are included in our continuing operations. As of December 31, 2010, we also owned mezzanine or first-mortgage loans receivable with a carrying value of $20.9 million. In addition, at December 31, 2010, we had ownership interests in two joint ventures that own mezzanine loans with a carrying value of $15.0 million, net of valuation allowance.

Based on our primary business objectives and forecasted operating conditions, our current key priorities and financial strategies include, among other things:


	•	acquisition of hotel properties;

	•	disposition of hotel properties;

	•	restructuring and liquidating positions in mezzanine loans;

	•	pursuing capital market activities to enhance long-term shareholder value;

	•	enhancing liquidity, and continuing current cost saving measures;

	•	implementing selective capital improvements designed to increase profitability;

	•	implementing asset management strategies to minimize operating costs and increase revenues;

	•	financing or refinancing hotels on competitive terms;

	•	utilizing hedges and derivatives to mitigate risks; and

	•	making other investments or divestitures that our Board of Directors deems appropriate.

Our long-term investment strategies continue to focus on the upscale and upper-upscale segments within the lodging industry. We believe that as supply, demand, and capital market cycles change, we will be able to shift our investment strategies to take advantage of new lodging-related investment opportunities as they may develop. Our Board of Directors may change our investment strategies at any time without shareholder approval or notice.

Significant Transactions in 2010 and Recent Developments

Resumption of Common Dividends – In February 2011, the Board of Directors accepted management’s recommendation to resume paying a cash dividend on our common shares with an annualized target of for 2011. The payment of $0.10 for the first quarter of 2011 has been approved and subsequent payments will be reviewed on a quarterly basis.

Reissuance of treasury stock – In December 2010, we reissued 7.5 million shares of our treasury stock at a gross price of $9.65 per share and received net proceeds of approximately $70.4 million. The net proceeds were used to repay a portion of our outstanding borrowings under our senior credit facility. In January 2011, an underwriter purchased an additional 300,000 shares of our common shares through the partial exercise of the underwriter’s 1.125 million share over-allotment option, and we received net proceeds of $2.8 million.

Impairment of Mezzanine Loans and a Hotel Property – We evaluated the collectability of the mezzanine loan secured by 105 hotel properties maturing in April 2011 at December 31, 2010, and weighted different probabilities of outcome from full payment at maturity to a foreclosure by the senior lender. Based on this analysis, we recorded an impairment charge of $7.8 million on December 31, 2010.

Preferred Stock Offering – In September 2010, we completed the offering of 3.3 million shares of our 8.45% Series D Cumulative Preferred Stock at a gross price of $23.178 per share, and received net proceeds of $72.2 million after underwriting fees and other costs and an accrued dividend of $1.6 million. The proceeds from the offering, together with some corporate funds, were used to pay down $80.0 million of our senior credit facility.

foreclosure was completed and the estimated fair value of the property was $14.2 million based on a third-party appraisal. Pursuant to the operating agreement of Redus JV, as a junior lien holder of the original participation note receivable, we are only entitled to receive our share of distributions after the original senior note holder has recovered its original investment of $18.4 million and Redus JV intends to sell the hotel property in the next 12 months. It is unlikely that the senior holder will be able to recover its original investment. Therefore, no cash flows were projected from Redus JV for the projected holding period. Under the applicable authoritative accounting guidance, we recorded a zero value for our 18% subordinated interest in Redus JV.

LIQUIDITY AND CAPITAL RESOURCES

Our cash position from operations is affected primarily by macro industry movements in occupancy and rate as well as our ability to control costs. Further, interest rates greatly affect the cost of our debt service as well as the financial hedges we put in place. We monitor very closely the industry fundamentals as well as interest rates. The strategy is that if the economy underperforms (negatively affecting industry fundamentals), some or all of the loss in cash flow should be offset by our financial hedges due to, what we believe to be, the expectation that the Federal Reserve will probably keep interest rates low. Alternatively, if the Federal Reserve raises interest rates because of inflation, our properties should benefit from the ability to rapidly raise room rates in an inflationary environment. Capital expenditures above our reserves will affect cash flow as well.

In September 2010, we entered into an at-the-market (“ATM”) program with an investment banking firm to offer for sale from time to time up to $50.0 million of our common stock at market prices. No shares were sold during 2010. Proceeds from the ATM program, to the extent utilized, are expected to be used for general corporate purposes including investments and reduction of debt.

In February 2010, we entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA Global Master SPV Ltd. (“YA Global”) that terminates in 2013, and is available to provide us additional liquidity if needed. Pursuant to the SEDA, YA Global has agreed to purchase up to $50.0 million (which may be increased to $65.0 million pursuant to the SEDA) of newly issued shares of our common stock if notified to do so by us in accordance with the SEDA.

Our principal sources of funds to meet our cash requirements include: positive cash flow from operations, capital market activities, property refinancing proceeds, asset sales, and net cash derived from interest rate derivatives. Additionally, our principal uses of funds are expected to include possible operating shortfalls, owner-funded capital expenditures, new investments and debt interest and principal payments. Items that impacted our cash flow and liquidity during the periods indicated are summarized as follows:

Net Cash Flows Provided By Operating Activities. Net cash flows provided by operating activities, pursuant to our Consolidated Statement of Cash Flows which includes the changes in balance sheet items, were $82.6 million and $65.6 million for 2010 and 2009, respectively. The increase is primarily due to improved occupancies experienced during 2010 that resulted in increased hotel revenues. The increase in operating cash flows is partially offset by an increase in interest payments on indebtedness of $5.7 million as a result of certain mortgage loans that were refinanced at higher interest rates.

Net Cash Flows (Used In) Provided by Investing Activities. In 2010, investing activities used cash of $47.5 million. Principal payments on notes receivable generated total cash of $28.3 million and the net cash proceeds from disposition of hotel properties was $1.4 million. We received $4.9 million net cash proceeds from the sale of the Hilton Suites in Auburn Hills, Michigan and a cash balance of $3.5 million was removed from our consolidated balance sheet as the Westin O’Hare hotel property was deconsolidated at the completion of the deed-in-lieu of foreclosure. Cash outlays consisted of a $15.0 million cash contribution to a joint venture for a 50% ownership interest in a mezzanine loan and capital improvements of $62.2 million made to various hotel properties. In 2009, investing activities used $44.8 million of cash. Capital improvements made to various hotel properties used $69.2 million and a cash balance of $3.5 million was eliminated as a result of the deconsolidation of the Hyatt Regency hotel property. These net cash outlays were offset by cash inflows from the sale of a mezzanine loan of $13.4 million and the sale of an interest in a laundry joint venture and a piece of land adjacent to a hotel property of $858,000, and insurance settlements on hotel properties damaged by a hurricane of $13.7 million.

Net Cash Flows Provided by (Used in) Financing Activities. For 2010, financing activities provided net cash inflow of $17.4 million. Cash inflows for 2010 consisted of $259.0 million from borrowings under our senior credit facility and mortgage refinances, $72.2 million from issuance of 3.3 million shares of Series D preferred stock, $70.4 million from reissuance of 7.5 million shares of treasury stock, $62.2 million from the counterparties of our interest rate derivatives, and $1.0 million of contributions from a noncontrolling interest joint venture partner. For 2010, cash outlays consisted of $365.7 million for repayments of indebtedness and capital leases, $45.1 million for purchases of common stock, $24.0 million for dividend payments to preferred shareholders and unit holders, $7.1 million payment for loan modification and extension fees, $5.3 million for the redemption of operating partnership units, $333,000 distribution to a noncontrolling interest joint venture partner, and $75,000 for purchases of interest rate caps.

For 2009, net cash flow used in financing activities was $97.3 million. Cash outlays consisted of payments of $196.8 million on indebtedness and capital leases, loan costs of $5.9 million, dividends of $22.9 million, $38.1 million for entering into interest rate derivatives, $81.3 million to acquire treasury shares, $10.7 million to purchase Series A and Series D preferred stocks, $972,000 for distributions to noncontrolling interests in consolidated joint ventures, and $462,000 for the redemption of operating partnership units. These cash outlays were partially offset by $208.8 million from debt refinancing and $50.9 million in cash payments from the counterparties of the interest rate derivatives.

We are required to maintain certain financial ratios under various debt, preferred equity and derivative agreements. If we violate covenants in any debt or derivative agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. Violations of certain debt covenants may result in us being unable to borrow unused amounts under a line of credit, even if repayment of some or all borrowings is not required. In any event, financial covenants under our current or future debt obligations could impair our planned business strategies by limiting our ability to borrow (i) beyond certain amounts or (ii) for certain purposes. Presently, our existing financial debt covenants primarily relate to maintaining minimum debt coverage ratios, maintaining an overall minimum net worth, maintaining a maximum loan to value ratio, and maintaining an overall minimum total assets. At December 31, 2010, we were in compliance with all covenants or other requirements set forth in our debt, preferred equity and derivative agreements as amended.

Virtually, our only recourse obligation is our $250 million senior credit facility held by 10 banks, which expires in April 2011. We have given notice to exercise the remaining one-year extension option. The outstanding balance on this credit facility at December 31, 2010 was $115.0 million. The main covenants in this senior credit facility include (i) the minimum fixed charge coverage ratio, as defined, of 1.25x through March 31, 2011 (ours was 1.70x at December 31, 2010), and 1.35x thereafter until expiration; and (ii) the maximum leverage ratio, as defined, of 65% (ours was 55.0% at December 31, 2010). The primary requirements to extend the credit facility are that (i) there must be no default or event of default, (ii) the representations and warranties must be true and correct in all material respects and (iii) we pay each lender a fee equal to 0.25% of such lender’s commitment (whether or not utilized). We may be able to extend or refinance a portion or all of this senior credit facility before maturity, and if it becomes necessary to pay down the principal balance, we believe we will be able to accomplish that with cash on hand, cash flows from operations, equity raises or, to the extent necessary, asset sales.

The articles governing our Series B-1 preferred stock require us to maintain certain covenants. The impairment charges recorded during the second, third and fourth quarter of 2009, and the second and fourth quarter of 2010 could have prevented us from satisfying one financial ratio. However, the holder of the Series B-1 preferred stock reviewed the specific impairment charges and agreed to exclude the impairment charges incurred in the second, third and fourth quarters of 2009, and the second and fourth quarters of 2010, as they impacted the financial ratio calculations for the affected periods. At December 31, 2010, we are in compliance with all covenants required under the articles governing the Series B-1 preferred stock.

Based upon the current level of operations, management believes that our cash flow from operations along with our cash balances and the amount available under our senior credit facility ($135.0 million at December 31, 2010) will be adequate to meet upcoming anticipated requirements for interest, working capital, and capital expenditures for the next 12 months. With respect to upcoming maturities, we will continue to proactively address our upcoming 2011 maturities. No assurances can be given that we will obtain additional financings or, if we do, what the amount and terms will be. Our failure to obtain future financing under favorable terms could adversely impact our ability to execute our business strategy. In addition, we may selectively pursue debt financing on individual properties and our debt investments.

We are committed to an investment strategy where we will opportunistically pursue hotel-related investments as suitable situations arise. Funds for future hotel-related investments are expected to be derived, in whole or in part, from future borrowings under a credit facility or other loans, or from proceeds from additional issuances of common stock, preferred stock, or other securities, asset sales, joint ventures and repayments of our loan investments. However, we have no formal commitment or understanding to invest in additional assets, and there can be no assurance that we will successfully make additional investments. We are encouraged by the incremental improvement in both the capital and debt markets over the last quarter and will continue to look at capital raising options.

Our existing hotels are mostly located in developed areas that contain competing hotel properties. The future occupancy, ADR, and RevPAR of any individual hotel could be materially and adversely affected by an increase in the number or quality of the competitive hotel properties in its market area. Competition could also affect the quality and quantity of future investment opportunities.

Dividend Policy. Effective with the fourth quarter ended December 31, 2008, and in conjunction with the amendment to our senior credit facility, the Board of Directors suspended the common stock dividend for 2009. In

December 2009, the Board of Directors determined, subject to ongoing review, to continue the suspension of the common dividend in 2010, except to the extent required to maintain our REIT status. In February 2011, the Board of Directors accepted management’s recommendation to resume paying cash dividends on our common shares with an annualized target of $0.40 per share for 2011. The payment of $0.10 for the first quarter of 2011 has been approved and subsequent payments will be reviewed on a quarterly basis. We may incur indebtedness to meet distribution requirements imposed on REITs under the Internal Revenue Code to the extent that working capital and cash flow from our investments are insufficient to fund required distributions. Or, we may elect to pay dividends on our common stock in cash or a combination of cash and shares of securities as permitted under federal income tax laws governing REIT distribution requirements.

RESULTS OF OPERATIONS

Marriott International, Inc. (“Marriott”) manages 41 of our properties. For these Marriott-managed hotels, the fiscal year reflects twelve weeks of operations for each of the first three quarters of the year and seventeen weeks for the fourth quarter of the year. Therefore, in any given quarterly period, period-over-period results will have different ending dates. For Marriott-managed hotels, the fourth quarters of 2010, 2009 and 2008 ended December 31, 2010, January 1, 2010, and January 2, 2009, respectively.

RevPAR is a commonly used measure within the hotel industry to evaluate hotel operations. RevPAR is defined as the product of the average daily room rate (“ADR”) charged and the average daily occupancy achieved. RevPAR does not include revenues from food and beverage or parking, telephone, or other guest services generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our hotels between periods and to analyze results of our comparable hotels (comparable hotels represent hotels we have owned for the entire year). RevPAR improvements attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs. RevPAR improvements attributable to increases in ADR are generally accompanied by increases in limited categories of operating costs, such as management fees and franchise fees.

The following table summarizes the changes in key line items from our consolidated statements of operations for the years ended December 31, 2010, 2009 and 2008 (in thousands):


										Favorable (Unfavorable)
	Year Ended December 31,									Change
	2010			2009			2008			2010 to 2009			2009 to 2008

Total revenue	$	841,365		$	840,592		$	1,031,329		$	773		$	(190,737	)
Total hotel expenses	$	(556,260	)	$	(552,169	)	$	(645,909	)	$	(4,091	)	$	93,740
Property taxes, insurance and other	$	(49,623	)	$	(53,386	)	$	(52,465	)	$	3,763		$	(921	)
Depreciation and amortization	$	(133,435	)	$	(139,385	)	$	(149,022	)	$	5,950		$	9,637
Impairment charges	$	(46,404	)	$	(148,679	)	$	—		$	102,275		$	(148,679	)
Gain on insurance settlements	$	—		$	1,329		$	—		$	(1,329	)	$	1,329
Transaction acquisition and contract termination costs	$	(7,001	)	$	—		$	—		$	(7,001	)	$	—
Corporate general and administrative	$	(30,619	)	$	(29,951	)	$	(28,702	)	$	(668	)	$	(1,249	)
Operating income (loss)	$	18,023		$	(81,649	)	$	155,231		$	99,672		$	(236,880	)
Equity (loss) earnings in unconsolidated joint ventures	$	(20,265	)	$	2,486		$	(2,205	)	$	(22,751	)	$	4,691
Interest income	$	283		$	297		$	2,062		$	(14	)	$	(1,765	)
Other income	$	62,826		$	56,556		$	10,153		$	6,270		$	46,403
Interest expense and amortization of loan costs	$	(140,609	)	$	(132,997	)	$	(144,068	)	$	(7,612	)	$	11,071
Write-off of premiums, loan costs and exit fees	$	(3,893	)	$	371		$	(1,226	)	$	(4,264	)	$	1,597
Unrealized gain (loss) on derivatives	$	12,284		$	(31,782	)	$	79,620		$	44,066		$	(111,402	)
Income tax benefit (expense)	$	155		$	(1,508	)	$	(439	)	$	1,663		$	(1,069	)
(Loss) income from continuing operations	$	(71,196	)	$	(188,226	)	$	99,128		$	117,030		$	(287,354	)
Income (loss) from discontinued operations	$	9,404		$	(100,434	)	$	46,543		$	109,838		$	(146,977	)
Net (loss) income	$	(61,792	)	$	(288,660	)	$	145,671		$	226,868		$	(434,331	)
Loss (income) from consolidated joint ventures attributable to noncontrolling interests	$	1,683		$	765		$	(1,444	)	$	918		$	2,209
Net loss (income) attributable to redeemable noncontrolling interests in operating partnership	$	8,369		$	37,653		$	(15,033	)	$	(29,284	)	$	52,686
Net (loss) income attributable to the Company	$	(51,740	)	$	(250,242	)	$	129,194		$	198,502		$	(379,436	)

Comparison of Year Ended December 31, 2010 with Year Ended December 31, 2009

Income from continuing operations includes the operating results of 97 hotel properties that we have owned throughout all of 2010 and 2009. The following table illustrates the key performance indicators of the comparable hotels for the periods indicated:


	Year Ended
	December 31,
	2010			2009

Total hotel revenue (in thousands)	$	839,562		$	828,990
Room revenue (in thousands)	$	643,694		$	629,298
RevPAR (revenue per available room)	$	87.05		$	85.10
Occupancy		70.14	%		66.52	%
ADR (average daily rate)	$	124.11		$	127.94

Revenue. Room revenues increased $14.4 million, or 2.3%, during the year ended December 31, 2010 (“2010”) compared to the year ended December 31, 2009 (“2009”). The room revenue increase resulting from the improved occupancy in 2010 of 362 basis points was partially offset by the decrease in average daily rate. The

economic downturn placed tremendous pressure on rates to maintain occupancy levels. Food and beverage revenue experienced a decline of $1.3 million due to lower volume on catering and banquet events. Other revenue, which consists mainly of telecommunication, parking, spa and golf fees, experienced a $2.3 million decline due to less demand for these services.

Rental income from the triple-net operating lease decreased $214,000 primarily due to the lower hotel revenues related to that hotel property resulting from the lower average daily rate net of the effect of slightly higher occupancy during 2010.

Interest income from notes receivable decreased $9.5 million for 2010 compared to 2009. This decrease is primarily due to the impairment of five mezzanine loans and the sale of one loan in our portfolio during 2009.

Asset management fees and other was $425,000 for 2010 and $726,000 for 2009. The decrease is primarily due to the expiration at December 31, 2009, of a consulting agreement with a joint venture.

Hotel Operating Expenses. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and management fees. We experienced increases of $3.7 million in direct expenses and $407,000 in indirect expenses and management fees in 2010 compared to 2009. The increase in direct expense was primarily the result of improved occupancy during 2010. The direct expenses were 33.1% of total hotel revenue for both 2010 and 2009.

Property Taxes, Insurance and Other. Property taxes, insurance and other decreased $3.8 million for 2010 to $49.6 million. Property taxes decreased $3.9 million for 2010 resulting from our successful appeals for the assessed value reductions related to certain of our hotel properties, which was partially offset by the tax rate increases in some jurisdictions as city/county and state governments try to maintain their tax base. The decrease in property taxes was partially offset by the increase in insurance costs of $221,000. The increase in insurance costs is primarily due to higher premiums for property policies renewed in 2010.

Depreciation and Amortization. Depreciation and amortization decreased $6.0 million for 2010 compared to 2009 primarily due to certain assets that had been fully depreciated during 2010. The decrease is partially offset by an increase in depreciation expense as a result of capital improvements made at several hotel properties.

Impairment Charges. The impairment charges for our continuing operations were $46.4 million for 2010. We recorded $8.7 million impairment charge on mezzanine loans, $39.9 million impairment on a hotel property that is expected to be sold in the near future, and a credit of $2.2 million related to the valuation adjustments on previously impaired loans in our mezzanine loan portfolio. Of the total impairment charges of $148.7 million for 2009, $109.4 million was the valuation allowance recorded for the Extended Stay Hotels mezzanine loan and $39.3 million for four other mezzanine notes. The impairment charge recorded on hotel properties for 2010 and 2009 of $35.7 million and $70.2 million, respectively, are included in the operating results of discontinued operations.

In evaluating possible loan impairment, we analyze our notes receivable individually and collectively for possible loan losses in accordance with applicable authoritative accounting guidance. Based on the analysis, if we conclude that no loans are individually impaired, we then further analyze the specific characteristics of the loans, based on other authoritative guidance to determine if there would be probable losses in a group of loans with similar characteristics.

The loans in our portfolio are collateralized by hotel properties. Some loans are collateralized by single hotel properties and others by hotel portfolios. The hotel properties are in different geographic locations, have different ages and a few of the properties have recently completed significant renovations which have a significant impact on the value of the underlying collateral. The hotel properties include independent and nationally recognized brands in all segments and classes including luxury, economy, extended-stay, full service, and select service. In addition, our loan assets vary by position in the related borrower’s capital structure, ranging from junior mortgage participations to mezzanine loans. The terms of our notes or participations were structured based on the different features of the related collateral and the priority in the borrower’s capital structure.

The authoritative accounting guidance requires that an individual loan not impaired individually be included in the assessment of the loss in a group of loans only if specific characteristics of the loan indicate that it is probable that there would be an incurred loss in a group of loans with similar characteristics. As loans in our portfolio have

significantly different risk factors and characteristics, such as different maturity terms, different types and classes of collateral, different interest rate structures, and different priority status, we concluded that the characteristics of the loans within the portfolio were not sufficiently similar as to allow an evaluation of these loans as a group for possible impairment within the authoritative accounting guidance.

Investments in hotel properties are reviewed for impairment for each reporting period. We take into account the latest operating cash flows and market conditions and their impact on future projections. For the properties that showed indicators of impairment, we perform a recoverability analysis using the sum of each property’s estimated future undiscounted cash flows compared to the property’s carrying value. The estimates of future cash flows are based on assumptions about the future operating results including disposition of the property. In addition, the cash flow estimation periods used are based on the properties’ remaining useful lives to us (expected holding periods). For properties securing mortgage loans, the assumptions regarding holding periods considered our ability and intent to hold the property to or beyond the maturity of the related indebtedness.

In analyzing projected hotel properties’ operating cash flows, we factored in RevPAR growth based on data from third party sources. In addition, the projected hotel properties’ operating cash flows factored in our ongoing implementation of asset management strategies to minimize operating costs. After factoring in the expected revenue growth and the impact of company-specific strategies implemented to minimize operating costs, the hotel properties’ estimated future undiscounted cash flows were in excess of the properties’ carrying values. With the exception of the three Hilton hotel properties, the analyses performed in 2010 did not identify any other properties with respect to which an impairment loss should be recognized.

For a full description of impairment charges, see Notes 3, 6 and 15 of Notes to Consolidated Financial Statements and the Executive Overview.

Transaction acquisition and Contract Termination Costs. We have been in negotiation with the borrowers, their equity holders, senior secured lenders and senior mezzanine lenders with respect to possible restructuring of the two mezzanine tranches owned by our joint ventures with PREI associated with the hotel portfolio of JER/Highland Hospitality. The resolution of such negotiation could be consummated via a conversion of the loans into equity and assumption of senior indebtedness associated with the portfolio with us investing additional funds. We incurred transaction acquisition costs of $1.4 million related to these negotiations through December 31, 2010.

In addition, during 2010, we terminated the management contract of the Hilton hotel property in Costa Mesa, California managed by Hilton Hotels and paid a contract termination fee of $5.6 million. This hotel property is currently managed by Remington Lodging.

Corporate General and Administrative. Corporate general and administrative expenses increased $668,000 in 2010 from 2009. The non-cash stock/unit-based compensation expense increased $2.0 million in 2010 primarily due to certain restricted stock/unit-based awards granted in the current year at a higher cost per share. Other corporate general and administrative expenses decreased $1.4 million during 2010 primarily attributable to a decline in legal expense of $1.2 million as the 2009 corporate general and administrative expenses included legal expense associated with defaulted mezzanine loan activities.

Equity (Loss) Earnings in Unconsolidated Joint Venture. Equity loss in unconsolidated joint venture was $20.3 million for 2010 and equity earnings for 2009 were $2.5 million. The decrease is primarily due to all the three mezzanine loans held in our joint ventures being in non-accrual status since July 2010. In addition, the borrowers of the mezzanine loan tranche 6 held in our joint venture with PREI related to the JER/Highland Hospitality portfolio stopped making debt service payments in August 2010 and we are currently negotiating a restructuring with their equity holders, senior secured lenders and senior mezzanine lenders. Due to our junior participation status, it is expected the tranche 6 mezzanine loan will be completely extinguished in the restructuring. As a result, we recorded a valuation allowance of $21.6 million for the entire carrying value of our investment in the joint venture on December 31, 2010.

Interest Income. Interest income decreased $14,000 in 2010 compared to 2009 primarily due to lower average cash balance and the decline in short-term interest rates in 2010.

Other Income. Other income was $62.8 million and $56.6 million in 2010 and 2009, respectively. Other income included income from non-hedge interest rate swaps, floors and flooridors of $62.9 million and $52.3 million for 2010 and 2009, respectively. The increase is primarily due to the new interest rate derivatives we entered into since July 2009. Also included in 2009 were a gain of $2.4 million recognized on the sale of a mezzanine note receivable, income of $1.5 million recognized for business interruption insurance proceeds received related to hotel properties sold in 2008, and a gain of $434,000 from the sale of our interest in a laundry joint venture.

Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs increased $7.6 million to $140.6 million for 2010 from $133.0 million for 2009. The increase is primarily attributable to certain debt that was refinanced at higher interest rates. The increase was partially offset by the lower average variable rate debt outstanding and the lower LIBOR rates in the 2010 period. Average LIBOR rates for 2010 and 2009 were 0.27% and 0.33%, respectively.

Write-off of Loan Cost and Exit Fees. During 2010 we refinanced the mortgage loan secured by the Gateway Arlington Marriott hotel property and incurred prepayment penalty of $3.3 million and wrote off the unamortized loan cost of $630,000. During 2009 we refinanced mortgage debt totaling $285.0 million. The unamortized premiums of $1.4 million and loan costs of $985,000 on the refinanced loans were written off.

Unrealized Gain (Loss) on Derivatives. We recorded an unrealized gain of $12.3 million in 2010 and an unrealized loss of $31.8 million in 2009 on our interest rate derivatives. The fair value of these derivatives increased during 2010 primarily due to the movements in the LIBOR forward curve used in determining the fair value.

Income Tax Benefit (Expense). Income tax expense for continuing operations was a benefit of $155,000 for 2010 and an expense of $1.5 million for 2009. The decrease in income tax expense is primarily due to our being able to record an income tax benefit of $898,000 in 2010 in connection with losses incurred by our joint venture partnership that is subject to District of Columbia income taxes. This benefit is largely offset by our accruals for the Texas Margin Tax and our federal and state income tax accruals for one of our TRS subsidiaries that began generating taxable income in the fourth quarter of 2009. Our 2010 accrual for the Texas Margin Tax was lower than in prior years primarily due to the tax write-off of mezzanine loans in 2010 that had been impaired in prior years for financial reporting purposes.

Income (Loss) from Discontinued Operations. Income from discontinued operations was $9.4 million for 2010 and loss from discontinued operations was $100.4 million for 2009. Discontinued operations include the operating results of five hotel properties for 2010 and six properties for 2009. These hotel properties were either sold, returned to lenders or under contracts to sell. Included in the income (loss) from discontinued operations for 2010 was a gain of $56.2 million on the consensual transfer of the Westin O’Hare hotel property and a loss of $283,000 on the sale of Hilton Auburn Hills property. The 2010 results also included impairment charges of $35.7 million recorded on the Hilton Auburn Hills property and the Hilton Rye Town property. For 2009, impairment charges totaling $70.2 million on the Westin O’Hare hotel property and the Hyatt Dearborn hotel property were recorded to write down the hotel property to its estimated fair value. A loss of $2.9 million was also recorded at deconsolidation of the Hyatt Regency Dearborn hotel property for 2009. Operating results of discontinued operations also reflected interest and related debt expense of $8.5 million and $14.1 million for 2010 and 2009, respectively. In addition, unamortized loan costs of $552,000 were written off in 2009 when the related mortgage debt was refinanced.

Loss (Income) from Consolidated Joint Ventures Attributable to Noncontrolling Interests. During 2010 and 2009, the noncontrolling interest partners in consolidated joint ventures were allocated a loss of $1.7 million and $765,000, respectively. Noncontrolling interests in consolidated joints ventures represent ownership interests ranging from 11% to 25% of six hotel properties held by two joint ventures.

Net Loss (Income) Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Net loss allocated to noncontrolling interests and distributions paid to these limited partners were $8.4 million and $37.7 million for 2010 and 2009, respectively. The redeemable noncontrolling interests participating in the allocation represented ownership of 12.4% and 14.8% in the operating partnership at December 31, 2010 and 2009, respectively. The decrease in ownership percentage during 2010 was due to the units redeemed and converted in 2010, net of the effect of the decrease in outstanding common shares as a result of the repurchase of our common shares.

Comparison of Year Ended December 31, 2009 with Year Ended December 31, 2008

Income from continuing operations includes the operating results of 97 hotel properties that we have owned throughout all of 2009 and 2008 and are included in continuing operations. The following table illustrates the key performance indicators of the comparable hotels for the periods indicated:


	Year Ended
	December 31,
	2009			2008

Total hotel revenue (in thousands)	$	828,990		$	1,005,266
Room revenue (in thousands)	$	629,298		$	761,838
RevPAR (revenue per available room)	$	85.10		$	102.03
Occupancy		66.52	%		72.05	%
ADR (average daily rate)	$	127.94		$	141.62

Revenue. Room revenues decreased $132.5 million, or 17.4%, during the year ended December 31, 2009 (“2009”) compared to the year ended December 31, 2008 (“2008”). Occupancy declined by 553 basis points from 72.05% to 66.52%. ADR declined by $13.68 to $127.94. The economy continued in recession in 2009 that resulted in decline in market demand and placed tremendous pressure on rates to maintain occupancy levels. We observed businesses adopting cost saving initiatives on their travel and meeting expenses. Food and beverage experienced a similar decline of $38.3 million due to lower occupancy and reduced volume on catering and banquet events. Other hotel revenue experienced a $4.9 million decline.

Rental income from the triple-net operating lease decreased $568,000 primarily due to the lower occupancy and ADR during 2009.

Interest income from notes receivable decreased $13.2 million for 2009 compared to 2008. This decrease was primarily due to the Extended Stay Hotels mezzanine loan that was reserved during 2009 as a result of the borrower’s bankruptcy filing. Prior to the bankruptcy filing in June 2009, all payments on this loan were current. We recorded income from this loan of $4.7 million and $11.9 million for 2009 and 2008, respectively. The decrease in interest income was also attributable to (i) the two mezzanine loans that were repaid during 2008; (ii) four other mezzanine loans that were impaired during 2009 and three of which were in default for at least a portion of 2009 (income recognized on impaired loans was $3.3 million and $6.4 million for 2009 and 2008, respectively); and (iii) the decline in LIBOR rates during 2009.

Asset management fees and other was $726,000 for 2009 and $2.0 million for 2008. The decrease was primarily due to the expiration in 2008 of an asset management consulting agreement with a related party which accounted for $1.3 million of the income in 2008.

Hotel Operating Expenses. We experienced a reduction of $48.3 million in direct expenses and a $45.4 million reduction in indirect expenses and management fees in 2009 compared to 2008. The decrease in these expenses was primarily due to the decline in occupancy. The decline in indirect expenses was also attributable to the result of cost saving initiatives adopted by the hotel managers. The direct expenses were 33.1% of total hotel revenue for 2009 as compared to 32.1% during 2008.

Property Taxes, Insurance and Other. Property taxes, insurance and other increased $921,000 during 2009 primarily due to higher insurance premiums on policies renewed during 2009 and other taxes paid.

Depreciation and Amortization. Depreciation and amortization decreased $9.6 million, or 6.5%, for 2009 compared to 2008 primarily due to certain assets that had been fully depreciated during 2009. The decrease was partially offset by an increase in depreciation expense as a result of capital improvements made at several hotel properties.

Impairment Charges. Impairment charges for our continuing operations of $148.7 million for 2009 related to the valuation allowance on the Extended Stay Hotels mezzanine loan and four other mezzanine notes. Of the total impairment charges, $109.4 million was the valuation allowance recorded for the Extended Stay Hotels mezzanine loan and $39.3 million for four other mezzanine notes. Impairment charges totaling $70.2 million related to the

Westin O’Hare hotel property and the Hyatt Regency Dearborn hotel property were included in the operating results of discontinued operations.

Corporate General and Administrative. Corporate general and administrative expense increased $1.2 million in 2009 from 2008. The higher expenses for 2009 was primarily due to increases in (i) accrued bonuses of $3.0 million resulting from the increased target incentives for certain executives approved by the Board of Directors in September 2009; (ii) accrued legal expense of $1.7 million primarily associated with defaulted mezzanine loans; and (iii) accrual of $601,000 for tax indemnities associated with the sale of two hotel properties in 2008. These increases were partially offset by decreases in (i) stock-based compensation of $1.8 million as a result of certain restricted stock awards granted in earlier years at a higher cost per share being fully vested in the first quarter of 2009; (ii) accrued accounting and audit fees of $691,000; and (iii) other corporate expenses resulting from the continued cost containment plans implemented at the corporate level. In December 2008, we implemented a cost saving plan at the corporate level which included reductions in overhead from staff layoffs, salary freezes, and other cost saving measures.

Equity Earnings (Loss) in Unconsolidated Joint Venture. Equity earnings in unconsolidated joint venture were $2.5 million for 2009 and equity loss for 2008 was $2.2 million. Equity loss for 2008 was primarily a result of a mezzanine loan held by the joint venture that was fully reserved in the fourth quarter of 2008. Excluding the valuation allowance, equity income recognized from the joint venture was $3.3 million for 2008. The decrease was primarily due to the write-off of the costs incurred by the joint venture for terminated transactions and the lost income on the fully reserved loan.

Interest Income. Interest income decreased $1.8 million in 2009 compared to 2008 primarily due to the significant decline in short-term interest rates during 2009.

Other Income. Other income was $56.6 million and $10.2 million in 2009 and 2008, respectively. Other income included income from non-hedge interest rate swaps, floors and flooridors of $52.3 million and $10.4 million for 2009 and 2008, respectively. The increase was primarily due to significant decreases in LIBOR rates that the derivatives are tied to as a result of the economic downturn and new interest rate derivatives we entered into during 2009. Also included in 2009 were a gain of $2.4 million recognized on the sale of a mezzanine note receivable, an income of $1.5 million recognized for business interruption insurance proceeds received related to hotel properties sold in 2008, and a gain of $434,000 from the sale of our interest in a laundry joint venture.

Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs decreased $11.1 million to $133.0 million for 2009 from $144.1 million for 2008. The decline was primarily attributable to the decrease in interest expense on our variable rate debt as a result of continued decline in LIBOR rates. The average LIBOR rates were 0.33% and 2.71% for 2009 and 2008, respectively. The decrease was partially offset by the higher average debt balance during 2009.

Write-off of Loan Cost and Exit Fees. During 2009, our continuing operations refinanced mortgage debt totaling $285.0 million. The unamortized premiums of $1.4 million and loan costs of $985,000 on the refinanced loans were written off. During 2008, we wrote off unamortized loan costs of $424,000 on the $127.2 million debt that was refinanced with a $160.0 million debt and incurred $802,000 of prepayment penalties on the payoff of another loan.

Unrealized (Loss) Gain on Derivatives. We recorded an unrealized loss of $31.8 million in 2009 and an unrealized gain of $79.6 million in 2008 on our interest rate derivatives. The decrease was primarily a result of the movements in the LIBOR forward curve used in determining the fair values during 2009.

Income Tax Expense. Income tax expense for continuing operations was $1.5 million and $439,000 for 2009 and 2008, respectively. The increase in 2009 was primarily due to providing for income taxes on one of our TRS subsidiaries that began to generate taxable income in 2009 and not being able to record any tax benefits from TRS subsidiaries’ net operating loss carrybacks as was done in 2008. The increase in 2009 was also due to an increase in the Texas Margin Tax resulting from a larger portion of revenues attributable to operations in Texas.

Income (Loss) from Discontinued Operations. Loss from discontinued operations was $100.4 million for 2009 and income from discontinued operations was $46.5 million for 2008. Included in income (loss) from

discontinued operations for 2009 were impairment charges of $10.9 million and $59.3 million related to the Hyatt Regency Dearborn property and the Westin O’Hare property, respectively. The 2009 results also included a loss of $2.9 million from deconsolidation of the Hyatt Regency Dearborn hotel property. For 2008, income from discontinued operations included gains on sales of $48.5 million. Operating results of discontinued operations also reflected interest and related debt expense of $14.1 million and $15.8 million for 2009 and 2008, respectively. In addition, unamortized loan costs of $552,000 were written off in 2009 when the related mortgage debt was refinanced. In 2008 unamortized loan costs of $1.8 million were written off in 2008 when the related debt was repaid upon the sale of the hotel properties collateralizing that debt. The 2008 results also reflect a $2.1 million write-off of loan premiums upon the sale of related hotel property.

Loss (Income) from Consolidated Joint Ventures Attributable to Noncontrolling Interests. During 2009 and 2008, the noncontrolling interest partners in consolidated joint ventures were allocated a loss of $765,000 and an income of $1.4 million, respectively.

Net Loss (Income) Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Net loss allocated to the noncontrolling interests and distributions paid to these limited partners were $37.7 million for 2009. For 2008, income and distributions allocated to the limited partners was $15.0 million.

INFLATION

We rely entirely on the performance of our properties and the ability of the properties’ managers to increase revenues to keep pace with inflation. Hotel operators can generally increase room rates rather quickly, but competitive pressures may limit their ability to raise rates faster than inflation. Our general and administrative costs, real estate and personal property taxes, property and casualty insurance, and utilities are subject to inflation as well.

SEASONALITY

OFF-BALANCE SHEET ARRANGEMENTS

During 2010, we did not maintain any off-balance sheet arrangements and do not currently anticipate any such arrangements.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The table below summarizes our future obligations for principal and estimated interest payments on our debt, future minimum lease payments on our operating and capital leases with regard to our continuing operations, each as of December 31, 2010 (in thousands):


	Payments Due by Period
	< 1 Year		2-3 Years		4-5 Years		> 5 Years		Total

Contractual obligations excluding extension options:
Long-term debt obligations	$	511,196	$	200,112	$	553,105	$	1,253,751	$	2,518,164
Capital lease obligations		36		—		—		—		36
Operating lease obligations		4,431		6,794		5,943		111,913		129,081
Estimated interest obligations ⁽¹⁾		128,224		237,574		211,756		105,101		682,655

Total contractual obligations	$	643,887	$	444,480	$	770,804	$	1,470,765	$	3,329,936

Contractual obligations including extension options ⁽²⁾ :
Long-term debt obligations	$	343,994	$	367,314	$	553,105	$	1,253,751	$	2,518,164
Capital lease obligations		36		—		—		—		36
Operating lease obligations		4,431		6,794		5,943		111,913		129,081
Estimated interest obligations ⁽¹⁾		130,318		238,719		211,756		105,101		685,894

Total contractual obligations	$	478,779	$	612,827	$	770,804	$	1,470,765	$	3,333,175


⁽¹⁾		For variable interest rate indebtedness, interest obligations are estimated based on the LIBOR interest rate as of December 31, 2010.
⁽²⁾		Extensions exclude options subject to debt service coverage tests.

In addition to the amounts discussed above, we also have management agreements which require us to pay monthly management fees, market service fees and other general fees, if required. These management agreements expire from 2012 through 2032. See Note 11 of Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

CRITICAL ACCOUNTING POLICIES

Our accounting policies are fully described in Note 2 of Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data. We believe that the following discussion addresses our most critical accounting policies, representing those policies considered most vital to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, and complex judgments.

Management Agreements – In connection with our acquisitions of Marriott Crystal Gateway hotel in Arlington, Virginia, on July 13, 2006 and the 51-hotel CNL portfolio on April 11, 2007, we assumed certain existing management agreements. Based on our review of these management agreements, we concluded that the terms of certain management agreements are more favorable to the respective managers than typical current market management agreements. As a result, we recorded unfavorable contract liabilities related to these management agreements of $23.4 million as of the respective acquisition dates based on the present value of expected cash outflows over the initial terms of the related agreements. Such unfavorable contract liabilities are being amortized as non-cash reductions to incentive management fees on a straight-line basis over the initial terms of the related agreements. In evaluating unfavorable contract liabilities, our analysis involves considerable management judgment and assumptions.

Income Taxes – At December 31, 2010, we had a valuation allowance of approximately $65.2 million which substantially offsets our gross deferred tax asset. As a result of Ashford TRS losses in 2010, 2009 and 2008, and the limitations imposed by the Internal Revenue Code on the utilization of net operating losses of acquired subsidiaries, we believe that it is more likely than not our gross deferred tax asset will not be realized, and therefore, have provided a valuation allowance to substantially reserve the balance. At December 31, 2010, Ashford TRS has net operating loss carryforwards for federal income tax purposes of approximately $114.6 million, which are available to offset future taxable income, if any, through 2030. The analysis utilized in determining our deferred tax asset valuation allowance involves considerable management judgment and assumptions.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued accounting guidance that clarified the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The guidance prescribes a financial statement recognition and measurement attribute for the recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also provides direction on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We classify interest and penalties related to underpayment of income taxes as income tax expense. We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and cities. Tax years 2007 through 2010 remain subject to potential examination by certain federal and state taxing authorities. Income tax examinations of two of our TRS subsidiaries are currently in process; see Note 11 of Notes to Consolidated Financial Statements included in Item 8. We believe that the results of the completion of these examinations will not have a material adverse effect on our financial condition.

Investment in Hotel Properties – Hotel properties are generally stated at cost. However, the Initial Properties contributed upon Ashford’s formation are stated at the predecessor’s historical cost, net of impairment charges, if any, plus a noncontrolling interest partial step-up related to the acquisition of noncontrolling interests from third parties associated with four of the Initial Properties. For hotel properties owned through our majority-owned joint ventures, the carrying basis attributable to the joint venture partners’ minority ownership is recorded at the predecessor’s historical cost, net of any impairment charges, while the carrying basis attributable to our majority ownership is recorded based on the allocated purchase price of our ownership interests in the joint ventures. All improvements and additions which extend the useful life of the hotel properties are capitalized.

Impairment of Investment in Hotel Properties – Hotel properties are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We test impairment by using current or projected cash flows over the estimated useful life of the asset. In evaluating the impairment of hotel properties, we make many assumptions and estimates, including projected cash flows, expected holding period and expected useful life. We may also use fair values of comparable assets. If an asset is deemed to be impaired, we record an impairment charge for the amount that the property’s net book value exceeds its estimated fair value. During 2010 and 2009, we recorded impairment charges of $75.6 million and $70.2 million on hotel properties, respectively. Of these impairment charges, $35.7 million and $70.2 million for 2010 and 2009, respectively, are included in the operating results of discontinued operations. See the detailed discussion in Notes 3 and 15 of Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Depreciation and Amortization Expense – Depreciation expense is based on the estimated useful life of the assets, while amortization expense for leasehold improvements is based on the shorter of the lease term or the estimated useful life of the related assets. Presently, hotel properties are depreciated using the straight-line method over lives which range from 7.5 to 39 years for buildings and improvements and 3 to 5 years for furniture, fixtures, and equipment. While we believe our estimates are reasonable, a change in estimated lives could affect depreciation expense and net income (loss) as well as resulting gains or losses on potential hotel sales.

Assets Held For Sale and Discontinued Operations – We classify assets as held for sale when management has obtained a firm commitment from a buyer, and consummation of the sale is considered probable and expected within one year. In addition, we deconsolidate a property when it becomes subject to the control of a government, court, administrator or regulator and we effectively lose control of the property/subsidiary. When deconsolidating a property/subsidiary, we recognize a gain or loss in net income measured as the difference between the fair value of any consideration received and the carrying amount of the former property/subsidiary. The related operations of assets held for sale are reported as discontinued if a) such operations and cash flows can be clearly distinguished, both operationally and financially, from the our ongoing operations, b) such operations and cash flows will be eliminated from ongoing operations once the disposal occurs, and c) we will not have any significant continuing involvement subsequent to the disposal.

Notes Receivable – We provide mezzanine and first-mortgage financing in the form of notes receivable. These loans are held for investment and are intended to be held to maturity and accordingly, are recorded at cost, net of unamortized loan origination costs and fees, loan purchase discounts and net of the allowance for losses when a loan is deemed to be impaired. Premiums, discounts, and net origination fees are amortized or accreted as an adjustment to interest income using the effective interest method over the life of the loan. We discontinue recording interest and amortizing discounts/premiums when the contractual payment of interest and/or principal is not received. Payments received on impaired nonaccrual loans are recorded as reductions to the note receivable balance. The net carrying

amount of the impaired notes receivable is adjusted to reflect the net present value of the future cash flows with the adjustment recorded in impairment charges.

Our mezzanine and first-mortgage notes receivable are each secured by various hotel properties or partnership interests in hotel properties and are subordinate to the senior holders in the secured hotel properties. All such notes receivable are considered to be variable interests in the entities that own the related hotels. Variable Interest Entities (“VIE”), as defined by authoritative accounting guidance, must be consolidated by a reporting entity if the reporting entity is the primary beneficiary that has: (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance, (ii) an implicit financial responsibility to ensure that a VIE operates as designed, and (iii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Because we do not have the power and financial responsibility to direct the mezzanine loan VIEs’ activities and operations, we are not considered to be the primary beneficiary of these hotel properties as a result of holding these loans. Therefore, we do not consolidate the hotels for which we have provided financing. We assess our interests in those entities on an ongoing basis to determine whether such entities should be consolidated. In evaluating VIEs, our analysis involves considerable management judgment and assumptions.

Impairment of Notes Receivable – We review notes receivable for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms. We apply normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment.

When a loan is impaired, we measure impairment based on the present value of expected cash flows discounted at the loan’s effective interest rate against the value of the asset recorded on the balance sheet. We may also measure impairment based on a loan’s observable market price or the fair value of collateral if the loan is collateral dependent. If a loan is deemed to be impaired, we record a valuation allowance through a charge to earnings for any shortfall. Our assessment of impairment is based on considerable judgment and estimates. During 2010 and 2009, we recorded a valuation allowance of $6.5 million and $148.7 million, net of subsequent valuation adjustments, for our mezzanine loan portfolio. See Notes 4 and 15 of Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Investments in Unconsolidated Joint Ventures – Investments in joint ventures in which we have ownership interests ranging from 14.4% to 50% are accounted for under the equity method of accounting by recording the initial investment and our percentage of interest in the joint venture’s net income. The equity accounting method is employed due to the fact that we do not have control or power to direct the activities of the joint venture, nor do we have the obligation to absorb the loss of the joint venture or the rights to the joint venture’s residual returns. We review the investment in our unconsolidated joint venture for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. The investment is impaired when its estimated fair value is less than the carrying amount of our investment. Any impairment is recorded in equity earnings (loss) in unconsolidated joint venture.

Derivative Financial Instruments and Hedges – We primarily use interest rate derivatives to capitalize on the historical correlation between changes in LIBOR (London Interbank Offered Rate) and RevPAR (Revenue per Available Room). Interest rate swaps (or reverse swaps) involve the exchange of fixed-rate payments for variable-rate payments (or vice versa) over the life of the derivative agreements without exchange of the underlying principal amount. Interest rate caps designated as cash flow hedges provide us with interest rate protection above the strike rate of the cap and result in us receiving interest payments when actual rates exceed the cap strike. For interest rate floors, we pay our counterparty interest when the variable interest rate index is below the strike rate. The interest rate flooridor combines two interest rate floors, structured such that the purchaser simultaneously buys an interest rate

floor at a strike rate X and sells an interest rate floor at a lower strike rate Y. The purchaser of the flooridor is paid when the underlying interest rate index (for example, LIBOR) resets below strike rate X during the term of the flooridor. Unlike a standard floor, the flooridor limits the benefit the purchaser can receive as the related interest rate index falls. Once the underlying index falls below strike Y, the sold floor offsets the purchased floor. The interest rate corridor involves purchasing an interest rate cap at strike rate X and selling an interest rate cap with a higher strike rate Y. The purchaser of the corridor is paid when the underlying interest rate index resets above the strike rate X during the term of the corridor. The corridor limits the benefit the purchaser can receive as the related interest rate index rises above the strike rate Y. There is no additional liability to us other than the purchase price associated with the flooridor and corridor.

We account for the interest rate derivatives at fair value in accordance with the applicable authoritative accounting guidance. All derivatives are recorded on the balance sheets at their fair values and reported as “Interest rate derivatives.” For derivatives designated as cash flow hedges, the effective portion of changes in the fair value is reported as a component of “Accumulated other comprehensive income (loss)” (OCI) in the equity section of the consolidated balance sheets. The amount recorded in OCI is reclassified to interest expense in the same period or periods during which the hedged transaction affects earnings, while the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings as “Unrealized gain (loss) on derivatives” in the consolidated statements of operations. For derivatives that are not designated as cash flow hedges, the changes in the fair value are recognized in earnings as “Unrealized gain (loss) on derivatives” in the consolidated statements of operations. We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2010, FASB issued an accounting standard update to require a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. The new disclosures are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. We will adopt the new disclosure requirements when a business combination occurs and do not expect the adoption will have an impact on our financial position and results of operations.

NON-GAAP FINANCIAL MEASURES

The following non-GAAP presentations of EBITDA and FFO are made to help our investors in evaluating our operating performance. EBITDA is defined as net income (loss) attributable to the Company before interest expense, interest income other than interest income from mezzanine loans, income taxes, depreciation and amortization, and noncontrolling interests in the operating partnership. We present EBITDA because we believe it provides useful information to investors as it is an indicator of our ability to meet our future debt payment requirements, working capital requirements and it provides an overall evaluation of our financial condition. EBITDA, as calculated by us may not be comparable to EBITDA reported by other companies that do not define EBITDA exactly as we define the term. EBITDA does not represent cash generated from operating activities determined in accordance with generally accepted accounting principles (“GAAP”), and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as determined by GAAP as a indicator of liquidity.

The following table reconciles net (loss) income to EBITDA (in thousands) (unaudited):


	Year Ended December 31,
	2010			2009			2008

Net (loss) income	$	(61,792	)	$	(288,660	)	$	145,671
Loss (income) from consolidated joint ventures attributable to noncontrolling interests		1,683			765			(1,444	)
Net loss (income) attributable to redeemable noncontrolling interests in operating partnership		8,369			37,653			(15,033	)

Net (loss) income attributable to the Company		(51,740	)		(250,242	)		129,194
Depreciation and amortization		141,547			153,907			172,262
Interest expense and amortization of loan costs		147,233			145,171			157,274
Income tax (benefit) expense		(132	)		1,565			1,093
Net (loss) income attributable to redeemable noncontrolling interests in operating partnership		(8,369	)		(37,653	)		15,033
Interest income		(273	)		(289	)		(2,020	)

EBITDA ⁽¹⁾	$	228,266		$	12,459		$	472,836


⁽¹⁾		EBITDA is not adjusted for income received from interest rate derivatives because the related derivatives are not designated as hedges under ASC 815 and therefore, this income is reported as other income instead of a reduction of interest expense in accordance with GAAP.

The White Paper on Funds From Operations (“FFO”) approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) in April 2002 defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses on sales of properties and extraordinary items as defined by GAAP, plus depreciation and amortization of real estate assets, and net of adjustments for the portion of these items attributable to noncontrolling interests in the operating partnership. NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that either do not define the term in accordance with the current NAREIT definition or interpret the NAREIT definition differently than us. FFO does not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to a) GAAP net income or loss as an indication of our financial performance or b) GAAP cash flows from operating activities as a measure of our liquidity, nor is it indicative of funds available to satisfy our cash needs, including our ability to make cash distributions. However, to facilitate a clear understanding of our historical operating results, we believe that FFO should be considered along with our net income or loss and cash flows reported in the consolidated financial statements.

The following table reconciles net (loss) income to FFO (in thousands) (unaudited):


	Year Ended December 31,
	2010			2009			2008

Net (loss) income	$	(61,792	)	$	(288,660	)	$	145,671
Loss (income) from consolidated joint ventures attributable to noncontrolling interests		1,683			765			(1,444	)
Net loss (income) attributable to redeemable noncontrolling interests in operating partnership		8,369			37,653			(15,033	)
Preferred dividends		(21,194	)		(19,322	)		(26,642	)

Net (loss) income available to common shareholders		(72,934	)		(269,564	)		102,552
Depreciation and amortization on real estate		141,285			153,621			171,791
Gain (loss) on sale/disposition of properties/note receivable		(55,931	)		511			(48,514	)
Gain on insurance settlement		—			(1,329	)		—
Net (loss) income attributable to redeemable noncontrolling interests in operating partnership		(8,369	)		(37,653	)		15,033

FFO	$	4,051		$	(154,414	)	$	240,862


Item 7A.	*Quantitative and Qualitative Disclosures about Market Risk*

Our primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments, our derivatives portfolio and notes receivable that bear interest at variable rates that fluctuate with market interest rates. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates.

At December 31, 2010, the total indebtedness of $2.5 billion of our continuing operations included $662.5 million of variable-rate debt. The impact on the results of operations of a 25-basis point change in interest rate on the outstanding balance of variable-rate debt at December 31, 2010 would be approximately $1.6 million per year. Interest rate changes will have no impact on the remaining $1.9 billion of fixed rate debt.

The above amounts were determined based on the impact of hypothetical interest rates on our borrowings and assume no changes in our capital structure. As the information presented above includes only those exposures that existed at December 31, 2010, it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on exposures that arise during the period, the hedging strategies at the time, and the related interest rates.

We primarily use interest rate derivatives in order to capitalize on the historical correlation between changes in LIBOR and RevPAR. Beginning in March 2008, we entered into various interest rate swap, cap, floor, and flooridor transactions that were not designated as hedges. The changes in the fair market values of these transactions are noncash items and recorded in earnings. Based on the LIBOR rates in effect on December 31, 2010, the interest rate derivatives we entered into since 2008 have resulted in cash income of approximately $62.9 million for 2010 and expect to result in income of approximately $70.4 million for 2011.


Item 8.	*Financial Statements and Supplementary Data*

Index to Consolidated Financial Statements



Report of Independent Registered Public Accounting Firm			58

Consolidated Balance Sheets — December 31, 2010 and 2009			59

Consolidated Statements of Operations — Years Ended December 31, 2010, 2009 and 2008			60

Consolidated Statements of Comprehensive (Loss) Income — Years Ended December 31, 2010, 2009 and 2008			61

Consolidated Statements of Changes in Equity — Years Ended December 31, 2010, 2009 and 2008			62

Consolidated Statements of Cash Flows — Years Ended December 31, 2010, 2009 and 2008			63

Notes to Consolidated Financial Statements			64

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Ashford Hospitality Trust, Inc.

We have audited the accompanying consolidated balance sheets of Ashford Hospitality Trust, Inc. and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, comprehensive (loss) income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also include the financial statement schedules listed in the Index at Item 15(a). These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Ashford Hospitality Trust, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 4, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Dallas, Texas

March 4, 2011

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)


	December 31,
	2010			2009

Assets
Investments in hotel properties, net	$	3,023,736		$	3,383,759
Cash and cash equivalents		217,690			165,168
Restricted cash		67,666			77,566
Accounts receivable, net of allowance of $298 and $492, respectively		27,493			31,503
Inventories		2,909			2,975
Notes receivable, net of allowance of $16,875 and $148,679, respectively		20,870			55,655
Investment in unconsolidated joint venture		15,000			20,736
Assets held for sale		144,511			—
Deferred costs, net		17,519			20,960
Prepaid expenses		12,727			13,234
Interest rate derivatives		106,867			94,645
Other assets		7,502			3,471
Intangible asset, net		2,899			2,988
Due from third-party hotel managers		49,135			41,838

Total assets	$	3,716,524		$	3,914,498

Liabilities and Equity
Liabilities:
Indebtedness of continuing operations	$	2,518,164		$	2,772,396
Indebtedness of assets held for sale		50,619			—
Capital leases payable		36			83
Accounts payable and accrued expenses		79,248			91,387
Dividends payable		7,281			5,566
Unfavorable management contract liabilities		16,058			18,504
Due to related party		2,400			1,009
Due to third-party hotel managers		1,870			1,563
Other liabilities		4,627			7,932
Other liabilities of assets held for sale		2,995			—

Total liabilities		2,683,298			2,898,440

Commitments and contingencies (Note 11)

Series B-1 cumulative convertible redeemable preferred stock, $0.01 par value, 7,247,865 shares and 7,447,865 shares issued and outstanding at December 31, 2010 and 2009		72,986			75,000
Redeemable noncontrolling interests in operating partnership		126,722			85,167

Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized – Series A cumulative preferred stock, 1,487,900 shares issued and outstanding		15			15
Series D cumulative preferred stock, 8,966,797 and 5,666,797 shares issued and outstanding at December 31, 2010 and 2009		90			57
Common stock, $0.01 par value, 200,000,000 shares authorized, 123,403,896 shares and 122,748,859 shares issued at December 31, 2010 and 2009; 58,999,324 shares and 57,596,878 shares outstanding at December 31, 2010 and 2009		1,234			1,227
Additional paid-in capital		1,552,657			1,436,009
Accumulated other comprehensive loss		(550	)		(897	)
Accumulated deficit		(543,788	)		(412,011	)
Treasury stock, at cost, 64,404,569 and 65,151,981 shares at December 31, 2010 and 2009		(192,850	)		(186,424	)

Total shareholders’ equity of the Company		816,808			837,976
Noncontrolling interests in consolidated joint ventures		16,710			17,915

Total equity		833,518			855,891

Total liabilities and equity	$	3,716,524		$	3,914,498

See Notes to Consolidated Financial Statements.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)


	Year Ended December 31,
	2010			2009			2008

Revenue
Rooms	$	643,694		$	629,298		$	761,838
Food and beverage		151,105			152,366			190,650
Rental income from operating leases		5,436			5,650			6,218
Other		39,327			41,676			46,560

Total hotel revenue		839,562			828,990			1,005,266
Interest income from notes receivable		1,378			10,876			24,050
Asset management fees and other		425			726			2,013

Total revenue		841,365			840,592			1,031,329

Expenses
Hotel operating expenses:
Rooms		148,854			143,024			163,232
Food and beverage		105,229			106,909			132,277
Other expenses		267,126			267,909			308,850
Management fees		35,051			34,327			41,550

Total hotel expenses		556,260			552,169			645,909
Property taxes, insurance and other		49,623			53,386			52,465
Depreciation and amortization		133,435			139,385			149,022
Impairment charges		46,404			148,679			—
Gain on insurance settlement		—			(1,329	)		—
Transaction acquisition and contract termination costs		7,001			—			—
Corporate general and administrative		30,619			29,951			28,702

Total expenses		823,342			922,241			876,098

Operating income (loss)		18,023			(81,649	)		155,231
Equity (loss) earnings in unconsolidated joint venture		(20,265	)		2,486			(2,205	)
Interest income		283			297			2,062
Other income		62,826			56,556			10,153
Interest expense and amortization of loan costs		(140,609	)		(132,997	)		(144,068	)
Write-off of premiums, loan costs and exit fees		(3,893	)		371			(1,226	)
Unrealized gain (loss) on derivatives		12,284			(31,782	)		79,620

(Loss) income from continuing operations before income taxes		(71,351	)		(186,718	)		99,567
Income tax benefit (expense)		155			(1,508	)		(439	)

(Loss) income from continuing operations		(71,196	)		(188,226	)		99,128
Income (loss) from discontinued operations		9,404			(100,434	)		46,543

Net (loss) income		(61,792	)		(288,660	)		145,671
Loss (income) from consolidated joint ventures attributable to noncontrolling interests		1,683			765			(1,444	)
Net loss (income) attributable to redeemable noncontrolling interests in operating partnership		8,369			37,653			(15,033	)

Net (loss) income attributable to the Company		(51,740	)		(250,242	)		129,194
Preferred dividends		(21,194	)		(19,322	)		(26,642	)

Net (loss) income available to common shareholders	$	(72,934	)	$	(269,564	)	$	102,552

(Loss) income per share – basic and diluted:
(Loss) income from continuing operations attributable to common shareholders	$	(1.59	)	$	(2.66	)	$	0.54
Income (loss) from discontinued operations attributable to common shareholders		0.16			(1.27	)		0.37

Net (loss) income attributable to common shareholders	$	(1.43	)	$	(3.93	)	$	0.91

Weighted average common shares outstanding – basic and diluted		51,159			68,597			111,295

Dividends declared per common share	$	—		$	—		$	0.63

Amounts attributable to common shareholders:
(Loss) income from continuing operations, net of tax	$	(60,066	)	$	(163,432	)	$	87,205
Income (loss) from discontinued operations, net of tax		8,326			(86,810	)		41,989
Preferred dividends		(21,194	)		(19,322	)		(26,642	)

Net (loss) income attributable to common shareholders	$	(72,934	)	$	(269,564	)	$	102,552

See Notes to Consolidated Financial Statements.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)


	Year Ended December 31,
	2010			2009			2008

Net (loss) income	$	(61,792	)	$	(288,660	)	$	145,671

Other comprehensive income (loss), net of tax:
Change in unrealized loss on derivatives		(136	)		(235	)		(952	)
Reclassification to interest expense		632			206			58
Foreign currency translation adjustments		—			—			(126	)

Total other comprehensive income (loss)		496			(29	)		(1,020	)

Total comprehensive (loss) income		(61,296	)		(288,689	)		144,651
Less: Comprehensive loss (income) attributable to noncontrolling interests in consolidated joint ventures		1,590			749			(1,226	)
Less: Comprehensive loss (income) attributable to redeemable noncontrolling interests in operating partnership		8,313			37,661			(15,033	)

Comprehensive (loss) income attributable to the Company	$	(51,393	)	$	(250,279	)	$	128,392

See Notes to Consolidated Financial Statements.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands)


																																								Redeemable
																									Accumulated									Noncontrolling						Noncontrolling
	Preferred Stock																		Additional						Other									Interests in						Interests in
	Series A						Series D						Common Stock						Paid-in			Accumulated			Comprehensive			Treasury Stock						Consolidated						Operating
	Shares			Amounts			Shares			Amounts			Shares			Amounts			Capital			Deficit			Income/(Loss)			Shares			Amounts			Joint Ventures			Total			Partnership

Balance at January 31, 2008		2,300		$	23			8,000		$	80			122,766		$	1,228		$	1,455,917		$	(153,664	)	$	(115	)		(2,390	)	$	(18,466	)	$	19,036		$	1,304,039		$	101,031
Purchases of preferred stock		(115	)		(1	)		(1,606	)		(16	)		—			—			(9,872	)		—			—			—			—			—			(9,889	)		—
Purchases of treasury shares		—			—			—			—			—			—			—			—			—			(34,028	)		(96,951	)		—			(96,951	)		—
Issuance of restricted shares/units under stock/unit-based compensation		—			—			—			—			—			—			(1,651	)		—			—			214			1,742			—			91			53
Stock/unit-based compensation expense		—			—			—			—			—			—			5,761			—			—			—			—			—			5,761			981
Forfeiture of restricted shares		—			—			—			—			(17	)		(1	)		1			—			—			—			—			—			—			—
Redemption/conversion of operating partnership units		—			—			—			—			—			—			(10	)		—			—			10			77			—			67			(67	)
Adjustments to noncontrolling interest balances assumed at acquisition		—			—			—			—			—			—			—			—			—			—			—			395			395			—
Contributions from noncontrolling interests		—			—			—			—			—			—			—			—			—			—			—			52			52			—
Distributions to noncontrolling interests		—			—			—			—			—			—			—			—			—			—			—			(1,354	)		(1,354	)		(9,562	)
Net income		—			—			—			—			—			—			—			129,194			—			—			—			1,444			130,638			15,033
Dividends declared – common shares		—			—			—			—			—			—			—			(73,670	)		—			—			—			—			(73,670	)		—
Dividends declared – Preferred A shares		—			—			—			—			—			—			—			(4,855	)		—			—			—			—			(4,855	)		—
Dividends declared – Preferred B-1 shares		—			—			—			—			—			—			—			(5,735	)		—			—			—			—			(5,735	)		—
Dividends declared – Preferred D shares		—			—			—			—			—			—			—			(16,052	)		—			—			—			—			(16,052	)		—
Change in unrealized loss on derivatives		—			—			—			—			—			—			—			—			(734	)		—			—			(218	)		(952	)		—
Reclassification to interest expense		—			—			—			—			—			—			—			—			58			—			—			—			58			—
Foreign currency translation adjustments		—			—			—			—			—			—			—			—			(126	)		—			—			—			(126	)		—
Adjustment resulting from sale of property		—			—			—			—			—			—			—			—			57			—			—			—			57			—

Balance at December 31, 2008		2,185			22			6,394			64			122,749			1,227			1,450,146			(124,782	)		(860	)		(36,194	)		(113,598	)		19,355			1,231,574			107,469
Purchases of preferred stock		(697	)		(7	)		(727	)		(7	)		—			—			(10,642	)		—			—			—			—			—			(10,656	)		—
Purchases of treasury stock		—			—			—			—			—			—			—			—			—			(30,058	)		(81,329	)		—			(81,329	)		—
Issuance of restricted shares under stock-based compensation		—			—			—			—			—			—			(8,426	)		—			—			1,100			8,503			—			77			—
Stock/unit-based compensation expense		—			—			—			—			—			—			3,977			—			—			—			—			—			3,977			983
Contributions from noncontrolling interests		—			—			—			—			—			—			—			—			—			—			—			281			281			—
Distributions to noncontrolling interests		—			—			—			—			—			—			—			—			—			—			—			(972	)		(972	)		(2,827	)
Net loss		—			—			—			—			—			—			—			(250,242	)		—			—			—			(765	)		(251,007	)		(37,653	)
Dividends declared – Preferred A shares		—			—			—			—			—			—			—			(3,180	)		—			—			—			—			(3,180	)		—
Dividends declared – Preferred B-1 shares		—			—			—			—			—			—			—			(4,171	)		—			—			—			—			(4,171	)		—
Dividends declared – Preferred D shares		—			—			—			—			—			—			—			(11,971	)		—			—			—			—			(11,971	)		—
Change in unrealized loss on derivatives		—			—			—			—			—			—			—			—			(202	)		—			—			—			(202	)		(33	)
Reclassification to interest expense		—			—			—			—			—			—			—			—			165			—			—			16			181			25
Redemption/conversion of operating partnership units		—			—			—			—			—			—			—			—			—			—			—			—			—			(381	)
Deferred compensation to be settled in shares		—			—			—			—			—			—			954			—			—			—			—			—			954			—
Adjustment to reflect redemption value of operating units		—			—			—			—			—			—			—			(17,665	)		—			—			—			—			(17,665	)		17,584

Balance at December 31, 2009		1,488			15			5,667			57			122,749			1,227			1,436,009			(412,011	)		(897	)		(65,152	)		(186,424	)		17,915			855,891			85,167
Purchases of treasury stock		—			—			—			—			—			—			—			—			—			(7,158	)		(45,087	)		—			(45,087	)		—
Reissuance of treasury stock		—			—			—			—			—			—			34,478			—			—			7,500			35,572			—			70,050			—
Issuance of Series D preferred stock		—			—			3,300			33			—			—			72,151			—			—			—			—			—			72,184			—
Issuance of restricted shares/units under stock/unit-based compensation		—			—			—			—			—			—			(3,536	)		—			—			469			3,536			—			—			54
Stock/unit based compensation expense		—			—			—			—			—			—			4,129			—			—			—			—			—			4,129			2,909
Forfeiture of restricted shares		—			—			—			—			—			—			146			—			—			(63	)		(447	)		—			(301	)		—
Contributions from noncontrolling interests		—			—			—			—			—			—			—			—			—			—			—			1,033			1,033			—
Distributions to noncontrolling interests		—			—			—			—			—			—			—			—			—			—			—			(648	)		(648	)		(2,942	)
Net loss		—			—			—			—			—			—			—			(51,740	)		—			—			—			(1,683	)		(53,423	)		(8,369	)
Dividends declared – Preferred A shares		—			—			—			—			—			—			—			(3,180	)		—			—			—			—			(3,180	)		—
Dividends declared – Preferred B-1 shares		—			—			—			—			—			—			—			(4,143	)		—			—			—			—			(4,143	)		—
Dividends declared – Preferred D shares		—			—			—			—			—			—			—			(13,871	)		—			—			—			—			(13,871	)		—
Change in unrealized loss on derivatives		—			—			—			—			—			—			—			—			(101	)		—			—			(14	)		(115	)		(21	)
Reclassification to interest expense		—			—			—			—			—			—			—			—			448			—			—			107			555			77
Conversion of Series B-1 preferred stock		—			—			—			—			200			2			2,012			—			—			—			—			—			2,014			—
Redemption/conversion of operating partnership units		—			—			—			—			455			5			3,677			(212	)		—			—			—			—			3,470			(8,784	)
Deferred compensation to be settled in shares		—			—			—			—			—			—			3,591			—			—			—			—			—			3,591			—
Adjustment to reflect redemption value of operating units		—			—			—			—			—			—			—			(58,631	)		—			—			—			—			(58,631	)		58,631

Balance at December 31, 2010		1,488		$	15			8,967		$	90			123,404		$	1,234		$	1,552,657		$	(543,788	)	$	(550	)		(64,404	)	$	(192,850	)	$	16,710		$	833,518		$	126,722

See Notes to Consolidated Financial Statements.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


	Year Ended December 31,
	2010			2009			2008

Cash Flows from Operating Activities
Net (loss) income	$	(61,792	)	$	(288,660	)	$	145,671
Adjustments to reconcile net (loss) income to net cash flows provided by operating activities:
Depreciation and amortization		145,326			157,107			174,365
Impairment charges		82,054			218,877			—
Equity loss (earnings) in unconsolidated joint venture		20,265			(2,486	)		2,205
Distributions of earnings from unconsolidated joint venture		492			873			1,800
Income from derivatives		(62,906	)		(52,282	)		(10,352	)
(Gain) loss on sale of properties/notes receivable, net		(55,905	)		511			(48,514	)
Gain on insurance settlement		—			(1,329	)		—
Amortization of loan costs, write-off of loan costs, premiums and exit fees, net		9,731			7,881			7,650
Amortization discounts and deferred costs and income on notes receivable, net		—			(3,129	)		(9,051	)
Unrealized loss (gain) on derivatives		(12,284	)		31,782			(79,620	)
Stock/unit-based compensation		7,067			5,037			6,834
Changes in operating assets and liabilities –
Restricted cash		9,900			(7,806	)		(16,934	)
Accounts receivable and inventories		3,065			(4,677	)		13,607
Prepaid expenses and other assets		(4,167	)		1,084			6,570
Accounts payable and accrued expenses		8,922			1,784			(39,327	)
Due to/from related parties		1,370			(1,369	)		(337	)
Due to/from third-party hotel managers		(6,606	)		4,280			(6,378	)
Other liabilities		(1,885	)		(1,864	)		(3,194	)

Net cash provided by operating activities		82,647			65,614			144,995

Cash Flows from Investing Activities
Acquisitions/originations of notes receivable		—			—			(138,039	)
Proceeds from sale/payments of notes receivable		28,284			13,355			23,165
Investment in unconsolidated joint venture		(15,000	)		—			(17,877	)
Cash released at disposition of hotel properties		(3,458	)		(3,494	)		—
Improvements and additions to hotel properties		(62,205	)		(69,176	)		(127,293	)
Net proceeds from sale of assets/properties		4,903			858			428,499
Proceeds from property insurance		—			13,703			—

Net cash (used in) provided by investing activities		(47,476	)		(44,754	)		168,455

Cash Flows from Financing Activities
Borrowings on indebtedness and capital leases		259,000			208,800			833,400
Repayments of indebtedness and capital leases		(365,702	)		(196,772	)		(741,634	)
Payments of loan costs and prepayment penalties		(7,080	)		(5,903	)		(7,845	)
Payments of dividends		(24,008	)		(22,867	)		(138,620	)
Purchases of treasury stock		(45,087	)		(81,327	)		(96,920	)
Purchase of preferred stock		—			(10,656	)		(9,889	)
Payments for derivatives		(75	)		(38,058	)		(9,914	)
Cash income from derivatives		62,212			50,928			8,599
Proceeds from preferred stock offering		72,208
Proceeds from common stock offering		70,443			—			—
Contributions from noncontrolling interests in consolidated joint ventures		1,033			—			—
Distributions to noncontrolling interests in joint ventures		(333	)		(972	)		(1,354	)
Redemption of operating partnership units and other		(5,260	)		(462	)		53

Net cash provided by (used in) financing activities		17,351			(97,289	)		(164,124	)

Net change in cash and cash equivalents		52,522			(76,429	)		149,326
Cash and cash equivalents at beginning of year		165,168			241,597			92,271

Cash and cash equivalents at end of year	$	217,690		$	165,168		$	241,597

Supplemental Cash Flow Information
Interest paid	$	142,998		$	137,252		$	160,255
Income taxes paid	$	1,424		$	651		$	276
Supplemental Disclosure of Investing and Financing Activities
Accrued interest added to principal of indebtedness	$	4,042		$	—		$	—
Assets transferred to receivership/lender	$	54,625		$	36,177		$	—
Liabilities transferred to receivership/lender	$	110,837		$	33,290		$	—
Note receivable contributed to unconsolidated joint venture	$	—		$	—		$	5,230

See Notes to Consolidated Financial Statements.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2010, 2009 and 2008


1.	Organization and Description of Business

Ashford Hospitality Trust, Inc., together with its subsidiaries (“Ashford”), is a self-advised real estate investment trust (“REIT”) focused on investing in the hospitality industry across all segments and in all methods including direct real estate, securities, equity, and debt. We commenced operations in August 2003 with the acquisition of six hotels (the “Initial Properties”) in connection with our initial public offering. We own our lodging investments and conduct our business through Ashford Hospitality Limited Partnership, our operating partnership. Ashford OP General Partner LLC, a wholly-owned subsidiary of Ashford, serves as the sole general partner of our operating partnership. In this report, the terms “the Company,” “we,” “us” or “our” mean Ashford Hospitality Trust, Inc. and all entities included in its consolidated financial statements.

As of December 31, 2010, we owned 94 hotel properties directly and six hotel properties through majority-owned investments in joint ventures, which represents 21,734 total rooms, or 21,392 net rooms excluding those attributable to joint venture partners. All of these hotel properties are located in the United States. At December 31, 2010, 97 of the 100 hotels were included in our continuing operations. At December 31, 2010, we also wholly owned mezzanine or first-mortgage loan receivables with a carrying value of $20.9 million and had ownership interests in two joint ventures that own mezzanine loans.

For federal income tax purposes, we elected to be treated as a REIT, which imposes limitations related to operating hotels. As of December 31, 2010, 99 of our 100 hotel properties were leased or owned by our wholly-owned subsidiaries that are treated as taxable REIT subsidiaries for federal income tax purposes (collectively, these subsidiaries are referred to as “Ashford TRS”). Ashford TRS then engages third-party or affiliated hotel management companies to operate the hotels under management contracts. Hotel operating results related to these properties are included in the consolidated statements of operations. As of December 31, 2010, one hotel property was leased on a triple-net lease basis to a third-party tenant who operates the hotel. Rental income from this operating lease is included in the consolidated results of operations.

Remington Lodging & Hospitality, LLC (“Remington Lodging”), our primary property manager, is beneficially wholly owned by Mr. Archie Bennett, Jr., our Chairman, and Mr. Monty J. Bennett, our Chief Executive Officer. As of December 31, 2010, Remington Lodging managed 46 of our 100 hotel properties, while third-party management companies managed the remaining 54 hotel properties.


2.	Significant Accounting Policies

Basis of Presentation – The accompanying consolidated financial statements include the accounts of Ashford, its majority-owned subsidiaries and its majority-owned joint ventures in which it has a controlling interest. All significant inter-company accounts and transactions between consolidated entities have been eliminated in these consolidated financial statements.

Marriott International, Inc. (“Marriott”) manages 41 of our properties. For these Marriott-managed hotels, the fiscal year reflects 12 weeks of operations for each of the first three quarters of the year and 16 weeks for the fourth quarter of the year. For 2008, Marriott-managed hotels reflected 17 weeks of operations for the fourth quarter. Therefore, in any given quarterly period, period-over-period results will have different ending dates. For Marriott-managed hotels, the fourth quarters of 2010, 2009 and 2008 ended December 31, 2010, January 1, 2010 and January 2, 2009, respectively.

Use of Estimates – The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash and Cash Equivalents – Cash and cash equivalents include cash on hand or held in banks and short-term investments with an initial maturity of three months or less at the date of purchase.

Restricted Cash – Restricted cash includes reserves for debt service, real estate taxes, and insurance, as well as excess cash flow deposits and reserves for furniture, fixtures, and equipment replacements of approximately 4% to 6% of property revenue for certain hotels, as required by certain management or mortgage debt agreement restrictions and provisions.

Accounts Receivable – Accounts receivable consists primarily of meeting and banquet room rental and hotel guest receivables. We generally do not require collateral. Ongoing credit evaluations are performed and an allowance for potential credit losses is provided against the portion of accounts receivable that is estimated to be uncollectible.

Inventories – Inventories, which primarily consist of food, beverages, and gift store merchandise, are stated at the lower of cost or market value. Cost is determined using the first-in, first-out method.

Investments in Hotel Properties – Hotel properties are generally stated at cost. However, the six hotel properties contributed upon Ashford’s formation (the “Initial Properties”) in 2003, are stated at the predecessor’s historical cost, net of impairment charges, if any, plus a noncontrolling interest partial step-up related to the acquisition of noncontrolling interests from third parties associated with four of the Initial Properties. For hotel properties owned through our majority-owned joint ventures, the carrying basis attributable to the joint venture partners’ minority ownership is recorded at the predecessor’s historical cost, net of any impairment charges, while the carrying basis attributable to our majority ownership is recorded based on the allocated purchase price of our ownership interests in the joint ventures. All improvements and additions which extend the useful life of the hotel properties are capitalized.

Variable interest entities, as defined by authoritative accounting guidance, must be consolidated by their controlling interest beneficiaries if the variable interest entities do not effectively disperse risks among the parties involved. Our mezzanine and first-mortgage notes receivable are each secured by various hotel properties or partnership interests in hotel properties and are subordinate to the controlling interest in the secured hotel properties. All such notes receivable are considered to be variable interests in the entities that own the related hotels. However, we are not considered to be the primary beneficiary of these hotel properties as a result of holding these loans. Therefore, we do not consolidate the hotels for which we have provided financing. We will evaluate the interests in entities acquired or created in the future to determine whether such entities should be consolidated. In evaluating variable interest entities, our analysis involves considerable management judgment and assumptions.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Impairment of Notes Receivable – We review notes receivables for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts recorded as assets on the balance sheet. We apply normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment.

Investments in Unconsolidated Joint Ventures – Investments in joint ventures in which we have ownership interests ranging from 14.4% to 50% are accounted for under the equity method of accounting by recording the initial investment and our percentage of interest in the joint venture’s net income. The equity accounting method is employed due to the fact that we do not control the joint venture and are not the primary beneficiary of the joint venture pursuant to the applicable authoritative accounting guidance. We review the investment in our unconsolidated joint venture for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. The investment is impaired when its estimated fair value is less than the carrying amount of our investment. Any impairment is recorded in equity earnings (loss) in unconsolidated joint venture. In 2010, we recorded a valuation allowance of $21.6 million to fully reserve our investment in a joint venture that holds mezzanine loans. See Note 5.

Assets Held for Sale and Discontinued Operations – We classify assets as held for sale when management has obtained a firm commitment from a buyer, and consummation of the sale is considered probable and expected within one year. In addition, we deconsolidate a property when it becomes subject to the control of a government, court, administrator or regulator and we effectively lose control of the property/subsidiary. When deconsolidating a property/subsidiary, we recognize a gain or loss in net income measured as the difference between the fair value of any consideration received and the carrying amount of the former property/subsidiary. The related operations of assets held for sale are reported as discontinued if a) such operations and cash flows can be clearly distinguished, both operationally and financially, from our ongoing operations, b) such operations and cash flows will be eliminated from ongoing operations once the disposal occurs, and c) we will not have any significant continuing involvement subsequent to the disposal.

Deferred Costs, net – Deferred loan costs are recorded at cost and amortized over the terms of the related indebtedness using the effective interest method. Deferred franchise fees are amortized on a straight-line basis over the terms of the related franchise agreements.

Due to/from Affiliates – Due to/from affiliates represents current receivables and payables resulting from transactions related to hotel management and project management with affiliated entities. Due from affiliates results primarily from advances of shared costs incurred. Due to affiliates results primarily from hotel management and project management fees incurred. Both due to and due from affiliates are generally settled within a period not exceeding one year.

Due to/from Third-Party Hotel Managers – Due from third-party hotel managers primarily consists of amounts due from Marriott related to cash reserves held at the Marriott corporate level related to operating, capital improvements, insurance, real estate taxes, and other items.

Unfavorable Management Contract Liabilities – Certain management agreements assumed in the acquisition of a hotel in 2006 and the CNL acquisition in 2007 have terms that are more favorable to the respective managers than typical market management agreements at the acquisition dates. As a result, we recorded unfavorable contract liabilities related to those management agreements totaling $23.4 million based on the present value of expected

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

cash outflows over the initial terms of the related agreements. The unfavorable contract liabilities are amortized as reductions to incentive management fees on a straight-line basis over the initial terms of the related agreements. In evaluating unfavorable contract liabilities, our analysis involves considerable management judgment and assumptions.

Noncontrolling Interests – The redeemable noncontrolling interests in the operating partnership represent the limited partners’ proportionate share of equity in earnings/losses of the operating partnership, which is an allocation of net income attributable to the common unit holders based on the weighted average ownership percentage of these limited partners’ common unit holdings throughout the period plus distributions paid to these limited partners’ Class B unit holdings. The redeemable noncontrolling interests in our operating partnership is classified in the mezzanine section of the consolidated balance sheets as these redeemable operating units do not meet the requirements for equity classification prescribed by the authoritative accounting guidance because the redemption feature requires the delivery of cash or registered shares. The carrying value of the noncontrolling interests in the operating partnership is based on the greater of the accumulated historical cost or the redemption value.

The noncontrolling interests in consolidated joint ventures represent ownership interests ranging from 11% to 25% of six hotel properties held by three joint ventures, and are reported in equity in the consolidated balance sheets.

Net income/loss attributable to redeemable noncontrolling interests in the operating partnership and income/loss from consolidated joint ventures attributable to noncontrolling interests in our consolidated joint ventures are reported as deductions/additions from/to net income/loss. Comprehensive income/loss attributable to these noncontrolling interests is reported as reductions/additions from/to comprehensive income/loss.

Guarantees – Upon acquisition of the 51-hotel CNL portfolio on April 11, 2007, we assumed certain guarantees, which represent funds provided by third-party hotel managers to guarantee minimum returns for certain hotel properties. As we are obligated to repay such amounts through increased incentive management fees through cash reimbursements, such guarantees are recorded as other liabilities. As of December 31, 2010 and 2009, these liabilities totaled $344,000.

Revenue Recognition – Hotel revenues, including room, food, beverage, and ancillary revenues such as long-distance telephone service, laundry, and space rentals, are recognized when services have been rendered. Rental income represents income from leasing hotel properties to third-party tenants on triple-net operating leases. Base rent on the triple-net lease is recognized on a straight-line basis over the lease terms and variable rent is recognized when earned. Interest income, representing interest on the mezzanine and first mortgage loan portfolio (including accretion of discounts on certain loans using the effective interest method), is recognized when earned. We discontinue recording interest and amortizing discounts/premiums when the contractual payment of interest and/or principal is not received. Asset management fees are recognized when services are rendered. Taxes collected from customers and submitted to taxing authorities are not recorded in revenue. For the hotel leased to a third party, we report deposits into our escrow accounts for capital expenditure reserves as income.

Other Expenses – Other expenses include telephone charges, guest laundry, valet parking, and hotel-level general and administrative fees, sales and marketing expenses, repairs and maintenance, franchise fees and utility costs. They are expensed as incurred.

Advertising Costs – Advertising costs are charged to expense as incurred. For the years ended December 31, 2010, 2009 and 2008, our continuing operations incurred advertising costs of $2.4 million, $2.9 million and $4.0 million, respectively. Advertising costs related to continuing operations are included in “Other expenses” in the accompanying consolidated statement of operations.

Stock/Unit-Based Compensation – Stock/unit-based compensation is accounted for at the fair value based on the market price of the shares at the date of grant in accordance with applicable authoritative accounting guidance.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair value is charged to compensation expense on a straight-line basis over the vesting period of the shares/units.

Depreciation and Amortization – Owned hotel properties are depreciated over the estimated useful life of the assets and leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related assets. Presently, hotel properties are depreciated using the straight-line method over lives ranging from 7.5 to 39 years for buildings and improvements and three to five years for furniture, fixtures and equipment. While we believe our estimates are reasonable, a change in estimated useful lives could affect depreciation expense and net income (loss) as well as resulting gains or losses on potential hotel sales.

Income Taxes – As a REIT, we generally will not be subject to federal corporate income tax on the portion of our net income (loss) that does not relate to taxable REIT subsidiaries. However, Ashford TRS is treated as a taxable REIT subsidiary for federal income tax purposes. In accordance with authoritative accounting guidance, we account for income taxes related to Ashford TRS using the asset and liability method under which deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective bases. In addition, the analysis utilized by us in determining our deferred tax asset valuation allowance involves considerable management judgment and assumptions.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued accounting guidance that clarified the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The guidance prescribes a financial statement recognition and measurement attribute for the recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also provides direction on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We classify interest and penalties related to underpayment of income taxes as income tax expense. We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and cities. Tax years 2007 through 2010 remain subject to potential examination by certain federal and state taxing authorities. Income tax examinations of two of our TRS subsidiaries are currently in process. We believe that the results of the completion of these examinations will not have a material adverse effect on our financial condition.

Derivative Instruments and Hedging – We primarily use interest rate derivatives in order to capitalize on the historical correlation between changes in LIBOR (London Interbank Offered Rate) and RevPAR (Revenue per Available Room). Interest rate swaps (or reverse swaps) involve the exchange of fixed-rate payments for variable-rate payments (or vice versa) over the life of the derivative agreements without exchange of the underlying principal amount. Interest rate caps designated as cash flow hedges provide us with interest rate protection above the strike rate on the cap and result in us receiving interest payments when actual rates exceed the cap strike. For interest rate floors, we pay our counterparty interest when the variable interest rate index is below the strike rate. The interest rate flooridor combines two interest rate floors, structured such that the purchaser simultaneously buys an interest rate floor at a strike rate X and sells an interest rate floor at a lower strike rate Y. The purchaser of the flooridor is paid when the underlying interest rate index (for example, LIBOR) resets below strike rate X during the term of the flooridor. Unlike a standard floor, the flooridor limits the benefit the purchaser can receive as the related interest rate index falls. Once the underlying index falls below strike Y, the sold floor offsets the purchased floor. The interest rate corridor involves purchasing of an interest rate cap at one strike rate X and selling an interest rate cap with a higher strike rate Y. The purchaser of the corridor is paid when the underlying interest rate index resets above the strike rate X during the term of the corridor. The corridor limits the benefit the purchaser can receive as the related interest rate index rises above the strike rate Y. There is no liability to us other than the purchase price associated with the flooridor and corridor.

All derivatives are recorded on the consolidated balance sheets at fair value in accordance with the applicable authoritative accounting guidance and reported as “Interest rate derivatives.” Accrued interest on the nonhedge-designated derivatives is included in “Accounts receivable, net” on the consolidated balance sheets. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value is reported as a component of “Accumulated other comprehensive income (loss)” (“OCI”) in the equity section of the consolidated balance

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

sheets. The amount recorded in OCI is reclassified to interest expense in the same period or periods during which the hedged transaction affects earnings, while the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings as “Unrealized gain (loss) on derivatives” in the consolidated statements of operations. For derivatives that are not designated as cash flow hedges, the changes in the fair value are recognized in earnings as “Unrealized gain (loss) on derivatives” in the consolidated statements of operations. We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. Derivatives subject to master netting arrangements are reported net in the consolidated balance sheets.

Income (Loss) Per Share – Basic income (loss) per common share is calculated by dividing net income (loss) attributable to common shareholders by the weighted average common shares outstanding during the period using the two-class method prescribed by applicable authoritative accounting guidance. Diluted income (loss) per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares, whereby such exercise or conversion would result in lower income per share under the two-class method.

Reclassifications – Certain amounts in the consolidated financial statements for the years ended December 31, 2009 and 2008 have been reclassified for discontinued operations. These reclassifications have no effect on the results of operations or financial position previously reported.

Recently Adopted Accounting Standards – In June 2009, FASB issued authoritative accounting guidance to redefine the characteristics of the primary beneficiary to be identified when an enterprise performs an analysis to determine whether the enterprise’s variable interest gives it a controlling financial interest in a VIE. This accounting guidance became effective at the beginning of the first annual reporting period beginning after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The new guidance requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed and ongoing reassessments of whether it is the primary beneficiary of a VIE. It also amends certain previous guidance for determining whether an entity is a VIE and eliminates the quantitative approach previously required for determining the primary beneficiary of a VIE. As of January 1, 2010, we adopted this new guidance and the adoption of the new guidance did not have a material effect on our financial condition and results of operations.

In January 2010, the FASB issued an accounting standard update to require additional disclosures for transfers in and out of levels 1 and 2 of the fair value input hierarchy and the activity in level 3 fair value measurements. The accounting update also requires disclosures about inputs and valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about the level 3 activity that are effective for fiscal periods beginning after December 15, 2010, and for interim periods within those fiscal years. We adopted the disclosure requirements as of January 1, 2010 and the required disclosures are presented in the related footnotes. The adoption of these accounting rules did not have a material impact on our financial position and results of operations.

In July 2010, the FASB issued an accounting standard update to require disclosures about the credit quality of financing receivables and the allowance for losses on a disaggregated basis. The accounting standard update defines two levels of disaggregation: portfolio segment and class of financing receivable. It also requires additional disclosures by class about credit quality indicators and the aging of past due financing receivables at the end of each reporting period, the nature and extent of troubled debt restructurings that occurred during the period, the nature and extent of financing receivables modified as troubled debt restructurings within the previous 12 months that defaulted during the reporting period, and significant purchases and sales of financing receivables disaggregated by portfolio segment. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010, except for the disclosures about troubled debt restructuring, the effective date of which was deferred in January 2010 until June 15, 2011. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15,

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2010. As of December 31, 2010, we have made the required new disclosures under this accounting guidance and the adoption did not result in a material impact on our financial statements.

Recently Issued Accounting Standards – In December 2010, FASB issued an accounting standard update to require a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. The new disclosures are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. We will adopt the new disclosure requirements when a business combination occurs and do not expect the adoption will have an impact on our financial position and results of operations.


3.	Investment in Hotel Properties

Investment in hotel properties consisted of the following (in thousands):


	December 31,
	2010			2009

Land	$	488,901		$	520,180
Buildings and improvements		2,774,822			3,002,249
Furniture, fixtures and equipment		383,860			394,246
Construction in progress		4,473			10,984

Total cost		3,652,056			3,927,659
Accumulated depreciation		(628,320	)		(543,900	)

Investment in hotel properties, net	$	3,023,736		$	3,383,759

For the years ended December 31, 2010, 2009 and 2008, we recognized depreciation expense, including depreciation of assets under capital leases and discontinued hotel properties, of $144.9 million, $156.7 million and $173.6 million, respectively.

The authoritative accounting guidance requires non-financial assets be measured at fair value when events or changes in circumstances indicate that the carrying amount of an asset will not be recoverable. An asset is considered impaired if the carrying value of the hotel property exceeds its estimated undiscounted cash flows and the impairment is calculated as the amount by which the carrying value of the hotel property exceeds its estimated fair value. Our investments in hotel properties are reviewed for impairment at each reporting period, taking into account the latest operating cash flows and market conditions and their impact on future projections. Management uses considerable subjective and complex judgments in determining the assumptions used to estimate the fair value and undiscounted cash flows, and believes these are assumptions that would be consistent with the assumptions of market participants.

At December 31, 2010, the Hilton hotel property in Tucson, Arizona had a reasonable probability of being sold in the near future. Based on our assessment of the purchase price obtained from potential buyers, we recorded an impairment charge of $39.9 million.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


4.	Notes Receivable

Notes receivable consisted of the following at December 31, 2010 and December 31, 2009 ($ in thousands):


													Impaired Loans				Impaired Loans
													Average Recorded				Interest Income
			Recognized						Impairment				Investment				Recognized
		Age as of	Investment						Status at				As of				Year Ended
	Accrual	December 31,	December 31,						December 31,				December 31,				December 31,
	Status	2010	2010			2009			2010		2009		2010		2009		2010		2009

Mezzanine loan with unpaid principal balance of $25,688, secured by 105 hotel properties, matures April 2011, at an interest rate of LIBOR plus 5%, with interest-only payments through maturity, net of valuation allowance of $7,800 at December 31, 2010	Performing but non-accrual	Current at December 31, 2010	$	17,888		$	25,688			Yes		No	$	25,088	$	—	$	—*	$	—
Mezzanine loan with unpaid principal balance of $7,056, secured by one hotel property, matures January 2011, at an interest rate of LIBOR plus 9%, net of valuation allowance of $-0- at December 31, 2010 and 2009	Impaired and settled in 2010	Not applicable		—			7,056			N/A		No		5,877		—		—		—
Mezzanine loan with principal balance of $38,000, secured by one hotel property, matures June 2017, at an interest rate of 9.66%, net of valuation allowance of $9,075 and $10,123 at December 31, 2010 and 2009	Modified	Current at December 31, 2010		2,982			22,955			N/A		Yes		—		30,290		—		3,009
Mezzanine loan with principal balance of $164,000, secured by 681 extended-stay hotel properties, matured June 2009, at an interest rate of LIBOR plus 2.5%, net of valuation allowance of -0- and $109,356 at December 31, 2010 and 2009	Charged-off in 2010	Not applicable		—			—			N/A		Yes		—		50,076		—		4,689
Mezzanine loan with principal balance of $18,200, secured by one hotel property, matured October 2008, at an interest rate of LIBOR plus 9%, net of valuation allowance of $-0- and $18,200 at December 31, 2010 and 2009	Charged-off in 2010	Not applicable		—			—			N/A		Yes		—		10,500		—		—
Mezzanine loan with principal balance of $7,000, secured by one hotel property, matured September 2009, at an interest rate of LIBOR plus 6.5%, net of valuation allowance of $-0- and $7,000 at December 31, 2010 and 2009	Settled and charged-off in 2010	Not applicable		—			—			N/A		Yes		—		3,231		—		245
Mezzanine loan with principal balance of $4,000, secured by one hotel property, matured July 2009, at an interest rate of LIBOR plus 5.75%, net of valuation allowance of $-0- and $4,000 at December 31, 2010 and 2009	Charged-off in 2010	Not applicable		—			—			N/A		Yes		—		1,846		—		60

				20,870			55,699						$	30,965	$	95,943	$	—	$	8,003

Deferred income				—			(44	)

Net notes receivable			$	20,870		$	55,655

Weighted average interest rate**				—	%		2.4	%


*		Interest income of $1.4 million was recognized on this loan for both 2010 and 2009 before it was impaired on December 31, 2010.
**		Due to impairment charges recorded on these mezzanine loans, no interest income is expected to be recorded in the future, therefore, the weighted average interest rate is zero percent.

Notes receivable in our portfolio are evaluated for collectability for each reporting period. The process of evaluating the collectability involves significant judgment. Therefore, there is at least a reasonable possibility that a change in our estimates regarding collectability will occur in the future. Valuation allowance recorded for loans impaired according to our analysis is included in “Impairment charges” in the consolidated statements of operations.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In evaluating possible loan impairments, we analyze our notes receivable individually and collectively for possible loan losses in accordance with applicable authoritative accounting guidance. Based on the analysis, if we conclude that no loans are individually impaired, we then further analyze the specific characteristics of the loans, based on other authoritative guidance to determine if there would be probable losses in a group of loans with similar characteristics.

The loans in our portfolio are collateralized by hotel properties. Some loans are collateralized by single hotel properties and others by hotel portfolios. The hotel properties are in different geographic locations, have different ages and a few of the properties have recently completed significant renovations which have a significant impact on the value of the underlying collateral. The hotel properties include independent and nationally recognized brands in all segments and classes including luxury, economy, extended-stay, full service, and select service. In addition, our loan assets can vary by position in the related borrower’s capital structure, ranging from junior mortgage participations to mezzanine loans. The terms of our notes or participations were structured based on the different features of the related collateral and the priority in the borrower’s capital structure.

We evaluated the collectability of the mezzanine loan secured by 105 hotel properties maturing in April 2011, and weighted different probabilities of outcome from full payment at maturity to a foreclosure by the senior lender. Based on this analysis, we recorded an impairment charge of $7.8 million on December 31, 2010.

In May 2010, the mezzanine loan with principal balance of $7.0 million secured by the Le Meridien hotel property in Dallas, Texas was settled with a cash payment of $1.1 million. The loan was fully reserved in 2009 as the borrower ceased making debt service payments on the loan. As a result of the settlement, the $1.1 million was recorded as a credit to impairment charges in accordance with authoritative accounting guidance for impaired loans.

Principal and interest payments were not made since October 2008, on the $18.2 million junior participation note receivable secured by the Four Seasons hotel property in Nevis. The underlying hotel property suffered significant damage by Hurricane Omar. We discontinued recording interest on this note beginning in October 2008. In 2009, we recorded impairment charge to fully reserve this note receivable. In May 2010, the senior mortgage lender foreclosed on the loan. As a result of the foreclosure, our interest in the senior mortgage was converted to a 14.4% subordinate beneficial interest in the equity of the trust that holds the hotel property. Due to our junior status in the trust, we have not recorded any value for our beneficial interest at December 31, 2010.

In February 2010, the mezzanine loan secured by the Ritz-Carlton hotel property in Key Biscayne, Florida, with a principal amount of $38.0 million and a net carrying value of $23.0 million at December 31, 2009 was restructured. In connection with the restructuring, we received a cash payment of $20.2 million and a $4.0 million note receivable. We recorded a net impairment charge of $10.7 million in 2009 on the original mezzanine loan. The restructured note bears an interest rate of 6.09% and matures in June 2017 with interest only payments through maturity. The note was recorded at its net present value of $3.0 million at restructuring, based on its future cash flows. The interest payments are recorded as reductions of the principal of the note receivable, and the valuation adjustments to the net carrying amount of this note are recorded as a credit to impairment charges.

Interest payments since March of 2009 were not made on the $7.1 million junior participation note receivable maturing January 2011 secured by a hotel property in La Jolla, California. In accordance with our accounting policy, we discontinued recording interest and fee income on this note beginning in March 2009. In August 2010, we reached an agreement with the borrower of the $7.1 million junior participation note receivable secured by the hotel property to settle the loan. Pursuant to the settlement agreement, we received total cash payments of $6.2 million in 2010. We recorded a net impairment charge of $836,000 based on the expected cash settlement.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Sheraton hotel property in Dallas, Texas, which collateralized our $4.0 million principal amount junior participating note receivable that matured in July 2009. The note receivable was fully reserved in 2009. We have an 18% subordinated interest in Redus JV. In March 2010, the foreclosure was completed and the estimated fair value of the property was $14.2 million based on a third-party appraisal. Pursuant to the operating agreement of Redus JV, as a junior lien holder of the original participation note receivable, we are only entitled to receive our share of distributions after the original senior note holder has recovered its original investment of $18.4 million and Redus JV intends to sell the hotel property in the next 12 months. It is unlikely that the senior holder will be able to recover its original investment. Therefore, no cash flows were projected from Redus JV for the projected holding period. Under the applicable authoritative accounting guidance, we recorded a zero value for our 18% subordinated interest in Redus JV.

In November 2009, we completed the sale of the $11.0 million mezzanine loan receivable secured by the Westin Westminster hotel property that was defeased by the original borrower. We negotiated for the release of the portfolio of government agency securities serving as the defeased loan collateral, and sold the actual securities via an auction for $13.6 million. We received net proceeds of $13.3 million and recorded a gain of $2.4 million which is included in “Other income” in the consolidated statements of operations.

In June 2009, Extended Stay Hotels, LLC (“ESH”), the issuer of our $164 million principal balance mezzanine loan receivable secured by 681 hotels with initial maturity in June 2009, filed for Chapter 11 bankruptcy protection from its creditors. This mezzanine loan was originally purchased for $98.4 million. At the time of ESH’s bankruptcy filing, a discount of $11.4 million had been amortized to increase the carrying value of the note to $109.4 million. We anticipated that ESH, through its bankruptcy filing, would attempt to impose a plan of reorganization which could extinguish our investment. Accordingly, we recorded a valuation allowance of $109.4 million in earnings for the full amount of the book value of the note. In October 2010, the ESH bankruptcy proceedings were completed and settled with new owners. The full amount of the valuation allowance was charged off in 2010.


5.	Investment in Unconsolidated Joint Ventures

We have an 18% subordinated interest in Redus JV that holds the Sheraton hotel property in Dallas, Texas, and a 14.4% subordinated beneficial interest in a trust that holds the Four Seasons hotel property in Nevis, both of which have a zero carrying value. In addition, we have ownership interests in two joint ventures with PREI that invest in mezzanine loans. The investment in the mezzanine loan joint ventures consisted of the following ($ in thousands):


	December 31,
	2010			2009

25% of a mezzanine loan acquired at a discounted price, secured by 28 hotel properties, matured August 2010, at an interest rate of LIBOR plus 2.75%, and with interest-only payments through maturity	$	20,997		$	20,221
25% of a mezzanine loan at par value, secured by two hotel properties, matures January 2018, at an interest rate of 14%, with interest-only payments through maturity		5,461			5,461
Valuation allowance		(27,051	)		(5,461	)
A partial interest in a mezzanine loan acquired at a discounted price, secured by 28 hotel properties, matured August 2010, at an interest rate of LIBOR plus 2.00%, and with interest-only payments through maturity		15,000			—
Other, net		129			106
Distributions		(3,165	)		(2,673	)
Equity income since inception before discounts amortization and impairment charges		3,629			3,082

Total	$	15,000		$	20,736

In July 2010, as a strategic complement to our existing joint venture with PREI in 2008, we contributed $15 million for an ownership interest in a new joint venture with PREI. The new joint venture acquired a tranche 4

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

mezzanine loan associated with JER Partner’s 2007 privatization of the JER/Highland Hospitality portfolio. The mezzanine loan is secured by the same 28 hotel properties as our existing joint venture investment in tranche 6 of a mezzanine loan portfolio.

The borrowers of these mezzanine loans stopped making debt service payments in August 2010 and we are currently negotiating a restructuring with their equity holders, senior secured lenders and senior mezzanine lenders. Due to our junior participation status, it is expected the tranche 6 mezzanine loan will be completely extinguished in the restructuring. As a result, we recorded a valuation allowance of $21.6 million for the entire carrying value of our investment in the joint venture on December 31, 2010. We did not record a valuation allowance for the tranche 4 mezzanine loan as the restructuring could result in a conversion of the mezzanine loan into equity with us investing an additional amount.

Beginning in October 2008, the borrower of the mezzanine note receivable of $21.5 million maturing 2018 defaulted on the debt service payments on both the first mortgage and its mezzanine loan. After an impairment test, we and our joint venture partner determined to provide a loss reserve for the entire amount of the loan balance of $21.5 million and related deferred loan costs. The valuation allowance of $5.5 million reflects our 25% share of the impairment charge taken by the PREI JV.


6.	Assets Held for Sale and Discontinued Operations

We have entered into asset sale agreements for the sale of the JW Marriott hotel property in San Francisco, California, the Hilton hotel property in Rye Town, New York, and the Hampton Inn hotel property in Houston, Texas. Based on the selling price, we recorded an impairment charge of $23.6 million on the Hilton Rye Town property in the fourth quarter of 2010 and expect these sales to close in the first quarter of 2011. In February 2011, the sale of the JW Marriott hotel property was completed and we received net cash proceeds of $43.6 million.

In June 2010, we entered into an agreement to sell the Hilton Suites in Auburn Hills, Michigan for $5.1 million, and the sale was completed in September 2010. Based on the sales price, we recorded an impairment charge of $12.1 million for the expected loss in June 2010 on the sale and an additional loss of $283,000 based on net proceeds received at closing. In addition, in September 2010, we completed the consensual transfer of the Westin O’Hare hotel property in Rosemont, Illinois that secured a $101.0 million non-recourse mortgage loan to its lender. The hotel property was deconsolidated from our financial statements and a gain of $56.2 million was recognized upon deconsolidation. An impairment charge of $59.3 million was previously recorded on the Westin O’Hare hotel property in the fourth quarter of 2009 as we wrote down the hotel property to its estimated fair value.

Beginning in June 2009, we ceased making payments on the note payable of $29.1 million secured by the Hyatt Regency Dearborn hotel property, due to the fact that the operating cash flows from the hotel property were not anticipated to cover the principal and interest payments on the note and the related capital expenditures on the property. The lender issued a notice of default and an acceleration notice. We did not cure the notice of default and intended to fully settle the debt via a judicial foreclosure of the hotel property. As a result, we wrote down the hotel property to its estimated fair value and recorded an impairment charge of $10.9 million. In determining the fair value of the property, we obtained a market analysis based on eight recent hotel sales in the Midwest region provided by a third party. Those sales ranged from a low of $33,000 per key to a high of $125,000 per key. We evaluated the analysis and determined that the note payable balance on the Dearborn hotel property of $29.1 million, or $38,000 per key, was within the price range and approximated the fair value of the hotel property. Effective December 3, 2009, a receiver appointed by the State of Michigan circuit court completed taking possession and full control of the hotel property and was authorized to sell the property to settle the indebtedness. As a result, the hotel property and related debt were deconsolidated and a loss of $2.9 million was recognized at deconsolidation.

Beginning in December 2009, we elected to cease making payments on the note payable of $101.0 million secured by the Westin O’Hare hotel property as the operating cash flows from the hotel property were inadequate to cover the debt service payments. As a result, we recorded an impairment charge of $59.3 million to write down the hotel property to its estimated fair value of $50.0 million. The fair value was determined based on market analyses

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

performed by third parties. Those analyses employed the discounted cash flow method using forecasted cash flows, including the estimated residual value, discounted at rates that were based on the market yields of the similar hotel class and similar hotel sales. The forecasted cash flows also considered the hotel property’s declining market shares, the decline in advanced bookings, and the sharp RevPAR decline in Chicago O’Hare submarket. It also projected an improved market starting in 2011 and assumed a market recovery leading to an increase in RevPAR of over 70% of the projected holding period. In September 2010, we successfully negotiated a consensual transfer of the underlying hotel property to the lender and the related non-recourse mortgage loan was settled.

The assets of hotel properties under contracts to sell have been reclassified as assets held for sale in the consolidated balance sheet at December 31, 2010. The operating results of all the hotel properties discussed above that are under contracts to sell or were sold, including the related impairment charges, for all periods presented have been reported as discontinued operations in the consolidated statements of operations. For 2009 and 2008, discontinued operations also include the operating results of the Hyatt Dearborn hotel property as a result of a receiver appointed by the State of Michigan circuit court taking possession and full control of the Hyatt Dearborn hotel property which resulted in the hotel property being deconsolidated effective December 3, 2009. In addition to the properties discussed above, discontinued operations for 2008 included 10 hotel properties that were sold in 2008.

In accordance with applicable accounting guidance, the inputs used in determining the fair values are categorized into three levels: level 1 inputs are inputs obtained from quoted prices in active markets for identical assets, level 2 inputs are significant other inputs that are observable for the assets either directly or indirectly, and level 3 inputs are unobservable inputs for the asset and reflect our own assumptions about the assumptions that market participants would use in pricing the asset.

The following table presents our hotel properties measured at fair value aggregated by the level in the fair value hierarchy within which measurements fall on a non-recurring basis at December 31, 2010 and 2009, and related impairment charges recorded (in thousands):


											Impairment
	Level 1		Level 2		Level 3			Total			Charges

2010
Hilton Rye Town	$	—	$	—	$	34,790	⁽¹⁾	$	34,790	⁽¹⁾	$	23,583	⁽¹⁾
Hilton Auburn Hills		—		—		—			—			12,068	⁽¹⁾

Total	$	—	$	—	$	34,790		$	34,790		$	35,651

2009
Hyatt Regency Dearborn	$	—	$	—	$	—		$	—		$	10,871	⁽²⁾
Westin O’Hare		—		—		50,000	⁽²⁾		50,000	⁽²⁾		59,328	⁽²⁾

Total	$	—	$	—	$	50,000		$	50,000		$	70,199


⁽¹⁾		The impairment charges were taken in the quarter ended December 31, 2010 and June 30, 2010, for the Hilton Rye Town property and the Hilton Auburn Hills property, respectively, based on their respective anticipated net sales prices of $34.8 million and $5.0 million, respectively.
⁽²⁾		The impairment charges were taken in the quarters ended December 31, 2009 and June 30, 2009, for the Westin O’Hare property and the Hyatt Regency Dearborn property, respectively, based on their respective estimated fair value of $50.0 million and $29.1 million, respectively.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the operating results of the discontinued operations ($ in thousands):


	Year Ended December 31,
	2010			2009			2008

Results of operations:
Hotel revenues	$	72,476		$	99,270		$	222,466
Hotel operating expenses		(58,153	)		(84,798	)		(168,367	)

Operating income		14,323			14,472			54,099
Property taxes, insurance and other		(4,766	)		(9,397	)		(14,601	)
Depreciation and amortization		(11,891	)		(17,722	)		(25,344	)
Impairment charge		(35,651	)		(70,199	)		—
Gain (loss) on disposal/sales of properties		55,905			(2,887	)		48,514
Interest expense and amortization of loan costs		(8,494	)		(14,093	)		(15,794	)
Write-off of loan costs, premiums and exit fees, net		—			(552	)		323

Income (loss) from discontinued operations before income taxes		9,426			(100,378	)		47,197
Income tax expense		(22	)		(56	)		(654	)

Income (loss) from discontinued operations		9,404			(100,434	)		46,543
Income from consolidated joint ventures attributable to noncontrolling interests		(122	)		(25	)		(160	)
(Income) loss from discontinued operations attributable to redeemable noncontrolling interests in operating partnership		(956	)		13,649			(4,394	)

Income (loss) from discontinued operations attributable to the Company	$	8,326		$	(86,810	)	$	41,989

At December 31, 2010, assets held for sale had investment in hotel properties of $143.8 million, deferred loan costs and other intangibles of $679,000, indebtedness of $50.6 million and other liabilities of $3.0 million. At December 31, 2009, the hotel properties discontinued in 2010 had investment in hotel properties of $243.3 million, and deferred loan costs of $769,000, indebtedness of $157.8 million and other liabilities of $3.2 million.


7.	Deferred Costs

Deferred costs consist of the following (in thousands):


	December 31,
	2010			2009

Deferred loan costs	$	30,770		$	32,417
Deferred franchise fees		4,151			4,044

Total costs		34,921			36,461
Accumulated amortization		(17,402	)		(15,501	)

Deferred costs, net	$	17,519		$	20,960


8.	Intangible Asset, net

Intangible asset consist of the following (in thousands):


	December 31,
	2010			2009

Costs	$	3,233		$	3,233
Accumulated amortization		(334	)		(245	)

Intangible asset, net	$	2,899		$	2,988

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible asset represents a favorable market-rate lease which relates to the purchase price allocated to a hotel property in the CNL Portfolio and is being amortized over the remaining lease term that expires in 2043.

For the years ended December 31, 2010, 2009 and 2008, amortization expense related to intangibles was $89,000, $89,000 and $67,000, respectively. Estimated future amortization expense is $89,000 for each of the next five years.


9.	Indebtedness

Indebtedness of our continuing operations and the carrying values of related collateral were as follows at December 31, 2010 and 2009 (in thousands):


				December 31, 2010						December 31, 2009
							Book					Book
				Debt			Value of			Debt		Value of
Indebtedness	Collateral	Maturity	Interest Rate	Balance			Collateral			Balance		Collateral

Mortgage loan	1 hotel	January 2011 ⁽¹⁾	8.32%	$	5,775		$	8,222		$	5,816	$	8,426
Senior credit facility	Notes Receivable	April 2011 ⁽²⁾	LIBOR ⁽³⁾ + 2.75% to 3.5% ⁽⁴⁾		115,000			28,670			250,000		55,655
Mortgage loan	10 hotels	May 2011 ⁽²⁾	LIBOR ⁽³⁾ + 1.65%		167,202			218,133			167,202		225,762
Mortgage loan	5 hotels	December 2011	LIBOR ⁽³⁾ + 1.72%		203,400			233,818			203,400		241,080
Mortgage loan	1 hotel	March 2012 ⁽⁵⁾	LIBOR ⁽³⁾ + 4%		—			—			60,800		128,290
Mortgage loan	1 hotel	March 2013	Greater of 6.25% or LIBOR ⁽³⁾ + 3.75%		—	*		—	*		52,500		96,807
Mortgage loan	2 hotels	August 2013	LIBOR ⁽³⁾ + 2.75%		150,383			271,907			156,600		268,865
Mortgage loan	1 hotel	December 2014	Greater of 5.5% or LIBOR ⁽³⁾ + 3.5%		19,740			22,198			19,740		64,146
Mortgage loan	8 hotels	December 2014	5.75%		108,940			83,255			110,899		85,172
Mortgage loan	1 hotel	January 2015	7.78%		—	*		—*			4,345		18,565
Mortgage loan	10 hotels	July 2015	5.22%		159,001			172,324			160,490		177,685
Mortgage loan	8 hotels	December 2015	5.70%		100,576			80,794			100,576		83,973
Mortgage loan	5 hotels	December 2015	12.26%		148,013			329,242			141,402		335,331
Mortgage loan	5 hotels	February 2016	5.53%		114,629			126,238			115,645		131,356
Mortgage loan	5 hotels	February 2016	5.53%		95,062			103,595			95,905		107,812
Mortgage loan	5 hotels	February 2016	5.53%		82,345			105,708			83,075		109,306
Mortgage loan	1 hotel	December 2016 ⁽⁶⁾	5.81%		—			—			101,000		49,978
Mortgage loan	1 hotel	April 2017	5.91%		35,000			96,622	**		35,000		99,799	**
Mortgage loan	5 hotels	April 2017	5.95%		128,251			150,747			128,251		155,706
Mortgage loan	3 hotels	April 2017	5.95%		260,980			289,046			260,980		295,258
Mortgage loan	7 hotels	April 2017	5.95%		115,600			130,498			115,600		133,834
Mortgage loan	5 hotels	April 2017	5.95%		103,906			116,768			103,906		118,563
Mortgage loan	5 hotels	April 2017	5.95%		158,105			169,209			158,105		174,017
Mortgage loan	7 hotels	April 2017	5.95%		126,466			147,141			126,466		150,450
TIF loan	1 hotel	June 2018	12.85%		8,098			— **			7,783		— **
Mortgage loan	1 hotel	November 2020 ⁽⁵⁾	6.26%		104,901			124,069			—		—
Mortgage loan	1 hotel	April 2034	Greater of 6% or Prime + 1%		6,791			17,670			6,910		17,967

Total				$	2,518,164		$	3,025,874		$	2,772,396	$	3,333,803


⁽¹⁾		We are currently working with the loan servicer for an extension or a restructure of the loan.
⁽²⁾		Each of these loans has a one-year extension option remaining as of December 31, 2010. The extension options have been given to the lenders of these loans.
⁽³⁾		LIBOR rates were 0.26% and 0.23% at December 31, 2010 and 2009, respectively.
⁽⁴⁾		Based on the debt-to-asset ratio defined in the loan agreement, interest on this debt was at LIBOR + 3% as of December 31, 2010. Unused fee ranges from 0.125% to 0.20% per annum based on the unused amount.
⁽⁵⁾		This loan was refinanced with the mortgage loan maturing November 2020 with a fixed rate of 6.26%.
⁽⁶⁾		The consensual deed-in-lieu of foreclosure of the underlying hotel property was completed in September 2010. See Note 6.
^*		These mortgage loans are reported as indebtedness of discontinued operations in the consolidated balance sheet at December 31, 2010.
^**		These two mortgage loans are collateralized by the same property.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In 2010, we made net payments of $135.0 million on our senior credit facility with proceeds from the reissuance of 7.5 million shares of our treasury stock, the issuance of 3.3 million shares of our 8.45% Series D Cumulative Preferred Stock and the refinance of a mortgage loan discussed below.

In October 2010, we closed on a $105.0 million refinancing of the Marriott Gateway in Arlington, Virginia. The new loan, which has a 10-year term and fixed interest rate of 6.26%, replaces a $60.8 million loan set to mature in 2012 with an interest rate of LIBOR plus 4.0%. The excess proceeds from the refinancing were used to reduce $40.0 million of the outstanding borrowings on our senior credit facility. In conjunction with the refinance, we incurred prepayment penalties and fees of $3.3 million and wrote off the unamortized loan costs on the refinanced debt of $630,000.

In July 2010, we modified the mortgage loan secured by the JW Marriott hotel property in San Francisco, California, to change the initial maturity date to its full extended maturity of March 2013 in exchange for a principal payment of $5.0 million. This mortgage loan is classified as indebtedness of assets held for sale in the consolidated balance sheet at December 31, 2010 as the hotel property collateralizing this mortgage loan was under a contract to be sold. The sale was completed in February 2011 and the related mortgage loan was repaid at closing along with miscellaneous fees of approximately $476,000.

Effective April 1, 2010, we completed the modification of the $156.2 million mortgage loan secured by two hotel properties in Washington D.C. and La Jolla, California. Pursuant to the modified loan agreement, we obtained the full extension of the loan to August 2013 without any extension tests in exchange for a $5.0 million paydown. We paid $2.5 million of the paydown amount at closing, and the remaining $2.5 million is payable quarterly in four consecutive installments of $625,000 each with the first two installments due and paid on July 1 and October 1, 2010. We paid a modification fee of $1.5 million in lieu of future extension fees. The modification also modifies covenant tests to minimize the likelihood of additional cash being trapped.

In March 2009, we obtained a $7.0 million mortgage loan on a previously unencumbered hotel property in Jacksonville, Florida. The new loan matures in April 2034 and bears an interest rate at the greater of 6% or prime plus 1%.

In November 2009, we refinanced two mortgage loans secured by seven hotel properties with two new loans secured by five hotel properties. The loans that were refinanced had principal balances of $75.0 million and $65.0 million and maturity dates in March 2010 and April 2011, respectively. The new loans consist of a senior loan with a principal amount of $100.0 million and a junior loan with a principal amount of $45.0 million ($41.0 million was advanced at closing) with a blended interest rate of 12.26%, and each matures in December 2015. The refinance unencumbered two hotel properties previously collateralizing the refinanced mortgage loans.

In December 2009, we refinanced a $19.7 million mortgage loan collateralized by a hotel property in Tucson, Arizona, maturing in June 2011, with a new loan having the same principal balance and bearing interest rate at the greater of 5.5% or LIBOR plus 3.5% for a term of five years. The new loan matures in December 2014.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Maturities of indebtedness of our continuing operations as of December 31, 2010 for each of the five following years are as follows (in thousands):


			Maturity
	Initial		Including
	Maturity		Extensions

2011	$	511,196	$	343,994	⁽¹⁾
2012		28,851		196,053	⁽¹⁾
2013		171,261		171,261
2014		150,782		150,782
2015		402,323		402,323
Thereafter		1,253,751		1,253,751

Total	$	2,518,164	$	2,518,164


⁽¹⁾		Excludes extension options subject to coverage tests.

We are required to maintain certain financial ratios under various debt, preferred equity and derivative agreements. If we violate covenants in any debt or derivative agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. Violations of certain debt covenants may result in us being unable to borrow unused amounts under a line of credit, even if repayment of some or all borrowings is not required. The assets of our subsidiaries listed on Exhibit 21.2 of this filing are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of Ashford Hospitality Trust, Inc. or our operating partnership, Ashford Hospitality Limited Partnership and the liabilities of such subsidiaries do not constitute the obligations of Ashford Hospitality Trust, Inc. or Ashford Hospitality Limited Partnership. Presently, our existing financial debt covenants primarily relate to maintaining minimum debt coverage ratios, maintaining an overall minimum net worth, maintaining a maximum loan to value ratio, and maintaining an overall minimum total assets. At December 31, 2010, we were in compliance with all covenants or other requirements set forth in our debt, preferred equity and derivative agreements as amended.


10.	Derivatives and Hedging Activities

We are exposed to risks arising from our business operations, economic conditions and financial markets. To manage the risks, we primarily use interest rate derivatives to hedge our debt as a way to potentially improve cash flows. We also use non-hedge derivatives to capitalize on the historical correlation between changes in LIBOR and RevPAR. To mitigate the nonperformance risk, we routinely rely on a third party’s analysis of the creditworthiness of the counterparties, which supports our belief that the counterparties’ nonperformance risk is limited. All derivatives are recorded at fair value. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts/payments and the discounted expected variable cash payments/receipts. The fair values of interest rate caps, floors, flooridors and corridors are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fell below the strike rates of the floors or rise above the strike rates of the caps. The variable interest rates used in the calculation of projected receipts and payments on the swaps, caps, and floors are based on an expectation of future interest rates derived from observable market interest rate curves (LIBOR forward curves) and volatilities (the “Level 2” inputs that are observable at commonly quoted intervals, other than quoted prices). We also incorporate credit valuation adjustments (the “Level 3” inputs that are unobservable and typically based on our own assumptions, as there is little, if any, related market activity) to appropriately reflect both our own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements.

We have determined that when a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when the valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

current credit spreads, to evaluate the likelihood of default by us and our counter-parties, which we consider significant (10% or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy. Transfers of inputs between levels are determined at the end of each reporting period. In determining the fair values of our derivatives at December 31, 2010, the LIBOR interest rate forward curve (the Level 2 inputs) assumed an uptrend from 0.26% to 1.8% for the remaining term of our derivatives. The credit spreads (the Level 3 inputs) used in determining the fair values assumed an uptrend in nonperformance risk for both of our own and most of our counterparties.

In October 2010, we converted our $1.8 billion interest rate swap into a fixed rate swap of 4.09%, resulting in locked-in annual interest savings of approximately $32 million through March 2013 at no cost to us. Under the previous swap, which we entered into in March 2008 and which expires in March 2013, we received a fixed rate of 5.84% and paid a variable rate of LIBOR plus 2.64%, subject to a LIBOR floor of 1.25%. Under the terms of the new swap transaction, we will continue to receive a fixed rate of 5.84%, but will pay a fixed rate of 4.09%.

During 2009 and 2008, in order to take advantage of the declining LIBOR rates, we entered into various one-year “flooridors” with notional amounts totaling $11.7 billion and maturing dates between December 2010 and December 2011 for a total cost of $40.6 million. Income from these derivatives totaling $28.1 million, $16.7 million and $47,000 was recognized in 2010, 2009 and 2008, respectively.

In addition, during 2010 and 2009, we entered into interest rate caps with total notional amounts of $370.6 million and $506.2 million, respectively, to cap the interest rates on our mortgage loans with strike rates between 4.0% and 6.25%, for total costs of $75,000 and $383,000, respectively. These interest rate caps were designated as cash flow hedges. At December 31, 2010 and 2009, our floating interest rate mortgage loans, including mortgage loans of assets held for sale, with total principal balances of $588.2 million and $660.2 million were capped by interest rate hedges.

In December 2009, we also entered into an interest rate corridor for $13,000, which was designated as a cash flow hedge, with a notional amount of $130.0 million to effectively lower the existing interest rate cap on one of our floating rate mortgage loans for the period between December 2009 and May 2010. Under the corridor, the counterparty would pay us interest on the notional amount when LIBOR rates are above 4.6% up to a maximum of 140 basis points during the term of the corridor.

We have derivative agreements that incorporate the loan covenant provisions of our senior credit facility requiring us to maintain certain minimum financial covenant ratios on our indebtedness. Failure to comply with the covenant provisions would result in us being in default on any derivative instrument obligations covered by the agreement. At December 31, 2010, we were in compliance with all the covenants under the senior credit facility and the fair value of derivatives related to this agreement was an asset of $69.3 million.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair value of our non-hedge designated interest rate derivatives and the effects of these derivatives on the consolidated statement of operations are as follows ($ in thousands):


						Fair Value						Gain or (Loss)									Interest Savings or (Cost)
						Assets (Liabilities)						Recognized in Income									Recognized in Income
	Notional					December 31,						Year Ended December 31,									Year Ended December 31,
Derivative Type	Amount		Strike Rate	Maturity		2010			2009			2010			2009			2008			2010			2009			2008

Interest rate cap	$	375,036	6.00%		2009	$	—		$	—		$	—		$	—		$	(4	)	$	—		$	—		$	—
Interest rate cap	$	35,000	6.25%		2009		—			—			—			—			(2	)		—			—			—
Interest rate cap	$	52,000	5.75%		Sold		—			—			—			—			3			—			—			—
Interest rate cap	$	800,000	3.75%		2009		—			—			—			—			(1,775	)		—			—			558
Interest rate cap	$	1,000,000	3.75%		2011		—			248			(248	)		(510	)		(7,262	)		—			—			698
Interest rate swap	$	1,800,000	Pays LIBOR plus 2.638%, receives 5.84%		2013		95,081			69,462			25,619			(29,744	)		95,014			53,453			51,722			9,096
Interest rate swap ⁽¹⁾	$	1,475,000	Pays 4.084%, receives LIBOR plus 2.638%		2013		(20,922	)		—			(20,922	)		—			—			(3,898	)		—			—
Interest rate swap	$	325,000	Pays 4.114%, receives greater of 3.888% or LIBOR plus 2.638%		2013		124			—			124			—			—			(163	)		—			—
Interest rate floor ⁽¹⁾	$	1,475,000	Pays up to 1.25%		2013		—			(14,727	)		14,727			(661	)		(5,946	)		(11,354	)		(13,191	)		(38	)
Interest rate floor	$	325,000	Pays up to 1.25%		2013		(4,951	)		(3,245	)		(1,706	)		(144	)		(3,101	)		(3,219	)		(2,907	)		(9	)
Interest rate flooridor	$	1,800,000	1.25% — 0.75%		2009		—			—			—			(5,718	)		2,738			—			8,408			47
Interest rate flooridor	$	2,700,000	2.00% — 1.00%		2009		—			—			—			(6,873	)		—			—			6,900			—
Interest rate flooridor	$	3,600,000	1.25% — 0.75%		2010		—			14,801			(14,801	)		6,351			—			17,300			900			—
Interest rate flooridor	$	1,800,000	1.75% — 1.25%		2010		—			7,981			(7,981	)		887			—			8,650			450			—
Interest rate flooridor	$	1,800,000	2.75% — 0.50%		2011		37,532			19,882			17,650			4,637			—			2,137			—			—

Total						$	106,864	⁽²⁾	$	94,402	⁽²⁾	$	12,462	⁽³⁾	$	(31,775	) ⁽³⁾	$	79,665	⁽³⁾	$	62,906	⁽⁴⁾	$	52,282	⁽⁴⁾	$	10,352	⁽⁴⁾


⁽¹⁾		This interest rate floor was terminated and replaced by the 4.084%, $1,475,000 notional amount interest rate swap.
⁽²⁾		Reported as “Interest rate derivatives” in the consolidated balance sheets.
⁽³⁾		Reported as “Unrealized gain (loss) on derivatives” in the consolidated statements of operations.
⁽⁴⁾		Reported as “Other income” in the consolidated statements of operations.

The fair value of our hedge-designated interest rate derivatives and the effects of these derivatives on the consolidated statement of operations are as follows ($ in thousands):


																					Reclassified from						Gain (Loss)
						Fair Value						Income (Loss)									Accumulated OCI into						Recognized in Income
						Asset						Recognized in OCI									Interest Expense						for Ineffective Portion
	Notional		Interest			December 31,						Year Ended December 31,									Year Ended December 31,						Year Ended December 31,
Derivative Type	Amount		Rate	Maturity		2010			2009			2010			2009			2008			2010		2009		2008		2010			2009			2008

Interest rate cap	$	47,500	7.00%		2008	$	—		$	—		$	—		$	—		$	3		$	—	$	—	$	3	$	—		$	—		$	—
Interest rate cap	$	212,000	6.25%		2009		—			—			—			126			55			—		126		55		—			—			(15	)
Interest rate cap	$	160,000	5.00%		2010		—			—			278			58			(337	)		275		65		—		(4	)		—			(9	)
Interest rate cap	$	160,000	5.00%		2011		—			85			90			9			(533	)		151		—		—		(24	)		(1	)		(21	)
Interest rate cap	$	55,000	5.00%		2010		—			—			69			13			(82	)		69		12		—		—			(4	)		—
Interest rate cap	$	55,000	5.00%		2011		—			6			15			(36	)		—			17		—		—		(4	)		(2	)		—
Interest rate cap	$	167,212	6.00%		2010		—			—			26			(26	)		—			26		3		—		—			—			—
Interest rate cap	$	167,212	4.75%		2011		—			—			(49	)		—			—			4		—		—		—			—			—
Interest rate cap	$	60,800	4.81%		2012		2			105			56			(56	)		—			13		—		—		(146	)		—			—
Interest rate cap	$	203,400	4.50%		2010		—			7			54			(54	)		—			61		—		—		—			—			—
Interest rate cap	$	203,400	6.25%		2011		1			—			(22	)		—			—			—		—		—		—			—			—
Interest rate cap	$	19,740	4.00%		2012		—			40			(34	)		(49	)		—			4		—		—		—			—			—
Interest rate corridor	$	130,000	4.6% – 6.0%		2010		—			—			13			(13	)		—			13		—		—		—			—			—

Total						$	3	⁽¹⁾	$	243	⁽¹⁾	$	496		$	(28	)	$	(894	)	$	633	$	206	$	58	$	(178	) ⁽²⁾	$	(7	) ⁽²⁾	$	(45	) ⁽²⁾


⁽¹⁾		Included in “Interest rate derivatives” in the consolidated balance sheets.
⁽²⁾		Included in “Unrealized gain (loss) on derivatives” in the consolidated statements of operations.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the next twelve months, we expect $609,000 of accumulated comprehensive loss will be reclassified to interest expense.

The following table presents our derivative assets and liabilities measured at fair value on a recurring basis aggregated by the level in the fair value hierarchy within which measurements fall (in thousands):


	December 31, 2010								December 31, 2009
	Level 2			Level 3		Total			Level 2		Level 3			Total

Assets
Non-hedge derivatives:
Interest rate swap	$	74,283		$	—	$	74,283		$	69,462	$	—		$	69,462
Interest rate cap		—			—		—			248		—			248
Interest rate flooridor		37,532			—		37,532			42,664		—			42,664
Hedge derivatives:
Interest rate cap		3			—		3			243		—			243

Subtotal		111,818			—		111,818			112,617		—			112,617

Liabilities
Non-hedge derivatives:
Interest rate floor		(4,951	)		—		(4,951	)		—		(17,972	)		(17,972	)
Hedge derivatives:
Interest rate cap		—			—		—			—		—			—

Subtotal		(4,951	)		—		(4,951	)		—		(17,972	)		(17,972	)

Net	$	106,867		$	—	$	106,867		$	112,617	$	(17,972	)	$	94,645

The reconciliation of the beginning and ending balances of the derivatives that were measured using Level 3 inputs is as follows (in thousands):


	Year Ended
	December 31,
	2010			2009

Balance at beginning of period	$	(17,972	)	$	(17,080	)
Total unrealized (loss) gain included in earnings		(2,042	)		5,589
Total unrealized loss included in other comprehensive income		—			(127	)
Total loss reclassified to interest expense		—			(33	)
Purchases		—			162
Assets transferred into Level 3 still held at the reporting date ⁽¹⁾		—			73,922
Assets/liabilities transferred out of Level 3 terminated during the year		16,400			—
Assets/liabilities transferred out of Level 3 still held at the reporting date ⁽¹⁾		3,614			(80,405	)

Balance at end of period	$	—		$	(17,972	)


⁽¹⁾		Transferred in/out of Level 3 because the unobservable inputs used to determine the fair value at end of period were more/less than 10% of the total valuation of these derivatives.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


11.	Commitments and Contingencies

Restricted Cash – Under certain management and debt agreements existing at December 31, 2010, we escrow payments required for insurance, real estate taxes, and debt service. In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow 4% to 6% of gross revenues for capital improvements.

Franchise Fees – Under franchise agreements existing at December 31, 2010, we pay franchisor royalty fees between 2.5% and 6% of gross room revenue and, in some cases, food and beverage revenues. Additionally, we pay fees for marketing, reservations, and other related activities aggregating between 1% and 3.75% of gross room revenue and, in some cases, food and beverage revenues. These franchise agreements expire on varying dates between 2011 to 2031. When a franchise term expires, the franchisor has no obligation to renew the franchise. A franchise termination could have a material adverse effect on the operations or the underlying value of the affected hotel due to loss of associated name recognition, marketing support, and centralized reservation systems provided by the franchisor. A franchise termination could also have a material adverse effect on cash available for distribution to shareholders. In addition, if we breach the franchise agreement and the franchisor terminates a franchise prior to its expiration date, we may be liable for up to three times the average annual fees incurred for that property.

For the years ended December 31, 2010, 2009, and 2008, our continuing operations incurred franchise fees of $24.6 million, $23.7 million, and $28.1 million, respectively, which are included in other expenses in the accompanying consolidated statements of operations.

Management Fees – Under management agreements existing at December 31, 2010, we pay a) monthly property management fees equal to the greater of $10,000 (CPI adjusted since 2003) or 3% of gross revenues, or in some cases 2% to 8.5% of gross revenues, as well as annual incentive management fees, if applicable, b) market service fees on approved capital improvements, including project management fees of up to 4% of project costs, for certain hotels, and c) other general fees at current market rates as approved by our independent directors, if required. These management agreements expire from 2012 through 2032, with renewal options. If we terminate a management agreement prior to its expiration, we may be liable for estimated management fees through the remaining term, liquidated damages or, in certain circumstances, we may substitute a new management agreement.

Leases – We lease land and facilities under non-cancelable operating leases, which expire between 2040 and 2084, including six ground leases (five of them related to our continuing operations) and one air lease related to our hotel properties. Several of these leases are subject to base rent plus contingent rent based on the related property’s financial results and escalation clauses. For the years ended December 2010, 2009 and 2008, our continuing operations recognized rent expense of $5.1 million, $5.8 million and $5.8 million, respectively, which included contingent rent of $1.2 million, $1.6 million and $1.5 million, respectively. Rent expense related to continuing operations is included in other expenses in the consolidated statements of operations. We also have equipment under a capital lease which expires in 2011 with an interest rate of 6.0% and is included in “Investment in hotel properties” in the accompanying consolidated balance sheets. Future minimum rentals due under non-cancelable leases are as follows for each of the years ending December 31, (in thousands):


	Operating		Capital
	Leases		Leases

2011	$	4,431	$	36
2012		3,565		—
2013		3,229		—
2014		2,975		—
2015		2,968		—
Thereafter		111,913		—

Total	$	129,081	$	36

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

At December 31, 2010, we had capital commitments of $13.2 million relating to general capital improvements that are expected to be paid in the next 12 months.

Employment Agreements – Our employment agreements with certain executive officers provide for minimum annual base salaries, other fringe benefits, and non-competition clauses as determined by the Board of Directors. The employment agreements terminated on December 31, 2010, with automatic one-year renewals, unless terminated by either party upon six months’ notice, subject to severance provisions.

Litigation – We are currently subject to litigation arising in the normal course of our business. In the opinion of management, none of these lawsuits or claims against us, either individually or in the aggregate, is likely to have a material adverse effect on our business, results of operations, or financial condition. In addition, management believes we have adequate insurance in place to cover any such significant litigation.

Taxes – We and our subsidiaries file income tax returns in the federal jurisdiction and various states. Tax years 2007 through 2010 remain subject to potential examination by certain federal and state taxing authorities. In 2010, the Internal Revenue Service (IRS) audited one of our taxable REIT subsidiaries that leases two of our hotel properties for the tax year ended December 31, 2007. During the year ended December 31, 2010, the IRS issued a notice of proposed adjustment that reduced the amount of rent we charged to the taxable REIT subsidiary. We own a 75% interest in the hotel properties and the taxable REIT subsidiary at issue. We disagree with the IRS’ position and during the fourth quarter of 2010, we filed a written protest with the IRS and requested an IRS Appeals Office conference. In determining amounts payable by our TRS subsidiaries under our leases, we engaged a third party to prepare a transfer pricing study which concluded that the lease terms were consistent with arm’s length terms as required by applicable Treasury regulations. However, if the IRS were to prevail in its proposed adjustment, our taxable REIT subsidiary would owe approximately $1.1 million additional U.S. federal income taxes plus possible additional state income taxes of $68,000, net of federal benefit, or we could be subject to a 100% federal excise tax on our share of the amount by which the rent was held to be greater than the arm’s-length rate. We anticipate that the IRS will grant the Appeals conference by the end of the third quarter of 2011. We believe we will prevail in the settlement of the audit and that the settlement will not have a material adverse effect on our financial condition and results of operations. During 2010, the Canadian taxing authorities selected our TRS subsidiary that leased our one Canadian hotel for audit for the tax years ended December 31, 2007, 2008 and 2009. The Canadian hotel was sold in June 2008 and the TRS ceased activity in Canada at that time. We believe that the results of the completion of this examination will not have a material adverse effect on our financial condition.

If we dispose of the four remaining properties contributed in connection with our initial public offering in 2003 in exchange for units of operating partnership, we may be obligated to indemnify the contributors, including our Chairman and Chief Executive Officer whom have substantial ownership interests, against the tax consequences of the sale. In addition, we agreed to use commercially reasonable efforts to maintain non-recourse mortgage indebtedness of at least $16.0 million, which allows contributors of the Las Vegas hotel property to defer gain recognition in connection with their contribution.

Additionally, for certain periods of time, we are prohibited from selling or transferring the Marriott Crystal Gateway in Arlington, Virginia, if as a result, the entity from which we acquired the property would recognize gain for federal tax purposes.

Further, in connection with our acquisition of certain properties on March 16, 2005 that were contributed in exchange for units of our operating partnership, we agreed to certain tax indemnities with respect to ten of these properties. If we dispose of these properties or reduce debt on these properties in a transaction that results in a taxable gain to the contributors, we may be obligated to indemnify the contributors or their specified assignees against the tax consequences of the transaction.

In general, tax indemnities equal the federal, state, and local income tax liabilities the contributor or their specified assignee incurs with respect to the gain allocated to the contributor. The contribution agreements’ terms

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

generally require us to gross up tax indemnity payments for the amount of income taxes due as a result of such tax indemnities.

Potential Pension Liabilities – Certain employees at one of our hotel properties are unionized and covered by a multiemployer defined benefit pension plan. At acquisition of the hotel property in 2006, there were no unfunded pension liabilities. Although those workers are not our employees, the hotel manager of that hotel property may in the future de-unionize given their work rules. It is reasonably possible that we may incur additional cost for the unfunded pension liabilities should a de-unionizing occur. At December 31, 2010, we accrued $74,000 for the potential unfunded liabilities.


12.	Series B-1 Preferred Stock

At December 31, 2010 and 2009, we had 7.2 million and 7.4 million, respectively, outstanding shares of Series B-1 cumulative convertible redeemable preferred stock. Series B-1 preferred stock is convertible at any time, at the option of the holder, into our common stock by dividing the preferred stock carrying value by the conversion price then in effect, which is $10.07, subject to certain adjustments, as defined. Series B-1 preferred stock is redeemable for cash at our option at the liquidation preference, which is set at $10.07. In 2010, 200,000 shares of our Series B-1 preferred stock with a carrying value of $2.0 million were converted to common shares, pursuant to the terms of the Series B-1 preferred stock. Series B-1 preferred stock is also redeemable for cash at the option of the holder at a specified redemption price, as defined, if certain events occur. Due to these redemption features that are not under our control, the preferred stock is classified outside of permanent equity. Series B-1 preferred stock holders are entitled to vote, on an as-converted basis voting as a single class together with common stock holders, on all matters to be voted on by our shareholders. Series B-1 preferred stock quarterly dividends are set at the greater of $0.14 per share or the prevailing common stock dividend rate. During 2010, 2009 and 2008, we declared dividends of $4.1 million, $4.2 million and $5.7 million, respectively, to holders of the Series B-1 preferred stock.

The articles governing our Series B-1 preferred stock require us to maintain certain covenants. The impairment charges recorded during the second, third and fourth quarter of 2009, and the second and fourth quarter of 2010 could have prevented us from satisfying one financial ratio. However, the holder of the Series B-1 preferred stock reviewed the specific impairment charges and agreed to exclude the impairment charges incurred in the second, third and fourth quarters of 2009, and in the second and fourth quarters of 2010 as they impacted the financial ratio calculations for the affected periods. At December 31, 2010, we are in compliance with all covenants required under the articles governing the Series B-1 preferred stock.


13.	Redeemable Noncontrolling Interests

Redeemable noncontrolling interests in the operating partnership represents the limited partners’ proportionate share of equity in earnings/losses of the operating partnership, which is an allocation of net income/loss attributable to the common unit holders based on the weighted average ownership percentage of these limited partners’ common units and the units issued under our Long-Term Incentive Plan (the “LTIP units”) that are vested throughout the period plus distributions paid to these limited partners with regard to the Class B units. Class B common units have a fixed dividend rate of 6.82% in years one to three and 7.2% thereafter, and have priority in payment of cash dividends over common units but otherwise have no preference over common units. Aside from the Class B units, all other outstanding units represent common units. Beginning one year after issuance, each common unit of limited partnership interest (including each Class B common unit) may be redeemed for either cash or one share of Ashford’s common stock at Ashford’s discretion, subject to contractual lock-up agreements that prevent holders of Class B common units from redeeming two-thirds of such units before 18 months and one-third of such units before two years from the issuance date of such units. Beginning ten years after issuance, each Class B unit may be converted into a common unit at either party’s discretion.

In 2010 and 2008, we issued 1,086,000 and 1,056,000 LTIP units, respectively, to certain executives and employees as compensation. The 2008 LTIP units vest over four and one-half years and the 2010 LTIP units vest

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

over three years. Upon vesting, each LTIP unit can be converted by the holder into one common partnership unit of the operating partnership which then can be redeemed for cash or, at Ashford’s election, settled in Ashford’s common stock. As of December 31, 2010, all the LTIP units have reached full economic parity with the common units. These LTIP units had an aggregate value of $14.0 million at the date of grant which is being amortized over the vesting period. Compensation expense of $2.9 million, $983,000 and $981,000 was recognized for 2010, 2009 and 2008 related to the LTIP units granted. The unamortized value of the LTIP units was $9.1 million at December 31, 2010 that will be amortized over a period of 2.2 years. During 2008, we declared cash distributions of $665,000, or $0.21 per unit per quarter for the first three quarters, related to the LTIP units. These distributions were recorded as a reduction of redeemable noncontrolling interests in operating partnership. No distributions were declared for 2009 and 2010.

During 2010, 719,000 operating partnership units with a carrying value of $5.2 million were redeemed for cash at an average price of $7.39 per unit and 455,000 operating partnership units presented for redemption with a carrying value of $3.6 million were converted to common shares at our election.

Redeemable noncontrolling interests in our operating partnership as of December 31, 2010 and December 31, 2009 were $126.7 million and $85.2 million, which represented ownership of 17.5% and 19.9% in our operating partnership, respectively. The carrying value of redeemable noncontrolling interests as of December 31, 2010 and 2009 included adjustments of $72.3 million and $17.6 million, respectively, to reflect the excess of redemption value over the accumulated historical costs. For 2010 and 2009, we allocated net loss of $8.4 million and $37.7 million to these redeemable noncontrolling interests, respectively. For 2008, we allocated net income of $15.0 million to these noncontrolling interests.

A summary of the activity of the operating partnership units is as follow (in thousands):


	Year Ended December 31,
	2010			2009			2008

Units outstanding at beginning of year		14,283			14,393			13,347
Units issued		1,086			—			1,056
Units redeemed for cash of $5,314 in 2010 and $464 in 2009		(719	)		(110	)		—
Units converted to common shares		(455	)		—			(10	)

Units outstanding at end of year		14,195			14,283			14,393

Units convertible at end of year		12,475			13,227			13,337


14.	Equity

Reissuance of treasury stock – In December 2010, we reissued 7.5 million shares of our treasury stock at a gross price of $9.65 per share and received net proceeds of approximately $70.4 million. In January 2011, an underwriter purchased an additional 300,000 shares of our common shares through the partial exercise of the underwriter’s 1.125 million share over-allotment option and we received net proceeds of $2.8 million. The net proceeds were used to repay a portion of our outstanding borrowings under our senior credit facility.

At December 31, 2010 and 2009, there were 123.4 million and 122.7 million shares of common stock issued, and 59.0 million and 57.6 million shares outstanding, respectively.

Potential Sale of Common Shares – In February 2010, we entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA Global Master SPV Ltd. (“YA Global”) that terminates in 2013, and is available to provide us additional liquidity if needed. Pursuant to the SEDA, YA Global has agreed to purchase up to $50.0 million (which may be increased to $65.0 million pursuant to the SEDA) of newly issued shares of our common stock if notified to do so by us in accordance with the SEDA.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

during 2010 pursuant to this program. Proceeds from the ATM program are expected to be used for general corporate purposes, including investments and debt paydown.

Stock Repurchases – In November 2007, our Board of Directors authorized management to purchase up to a total of $50 million of our common shares from time to time on the open market. We completed substantially all of the $50 million repurchase in early September 2008. On September 5, 2008, the Board of Directors authorized the repurchase of an additional $75 million of our common stock that could be purchased under the same share repurchase program. The $75 million authorization was subsequently revised to include repurchases of both common and preferred stock. We completed the additional $75 million repurchase in December 2008. In January 2009, the Board of Directors approved an additional $200 million authorization under the same repurchase plan (excluding fees, commissions and all other ancillary expenses) and expanded the plan to include: (i) the repurchase of shares of our common stock, Series A preferred stock, Series B-1 preferred stock and Series D preferred stock and/or (ii) the prepayment of our outstanding debt obligations, including debt secured by our hotel assets and debt senior to our mezzanine or loan investments. In February 2010, the Board of Directors expanded the repurchase program further to include the potential repurchase of units of our operating partnership. As of June 2010, we ceased all repurchases under this plan indefinitely. Total shares repurchased on the open market are summarized as follows (in thousands, except per share amounts):


	Year Ended December 31,
	2010						2009						2008
	Total		Aggregate		Average		Total		Aggregate		Average		Total		Aggregate		Average
	Number of		Purchase		Price Per		Number of		Purchase		Price Per		Number of		Purchase		Price Per
	Shares		Price		Share		Shares		Price		Share		Shares		Price		Share

Common Stock		7,158	$	45,087	$	6.30		30,058	$	81,329	$	2.71		34,023	$	96,920	$	2.85
Series A Preferred		—	$	—	$	—		697	$	5,338	$	7.65		115		700		6.12
Series D Preferred		—	$	—	$	—		727	$	5,318	$	7.31		1,606		9,189		5.72

In addition, we acquired 47,403 shares, 374 shares and 5,687 shares of our common stock in 2010, 2009 and 2008, respectively, to satisfy employees’ statutory minimum federal income tax obligations in connection with vesting of equity grants issued under our stock-based compensation plan. Included in the 64.4 million and 65.2 million shares of treasury stock at December 31, 2010 and 2009, 853,000 shares and 295,000 shares were purchased under a deferred compensation plan that will be settled in our shares.

Preferred Stock – In accordance with Ashford’s charter, we are authorized to issue 50 million shares of preferred stock, which currently includes Series A cumulative preferred stock and Series D cumulative preferred stock.

Series A Preferred Stock. At December 31, 2010 and 2009, we had 1.5 million outstanding shares of 8.55% Series A cumulative preferred stock. Series A preferred stock has no maturity date, and we are not required to redeem these shares at any time. Prior to September 22, 2009, Series A preferred stock was not redeemable, except in certain limited circumstances relating to the ownership limitation necessary to preserve our qualification as a REIT. However, on and after September 22, 2009, Series A preferred stock is redeemable at our option for cash, in whole or from time to time in part, at a redemption price of $25 per share plus accrued and unpaid dividends, if any, at the redemption date. Series A preferred stock dividends are payable quarterly, when and as declared, at the rate of 8.55% per annum of the $25 liquidation preference (equivalent to an annual dividend rate of $2.1375 per share). In general, Series A preferred stock holders have no voting rights.

Series D Preferred Stock. In September 2010, we completed the offering of 3.3 million shares of our 8.45% Series D Cumulative Preferred Stock at a gross price of $23.178 per share, and we received net proceeds of $72.2 million after underwriting fees and other costs and an accrued dividend of $1.6 million. The proceeds from the offering, together with some corporate funds, were used to pay down $80.0 million of our senior credit facility. At December 31, 2010 and 2009, we had 9.0 million and 5.7 million outstanding shares of Series D preferred stock, respectively. Series D preferred stock has no maturity date, and we are not required to redeem the shares at any time.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Prior to July 18, 2012, Series D preferred stock is not redeemable, except in certain limited circumstances such as to preserve the status of our qualification as a REIT or in the event the Series D stock ceases to be listed on an exchange and we cease to be subject to the reporting requirements of the Securities Exchange Act, as described in Ashford’s charter. However, on and after July 18, 2012, Series D preferred stock is redeemable at our option for cash, in whole or from time to time in part, at a redemption price of $25 per share plus accrued and unpaid dividends, if any, at the redemption date. Series D preferred stock quarterly dividends are set at the rate of 8.45% per annum of the $25 liquidation preference (equivalent to an annual dividend rate of $2.11 per share). The dividend rate increases to 9.45% per annum if these shares are no longer traded on a major stock exchange. In general, Series D preferred stock holders have no voting rights.

Dividends – A summary of dividends declared is as follows (in thousands):


	Year Ended December 31,
	2010		2009		2008

Common stock related:
Common shares	$	—	$	—	$	73,670
Preferred stocks:
Series A preferred stock		3,180		3,180		4,855
Series D preferred stock		13,871		11,971		16,052

Total dividends declared	$	17,051	$	15,151	$	94,577

Noncontrolling Interests in Consolidated Joint Ventures – Noncontrolling joint venture partners have ownership interests ranging from 11% to 25% in six hotel properties with a total carrying value of $16.7 million and $17.9 million at December 31, 2010 and 2009, respectively, and are reported in equity in the consolidated balance sheets. Loss from consolidated joint ventures attributable to these noncontrolling interests was $1.7 million and $765,000 for 2010 and 2009, respectively, and income from consolidated joint ventures attributable to these noncontrolling interests was $1.4 million for 2008.


15.	Impairment Charges

Investment in Hotel Properties – At December 31, 2010, the Hilton hotel property in Tucson, Arizona had a reasonable probability of being sold in the near future. Based on our assessment of the expected purchase price obtained from potential buyers (a level 3 measure), we recorded an impairment charge of $39.9 million. This hotel property was carried at its estimated fair value of $22.2 million at December 31, 2010.

Notes Receivable — We evaluated the collectability of the mezzanine loan secured by 105 hotel properties maturing in April 2011, and weighted different probabilities of outcome from full payment at maturity to a foreclosure by the senior lender. Based on this analysis, we recorded an impairment charge of $7.8 million on December 31, 2010.

Interest payments since March of 2009 were not made on the $7.1 million junior participation note receivable maturing January 2011 secured by a hotel property in La Jolla, California. In accordance with our accounting policy, we discontinued recording interest and fee income on this note beginning in March of 2009. In August 2010, we reached an agreement with the borrower to settle the loan and pursuant to the settlement agreement, we received total cash payments of $6.2 million in 2010 and recorded a net impairment charge of $836,000.

Principal and interest payments were not made since October 2008, on the $18.2 million junior participation note receivable secured by the Four Seasons hotel property in Nevis. The underlying hotel property suffered significant damage by Hurricane Omar. We discontinued recording interest on this note beginning in October 2008. In 2009, we recorded an impairment charge to fully reserve this note receivable. In May 2010, the senior mortgage lender foreclosed on the loan. As a result of the foreclosure, our interest in the senior mortgage was converted to a

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.4% subordinate beneficial interest in the equity of the trust that holds the hotel property. Due to our junior status in the trust, we have not recorded any value for our beneficial interest at December 31, 2010.

The borrower of the $4.0 million junior participation loan collateralized by the Sheraton hotel property in Dallas, Texas due in July 2009 has been in default since May 11, 2009. Based on a third-party appraisal (level 3 measure), it is unlikely that we would be able to recover our full investment due to our junior status. As a result, we recorded a valuation allowance for the full amount of the note receivable during 2009. In February 2010, we and the senior note holder of the participation note receivable formed Redus JV for the purposes of holding, managing or disposing of the Sheraton hotel property in Dallas, Texas, which collateralized our $4.0 million principal amount junior participating note receivable that matured in July 2009. The note receivable was fully reserved in 2009. We have an 18% subordinated interest in Redus JV. In March 2010, the foreclosure was completed and the estimated fair value of the property was $14.2 million based on a third-party appraisal (level 3 measure). Pursuant to the operating agreement of Redus JV, as a junior lien holder of the original participation note receivable, we are only entitled to receive our share of distributions after the original senior note holder has recovered its original investment of $18.4 million and Redus JV intends to sell the hotel property in the next 12 months. It is unlikely that the senior holder will be able to recover its original investment. Therefore, no cash flows were projected from Redus JV for the projected holding period. Under the applicable authoritative accounting guidance, we recorded a zero value for our 18% subordinated interest in Redus JV.

In May 2010, the mezzanine loan with a principal balance of $7.0 million secured by the Le Meridien hotel property in Dallas, Texas was settled with a cash payment of $1.1 million. The loan was fully reserved in 2009 as the borrower ceased making debt service payments on the loan. As a result of the settlement, the $1.1 million was recorded as a credit to impairment charges in accordance with authoritative accounting guidance for impaired loans.

In February 2010, the mezzanine loan secured by the Ritz-Carlton hotel property in Key Biscayne, Florida, with a principal amount of $38.0 million and a net carrying value of $23.0 million at December 31, 2009 was restructured. In connection with the restructuring, we received a cash payment of $20.2 million and a $4.0 million note receivable. We recorded a net impairment charge of $10.7 million in 2009 on the original mezzanine loan. The restructured note bears an interest rate of 6.09% and matures in June 2017 with interest only payments through maturity. The note was recorded at its net present value of $3.0 million at restructuring, based on its future cash flows. The interest payments are recorded as reductions of the principal of the note receivable, and the valuation adjustments to the net carrying amount of this note are recorded as a credit to impairment charges.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the changes in allowance for losses for the year ended December 31, 2010 and 2009 (in thousands):


	Year Ended
	December 31,
	2010			2009

Balance at beginning of period	$	148,679		$	—
Impairment charges		8,691			149,285
Valuation adjustments (credits to impairment charges)		(2,216	)		(606	)
Charge-offs		(138,279	)		—

Balance at end of period	$	16,875		$	148,679

Assets Held for Sale – As fully discussed in Note 6, we recorded impairment charges on hotel properties held for sale of $35.7 million and $70.2 million in 2010 and 2009, respectively, to write down those properties to their estimated fair values less cost to sell.


16.	Stock-Based Compensation

Under the Amended and Restated 2003 Stock Incentive Plan (the “Plan”), we are authorized to grant 7.8 million restricted shares of our common stock as incentive stock awards. In June 2008 an additional 3.8 million shares were approved for grant under the Plan at our annual shareholders meeting.

At December 31, 2010, 3.4 million shares were available for future issuance under the Plan. A summary of our restricted stock activity is as follows (shares in thousands):


	Year Ended December 31,
	2010					2009					2008
				Weighted					Weighted					Weighted
				Average					Average					Average
	Restricted			Price at		Restricted			Price at		Restricted			Price at
	Shares			Grant		Shares			Grant		Shares			Grant

Outstanding at beginning of year		1,589		$	4.60		991		$	10.96		1,369		$	12.19
Restricted shares granted		468		$	7.08		1,100		$	1.84		214		$	4.83
Restricted shares vested		(655	)	$	5.72		(502	)	$	11.10		(575	)	$	11.60
Restricted shares forfeited		(15	)	$	4.51		—		$	—		(17	)	$	11.55

Outstanding at end of year		1,387		$	4.91		1,589		$	4.60		991		$	10.96

At December 31, 2010, the outstanding restricted stock had vesting schedules between March 2011 and April 2015. Stock-based compensation expense of $4.1 million, $4.0 million and $5.8 million was recognized for the years ended December 31, 2010, 2009 and 2008, respectively. The restricted stock vested during 2010 had a fair value of $4.6 million at the date of vesting. At December 31, 2010, the unamortized cost of the unvested shares of restricted stock was $3.8 million that will be amortized over a period of 4.3 years, and the outstanding restricted shares had an aggregate intrinsic value of $13.4 million.


17.	Employee Benefit Plans

In December 2008, management made a decision to suspend, effective January 1, 2009, the company match for all the benefit plans described below, unvested past matches will continue to vest in accordance with the terms of the plans. In December 2009, management announced the resumption of the company match for all the benefit plans effective January 1, 2010.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Employee Savings and Incentive Plan (ESIP) – Our ESIP, a nonqualified compensation plan that covers employees who work at least 25 hours per week, allows eligible employees to contribute up to 100% of their compensation to various investment funds. We match 25% of the first 10% each employee contributes. Employee contributions vest immediately whereas company contributions vest 25% annually. For the years ended December 31, 2010, 2009 and 2008, we incurred matching expenses of $4,000, $-0- and $47,000, respectively.

401(k) Plan – Effective January 1, 2006, we established our 401(k) Plan, a qualified defined contribution retirement plan that covers employees 21 years of age or older who have completed one year of service and work a minimum of 1,000 hours annually. The 401(k) Plan allows eligible employees to contribute up to 100% of their compensation, subject to IRS imposed limitations, to various investment funds. We make matching cash contributions of 50% of each participant’s contributions, based on participant contributions of up to 6% of compensation. However, company matching only occurs in either the 401(k) Plan or the ESIP, as directed by the participant. Participant contributions vest immediately whereas company matches vest 25% annually. For the years ended December 31, 2010, 2009 and 2008, we incurred matching expense of $162,000, $-0-, and $127,000, respectively.

Deferred Compensation Plan – Effective January 1, 2008, we established a nonqualified deferred compensation plan for certain executive officers. The plan allows participants to defer up to 100% of their base salary, bonus and stock awards and select an investment fund for measurement of the deferred compensation liability. We recorded losses of $81,000, $27,000 and $199,000 in 2010, 2009 and 2008, respectively, for the change in cash surrender value of the life insurance policy where deferred funds were invested. In addition, as a result of the change in market value of the investment fund, an additional compensation expense of $11,000, $387,000 and a credit to compensation expense of $220,000 were recorded for 2010, 2009 and 2008, respectively. In November 2010, we surrendered the life insurance policy that indexed the deferred compensation plan.


18.	Income Taxes

For federal income tax purposes, we elected to be treated as a REIT under the Internal Revenue Code. To qualify as a REIT, we must meet certain organizational and operational stipulations, including a requirement that we distribute at least 90% of our REIT taxable income, excluding net capital gains, to our shareholders. We currently intend to adhere to these requirements and maintain our REIT status. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes as well as to federal income and excise taxes on our undistributed taxable income.

At December 31, 2010, 99 of our 100 hotel properties were leased or owned by Ashford TRS (our taxable REIT subsidiaries) while the remaining hotel was leased on a triple-net lease basis to a third-party tenant. Ashford TRS recognized net book income (loss) of $21.8 million, $(27.4) million and $(36.3) million for the years ended December 31, 2010, 2009 and 2008, respectively.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table reconciles the income tax expense at statutory rates to the actual income tax expense recorded (in thousands):


	Year Ended December 31,
	2010			2009			2008

Income tax (expense) benefit at federal statutory income tax rate of 35%	$	(8,429	)	$	575		$	8,699
State income tax (expense) benefit, net of federal income tax benefit		(1,217	)		36			1,283
Permanent differences		(130	)		(149	)		(183	)
State and local income tax benefit (expense) on pass-through entity subsidiaries		825			(123	)		(436	)
Gross receipts and margin taxes		(537	)		(940	)		(568	)
Other		(32	)		(91	)		174
Valuation allowance		9,675			(816	)		(9,408	)

Income tax benefit (expense) for income from continuing operations		155			(1,508	)		(439	)
Income tax expense for income from discontinued operations		(22	)		(56	)		(654	)

Total income tax benefit (expense)	$	133		$	(1,564	)	$	(1,093	)

The components of income tax benefit (expense) from continuing operations are as follows (in thousands):


	Year Ended December 31,
	2010			2009			2008

Current:
Federal	$	(100	)	$	(349	)	$	854
State		(656	)		(1,135	)		(1,433	)

Total current		(756	)		(1,484	)		(579	)

Deferred:
Federal		85			—			(218	)
State		826			(24	)		358

Total deferred		911			(24	)		140

Total income tax benefit (expense)	$	155		$	(1,508	)	$	(439	)

For the year ended December 31, 2010, 2009 and 2008, income tax expense includes interest and penalties paid to taxing authorities of $32,000, $23,000 and $80,000, respectively. At December 31, 2010 and 2009, we determined that there were no amounts to accrue for interest and penalties due to taxing authorities.

In May 2006, the State of Texas adopted House Bill 3, which modified the state’s franchise tax structure, replacing the previous tax based on capital or earned surplus with a margin tax (the Texas Margin Tax) effective with franchise tax reports filed on or after January 1, 2008. The Texas Margin Tax is computed by applying the applicable tax rate (1% for our business) to the profit margin, which is generally determined by total revenue less either the cost of goods sold or compensation as applicable. Although House Bill 3 states that the Texas Margin Tax is not an income tax, we believe that the authoritative accounting guidance related to income taxes applies to the Texas Margin Tax. We were required to record an income tax provision for the Texas Margin Tax of $574,000, $970,000 and $710,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

In July 2007, the State of Michigan adopted Senate Bill 94, which modified the state’s business tax structure, replacing the previous tax which was a modified value added tax with a new tax (the “Michigan Business Tax”) that

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

has two components, income and modified gross receipts. The income tax component is computed by applying the applicable tax rate (4.95%) to taxable income after the REIT dividends paid deduction. The modified gross receipts tax component is computed by applying the applicable tax rate (0.8%) to modified gross receipts, which is generally determined by total revenue less purchases from other businesses. The total Michigan Business Tax is calculated as the sum of the two components plus a surcharge of 21.99% on the total tax liability. For the years ended December 31, 2010, 2009 and 2008, we were liable for the modified gross receipts component (plus the surcharge) and recorded an income tax provision for the Michigan Business Tax of $113,000, $47,000 and $370,000, respectively.

At December 31, 2010 and 2009, our deferred tax asset (liability) and related valuation allowance consisted of the following (in thousands):


	December 31,
	2010			2009

Allowance for doubtful accounts	$	160		$	238
Unearned income		1,234			1,270
Unfavorable management contract liability		6,407			7,383
Federal and state net operating losses		46,174			42,087
Accrued expenses		2,340			2,551
Prepaid expenses		(3,241	)		—
Interest expense carryforwards		5,332			5,332
Tax property basis greater than book basis		14,306			14,734
Tax derivatives basis less than book basis		(7,449	)		—
Other		90			38

Gross deferred tax asset		65,353			73,633
Valuation allowance		(65,249	)		(73,633	)

Subtotal		104			—
Tax property basis less than book basis		—			(894	)

Net deferred tax asset (liability)	$	104		$	(894	)

At December 31, 2010 and 2009, we recorded a valuation allowance of $65.2 million and $73.6 million, respectively, to substantially offset our gross deferred tax asset. As a result of Ashford TRS losses in 2010, 2009 and 2008, and the limitation imposed by the Internal Revenue Code on the utilization of net operating losses of acquired subsidiaries, we believe that it is more likely than not our gross deferred tax asset will not be realized, and therefore, have provided a valuation allowance to substantially reserve against the balances. At December 31, 2010, Ashford TRS had net operating loss carryforwards for federal income tax purposes of $114.6 million, which begin to expire in 2022, and are available to offset future taxable income, if any, through 2030. Approximately $14.2 million of the $114.6 million of net operating loss carryforwards is attributable to acquired subsidiaries and subject to substantial limitation on its use.

The following table summarizes the changes in the valuation allowance (in thousands):


	Year Ended December 31,
	2010			2009			2008

Balance at beginning of year	$	73,633		$	77,160		$	64,137
Additions charged to other		3,786			11,554			15,472
Deductions		(12,170	)		(15,081	)		(2,449	)

Balance at end of year	$	65,249		$	73,633		$	77,160

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


19.	Income (Loss) Per Share

The following table reconciles the amounts used in calculating basic and diluted earnings (loss) per share (in thousands, except per share amounts):


	Year Ended December 31,
	2010			2009			2008

(Loss) income from continuing operations attributable to the Company	$	(60,066	)	$	(163,432	)	$	87,205
Less: Dividends on preferred stocks		(21,194	)		(19,322	)		(26,642	)
Less: Dividends on common stocks		—			—			(73,106	)
Less: Dividends on unvested restricted shares		—			—			(564	)

Undistributed loss from continuing operations allocated to common shareholders	$	(81,260	)	$	(182,754	)	$	(13,107	)

Income (loss) from discontinued operations allocated to common shareholders	$	8,326		$	(86,810	)	$	41,989

Income from continuing operations distributed to common shareholders	$	—		$	—		$	73,106
Undistributed loss from continuing operations allocated to common shareholders		(81,260	)		(182,754	)		(13,107	)

Total distributed and undistributed (loss) income from continuing operations allocated to common shareholders		(81,260	)		(182,754	)		59,999
Income (loss) from discontinued operations allocated to common shareholders		8,326			(86,810	)		41,989

Total distributed and undistributed (loss) income allocated to common shareholders	$	(72,934	)	$	(269,564	)	$	101,988

Weighted average common shares – Basic and diluted		51,159			68,597			111,295

Basic and diluted (loss) income per share:
Distributed income from continuing operations	$	—		$	—		$	0.66
Undistributed loss from continuing operations		(1.59	)		(2.66	)		(0.12	)

Total distributed and undistributed (loss) income from continuing operations		(1.59	)		(2.66	)		0.54
Undistributed income (loss) from discontinued operations		0.16			(1.27	)		0.37

Basic and diluted net (loss) income attributable to common shares	$	(1.43	)	$	(3.93	)	$	0.91

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Due to their anti-dilutive effect, the computation of diluted income per share does not reflect the adjustments for the following items (in thousands):


	Year Ended December 31,
	2010			2009			2008

Diluted income (loss) from continuing operations attributable to common shareholders not adjusted for:
Dividends to convertible Series B-1 Preferred Stock	$	4,143		$	4,171		$	5,735
(Loss) income from continuing operations attributable to redeemable noncontrolling interests in operating partnership		(9,325	)		(24,004	)		10,639

Total	$	(5,182	)	$	(19,833	)	$	16,374

Diluted shares not adjusted for:
Effect of assumed conversion of Series B-1 Preferred Stock		7,414			7,448			7,448
Effect of assumed conversion of operating partnership units		14,470			13,485			13,924

Total		21,884			20,933			21,372


20.	Segment Reporting

We operate in two business segments within the hotel lodging industry: direct hotel investments and hotel financing. Direct hotel investments refer to owning hotels through either acquisition or new development. We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments have similar economic characteristics and exhibit similar long-term financial performance. Hotel financing refers to owning subordinate hotel-related mortgages through acquisition or origination. We do not allocate corporate-level accounts to our operating segments, including transaction acquisition costs and contract termination costs, corporate general and administrative expenses, non-operating interest income, other income, interest expense and amortization of loan costs, write-off of loan costs and exit fees, unrealized gain (loss) on derivatives, and income tax

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

expense/benefit. For the years ended December 31, 2010, 2009 and 2008, financial information related to our reportable segments was as follows (in thousands):


	Direct Hotel		Hotel
	Investments		Financing			Corporate			Consolidated

Year Ended December 31, 2010:
Total revenues	$	839,987	$	1,378		$	—		$	841,365

Total hotel expenses		556,260		—			—			556,260
Property taxes, insurance and other		49,623		—			—			49,623
Depreciation and amortization		133,435		—			—			133,435
Impairment charges		39,903		6,501			—			46,404
Transaction acquisition and contract termination costs		—		—			7,001			7,001
Corporate general and administrative		—		—			30,619			30,619

Total expenses		779,221		6,501			37,620			823,342

Operating income (loss)		60,766		(5,123	)		(37,620	)		18,023
Equity loss in unconsolidated joint venture		—		(20,265	)		—			(20,265	)
Interest income		—		—			283			283
Other income		—		—			62,826			62,826
Interest expense and amortization of loan costs		—		—			(140,609	)		(140,609	)
Write-off of premiums, loan costs and exit fees		—		—			(3,893	)		(3,893	)
Unrealized gain on derivatives		—		—			12,284			12,284

Income (loss) from continuing operations before income taxes		60,766		(25,388	)		(106,729	)		(71,351	)
Income tax benefit		—		—			155			155

Income (loss) from continuing operations	$	60,766	$	(25,388	)	$	(106,574	)	$	(71,196	)

As of December 31, 2010:
Total assets	$	3,354,772	$	40,726		$	321,026		$	3,716,524

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Direct Hotel			Hotel
	Investments			Financing			Corporate			Consolidated

Year Ended December 31, 2009:
Total revenues	$	829,716		$	10,876		$	—		$	840,592

Total hotel expenses		552,169			—			—			552,169
Property taxes, insurance and other		53,386			—			—			53,386
Depreciation and amortization		139,385			—			—			139,385
Impairment charges		—			148,679			—			148,679
Gain on insurance settlement		(1,329	)		—			—			(1,329	)
Corporate general and administrative		—			—			29,951			29,951

Total expenses		743,611			148,679			29,951			922,241

Operating income (loss)		86,105			(137,803	)		(29,951	)		(81,649	)
Equity earnings in unconsolidated joint venture		—			2,486			—			2,486
Interest income		—			—			297			297
Other income		—			—			56,556			56,556
Interest expense and amortization of loan costs		—			—			(132,997	)		(132,997	)
Write-off of premiums, loan costs and exit fees		—			—			371			371
Unrealized loss on derivatives		—			—			(31,782	)		(31,782	)

Income (loss) from continuing operations before income taxes		86,105			(135,317	)		(137,506	)		(186,718	)
Income tax expense		—			—			(1,508	)		(1,508	)

Income (loss) from continuing operations	$	86,105		$	(135,317	)	$	(139,014	)	$	(188,226	)

As of December 31, 2009:
Total assets	$	3,553,980		$	78,003		$	282,515		$	3,914,498

Year Ended December 31, 2008:
Total revenues	$	1,007,279		$	24,050		$	—		$	1,031,329

Total hotel expenses		645,909			—			—			645,909
Property taxes, insurance and other		52,465			—			—			52,465
Depreciation and amortization		149,022			—			—			149,022
Corporate general and administrative		—			—			28,702			28,702

Total expenses		847,396			—			28,702			876,098

Operating income (loss)		159,883			24,050			(28,702	)		155,231
Equity loss in unconsolidated joint ventures		—			(2,205	)		—			(2,205	)
Interest income		—			—			2,062			2,062
Other income		—			—			10,153			10,153
Interest expense and amortization of loan costs		—			—			(144,068	)		(144,068	)
Write-off of premiums, loan costs and exit fees		—			—			(1,226	)		(1,226	)
Unrealized gains on derivatives		—			—			79,620			79,620

Income (loss) from continuing operations before income taxes		159,883			21,845			(82,161	)		99,567
Income tax expense		—			—			(439	)		(439	)

Income (loss) from continuing operations	$	159,883		$	21,845		$	(82,600	)	$	99,128

As of December 31, 2008:
Total assets	$	3,789,390		$	239,158		$	311,134		$	4,339,682

As of December 31, 2010 and 2009, all of our hotel properties were domestically located and all hotel properties securing our notes receivable were also domestically located.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


21.	Fair Value Measurements

The authoritative accounting guidance requires disclosures about the fair value of all financial instruments. Determining estimated fair values of our financial instruments requires considerable judgment to interpret market data. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled. The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):


	December 31, 2010				December 31, 2009
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value

Financial assets:
Cash and cash equivalents	$	217,690	$	217,690	$	165,168	$	165,168
Restricted cash	$	67,666	$	67,666	$	77,566	$	77,566
Accounts receivable	$	27,493	$	27,493	$	31,503	$	31,503
Notes receivable	$	20,870		$6,756 to $7,467	$	55,655		$24,290 to $26,846
Interest rate derivatives – cash flow hedges	$	3	$	3	$	243	$	243
Interest rate derivatives – non-cash flow hedges	$	106,864	$	106,864	$	94,402	$	94,402
Due from third-party hotel managers	$	49,135	$	49,135	$	41,838	$	41,838
Financial liabilities:
Indebtedness of continuing operations	$	2,518,164		$2,082,207 to $2,301,387	$	2,772,396		$1,848,034 to $2,042,563
Indebtedness of discontinued operations	$	50,619		$44,587 to $49,281	$	—	$	—
Accounts payable and accrued expenses	$	79,248	$	79,248	$	91,387	$	91,387
Dividends payable	$	7,281	$	7,281	$	5,566	$	5,566
Due to related parties	$	2,400	$	2,400	$	1,009	$	1,009
Due to third-party hotel managers	$	1,870	$	1,870	$	1,563	$	1,563

Cash, cash equivalents and restricted cash. These financial assets bear interest at market rates and have maturities of less than 90 days. The carrying value approximates fair value due to the short-term nature.

Accounts receivable, due to/from related parties or third-party hotel managers, dividends payable, accounts payable and accrued expenses . The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments.

Notes receivable. Fair value of the notes receivable was determined by using similar loans with similar collateral. Since there is very little to no trading activity we had to rely on our internal analysis of what we believe a willing buyer would pay for these notes at December 31, 2010 and 2009. We estimated the fair value of the notes receivable to be approximately 64% to 68% lower than the carrying value of $20.9 million at December 31, 2010, and approximately 52% to 56% lower than the carrying value of $55.7 million at December 31, 2009.

Indebtedness. Fair value of the indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. For variable rate instruments, cash flows are determined using a forward interest rate yield curve. The current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied, and adjusted for the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral. For the December 31, 2010 and 2009 indebtedness valuations, we used estimated future cash flows discounted at applicable index forward curves adjusted for credit spreads. We estimated the fair value of the total indebtedness to be approximately 8% to 17% lower than the carrying value of $2.6 billion at December 31, 2010, and approximately 26% to 33% lower than the carrying value of $2.8 billion at December 31, 2009.

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Interest rate derivatives. Fair value of the interest rate derivatives are determined using net discounted cash flow of the expected cash flows of each derivative based on the market-based interest rate curve and adjusted for credit spreads of Ashford and the counterparties. See Note 10 for a complete description of the methodology and assumptions utilized in determining the fair values.


22.	Related Party Transactions

We have management agreements with parties owned by our Chairman and our Chief Executive Officer. Under the agreements, we pay the related parties a) monthly property management fees equal to the greater of $10,000 (CPI adjusted since 2003) or 3% of gross revenues as well as annual incentive management fees, if certain operational criteria are met, b) project management fees of up to 4% of project costs, c) market service fees including purchasing, design and construction management not to exceed 16.5% of project budget cumulatively, including project management fees, and d) other general and administrative expense reimbursements, approved by our independent directors, including rent, payroll, office supplies, travel, and accounting. These related parties allocate such charges to us based on various methodologies, including headcount and actual amounts incurred.

At December 31, 2010, these related parties managed 46 of our 97 hotels included in continuing operations and the continuing operations incurred the following fees related to the management agreements with related parties (in thousands):


	Year Ended December 31,
	2010		2009		2008

Property management fees, including incentive property management fees	$	11,643	$	10,426	$	12,257
Market service fees		5,808		5,497		9,186
Corporate general and administrative expense reimbursements		4,689		4,613		4,927

Total	$	22,140	$	20,536	$	26,370

Management agreements with related parties include exclusivity clauses that require us to engage such related parties, unless our independent directors either (i) unanimously vote to hire a different manager or developer or (ii) by a majority vote elect not to engage such related party because either special circumstances exist such that it would be in the best interest of our Company not to engage such related party, or, based on the related party’s prior performance, it is believed that another manager or developer could perform the management, development or other duties materially better.

Upon formation, we also agreed to indemnify certain related parties, including our Chairman and Chief Executive Officer, who contributed hotel properties in connection with our initial public offering in exchange for operating partnership units, against the income tax such related parties may incur if we dispose of one or more of those contributed properties under the terms of the agreement.

In addition, we received asset management consulting fees from the related parties of $901,000 for the years ended December 31, 2008. The asset management consulting agreement with the affiliate expired in 2008.


23.	Concentration of Risk

Our investments are all concentrated within the hotel industry. Our investment strategy is to acquire or develop upscale to upper-upscale hotels, acquire first mortgages on hotel properties, and invest in other mortgage-related instruments such as mezzanine loans to hotel owners and operators. At present, all of our hotels are located domestically. During 2010, approximately 19.1% of our total hotel revenue was generated from 11 hotels located in the Washington D.C. and Baltimore areas. In addition, all hotels securing our loans receivable are also located domestically at December 31, 2010. Presently, all our notes receivable are collateralized by either the properties securing the loans or interest in the first lien on such properties. Accordingly, adverse conditions in the hotel

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

industry will have a material adverse effect on our operating and investment revenues and cash available for distribution to shareholders.

With respect to our mezzanine loans receivable, these types of loans involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real property due to a variety of factors, including such loans being entirely unsecured or, if secured, becoming unsecured as a result of foreclosure by the senior lender. We may not recover some or all of our investment in these loans. In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans resulting in less equity in the property and increasing the risk of loss of principal.


24.	Selected Quarterly Financial Data (Unaudited)

The following is a summary of the quarterly results of operations for the years ended December 31, 2010 and 2009 (in thousands, except per share data):


	First		Second			Third			Fourth			Full
	Quarter		Quarter			Quarter			Quarter			Year

2010
Total revenue	$	199,203	$	218,308		$	202,741		$	221,113		$	841,365
Total operating expenses	$	184,238	$	193,759		$	189,284		$	256,061		$	823,342
Operating income (loss)	$	14,965	$	24,549		$	13,457		$	(34,948	)	$	18,023
Income (loss) from continuing operations	$	10,003	$	21,715		$	(5,387	)	$	(97,527	)	$	(71,196	)
Income (loss) from continuing operations attributable to the Company	$	9,208	$	18,680		$	(4,333	)	$	(83,621	)	$	(60,066	)
Income (loss) from continuing operations attributable to common shareholders	$	4,378	$	13,849		$	(9,321	)	$	(90,166	)	$	(81,260	)
Diluted income (loss) from continuing operations attributable to common shareholders per share	$	0.08	$	0.27		$	(0.19	)	$	(1.75	)	$	(1.59	)
Weighted average diluted common shares		53,073		72,981			49,714			51,407			51,159

2009
Total revenue	$	218,389	$	213,344		$	196,445		$	212,414		$	840,592
Total operating expenses	$	192,504	$	321,915		$	208,819		$	199,003		$	922,241
Operating income (loss)	$	25,885	$	(108,571	)	$	(12,374	)	$	13,411		$	(81,649	)
Income (loss) from continuing operations	$	23,185	$	(167,375	)	$	(25,967	)	$	(18,069	)	$	(188,226	)
Income (loss) from continuing operations attributable to the Company	$	20,261	$	(146,300	)	$	(22,092	)	$	(15,301	)	$	(163,432	)
Income (loss) from continuing operations attributable to common shareholders	$	15,431	$	(151,131	)	$	(26,923	)	$	(20,131	)	$	(182,754	)
Diluted income (loss) from continuing operations attributable to common shareholders per share	$	0.19	$	(2.13	)	$	(0.41	)	$	(0.34	)	$	(2.66	)
Weighted average diluted common shares		80,530		70,882			65,266			59,101			68,597


	Note:	Quarterly amounts are different from those reported in the previous Form 10-Q due to reclassification of certain hotel properties to discontinued operations.

100

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


25.	Subsequent Events (Unaudited)

In January 2011, an underwriter purchased an additional 300,000 shares of our common shares through the partial exercise of the underwriter’s 1.125 million share over-allotment option in connection with the reissuance of 7.5 million of our treasury shares completed in December 2010, and we received net proceeds of $2.8 million.

In February 2011, the Board of Directors accepted management’s recommendation to resume paying cash dividends on our common shares with an annualized target of $0.40 per share for 2011. The payment of $0.10 for the first quarter of 2011 has been approved and subsequent payments will be reviewed on a quarterly basis.

In February 2011, we completed the sale of the JW Marriott hotel property in San Francisco, California and received net proceeds of $43.6 million. The mortgage loan of $47.5 million secured by the hotel property was repaid at closing along with miscellaneous fees. We used $40.0 million of the net proceeds to reduce the borrowings on our senior credit facility. After the payment, the credit facility has an outstanding balance of $75.0 million.

101


Item 9.	*Changes in and Disagreements with Accountants on Accounting and Financial Disclosure*

None.


Item 9A.	*Controls and Procedures*

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of the our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2010 (“Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective (i) to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of our internal control over financial reporting. The internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and our expenditures are being made only in accordance with authorizations of management and our directors and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making the assessment of the effectiveness of our internal control over financial reporting, management has utilized the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on management’s assessment, we concluded that, as of December 31, 2010, our internal control over financial reporting is effective based on those criteria. The effectiveness of our internal control over financial reporting as of December 31, 2010 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears in this Form 10-K.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

102

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Ashford Hospitality Trust, Inc.

We have audited Ashford Hospitality Trust, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Ashford Hospitality Trust, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Ashford Hospitality Trust, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2010 consolidated financial statements and financial statement schedules of Ashford Hospitality Trust, Inc. and subsidiaries and our report dated March 4, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Dallas, Texas

March 4, 2011

103


Item 9B.	*Other Information*

None.

PART III


Item 10.	*Directors, Executive Officers, and Corporate Governance*

The required information is incorporated by reference from the Proxy Statement pertaining to our 2011 Annual Meeting of Shareholders.


Item 11.	*Executive Compensation*

The required information is incorporated by reference from the Proxy Statement pertaining to our 2011 Annual Meeting of Shareholders.


Item 12.	*Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matter*

The required information is incorporated by reference from the Proxy Statement pertaining to our 2011 Annual Meeting of Shareholders.


Item 13.	*Certain Relationships and Related Transactions, and Director Independence*

The required information is incorporated by reference from the Proxy Statement pertaining to our 2011 Annual Meeting of Shareholders.


Item 14.	*Principal Accountant Fees and Services*

The required information is incorporated by reference from the Proxy Statement pertaining to our 2011 Annual Meeting of Shareholders.

PART IV


Item 15.	*Financial Statement Schedules and Exhibits*


(a)	Financial Statements and Schedules

See Item 8, “Financial Statements and Supplementary Data,” on pages 57 through 101 hereof, for a list of our consolidated financial statements and report of independent registered public accounting firm.

The following financial statement schedules are included herein on pages 106 through 109.

Schedule III – Real Estate and Accumulated Depreciation

Schedule IV – Mortgage Loans and Interest Earned on Real Estate

All other financial statement schedules have been omitted because such schedules are not required under the related instructions, such schedules are not significant, or the required information has been disclosed elsewhere in the consolidated financial statements and related notes thereto.


(b)	Exhibits

Exhibits required by Item 601 of Regulation S-K: The exhibits filed in response to this item are listed in the Exhibit Index on pages 110 through 117.

104

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 4, 2011.

ASHFORD HOSPITALITY TRUST, INC.


	By:	/s/ MONTY J. BENNETT

Monty J. Bennett

Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below on behalf of the Registrant in the capacities and on the dates indicated.


Signature	Title	Date


/s/ ARCHIE BENNETT, JR. Archie Bennett, Jr.	Chairman of the Board of Director	March 4, 2011

/s/ MONTY J. BENNETT Monty J. Bennett	Chief Executive Officer, and Director (Principal Executive Officer)	March 4, 2011

/s/ DAVID J. KIMICHIK David J. Kimichik	Chief Financial Officer	March 4, 2011

/s/ MARK L. NUNNELEY Mark L. Nunneley	Chief Accounting Officer	March 4, 2011

/s/ BENJAMIN J. ANSELL, M.D. Benjamin J. Ansell, M.D.	Director	March 4, 2011

/s/ THOMAS E. CALLAHAN Thomas E. Callahan	Director	March 4, 2011

/s/ MARTIN L. EDELMAN Martin L. Edelman	Director	March 4, 2011

/s/ MICHAEL MURPHY Michael Murphy	Director	March 4, 2011

/s/ PHILLIP S. PAYNE Philip S. Payne	Director	March 4, 2011

105

SCHEDULE III

ASHFORD HOSPITALITY TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2010
(dollars in thousands)


Column A		Column B		Column C				Column D						Column E						Column F		Column G	Column H	Column I
								Costs Capitalized						Gross Carrying Amount
				Initial Cost				Since Acquisition						At Close of Period
						FF&E, Buildings					FF&E, Buildings					FF&E, Buildings				Accumulated		Construction	Acquisition	Income
Hotel Property	Location	Encumbrances		Land		and improvements		Land			and improvements			Land		and improvements		Total		Depreciation		Date	Date	Statement

Embassy Suites	Austin, TX	$	14,296	$	1,200	$	11,531	$	201		$	4,436		$	1,401	$	15,967	$	17,368	$	7,090	08/1998	—		(1),(2),(3)
Embassy Suites	Dallas, TX		8,449		1,871		10,960		244			4,220			2,115		15,180		17,295		7,206	12/1998	—		(1),(2),(3)
Embassy Suites	Herndon, VA		25,541		1,298		11,775		282			5,155			1,580		16,930		18,510		7,308	12/1998	—		(1),(2),(3)
Embassy Suites	Las Vegas, NV		32,176		3,300		20,055		404			8,973			3,704		29,028		32,732		13,081	05/1999	—		(1),(2),(3)
Embassy Suites	Syracuse, NY		12,649		2,839		10,959		—			5,907			2,839		16,866		19,705		6,622	—	10/2003		(1),(2),(3)
Embassy Suites	Flagstaff, AZ		11,407		1,267		4,873		—			2,803			1,267		7,676		8,943		2,757	—	10/2003		(1),(2),(3)
Embassy Suites	Houston, TX		12,935		1,800		10,547		—			2,375			1,800		12,922		14,722		3,030	—	03/2005		(1),(2),(3)
Embassy Suites	West Palm Beach, FL		18,362		3,277		14,126		—			7,142			3,277		21,268		24,545		5,997	—	03/2005		(1),(2),(3)
Embassy Suites	Philadelphia, PA		38,608		5,791		35,740		—			11,426			5,791		47,166		52,957		9,248	—	12/2006		(1),(2),(3)
Embassy Suites	Walnut Creek, CA		30,413		7,452		26,828		—			7,444			7,452		34,272		41,724		7,058	—	12/2006		(1),(2),(3)
Embassy Suites	Arlington, VA		36,967		36,065		45,202		—			5,050			36,065		50,252		86,317		8,924	—	04/2007		(1),(2),(3)
Embassy Suites	Portland, OR		29,294		11,110		63,067		—			3,297			11,110		66,364		77,474		9,389	—	04/2007		(1),(2),(3)
Embassy Suites	Santa Clara, CA		25,647		8,948		48,878		—			7,458			8,948		56,336		65,284		10,161	—	04/2007		(1),(2),(3)
Embassy Suites	Orlando, FL		12,720		5,674		22,988		—			2,477			5,674		25,465		31,139		3,897	—	04/2007		(1),(2),(3)
Doubletree Guest Suites	Columbus, OH		7,896		—		9,663		—			3,447			—		13,110		13,110		4,550	—	10/2003		(1),(2),(3)
Hilton Garden Inn	Jacksonville, FL		11,098		1,751		9,920		—			2,248			1,751		12,168		13,919		3,885	—	11/2003		(1),(2),(3)
Hilton	Ft. Worth, TX		23,839		4,539		15,203		—			14,263			4,539		29,466		34,005		10,849	—	03/2005		(1),(2),(3)
Hilton	Houston, TX		15,686		2,200		13,742		—			11,100			2,200		24,842		27,042		8,561	—	03/2005		(1),(2),(3)
Hilton	St. Petersburg, FL		19,393		2,991		14,715		—			8,708			2,991		23,423		26,414		7,267	—	03/2005		(1),(2),(3)
Hilton	Santa Fe, NM		16,658		7,004		11,632		—			4,940			7,004		16,572		23,576		5,012	—	12/2006		(1),(2),(3)
Hilton	Bloomington, MN		54,416		5,685		61,479		—			6,089			5,685		67,568		73,253		10,907	—	04/2007		(1),(2),(3)
Hilton	Washington DC		84,591		45,720		114,372		—			28,836			45,720		143,208		188,928		24,649	—	04/2007		(1),(2),(3)
Hilton	Lo Jolla, CA		65,793		—		128,210		—			6,869			—		135,079		135,079		27,451	—	04/2007		(1),(2),(3)
Hilton	Costa Mesa, CA		43,384		12,917		100,614		—			7,469			12,917		108,083		121,000		19,600	—	04/2007		(1),(2),(3)
Hilton	Tucson, AZ		19,740		12,035		57,160		(8,094	)		(28,267	)		3,941		28,893		32,834		10,637	—	04/2007		(1),(2),(3)
Homewood Suites	Mobile, AL		8,470		1,334		7,559		—			2,047			1,334		9,606		10,940		2,734	—	11/2003		(1),(2),(3)
Hampton Inn	Lawrenceville, GA		5,084		697		3,951		—			1,157			697		5,108		5,805		1,473	—	11/2003		(1),(2),(3)
Hampton Inn	Evansville, IN		7,155		1,301		5,599		—			3,097			1,301		8,696		9,997		3,495	—	09/2004		(1),(2),(3)
Hampton Inn	Terre Haute, IN		9,299		700		7,745		—			1,980			700		9,725		10,425		2,683	—	09/2004		(1),(2),(3)
Hampton Inn	Buford, GA		7,829		1,168		5,502		—			1,018			1,168		6,520		7,688		1,680	—	07/2004		(1),(2),(3)
Hampton Inn	Jacksonville, FL		—		1,701		15,328		—			1,941			1,701		17,269		18,970		2,346	—	05/2007		(1),(2),(3)
Marriott	Durham, NC		25,983		1,794		26,370		—			6,534			1,794		32,904		34,698		7,817	—	02/2006		(1),(2),(3)
Marriott	Arlington, VA		104,901		20,637		103,103		—			23,666			20,637		126,769		147,406		23,337	—	07/2006		(1),(2),(3)
Marriott	Seattle, WA		135,710		31,888		121,685		—			3,902			31,888		125,587		157,475		21,128	—	04/2007		(1),(2),(3)
Marriott	Bridgewater, NJ		75,391		5,058		94,816		—			4,130			5,058		98,946		104,004		15,217	—	04/2007		(1),(2),(3)
Marriott	Plano, TX		79,575		2,724		97,213		—			4,530			2,724		101,743		104,467		15,165	—	04/2007		(1),(2),(3)
Marriott	Dallas, TX		26,942		2,701		33,278		—			1,733			2,701		35,011		37,712		5,994	—	04/2007		(1),(2),(3)
SpringHill Suites by Marriott	Jacksonville, FL		8,168		1,348		7,636		—			1,511			1,348		9,147		10,495		2,780	—	11/2003		(1),(2),(3)
SpringHill Suites by Marriott	Baltimore, MD		15,372		2,502		13,666		—			1,606			2,502		15,272		17,774		3,578	—	05/2004		(1),(2),(3)
SpringHill Suites by Marriott	Kennesaw, GA		7,187		1,122		5,279		—			1,236			1,122		6,515		7,637		1,825	—	07/2004		(1),(2),(3)
SpringHill Suites by Marriott	Buford, GA		8,048		1,132		6,480		—			593			1,132		7,073		8,205		1,640	—	07/2004		(1),(2),(3)
SpringHill Suites by Marriott	Gaithersburg, MD		15,542		2,200		19,827		—			1,858			2,200		21,685		23,885		3,928	—	06/2005		(1),(2),(3)
SpringHill Suites by Marriott	Centerville, VA		9,070		1,806		11,780		—			1,813			1,806		13,593		15,399		2,719	—	06/2005		(1),(2),(3)
SpringHill Suites by Marriott	Charlotte, NC		6,242		1,235		7,090		—			740			1,235		7,830		9,065		1,535	—	06/2005		(1),(2),(3)
SpringHill Suites by Marriott	Durham, NC		5,350		1,090		4,051		—			645			1,090		4,696		5,786		862	—	06/2005		(1),(2),(3)

(Continued on Next Page)

106


Column A		Column B		Column C				Column D					Column E						Column F		Column G		Column H		Column I
								Costs Capitalized					Gross Carrying Amount
				Initial Cost				Since Acquisition					At Close of Period
						FF&E, Buildings					FF&E, Buildings				FF&E, Buildings				Accumulated		Construction		Acquisition		Income
Hotel Property	Location	Encumbrances		Land		and improvements		Land			and Improvements		Land		and improvements		Total		Depreciation		Date		Date		Statement

SpringHill Suites by Marriott	Orlando, FL	$	30,213	$	8,620	$	28,899	$	—		$	1,488	$	8,620	$	30,387	$	39,007	$	4,311		—		04/2007		(1),(2),(3)
SpringHill Suites by Marriott	Manhattan Beach, CA		21,920		5,726		21,318		—			505		5,726		21,823		27,549		2,292		—		04/2007		(1),(2),(3)
SpringHill Suites by Marriott	Plymouth Meeting, PA		20,000		3,210		25,374		—			643		3,210		26,017		29,227		3,335		—		04/2007		(1),(2),(3)
SpringHill Suites by Marriott	Glen Allen, VA		15,286		2,045		16,006		—			481		2,045		16,487		18,532		1,849		—		04/2007		(1),(2),(3)
Fairfield Inn by Marriott	Kennesaw, GA		7,045		840		4,489		—			1,179		840		5,668		6,508		1,047		—		07/2004		(1),(2),(3)
Fairfield Inn by Marriott	Orlando, FL		15,930		6,507		10,710		—			2,207		6,507		12,917		19,424		2,668		—		04/2007		(1),(2),(3)
Courtyard by Marriott	Bloomington, IN		12,323		900		11,034		—			1,805		900		12,839		13,739		3,561		—		09/2004		(1),(2),(3)
Courtyard by Marriott	Columbus, IN		6,206		673		5,165		—			1,339		673		6,504		7,177		1,993		—		09/2004		(1),(2),(3)
Courtyard by Marriott	Louisville, KY		14,745		1,352		13,467		—			992		1,352		14,459		15,811		3,560		—		09/2004		(1),(2),(3)
Courtyard by Marriott	Crystal City, VA		34,202		5,411		38,746		—			5,757		5,411		44,503		49,914		8,404		—		06/2005		(1),(2),(3)
Courtyard by Marriott	Ft. Lauderdale, FL		14,868		2,244		19,216		—			2,148		2,244		21,364		23,608		4,152		—		06/2005		(1),(2),(3)
Courtyard by Marriott	Overland Park, KS		12,503		1,868		14,114		—			2,922		1,868		17,036		18,904		3,287		—		06/2005		(1),(2),(3)
Courtyard by Marriott	Palm Desert, CA		11,245		2,722		12,071		—			1,806		2,722		13,877		16,599		2,876		—		06/2005		(1),(2),(3)
Courtyard by Marriott	Foothill Ranch, CA		13,877		2,447		17,123		—			693		2,447		17,816		20,263		3,555		—		06/2005		(1),(2),(3)
Courtyard by Marriott	Alpharetta, GA		10,705		2,244		12,422		—			2,148		2,244		14,570		16,814		3,070		—		06/2005		(1),(2),(3)
Courtyard by Marriott	Philadelphia, PA		43,098		9,812		100,412		—			3,108		9,812		103,520		113,332		16,710		—		04/2007		(1),(2),(3)
Courtyard by Marriott	Seattle, WA		59,711		17,194		51,200		—			938		17,194		52,138		69,332		8,965		—		04/2007		(1),(2),(3)
Courtyard by Marriott	San Francisco, CA		68,540		22,653		75,096		—			4,509		22,653		79,605		102,258		11,878		—		04/2007		(1),(2),(3)
Courtyard by Marriott	Orlando, FL		29,190		7,389		28,408		—			3,799		7,389		32,207		39,596		5,983		—		04/2007		(1),(2),(3)
Courtyard by Marriott	Oakland, CA		24,002		5,112		20,209		—			486		5,112		20,695		25,807		2,779		—		04/2007		(1),(2),(3)
Courtyard by Marriott	Scottsdale, AS		23,043		3,700		22,998		—			753		3,700		23,751		27,451		3,189		—		04/2007		(1),(2),(3)
Courtyard by Marriott	Plano, TX		19,688		2,115		22,482		—			682		2,115		23,164		25,279		2,461		—		04/2007		(1),(2),(3)
Courtyard by Marriott	Edison, NJ		12,640		2,147		12,332		—			1,252		2,147		13,584		15,731		1,877		—		04/2007		(1),(2),(3)
Courtyard by Marriott	Newark, CA		6,227		2,863		11,262		—			429		2,863		11,691		14,554		1,695		—		04/2007		(1),(2),(3)
Courtyard by Marriott	Manchester, CT		5,775		1,300		7,915		—			475		1,300		8,390		9,690		1,468		—		04/2007		(1),(2),(3)
Courtyard by Marriott	Basking Ridge, NJ		42,640		5,419		46,304		—			2,630		5,419		48,934		54,353		6,822		—		04/2007		(1),(2),(3)
Marriott Residence Inn	Lake Buena Vista, FL		24,622		2,555		22,887		—			4,157		2,555		27,044		29,599		8,377		—		03/2004		(1),(2),(3)
Marriott Residence Inn	Evansville, IN		6,911		961		6,285		—			1,225		961		7,510		8,471		2,126		—		09/2004		(1),(2),(3)
Marriott Residence Inn	Orlando, FL		36,132		6,554		41,939		—			4,569		6,554		46,508		53,062		8,388		—		06/2005		(1),(2),(3)
Marriott Residence Inn	Falls Church, VA		23,640		2,752		35,058		—			2,749		2,752		37,807		40,559		6,589		—		06/2005		(1),(2),(3)
Marriott Residence Inn	San Diego, CA		21,187		3,156		29,589		—			2,841		3,156		32,430		35,586		5,995		—		06/2005		(1),(2),(3)
Marriott Residence Inn	Salt Lake City, UT		14,564		1,897		16,429		—			1,168		1,897		17,597		19,494		2,695		—		06/2005		(1),(2),(3)
Marriott Residence Inn	Palm Desert, CA		11,641		3,280		10,528		—			1,554		3,280		12,082		15,362		2,367		—		06/2005		(1),(2),(3)
Marriott Residence Inn	Las Vegas, NV		46,266		18,177		42,024		—			1,184		18,177		43,208		61,385		6,579		—		04/2007		(1),(2),(3)
Marriott Residence Inn	Phoenix, AZ		23,150		4,100		24,087		—			724		4,100		24,811		28,911		3,369		—		04/2007		(1),(2),(3)
Marriott Residence Inn	Plano, TX		14,760		2,045		16,907		—			768		2,045		17,675		19,720		1,915		—		04/2007		(1),(2),(3)
Marriott Residence Inn	Newark, CA		11,120		3,272		12,205		—			528		3,272		12,733		16,005		1,768		—		04/2007		(1),(2),(3)
Marriott Residence Inn	Manchester, CT		—		1,462		8,906		—			682		1,462		9,588		11,050		1,728		—		04/2007		(1),(2),(3)
Marriott Residence Inn	Atlanta, GA		15,933		1,901		16,794		—			1,142		1,901		17,936		19,837		1,986		—		04/2007		(1),(2),(3)
Marriott Residence Inn	Jacksonville, FL		6,791		1,997		16,681		—			1,283		1,997		17,964		19,961		2,291		—		05/2007		(1),(2),(3)
TownePlace Suites by Marriott	Manhattan Beach, CA		20,230		4,805		17,652		—			1,838		4,805		19,490		24,295		2,569		—		04/2007		(1),(2),(3)
One Ocean	Atlantic Beach, FL		19,365		5,815		17,440		—			36,757		5,815		54,197		60,012		17,780		—		04/2004		(1),(2),(3)
Sheraton Hotel	Langhorne, PA		18,382		2,037		12,624		—			8,222		2,037		20,846		22,883		7,247		—		07/2004		(1),(2),(3)
Sheraton Hotel	Minneapolis, MN		19,393		2,953		14,753		—			4,165		2,953		18,918		21,871		4,397		—		03/2005		(1),(2),(3)
Sheraton Hotel	Indianapolis, IN		26,986		3,100		22,481		—			13,422		3,100		35,903		39,003		10,450		—		03/2005		(1),(2),(3)
Sheraton Hotel	Anchorage, AK		43,019		4,023		40,207		—			16,890		4,023		57,097		61,120		10,995		—		12/2006		(1),(2),(3)
Sheraton Hotel	San Diego, CA		36,944		7,294		37,162		—			4,924		7,294		42,086		49,380		6,410		—		12/2006		(1),(2),(3)
Hyatt Regency	Coral Gables, FL		33,859		4,805		51,183		—			8,142		4,805		59,325		64,130		8,163		—		04/2007		(1),(2),(3)
Crowne Plaza	Beverly Hills, CA		31,743		6,510		22,458		—			5,318		6,510		27,776		34,286		5,943		—		03/2005		(1),(2),(3)
Crowne Plaza	Key West, FL		29,202		—		27,746		—			4,938		—		32,684		32,684		6,729		—		03/2005		(1),(2),(3)
Annapolis Inn	Annapolis, MD		12,731		3,028		7,962		—			6,512		3,028		14,474		17,502		4,868		—		03/2005		(1),(2),(3)
Renaissance	Tampa, FL		45,695		—		75,780		—			1,467		—		77,247		77,247		13,850		—		04/2007		(1),(2),(3)

Total		$	2,403,164	$	495,864	$	2,768,736	$	(6,963	)	$	391,945	$	488,901	$	3,160,681	$	3,649,582	$	626,433


(1)		Estimated useful life for buildings is 39 years.
(2)		Estimated useful life for building improvements is 15 years.
(3)		Estimated useful life for furniture and fixtures is 3 to 5 years.

107


	Year Ended December 31,
	2010			2009			2008

Investment in Real Estate:
Beginning balance	$	3,925,287		$	3,965,227		$	4,217,670
Additions		58,528			68,746			161,289
Reclassification		—			6,780			7,461
Impairment/write-offs		(44,865	)		(80,549	)		(834	)
Sales/disposals		(289,368	)		(34,917	)		(420,359	)

Ending balance		3,649,582			3,925,287			3,965,227

Accumulated Depreciation:
Beginning balance		542,274			398,043			258,143
Depreciation expense		144,666			156,423			173,167
Reclassification		—			4,093			8,319
Impairment/write-offs		(4,952	)		(10,347	)		(465	)
Sales/disposals		(55,555	)		(5,938	)		(41,121	)

Ending balance		626,433			542,274			398,043

Investment in Real Estate, net	$	3,023,149		$	3,383,013		$	3,567,184

108

SCHEDULE IV — MORTGAGE LOANS AND INTEREST EARNED ON REAL ESTATE

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
December 31, 2010
(in thousands)


													Column G
							Column D		Column E		Column F		Interest Income
				Column C			Delinquent		Being		Accrued		During the
Column A				Balance at			Principal		Foreclosed at		Interest at		Year Ended
		Column B		December 31,			December 31,		December 31,		December 31,		December 31,
Description		Prior Liens		2010			2010		2010		2010		2010

Portfolio: 105 Hotels	Various		—	$	25,688		$	—	$	—	$	—	$	1,378
Ritz Carlton	Key Biscayne, FL		—		12,057			—		—		—		—

Total		$	—		37,745			—	$	—	$	—	$	1,378

Valuation allowance					(16,875	)		—

Net carrying value				$	20,870		$	—


	Year Ended December 31,
	2010			2009			2008

Investment in Mortgage Loans:
Balance at January 1	$	55,699		$	212,771		$	94,394
New mortgage loans		—			—			138,412
Principal payments		(28,284	)		(11,000	)		(7,000	)
Contributed to a joint venture		—			—			(21,500	)
Amortization of discounts/deferred income		(44	)		3,129			8,465
Valuation allowance		(6,501	)		(149,201	)		—

Balance at December 31	$	20,870		$	55,699		$	212,771

109

EXHIBIT INDEX


Exhibit			Description

	3	.1	Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 of Form S-11/A, filed on July 31, 2003)
	3	.2.1	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of Form S-11/A, filed on July 31, 2003)
	3	.2.2	Amendment No. 1 to Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2.2 to the Registrant’s Form 10-K, filed on March 29, 2004)
	3	.2.3	Amendment No. 1 to Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed on November 9, 2010)
	4	.1	Form of Certificate for Common Stock (incorporated by reference to Exhibit 4.1 of Form S-11/A, filed on August 20, 2003)
	4	.1.1	Articles Supplementary for Series A Cumulative Preferred Stock, dated September 15, 2004 (incorporated by reference to Exhibit 4.4 to the Registrant’s Form 8-K, dated September 21, 2004, for the event dated September 15, 2004)
	4	.1.2	Form of Certificate of Series A Cumulative Preferred Stock (incorporated by reference to Exhibit 4.4.1 to the Registrant’s Form 8-K, dated September 21, 2004, for the event dated September 15, 2004)
	4	.2	Articles Supplementary for Series B-1 Cumulative Convertible Redeemable Preferred Stock, dated December 28, 2004 (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K, dated January 4, 2005, for the event dated December 28, 2004)
	4	.3	Articles Supplementary for Series D Cumulative Preferred Stock, dated July 17, 2007 (incorporated by reference to Exhibit 3.5 to the Registrant’s Form 8-A, filed July 17, 2007)
	4	.4	Form of Certificate of Series D Cumulative Preferred Stock (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-A, filed July 17, 2007)
	10	.1.1	Third Amended and Restated Agreement of Limited Partnership of Ashford Hospitality Limited Partnership (incorporated by reference to Exhibit 10.1.4 to the Registrant’s Form 10-Q, filed on May 9, 2007)
	10	.1.2	Amended No. 1 to Third Amended and Restated Agreement of Limited Partnership of Ashford Hospitality Limited Partnership (incorporated by reference to Exhibit 10.1.5 of Form 8-K, dated July 24, 2007, for the event dated July 18, 2007)
	10	.1.3	Amend No. 2 to Third Amended Restated Agreement of Limited Partnership of Ashford Hospitality Limited Partnership (incorporated by reference to Exhibit 10.1.3 to the Registrant’s Form 10-K, filed on February 29, 2008))
	10	.1.4	Amendment No. 3 to Third Amended and Restated Agreement of Limited Partnership of Ashford Hospitality Limited Partnership (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed on March 27, 2008)
	10	.2	Registration Rights Agreement among Ashford Hospitality Trust, Inc. and the persons named therein (incorporated by reference to Exhibit 10.2 of Form S-11/A, filed on July 31, 2003)
	10	.3.1	Amended and Restated 2003 Stock Incentive Plan of Ashford Hospitality Trust, Inc. (incorporated by reference to Exhibit 10.3.1 to the Registrant’s Form 8-K, dated May 9, 2005, for the event dated May 3, 2005)
	10	.3.1.1	Amendment No. 1 to the Amended and Restated 2003 Incentive Stock Plan of Ashford Hospitality Trust, Inc., dated June 10, 2008 (incorporated by reference to Exhibit 10.3.1.1 to the Registrant’s Form 10-K, filed on March 2, 2009)
	10	.3.2	Amended and Restated Ashford Hospitality Trust, Inc. Nonqualified Deferred Compensation Plan, dated April 4, 2008 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed on April 8, 2008, for the event dated April 4, 2008)

(Continued on Next Page)

110


Exhibit			Description

	10	.3.2.1	First Amendment to the Ashford Hospitality Trust, Inc. Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed on January 7, 2009, for the event dated December 31, 2008)
	10	.4	Non-Compete/Services Agreement, dated as of March 21, 2008, between Ashford Hospitality Trust, Inc. and Archie Bennett, Jr. (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K, dated March 27, 2008, for the event dated March 21, 2008)
	10	.5.1	Employment Agreement, dated as of March 21, 2008, between Ashford Hospitality Trust, Inc. and Montgomery J. Bennett (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K, dated March 27, 2008, for the event dated March 21, 2008)
	10	.5.2	Amendment No. 1 to Employment Agreement, dated as of January 23, 2009, between Ashford Hospitality Trust, Inc. and Montgomery J. Bennett (incorporated by reference to Exhibit 10.5.2 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.5.3	Employment Agreement, dated as of March 21, 2008, between Ashford Hospitality Trust, Inc. and Douglas A. Kessler (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K, dated March 27, 2008, for the event dated March 21, 2008)
	10	.5.4	Amendment No. 1 to Employment Agreement, dated as of January 23, 2009, between Ashford Hospitality Trust, Inc. and Douglas Kessler (incorporated by reference to Exhibit 10.5.4 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.5.5	Employment Agreement, dated as of March 21, 2008, between Ashford Hospitality Trust, Inc. and David A. Brooks (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 8-K, dated March 27, 2008, for the event dated March 21, 2008)
	10	.5.6	Amendment No. 1 to Employment Agreement, dated as of January 23, 2009, between Ashford Hospitality Trust, Inc. and David A. Brooks (incorporated by reference to Exhibit 10.5.6 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.5.7	Employment Agreement, dated as of March 21, 2008, between Ashford Hospitality Trust, Inc. and David J. Kimichik (incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K, dated March 27, 2008, for the event dated March 21, 2008)
	10	.5.8	Employment Agreement, dated as of March 21, 2008, between Ashford Hospitality Trust, Inc. and Mark L. Nunneley (incorporated by reference to Exhibit 10.7 to the Registrant’s Form 8-K, dated March 27, 2008, for the event dated March 21, 2008)
	10	.5.9	Amendment to Employment Agreement, dated as of September 3, 2009 and effective January 1, 2009, between Ashford Hospitality Trust, Inc. and Montgomery J. Bennett (incorporated by reference to Exhibit 10.5.9 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.5.10	Amendment to Employment Agreement, dated as of September 3, 2009 and effective January 1, 2009, between Ashford Hospitality Trust, Inc. and Douglas Kessler (incorporated by reference to Exhibit 10.5.10 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.5.11	Amendment to Employment Agreement, dated as of September 3, 2009 and effective January 1, 2009, between Ashford Hospitality Trust, Inc. and David A. Brooks (incorporated by reference to Exhibit 10.5.11 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.5.12	Amendment to Employment Agreement, dated as of September 3, 2009 and effective January 1, 2009, between Ashford Hospitality Trust, Inc. and Mark L. Nunneley (incorporated by reference to Exhibit 10.5.12 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.6	Form of Management Agreement between Remington Lodging and Ashford TRS Corporation (incorporated by reference to Exhibit 10.10 of Form S-11/A, filed on July 31, 2003)
	10	.6.1	Hotel Management Agreement between Remington Management, L.P. and Ashford TRS Corporation (incorporated by reference to Exhibit 10.6.1 of Form 10-K, filed on March 9, 2007)
	10	.7	Form of Lease Agreement between Ashford Hospitality Limited Partnership and Ashford TRS Corporation (incorporated by reference to Exhibit 10.11 of Form S-11/A, filed on July 31, 2003)

(Continued on Next Page)

111


Exhibit			Description

	10	.8.1	Assignment and Assumption of Contract and Contract Rights between Ashford Hospitality Limited Partnership and Ashford Financial Corporation, dated October 7, 2003 (incorporated by reference to Exhibit 10.4 of Form 10-Q, filed on November 14, 2003)
	10	.8.2	Assignment and Assumption of Contract and Contract Rights between Ashford Hospitality Limited Partnership and Ashford Financial Corporation, dated January 4, 2004 Bylaws (incorporated by reference to Exhibit 10.10.2 to the Registrant’s Form 10-K, filed on March 29, 2004)
	10	.9	Guaranty by Ashford Financial Corporation in favor of Ashford Hospitality Trust Limited Partnership (incorporated by reference to Exhibit 10.26 of Form S-11/A, filed on July 31, 2003)
	10	.10	Mutual Exclusivity Agreement by and between Ashford Hospitality Limited Partnership, Ashford Hospitality Trust, Inc., Remington Hotel Corporation and Remington Lodging and Hospitality, L.P. (incorporated by reference to Exhibit 10.22 of Form S-11/A, filed on July 31, 2003)
	10	.11	Tax Indemnification Agreement between Ashford Hospitality Trust, Inc. and the persons named therein (incorporated by reference to Exhibit 10.25 of Form S-11/A, filed on July 31, 2003)
	10	.13	Contribution and Purchase and Sale Agreement, dated December 27, 2004, between the Registrant and FGSB Master Corp. (incorporated by reference to Exhibit 10.20 to the Registrant’s Form 8-K, dated December 28, 2004, for the event dated December 27, 2004)
	10	.14	Purchase Agreement, dated December 27, 2004, between the Registrant and Security Capital Preferred Growth Incorporated (incorporated by reference to Exhibit 10.21 to the Registrant’s Form 8-K, dated December 28, 2004, for the event dated December 27, 2004)
	10	.14.1	Form of Registration Rights Agreement, dated December 27, 2004, between the Registrant and Security Capital Preferred Growth Incorporated (incorporated by reference to Exhibit 10.14.1 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.14.2	Amendment No. 1 to Purchase Agreement, dated February 8, 2005, between the Registrant and Security Capital Preferred Growth Incorporated (incorporated by reference to Exhibit 10.21.2 to the Registrant’s Form 8-K, dated February 10, 2005, for the event dated February 8, 2005)
	10	.16	Commitment Letter, dated October 5, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.8 to the Registrant’s Form 8-K, dated October 19, 2005, for the event dated October 13, 2005)
	10	.16.1	Early Rate Lock Agreement, dated October 5, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.9 to the Registrant’s Form 8-K, dated October 19, 2005, for the event dated October 13, 2005)
	10	.16.2	Amended and Restated Loan Agreement, dated as of October 13, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.10 to the Registrant’s Form 8-K, dated October 19, 2005, for the event dated October 13, 2005)
	10	.16.2.1	Amended and Restated Cross-Collateralization and Cooperation Agreement, dated October 13, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.10.1 to the Registrant’s Form 8-K, dated October 19, 2005, for the event dated October 13, 2005)
	10	.16.2.2	Loan Agreement, dated as of October 13, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.11 to the Registrant’s Form 8-K, dated October 19, 2005, for the event dated October 13, 2005)
	10	.16.2.2.1	Cross-Collateralization and Cooperation Agreement, dated October 13, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.11.1 to the Registrant’s Form 8-K, dated October 19, 2005, for the event dated October 13, 2005)
	10	.16.3	Amended and Restated Loan Agreement, dated as of October 13, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.12 to the Registrant’s Form 8-K, dated October 19, 2005, for the event dated October 13, 2005)

(Continued on Next Page)

112


Exhibit			Description

	10	.16.3.1	Amended and Restated Cross-Collateralization and Cooperation Agreement, dated October 13, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.12.1 to the Registrant’s Form 8-K, dated October 19, 2005, for the event dated October 13, 2005)
	10	.16.4	Amended and Restated Loan Agreement, dated as of October 13, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.13 to the Registrant’s Form 8-K, dated October 19, 2005, for the event dated October 13, 2005)
	10	.16.4.1	Amended and Restated Cross-Collateralization and Cooperation Agreement, dated October 13, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.13.1 to the Registrant’s Form 8-K, dated October 19, 2005, for the event dated October 13, 2005)
	10	.16.5	Amended and Restated Loan Agreement, dated as of December 20, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.14 to the Registrant’s Form 8-K, dated December 22, 2005, for the event dated December 20, 2005)
	10	.16.5.1	Amended and Restated Cross-Collateralization and Cooperation Agreement, dated December 20, 2005, between the Registrant and Merrill Lynch Mortgage Lending, Inc. (incorporated by reference to Exhibit 10.24.14.1 to the Registrant’s Form 8-K, dated December 22, 2005, for the event dated December 20, 2005)
	10	.17	Mortgage Loan Agreement (Pool 1), dated November 14, 2005, between the Registrant and UBS Real Estate Investments, Inc. (incorporated by reference to Exhibit 10.25 to the Registrant’s Form 8-K, dated November 18, 2005, for the event dated November 14, 2005)
	10	.17.1	Mortgage Loan Agreement (Pool 2), dated November 14, 2005, between the Registrant and UBS Real Estate Investments, Inc. (incorporated by reference to Exhibit 10.25.1 to the Registrant’s Form 8-K, dated November 18, 2005, for the event dated November 14, 2005)
	10	.17.2	Guarantee of Recourse Obligations, dated November 14, 2005, by the Registrant for the benefit of UBS Real Estate Investments, Inc. with respect to Pool 1 (incorporated by reference to Exhibit 10.25.2 to the Registrant’s Form 8-K, dated November 18, 2005, for the event dated November 14, 2005)
	10	.17.3	Guarantee of Recourse Obligations, dated November 14, 2005, by the Registrant for the benefit of UBS Real Estate Investments, Inc. with respect to Pool 1 (incorporated by reference to Exhibit 10.25.3 to the Registrant’s Form 8-K, dated November 18, 2005, for the event dated November 14, 2005)
	10	.17.4	Guarantee of Recourse Obligations, dated November 14, 2005, by the Registrant for the benefit of UBS Real Estate Investments, Inc. with respect to Pool 2 (incorporated by reference to Exhibit 10.25.4 to the Registrant’s Form 8-K, dated November 18, 2005, for the event dated November 14, 2005)
	10	.17.5	Guarantee of Recourse Obligations, dated November 14, 2005, by the Registrant for the benefit of UBS Real Estate Investments, Inc. with respect to Pool 2 (incorporated by reference to Exhibit 10.25.5 to the Registrant’s Form 8-K, dated November 18, 2005, for the event dated November 14, 2005)
	10	.21	Purchase and Sale Agreement, dated May 18, 2006, between the Registrant and EADS Associates Limited Partnership (incorporated by reference to Exhibit 10.29 to the Registrant’s Form 8-K, dated May 23, 2006, for the event dated May 18, 2006)
	10	.23.1	Loan Agreement, dated December 7, 2006, between the Registrant and Countrywide Commercial Real Estate Finance, Inc. (incorporated by reference to Exhibit 10.31.1 to the Registrant’s Form 8-K, dated December 11, 2006, for the event dated December 7, 2006)
	10	.23.2	$212 Million Rate Protection Agreement, dated December 6, 2006, between the Registrant and SMBC Derivative Products Limited Branch (incorporated by reference to Exhibit 10.31.2 to the Registrant’s Form 8-K, dated December 11, 2006, for the event dated December 7, 2006)

(Continued on Next Page)

113


Exhibit			Description

	10	.23.3	$35 Million Rate Protection Agreement, dated December 6, 2006, between the Registrant and SMBC Derivative Products Limited Branch (incorporated by reference to Exhibit 10.31.3 to the Registrant’s Form 8-K, dated December 11, 2006, for the event dated December 7, 2006)
	10	.24	Loan Agreement, dated November 16, 2006, between the Registrant and Morgan Stanley Mortgage Capital, Inc. (incorporated by reference to Exhibit 10.32 to the Registrant’s Form 8-K, dated November 20, 2006, for the event dated November 16, 2006)
	10	.25	Purchase and Sale Agreement, dated January 18, 2007, between the Registrant and CNL Hotels and Resorts, Inc. (incorporated by reference to Exhibit 10.33 of Form 10-K, filed on March 9, 2007)
	10	.25.1	Agreement and Plan of Merger, dated January 18, 2007, between the Registrant, MS Resort Holdings LLC, MS Resort Acquisition LLC, MS Resort Purchase LLC, and CNL Hotels & Resorts, Inc. (incorporated by reference to Exhibit 10.33.1 of Form 10-K, filed on March 9, 2007)
	10	.25.1.1	Amendment #1 to Agreement and Plan of Merger, dated February 21, 2007, between the Registrant, MS Resort Holdings LLC, MS Resort Acquisition LLC, MS Resort Purchase LLC, and CNL Hotels & Resorts, Inc. (incorporated by reference to Exhibit 10.33.1.1 of Form 10-Q, filed on May 9, 2007)
	10	.25.1.2	Amendment #2 to Agreement and Plan of Merger, dated April 4, 2007, between the Registrant, MS Resort Holdings LLC, MS Resort Acquisition LLC, MS Resort Purchase LLC, and CNL Hotels & Resorts, Inc. (incorporated by reference to Exhibit 10.33.1.2 of Form 10-Q, filed on May 9, 2007)
	10	.25.2	Guaranty Agreement, dated January 18, 2007, between the Registrant and Morgan Stanley Real Estate Fund V U.S., L.P. in favor of CNL Hotels and Resorts, Inc. (incorporated by reference to Exhibit 10.33.2 of Form 10-K, filed on March 9, 2007)
	10	.25.3	Contribution and Rights Agreement, dated January 18, 2007, between the Registrant and Morgan Stanley Real Estate Fund V U.S., L.P. (incorporated by reference to Exhibit 10.33.3 of Form 10-K, filed on March 9, 2007)
	10	.25.4	Loan and Security Agreement, dated as of April 11, 2007, between Ashford Sapphire Junior Holder I LLC, Ashford Sapphire Junior Holder II LLC, and Wachovia Bank, National Association (incorporated by reference to Exhibit 10.33.4 to the Registrant’s Form 8-K, dated April 13, 2007, for the event dated April 11, 2007)
	10	.25.4.1	Loan and Security Agreement, dated as of April 11, 2007, between Ashford Sapphire Junior Mezz I LLC, Ashford Sapphire Junior Mezz II LLC and Wachovia Bank, National Association (incorporated by reference to Exhibit 10.33.4.1 to the Registrant’s Form 8-K, dated April 13, 2007, for the event dated April 11, 2007)
	10	.25.4.2	Loan and Security Agreement, dated as of April 11, 2007, between Ashford Sapphire Senior Mezz I LLC, Ashford Senior Mezz II LLC and Wachovia Bank, National Association (incorporated by reference to Exhibit 10.33.4.2 to the Registrant’s Form 8-K, dated April 13, 2007, for the event dated April 11, 2007)
	10	.25.4.3	Mortgage Security Agreement, Assignment of Rents and Fixture Filing from Ashford Atlantic Beach LP, as Borrower to Wachovia Bank, National Association, as Lender, dated April 11, 2007, with respect to Sea Turtle Inn, Atlantic Beach, Florida (incorporated by reference to Exhibit 10.25.4.3 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.25.4.3a	Schedule of Agreements omitted pursuant to Instruction 2 to Item 601 of Regulation S-K (incorporated by reference to Exhibit 10.25.4.3a to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.25.4.4	Mortgage Security Agreement, Assignment of Rents and Fixture Filing from Ashford Edison LP, as Borrower to Wachovia Bank, National Association, as Lender, dated April 11, 2007, with respect to Courtyard Edison, Edison, New Jersey (incorporated by reference to Exhibit 10.25.4.3 to the Registrant’s Form 10-Q, filed on November 6, 2009)

(Continued on Next Page)

114


Exhibit			Description

	10	.25.4.4a	Schedule of Agreements omitted pursuant to Instruction 2 to Item 601 of Regulation S-K (incorporated by reference to Exhibit 10.25.4.3a to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.25.4.5	Credit Agreement, dated as of April 10, 2007, by and among Ashford Hospitality Limited Partnership, as Borrower, Ashford Hospitality Trust, Inc., as Parent, Wachovia Capital Markets, LLC, as Arranger, Wachovia Bank, National Association, as Administrative Agent, Morgan Stanley Senior Funding, Inc. and Merrill Lynch Bank USA, as Co-Syndication Agents, each of Bank America, N.A. and Caylon New York Branch, as Co-Documentation Agents and the financial institutions initially signatory thereto and their assignees, as Lenders (incorporated by reference to Exhibit 10.33.4.5 to the Registrant’s Form 8-K, dated April 13, 2007, for the event dated April 10, 2007)
	10	.25.4.5.1	First Amendment to Credit Agreement between the Registrant and Wachovia Bank, National Association, dated May 22, 2007 (incorporated by reference to Exhibit 10.33.4.5.1 of Form 8-K, dated May 24, 2007, for the event dated May 22, 2007)
	10	.25.4.5.2	Second Amendment to Credit Agreement and First Amendment to Security Agreement dated as of June 23, 2008 by and among Ashford Hospitality Limited Partnership, as the Borrower, Ashford Hospitality Trust, Inc., as the Parent and Grantor, each of the Lenders party thereto, and Wachovia Bank, National Association, as Secured Party (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, dated June 26, 2008, for the event dated June 23, 2008)
	10	.25.4.5.4	Guarantor Acknowledgement of the Registrant in favor of Wachovia Bank, National Association, dated May 22, 2007 (incorporated by reference to Exhibit 10.33.4.5.2 of Form 8-K, dated May 24, 2007, for the event dated May 22, 2007)
	10	.25.4.5.5	Revolving Note Agreements between the Registrant and Wachovia Bank, National Association, dated May 22, 2007 (incorporated by reference to Exhibit 10.33.4.5.3 of Form 8-K, dated May 24, 2007, for the event dated May 22, 2007)
	10	.25.4.6	Guaranty for Fixed-Rate Pool 1, executed as of April 11, 2007 by the Registrant, for the benefit of Wachovia Bank, National Association (incorporated by reference to Exhibit 10.25.4.6 to Form 10-Q, filed on November 6, 2009)
	10	.25.4.6a	Schedule of Agreements omitted pursuant to Instruction 2 to Item 601 of Regulation S-K (incorporated by reference to Exhibit 10.25.4.6a to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.25.4.7	Guaranty Agreement for Floating-Rate Pool between Registrant and Wachovia Bank, National Association, dated April 11, 2007 (incorporated by reference to Exhibit 10.33.4.7 of Form 10-Q, filed on May 9, 2007)
	10	.25.4.8	Guaranty Agreement for Junior Mezzanine Loan between Registrant and Wachovia Bank, National Association, dated April 11, 2007 (incorporated by reference to Exhibit 10.33.4.8 of Form 10-Q, filed on May 9, 2007)
	10	.25.4.9	Guaranty Agreement for Intermediate Mezzanine Loan between Registrant and Wachovia Bank, National Association, dated April 11, 2007 (incorporated by reference to Exhibit 10.33.4.9 of Form 10-Q, filed on May 9, 2007)
	10	.25.4.10	Guaranty Agreement for Senior Mezzanine Loan between Registrant and Wachovia Bank, National Association, dated April 11, 2007 (incorporated by reference to Exhibit 10.33.4.10 of Form 10-Q, filed on May 9, 2007)
	10	.25.5.2	Letter Agreement, dated April 10, 2007, between the registrant and Security Capital Preferred Growth Incorporated (incorporated by reference to Exhibit 10.33.5.2 to the Registrant’s Form 8-K, dated April 12, 2007, for the event dated April 11, 2007)
	10	.26	Investor Program Agreement, dated January 22, 2008, between the registrant and Prudential Investment Management, Inc. (incorporated by reference to Exhibit 10.26 to the Registrant’s Form 10-K, filed on February 29, 2008)

(Continued on Next Page)

115


Exhibit			Description

	10	.26.1	Joint Venture Agreement to the Investor Program Agreement, dated February 6, 2008, between Registrant and Prudential Investment Management, Inc. (incorporated by reference to Exhibit 10.26.1 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.26.2	Loan Servicing Agreement to the Investor Program Agreement, dated February 6, 2008, between Registrant and Prudential Investment Management, Inc. (incorporated by reference to Exhibit 10.26.2 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.26.3	Limited Liability Company Agreement of PIM Ashford Venture I, LLC, dated February 6, 2008, between the registrant and Prudential Investment Management, Inc. (incorporated by reference to Exhibit 10.26.3 to the Registrant’s Form 10-K, filed on February 29, 2008)
	10	.27	ISDA Master Agreement between Ashford Hospitality Limited Partnership and Wachovia Bank, National Association, dated March 12, 2008 (incorporated by reference to Exhibit 10.27.1 to the Registrant’s Form 8-K/A, dated March 18, 2008, for the event dated March 13, 2008)
	10	.27.1	Schedule to the Master Agreement between Ashford Hospitality Limited Partnership and Wachovia Bank, National Association, dated March 12, 2008 (incorporated by reference to Exhibit 10.27.1.1 to the Registrant’s Form 8-K/A, dated March 18, 2008, for the event dated March 13, 2008)
	10	.27.2	Letter Agreement between Ashford Hospitality Limited Partnership and Wachovia Bank, National Association, dated March 12, 2008 (incorporated by reference to Exhibit 10.27.1.2 to the Registrant’s Form 8-K/A, dated March 18, 2008, for the event dated March 13, 2008)
	10	.28	Employment Agreement, dated as of March 21, 2008, between Ashford Hospitality Trust, Inc. and Alan L. Tallis (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 8-K, dated March 27, 2008, for the event dated March 21, 2008)
	10	.29	Form of LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.15 to the Registrant’s Form 8-K, dated March 27, 2008, for the event dated March 21, 2008)
	10	.30.1	Confirmation of Trade, dated December 8, 2008, related to the purchase of 1-year Flooridor by Ashford Hospitality Limited Partnership from Bank of America, N.A. as effected on December 2, 2008 (incorporated by reference to the Exhibit 10.30.1 to the Registrant’s Form 10-K, filed on March 2, 2009)
	10	.30.2	Confirmation of Trade, dated December 8, 2008, related to the purchase of 1-year Flooridor by Ashford Hospitality Limited Partnership from Credit Suisse International as effected on December 2, 2008 (incorporated by reference to the Exhibit 10.30.1 to the Registrant’s Form 10-K, filed on March 2, 2009)
	10	.30.3	Confirmation of Trade, dated March 5, 2009, related to the purchase of 1-year Flooridor by Ashford Hospitality Limited Partnership from UBS AG as effected on December 14, 2009 (incorporated by reference to the Exhibit 10.30.3 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.30.4	Confirmation of Trade, dated July 1, 2009, related to the purchase of 1-year Flooridor by Ashford Hospitality Limited Partnership from Bank of New York Mellon as effected on December 14, 2010 (incorporated by reference to the Exhibit 10.30.4 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.30.5	Confirmation of Trade, dated July 1, 2009, related to the purchase of 1-year Flooridor by Ashford Hospitality Limited Partnership from SMBC Capital Markets, Inc. as effected on December 14, 2009 (incorporated by reference to the Exhibit 10.30.5 to the Registrant’s Form 10-Q, filed on November 6, 2009)
	10	.30.6	Confirmation of Trade, dated October 21, 2009, related to the purchase of 1-year Flooridor by Ashford Hospitality Limited Partnership from Calyon Corporate and Investment Bank New York Branch as effected on October 21, 2009 (incorporated by reference to Exhibit 10.30.6 to the Registrant’s Form 10-K, filed on March 2, 2010)
	10	.30.7*	Confirmation of Amended and Restated Swap Transaction, dated November 4, 2010, related to the trade of an interest rate swap by Ashford Hospitality Limited Partnership from Wells Fargo Bank, N.A. as effected on October 13, 2010

(Continued on Next Page)

116


Exhibit			Description

	10	.30.8*	Confirmation of Termination of Swap Transaction, dated November 4, 2010, related to the termination of an interest rate swap by Ashford Hospitality Limited Partnership from Wells Fargo Bank, N.A. as effected on October 13, 2010
	10	.30.9*	Confirmation of Trade, dated November 19, 2010, related to the trade of an interest rate swap by Ashford Hospitality Limited Partnership from Credit Agricole Corporate and Investment Bank New York Branch as effected on October 13, 2010
	10	.30.10*	Loan and Security Agreement between Ashford Crystal Gateway LP, as Borrower to German American Capital Corporation, as Lender, dated October 29, 2010, with respective to Marriott Crystal Gateway, Arlington, Virginia
	21	.1*	Registrant’s Subsidiaries Listing as of December 31, 2010
	21	.2*	Registrant’s Special-Purpose Entities Listing as of December 31, 2010
	23	.1*	Consent of Ernst & Young LLP
	31	.1*	Certification of the Chief Executive Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
	31	.2*	Certification of the Chief Financial Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
	32	.1*	Certification of the Chief Executive Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (In accordance with Sec Release 33-8212, this exhibit is being furnished, and is not being filed as part of this report or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement.)
	32	.2*	Certification of the Chief Financial Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (In accordance with Sec Release 33-8212, this exhibit is being furnished, and is not being filed as part of this report or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement.)


*		Filed herewith.

117

Exhibit 10.30.7

1/4

AMENDED AND RESTATED
SWAP TRANSACTION CONFIRMATION



To:		Ashford Hospitality Limited Partnership (“Counterparty”)
Attention:		Randy Medina
Telephone:		972-778-9452
Email:		rmedina@chathamfinancial.com

From:		Wells Fargo Bank, N.A. (“Wells Fargo”)
Telephone:		(704) 383-4599
Fax:		(704) 383-9139
Email:		inboundconfirms@wellsfargo.com

Ref. No:		7614901

Date:		November 04, 2010

Dear Randy Medina:

Reference is made to that certain Confirmation dated October 19, 2010 between the Counterparty and Wells Fargo regarding a Transaction with a Wells Fargo reference number of 7614901, a Trade Date of October 19, 2010, an Effective Date of October 13, 2010 and a Termination Date of March 13, 2013 (“Prior Confirmation”). This Confirmation amends and restates the Prior Confirmation.

This confirms the terms of the Transaction described below between Counterparty and Wells Fargo. The definitions and provisions contained in the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. Fixed Amounts and Floating Amounts for each applicable Payment Date hereunder will be calculated in accordance with the ISDA Definitions, and if any Fixed Amount and Floating Amount are due for the same Payment Date hereunder, then those amounts shall not be payable and instead the Fixed Rate Payer shall pay the positive difference, if any, between the Fixed Amount and the Floating Amount, and the Floating Rate Payer shall pay the positive difference, if any, between the Floating Amount and the Fixed Amount.

1. The terms of the particular Transaction to which the Confirmation relates are as follows:


Transaction Type:		Interest Rate Swap
Currency for Payments:		U.S. Dollars
Notional Amount:		USD 1,475,000,000.00
Term:
Trade Date:		October 19, 2010
Effective Date:		October 13, 2010

Wells Fargo: 7614901

2/4


Termination Date:		March 13, 2013, subject to adjustment in accordance with the Modified Following Business Day Convention.
Fixed Amounts:

Fixed Rate Payer:		Counterparty
Payment Dates:		Monthly on the 13th of each month commencing November 15, 2010, through and including the Termination Date
Business Day Convention:		Modified Following
Business Day:		New York
Fixed Rate:		4.084%
Fixed Rate Day Count Fraction:		Actual/360

Floating Amounts:

Floating Rate Payer:		Wells Fargo
Payment Dates:		Monthly on the 13th of each month commencing November 15, 2010, through and including the Termination Date
Business Day Convention:		Modified Following
Business Day:		New York
Floating Rate for initial		Determined two London Banking Days prior to the Effective Date
Calculation Period:
Floating Rate Option:		USD-LIBOR-BBA
Designated Maturity:		1 Month
Spread:		Plus 2.638%
Floating Rate Day Count		Actual/360
Fraction:
Floating Rate determined:		Two London Banking Days prior to each Reset Date.
Reset Dates:		The first day of each Calculation Period.
Compounding:		Inapplicable
Rounding convention:		5 decimal places per the ISDA Definitions.
2. The additional provisions of this Confirmation are as follows:

Calculation Agent:		Wells Fargo
Payment Instructions:		Wells Fargo Bank, NA (San Francisco)
		CIB Group, ABA 121000248
		Ref: Derivative Desk (Trade No: 7614901)
		Account #: 01014890064228
Wells Fargo Contacts:		Settlement and/or Rate Resets:
		1-800-249-3865
		1-704-383-8429

		Documentation:
		Tel: (704)383-4599
		Fax: (704)383-9139

		Collateral:
		Tel: (704)427-5785

Wells Fargo: 7614901

3/4


		Fax: (704) 427-5480
		Email: collateral.mgmt@wachovia.com

		Please quote transaction reference number.
Payments to Counterparty:		Per your standing payment instructions or debit authorization
		if provided to Wells Fargo, as relevant. If not provided, please
		contact us in order for payment to be made.

		Phone: 1-800-249-3865 Fax: 1-704-383-8429

Additional Terms

Together with this Transaction, Wells Fargo and Counterparty have entered into the following Transaction (the “Offsetting Transaction”) with the Trade Date of March 12, 2008: an Interest Rate Swap Transaction under a Swap Transaction Confirmation dated March 13, 2008, Wells Fargo ref. no. 2414448. Notwithstanding any other provision of the ISDA Master Agreement to the contrary, if any Separation Event occurs, then an Additional Termination Event shall be deemed to occur under the ISDA Master Agreement with respect to this Transaction as an Affected Transaction and for such purpose the Counterparty shall be deemed the Affected Party.

“Separation Event” means (i) any transfer of any Offsetting Transaction occurs by consent of Wells Fargo or Counterparty as required under the ISDA Master without the simultaneous transfer of this Transaction pursuant to such consent, (ii) any early termination of any Offsetting Transaction by mutual agreement of Wells Fargo and Counterparty without the simultaneous early termination of this Transaction, or (iii) any Offsetting Transaction becomes a Terminated Transaction under and as defined in the ISDA Master Agreement without this Transaction simultaneously becoming a Terminated Transaction thereunder.

Fixed Rate Adjustment

At Counterparty’s request, the early termination value of another Transaction terminated by mutual agreement of the parties has been rolled over into this Transaction as reflected in an adjustment to the Fixed Rate of this Transaction. Termination of the other Transaction is evidenced by a Confirmation dated November 04, 2010 between Wells Fargo and Counterparty (Wells Fargo reference number 2420215).

Documentation

This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement between Wells Fargo and Counterparty dated as of March 12, 2008, as amended and supplemented from time to time (the “ISDA Master Agreement”). All provisions contained or incorporated by reference in the ISDA Master Agreement will govern this Confirmation except as expressly modified herein.

Wells Fargo: 7614901

4/4

Please confirm that the foregoing correctly sets forth the terms of our agreement by executing a copy of this
Confirmation and returning it to us.


		Very truly yours,
		Wells Fargo Bank, N.A.

		By:
		Name: Tracey Bissell
		Title: Vice President

		Ref. No. 7614901

Accepted and Confirmed as of date first
written above:
Ashford Hospitality Limited Partnership


By:		Ashford OP General Partner LLC

By:
Name: David Brooks
Title: Vice President

Wells Fargo: 7614901

Exhibit 10.30.8

1/3

CONFIRMATION OF TERMINATION
OF SWAP TRANSACTION



To:		Ashford Hospitality Limited Partnership (“Counterparty”)
Attention:		Randy Medina
Email:		rmedina@chathamfinancial.com

From:		Wells Fargo Bank, N.A. (“Wells Fargo”)
Telephone:		(704) 383-4599
Fax:		(704) 383-9139
Email:		inboundconfirms@wellsfargo.com

Ref. No:		2420215

Date:		November 04, 2010

Dear Randy Medina:

Reference is made to that certain Transaction with a Trade Date of March 12, 2008, an Effective Date of March 13, 2008 and a Termination Date of March 13, 2013 (“Reference Transaction”), which Reference Transaction is evidenced by a Confirmation between Wells Fargo and the Counterparty (as the same may have been amended or modified prior to the date hereof, the “Reference Confirmation”).

This confirms that, as of October 19, 2010 (the “Unwind Date”), the parties have terminated the Reference Transaction, together with their remaining obligations to make any further payments under the Reference Transaction for any future Payment Date occurring after the Unwind Date as described in the Reference Confirmation, subject to any Termination Fee as provided below. The obligation of either party to make any payment under the Reference Transaction for any Payment Date occurring on or prior to the Unwind Date (including overdue interest thereon, whether accruing before or after the Unwind Date) shall survive such termination, and any such payment has not been included in any such Termination Fee.

Termination Fee:

At Counterparty’s request, the value to either party of terminating the Reference Transaction on the Unwind Date has been rolled over into another Transaction as reflected in an adjustment to the Fixed Rate thereof without either party agreeing to pay or receive a termination fee for such early termination of the Reference Transaction (“Termination Fee”). The other Transaction is evidenced by a Confirmation dated November 04, 2010 between Wells Fargo and Counterparty (Wells Fargo reference number 7614901). Accordingly, neither party shall be obligated to pay a Termination Fee for the termination of the Reference Transaction.


Wells Fargo Contacts:		Settlement and/or Rate Resets:
		1-800-249-3865

Wells Fargo: 2420215

2/3


		1-704-383-8429

		Documentation:
		Tel: (704) 383-4599
		Fax: (704) 383-9139

		Collateral:
		Tel: (704) 427-5785
		Fax: (704) 427-5480
		Email: collateral.mgmt@wachovia.com

		Please quote transaction reference number.

Documentation:

This Confirmation is a binding and complete contract between the parties, provided that if the Reference Transaction was governed by a master agreement (however described) between the parties (“Master Agreement”), this Confirmation is a Confirmation under the Master Agreement and supplements, forms part of and will be governed by the Master Agreement. Unless otherwise provided in the Master Agreement, this Confirmation is governed by the law (and not the law of conflicts) of the State of New York.

Please confirm that the foregoing correctly sets forth the terms of our agreement by executing a copy of this Confirmation and returning
it to us.


		Very truly yours,
		Wells Fargo Bank, N.A.

		By:
		Name: Tracey Bissell
		Title: Vice President

		Ref. No. 2420215

Accepted and Confirmed as of date first
written above:
Ashford Hospitality Limited Partnership

Wells Fargo: 2420215

3/3


By:		Ashford OP General Partner LLC

By:
Name: David Brooks
Title: Vice President

Wells Fargo: 2420215

Exhibit 10.30.9

Direction des Opérations
Back Office Dérivés

Objet : Derivatives Confirmation

Credit Agricole Corporate and Investment Bank
BACK OFFICE SWAPS

1301 AVENUE OF THE AMERICAS
NY 10019-6022 NEW YORK
UNITED STATES OF AMERICA

ASHFORD HOSPITALITY LP
M DERIC EUBANKS
14185 DALLAS PARKWAY
SUITE 1100
75254 DALLAS
UNITED STATE

For clarification, in this confirmation, the entity “Ashford Hospitality IP” is equivalent to the entity
“Ashford Hospitality Limited partnership”

NEWYORK, Nov 19, 2010



Re	:	Confirmation Agreement

Our reference	:	3903758NY / D00027OBAR

To	:	ASHFORD HOSPITALITY LP DALLAS

Attn	:	M DERIC EUBANKS

Dear Sirs,

We are pleased to enclose one execution copy of the above referenced Confirmation Agreement signed on behalf of Credit Agricole Corporate and Investment Bank.

Assuming that you are in accordance with these documents, we would be grateful if you could arrange to have each copy signed by the appropriate authorized officers and return one copy to the following address:

CA-CIB New York Branch
c/o CA-CIB France
BACK OFFICE PRODUITS DERIVES
9 QUAI DU PRESIDENT PAUL DOUMER
92920 PARIS LA DEFENSE CEDEX
FRANCE

We look forward to receiving signed documents but in the meantime should you have any questions please do not hesitate to call us on
33 1 41894717 / 33 1 41896882.

Thank you very much for your cooperation, we look forward to hearing from you in the future.

Best regards,

BACK OFFICE SWAPS

Credit Agricole Corporate and Investment Bank, NEW YORK

3903758NY / D00027OBAR

Page 1 / 6

INTEREST RATE SWAP TRANSACTION

This confirmation cancels and supersedes the previous confirmation under the same reference

Dear Sirs,

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the Transaction entered into between us on the Trade Date specified below (the “Transaction”).

1. This Confirmation supplements, forms part of and is subject to, the ISDA Master Agreement dated as of Jun 25, 2008 as amended and supplemented from time to time (the “Agreement”), between Credit Agricole Corporate and Investment Bank (“Party A”) and ASHFORD HOSPITALITY LP (“Party B”). All provisions contained in the Agreement govern this Confirmation except as expressly modified below.

The definitions and provisions contained in the 2006 ISDA Definitions (the “Definitions”), as published by the International Swaps and Derivatives Association, Inc., are incorporated by reference herein. In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern.

2. The terms of the particular Swap Transaction to which this Confirmation relates are as follows:


Our reference	:	3903758NY / D00027OBAR

Trade Date	:	Oct 14, 2010

Effective Date	:	Oct 13, 2010

Termination Date	:	Mar 13, 2013, subject to adjustment in accordance with the Modified Following Business Day Convention

Notional Amount	:	USD 325,000,000.00

3. Floating Amounts


Floating Rate Payer	:	Credit Agricole Corporate and Investment Bank, NEW YORK

Floating Rate Payer Payment Dates	:	Monthly on the 13th commencing Nov 15, 2010 and ending with the Termination Date subject to adjustment in accordance with the Modified Following Business Day Convention

Floating Amount	:	The Floating Rate Option with the Designated Maturity plus Spread. The Floating Rate Option is subject to Condition 1

3903758NY / D00027OBAR

Page 2 / 6


Condition 1	:	The Floating Rate Option shall never be leas than 1.25%

Floating Rate Option	:	USD-LIBOR-BBA

Designated Maturity	:	1 month

Spread	:	263.800000 basis point (s)

Floating Rate Day Count Fraction	:	Actual / 360

Period End Date	:	Adjusted

Reset Dates	:	The First Day of each Calculation Period

Fixing Dates	:	2 business day(s) before the first business day of each Floating Rate Calculation Period

Compounding	:	Inapplicable

Business Days for Fixings	:	London

Business Days for Payments	:	New York

4. Fixed Amounts


Fixed Rate Payer	:	ASHFORD HOSPITALITY LP, DALLAS

Fixed Rate	:	4.113600 percent per annum

Fixed Rate Payer Payment Dates	:	Monthly on the 13th commencing Nov 15, 2010 and ending with the Termination Date subject to adjustment in accordance with the Modified Following Business Day Convention

Fixed Rate Day Count Fraction	:	Actual / 360

Period End Date	:	Adjusted

Compounding	:	Inapplicable

Business Days for Payments	:	New York

Calculation Agent	:	Credit Agricole Corporate and Investment Bank, NEW YORK unless otherwise specified in the Master Agreement

5. Additional clause:

Credit Agricole Corporate and Investment Bank transaction D00027OBAR/3903758NY can not be terminated or modified without the same termination or modification of Credit

3903758NY / D00027OBAR

Page 3 / 6

Agricole Corporate and Investment Bank Trades NO1809SSTD/2443525NY and NO1814OSTD/2443796NY.

6. Account Details:


Payments To ASHFORD HOSPITALITY LP, DALLAS:

Accounts for payments in USD

We will pay by bank transfer
To	:	JPMORGAN CHASE BANK DALLAS, TEXAS
SWIFT	:
A/C	:	08806397111
Fav.	:	ASHFORD HOSPITALITY LP, DALLAS


Payments To Credit Agricole Corporate and Investment Bank, NEW YORK :

Accounts for payments in USD


Please pay bank transfer
TO	:	CA-CIB New York Branch, NEW YORK
SWIFT	:	CRLYUS33
A/C	:	0188180321100
Fav.	:	CA-CIB New York Branch, NEW YORK
Ref	:	/BNF/ STEPHANIE BILY 972-778-9284

7. Offices:

The office of Counterparty for the Notification is:

ASHFORD HOSPITALITY LP
M DERIC EUBANKS

14185 DALLAS PARKWAY
SUITE 1100
75254 DALLAS
UNITED STATE

Tel.: 0019727789451
Fax: 0019727789261

The office of Credit Agricole Corporate and Investment Bank for the Notification is:

CA-CIB New York Branch
c/o CA-CIB France
BACK OFFICE PRODUITS DERIVES
9 QUAI DU PRESIDENT PAUL DOUMER
92920 PARIS LA DEFENSE CEDEX
FRANCE

Tel. (vanilla/exotic): 33 / 33

Fax (vanilla/exotic): 33 1 41893916 / 33

Local contact:
Tel: 0012122617136

3903758NY / D00027OBAR

Page 4 / 6

Fax: 0012124593166

8. Broker: none

9. Representations:

Relationship Between Parties. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction):

(a) Non-reliance. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction, it being understood that information and explanations related to the terms and conditions of a Transaction will not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party will be deemed to be an assurance or guarantee as to the expected results of that Transaction.

(b) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes the risks of that Transaction.

(c) Status of Parties. The other party is not acting as a fiduciary for or an adviser to it in respect of that Transaction.

(d) Risk Management. If Party B is not a bank, a credit institution, an investment firm (or any licensed financial institution), it has entered into this Transaction for the purpose of hedging in connection with its line of business and not for speculation purposes.

3903758NY / D00027OBAR

Page 5 / 6

The Parties declare that this Confirmation may be issued through a computer system and may be signed by the Parties by digitalization of the signature of a person duly authorized by the Parties (hereafter the “Digital Signature”).

In the context of this Confirmation, which is governed by the ISDA Master-Agreement, the Digital Signature is valid with regard to the Parties as to identity authorized by each of the Parties to sign and of their consent to the rights and obligations evidenced in the Confirmation.

The Parties declare and accept that the Digital Signature is equivalent to a manuscript signature and expressly renounce the right to institute any proceedings based on the absence of a manuscript signature.

Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter or telex substantially similar to this letter, which letter or telex sets forth the material terms of the Transaction to which this Confirmation relates and indicates agreement to those terms.

Yours sincerely,


Credit Agricole Corporate and		ASHFORD HOSPITALITY LP
Investment Bank		By: Ashford OP General Partner


Joseph KUAKUVI Capital Markets Operations
		By: David A. Brooks Vice President

Delphine MARGUERITAIN

Credit Derivative Back Office

3903758NY / D00027OBAR

Page 6 /6

Exhibit 10.30.10

LOAN AND SECURITY AGREEMENT

Dated as of October 29, 2010

Between

ASHFORD CRYSTAL GATEWAY LP,

as Borrower

AND

GERMAN AMERICAN CAPITAL CORPORATION ,

as Lender

With respect to:

Marriott Crystal Gateway
1700 Jefferson David Highway
City of Arlington, Arlington County, Commonwealth of Virginia

TABLE OF CONTENTS


				Page

I.	DEFINITIONS; PRINCIPLES OF CONSTRUCTION				1
	1.1	Definitions			1
	1.2	Principles of Construction			26

II.	GENERAL TERMS				26
	2.1	Loan; Disbursement to Borrower			26
		2.1.1	The Loan		26
		2.1.2	Disbursement to Borrower		26
		2.1.3	The Note, Security Instrument and Loan Documents		26
		2.1.4	Use of Proceeds		26
	2.2	Interest; Loan Payments; Late Payment Charge			27
		2.2.1	Payment of Principal and Interest		27
		2.2.2	Method and Place of Payment		27
		2.2.3	Late Payment Charge		27
		2.2.4	Usury Savings		28
	2.3	Prepayments			28
		2.3.1	Prepayments		28
		2.3.2	Prepayments After Event of Default		28
		2.3.3	Release of Property		28
	2.4	Regulatory Change; Taxes			28
		2.4.1	Increased Costs		28
		2.4.2	Special Taxes		29
		2.4.3	Other Taxes		29
		2.4.4	Indemnity		29
		2.4.5	Change of Office		29
		2.4.6	Survival		30
	2.5	Conditions Precedent to Closing			30
		2.5.1	Representations and Warranties; Compliance with Conditions		30
		2.5.2	Delivery of Loan Documents; Title Policy; Reports; Leases		30
		2.5.3	Delivery of Organizational Documents		32
		2.5.4	Opinions of Borrower’s Counsel		32
		2.5.5	Budgets		32
		2.5.6	Completion of Proceedings		33
		2.5.7	Payments		33
		2.5.8	Transaction Costs		33
		2.5.9	Material Adverse Effect		33
		2.5.10	Tax Lot		33
		2.5.11	Physical Conditions Report		33
		2.5.12	Manager Consent		33
		2.5.13	Appraisal		33
		2.5.14	Financial Statements		33
		2.5.15	Further Documents		33


				Page

III.	CASH MANAGEMENT				34
	3.1	Cash Management			34
		3.1.1	Establishment of Accounts		34
		3.1.2	Pledge of Account Collateral		35
		3.1.3	Maintenance of Collateral Accounts		35
		3.1.4	Eligible Accounts		36
		3.1.5	Deposits into Sub-Accounts		36
		3.1.6	Monthly Funding of Sub-Accounts		36
		3.1.7	Payments from Sub-Accounts		38
		3.1.8	Cash Management Bank		38
		3.1.9	Borrower’s Account Representations, Warranties and Covenants		39
		3.1.10	Account Collateral and Remedies		39
		3.1.11	Transfers and Other Liens		40
		3.1.12	Reasonable Care		40
		3.1.13	Lender’s Liability		41
		3.1.14	Continuing Security Interest		41

IV.	REPRESENTATIONS AND WARRANTIES				41
	4.1	Borrower Representations			41
		4.1.1	Organization		41
		4.1.2	Proceedings		42
		4.1.3	No Conflicts		42
		4.1.4	Litigation		43
		4.1.5	Agreements		43
		4.1.6	Title		43
		4.1.7	No Bankruptcy Filing		43
		4.1.8	Full and Accurate Disclosure		44
		4.1.9	All Property		44
		4.1.10	No Plan Assets		44
		4.1.11	Compliance		44
		4.1.12	Financial Information		45
		4.1.13	Condemnation		45
		4.1.14	Federal Reserve Regulations		45
		4.1.15	Utilities and Public Access		45
		4.1.16	Not a Foreign Person		45
		4.1.17	Separate Lots		45
		4.1.18	Assessments		46
		4.1.19	Enforceability		46
		4.1.20	No Prior Assignment		46
		4.1.21	Insurance		46
		4.1.22	Use of Property		46
		4.1.23	Certificate of Occupancy; Licenses		46
		4.1.24	Flood Zone		46
		4.1.25	Physical Condition		46
		4.1.26	Boundaries		47
		4.1.27	Leases		47
		4.1.28	Filing and Recording Taxes		47


				Page

		4.1.29	Single Purpose Entity/Separateness		47
		4.1.30	Management Agreement		48
		4.1.31	Illegal Activity		48
		4.1.32	No Change in Facts or Circumstances; Disclosure		48
		4.1.33	Tax Filings		48
		4.1.34	Solvency/Fraudulent Conveyance		48
		4.1.35	Investment Company Act		49
		4.1.36	Labor		49
		4.1.37	Inventory		49
		4.1.38	Brokers		49
		4.1.39	No Other Debt		49
		4.1.40	Taxpayer Identification Number; Jurisdiction of Formation		49
		4.1.41	Compliance with Anti-Terrorism, Embargo and Anti-Money Laundering Laws		49
		4.1.42	REAs and the Operating Lease		50
		4.1.43	Intellectual Property		50
		4.1.44	Backward Representations — Entity		50
		4.1.45	Backward Representations — Separateness		51
	4.2	Survival of Representations			52


V.	BORROWER COVENANTS				52
	5.1	Affirmative Covenants			52
		5.1.1	Performance by Borrower		52
		5.1.2	Existence; Compliance with Legal Requirements; Insurance		52
		5.1.3	Litigation; Notices		53
		5.1.4	Single Purpose Entity		53
		5.1.5	Consents		55
		5.1.6	Access to Property		55
		5.1.7	Notice of Default		55
		5.1.8	Cooperate in Legal Proceedings		55
		5.1.9	Perform Loan Documents		55
		5.1.10	Insurance		56
		5.1.11	Further Assurances; Separate Notes; Loan Resizing		56
		5.1.12	Mortgage Taxes		58
		5.1.13	Compliance with Management Agreement & Operating Lease		58
		5.1.14	Business and Operations; Licenses		59
		5.1.15	Title to the Property		59
		5.1.16	Costs of Enforcement		59
		5.1.17	Estoppel Statement		60
		5.1.18	Loan Proceeds		60
		5.1.19	No Joint Assessment		60
		5.1.20	No Further Encumbrances		60
		5.1.21	Article 8 “Opt In” Language		60
		5.1.22	Leases, REAs, etc.		60
		5.1.23	Independent Directors, Independent Managers, Independent Members		61
		5.1.24	Extension or Renewal of Operating Lease, etc.		61
		5.1.25	Broker Indemnity		61

iii


				Page

		5.1.26	Tunnel Agreement		61
	5.2	Negative Covenants			62
		5.2.1	Incur Debt; FF&E Leasing		62
		5.2.2	Encumbrances		62
		5.2.3	Engage in Different Business		62
		5.2.4	Make Advances		62
		5.2.5	Partition		62
		5.2.6	Commingle		62
		5.2.7	Guarantee Obligations		62
		5.2.8	Transfer Assets		62
		5.2.9	Amend Organizational Documents		62
		5.2.10	Dissolve		63
		5.2.11	Bankruptcy		63
		5.2.12	ERISA		63
		5.2.13	Distributions		63
		5.2.14	Manager and Management Agreement		63
		5.2.15	Modify or Termination of REAs or Operating Lease		64
		5.2.16	Modify Account Agreement		64
		5.2.17	Zoning Reclassification		64
		5.2.18	Debt Cancellation		64
		5.2.19	Intentionally Omitted		65
		5.2.20	Single-Purpose Entity		65
		5.2.21	Affiliate Transactions		65
		5.2.22	Intellectual Property		65

VI.	INSURANCE; CASUALTY; CONDEMNATION; RESTORATION				65
	6.1	Insurance Coverage Requirements			65
		6.1.1	Property Insurance		65
		6.1.2	Liability Insurance		65
		6.1.3	Workers’ Compensation Insurance		66
		6.1.4	Commercial Rents Insurance		66
		6.1.5	Builder’s All-Risk Insurance		66
		6.1.6	Boiler and Machinery Insurance		66
		6.1.7	Flood Insurance		66
		6.1.8	Windstorm Insurance		66
		6.1.9	Terrorism Insurance		67
		6.1.10	Other Insurance		67
		6.1.11	Ratings of Insurers		67
		6.1.12	Form of Insurance Policies; Endorsements		67
		6.1.13	Certificates		68
		6.1.14	Separate Insurance		68
		6.1.15	Blanket Policies		69
	6.2	Condemnation and Insurance Proceeds			69
		6.2.1	Notification		69
		6.2.2	Proceeds		69
		6.2.3	Lender to Take Proceeds		70
		6.2.4	Borrower to Restore		71


				Page

		6.2.5	Disbursement of Proceeds		72

VII.	IMPOSITIONS, OTHER CHARGES, LIENS AND OTHER ITEMS				73
	7.1	Borrower to Pay Impositions and Other Charges			73
	7.2	No Liens			74
	7.3	Contest			74

VIII.	TRANSFERS, INDEBTEDNESS AND SUBORDINATE LIENS				75
	8.1	Restrictions on Transfers			75
		8.1.1	General		75
		8.1.2	Restriction		75
	8.2	Sale of Building Equipment			75
	8.3	Immaterial Transfers and Easements, etc.			75
	8.4	Indebtedness			76
		8.4.1	Prohibition		76
		8.4.2	Preferred Equity		76
		8.4.3	Additional Mezzanine Loan		76
	8.5	Permitted Equity Transfers			78
		8.5.1	Less than 49%		78
		8.5.2	More than 49%		78
		8.5.3	Exceptions		79
	8.6	Deliveries to Lender			79
	8.7	Loan Assumption			79
	8.8	Leases			80
		8.8.1	New Leases and Lease Modifications		80
		8.8.2	Security Deposits		80

IX.	INTENTIONALLY OMITTED				80

X.	MAINTENANCE OF PROPERTY; ALTERATIONS				80
	10.1	Maintenance of Property			80
	10.2	Conditions to Alteration			81
	10.3	Costs of Alteration			81

XI.	BOOKS AND RECORDS, FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION				82
	11.1	Books and Records			82
	11.2	Financial Statements			83
		11.2.1	Quarterly Reports		83
		11.2.2	Annual Reports		83
		11.2.3	Capital Expenditures Summaries		83
		11.2.4	Management Agreement		83
		11.2.5	Annual Budget		83
		11.2.6	Other Information		84

XII.	ENVIRONMENTAL MATTERS				84
	12.1	Representations			84


				Page

	12.2	Compliance with Environmental Laws			85
	12.3	Environmental Reports			85
	12.4	Environmental Indemnification			85
	12.5	Recourse Nature of Certain Indemnifications			86

XIII.	DEFEASANCE				86
	13.1	Generally			86
		13.1.1	Defeasance Note		86
		13.1.2	Defeasance Security Agreement		87
		13.1.3	Defeasance Assumption Agreement		87
		13.1.4	Substitute Borrower Organizational Documents		87
		13.1.5	Release Documents		87
		13.1.6	Other Conditions		87
		13.1.7	No Event of Default		87
	13.2	Defeasance Collateral			87
		13.2.1	Establishment of Account		87
		13.2.2	Delivery of Defeasance Collateral		87
		13.2.3	Grant of Lien		87
		13.2.4	Officer’s Certificate		88
	13.3	Sufficiency of Defeasance Collateral			88
	13.4	Lender Release			89
	13.5	Defeasance Collateral Account			89
	13.6	Payments			89
	13.7	Loan Document Amendments			89
	13.8	Lender’s Costs			89

XIV.	SECURITIZATION AND PARTICIPATION				90
	14.1	Sale of Note and Securitization			90
	14.2	Securitization Financial Statements			91
	14.3	Securitization Indemnification			91
		14.3.1	Disclosure Documents		91
		14.3.2	Indemnification Certificate		92
	14.4	Retention of Servicer			94

XV.	ASSIGNMENTS AND PARTICIPATIONS				94
	15.1	Assignment and Acceptance			94
	15.2	Effect of Assignment and Acceptance			94
	15.3	Content			95
	15.4	Register			95
	15.5	Substitute Notes			95
	15.6	Participations			96
	15.7	Disclosure of Information			96
	15.8	Security Interest in Favor of Federal Reserve Bank			97

XVI.	RESERVE ACCOUNTS				97
	16.1	Tax Reserve Account			97
		16.1.1	General		97


				Page

		16.1.2	Disbursement		97
	16.2	Insurance Reserve Account			98
		16.2.1	General		98
		16.2.2	Disbursement		98
	16.3	FF&E Reserve Account			98
		16.3.1	General		98
		16.3.2	Disbursement		98

XVII.	DEFAULTS				99
	17.1	Event of Default			99
	17.2	Remedies			102
	17.3	Remedies Cumulative; Waivers			103
	17.4	Costs of Collection			104

XVIII.	SPECIAL PROVISIONS				104
	18.1	Exculpation			104
		18.1.1	Exculpated Parties		104
		18.1.2	Carveouts From Non-Recourse Limitations		105
XIX.	MISCELLANEOUS				107
	19.1	Survival			107
	19.2	Lender’s Discretion			107
	19.3	Governing Law			107
	19.4	Modification, Waiver in Writing			108
	19.5	Delay Not a Waiver			108
	19.6	Notices			109
	19.7	TRIAL BY JURY			110
	19.8	Headings			110
	19.9	Severability			110
	19.10	Preferences			110
	19.11	Waiver of Notice			111
	19.12	Expenses; Indemnity			111
	19.13	Exhibits and Schedules Incorporated			113
	19.14	Offsets, Counterclaims and Defenses			113
	19.15	Liability of Assignees of Lender			113
	19.16	No Joint Venture or Partnership; No Third Party Beneficiaries			113
	19.17	Publicity			114
	19.18	Waiver of Marshalling of Assets			114
	19.19	Waiver of Counterclaim and other Actions			114
	19.20	Conflict; Construction of Documents; Reliance			114
	19.21	Prior Agreements			115
	19.22	Counterparts			115

vii


		SCHEDULES

SCHEDULE I		Qualified Institutional Holder Requirements
SCHEDULE II		Restricted Party List
SCHEDULE III		Litigation
SCHEDULE IV		REAs

		EXHIBITS

EXHIBIT A		Manager Direction Letter
EXHIBIT B		Organizational Chart
EXHIBIT C		INTENTIONALLY OMITTED
EXHIBIT D		Form of Independent Director, Independent Manager, Independent Member Certificate
EXHIBIT E		Article 8 “Opt In” Language

viii

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT , dated as of the 29th day of October, 2010, is between ASHFORD CRYSTAL GATEWAY LP , a Delaware limited partnership (together with its successors and permitted assigns, “ Borrower ”) having an office at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254, and GERMAN AMERICAN CAPITAL CORPORATION , a Maryland corporation, having an address at 60 Wall Street, 10 ^th Floor, New York, New York 10005 (together with its successors and assigns, “ Lender ”).

RECITALS:

WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined) from Lender;

WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of this Agreement (as hereinafter defined) and the other Loan Documents (as hereinafter defined).

NOW, THEREFORE, in consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby covenant, agree, represent and warrant as follows:

I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION

1.1 Definitions . For all purposes of this Agreement, except as otherwise expressly required or unless the context clearly indicates a contrary intent:

“ Account Agreement ” shall mean the Account and Control Agreement among Lender, Borrower and Cash Management Bank, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Account Collateral ” shall have the meaning set forth in Section 3.1.2 .

“ Additional Non-Consolidation Opinion ” shall have the meaning set forth in Section 5.1.4(h) .

“ Affiliate ” shall mean, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with, or any general partner or managing member in, such specified Person. An Affiliate of a Person includes, without limitation, (a) any officer or director of such Person, and (b) any record or beneficial owner of more than 10% of any class of ownership interests of such Person; provided that for purposes of any provision of the Loan Documents addressing transactions among Affiliates, Remington Lodging & Hospitality, LLC shall be deemed to be an Affiliate of Borrower, General Partner, Tenant or Guarantor. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management or policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interest, by contract or otherwise; and the terms “controlling” and “controlled” have the meanings correlative to the foregoing.

“ Agreement ” shall mean this Agreement, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ ALTA ” shall mean American Land Title Association, or any successor thereto.

“ Alteration ” shall have the meaning set forth in Section 10.2 .

“ Annual Budget ” shall mean the annual operating budget, if any, for (a) the Borrower, (b) the General Partner, (c) Tenant or (d) the Property, in each case, prepared by Borrower or, with respect to the Property, Manager, on Borrower’s behalf, pursuant to the Management Agreement, in each case, for the applicable Fiscal Year or other period setting forth, in reasonable detail, Borrower’s and Manager’s, as applicable, good faith estimates of the anticipated results of operations of Borrower, Tenant and the Property, including revenues from all sources, all Operating Expenses, management fees and Capital Expenditures.

“ Approved Bank ” shall have the meaning set forth in the Account Agreement.

“ Approved Operating Expenses ” shall mean the monthly Operating Expenses as set forth on the Annual Budget approved (or deemed approved) by Lender pursuant to Section 11.2.5 ; provided , however , that if such Annual Budget has not been approved (or deemed approved) by Lender, then the term “Approved Operating Expenses” shall mean the amount of Operating Expenses set forth on the immediately preceding Annual Budget approved (or deemed approved) by the Lender.

“ Assignment and Acceptance ” shall mean an assignment and acceptance entered into by Lender and an assignee, and accepted by Lender in accordance with Article XV and in such form as is customarily used by Lender in connection with the participation or syndication of mortgage loans at the time of such assignment.

“ Assignment of Leases ” shall mean that certain first priority Assignment of Leases, Rents and Security Deposits from Borrower, as assignor, to Lender, as assignee, assigning to Lender all of Borrower’s right, title and interest in and to the Operating Lease, Leases, Rents and Security Deposits as security for the Loan, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Assignment of Management Agreement ” shall mean that certain Collateral Assignment of Management Agreement and Intellectual Property among Lender, Borrower and Tenant, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Assumed Debt Service ” shall mean the sum of (a) payments of Debt Service with respect to the Loan made by Borrower to Lender on each Payment Date, plus (b) payments made with respect to any New Mezzanine Loan, in each case, during the immediately preceding 12-month period.

“ Assumed Debt Service Coverage Ratio ” shall mean a ratio, as reasonably determined by Lender for the applicable period, in which:

(a) the numerator is the Net Operating Income, as stated on Borrower’s four most recent quarterly financial statements delivered to Lender pursuant to Article XI hereof, for the trailing 12 month period immediately prior to the applicable calculation date; and

(b) the denominator is the Assumed Debt Service.

“ Bankruptcy Code ” shall mean Title 11, U.S.C.A., as amended from time to time and any successor statute or statutes and all rules and regulations from time to time promulgated thereunder, or any other Federal or state bankruptcy or insolvency law.

“ Borrower ” has the meaning set forth in the first paragraph of this Agreement.

“ Borrower’s Account ” shall mean the account designated in writing from time to time by Borrower as the “Borrower’s Account”.

“ Building Equipment ” shall have the meaning set forth in the Security Instrument.

“ Business Day ” shall mean any day other than a Saturday, Sunday or any other day on which national banks in New York, or the place of business of the trustee under a Securitization (or, if no Securitization has occurred, Lender), or any Servicer or the financial institution that maintains any collection account for or on behalf of any Servicer or the New York Stock Exchange or the Federal Reserve Bank of New York is not, in each case, open for business.

“ Capital Expenditures ” shall mean, for any period, the amount expended for items capitalized under GAAP (including expenditures for building improvements or major repairs).

“ Cash ” shall mean the legal tender of the United States of America.

“ Cash and Cash Equivalents ” shall mean any one or a combination of the following: (a) Cash, and (b) U.S. Government Obligations.

“ Cash Flow Reserve Account ” shall have the meaning set forth in Section 3.1.1(v) .

“ Cash Management Bank ” shall mean (a) Deutsche Bank Trust Company Americas, a New York banking corporation, (b) any Approved Bank acting as Cash Management Bank under the Account Agreement or (c) other financial institution approved by the Lender and, if a Securitization has occurred, the Rating Agencies.

“ Casualty Amount ” shall mean $7,500,000.

“ Closing Date ” shall mean the date of this Agreement set forth in the first paragraph hereof.

“ Code ” shall mean the Internal Revenue Code of 1986, as amended, as it may be further amended from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

“ Collateral Accounts ” shall have the meaning set forth in Section 3.1.1 .

“ Control ” shall mean (a) the power to direct the management or policies of a Person, directly or indirectly and whether through ownership of voting securities or other beneficial interest, by contract or otherwise and (b) the ownership, direct or indirect, of no less than 51% of the voting securities or other beneficial interest of such Person, and the terms “Controlled”, “Controlling” and “Common Control” shall have correlative meanings.

“ Control Agreement ” shall mean one or more agreements, each in form and substance satisfactory to Lender, that create and perfect in favor of Lender but subject to the terms of the Manager’s Subordination Agreement, a first priority security interest in and to the FF&E Holding Account, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time in accordance with the terms hereof.

“ Cut-Off Date ” shall have the meaning set forth in Section 6.2.3 .

“ DBS ” shall have the meaning set forth in Section 14.3.2(b) .

“ DBS Group ” shall have the meaning set forth in Section 14.3.2(b) .

“ DSCR Event ” shall mean with respect to the calculation date occurring on the last day of the immediately preceding calendar quarter, that Borrower has failed to maintain an Assumed Debt Service Coverage Ratio of 1.20 to 1.00.

“ Debt ” shall mean, with respect to any Person at any time: (a) indebtedness or liability of such Person for borrowed money whether or not evidenced by bonds, debentures, notes or other instruments, or for the deferred purchase price of property or services; (b) obligations of such Person as lessee under leases which should have been or should be, in accordance with GAAP, recorded as capital leases; (c) current liabilities of such Person in respect of unfunded vested benefits under plans covered by Title IV of ERISA; (d) obligations issued for, or liabilities incurred on the account of, such Person; (e) obligations or liabilities of such Person arising under letters of credit, credit facilities or other acceptance facilities; (f) obligations of such Person under any guarantees or other agreement to become secondarily liable for any obligation of any other Person, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person or otherwise to assure a creditor against loss; (g) obligations of such Person secured by any Lien on any property of such Person, whether or not the obligations have been assumed by such Person; or (h) obligations of such Person under any interest rate or currency exchange agreement.

“ Debt Service ” shall mean, with respect to any particular period of time, scheduled interest payments under the Note, any Mezzanine Loans and any New Mezzanine Loans.

“ Debt Service Reserve Account ” shall have the meaning set forth in Section 3.1.1(iii) .

“ Default ” shall mean the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would be an Event of Default.

“ Default Rate ” shall have the meaning set forth in the Note.

“ Defeasance ” shall have the meaning set forth in Section 13.1 .

“ Defeasance Collateral ” shall mean Defeasance Eligible Investments pledged to Lender as collateral pursuant to Article XIII (including, without limitation, all amounts then on deposit in the Defeasance Collateral Account).

“ Defeasance Collateral Account ” shall have the meaning set forth in Section 13.5 .

“ Defeasance Collateral Requirement ” shall mean an amount sufficient to provide payment of all (a) principal indebtedness outstanding as of the date of Defeasance under the Note as it becomes due through the date that is six months prior to the Maturity Date, (b) scheduled interest on the Loan as it becomes due through the date that is six months prior to the Maturity Date and (c) all other Indebtedness outstanding hereunder or under any of the other Loan Documents as it becomes due through the date that is six months prior to the Maturity Date.

“ Defeasance Eligible Investments ” shall mean (a) obligations or securities not subject to prepayment, call or early redemption which are direct obligations of, or obligations fully guaranteed as to timely payment by, the full faith and credit of the United States of America or any agency or instrumentality of the United States of America, the ownership of which will not cause Lender to be an “investment company” under the Investment Company Act of 1940, as amended, as evidenced by an Opinion of Counsel reasonably acceptable to Lender, and which qualify under §1.860G-2(a)(8) of the Treasury regulations, and (ii) such other securities as are (A) acceptable to Lender in its reasonable discretion or (B) if a Securitization has occurred, then being generally accepted by the Rating Agencies without any reduction, downgrade or withdrawal of the ratings for the certificates or any class thereof issued in connection with the Securitization. All such obligations or securities shall mature or be redeemable, or provide for payments of interest thereon, on or prior to the Business Day preceding the date principal and interest payments are required to be paid pursuant to Article XIII .

“ Defeasance Lockout Period ” shall have the meaning set forth in the Note.

“ Defeasance Note ” shall have the meaning set forth in Section 13.1.1 .

“ Defeasance Security Agreement ” shall have the meaning set forth in Section 13.1.2 .

“ Deficiency ” shall have the meaning set forth in Section 6.2.4(b)(ii) .

“ Disclosure Documents ” shall have the meaning set forth in Section 14.3.1 .

“ Eligible Account ” has the meaning set forth in the Account Agreement.

“ Environmental Certificate ” shall have the meaning set forth in Section 12.2 .

“ Environmental Claim ” shall mean any claim, action, cause of action, investigation or written notice by any Person alleging potential liability (including potential liability for investigatory costs, cleanup costs, natural resource damages, property damages, personal injuries or penalties) arising out of, based upon or resulting from (a) the presence, threatened presence, release or threatened release into the environment of any Hazardous Materials from or at the Property, or (b) the violation, or alleged violation, of any Environmental Law relating to the Property.

“ Environmental Consultant ” shall mean an Independent environmental consulting firm having at least five years experience (a) conducting environmental assessments for properties similar to the Property and (b) preparing and supervising remediation plans for properties similar to the Property, which firm is selected by Borrower and is reasonably acceptable to Lender.

“ Environmental Event ” shall have the meaning set forth in Section 12.2 .

“ Environmental Indemnity ” shall mean the Environmental Indemnity made by Guarantor in favor of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Environmental Law ” shall have the meaning provided in the Environmental Indemnity.

“ Environmental Reports ” shall have the meaning set forth in Section 12.1 .

“ ERISA ” shall mean the United States Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute or statutes thereto, the temporary and permanent regulations promulgated thereunder, and the rulings issued thereunder.

“ Event of Default ” shall have the meaning set forth in Section 17.1(a) .

“ Excess Cash Flow ” shall have the meaning set forth in Section 3.1.6(a)(v) .

“ Exchange Act ” shall have the meaning set forth in Section 14.3.1 .

“ Exculpated Parties ” shall have the meaning set forth in Section 18.1.1 .

“ Excusable Delay ” shall mean a delay solely due to acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes, work stoppages, shortages of labor or materials or other causes beyond the reasonable control of Borrower, but Borrower’s lack of funds in and of itself shall not be deemed a cause beyond the control of Borrower.

“ Facility Mortgagee Agreement ” shall mean that certain Facility Mortgagee Agreement among Lender, Borrower and Tenant, as the same may be amended, restated,

replaced, supplemented or otherwise modified from time to time in accordance with the terms hereof.

“FF&E ” shall mean furniture, fixtures, equipment and personal property of the type customarily utilized in hotel properties such as the Property.

“ FF&E Holding Account ” shall mean the account maintained by Manager in accordance with Section 5.02 (FF&E Reserve) of the Management Agreement, into which Manager deposits the Monthly FF&E Reserve Amount in accordance with the terms of the Management Agreement.

“ FF&E Reserve Account ” shall have the meaning set forth in Section 3.1.1(iv) .

“ FF&E Reserve Amount ” shall have the meaning set forth in Section 16.3.1 .

“ Fiscal Year ” shall mean each 12 month period commencing on January 1 and ending on December 31 during each year of the term of the Loan or the portion of any such 12-month period falling within the term of the Loan in the event that such a 12-month period occurs partially before or after, or partially during, the term of the Loan.

“ Fitch ” shall mean Fitch Ratings Ltd., together with its successors and assigns.

“ GAAP ” shall mean the generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such entity as may be in general use by significant segments of the U.S. accounting profession, to the extent such principles are applicable to the facts and circumstances on the date of determination.

“ General Partner ” shall mean Ashford Crystal Gateway GP LLC, a Delaware limited liability company, together with its successors and permitted assigns.

“ Governmental Authority ” shall mean any court, board, agency, commission, office or other authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence.

“ Guarantor ” shall mean Ashford Hospitality Limited Partnership, a Delaware limited partnership, together with its successors and permitted assigns.

“ Hazardous Materials ” shall have the meaning provided in the Environmental Indemnity.

“ Holding Account ” shall have the meaning set forth in Section 3.1.1 .

“ Impositions ” shall mean all taxes (including all ad valorem , sales (including those imposed on lease rentals), use, single business, gross receipts, value added, intangible transaction, privilege or license or similar taxes), governmental assessments (including all

assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not commenced or completed within the term of this Agreement), water, sewer or other rents and charges, excises, levies, fees (including license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Property and/or any Rents (including all interest and penalties thereon), which at any time prior to, during or in respect of the term hereof may be assessed or imposed on or in respect of or be a Lien upon (a) Borrower (including all income, franchise, single business or other taxes imposed on Borrower for the privilege of doing business in the jurisdiction in which the Property is located), (b) the Property, or any other collateral delivered or pledged to Lender in connection with the Loan, or any part thereof, or any Rents therefrom or any estate, right, title or interest therein, or (c) any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with the Property or the leasing or use of all or any part thereof. Nothing contained in this Agreement shall be construed to require Borrower to pay any tax, assessment, levy or charge imposed on (i) any tenant occupying any portion of the Property, (ii) any third party manager of the Property, including any Manager, or (iii) Lender in the nature of a capital levy, estate, inheritance, succession, income or net revenue tax.

“ Improvements ” shall have the meaning set forth in the Security Instrument.

“ Increased Costs ” shall have the meaning set forth in Section 2.4.1 .

“ Indebtedness ” shall mean, at any given time, the Principal Amount, together with all accrued and unpaid interest thereon and all other obligations and liabilities due or to become due to Lender pursuant hereto, under the Note or in accordance with the other Loan Documents and all other amounts, sums and expenses paid by or payable to Lender hereunder or pursuant to the Note or the other Loan Documents.

“ Indemnified Parties ” shall have the meaning set forth in Section 19.12(b) .

“ Independent ” shall mean, when used with respect to any Person, a Person who: (a) does not have any direct financial interest or any material indirect financial interest in Borrower or in any Affiliate of Borrower; (b) is not connected with Borrower or any Affiliate of Borrower as an officer, employee, promoter, underwriter, trustee, partner, member, manager, creditor, director, supplier, customer or person performing similar functions and; (c) is not a member of the immediate family of a Person defined in (a) or (b) above.

“ Independent Accountant ” shall mean a firm of nationally recognized, certified public accountants which is Independent and which is selected by Borrower and reasonably acceptable to Lender.

“ Independent Architect ” shall mean an architect, engineer or construction consultant selected by Borrower which is Independent, licensed to practice in the State and has at least five years of architectural experience and which is reasonably acceptable to Lender.

“ Independent Director ”, “ Independent Manager ”, or “ Independent Member ” shall mean an Independent individual who (a) has prior experience as an independent manager,

independent director or independent member with at least five years of employment experience and who is provided by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Global Securitization Services, LLC, Wilmington Trust Company, Stewart Management Company, Lord Securities Corporation, or any other nationally-recognized company regularly engaged in the business of providing professional independent managers, in each case, that is not an Affiliate of Borrower and that provides professional independent managers and other corporate services in the ordinary course of its business; (b) is duly appointed as an “Independent Director”, “Independent Manager” or “Independent Member”; and (c) is not, has not been in the last five years, and will not be while serving as an Independent Director, Independent Manager or Independent Member, as applicable, any of the following: (i) a member, partner, equity holder, manager, director, trustee, officer, attorney, counsel or employee of Borrower, the General Partner, Tenant, Guarantor or any of their respective equity holders or Affiliates (other than serving as an Independent Director, Independent Manager or Independent Member of (x) Borrower, General Partner, Tenant or Guarantor or (y) an Affiliate of Borrower, the General Partner, Tenant or Guarantor); (ii) a creditor, customer, supplier or service provider (including provider of professional services) to Borrower, the General Partner, Tenant, Guarantor or any of their respective equity holders or Affiliates (other than an employee of a nationally-recognized company that routinely provides professional independent managers and other corporate services to the General Partner, Tenant, Guarantor or any of their respective Affiliates in the ordinary course of its business); (iii) a family member of any such member, partner, equity holder, manager, director, trustee, officer, employee, creditor, customer, supplier or service provider; or (i) a Person that Controls (whether directly, indirectly or otherwise) any of (i), (ii) or (iii) above.

“ Insurance Requirements ” shall mean, collectively, (a) the terms of any insurance policy required pursuant to this Agreement and (b) all regulations and then-current standards applicable to or affecting the Property or any part thereof or any use or condition thereof, which may, at any time, be recommended by the Board of Fire Underwriters, if any, having jurisdiction over the Property, or such other body exercising similar functions.

“ Insurance Reserve Account ” shall have the meaning set forth in Section 3.1.1(ii) .

“ Insurance Reserve Amount ” shall have the meaning set forth in Section 16.2.1 .

“ Intangible ” shall have the meaning set forth in the Security Instrument.

“ Interest Determination Date ” shall have the meaning set forth in the Note.

“ Interest Period ” shall have the meaning set forth in the Note.

“ Intellectual Property ” means shall mean (a) all trademarks, service marks, trade names, licenses, trade dress, designs, logos, slogans, or other indications of origin, and general intangibles of like nature, whether registered or unregistered, together with all registrations and applications therefor and all goodwill of any business connected with the use of and symbolized thereby, (b) patents and industrial designs (including any continuations, divisional, continuations in part, renewals, reissues, and applications for any of the foregoing), (c) rights in computer programs, documentation and databases, including copyrights therein; (d) copyrights and

copyrights in unpublished and published works, (e) ways of doing business, (f) Internet domain names, (g) any registration, applications for registration or issuance, recordings, renewals and extensions relating to any of the foregoing, and (h) trade secrets and other information (including know-how, ideas, techniques, customer lists, customer information, business methods and processes, marketing plans, specifications and other similar information) that is confidential and proprietary to its owner, whether patentable or unpatentable, as well as inventions, workings of authorship, technology, data and databases, manuals, promotional materials, telephone numbers (toll free or otherwise), reservation systems, in each case, used or otherwise necessary to operate the Property as a first-class, full service hotel and conference center, and other appurtenant and related uses and whether now owned or hereafter acquired.

“ Land ” shall have the meaning set forth in the Security Instrument.

“ Late Payment Charge ” shall have the meaning set forth in Section 2.2.3 .

“ LC Expiration Date ” shall have the meaning set forth in the definition of “Letter of Credit”.

“ Lease ” and “ Leases ” shall mean any lease (other than the Operating Lease), sublease or sub-sublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in the Property, and every modification, amendment or other agreement relating to such lease, sublease, sub-sublease, or other agreement entered into in connection with such lease, sublease, sub-sublease, or other agreement and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto; provided that a “Lease” shall not include any license or concession granted to any individuals who are transient guests occupying the hotel operated on the Property.

“ Lease Action ” shall have the meaning set forth in Section 8.8.1 .

“ Legal Requirements ” shall mean all present and future laws, statutes, codes, ordinances, orders, judgments, decrees, injunctions, rules, regulations and requirements, and irrespective of the nature of the work to be done, of every Governmental Authority including, without limitation, Environmental Laws and all covenants, restrictions and conditions now or hereafter of record which may be applicable to Borrower or to the Property and the Improvements and the Building Equipment thereon, or to the use, manner of use, occupancy, possession, operation, maintenance, alteration, repair or reconstruction of the Property and the Improvements and the Building Equipment thereon including, without limitation, building and zoning codes and ordinances and laws relating to handicapped accessibility.

“ Lender ” shall have the meaning set forth in the first paragraph of this Agreement.

“ Letter of Credit ” shall mean an irrevocable, unconditional, transferable, clean sight draft letter of credit (either an evergreen letter of credit or one which does not expire until at least 60 days after Lender’s reasonable estimation of the completion date for the applicable Material Alteration (the “ LC Expiration Date ”), in favor of Lender and entitling Lender to draw thereon in New York, New York, based solely on a statement executed by an officer or

authorized signatory of Lender and issued by an Approved Bank. If at any time (a) the institution issuing any such Letter of Credit shall cease to be an Approved Bank or (b) the Letter of Credit is due to expire prior to the LC Expiration Date, Lender shall have the right immediately to draw down the same in full and hold the proceeds thereof in accordance with the provisions of this Agreement, unless Borrower shall deliver a replacement Letter of Credit from an Approved Bank within (i) as to (a) above, 20 days after Lender delivers written notice to Borrower that the institution issuing the Letter of Credit has ceased to be an Approved Bank or (ii) as to (b) above, at least 20 days prior to the expiration date of said Letter of Credit.

“ Liabilities ” shall have the meaning set forth in Section 14.3.2(b) .

“ License ” shall have the meaning set forth in Section 4.1.23 .

“ Lien ” shall mean any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance or charge on or affecting Borrower, the Property, any portion thereof or any interest therein, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and the filing of mechanic’s, materialmen’s and other similar liens and encumbrances.

“ Liquidated Damages Amount ” shall have the meaning set forth in the Note.

“ Loan ” shall mean the loan in the amount of $105,000,000.00 made by Lender to Borrower pursuant to this Agreement.

“ Loan Documents ” shall mean, collectively, this Agreement, the Note, the Security Instrument, the Assignment of Leases, the Environmental Indemnity, the Assignment of Management Agreement, Subordination of Operating Lease, the Account Agreement, the Recourse Guaranty, the Manager’s Subordination Agreement, the Control Agreement, the Facility Mortgagee Agreement and all other documents executed and/or delivered by Borrower in connection with the Loan including any certifications or representations delivered by or on behalf of Borrower or any Affiliate of Borrower.

“ Lockbox Event ” shall mean the occurrence and continuation of an Event of Default or a DSCR Event.

“ Lockout Release Date ” shall have the meaning set forth in the Note.

“ Management Agreement ” shall mean collectively, (a) the Management Agreement dated as of July 13, 2006, between Manager and Tenant, as amended by the First Amendment to Management Agreement dated as of July 17, 2007, the Second Amendment to Management Agreement dated as of February 20, 2009 and the Third Amendment to Management Agreement dated as of December __, 2009, and as further modified by those certain letters dated July 13, 2006, September 26, 2008, and April 6, 2010, in each case between Manager, Tenant and Borrower, (b) the Owner’s Agreement, and (c) the Real Estate and Personal Property Taxes Agreement dated as of February 20, 2009, among Manager, Borrower and Tenant, as amended by the First Amendment date the date hereof, in each case, as the same may

be amended, restated, replaced, supplemented or otherwise modified from time to time in accordance with the terms hereof.

“ Management Fee ” shall mean an amount equal to the property management fee payable to the Manager pursuant to the terms of the Management Agreement for management services.

“ Manager ” shall mean Marriott Hotel Services, Inc., a Delaware corporation, together with its successors and permitted assigns.

“ Manager’s Subordination Agreement ” shall mean that certain Subordination, Non-Disturbance and Attornment Agreement among Lender, Borrower, Tenant and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time in accordance with the terms thereof.

“ Material Action ” shall mean (a) to merge or consolidate such Person (or in the case of General Partner, Borrower) with or into any other entity or convey or Transfer all or substantially all of the properties and assets of such Person (or in the case of General Partner, Borrower) other than as expressly provided in Article VIII , (b) to institute proceedings to have such Person (or in the case of General Partner, Borrower) be adjudicated bankrupt or insolvent, (c) consent to the institution of bankruptcy or insolvency proceedings against such Person (or in the case of General Partner, Borrower), (d) file a petition seeking, or consent to, reorganization or relief with respect to such Person (or in the case of General Partner, Borrower) under any applicable federal or state law relating to bankruptcy, (e) consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of such Person (or in the case of General Partner, Borrower) or a substantial part of its property and assets, (f) make any assignment for the benefit of creditors of such Person (or in the case of General Partner, Borrower), and (g) admit in writing the such Person’s (or in the case of General Partner, Borrower) inability to pay its respective debts generally as they become due, or take action in furtherance of any such action, or, to the fullest extent permitted by law, dissolve or liquidate such Person (or in the case of General Partner, Borrower).

“ Material Adverse Effect ” shall mean any event or condition that has a material adverse effect on (a) the Property, taken as a whole, (b) the use, operation, or value of the Property, (c) the business, profits, operations or financial condition of Borrower, or (d) the ability of Borrower to repay the principal and interest of the Loan as it becomes due or to satisfy any of Borrower’s obligations under the Loan Documents.

“ Material Alteration ” shall mean any Alteration which, when aggregated with all related Alterations (other than decorative work such as painting, wall papering and carpeting and the replacement of fixtures, furnishings and equipment to the extent being of a routine and recurring nature and performed in the ordinary course of business) constituting a single project, involves an estimated cost exceeding the Threshold Amount with respect to such Alteration or related Alterations (including the Alteration in question) then being undertaken at the Property.

“ Maturity Date ” shall have the meaning set forth in the Note.

“ Maturity Date Payment ” shall have the meaning set forth in the Note.

“ Maximum Legal Rate ” shall mean the maximum non-usurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under the laws of such state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan.

“ Mezzanine Borrower ” shall have the meaning set forth in Section 8.4.3(c) .

“ Mezzanine Loan ” shall have the meaning set forth in Section 8.4.3 .

“ Monetary Default ” shall mean a Default (a) subject to the terms of Section 7.3 hereof, in the payment of money to Lender or as otherwise required to be paid by Borrower pursuant to the Loan Documents or (b) arising pursuant to Section 17.1(a)(vi) or (vii) .

“ Monthly FF&E Reserve Amount ” shall have the meaning set forth in Section 16.3.1 .

“ Monthly Insurance Reserve Amount ” shall have the meaning set forth in Section 16.2.1 .

“ Monthly Tax Reserve Amount ” shall have the meaning set forth in Section 16.1.1 .

“ Moody’s ” shall mean Moody’s Investors Service, Inc., together with its successors and assigns.

“ Net Operating Income ” shall mean the amount obtained by subtracting Operating Expenses from Operating Income.

“ New Mezzanine Borrower ” shall have the meaning provided in Section 5.1.11(b) .

“ New Mezzanine Loan ” shall have the meaning provided in Section 5.1.11(b) .

“ Non-Consolidation Opinion ” shall have the meaning provided in Section 2.5.4(b) .

“ Note ” shall mean that certain Note in the principal amount of $105,000,000 made by Borrower in favor of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Obligations ” shall have meaning set forth in the recitals of the Security Instrument.

“ OFAC List ” shall means the list of specially designated nationals and blocked persons subject to financial sanctions that is maintained by the U.S. Treasury Department, Office of Foreign Assets Control and accessible through the internet website www.treas.gov/ofac/t11sdn.pdf .

“ Officer’s Certificate” shall mean a certificate executed by an authorized signatory of Borrower that is familiar with the financial condition of Borrower and the operation of the Property.

“ Operating Asset ” shall have the meaning set forth in the Security Instrument.

“ Operating Expenses ” shall mean, for any period, without duplication, all expenses actually paid or payable by Borrower, Tenant or Manager during such period in connection with the operation, management, maintenance, repair and use of the Property, determined on an accrual basis, and, except to the extent otherwise provided in this definition, in accordance with GAAP. Operating Expenses specifically shall include (a) all expenses incurred for the applicable period based on quarterly financial statements delivered to Lender in accordance with Article XI , (b) all payments required to be made pursuant to any REAs, (c) property management fees in an amount equal to the greater of three percent of Operating Income and the management fees actually paid under the Management Agreement, (d) administrative, payroll, security and general expenses for the Property, (e) the cost of utilities, inventories and fixed asset supplies consumed in the operation of the Property, (f) a reasonable reserve for uncollectible accounts, (g) costs and fees of independent professionals (including, without limitation, legal, accounting, consultants and other professional expenses), technical consultants, operational experts (including quality assurance inspectors) or other third parties retained to perform services required or permitted hereunder, (h) cost of attendance by employees at training and manpower development programs, (i) association dues, (j) computer processing charges, (k) operational equipment and other lease payments as reasonably approved by Lender, (l) taxes and other Impositions, other than income taxes or other Impositions in the nature of income taxes and insurance premiums and (m) all underwritten reserves required by Lender hereunder (without duplication). Notwithstanding the foregoing, Operating Expenses shall not include (i) depreciation or amortization, (ii) income taxes or other Impositions in the nature of income taxes, (iii) any expenses (including legal, accounting and other professional fees, expenses and disbursements) incurred in connection with the making of the Loan or the Transfer, financing or refinancing of all or any portion of the Property or in connection with the recovery of Proceeds which are applied to prepay the Note, (iv) any expenses which in accordance with GAAP should be capitalized, (v) Debt Service, and (vi) any item of expense which would otherwise be considered within Operating Expenses pursuant to the provisions above but is paid directly by any tenant under a Lease.

“ Operating Income ” shall mean, for any period, all income of Borrower or Tenant during such period from the use, ownership or operation of the Property including:

(a) business interruption insurance proceeds with respect to the Property allocable to the applicable reporting period; and

(b) all other amounts which in accordance with GAAP are included in Borrower’s quarterly or annual financial statements delivered to Lender in accordance with Article XI as operating income attributable to the Property.

Notwithstanding the foregoing, Operating Income shall not include (i) any Proceeds (other than business interruption insurance proceeds and only to the extent allocable to the applicable

reporting period), (ii) any proceeds resulting from the Transfer of all or any portion of the Property, (iii) security deposits received from Tenants until forfeited or applied, and (iv) any rent (whether base rent or percentage rent) payable to Borrower under the Operating Lease. Operating Income shall be calculated on the accrual basis of accounting and, except to the extent otherwise provided in this definition, in accordance with GAAP.

“ Operating Lease ” shall mean the Lease Agreement dated as of July 13, 2006, between Borrower and Tenant, as amended by the Amendment to Lease Agreement dated January 1, 2008, and the Second Amendment to Lease Agreement dated April 1, 2009, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time in accordance with the terms hereof.

“ Opinion of Counsel ” shall mean an opinion of counsel of a law firm selected by Borrower and reasonably acceptable to Lender.

“ Other Charges ” shall mean maintenance charges, impositions other than Impositions, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed against the Property or any part thereof by any Governmental Authority, other than those required to be paid by a tenant pursuant to its respective Lease.

“ Other Taxes ” shall have the meaning set forth in Section 2.4.3 .

“ Owner’s Agreement ” shall mean that certain Owner Agreement dated July 13, 2006, among Manager, Borrower and Tenant, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time in accordance with the terms hereof.

“ Parent ” means Ashford Hospitality Trust, Inc., a Maryland corporation, together with its successors and permitted assigns.

“ Payment Date ” shall have the meaning set forth in the Note.

“ Permitted Debt ” shall mean collectively, (a) the Note and the other obligations, indebtedness and liabilities specifically provided for in any Loan Document and secured by this Agreement, the Security Instrument and the other Loan Documents; (b) trade payables and leases related to FF&E that are required by GAAP to be capitalized by Borrower, in each case, incurred in the ordinary course of Borrower’s business, not secured by Liens on the Property (other than liens being properly contested in accordance with the provisions of this Agreement or the Security Instrument), not to exceed three percent of the Principal Amount at any one time outstanding, payable by or on behalf of Borrower for or in respect of the operation of the Property in the ordinary course of operating Borrower’s business; provided that (but subject to the remaining terms of this definition) each such amount constituting trade payables shall be paid within 60 days following the date on which each such amount is incurred; (c) the obligations, indebtedness and liabilities associated with any Preferred Equity issued in accordance with the terms of Section 8.4.2 ; (d) the obligations, indebtedness and liabilities associated with any Mezzanine Loan incurred in accordance with Section 8.4.3 , (e) the obligations, indebtedness and liabilities associated with any New Mezzanine Loan incurred in accordance with the terms of Section 5.1.11(b) , and (f) the obligations and liabilities of Borrower under the Owner’s

Agreement. Nothing contained in this definition shall be deemed to require Borrower to pay any amount, so long as Borrower is in good faith, and by proper legal proceedings, diligently contesting the validity, amount or application thereof in accordance with Section 7.3 hereof. Notwithstanding anything set forth herein, (i) in no event shall Borrower be permitted under this provision to enter into a note (other than the Note and the other Loan Documents) or other instrument for borrowed money and (ii) nothing herein shall prohibit the delivery of a note by a New Mezzanine Borrower or Mezzanine Borrower in connection with any New Mezzanine Loan or Mezzanine Loan incurred in accordance with the terms of this Agreement.

“ Permitted Encumbrances ” shall mean collectively, (a) the Liens and security interests created or permitted by the Loan Documents (including with respect to any Mezzanine Loans and New Mezzanine Loans), (b) all Liens, encumbrances and other matters disclosed in the Title Policy, (c) Liens, if any, for Impositions imposed by any Governmental Authority not yet due or delinquent, and (d) rights of future tenants, licensees and concessionaires pursuant to Leases hereinafter entered into in accordance with the terms of Section 8.8 .

“ Permitted Investments ” shall have the meaning set forth in the Account Agreement.

“ Person ” shall mean any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

“ Personal Property ” shall have the meaning set forth in the granting clause of the Security Instrument.

“ Physical Conditions Report ” shall mean the structural engineering report with respect to the Property (a) prepared by a Person designated by or otherwise acceptable to Lender, (b) addressed to Lender, (c) prepared based on a scope of work determined by Lender in Lender’s reasonable discretion, and (d) in form and content acceptable to Lender in Lender’s reasonable discretion, together with any amendments or supplements thereto.

“ Plan ” shall have the meaning set forth in Section 4.1.10(a) .

“ Preferred Equity ” shall have the meaning set forth in Section 8.4.2 .

“ Principal Amount ” shall have the meaning set forth in the Note.

“ Prohibited Person ” means any Person identified on the OFAC List or any other Person with whom a U.S. Person may not conduct business or transactions by prohibition of Federal law or Executive Order of the President of the United States or America.

“ Proceeds ” shall have the meaning set forth in Section 6.2.2 .

“ Property ” shall have the meaning set forth in the Security Instrument.

“ Provided Information ” shall have the meaning set forth in Section 14.1(a) .

“ Qualified Institutional Holder ” means a Person, other than an individual, Borrower, General Partner, Guarantor or an Affiliate of Borrower, General Partner or Guarantor, that satisfies the requirements of Schedule I .

“ Qualified Manager ” shall mean (a) Manager, Remington Lodging & Hospitality, LLC or their respective Affiliates, (b) a reputable and experienced hotel management organization of national standing similar that (i) has at least three years experience in the management and operation of a business hotel substantially similar to the Property in the Washington-Baltimore-Northern Virginia, DC-MD-VA-WV CSA, (ii) manages and operates, at the time of the proposed engagement or transfer, at least three business hotels having an aggregate (exclusive of the Property) of at least 2,000 guest rooms, (iii) is not, at the time of the proposed engagement or transfer, subject to any action or proceeding under the Bankruptcy Code, (iv) (A) prior to a Securitization, Borrower shall have obtained the prior written consent of Lender for such Person, which consent shall not be unreasonably withheld or delayed and (B) after a Securitization, in addition to Lender’s consent, which consent shall not be unreasonably withheld or delayed, Borrower shall have obtained a Rating Agency Confirmation or (c) any other Person as Lender shall approve in its sole and absolute discretion.

“ Qualified Transferee ” shall mean any one of the following Persons: (a) a pension fund, pension trust or pension account that has total real estate assets of at least $500,000,000 (exclusive of the Property); (b) a pension fund advisor which (i) controls or manages accounts of at least $500,000,000 of real estate assets (exclusive of the Property), and (ii) is acting on behalf of one or more pension funds that own substantial interests in and/or operate four Class “A” business hotel projects with at least 1,000 rooms (exclusive of the Property); (c) an insurance company which is subject to supervision by an insurance commissioner, or similar official or agency, or a state or territory of the United States (including the District of Columbia) (i) with a net worth as of a date no more than six months prior to the date of the Transfer of at least $250,000,000 and (ii) who controls real estate assets of at least $1,000,000,000 (exclusive of the Property); (d) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (i) with a combined capital and surplus of at least $250,000,000 and (ii) which controls, directly or indirectly, gross real estate assets of at least $500,000,000 (exclusive of the Property); (e) any Person (other than an individual) (i) with a long term unsecured debt rating from each of the Rating Agencies of at least “BBB-” (or its equivalent) and is regularly engaged (itself or through a wholly-owned subsidiary) in making commercial real estate loans or owning commercial real estate or (ii) who together with Affiliates (including, without limitation, real estate or other investment funds managed by such Person or its Affiliates and joint ventures) (A) has a net worth, market capitalization, capital commitments or assets under management, as of a date no more than six months prior to the date of such Transfer, of at least $250,000,000 and (B)(I) owns substantial interests in and/or operates four Class “A” business hotel projects totaling at least 1,000 rooms (exclusive of the Property), or (II) controls real estate assets of at least $250,000,000 (exclusive of the Property); (f) any Person in which more than 50% of the ownership interests are owned directly or indirectly by any of the entitles listed in subsections (a) through (e), or any combination of more than one such entity, and which is controlled directly or indirectly by such entity or entities.

“ Rating Agencies ” shall mean (a) prior to a Securitization, S&P, Moody’s, Fitch or any other nationally-recognized statistical rating agency which has been approved by Lender and (b) after a Securitization has occurred, each such Rating Agency which has rated the Securities in the Securitization.

“ Rating Agency Confirmation ” shall mean, collectively, a written affirmation from each of the Rating Agencies that the credit rating of the Securities given by such Rating Agency immediately prior to the occurrence of the event with respect to which such Rating Agency Confirmation is sought will not be qualified, downgraded or withdrawn as a result of the occurrence of such event, which affirmation may be granted or withheld in such Rating Agency’s sole and absolute discretion. In the event that, at any given time, no such Securities shall have been issued and are then outstanding, then the term Rating Agency Confirmation shall be deemed instead to require the written approval of Lender based on its good faith determination of whether the Rating Agencies would issue a Rating Agency Confirmation if any such Securities were outstanding.

“ REAs ” shall mean, collectively, as the same may be amended, restated, supplemented or otherwise modified from time to time, those certain agreements more specifically described on Schedule IV .

“ Real Estate Taxes ” means all real and personal ad valorem taxes, assessments, or impositions at any time imposed or to be imposed by a Governmental Authority upon the Borrower, Property, Account Collateral or any other collateral delivered from time to time to secure the repayment of the Indebtedness.

“ Real Property ” shall mean, collectively, the Land, the Improvements and the Appurtenances (as defined in the Security Instrument).

“ Recourse Guaranty ” shall mean that certain Guaranty of Recourse Obligations of Borrower by Guarantor in favor of Lender, as the same may be amended, supplemented, restated or otherwise modified from time to time.

“ Register ” shall have the meaning set forth in Section 15.4 .

“ Registrar ” shall have the meaning set forth in Section 15.1(a) .

“ Regulatory Change ” shall mean any change after the date of this Agreement in federal, state or foreign laws or regulations or the adoption or the making, after such date, of any interpretations, directives or requests applying to Lender, or any Person Controlling Lender or to a class of banks or companies Controlling banks of or under any federal, state or foreign laws or regulations (whether or not having the force of law) by any court or Governmental Authority or monetary authority charged with the interpretation or administration thereof.

“ Related Party ” and “ Related Parties ” shall have the meaning set forth in Section 4.1.45 .

“ Rent ” and “ Rents ” shall mean all rents, rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all oil and

gas or other mineral royalties and bonuses), income, receivables, receipts, revenues, deposits (including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Borrower from any and all sources arising from or attributable to the Property and Proceeds, if any, from business interruption or other loss of income insurance.

“ S&P ” shall mean Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., together with its successors and assigns.

“ Securities ” shall have the meaning set forth in Section 14.1 .

“ Securities Act ” shall have the meaning set forth in Section 14.3.1 .

“ Securitization ” shall have the meaning set forth in Section 14.1 .

“ Security Deposits ” shall have the meaning set forth in Section 8.8.2 .

“ Security Instrument ” shall mean that certain first priority Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits executed and delivered by Borrower to Lawyers Title Realty Services, Inc for the benefit of Lender and encumbering the Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Servicer ” shall mean such Person designated in writing to Borrower by Lender, in its sole discretion, to act as Lender’s agent hereunder with such powers as are specifically delegated to the Servicer by Lender, whether pursuant to the terms of this Agreement, the Account Agreement or otherwise, together with such other powers as are reasonably incidental thereto.

“ Single Purpose Entity ” shall mean a Person (other than an individual) that, at all times on and after the date hereof, complies with the following requirements unless it has received either prior consent to do otherwise from Lender, and, following a Securitization, a Rating Agency Confirmation has been delivered to Lender:

(a) is and shall be organized solely for the purpose of (i) in the case of Borrower: (A) the acquisition, holding, ownership, management, operation, leasing, improvement, development, disposal and financing of the Property; (B) conducting all business activity of Borrower on, in or in connection with the Property and all business incidental thereto or operated in conjunction therewith; (C) the execution, delivery and performance of the Loan Documents to which Borrower is a party; and (D) any actions or activities permitted under the laws of the State of Delaware which are necessary or incidental to the activities described in clauses (A) through (C), (ii) in the case of General Partner: (A) to act as the sole general partner of Borrower; (B) to execute, deliver and perform the Loan Documents and the Management Agreement to which General Partner or Borrower is a party, in its individual capacity and in its capacity as the sole general partner of Borrower; (C) to cause Borrower to invest, or direct the investment of, proceeds from the Property and its other assets and any capital and income of General Partner in compliance with the Loan Documents and the Management Agreement or as

otherwise determined by the member of General Partner and not inconsistent with the Loan Documents and the Management Agreement or Section 7 and 9(f) of General Partner’s limited liability company agreement; and (D) to engage in any lawful act or activity and to exercise any powers permitted to limited liability companies organized under the laws of the State of Delaware that are related or incidental to and necessary, convenient or advisable for the accomplishment of the above mentioned purposes; and (iii) in the case of Tenant: (A) to enter into and perform the obligations of Tenant under the Operating Lease, Management Agreement, franchise agreements, Licenses and maintenance, service, lease and other agreements necessary for the operation of the Property; (B) to execute, deliver and perform the Loan Documents to which it is a party; and (C) engage in any lawful act or activity and to exercise any powers permitted to corporations organized under the laws of the State of Delaware that are related or incidental to and necessary, convenient or advisable for the accomplishment of the above mentioned purposes;

(b) is organized solely for the purposes specified in clause (a) above, as applicable;

(d) does not have and shall not have any assets other than (i) personal property necessary or incidental to its ownership and operation of the Property, and (ii) cash, cash equivalents and accounts receivable, and (iii) in the case of (A) Borrower, the Property (B) General Partner, its general partnership interests in Borrower and personal property necessary or incidental to its ownership and operation of the foregoing, and (C) Tenant, its interest in the Operating Lease and personal property necessary or incidental to its ownership and operation of the foregoing;

(e) shall not engage in, seek, consent to or permit (i) any dissolution, winding up, liquidation, consolidation or merger, (ii) any sale or other transfer of all or substantially all of its assets or any sale of assets outside the ordinary course of its business, except as permitted by the Loan Documents, or (iii) any Transfer of any direct or indirect interest in Borrower or General Partner, except as permitted by the Loan Documents;

(f) shall not cause, consent to or permit any amendment of its limited partnership agreement, articles of incorporation, articles of organization, certificate of formation, operating agreement, bylaws or other organizational document, as applicable, with respect to the matters set forth in this definition without the prior written consent of Lender;

(g) if such entity is a limited partnership, has and shall have at least one general partner and has and shall have, as its only general partners, SPE Entities, each of which (i) is a corporation or single-member Delaware limited liability company, (ii) has two Independent Managers or Independent Members, as applicable, and (iii) holds a direct interest as general partner in the limited partnership of not less than one tenth of one percent (0.1%);

(h) if such entity is a corporation, has and shall have at least two (2) Independent Directors;

(i) if such entity is a limited liability company (other than a limited liability company meeting all of the requirements applicable to a single-member limited liability company set forth in this definition of “Special Purpose Entity”), has and shall have at least one member or manager that is a Special Purpose Entity, that is a corporation or a limited liability company meeting all of the requirements applicable to a single-member limited liability company set forth in this definition of “Special Purpose Entity”, that has at least two Independent Managers or Independent Members, as applicable, and that directly owns at least one tenth of one percent (0.1%) of the equity of the limited liability company;

(j) if such entity is a single-member limited liability company, (i) is and shall be a Delaware limited liability company, (ii) has and shall have at least two Independent Mangers serving as managers of such company, (iii) shall not take any Material Action, with respect to any SPE Entity unless two Independent Managers then serving as managers of the company shall have consented in writing to such action, and (iv) has and shall have either (A) a member which owns no economic interest in the company, has signed the company’s limited liability company agreement and has no obligation to make capital contributions to the company, or (B) two natural persons or one entity that is not a member of the company, that has signed its limited liability company agreement and that, under the terms of such limited liability company agreement becomes a member of the company immediately prior to the withdrawal or dissolution of the last remaining member of the company;

(k) shall not (and, if such entity is (i) a limited liability company, has and shall have a limited liability agreement or an operating agreement, as applicable, (ii) a limited partnership, has a limited partnership agreement, or (iii) a corporation, has a certificate of incorporation or articles that, in each case, provide that such entity shall not) without the affirmative vote of two Independent Directors, Independent Managers or Independent Members, as applicable, of itself or the consent of any other SPE Entity that is a member or general partner in it take any Material Action;

(l) shall not take any action requiring the unanimous affirmative vote of its members, partners, stockholders, managers, directors or similar Persons unless all of the members, partners, stockholders, managers, directors or similar Persons, including, without limitation, all Independent Directors, Independent Managers and Independent Members, as applicable, shall have participated in such vote;

(m) shall at all times remain solvent and shall pay its debts and liabilities (including, a fairly-allocated portion of any personnel and overhead expenses that it shares with any Affiliate) from its assets as the same shall become due, and shall maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; provided , however , that the provisions of this clause (m) shall not require, and shall not be construed to require, any direct or indirect partner, member or shareholder in such Person to make any capital contributions to such Person and failure to comply with the provisions of this clause (m) shall, in no event give rise, or be construed to give rise, to any liability or obligation on the part of any such direct or indirect partner, member or shareholder under the Loan Documents (including, without limitation, the Guarantor), except with respect to distributions of capital received in violation of any applicable Legal Requirements;

(n) in making any determination of whether to consent or authorize a Material Action, to the fullest extent permitted by applicable Legal Requirements, notwithstanding any duty otherwise existing at law or in equity, the Independent Directors, Independent Managers or Independent Members, as applicable, shall consider only the interests of such Person (including its creditors) in acting or otherwise voting on matters applicable to such Person; and except for such duties (including duties to the beneficial owner of such Person and such Person’s creditors solely to the extent of their respective economic interests in the Person but excluding (i) all other interests of such beneficial owners, (ii) the interests of Affiliates of such Person and (iii) the interests of any group of Affiliates of which such Person is a part) the Independent Directors, Independent Managers or Independent Members, as applicable, shall not have any fiduciary duties to, and shall not consider the interests of, any direct or indirect beneficial owner of such Person, any Affiliates of such Person, or the interests of any group of Affiliates of which such Person is a part, provided , however , the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing;

(o) shall not fail to correct any known misunderstanding regarding the separate identity of such entity and has not identified and shall not identify itself as a division of any other Person;

(p) to the extent that it is required to file tax returns under applicable law, shall file its own tax returns, except to the extent that it is required by law to file consolidated federal or unitary state tax returns (or any analogous combined state tax returns);

(q) shall maintain its own records, books, resolutions and agreements;

(r) shall not commingle its funds or assets with those of any other Person, except as permitted by the Loan Documents;

(s) shall hold its assets in its own name;

(t) will conduct its business in its own name and not permit its name, identity or type of entity to be changed;

(u) will maintain its books, records, financial statements, bank accounts, accounting records and other entity documents separate from any other Person and not have its assets listed on the financial statements of any other Person except as required by GAAP; provided , however , that its assets may be included in a consolidated financial statement of any of its Affiliates so long as (i) an appropriate notation shall be made on such consolidated financial statements indicating that such Person’s separate assets and credit are not available to satisfy the debts and other obligations of such Affiliate and that its liabilities do not constitute obligations of the consolidated entity and (ii) such Person shall be shown as a separate member of such group;

(v) will pay its own liabilities out of its own funds and assets except as provided in the Environmental Indemnity and Recourse Guaranty;

(w) shall observe all partnership, corporate or limited liability company formalities, as applicable, as they relate to separateness;

(x) will not assume or guarantee or become obligated for the debts of any other Person or hold out its credit as being available to satisfy the obligations of any other Person other than pursuant to the Loan Documents or the Management Agreement;

(y) will incur, create or assume no indebtedness other than Permitted Debt;

(z) shall not acquire obligations or securities of its partners, members or shareholders or any other owner or Affiliate;

(aa) shall allocate fairly and reasonably any overhead expenses that are shared with any of its Affiliates, constituents, or owners, or any guarantors of any of their respective obligations, or any Affiliate of any of the foregoing, including, but not limited to, paying for shared office space and for services performed by any employee of an Affiliate;

(bb) shall maintain and use separate stationery, invoices and checks bearing its name and not bearing the name of any other entity unless such entity is clearly designated as being its agent;

(cc) other than in connection with the Loan, shall not pledge its assets to secure the obligations of any Person;

(dd) shall not make loans to any Person;

(ee) shall not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or part of it, and shall not identify itself as a division of any other Person;

(ff) other than capital contributions and distributions permitted under the terms of its organizational documents and the execution and delivery of the Loan Documents, shall not enter into or be a party to, any transaction with any of its partners, members, shareholders or Affiliates except in the ordinary course of its business and on terms which are commercially reasonable terms comparable to those of an arm’s-length transaction with an unrelated third party;

(gg) shall not have any obligation to, and shall not indemnify its partners, officers, directors or members, as the case may be, in each case unless such an obligation or indemnification is fully subordinated to the Indebtedness and shall not constitute a claim against it in the event that its cash flow is insufficient to pay the Indebtedness;

(hh) maintain a sufficient number of employees in light of its contemplated business purpose and pay the salaries of its own employees from its own funds; and

(ii) shall not form, acquire or hold any subsidiary, except in the case of General Partner, its general partnership interest in Borrower;

(jj) shall comply with all of the terms and provisions contained in its organizational documents that relate to its separateness; and

(kk) shall cause its subsidiaries, if any, to comply all of the terms and provisions contained in such subsidiary’s organizational documents that relate to its separateness.

“ Special Taxes ” shall mean any and all present or future taxes, levies, imposts, deductions, charges or withholdings, or any liabilities with respect thereto, including those arising after the date hereof as result of the adoption of or any change in law, treaty, rule, regulation, guideline or determination of a Governmental Authority or any change in the interpretation or application thereof by a Governmental Authority but excluding, in the case of Lender, such taxes (including income taxes, franchise taxes and branch profit taxes) as are imposed on or measured by Lender’s net income by the United States of America or any Governmental Authority of the jurisdiction under the laws under which Lender is organized or maintains a lending office.

“ SPE Entity ” shall mean each of Borrower, General Partner and Tenant, and if, as and when created in accordance with the terms of this Agreement, any Mezzanine Borrower and any New Mezzanine Borrower.

“ State ” shall mean the State in which the Property or any part thereof is located.

“ Sub-Account(s) ” shall have the meaning set forth in Section 3.1.1 .

“ Subordination of Operating Lease ” shall mean that certain Subordination and Attornment Agreement between Lender and Tenant, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ Survey ” shall mean a survey of the Property prepared by a surveyor licensed in the State and satisfactory to Lender and the company or companies issuing the Title Policy, and containing a certification of such surveyor satisfactory to Lender.

“ Taking ” shall mean a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of the Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting the Property or any part thereof.

“ Tax Reserve Account ” shall have the meaning set forth in Section 3.1.1(i) .

“ Tax Reserve Amount ” shall have the meaning set forth in Section 16.1.1 .

“ Tenant ” shall mean Ashford Gateway TRS Corporation, a Delaware corporation, together with its successors and permitted assigns.

“ Threshold Amount ” shall mean $7,500,000.

“ Title Company ” shall mean, collectively, Commonwealth Land Title Insurance Company and Chicago Title Insurance Company.

“ Title Policy ” shall mean an ALTA mortgagee title insurance policy in a form and substance acceptable to Lender (or, if the Property is in a State which does not permit the issuance of such ALTA policy, such form as shall be permitted in such State and acceptable to Lender) issued by the Title Company with respect to the Property and insuring the lien of the Security Instrument.

“ Total Loss ” shall mean (a) a casualty, damage or destruction of the Property which, in the reasonable judgment of Lender, (i) involves an actual or constructive loss of more than 25% of the lesser of (A) the fair market value of the Property or (B) the Principal Amount, and in either case with respect to which Borrower is not required under the Operating Lease to apply Proceeds to the restoration of the Property, or (ii) results in the cancellation of Operating Lease or (b) a permanent Taking which, in the reasonable judgment of Lender, (i) involves an actual or constructive loss of more than 15% of the lesser of (A) the fair market value of the Property or (B) the Principal Amount, or (ii) renders untenantable either more than 15% of the guest rooms at the Property, or (c) a casualty, damage, destruction or Taking that affects so much of the Property such that it would be impracticable, in Lender’s reasonable discretion, even after restoration, to operate the Property as an economically viable whole.

“ Transfer ” shall mean to, directly or indirectly, sell, assign, convey, mortgage, transfer, pledge, hypothecate, lease, sublease, license, sublicense, encumber, grant a security interest in, exchange or otherwise dispose of any beneficial interest or grant any option or warrant with respect to, or where used as a noun, a direct or indirect sale, assignment, conveyance, transfer, pledge or other disposition of any beneficial interest by any means whatsoever whether voluntary, involuntary, by operation of law or otherwise.

“ Tunnel Agreement ” means that certain Agreement dated May 4, 1981, between EADS Associates (the predecessor in interest to Borrower) and The Commonwealth of Virginia, acting by and through the State Highway and Transportation Commissioner, relating to a certain underground pedestrian tunnel running, in part, underneath the Property, as such agreement may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“ UCC ” or “ Uniform Commercial Code ” shall mean the Uniform Commercial Code as in effect in the State.

“ Underwriter Group ” shall have the meaning set forth in Section 14.3.2(b) .

“ U.S. Government Obligations ” shall mean any direct obligations of, or obligations guaranteed as to principal and interest by, the United States Government or any agency or instrumentality thereof; provided that such obligations are backed by the full faith and credit of the United States. Any such obligation must be limited to instruments that have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change. If any such obligation is rated by S&P, it shall not have an “r” highlighter affixed to its rating. Interest must be fixed or tied to a single interest rate index plus a single fixed spread (if any), and move proportionately with said index. U.S. Government Obligations include, but are not limited

to: U.S. Treasury direct or fully guaranteed obligations, Farmers Home Administration certificates of beneficial ownership, General Services Administration participation certificates, U.S. Maritime Administration guaranteed Title XI financing, Small Business Administration guaranteed participation certificates or guaranteed pool certificates, U.S. Department of Housing and Urban Development local authority bonds, and Washington Metropolitan Area Transit Authority guaranteed transit bonds. In no event shall any such obligation have a maturity in excess of 365 days.

“ Work ” shall have the meaning provided in Section 6.2.4(a) .

1.2 Principles of Construction . All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. When used herein, the term “financial statements” shall include the notes and schedules thereto. Unless otherwise specified herein or therein, all terms defined in this Agreement shall have the definitions given to them in this Agreement when used in any other Loan Document or in any certificate or other document made or delivered pursuant thereto. All uses of the word “including” shall mean including, without limitation unless the context shall indicate otherwise. Unless otherwise specified, the words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined.

II. GENERAL TERMS

2.1 Loan; Disbursement to Borrower .

2.1.1 The Loan . Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept the Loan on the Closing Date.

2.1.2 Disbursement to Borrower . Borrower may request and receive only one borrowing hereunder in respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be reborrowed. Borrower acknowledges and agrees that the full proceeds of the Loan have been disbursed by Lender to Borrower on the Closing Date.

2.1.3 The Note, Security Instrument and Loan Documents . The Loan shall be evidenced by the Note and secured by the Security Instrument, the Assignment of Leases, this Agreement and the other Loan Documents.

2.1.4 Use of Proceeds . Borrower shall use the proceeds of the Loan to (a) repay and discharge any existing mortgage and mezzanine loans secured directly or indirectly by the Property, (b) make initial deposits into the Sub-Accounts as required hereunder, (c) pay costs and expenses incurred in connection with the closing of the Loan, and (d) to the extent any proceeds remain after satisfying clauses (a) through (c) above, for such other general corporate purposes of Borrower as Borrower shall designate, including, for distributions to the Guarantor and the General Partner.

2.2 Interest; Loan Payments; Late Payment Charge .

2.2.1 Payment of Principal and Interest .

(a) Except as set forth in Section 2.2.1(b) , interest shall accrue on the Principal Amount as set forth in the Note.

(b) Upon the occurrence and during the continuance of an Event of Default if the Loan is not repaid on the Maturity Date, interest on the outstanding principal balance of the Loan and, to the extent permitted by law, overdue interest and other amounts due in respect of the Loan shall accrue at the Default Rate calculated from the date such payment was due without regard to any grace or cure periods contained herein. Interest at the Default Rate shall be computed from the occurrence of the Event of Default until the actual receipt and collection of the Indebtedness (or that portion thereof that is then due). To the extent permitted by applicable law, interest at the Default Rate shall be added to the Indebtedness, shall itself accrue interest at the same rate as the Loan and shall be secured by the Security Instrument. This paragraph shall not be construed as an agreement or privilege to extend the date of the payment of the Indebtedness, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default, and Lender retains its rights under the Note to accelerate and to continue to demand payment of the Indebtedness upon the occurrence and during the continuation of an Event of Default.

2.2.2 Method and Place of Payment .

(a) On each Payment Date, Borrower shall pay to Lender $647,186.12.

(b) The Maturity Date Payment shall be due and payable in full on the Maturity Date.

(c) All amounts advanced by Lender pursuant to the applicable provisions of the Loan Documents, together with any interest at the Default Rate or other charges as provided therein, shall be due and payable hereunder as provided in the Loan Documents. In the event any such advance or charge is not so repaid by Borrower, Lender may, at its option, first apply any payments received under the Note to repay such advances, together with any interest thereon, or other charges as provided in the Loan Documents, and the balance, if any, shall be applied in payment of any installment of interest or principal then due and payable.

2.2.3 Late Payment Charge . If any principal, interest or any other sums due under the Loan Documents (other than the outstanding Principal Amount due and payable on the Maturity Date) is not paid by Borrower on or prior to the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of three percent of such unpaid sum or the Maximum Legal Rate (the “ Late Payment Charge ”) in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. Any such amount shall be secured by this Agreement, the Security Instrument and the other Loan Documents to the extent permitted by applicable law.

2.2.4 Usury Savings . This Agreement and the Note are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due under the Note at a rate in excess of the Maximum Legal Rate, then the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due under the Note. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.

2.3 Prepayments .

2.3.1 Prepayments . No prepayments of the Loan shall be permitted except as set forth in Section 4 of the Note.

2.3.2 Prepayments After Event of Default . If, following an Event of Default, Lender shall accelerate the Loan and Borrower thereafter tenders payment of all or any part of the Loan, or if all or any portion of the Loan is recovered by Lender after such Event of Default, (a) such payment may be made only on the next occurring Payment Date together with all unpaid interest thereon as calculated through such Payment Date, and all other fees and sums payable hereunder or under the Loan Documents, including without limitation, any interest that has accrued at the Default Rate and any Late Payment Charges, (b) such payment shall be deemed a voluntary prepayment by Borrower, and (c) Borrower shall pay, in addition to the Indebtedness, an amount equal to the Liquidated Damages Amount in the event the prepayment occurs during the Defeasance Lockout Period.

2.3.3 Release of Property . Lender shall, at the expense of Borrower, upon payment in full of the Indebtedness in accordance with the terms and provisions of the Loan Documents, release the Lien of (a) this Agreement upon the Account Collateral and (b) the Security Instrument on the Property. In such event, Borrower shall submit to Lender, not less than ten (10) Business Days prior to the date of such release, a release of lien for such property for execution by Lender. Such release shall be in a form appropriate in each jurisdiction in which the Property is located and satisfactory to Lender in its discretion. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release.

2.4 Regulatory Change; Taxes .

2.4.1 Increased Costs . If as a result of any Regulatory Change or compliance of Lender therewith, the basis of taxation of payments to Lender or any company Controlling Lender of the principal of or interest on the Loan is changed or Lender or the company

Controlling Lender shall be subject to (a) any tax, duty, charge or withholding of any kind with respect to this Agreement (excluding federal taxation of the overall net income of Lender or the company Controlling Lender); or (b) any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities, of Lender or any company Controlling Lender is imposed, modified or deemed applicable; or (c) any other condition affecting loans originated by Lender is imposed on Lender or any company Controlling Lender and Lender determines that, by reason thereof, the cost to Lender or any company Controlling Lender of making, maintaining or extending the Loan to Borrower is increased, or any amount receivable by Lender or any company Controlling Lender hereunder in respect of any portion of the Loan to Borrower is reduced, in each case by an amount deemed by Lender in good faith to be material (such increases in cost and reductions in amounts receivable being herein called “ Increased Costs” ), then Lender shall provide notice thereof to Borrower and Borrower agrees that it will pay to Lender upon Lender’s written request such additional amount or amounts as will compensate Lender or any company Controlling Lender for such Increased Costs to the extent Lender determines that such Increased Costs are allocable to the Loan. If Lender requests compensation under this Section 2.4.1 , Borrower may, by notice to Lender, require that Lender furnish to Borrower a statement setting forth the basis for requesting such compensation and the method for determining the amount thereof.

2.4.2 Special Taxes . Borrower shall make all payments hereunder free and clear of and without deduction for Special Taxes. If Borrower shall be required by law to deduct any Special Taxes from or in respect of any sum payable hereunder or under any other Loan Document to Lender, (a) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.4.2 ) Lender receives an amount equal to the sum it would have received had no such deductions been made, (b) Borrower shall make such deductions, and (c) Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

2.4.3 Other Taxes . In addition, Borrower agrees to pay any present or future stamp or documentary taxes or other excise or property taxes, charges, or similar levies which arise from any payment made hereunder, or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the other Loan Documents, or the Loan (hereinafter referred to as “ Other Taxes ”).

2.4.4 Indemnity . Borrower shall indemnify Lender for the full amount of Special Taxes and Other Taxes (including any Special Taxes or Other Taxes imposed by any Governmental Authority on amounts payable under this Section 2.4.4 ) paid by Lender and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto, whether or not such Special Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days after the date Lender makes written demand therefor. Nothing in this Section 2.4.4 shall be deemed to limit Borrower’s right to contest the amount of any Special Taxes and Other Taxes in accordance with Section 7.3 hereof.

2.4.5 Change of Office . To the extent that changing the jurisdiction of Lender’s applicable office would have the effect of minimizing Special Taxes, Other Taxes or Increased

Costs, Lender shall use reasonable efforts to make such a change, provided that same would not otherwise be disadvantageous to Lender.

2.4.6 Survival . Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements and obligations of Borrower contained in this Section 2.4 shall survive the payment in full of principal and interest hereunder, and the termination of this Agreement.

2.5 Conditions Precedent to Closing . The obligation of Lender to make the Loan hereunder is subject to the fulfillment by, or on behalf of, Borrower or waiver by Lender of the following conditions precedent no later than the Closing Date; provided , however , that unless a condition precedent shall expressly survive the Closing Date pursuant to a separate agreement, by funding the Loan, Lender shall be deemed to have waived any such conditions not theretofore fulfilled or satisfied:

2.5.1 Representations and Warranties; Compliance with Conditions . The representations and warranties of Borrower contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the Closing Date with the same effect as if made on and as of such date, and no Default or Event of Default shall have occurred and be continuing; and Borrower shall be in compliance in all material respects with all terms and conditions set forth in this Agreement and in each other Loan Document on its part to be observed or performed.

2.5.2 Delivery of Loan Documents; Title Policy; Reports; Leases .

(a) Loan Documents . Lender shall have received an original copy of this Agreement, the Note and all of the other Loan Documents, in each case, duly executed (and to the extent required, acknowledged) and delivered on behalf of Borrower, General Partner, Guarantor and any other parties thereto.

(b) Security Instrument, Assignment of Leases . Lender shall have received evidence that original counterparts of the Security Instrument and Assignment of Leases, in proper form for recordation, have been delivered to the Title Company for recording, so as effectively to create, in the reasonable judgment of Lender, upon such recording valid and enforceable first priority Liens upon the Property, in favor of Lender (or such other trustee as may be required or desired under local law), subject only to the Permitted Encumbrances and such other Liens as are permitted pursuant to the Loan Documents.

(c) UCC Financing Statements . The UCC financing statements relating to the Security Instrument, the Control Agreement, the Facility Mortgagee Agreement and this Agreement have been delivered to Lender for recording in the appropriate Governmental Authority.

(d) Title Insurance . Lender shall have received a Title Policy issued by the Title Company and dated as of the Closing Date, with reinsurance and direct access agreements or endorsements acceptable to Lender. Such Title Policy shall (i) provide coverage in the amount of the Loan, (ii) insure Lender that the Security Instrument creates a valid, first priority Lien on the Property, free and clear of all exceptions from coverage other than Permitted

Encumbrances and standard exceptions and exclusions from coverage (as modified by the terms of any endorsements), (iii) contain the endorsements and affirmative coverage (including a mezzanine endorsement to the Title Policy) as Lender may reasonably request, and (iv) name Lender as the insured. The Title Policy shall be assignable. Lender also shall have received evidence that all premiums in respect of such Title Policy have been paid.

(e) Survey . Lender shall have received a Survey for the Property that is in form and substance reasonably acceptable to Lender. Such Survey shall reflect the same legal description contained in the Title Policy referred to in clause (d) above and shall include, among other things, a metes and bounds (or lot and block) description of the real property comprising part of the Property reasonably satisfactory to Lender. The surveyor’s seal shall be affixed to the Survey and the surveyor shall provide a survey certification in form and substance reasonably acceptable to Lender.

(f) Insurance . Lender shall have received valid certificates of insurance for the policies of insurance required under the Loan Documents, satisfactory to Lender in its sole discretion, and evidence of the payment of all insurance premiums currently due and payable for the existing policy period.

(g) Environmental Reports . Lender shall have received an Environmental Report in respect of the Property satisfactory to Lender.

(h) Zoning . Lender shall have received (i) letters or other evidence with respect to the Property from the appropriate municipal authorities or other Persons concerning applicable zoning and building laws acceptable to Lender or (ii) an ALTA 3.1 zoning endorsement for the Title Policy.

(i) Certificate of Occupancy . Lender shall have received a copy of the valid permanent certificate of occupancy for the Property acceptable to Lender.

(j) Encumbrances . Borrower shall have taken or caused to be taken such actions in such a manner so that Lender has a valid and perfected first Lien as of the Closing Date on the Property, subject only to Permitted Encumbrances and such other Liens as are permitted pursuant to the Loan Documents, and Lender shall have received satisfactory evidence thereof.

(k) Account Agreement . Lender shall have received the original of the Account Agreement executed by each of Cash Management Bank and Borrower.

(l) Manager’s Subordination Agreement . Lender shall have received the original of the Manager’s Subordination Agreement executed and acknowledged by each of Borrower, Tenant and Manager, together with a true and complete copy of the Management Agreement certified by an Officer’s Certificate.

(m) Subordination of Operating Lease . Lender shall have received the original of the Subordination of Operating Lease executed and acknowledged by each of Borrower and Tenant, together with a true and complete copy of the Operating Lease certified by an Officer’s Certificate.

(n) Tenant Estoppels . Lender shall have received an executed tenant estoppel letter from (i) Tenant, and (ii) from all other Persons as requested by Lender occupying a material portion of the Property (as determined by Lender) pursuant to a Lease, in each case, in form and substance reasonably acceptable to Lender.

(o) REA Estoppels . Lender shall have received an executed reciprocal easement agreement estoppel letter from all parties under the REAs requested by Lender in form and substance reasonably acceptable to Lender.

(p) Manager Estoppel . Lender shall have received an executed estoppel from Manager in form and substance reasonably acceptable to Lender.

(q) Collateral Assignment . Lender shall have received an executed Assignment of Management Agreement, in form and substance acceptable to Lender, assigning to Lender all right, title and interest in the Management Agreement, signed by Borrower and Tenant.

(r) Independent Director/Independent Manager/Independent Member Certificate . Lender shall have received an executed certificate substantially in the form attached as Exhibit T from each Independent Director, Independent Manager and Independent Member, as applicable, of each SPE Entity.

(s) Facility Mortgagee Agreement . Lender shall have received an executed Facility Mortgagee Agreement, in form and substance reasonably acceptable to Lender.

(t) Control Agreement . Lender shall have received an executed Control Agreement, in form and substance reasonably acceptable to Lender.

2.5.3 Delivery of Organizational Documents . On or before the Closing Date, Borrower shall deliver, or cause to be delivered, to Lender copies certified by an Officer’s Certificate, of all organizational documentation related to Borrower, General Partner, Tenant and Guarantor, including, without limitation, good standing certificates, qualifications to do business in the appropriate jurisdictions, resolutions authorizing the entering into of the Loan and incumbency certificates. Each of the organizational documents of Borrower, General Partner, Guarantor and Tenant shall be in form and substance acceptable to Lender in its sole discretion.

2.5.4 Opinions of Borrower’s Counsel .

(a) Lender shall have received the Opinion of Counsel in form and substance acceptable to Lender in its sole discretion.

(b) Lender shall have received a non-consolidation opinion satisfying the requirements of each of the Rating Agencies and otherwise in form and substance acceptable to Lender in its sole discretion (the “ Non-Consolidation Opinion ”).

2.5.5 Budgets . Borrower shall have delivered the Annual Budget for the current Fiscal Year which Annual Budget shall be certified by an Officer’s Certificate and reasonably acceptable to Lender.

2.5.6 Completion of Proceedings . All limited partnership and other proceedings taken or to be taken by Borrower, General Partner, Tenant or Guarantor in connection with the transactions contemplated by this Agreement and other Loan Documents and all documents incidental thereto shall be satisfactory in form and substance to Lender, and Lender shall have received all such counterpart originals or certified copies of such documents as Lender may reasonably request.

2.5.7 Payments . All payments, deposits or escrows, if any, required to be made or established by Borrower under this Agreement, the Note and the other Loan Documents on or before the Closing Date shall have been paid.

2.5.8 Transaction Costs . Borrower shall have paid or reimbursed Lender for all title insurance premiums, recording and filing fees, costs of Environmental Reports, Physical Conditions Reports, appraisals and other reports, the reasonable fees and costs of Lender’s counsel and all other third party out-of-pocket expenses incurred in connection with the origination of the Loan.

2.5.9 Material Adverse Effect . No event or condition shall have occurred since the date of Borrower’s most recent financial statements previously delivered to Lender which has or could reasonably be expected to have a Material Adverse Effect. The Operating Income and Operating Expenses of the Property, the Leases, and all other features of the transaction shall be as represented to Lender without material adverse change. Neither Borrower nor any of its constituent Persons shall be the subject of any bankruptcy, reorganization, or insolvency proceeding.

2.5.10 Tax Lot . Lender shall have received evidence that the Property constitutes one or more separate tax lots, which evidence shall be reasonably satisfactory in form and substance to Lender.

2.5.11 Physical Conditions Report . Lender shall have received a Physical Conditions Report with respect to the Property, which report shall be satisfactory in form and substance to Lender.

2.5.12 Manager Consent . Lender shall received evidence satisfactory to Lender in its sole discretion that Manager has, in accordance with the terms of the Management Agreement, consented to the transactions contemplated by the Loan Documents.

2.5.13 Appraisal . Lender shall have received an appraisal of the Property, which shall (a) be satisfactory in form and substance to Lender, and (b) shall demonstrate that the “Loan to Value Ratio” on the Closing Date is no greater than 65%.

2.5.14 Financial Statements . Lender shall have received certified copies of financial statements with respect to the Property for the three most recent Fiscal Years, each in form and substance satisfactory to Lender, and such financial statements demonstrate that the Assumed Debt Service Coverage Ratio as of Closing is no less than 1.55 to 1.00.

2.5.15 Further Documents . Each additional document not specifically referenced in this Agreement, but relating to the transactions contemplated herein and required by Lender,

shall have been duly authorized, executed and delivered by all parties thereto and Lender shall have received and approved certified copies thereof. Lender or its counsel shall also have received such other and further approvals, opinions, documents and information as Lender or its counsel may have reasonably requested, in each case, in form and substance satisfactory to Lender and its counsel.

III. CASH MANAGEMENT

3.1 Cash Management .

3.1.1 Establishment of Accounts . Borrower hereby confirms that, simultaneously with the execution of this Agreement, pursuant to the Account Agreement, it has established with Cash Management Bank, in the name of Borrower for the benefit of Lender, as secured party, the holding account (the “ Holding Account ”), which has been established as a securities account. The Holding Account and each sub-account of such account and the funds deposited therein and securities and other assets credited thereto shall serve as additional security for the Loan. Pursuant to the Account Agreement, Borrower shall irrevocably instruct and authorize Cash Management Bank to disregard any and all orders for withdrawal from the Holding Account made by, or at the direction of, Borrower. Borrower agrees that, prior to the payment in full of the Indebtedness, the terms and conditions of the Account Agreement shall not be amended or modified without the prior written consent of Lender (which consent Lender may grant or withhold in its sole discretion), and if a Securitization has occurred, the delivery to Lender of a Rating Agency Confirmation. In recognition of Lender’s security interest in the funds deposited into the Holding Account, Borrower shall identify the Holding Account with the name of Lender, as secured party. The Holding Account shall be named as follows: “Ashford Crystal Gateway LP f/b/o German American Capital Corporation, as secured party — Holding Account”. Borrower confirms that it has established with Cash Management Bank the following sub-accounts of the Holding Account (each, a “ Sub-Account ” and, collectively, the “ Sub-Accounts ” and together with the Holding Account, the “ Collateral Accounts ”), which (a) may be ledger or book entry sub-accounts and need not be actual sub-accounts, (b) shall each be linked to the Holding Account, (c) shall each be a “Securities Account” pursuant to Article 8 of the UCC and (d) shall each be an Eligible Account to which certain funds shall be allocated and from which disbursements shall be made pursuant to the terms of this Agreement:

(i) a sub-account for the retention of Account Collateral in respect of Impositions and Other Charges for the Property (the “ Tax Reserve Account ”);

(ii) a sub-account for the retention of Account Collateral in respect of insurance premiums for the Property (the “ Insurance Reserve Account ”);

(iii) a sub-account for the retention of Account Collateral in respect of Debt Service on the Loan (the “ Debt Service Reserve Account ”);

(iv) a sub-account for the retention of Account Collateral in respect of FF&E (the “ FF&E Reserve Account ”); and

(v) a sub-account for the retention of Account Collateral in respect of the occurrence and continuation of a Lockbox Event (the “ Cash Flow Reserve Account ”).

3.1.2 Pledge of Account Collateral . To secure the full and punctual payment and performance of the Obligations, Borrower hereby collaterally assigns, grants a security interest in and pledges to Lender, to the extent not prohibited by applicable law, a first priority continuing security interest in and to the following property of Borrower, whether now owned or existing or hereafter acquired or arising and regardless of where located (all of the same, collectively, the “ Account Collateral ”):

(a) the Collateral Accounts and all cash, checks, drafts, securities entitlements, certificates, instruments and other property, including, without limitation, all deposits and/or wire transfers from time to time deposited or held in, credited to or made to Collateral Accounts;

(b) any and all amounts invested in Permitted Investments;

(c) all interest, dividends, cash, instruments, securities entitlements and other property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing or purchased with funds from the Collateral Accounts; and

(d) to the extent not covered by clauses (a), (b) or (c) above, all proceeds (as defined under the UCC) of any or all of the foregoing.

In addition to the rights and remedies herein set forth, Lender shall have all of the rights and remedies with respect to the Account Collateral available to a secured party at law or in equity, including, without limitation, the rights of a secured party under the UCC, as if such rights and remedies were fully set forth herein. This Agreement shall constitute a security agreement for purposes of the Uniform Commercial Code and other applicable law.

3.1.3 Maintenance of Collateral Accounts . Borrower agrees that each of the Holding Account and the Sub-Accounts is and shall be maintained (a) as a “securities account” (as such term is defined in Section 8-501(a) of the UCC), (b) in such a manner that Lender shall have control (within the meaning of Section 8-106(d)(2) of the UCC) over the Holding Account and any Sub-Account, (c) such that neither Borrower nor Manager shall have any right of withdrawal from the Holding Account or the Sub-Accounts and, except as provided herein, no Account Collateral shall be released to Borrower from the Holding Account or the Sub-Accounts, (d) in such a manner that the Cash Management Bank shall agree to treat all property credited to the Holding Account or the Sub-Accounts as “financial assets” and (e) such that all securities or other property underlying any financial assets credited to the Accounts shall be registered in the name of Cash Management Bank, indorsed to Cash Management Bank or in blank or credited to another securities account maintained in the name of Cash Management Bank and in no case will any financial asset credited to any of the Collateral Accounts be registered in the name of Borrower, payable to the order of Borrower or specially indorsed to Borrower except to the extent the foregoing have been specially indorsed to Cash Management

Bank or in blank. Without limiting Borrower’s obligations under the immediately preceding sentence, Borrower shall only establish and maintain the Holding Account with an Approved Bank that has executed an agreement substantially in the form of the Account Agreement or in such other form acceptable to Lender in its sole discretion.

3.1.4 Eligible Accounts . The Collateral Accounts shall be Eligible Accounts. The Collateral Accounts shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other banking or governmental authority, as may now or hereafter be in effect. Income and interest accruing on the Collateral Accounts or any investments held in such accounts shall be periodically added to the principal amount of such account and shall be held, disbursed and applied in accordance with the provisions of this Agreement and the Account Agreement. Borrower shall be the beneficial owner of the Collateral Accounts for federal income tax purposes and shall report all income on the Collateral Accounts.

3.1.5 Deposits into Sub-Accounts . On the date hereof, Borrower has deposited the following amounts into the Sub-Accounts:

(a) $166,552.75 into the Tax Reserve Account;

(b) $0.00 into the Insurance Reserve Account;

(d) $0.00 into the FF&E Reserve Account.

3.1.6 Monthly Funding of Sub-Accounts .

(a) Borrower hereby irrevocably authorizes Lender to transfer (and, pursuant to the Account Agreement shall irrevocably authorize Cash Management Bank to execute any corresponding instructions of Lender), and Lender shall transfer, from the Holding Account by 11:00 a.m. New York time on each Payment Date, or as soon thereafter as sufficient funds are in the Holding Account to make the applicable transfers, commencing on December 1, 2010, funds in the following amounts and in the following order of priority:

(i) funds in an amount equal to the Monthly Tax Reserve Amount and any other amounts required pursuant to Section 16.1 for the preceding month in which the transfer from the Holding Account is made and transfer the same to the Tax Reserve Account;

(ii) funds in an amount equal to the Monthly Insurance Reserve Amount and any other amounts required pursuant to Section 16.2 for the preceding month in which the transfer from the Holding Account is made and transfer the same to the Insurance Reserve Account; provided that so long as the coverage required by Article VI is maintained for the benefit of Borrower by Manager or Guarantor (and evidence of such coverage and the payment in full of the associated premiums is delivered to Lender prior to the expiration of any existing coverage), then Lender shall not deposit the Monthly Insurance Reserve Amount into the Insurance Reserve Account;

(iii) funds in an amount equal to the amount of Debt Service on the Loan due on the Payment Date for the preceding month in which the transfer from the Holding Account is made and transfer the same to the Debt Service Reserve Account;

(iv) funds in an amount equal to the Monthly FF&E Reserve Amount for the preceding month in which the transfer from the Holding Account is made and transfer the same to the FF&E Reserve Account; provided that so long as Manager is depositing or otherwise remitting the entire Monthly FF&E Reserve Amount into the FF&E Holding Account, then Lender shall not deposit the Monthly FF&E Reserve Amount into the FF&E Reserve Account;

(v) provided a Lockbox Event has occurred and is continuing, transfer any remaining funds on deposit in the Holding Account after the foregoing deposits (such remainder being hereinafter referred to as “ Excess Cash Flow ”) to the Cash Flow Reserve Account; and

(vi) provided no Lockbox Event shall have occurred and is then continuing, transfer any Excess Cash Flow to the Borrower’s Account.

(b) If Lender shall reasonably determine that there will be insufficient amounts in the Holding Account to make any of the transfers pursuant to this Section 3.1.6 inclusive on the date required hereunder, Lender shall provide notice to Borrower of such insufficiency and, within five Business Days after receipt of said notice and prior to the expiration of any grace period applicable to such payment, Borrower shall deposit into the Holding Account an amount equal to the shortfall of available funds in the Holding Account taking into account any funds which accumulate in the Holding Account during such five day Business Day period. Notwithstanding anything to the contrary contained in this Agreement or in the other Loan Documents, Borrower shall not be deemed to be in default hereunder or thereunder or otherwise liable to Lender (and no Late Payment Charge shall be assessed) in the event that, after giving effect to a transfer of all funds then on deposit in the Holding Account pursuant to Section 3.1.6 above, funds sufficient for a required transfer are held in an appropriate Sub-Account and Lender or Cash Management Bank fails to timely make any transfer from such Sub-Account as contemplated by this Agreement unless due to the negligence or willful misconduct of Borrower.

(c) Following the occurrence of a Lockbox Event and provided no Event of Default shall have occurred and is then continuing, at such time as the Assumed Debt Service Coverage Ratio has been at least 1.20 to 1.00 for at least two consecutive quarters, the Lockbox Event shall no longer be deemed continuing and any amounts on deposit in the Cash Flow Reserve Account shall be released to Borrower following Borrower’s delivery to Lender of an Officer’s Certificate and reasonably detailed supporting calculations evidencing the satisfaction of the foregoing Assumed Debt Service Coverage Ratio requirement.

(d) Notwithstanding anything to the contrary contained herein or in the Security Instrument, to the extent that Borrower shall fail to pay any mortgage recording tax, costs, expenses or other amounts pursuant to Section 19.12 of this Agreement within the time period set forth therein, Lender shall have the right, at any time, upon notice to Borrower, to

withdraw from the Holding Account, an amount equal to such unpaid taxes, costs, expenses and/or other amounts and pay such amounts to the Person(s) entitled thereto.

3.1.7 Payments from Sub-Accounts . Borrower irrevocably authorizes Lender to make and, provided no Event of Default shall have occurred and be continuing, Lender hereby agrees to make, the following payments from the Sub-Accounts to the extent of the monies on deposit therefor:

(i) funds from the Tax Reserve Account to Lender sufficient to permit Lender to pay (A) Real Estate Taxes and (B) Other Charges, on the respective due dates therefor, and Lender shall so pay such funds to the Governmental Authority having the right to receive such funds;

(ii) subject to the conditions set forth in Section 3.1.6(a)(ii) above, funds from the Insurance Reserve Account to Lender sufficient to permit Lender to pay insurance premiums for the insurance required to be maintained pursuant to the terms of this Agreement and the Security Instrument, on the respective due dates therefor, and Lender shall so pay such funds to the insurance company having the right to receive such funds;

(iii) funds from the Debt Service Reserve Account to Lender sufficient to pay Debt Service on the Loan on each Payment Date, and Lender, on each Payment Date, shall apply such funds to the payment of the Debt Service on the Loan payable on such Payment Date;

(iv) subject to the conditions set forth in Section 3.1.6(a)(iv) above, no more frequently than once in any calendar month, and provided Borrower (or Manager, as agent for Borrower) shall have complied with the procedures set forth in Section 16.3.2 , funds from the FF&E Reserve Account to an account designated in writing by Borrower or Manager to pay for FF&E; and

(v) upon Lender’s direction in its sole and absolute discretion and at any time during the continuation of a Lockbox Event, funds from the Cash Flow Reserve Account to any applicable Sub-Account in order to make any of the transfers pursuant to Section 3.1.6 inclusive.

3.1.8 Cash Management Bank .

(a) Lender shall have the right at Borrower’s sole cost and expense to replace the Cash Management Bank with a financial institution reasonably satisfactory to Borrower in the event that (i) the Cash Management Bank fails, in any material respect, to comply with the Account Agreement, or (ii) the Cash Management Bank is no longer an Approved Bank. In addition, upon the occurrence and during the continuance of an Event of Default, Lender shall have the right at Borrower’s sole cost and expense to replace Cash Management Bank at any time, without notice to Borrower. Borrower shall cooperate with Lender in connection with the appointment of any replacement Cash Management Bank and the execution by the Cash Management Bank and the Borrower of an Account Agreement and delivery of same to Lender.

(b) So long as no Event of Default shall have occurred and be continuing, Borrower shall have the right at its sole cost and expense to replace the Cash Management Bank with a financial institution that is an Approved Bank provided that such financial institution and Borrower shall execute and deliver to Lender an Account Agreement substantially similar to the Account Agreement executed as of the Closing Date.

3.1.9 Borrower’s Account Representations, Warranties and Covenants .

(a) Borrower represents, warrants and covenants that as of the date hereof, Borrower has irrevocably (until the repayment in full of the Indebtedness) directed the Tenant under the Operating Lease to wire all funds payable to Borrower under the Operating Lease directly to the Holding Account. If requested by Lender, Borrower shall confirm such instructions to Tenant in writing (a copy of which shall, in such case, be provided to Lender).

(b) Borrower further represents, warrants and covenants that (i) pursuant to the direction letter attached as Exhibit A , Borrower and Tenant have each irrevocably directed Manager to deposit all amounts payable to Borrower or Tenant pursuant to the Management Agreement directly into the Holding Account, (ii) Borrower shall pay or cause to be paid all Rents, Cash and Cash Equivalents or other items of Operating Income not covered by the preceding subsection (a) within one Business Day after receipt thereof by Borrower or its Affiliates directly into the Holding Account and, until so deposited, any such amounts held by Borrower shall be deemed to be Account Collateral and shall be held in trust by it for the benefit, and as the property, of Lender and shall not be commingled with any other funds or property of Borrower, (iii) there are no accounts other than the Collateral Accounts maintained by Borrower or any other Person (other than Manager) with respect to Property or the collection of Rents and (iv) so long as the Loan shall be outstanding, neither Borrower nor any other Person (other than Manager) shall open any other operating accounts with respect to the Property or the collection of Rents, except for the Collateral Accounts; provided that, Borrower and Manager shall not be prohibited from utilizing one or more separate accounts for the disbursement or retention of funds that have been transferred to the Borrower’s Account.

3.1.10 Account Collateral and Remedies .

(a) Upon the occurrence and during the continuance of an Event of Default, without additional notice from Lender to Borrower, (i) Lender may, in addition to and not in limitation of Lender’s other rights, make any and all withdrawals from, and transfers between and among, the Collateral Accounts as Lender shall determine in its sole and absolute discretion to pay any Obligations, Operating Expenses and/or Capital Expenditures for the Property; (ii) all Excess Cash Flow shall be retained in the Holding Account or applicable Sub-Accounts, and (iv) Lender may liquidate and transfer any amounts then invested in Permitted Investments to the Collateral Accounts to which they relate or reinvest such amounts in other Permitted Investments as Lender may reasonably determine is necessary to perfect or protect any security interest granted or purported to be granted hereby or to enable Lender to exercise and enforce Lender’s rights and remedies hereunder with respect to any Account Collateral or to preserve the value of the Account Collateral.

(b) Upon the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably constitutes and appoints Lender as Borrower’s true and lawful attorney-in-fact, with full power of substitution, to execute, acknowledge and deliver any instruments and to exercise and enforce every right, power, remedy, option and privilege of Borrower with respect to the Account Collateral, and do in the name, place and stead of Borrower, all such acts, things and deeds for and on behalf of and in the name of Borrower, which Borrower could or might do or which Lender may deem necessary or desirable to more fully vest in Lender the rights and remedies provided for herein and to accomplish the purposes of this Agreement. The foregoing powers of attorney are irrevocable and coupled with an interest. Upon the occurrence and during the continuance of an Event of Default, Lender may perform or cause performance of any such agreement, and any reasonable expenses of Lender incurred in connection therewith shall be paid by Borrower as provided in Section 5.1.16 .

(c) Borrower hereby expressly waives, to the fullest extent permitted by law, presentment, demand, protest or any notice of any kind in connection with this Agreement or the Account Collateral. Borrower acknowledges and agrees that 10 days’ prior written notice of the time and place of any public sale of the Account Collateral or any other intended disposition thereof shall be reasonable and sufficient notice to Borrower within the meaning of the UCC.

3.1.11 Transfers and Other Liens . Borrower agrees that it will not (a) sell or otherwise dispose of any of the Account Collateral or (b) create or permit to exist any Lien upon or with respect to all or any of the Account Collateral, except for the Lien granted to Lender under the Loan Documents.

3.1.12 Reasonable Care . Beyond the exercise of reasonable care in the custody thereof, Lender shall have no duty as to any Account Collateral in its possession or control as agent therefor or bailee thereof or any income thereon or the preservation of rights against any person or otherwise with respect thereto. Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Account Collateral in its possession if the Account Collateral is accorded treatment substantially equal to that which Lender accords its own property, it being understood that Lender shall not be liable or responsible for any loss or damage to any of the Account Collateral, or for any diminution in value thereof, by reason of the act or omission of Lender, its Affiliates, agents, employees or bailees, except to the extent that such loss or damage results from Lender’s gross negligence or willful misconduct. In no event shall Lender be liable either directly or indirectly for losses or delays resulting from any event which may be the basis of an Excusable Delay, computer malfunctions, interruption of communication facilities, labor difficulties or other causes beyond Lender’s reasonable control or for indirect, special or consequential damages except to the extent of Lender’s gross negligence or willful misconduct. Notwithstanding the foregoing, Borrower acknowledges and agrees that (a) Lender does not have custody of the Account Collateral, (b) Cash Management Bank has custody of the Account Collateral, (c) the initial Cash Management Bank was chosen by Borrower and (d) Lender has no obligation or duty to supervise Cash Management Bank or to see to the safe custody of the Account Collateral.

3.1.13 Lender’s Liability .

(a) Lender shall be responsible for the performance only of such duties with respect to the Account Collateral as are specifically set forth in this Section 3.1 or elsewhere in the Loan Documents, and no other duty shall be implied from any provision hereof. Lender shall not be under any obligation or duty to perform any act with respect to the Account Collateral which would cause it to incur any expense or liability or to institute or defend any suit in respect hereof, or to advance any of its own monies. Borrower shall indemnify and hold Lender, its employees and officers harmless from and against any loss, cost or damage (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by Lender in connection with the transactions contemplated hereby with respect to the Account Collateral except as such may be caused by the gross negligence or willful misconduct of Lender, its employees, officers or agents.

(b) Lender shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, opinion, bond or other paper, document or signature believed by it in good faith to be genuine, and, in so acting, it may be assumed that any person purporting to give any of the foregoing in connection with the provisions hereof has been duly authorized to do so. Lender may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder and in good faith in accordance therewith.

3.1.14 Continuing Security Interest . This Agreement shall create a continuing security interest in the Account Collateral and shall remain in full force and effect until payment in full of the Indebtedness. Upon payment in full of the Indebtedness, this security interest shall automatically terminate without further notice from any party and Borrower shall be entitled to the return, upon its request, of such of the Account Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof and Lender shall execute such instruments and documents as may be reasonably requested by Borrower to evidence such termination and the release of the Account Collateral.

IV. REPRESENTATIONS AND WARRANTIES

4.1 Borrower Representations . Borrower represents and warrants as of the Closing Date that:

4.1.1 Organization .

(a) Borrower and Guarantor are each limited partnerships that have been duly organized and are validly existing and in good standing pursuant to the laws of the State of Delaware with requisite limited partnership power and authority to own their respective properties and assets and to transact the businesses in which ach of them are now engaged. Each of Borrower and Guarantor is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its respective properties, assets, businesses and operations. Each of Borrower and Guarantor possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and assets, and to transact the businesses in which it is now engaged, and the sole

business of Borrower is the ownership and operation of the Property. The organizational structure of Borrower is accurately depicted by the diagram attached hereto as Exhibit B . Borrower shall not itself, and shall not permit any other SPE Entity to, change its name, identity, corporate structure or jurisdiction of organization unless it shall have given Lender 30 days prior written notice of any such change and shall have taken all steps reasonably requested by Lender to grant, perfect, protect and/or preserve the security interest granted hereunder to Lender.

(b) General Partner is a limited liability company that has been duly organized and is validly existing and in good standing pursuant to the laws of the State of Delaware with requisite limited liability company power and authority to own its properties and assets and to transact the businesses in which it is now engaged. General Partner has duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, assets, businesses and operations. General Partner possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and assets and to transact the businesses in which it is now engaged, and the sole business of General Partner is to act as the general partner of Borrower.

(c) Tenant is a corporation that has been duly organized and is validly existing and in good standing pursuant to the laws of the State of Delaware with requisite corporate power and authority to own its properties and assets and to transact the businesses in which it is now engaged. Tenant has duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, assets, businesses and operations. Tenant possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and assets and to transact the businesses in which it is now engaged, and the sole business of Tenant is to act as the tenant under the Operating Lease.

4.1.2 Proceedings . Each of Borrower, General Partner, Tenant and Guarantor has full power to and has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party. This Agreement and the other Loan Documents have been duly executed and delivered by, or on behalf of, Borrower, General Partner, Tenant and Guarantor, as applicable, and constitute legal, valid and binding obligations of Borrower, General Partner, Tenant and Guarantor, as applicable, enforceable against each of them, as applicable, in accordance with their respective terms, subject only to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

4.1.3 No Conflicts . The execution, delivery and performance of this Agreement and the other Loan Documents by Borrower, General Partner, Tenant and Guarantor, as applicable, will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the property or assets of Borrower, General Partner, Tenant or Guarantor pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, partnership agreement or other agreement or instrument to which Borrower, General Partner, Tenant or Guarantor is a party or by which any of Borrower’s, General Partner’s, Tenant’s or Guarantor’s property or assets is subject (unless

consents from all applicable parties thereto have been obtained), nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority, and any consent, approval, authorization, order, registration or qualification of or with any Governmental Authority required for the execution, delivery and performance by Borrower, General Partner, Tenant or Guarantor of this Agreement or any other Loan Documents has been obtained and is in full force and effect.

4.1.4 Litigation . Except as set forth on Schedule III attached hereto, there are no arbitration proceedings, governmental investigations, actions, suits or proceedings at law or in equity by or before any Governmental Authority now pending or, to the best of Borrower’s knowledge, threatened against or affecting Borrower, General Partner, Tenant, Guarantor or the Property. The actions, suits or proceedings identified on Schedule III , if determined against Borrower, General Partner, Tenant, Guarantor or the Property, would not materially and adversely affect the condition (financial or otherwise) or business of Borrower, General Partner, Tenant, Guarantor or the condition or operation of the Property.

4.1.5 Agreements . Borrower is not a party to any agreement or instrument or subject to any restriction which is reasonably likely to constitute a Material Adverse Effect other than the Management Agreement and Operating Lease. Borrower has not received any written notice of any material default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which Borrower or the Property is bound. Borrower has no material financial obligation (contingent or otherwise) under any indenture, mortgage, deed of trust, loan agreement, REA or other agreement or instrument to which Borrower is a party or by which Borrower or the Property is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of the Property and (b) obligations under the Loan Documents.

4.1.6 Title . Borrower has good, marketable and insurable fee simple title to the Land and the Improvements, free and clear of all Liens whatsoever except the Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. Borrower has good and marketable title to the remainder of the Property owned by Borrower, free and clear of all Liens whatsoever except the Permitted Encumbrances. The Security Instrument, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (a) a valid, perfected first mortgage lien on the Land and the Improvements, subject only to Permitted Encumbrances and (b) perfected security interests in and to, and perfected collateral assignments of, all personalty (including the Operating Lease and Management Agreement), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances. There are no claims for payment for work, labor or materials affecting the Property which are or may become a lien prior to, or of equal priority with, the Liens created by the Loan Documents.

4.1.7 No Bankruptcy Filing . None of Borrower, General Partner, any other SPE Entity, or Guarantor, or to the knowledge of Borrower, Manager, is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of such entity’s assets or property, and Borrower has no

knowledge of any Person contemplating the filing of any such petition against Borrower, General Partner, any other SPE Entity, Guarantor or Manager.

4.1.8 Full and Accurate Disclosure . No statement of fact made by Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no fact presently known to Borrower which has not been disclosed which could reasonably be expected to have a Material Adverse Effect.

4.1.9 All Property . The Property constitutes all of the real property, personal property, equipment and fixtures currently (a) owned or leased by Borrower or (b) used in the operation of the business located on the Property. To the extent perfection may be effected pursuant to applicable Legal Requirements, by recoding or filing, the UCC financing statements are in form and substance acceptable for filing and/or recording in all appropriate public filing and recording offices, and by such recording or filing, such UCC financing statements will create a first priority perfected security interest in and Lien on all FF&E that is necessary to operate the Property in the manner operated on the date hereof.

4.1.10 No Plan Assets

(a) Borrower is not an employee benefit plan, as defined in Section 3(3) of ERISA, subject to Title I of ERISA, none of the assets of Borrower constitutes or will constitute plan assets of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101 and Borrower is not a governmental plan within the meaning of Section 3(32) of ERISA and transactions by or with Borrower are not subject to state statutes regulating investment of, and fiduciary obligations with respect to, governmental plans similar to the provisions of Section 406 of ERISA or Section 4975 of the Code currently in effect, which prohibit or otherwise restrict the transactions contemplated by this Agreement.

(b) Borrower does not maintain an employee benefit plan as defined by Section 3(3) of ERISA, which is subject to Title IV of ERISA, and Borrower (i) has no knowledge of any material liability which has been incurred or is expected to be incurred by Borrower which is or remains unsatisfied for any taxes or penalties with respect to any “employee benefit plan,” within the meaning of Section 3(3) of ERISA, or any “plan,” within the meaning of Section 4975(e)(1) of the Internal Revenue Code or any other benefit plan (other than a multiemployer plan) maintained, contributed to, or required to be contributed to by Borrower or by any entity that is under common control with Borrower within the meaning of ERISA Section 4001(a)(14) (a “ Plan ”) or any plan that would be a Plan but for the fact that it is a multiemployer plan within the meaning of ERISA Section 3(37); and (ii) has made and shall continue to make when due all required contributions to all such Plans, if any. Each such Plan has been and will be administered in compliance with its terms and the applicable provisions of ERISA, the Internal Revenue Code, and any other applicable federal or state law; and no action shall be taken or fail to be taken that would result in the disqualification or loss of tax-exempt status of any such Plan intended to be qualified and/or tax exempt; and

4.1.11 Compliance . Borrower and the Property and the use thereof comply in all material respects with all applicable Legal Requirements, including, without limitation, building

and zoning ordinances and codes. Borrower is not in material default or in material violation of any order, writ, injunction, decree or demand of any Governmental Authority. To the best of Borrower’s knowledge, there has not been committed by Borrower any act or omission affording any Governmental Authority the right of forfeiture as against the Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.

4.1.12 Financial Information . All financial data including, without limitation, the statements of cash flow and income and operating expense, that have been delivered by or on behalf of Borrower to Lender in respect of Borrower or the Property (a) are true, complete and correct in all material respects, (b) fairly represent the financial condition of Borrower or the Property, as applicable, as of the date of such reports, and (c) to the extent prepared or audited by an independent certified public accounting firm, have been prepared in accordance with GAAP throughout the periods covered, except as disclosed therein. Borrower does not have any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and could reasonably be expected to have a Material Adverse Effect. Since the date of such financial statements, there has been no material adverse change in the financial condition, operations or business of Borrower from that set forth in said financial statements.

4.1.13 Condemnation . No Condemnation has been commenced or, to Borrower’s knowledge, is contemplated with respect to all or any portion of the Property or for the relocation of roadways providing access to the Property.

4.1.14 Federal Reserve Regulations . None of the proceeds of the Loan will be used for the purpose of purchasing or carrying any “margin stock” as defined in Regulation U, Regulation X or Regulation T or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry “margin stock” or for any other purpose which might constitute this transaction a “purpose credit” within the meaning of Regulation U or Regulation X. As of the Closing Date, Borrower does not own any “margin stock.”

4.1.15 Utilities and Public Access . The Property has rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service the Property for its intended uses. All utilities necessary to the existing use of the Property are located either in the public right-of-way abutting the Property (which are connected so as to serve the Property without passing over other property) or in recorded easements serving the Property and such easements are set forth in and insured by the Title Policy. All roads necessary for the use of the Property for its current purposes have been completed and, if necessary, dedicated to public use.

4.1.16 Not a Foreign Person . Borrower is not a foreign person within the meaning of § 1445(f)(3) of the Code.

4.1.17 Separate Lots . The Property is comprised of one or more contiguous parcels which constitute a separate tax lot or lots and does not constitute or include a portion of any other tax lot not a part of the Property.

4.1.18 Assessments . Except as disclosed on Schedule B-2 of the Title Policy, there are no pending or proposed special or other assessments for public improvements or otherwise affecting the Property, nor are there any improvements to the Property contemplated by Borrower, Tenant or Manager that may result in such special or other assessments.

4.1.19 Enforceability . The Loan Documents are not subject to any existing right of rescission, set-off, counterclaim or defense by Borrower, including the defense of usury, nor would the operation of any of the terms of the Loan Documents, or the exercise of any right thereunder, render the Loan Documents unenforceable (subject to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law)), and Borrower has not asserted any right of rescission, set-off, counterclaim or defense with respect thereto.

4.1.20 No Prior Assignment . There are no prior sales, transfers or assignments of the Operating Lease, Management Agreement or any portion of the Rents due and payable or to become due and payable which are presently outstanding following the funding of the Loan, other than those being terminated or assigned to Lender concurrently herewith.

4.1.21 Insurance . Borrower has obtained and has delivered to Lender certified copies or originals of or certificates of insurance evidencing all insurance policies required under this Agreement, reflecting the insurance coverage, amounts and other requirements set forth in this Agreement. Borrower has not, and to the best of Borrower’s knowledge no Person has, done by act or omission anything which would impair the coverage of any such policy.

4.1.22 Use of Property . The Property is used exclusively as a first-class, full service hotel and conference center, and other appurtenant and related uses.

4.1.23 Certificate of Occupancy; Licenses . All certifications, liquor licenses, permits, licenses and approvals, including without limitation, certificates of completion and occupancy permits required of Borrower or Manager for the legal use, occupancy and operation of the Property as a as a first-class, full service hotel and conference center, and other appurtenant and related uses (collectively, the “ Licenses” ), have been obtained and are in full force and effect. The use being made of the Property is in conformity with the certificate of occupancy issued for the Property.

4.1.24 Flood Zone . None of the Improvements on the Property are located in an area as identified by the Federal Emergency Management Agency as an area having special flood hazards.

4.1.25 Physical Condition . To the best of Borrower’s knowledge and except as expressly disclosed in the Physical Conditions Report, the Property, including, without limitation, all buildings, Improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects; to the best of Borrower’s knowledge and except as disclosed in the Physical Conditions Report, there exists no

structural or other material defects or damages in or to the Property, whether latent or otherwise, and Borrower has not received any written notice from any insurance company or bonding company of any defects or inadequacies in the Property, or any part thereof, which would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.

4.1.26 Boundaries . Except as shown on the Survey, all of the Improvements lie wholly within the boundaries and building restriction lines of the Real Property, and no improvements on adjoining properties encroach upon the Real Property, and no easements or other encumbrances upon the Real Property encroach upon any of the Improvements, so as constitute a Material Adverse Effect (except those which are insured against by the Title Policy).

4.1.27 Leases . The Property is not subject to any Lease other than the Operating Lease. No Person has any possessory interest in the Property or right to occupy the same except under and pursuant to the provisions of the Operating Lease, the Management Agreement and the REAs and individuals who are transient guests occupying the hotel operated on the Property. The Operating Lease is in full force and effect and there are no defaults thereunder by either Borrower or Tenant, and there are no conditions that, with the passage of time or the giving of notice, or both, would constitute material defaults thereunder. No Rent has been paid more than 30 days in advance of its due date. There has been no prior sale, transfer or assignment, hypothecation or pledge by Borrower of the Operating Lease or of the Rents received therein, which will be outstanding following the funding of the Loan. Tenant does not have a right or option pursuant to the Operating Lease or otherwise to purchase all or any part of the Property.

4.1.28 Filing and Recording Taxes . All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the transfer of the Property to Borrower have been paid and the granting and recording of the Security Instrument and the UCC financing statements required to be filed in connection with the Loan. All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Security Instrument, have been paid, and, under current Legal Requirements, the Security Instrument is enforceable against Borrower in accordance with its terms by Lender (or any subsequent holder thereof) subject only to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law.

4.1.29 Single Purpose Entity/Separateness .

(a) Until the Indebtedness has been paid in full, Borrower hereby represents, warrants and covenants that Borrower and each SPE Entity is, and shall continue to be, a Single Purpose Entity.

(b) All of the assumptions made in the Non-Consolidation Opinion, including, but not limited to, any exhibits attached thereto, are true and correct in all material respects. Borrower and each SPE Entity have complied and will comply with all of the assumptions made with respect to it in the Non-Consolidation Opinion.

4.1.30 Management Agreement . The Management Agreement is in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice would constitute a default thereunder. The Manager is not an affiliate of Borrower. The Management Agreement and Manager’s Subordination Agreement together embody the entire agreement and understanding among Borrower, Tenant and Manager with respect to the management of the Property.

4.1.31 Illegal Activity . No portion of the Property has been or will be purchased with proceeds of any illegal activity.

4.1.32 No Change in Facts or Circumstances; Disclosure . All written information, reports, certificates and other documents submitted by Borrower to Lender in connection with the Loan are, to the best of Borrower’s knowledge, accurate, complete and correct in all material respects. There has been no material adverse change known to Borrower in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially and adversely affects the Property or the business operations or the financial condition of Borrower. Borrower has disclosed to Lender all material facts known to Borrower and has not failed to disclose any material fact known to Borrower that is likely to cause any representation or warranty made herein to be materially misleading.

4.1.33 Tax Filings . Borrower has filed (or has obtained effective extensions for filing) all federal, state and local tax returns required to be filed and has paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments payable by Borrower.

4.1.34 Solvency/Fraudulent Conveyance . Borrower (a) has not entered into the transaction contemplated by this Agreement or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) has received reasonably equivalent value in exchange for its obligations under the Loan Documents. After giving effect to the Loan, the fair saleable value of Borrower’s assets exceeds and will, immediately following the making of the Loan, exceed Borrower’s total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair saleable value of Borrower’s assets is and will, immediately following the making of the Loan, be greater than Borrower’s probable liabilities, including the maximum amount of its contingent liabilities on its Debts as such Debts become absolute and matured. Borrower’s assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur Debt and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such Debt and liabilities as they mature (taking into account the timing and amounts of cash to be received by Borrower and the amounts to be payable on or in respect of obligations of Borrower).

4.1.35 Investment Company Act . Borrower is not (a) an investment company or a company Controlled by an investment company, within the meaning of the Investment Company Act of 1940, as amended, (b) a holding company or a subsidiary company of a holding company or an affiliate of either a holding company or a subsidiary company within the mean of the Public Utility Holding Company Act of 1935, as amended or (c) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

4.1.36 Labor . No organized work stoppage or labor strike is pending or threatened by employees and other laborers at the Property. Neither Borrower nor, to the best of Borrower’s knowledge, Manager (a) is involved in or threatened with any labor dispute, grievance or litigation relating to labor matters involving any employees and other laborers at the Property, including, without limitation, violation of any federal, state or local labor, safety or employment laws (domestic or foreign) and/or charges of unfair labor practices or discrimination complaints, (b) has engaged in any unfair labor practices within the meaning of the National Labor Relations Act or the Railway Labor Act or (c) is a party to, or bound by, any collective bargaining agreement or union contract with respect to employees and other laborers at the Property and no such agreement or contract is currently being negotiated by the Borrower, Manager or any of its Affiliates.

4.1.37 Inventory . Borrower is the owner of all of the FF&E is located on or at the Property. The FF&E owned by Borrower sufficient to operate the Property in the manner required hereunder and in the manner in which the Property is operated as of the Closing Date.

4.1.38 Brokers . Neither Borrower nor Lender has dealt with any broker or finder with respect to the transactions contemplated by the Loan Documents and neither party has done any acts, had any negotiations or conversations, or made any agreements or promises which will in any way create or give rise to any obligation or liability for the payment by either party of any brokerage fee, charge, commission or other compensation to any Person with respect to the transactions contemplated by the Loan Documents.

4.1.39 No Other Debt . Borrower has not incurred any Debt that has not been heretofore repaid in full, other than the Permitted Debt.

4.1.40 Taxpayer Identification Number; Jurisdiction of Formation . The Federal taxpayer identification number of (a) Borrower is 20-4761853, and (b) General Partner is 20-4761835. Borrower, General Partner and Guarantor are each organized under the laws of the State of Delaware.

4.1.41 Compliance with Anti-Terrorism, Embargo and Anti-Money Laundering Laws . (a) None of Borrower, General Partner, Tenant, Guarantor or Parent or any Person who owns any equity interest in or Controls Borrower, General Partner, Tenant or Guarantor currently is identified on the OFAC List or otherwise qualifies as a Prohibited Person, and Borrower has implemented procedures to ensure that no Person who now or hereafter owns any equity interest in Borrower, General Partner, Tenant or Guarantor is a Prohibited Person or Controlled by a Prohibited Person, and (ii) none of Borrower, General Partner, Tenant, Guarantor or Parent is in violation of any Legal Requirements relating to anti-money laundering or anti-terrorism, including, without limitation, Legal Requirements related to transacting business with Prohibited

Persons or the requirements of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related regulations issued thereunder, including temporary regulations, all as amended from time to time.

4.1.42 REAs and the Operating Lease .

(a) Borrower or the Title Company has heretofore delivered to Lender true and complete copies of all Leases and REAs and any and all amendments or modifications thereof. No events or circumstances exist which with or without the giving of notice, the passage of time or both, may constitute a material default on the part of Borrower under any Leases or REAs. Borrower has complied with and performed all of its material construction, improvement and alteration obligations with respect to the Property required as of the date hereof and any other obligations under the other REAs or the Leases that are required as of the date hereof have either been complied with or the failure to comply with the same does not and could not reasonably be expected to have a Material Adverse Effect. Each Lease is subordinate to the Lien of the Security Instrument.

(b) The Operating Lease is in full force and effect and there is no material default, breach or violation existing thereunder by Borrower or Tenant and no event has occurred that, with the passage of time or the giving of notice, or both, would constitute a default, breach or violation by any party thereunder. The Operating Lease is subordinate to the Lien of the Security Instrument.

4.1.43 Intellectual Property . Borrower or Tenant either owns or is licensed to use all Intellectual Property necessary for the use, occupancy and operation of the Property as a first-class, full service hotel and conference center, and other appurtenant and related uses. Borrower’s and Tenant’s use of the Intellectual Property is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge. To Borrower’s knowledge, (a) no Person has given or received written notice purporting to avoid, repudiate, rescind or terminate any agreement that authorizes the use of any Intellectual Property that is licensed to Borrower or Tenant by a third party, and, to the knowledge of Borrower, the terms of any agreement authorizing the use of any Intellectual Property to which Borrower or Tenant is a party have been complied with by all parties in all material respects, and (b) the use of the Intellectual Property in the manner in which it is currently used does not infringe, dilute, misappropriate or otherwise violate the rights of any Person and no Intellectual Property is being infringed, diluted, misappropriated or otherwise violated by any Person.

4.1.44 Backward Representations — Entity . Borrower hereby represents that, from and after the date of formation of each of Borrower and General Partner and through the date of this Agreement: (a) neither Borrower nor General Partner has any judgments or liens of any nature that remain unsatisfied as of the Closing Date, except for tax liens not yet due; (b) each of Borrower and General Partner is in compliance in all material respects with all applicable Legal Requirements; (c) neither Borrower nor General Partner is involved in any dispute with any taxing authority; (d) each of Borrower and General Partner has paid all taxes which it owes (or has filed valid extensions therefor and paid any amounts required thereunder); (e) neither Borrower nor General Partner has owned any real property other than the Property and personal

property necessary or incidental to its ownership or operation of the Property; (f) neither Borrower nor General Partner is now, nor has ever been, party to any lawsuit, arbitration, summons, or legal proceeding that, to Borrower’s knowledge, is still pending, or that resulted in a judgment against Borrower or General Partner that has not been paid or otherwise satisfied in full; and (g) neither Borrower nor General Partner has any material obligations, contingent or actual, that are not related to the Property or any business activity involving the Property.

4.1.45 Backward Representations — Separateness . Borrower hereby represents that, from and after the date of formation of each of Borrower and General Partner and through the date of this Agreement: (a) neither Borrower nor General Partner has entered into any contract or agreement with any of its Affiliates, constituents, or owners, or any guarantors of any of its obligations or any Affiliate of any of the foregoing (individually, a “ Related Party ” and collectively, the “ Related Parties ”), except upon terms and conditions that are commercially reasonable and substantially similar to those available in an arm’s-length transaction with an unrelated party; (b) each of Borrower and General Partner has paid all of its debts and liabilities from its assets; (c) each of Borrower and General Partner has done or caused to be done all things necessary to observe all organizational formalities applicable to it and to preserve its existence; (d) each of Borrower and General Partner has maintained all of its books, records, financial statements and bank accounts separate from those of any other Person; (e) neither Borrower nor General Partner has had its assets listed as assets on the financial statement of any other Person except as required by GAAP (or such other accounting basis acceptable to Lender); (f) each of Borrower and General Partner has filed its own tax returns (except to the extent that it has been a tax-disregarded entity not required to file tax returns under applicable law); (g) each of Borrower and General Partner has been, and at all times has held itself out to the public as, a legal entity separate and distinct from any other Person (including any Affiliate or other Related Party); (h) each of Borrower and General Partner has corrected any known misunderstanding regarding its status as a separate entity; (i) each of Borrower and General Partner has conducted all of its business and held all of its assets in its own name; (j) each of Borrower and General Partner has not identified itself or any of its Affiliates as a division or part of the other; (k) each of Borrower and General Partner has maintained and utilized separate stationery, invoices and checks bearing its own name; (l) each of Borrower and General Partner has not commingled its assets with those of any other Person and has held all of its assets in its own name; (m) each of Borrower and General Partner has not guaranteed or become obligated for the debts of any other Person other than as provided in the Owner’s Agreement; (n) neither Borrower nor General Partner has held itself out as being responsible for the debts or obligations of any other Person; (o) each of Borrower and General Partner has allocated fairly and reasonably any overhead expenses that have been shared with an Affiliate, including paying for office space and services performed by any employee of an Affiliate or Related Party; (p) neither Borrower nor General Partner has pledged its assets to secure the obligations of any other Person and no such pledge remains outstanding except in connection with the Loan; (q) each of Borrower and General Partner has maintained adequate capital in light of its contemplated business operations; (r) each of Borrower and General Partner has maintained a sufficient number of employees in light of its contemplated business operations and has paid the salaries of its own employees from its own funds; (s) neither Borrower nor General Partner has owned any subsidiary or any equity interest in any other entity other than the general partnership interest in Borrower owned by General Partner; (t) neither Borrower nor General Partner has incurred any indebtedness that is still outstanding other than indebtedness that is permitted under the Loan Documents; and (u) neither

Borrower nor General Partner has had any of its obligations guaranteed by an Affiliate, except for guarantees that have been either released or discharged (or that will be discharged as a result of the closing of the Loan) or guarantees that are contemplated by the Loan Documents.

4.2 Survival of Representations . Borrower agrees that all of the representations and warranties of Borrower set forth in Section 4.1 and elsewhere in this Agreement and in the other Loan Documents shall be deemed given and made as of the date of the funding of the Loan and survive for so long as any amount remains owing to Lender under this Agreement or any of the other Loan Documents by Borrower or Guarantor unless a longer survival period is expressly stated in a Loan Document with respect to a specific representation or warranty, in which case, for such longer period. All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents by Borrower shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.

V. BORROWER COVENANTS

5.1 Affirmative Covenants . From the Closing Date and until payment and performance in full of all obligations of Borrower under the Loan Documents or the release of the Lien in favor of Lender pursuant to the Loan Documents, Borrower hereby covenants and agrees with Lender that:

5.1.1 Performance by Borrower . Borrower shall in a timely manner observe, perform and fulfill each and every covenant, term and provision of each Loan Document executed and delivered by, or applicable to, Borrower, and shall not enter into or otherwise suffer or permit any amendment, waiver, supplement, termination or other modification of any Loan Document executed and delivered by, or applicable to, Borrower, as applicable, without the prior written consent of Lender.

5.1.2 Existence; Compliance with Legal Requirements; Insurance . Subject to Borrower’s right of contest pursuant to Section 7.3 , Borrower shall at all times comply and cause the Property to be in compliance in all material respects with all Legal Requirements applicable to the Borrower, any SPE Entity and the Property and the uses permitted upon the Property. Borrower shall do or cause to be done all things reasonably necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises necessary to comply with all Legal Requirements applicable to it and the Property. There shall never be committed by Borrower, and Borrower shall not knowingly permit any other Person in occupancy of or involved with the operation or use of the Property to commit, any act or omission affording the federal government or any state or local government the right of forfeiture as against the Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents. Borrower hereby covenants and agrees not to commit, knowingly permit or suffer to exist any act or omission affording such right of forfeiture. Borrower shall at all times maintain, preserve and protect all franchises and trade names and preserve all the remainder of its property used in the conduct of its business and shall keep the Property in good working order and repair, and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto, all as more fully set forth in the Security Instrument. Borrower shall keep the Property

insured at all times to such extent and against such risks, and maintain liability and such other insurance, as is more fully set forth in this Agreement.

5.1.3 Litigation; Notices .

(a) Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened in writing against Borrower which, if determined adversely to Borrower would have a Material Adverse Effect.

(b) In addition to all other notices required to be given by Borrower hereunder, Borrower shall give notice to Lender promptly upon the occurrence of: (i) any Default; and (ii) a material adverse change in the business, operations, property or financial condition of Borrower or the Property.

5.1.4 Single Purpose Entity .

(a) Each of Borrower and each SPE Entity shall remain a Single Purpose Entity, and each SPE Entity shall at all times have at least two Independent Directors, Independent Managers or Independent Members, as applicable.

(b) Each of Borrower and each SPE Entity shall continue to maintain its own deposit account or accounts, separate from those of any Affiliate, with commercial banking institutions. None of the funds of Borrower or any SPE Entity will be diverted to any other Person or for other than business uses (including distributions to the Guarantor and General Partner) of Borrower or any SPE Entity, as applicable, nor will such funds be commingled with the funds of any other Affiliate.

(c) To the extent that Borrower or any SPE Entity shares the same officers or other employees as any of Borrower, any SPE Entity or their Affiliates, the salaries of and the expenses related to providing benefits to such officers and other employees shall be fairly allocated among such entities, and each such entity shall bear its fair share of the salary and benefit costs associated with all such common officers and employees.

(d) To the extent that Borrower or any SPE Entity jointly contracts with any of Borrower, any SPE Entity or either of their Affiliates, as applicable, to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing shall be allocated fairly among such entities, and each such entity shall bear its fair share of such costs. To the extent that either Borrower or any SPE Entity contracts or does business with vendors or service providers where the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or among such entities for whose benefit the goods and services are provided, and each such entity shall bear its fair share of such costs. All material transactions between (or among) Borrower or each SPE Entity and any of their respective Affiliates shall be conducted on substantially the same terms (or on more favorable terms for Borrower or any SPE Entity, as applicable) as would be conducted with third parties.

(e) To the extent that Borrower, any SPE Entity or any of their Affiliates have offices in the same location, there shall be a fair and appropriate allocation of overhead costs among them, and each such entity shall bear its fair share of such expenses.

(f) Borrower and each SPE Entity shall conduct its affairs strictly in accordance with its organizational documents, and observe all necessary, appropriate and customary corporate, limited liability company or partnership formalities, as applicable, including, but not limited to, obtaining any and all members’ consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, without limitation, payroll and intercompany transaction accounts.

(g) In addition, Borrower and each SPE Entity shall each: (i) maintain its books and records separate from those of any other Person; (ii) maintain its assets in such a manner that it is not more costly or difficult to segregate, identify or ascertain such assets; (iii) hold regular meetings of its board of directors, shareholders, partners or members, as the case may be, and observe all other corporate, partnership or limited liability company, as the case may be, formalities; (iv) hold itself out to creditors and the public as a legal entity separate and distinct from any other entity; (v) to the extent that it is required to file tax returns under applicable law, shall file its own tax returns, except to the extent that it is required by law to file consolidated federal or unitary state tax returns (or any analogous combined state tax returns); (vi) will maintain its books, records, financial statements, bank accounts, accounting records and other entity documents separate from any other Person and not have its assets listed on the financial statements of any other Person except as required by GAAP; provided , however , that its assets may be included in a consolidated financial statement of any of its Affiliates so long (A) as an appropriate notation shall be made on such consolidated financial statements indicating that such Person’s separate assets and credit are not available to satisfy the debts and other obligations of such Affiliate and that its liabilities do not constitute obligations of the consolidated entity and (B) such Person shall be shown as a separate member of such group; (vii) transact all business with its Affiliates on an arm’s-length basis and pursuant to enforceable agreements; (viii) conduct business in its name and use separate stationery, invoices and checks; (ix) not commingle its assets or funds with those of any other Person other than as contemplated by the Loan Document; and (x) not assume, guarantee or pay the debts or obligations of any Person other than as other than as contemplated by the Loan Documents or the Owner’s Agreement.

(h) All of the assumptions made in any subsequent non-consolidation opinion delivered in connection with the Loan Documents (an “ Additional Non-Consolidation Opinion ”), including, but not limited to, any exhibits attached thereto, will have been and shall be true and correct in all material respects. Borrower and each SPE Entity will have complied and will comply in all material respects with all of the assumptions made with respect to it in any Additional Non-Consolidation Opinion. Each entity other than Borrower with respect to which an assumption shall be made in any Additional Non-Consolidation Opinion will have complied and will comply in all material respects with all of the assumptions made with respect to it in any Additional Non-Consolidation Opinion.

5.1.5 Consents .

(a) If Borrower or any SPE Entity is a corporation, the board of directors of such Person may not take any action requiring the unanimous affirmative vote of 100% of the members of the board of directors unless all of the directors, including the Independent Directors shall have participated in such vote. If Borrower or any SPE Entity is a limited liability company, (i) if such Person is managed by a board of managers, the board of managers of such Person may not take any action requiring the unanimous affirmative vote of 100% of the members of the board of managers unless all of the managers, including the Independent Managers, shall have participated in such vote, (ii) if such Person is not managed by a board of managers, the members of such Person may not take any action requiring the affirmative vote of 100% of the members of such Person unless all of the members, including the Independent Members, shall have participated in such vote.

(b) An affirmative vote of 100% of the directors, board of managers or members, as applicable, of Borrower and any SPE Entity shall be required to (i) file a bankruptcy or insolvency petition or otherwise institute insolvency proceedings or to authorize Borrower or any SPE Entity to do so or (ii) file an involuntary bankruptcy petition against any Affiliate, Manager, or any Affiliate of Manager. Furthermore, Borrower’s and each SPE Entity’s formation documents shall expressly state that for so long as the Loan is outstanding and unless at least two Independent Directors, Independent Managers or Independent Members satisfying the requirements of this Agreement and the applicable organizational documents shall then be appointed and serving, neither Borrower nor any SPE Entity shall be permitted to (A) dissolve, liquidate, consolidate, merge or sell all or substantially all of Borrower’s or any SPE Entity’s assets other than in connection with the repayment of the Loan or as expressly permitted in Article VIII hereof, (B) engage in any other business activity and such restrictions shall not be modified or violated for so long as the Loan is outstanding, or (C) consider, authorize or take any of the actions described in Section 5.1.5(b)(i) or Section 5.1.5(b)(ii) ; any such action shall be void ab intio .

5.1.6 Access to Property . Borrower shall permit agents, representatives and employees of Lender and the Rating Agencies to inspect the Property or any part thereof during normal business hours on Business Days upon reasonable advance notice.

5.1.7 Notice of Default . Borrower shall promptly advise Lender (a) of any event or condition that has or is likely to have a Material Adverse Effect and (b) of the occurrence of any Default or Event of Default of which Borrower has knowledge.

5.1.8 Cooperate in Legal Proceedings . Borrower shall cooperate fully with Lender with respect to any proceedings before any court, board or other Governmental Authority which would reasonably be expected to affect in any material adverse way the rights of Lender hereunder or under any of the other Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any such proceedings which may have a Material Adverse Effect.

5.1.9 Perform Loan Documents . Borrower shall observe, perform and satisfy all the terms, provisions, covenants and conditions of, and shall pay when due all costs, fees and

expenses to the extent required, under the Loan Documents executed and delivered by, or applicable to, Borrower.

5.1.10 Insurance .

(a) Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Proceeds lawfully or equitably payable in connection with the Property, and Lender shall be reimbursed for any expenses incurred in connection therewith (including reasonable attorneys’ fees and disbursements) out of such Proceeds.

(b) Borrower shall comply with all Insurance Requirements and shall not bring or keep or permit to be brought or kept any article upon any of the Property or cause or permit any condition to exist thereon which would be prohibited by any Insurance Requirement, or would invalidate insurance coverage required hereunder to be maintained by Borrower on or with respect to any part of the Property pursuant to Article VI .

5.1.11 Further Assurances; Separate Notes; Loan Resizing .

(a) Borrower shall execute and acknowledge (or cause to be executed and acknowledged) and deliver to Lender all documents, and take all actions, reasonably required by Lender from time to time to confirm the rights created or now or hereafter intended to be created under this Agreement and the other Loan Documents and any security interest created or purported to be created thereunder, to protect and further the validity, priority and enforceability of this Agreement and the other Loan Documents, to subject to the Loan Documents any property of Borrower intended by the terms of any one or more of the Loan Documents to be encumbered by the Loan Documents, or otherwise carry out the purposes of the Loan Documents and the transactions contemplated thereunder. Borrower agrees that it shall, upon request, reasonably cooperate with Lender in connection with any request by Lender to (i) sever the Note into two or more separate substitute notes having an aggregate principal amount equal to the Principal Amount, (ii) reapportion the Loan among separate subordinate notes having an aggregate principal amount equal to the Principal Amount, or (iii) effectuate any combination of (i) or (ii). In so cooperating, Borrower shall take all actions reasonably requested by Lender, including, without limitation, by executing and delivering to Lender new substitute or subordinate notes to replace the Note, amendments to or replacements of existing Loan Documents, and delivering such Opinions of Counsel with respect to such substitute or subordinate notes, amendments and/or replacements as Lender shall reasonably require, provided that Borrower shall bear no costs or expenses in connection therewith (other than administrative costs and expenses of Borrower). Any such substitute or subordinate notes may have varying principal amounts and economic terms, provided , however , that (A) the maturity date of any such substitute and subordinate notes shall be the same as the scheduled Maturity Date of the Note immediately prior to the issuance of such substitute, subordinate or mezzanine notes, (B) the substitute and subordinate notes shall provide for amortization of the Principal Amount on a weighted average basis over a period not less than the amortization period, if any, provided under the Note immediately prior to the issuance of the substitute and subordinate notes, (C) the initial economics of the Loan, taken as a whole, shall not change in a manner which is adverse to Borrower, and (D) Borrower shall not have (except to a de minimis extent) any lesser rights or greater obligations than currently set forth in the Loan Documents. Upon the occurrence and

during the continuance of an Event of Default, Lender may apply payment of all sums due under such substitute notes in such order and priority as Lender shall elect in its sole and absolute discretion.

(b) After Closing Date and prior to a Securitization, Lender shall have the right, at no cost and expense to Borrower (other than administrative costs and expenses of Borrower), to create one or more mezzanine loans (each, a “ New Mezzanine Loan ”), to establish different interest rates and to reallocate principal balances of each of the Loan and any New Mezzanine Loan(s) amongst each other and to reallocate the interest rate among the Loan and any new Mezzanine Loan(s) and to require the payment of the Loan and any New Mezzanine Loan(s) in such order of priority as may be designated by Lender; provided , that (i) the maturity date of the Loan and any New Mezzanine Loan(s) shall be the same as the scheduled Maturity Date of the Note, (ii) the initial economics of the Loan and any New Mezzanine Loan(s), taken as a whole, shall not change in a manner which is adverse to Borrower, and (iii) Borrower shall not have (except to a de minimis extent) any lesser rights or greater obligations than currently set forth in the Loan Documents. Borrower shall, at no cost and expense to Borrower (other than administrative costs and expenses of Borrower), execute and deliver such documents as shall reasonably be required by Lender as promptly as possible under the circumstances in connection with this Section 5.1.11(b) , all in form and substance reasonably satisfactory to Borrower, Lender and the Rating Agencies, including, without limitation, in connection with the creation of any New Mezzanine Loan, a promissory note and loan documents necessary to evidence such New Mezzanine Loan, and Borrower shall execute such amendments to the Loan Documents as are necessary in connection with the creation of such New Mezzanine Loan all of which shall be on substantially the same terms and conditions as the Loan Documents. In addition, Borrower shall, at no cost and expense to Borrower (other than administrative costs and expenses of Borrower), cause the formation of one or more special purpose, bankruptcy remote entities as required by Lender in order to serve as the borrower under any New Mezzanine Loan(s) (each, a “ New Mezzanine Borrower ”) and the applicable organizational documents of Borrower shall be amended and modified as necessary or required in the formation of any New Mezzanine Borrower. Further, in connection with any New Mezzanine Loan, Borrower shall, at no cost and expense to Borrower (other than administrative costs and expenses of Borrower), deliver to Lender opinions of legal counsel, in substantially the same form as were delivered in connection with the Loan, with respect to due execution, authority and enforceability of the New Mezzanine Loan and the Loan Documents, as amended and an Additional Non-Consolidation Opinion for the Loan and a substantive non-consolidation opinion with respect to any New Mezzanine Loan, each as reasonably acceptable to Lender and/or the Rating Agencies.

(c) In addition, Borrower shall, at Borrower’s sole cost and expense (except if in connection with Section 5.1.11(a) or Section 5.1.11(b) above, in which case, at no cost and expense to Borrower (other than administrative costs and expenses of Borrower):

(i) furnish to Lender, at Lender’s request, to the extent not otherwise already furnished to Lender and reasonably acceptable to Lender, all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, in each case, to the extent in Borrower’s possession or control, and each and every other document, certificate,

agreement and instrument required to be furnished by Borrower pursuant to the terms of the Loan Documents;

(ii) execute and deliver, from time to time, such further instruments (including, without limitation, delivery of any financing statements under the UCC) as may be reasonably requested by Lender to confirm the Lien of the Security Instrument on any Building Equipment, Operating Asset or any Intangible;

(iii) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts necessary to evidence, preserve and/or protect the collateral at any time securing or intended to secure the obligations of Borrower under the Loan Documents, as Lender may reasonably require; and

(iv) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the carrying out of the terms and conditions of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time.

(d) Borrower hereby authorizes the filing of any financing statements or continuation statements, and amendments to financing statements, in any jurisdictions and with any filing offices as the Lender may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to the Lender in connection with the Loan Documents. Such financing statements may describe the collateral in the same manner as described in the Security Agreement or may contain an indication or description of collateral that describes such property in any other manner as the Lender may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Property and other collateral granted to Lender under the Loan Documents, including, without limitation, describing such property as “all assets” or “all personal property,” whether now owned or hereafter acquired and wherever located.

5.1.12 Mortgage Taxes . Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Note or the Liens created or secured by the Loan Documents, other than income, franchise and doing business taxes imposed on Lender.

5.1.13 Compliance with Management Agreement & Operating Lease .

(a) Borrower shall, and shall cause Tenant to use commercially reasonable efforts to cause Manager to, (i) promptly perform and/or observe all of the covenants and agreements required to be performed and observed by Manager and Tenant under the Management Agreement and do all things necessary to preserve and to keep unimpaired Borrower’s and Tenants material rights thereunder, if any; (ii) promptly notify Lender of any “event of default” under the Management Agreement of which it is aware; (iii) promptly deliver to Lender a copy of each financial statement, capital expenditures plan, property improvement plan and any other notice, report and estimate received by it under the Management Agreement; and (iv) enforce in a commercially reasonable manner the performance and observance of all of the material covenants and agreements required to be performed and/or observed by the Manager under the Management Agreement.

(b) Borrower shall, and shall cause Tenant to, (i) cause the Property to be operated pursuant to the Operating Lease; (ii) promptly perform and/or observe all of the material covenants, agreements and obligations required to be performed and observed by Borrower under the Operating Lease and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (iii) promptly notify Lender in writing of any material default under the Operating Lease (or any immaterial default which could give Borrower or Tenant the right to terminate the Operating Lease); (iv) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, notice, report and estimate received by Borrower under the Operating Lease; (v) promptly enforce in a commercially reasonable manner the performance and observance of all of the material covenants and agreements required to be performed and/or observed by Tenant under the Operating Lease; (v) cause Tenant to deposit all Rents from the Property into the Holding Account; and (vi) cause Tenant to operate the Properties and conduct its business and operations in accordance with the terms of this Agreement as if it were a Borrower hereunder and not allow or permit Tenant to take any of the actions that Borrower is prohibited from taking pursuant to the terms of this Agreement.

5.1.14 Business and Operations; Licenses . Borrower shall continue to engage in the businesses presently conducted by it as and to the extent the same are necessary for the ownership, maintenance, management and operation of the Property. Borrower shall qualify to do business and shall remain in good standing under the laws of the State in which the Property is located and as and to the extent required for the ownership, maintenance, management and operation of the Property. Borrower shall keep and maintain (or cause Tenant to use commercially reasonable efforts to cause Manager to keep and maintain) all Licenses necessary for the operation of the Property as a first-class, full service hotel and conference center, and other appurtenant and related uses.

5.1.15 Title to the Property . Borrower shall preserve, warrant and defend (a) Borrower’s right, title and interest in and to the Property and every part thereof, subject only to the Permitted Encumbrances and (b) the validity and priority of the Liens of the Security Instrument, the Assignment of Leases and this Agreement on the Property, subject only to the Permitted Encumbrances, in each case against the claims of all Persons whomsoever. Borrower shall reimburse Lender for any losses, costs, damages or expenses (including reasonable attorneys’ fees and court costs) incurred by Lender if an interest in the Property, other than as permitted hereunder, is claimed by another Person.

5.1.16 Costs of Enforcement . In the event (a) that this Agreement or the Security Instrument is foreclosed upon in whole or in part or that this Agreement or the Security Instrument is put into the hands of an attorney for collection, suit, action or foreclosure, (b) of the foreclosure of any security agreement prior to or subsequent to this Agreement in which proceeding Lender is made a party, or a mortgage prior to or subsequent to the Security Instrument in which proceeding Lender is made a party, or (c) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Borrower or any of its constituent Persons or an assignment by Borrower or any of its constituent Persons for the benefit of its creditors, Borrower, its successors or assigns, shall be chargeable with and agrees to pay all costs of collection and defense, including reasonable attorneys’ fees and costs, incurred by Lender or

Borrower in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, together with all required service or use taxes.

5.1.17 Estoppel Statement .

(a) Borrower shall, from time to time, upon 30 days’ prior written request from Lender, execute, acknowledge and deliver to the Lender, an Officer’s Certificate, stating that this Agreement and the other Loan Documents are unmodified and in full force and effect (or, if there have been modifications, that this Agreement and the other Loan Documents are in full force and effect as modified and setting forth such modifications), stating the amount of accrued and unpaid interest and the outstanding principal amount of the Note and containing such other information with respect to the Borrower, the Property and the Loan as Lender shall reasonably request. The estoppel certificate shall also state either that no Default is known to exist hereunder or, if any Default shall be known to exist hereunder, specify such Default and the steps being taken to cure such Default.

(b) Borrower shall use commercially reasonable efforts to deliver to Lender, within 15 Business Days of Lender’s request, tenant estoppel certificates from Tenant, Manager, any counterparty to the REAs or any other Person having an interest in the Property from time to time, in each case, in form and substance reasonably acceptable to Lender; provided that Borrower shall not be required to deliver such certificates more frequently than three times in any calendar year.

5.1.18 Loan Proceeds . Borrower shall use the proceeds of the Loan received by it on the Closing Date only for the purposes set forth in Section 2.1.4 .

5.1.19 No Joint Assessment . Borrower shall not suffer, permit or initiate the joint assessment of the Property (a) with any other real property constituting a tax lot separate from the Property and (b) which constitutes real property with any portion of the Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such real property portion of the Property.

5.1.20 No Further Encumbrances . Borrower shall do, or cause to be done, all things necessary to keep and protect the Property and all portions thereof unencumbered from any Liens, easements or agreements granting rights in or restricting the use or development of the Property, except for (a) Permitted Encumbrances, (b) Liens permitted pursuant to the Loan Documents, and (c) Liens for Impositions prior to the imposition of any interest, charges or expenses for the non-payment thereof. Nothing in this Section 5.1.20 shall be deemed to limit Borrower’s right to contest Liens for Impositions in accordance with Section 7.3 hereof.

5.1.21 Article 8 “Opt In” Language . Each organizational document of Borrower, General Partner, each SPE Entity, any Mezzanine Borrower and any New Mezzanine Borrower shall, if requested by Lender, be modified to include the language set forth on Exhibit U .

5.1.22 Leases, REAs, etc. Borrower shall promptly after receipt thereof deliver to Lender a copy of any notice received with respect to the REAs, the Operating Lease, Management Agreement, or any Lease claiming any default in the performance or observance of

any of the material terms, covenants or conditions of any of the REAs, Operating Lease, Management Agreement, or Lease.

5.1.23 Independent Directors, Independent Managers, Independent Members . Borrower shall provide Lender with 10 Business Days’ written notice prior to the removal of an Independent Director, Independent Manager or Independent Member of Borrower, General Partner or any other SPE Entity, and no Independent Director, Independent Manager or Independent Member of Borrower, General Partner or any other SPE Entity may be removed for a reason other than: (a) acts of omissions by such Independent Director that constitute willful disregard of (or gross negligence or willful misconduct with respect of) such independent director’s duties under this Agreement or the organizational documents of the applicable entity) or (b) such Independent Director, Independent Manager or Independent Member has engaged in or has been charged with, or has been convicted of, fraud or other acts constituting a crime under any Legal Requirements.

5.1.24 Extension or Renewal of Operating Lease, etc . At least 60 days prior to the scheduled expiration of the Operating Lease (which is, as of the date of this Agreement, scheduled to expire on December 31, 2012), Borrower shall deliver to Lender (a) an amendment to the Operating Lease extending the term of the Operating Lease for a period of at least five years with no other changes in the terms thereof except to the extent required to comply with Legal Requirements applicable to taxable subsidiaries of real estate investment trusts, (b) a replacement lease agreement containing terms and conditions (including rental rates, percentage rental payments, and other substantive terms and conditions) no less favorable to Borrower than what is provided in the Operating Lease in effect on the date of this Agreement except to the extent required to comply with Legal Requirements applicable to taxable subsidiaries of real estate investment trusts, or (c) an agreement with a Qualified Manager to operate the Property for and on behalf of Borrower, which agreement shall be subject to the terms and conditions of Section 5.2.14 below. Any agreement, amendment or other instrument delivered by Borrower pursuant to this Section 5.1.24 shall be in form and substance reasonably acceptable to Lender, and following a Securitization, the Rating Agencies, and shall include (or obligate the counterparty thereto to execute and deliver) such other instruments or agreements as Lender or the Rating Agencies, as applicable, may reasonably require.

5.1.25 Broker Indemnity . Borrower shall pay as and when due any and all brokerage fees, charges, commissions or other compensation or reimbursement due to Broker with respect to the transactions contemplated by the Loan Documents. Borrower and Guarantor, jointly and severally, on the one hand and Lender on the other hand shall each indemnify and hold harmless the other from and against any loss, liability, cost or expense, including any judgments, attorneys’ fees, or costs of appeal, incurred by the other party and arising out of or relating to any breach or default by the indemnifying party of its representations, warranties and/or agreements set forth in this Section 5.1.25 . The provisions of this Section 5.1.25 shall survive the expiration and termination of this Agreement and the payment of the Indebtedness.

5.1.26 Tunnel Agreement . Borrower shall promptly post, at its sole cost and expense, any bond or other security if and when required to do so by the Virginia State Highway and Transportation Commissioner pursuant to the Tunnel Agreement; Borrower acknowledges (for the benefit of Lender and no other Person) that is the successor/assignee to EADS

Associates under the Tunnel Agreement. Borrower shall promptly deliver to Lender any notices its receives form the Virginia State Highway and Transportation Commissioner. (or any other Governmental Authority) relating to the Tunnel Agreement.

5.2 Negative Covenants . From the Closing Date until payment and performance in full of all obligations of Borrower under the Loan Documents or the earlier release of the Lien of this Agreement or the Security Instrument in accordance with the terms of this Agreement and the other Loan Documents, Borrower covenants and agrees with Lender that it will not do, directly or indirectly, any of the following:

5.2.1 Incur Debt; FF&E Leasing . Incur, create or assume any Debt other than Permitted Debt, or lease any FF&E other than as expressly permitted under this Agreement;

5.2.2 Encumbrances . Other than in connection with any Mezzanine Loan or New Mezzanine Loan, incur, create or assume or permit the incurrence, creation or assumption of any Debt secured by an interest in Borrower, Mezzanine Borrower, any New Mezzanine Borrower or any SPE Entity and shall not Transfer or permit the Transfer of any interest in Borrower, Mezzanine Borrower, any New Mezzanine Borrower or any SPE Entity except as permitted pursuant to Article VIII ;

5.2.3 Engage in Different Business . Engage, directly or indirectly, in any business other than that of entering into this Agreement and the other Loan Documents to which Borrower is a party and the use, ownership, management, financing, operation and maintenance of the Property and activities related thereto;

5.2.4 Make Advances . Make advances or make loans to any Person, or hold any investments, except as expressly permitted pursuant to the terms of this Agreement or any other Loan Document;

5.2.5 Partition . Partition the Property;

5.2.6 Commingle . Commingle its assets with the assets of any of its Affiliates;

5.2.7 Guarantee Obligations . Guarantee any obligations of any Person other than as provided in the Owner’s Agreement;

5.2.8 Transfer Assets . Transfer any asset other than in the ordinary course of business or Transfer any interest in the Property except as may be expressly permitted in Article VIII ;

5.2.9 Amend Organizational Documents . Amend or modify any of its organizational documents (or the organizational documents of the General Partner or Tenant) without Lender’s consent, other than in connection with any Transfer permitted pursuant to Article VIII or to reflect any change in capital accounts, contributions, distributions, allocations or other provisions that do not and could not reasonably be expected to have a Material Adverse Effect and provided that Borrower and each SPE Entity each remain a Single Purpose Entity;

5.2.10 Dissolve . Dissolve, wind-up, terminate, liquidate, merge with or consolidate into another Person, except as expressly permitted pursuant to this Agreement;

5.2.11 Bankruptcy . (a) File a bankruptcy or insolvency petition or otherwise institute insolvency proceedings; (b) dissolve, liquidate, consolidate, merge or sell all or substantially all of Borrower’s assets other than in connection with (i) the repayment of the Loan or (ii) any Transfer expressly permitted by Article VIII ; (c) engage in any other business activity; (d) file or solicit the filing of an involuntary bankruptcy petition against Borrower, General Partner, Tenant or Guarantor, without obtaining the prior consent of all of the directors of such SPE Entity, including, without limitation, the Independent Directors, Independent Managers or Independent Members, as applicable; (e) seek, or permit Guarantor or any Affiliate of Borrower or Guarantor to seek, substantive consolidation in connection with a proceeding under the Bankruptcy Code or under federal, state or foreign insolvency law involving Guarantor; (f) seek, or permit Guarantor or any Affiliate of Borrower or Guarantor to seek, to contest, oppose or object to any motion made by Lender to obtain relief from the automatic stay or seek to reinstate the automatic stay in the event of a future proceeding under the Bankruptcy Code or under any other federal, state or foreign insolvency law of Guarantor; or (f) provide, originate, acquire an interest in or solicit or accept, or permit Guarantor or any Affiliate of Borrower or Guarantor to provide, originate, acquire an interest in or solicit or accept, any debtor-in-possession financing on behalf of Guarantor in the event that Guarantor is the subject of a proceeding under the Bankruptcy Code or under federal, state or foreign insolvency law;

5.2.12 ERISA . Engage in any activity that would subject it to regulation under ERISA or qualify it as an “employee benefit plan” (within the meaning of Section 3(3) of ERISA) to which ERISA applies and Borrower’s assets do not and will not constitute plan assets within the meaning of 29 C.F.R. Section 2510.3-101;

5.2.13 Distributions . From and after the occurrence and during the continuance of an Event of Default, make any distributions to or for the benefit of any of its partners or members or its or their Affiliates;

5.2.14 Manager and Management Agreement .

(a) Without the prior written consent of Lender, which consent shall not be unreasonably withheld or delayed (provided, if a Securitization shall have occurred, Borrower obtains a Rating Agency Confirmation with respect to such action): (i) materially modify, change, supplement, alter or amend (or permit Tenant to materially modify, change, supplement, alter or amend) the Management Agreement or waive or release any of its right and remedies under the Management Agreement that would have a Material Adverse Effect or (ii) terminate the Management Agreement and replace (or permit Tenant to replace) the Manager with a Person other than a Qualified Manager; provided that if such replacement is Remington Lodging & Hospitality, LLC or any of its Affiliates consent of Lender shall not be required (provided (A) if a Securitization shall have occurred, Borrower obtains a Rating Agency Confirmation with respect to such action, and (B) in all cases, such replacement Manager executes and delivers to Lender such agreements, documents or instruments as Lender shall than reasonably require);

(b) Borrower shall notify Lender in writing (and shall deliver a copy of the proposed management agreement) of any entity proposed to be designated (whether by Tenant, Borrower or otherwise) as a Qualified Manager of the Property not less than 30 days before such Qualified Manager, begins to manage the Property, and, if a Securitization shall have occurred, shall obtain prior to any appointment of a Qualified Manager a Rating Agency Confirmation, with respect to any proposed Qualified Manager;

(c) If the Manager shall become insolvent or is otherwise in default (beyond any applicable notice and cure period) under the Management Agreement, Borrower shall (or shall cause Tenant to), at the request of Lender, terminate the Management Agreement and replace the Manager with a Qualified Manager in accordance with this Section 5.2.14 and shall deliver an acceptable Non-Consolidation Opinion covering such replacement Manager if such Person (A) is not covered by the Non-Consolidation Opinion or an Additional Non-Consolidation Opinion, and (B) is an Affiliate of Borrower; and

(d) Upon the retention of a Qualified Manager, Lender, and if a Securitization shall have occurred, the Rating Agencies, shall have the right to approve any new management agreement with such Qualified Manager (which approval by Lender shall not be unreasonably withheld or delayed). Borrower shall cause Tenant to comply with this covenant.

(e) Except with respect to any replacement Qualified Manager which may be an Affiliate of Borrower, General Partner, Tenant or Guarantor, Lender agrees to execute and deliver a subordination, non-disturbance and attornment agreement with substantially the same terms as the Manager’s Subordination Agreement (as modified for any then prevailing requirements of the Rating Agencies).

5.2.15 Modify or Termination of REAs or Operating Lease . Except as provided in Section 5.1.24 (with respect to the Operating Lease) and Section 8.3 (with respect to REAs), Borrower shall not (and shall not permit Tenant or Manager to), without the prior consent of Lender, terminate, amend, modify, restate or otherwise enter into any supplement with respect to, the Operating Lease or any REAs;

5.2.16 Modify Account Agreement . Without the prior consent of Lender (and if a Securitization shall have occurred, a Rating Agency Confirmation obtained by Borrower), Borrower shall not execute any modification to the Account Agreement;

5.2.17 Zoning Reclassification . Without the prior written consent of Lender, (a) initiate or consent to any zoning reclassification of any portion of the Property, (b) seek any variance under any existing zoning ordinance that could result in the use of the Property becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, or (c) allow any portion of the Property to be used in any manner that could result in the use of the Property becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation;

5.2.18 Debt Cancellation . Cancel or otherwise forgive or release any material claim or debt owed to it by any Person, except for adequate consideration or in the ordinary course of its business;

5.2.19 Intentionally Omitted ;

5.2.20 Single-Purpose Entity . Take or suffer any action or inaction the result of which would be to cause Borrower or any SPE Entity to cease to be a Single-Purpose Entity;

5.2.21 Affiliate Transactions . Enter into or be a party to any transaction with its partners, members, shareholders or Affiliates except in the ordinary course of its business and on terms which are commercially reasonable and are no less favorable to it than would be obtained in a comparable arm’s length transaction with an unrelated third party; or

5.2.22 Intellectual Property . Without the prior written consent of Lender, modify, terminate or otherwise relinquish any right, title interest in or to use any Intellectual Property which could constitute a Material Adverse Effect.

VI. INSURANCE; CASUALTY; CONDEMNATION; RESTORATION

6.1 Insurance Coverage Requirements . Borrower shall, at its sole cost and expense, keep in full force and effect insurance coverage of the types and minimum limits as follows during the term of this Agreement:

6.1.1 Property Insurance . Insurance against loss customarily included under so called “All Risk” policies including flood, earthquake, vandalism, and malicious mischief, boiler and machinery, and such other insurable hazards as, under good insurance practices, from time to time are insured against for other property and buildings similar to the Improvements and Building Equipment in nature, use, location, height, and type of construction. Such insurance policy shall also insure the additional expense of demolition and if any of the Improvements or the use of the Property shall at any time constitute legal non-conforming structures or uses, provide coverage for contingent liability from Operation of Building Laws, Demolition Costs and Increased Cost of Construction Endorsements and containing an “Ordinance or Law Coverage” or “Enforcement” endorsement. The amount of such “All Risk” insurance shall be not less than 100% of the replacement cost value of the Improvements and the Building Equipment. Each such insurance policy shall contain an agreed amount or coinsurance waiver and replacement cost value endorsement, and shall cover, without limitation, all tenant improvements and betterments which Borrower is required to insure in accordance with any Lease. Lender shall be named “Loss Payee” on a “Standard Mortgagee Endorsement” and be provided not less than 30 days advance notice of change in coverage, cancellation or non-renewal.

6.1.2 Liability Insurance . “General Public Liability” insurance, including, without limitation, “Commercial General Liability” insurance; “Owned” (if any), “Hired” and “Non Owned Auto Liability”; and “Umbrella Liability” coverage for “Personal Injury”, “Bodily Injury”, “Death, Accident and Property Damage”, providing in combination no less than $30,000,000 ($60,000,000 during construction) per occurrence and in the annual aggregate, per location. In the event that aggregate limits do not apply on a “per location” basis, then the umbrella limit shall be increased from $30,000,000 to $40,000,000. The policies described in this paragraph shall cover, without limitation: elevators, escalators, independent contractors, “Contractual Liability” (covering, to the maximum extent permitted by law, Borrower’s

obligation to indemnify Lender as required under this Agreement and “Products and Completed Operations Liability” coverage). All public liability insurance shall name Lender as “Additional Insured” either on a specific endorsement or under a blanket endorsement satisfactory to Lender.

6.1.3 Workers’ Compensation Insurance . Workers compensation and disability insurance as required by law.

6.1.4 Commercial Rents Insurance . “Commercial rents” insurance in an amount equal to 18 months actual rental loss plus a 12 month extended period of indemnity endorsement and with a limit of liability sufficient to avoid any co-insurance penalty and to provide Proceeds which will cover the actual loss of profits and rents sustained during the period of at least 18 months following the date of casualty. Such policies of insurance shall be subject only to exclusions that are reasonably acceptable to Lender and, if the Loan is the subject of a Securitization, the Rating Agencies; provided , however , that such exclusions are reasonably consistent with those required for loans similar to the Loan provided herein. Such insurance shall be deemed to include “loss of rental value” insurance where applicable. The term “rental value” means the sum of (a) the total then ascertainable Rents payable under the Leases and (b) the total ascertainable amount of all other amounts to be received by Borrower from third parties which are the legal obligation of Tenants, reduced to the extent such amounts would not be received because of operating expenses not incurred during a period of non-occupancy of that portion of such Property then not being occupied.

6.1.5 Builder’s All-Risk Insurance . During any period of repair or restoration, builder’s “All-Risk” insurance in an amount equal to not less than the full insurable value of the Property against such risks (including so called “All Risk” perils coverage and collapse of the Improvements to agreed limits as Lender may request, in form and substance acceptable to Lender).

6.1.6 Boiler and Machinery Insurance . Comprehensive boiler and machinery insurance (without exclusion for explosion) covering all mechanical and electrical equipment against physical damage, rent loss and improvements loss and covering, without limitation, all tenant improvements and betterments that Borrower is required to insure pursuant to any Lease on a replacement cost basis, in amounts of insurance that shall be reasonably required by Lender.

6.1.7 Flood Insurance . If any portion of the Improvements is located within an area designated as “flood prone” or a “special flood hazard area” (as defined under the regulations adopted under the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973), flood insurance shall be provided, in an amount not less than the maximum limit of coverage available under the Federal Flood Insurance plan with respect to the Property. Excess flood insurance coverage shall be required to compensate for any damage or loss on a replacement basis and shall include business interruption coverage as reasonably required by Lender. Borrower shall deliver to Lender a FEMA Elevation Certification prepared by a surveyor if any portion of the Improvements is located in flood zones A, AR, or V.

6.1.8 Windstorm Insurance . If the Property is in an area prone to hurricanes and windstorms, as reasonably determined by Lender, Borrower shall provide windstorm insurance

(including coverage for wind driven water), including business interruption coverage as reasonably required by Lender.

6.1.9 Terrorism Insurance . So long as the Terrorism Risk Insurance Act of 2002 (“ TRIA ”) or a similar statute is in effect, Borrower shall be required to carry Terrorism Insurance in an amount equal to the lesser of the Loan Amount and the full replacement cost of the Property plus 12 months of business interruption coverage. If TRIA or a similar statute is not in effect, then provided that Terrorism Insurance is commercially available, Borrower shall be required to carry Terrorism Insurance throughout the Loan term in the same amount detailed in the preceding sentence; provided that Borrower shall not be required to spend more than two times the estimated current cost of stand alone terrorism insurance. Terrorism insurance coverage may be provided under a blanket policy that is acceptable to Lender.

6.1.10 Other Insurance . At Lender’s reasonable request, such other insurance with respect to the Property against loss or damage of the kinds from time to time customarily insured against and in such amounts as are generally required by institutional lenders on loans of similar amounts and secured by properties comparable to, and in the general vicinity of, the Property.

6.1.11 Ratings of Insurers . Borrower shall maintain the insurance coverage described in Section 6.1.1 through Section 6.1.8 above, in all cases, with one or more domestic primary insurers reasonably acceptable to Lender, having both (a) claims-paying-ability and financial strength ratings by S&P of not less than “A-” and its equivalent by the other Rating Agencies, and (b) an Alfred M. Best Company, Inc. rating of “A-” or better and a financial size category of not less than “X”. All insurers providing insurance required by this Agreement shall be authorized to issue insurance in the State.

6.1.12 Form of Insurance Policies; Endorsements . All insurance policies shall be in such form and with such endorsements as are satisfactory to Lender (and Lender shall have the right to approve amounts, form, risk coverage, deductibles, loss payees and insureds). A certificate of insurance with respect to all of the above-mentioned insurance policies has been delivered to Lender and originals or certified copies of all such policies shall be delivered to Lender within five days following Lender’s written request for such certified policies. All policies shall name Lender as an additional insured, shall provide that all Proceeds (except with respect to Proceeds of general liability and workers’ compensation insurance) be payable to Lender as and to the extent set forth in Section 6.2 , and shall contain: (a) a standard “non-contributory mortgagee” endorsement or its equivalent relating, inter alia , to recovery by Lender notwithstanding the negligent or willful acts or omissions of Borrower; (b) a waiver of subrogation endorsement in favor of Lender; (c) an endorsement providing that no policy shall be impaired or invalidated by virtue of any act, failure to act, negligence of, or violation of declarations, warranties or conditions contained in such policy by Borrower, Lender or any other named insured, additional insured or loss payee, except for the gross negligence or willful misconduct of Lender knowingly in violation of the conditions of such policy; (d) an endorsement providing for a deductible per loss of an amount not more than that which is customarily maintained by prudent owners of properties with a standard of operation and maintenance comparable to and in the general vicinity of the Property, but in no event in excess of an amount reasonably acceptable to Lender; and (e) a provision that such policies shall not be

canceled, terminated or expire without at least 30 days’ prior written notice to Lender, in each instance. No insurance policy required hereunder shall include any so called “terrorist exclusion” or similar exclusion or exception to insurance coverage relating to the acts of terrorist groups or individuals. Each insurance policy shall contain a provision whereby the insurer: (i) agrees that such policy shall not be canceled or terminated, the coverage, deductible, and limits of such policy shall not be modified, other provisions of such policy shall not be modified if such policy, after giving effect to such modification, would not satisfy the requirements of this Agreement, and such policy shall not be canceled or fail to be renewed, without in each case, at least 30 days prior written notice to Lender, (ii) waives any right to claim any premiums and commissions against Lender, provided that the policy need not waive the requirement that the premium be paid in order for a claim to be paid to the insured, and (iii) provides that Lender at its option, shall be permitted to make payments to effect the continuation of such policy upon notice of cancellation due to non-payment of premiums. In the event any insurance policy (except for general public and other liability and workers compensation insurance) shall contain breach of warranty provisions, such policy shall provide that with respect to the interest of Lender, such insurance policy shall not be invalidated by and shall insure Lender regardless of (A) any act, failure to act or negligence of or violation of warranties, declarations or conditions contained in such policy by any named insured, (B) the occupancy or use of the Property for purposes more hazardous than permitted by the terms thereof, or (C) any foreclosure or other action or proceeding taken by Lender pursuant to any provision of this Agreement.

6.1.13 Certificates . Borrower shall deliver to Lender annually, concurrently with the renewal of the insurance policies required hereunder, a certificate from Borrower’s insurance agent stating that the insurance policies required to be delivered to Lender pursuant to this Section 6.1 are maintained with insurers who comply with the terms of Section 6.1.9 , setting forth a schedule describing all premiums required to be paid by Borrower to maintain the policies of insurance required under this Section 6.1 , and stating that Borrower has paid such premiums. Certificates of insurance with respect to all replacement policies shall be delivered to Lender not less than 15 Business Days prior to the expiration date of any of the insurance policies required to be maintained hereunder which certificates shall bear notations evidencing payment of applicable premiums. Borrower shall deliver to Lender originals (or certified copies) of such replacement insurance policies within five days after Lender’s written request for such originals. If Borrower fails to maintain and deliver to Lender the certificates of insurance and certified copies or originals required by this Agreement, upon five Business Days’ prior notice to Borrower, Lender may procure such insurance, and all costs thereof (and interest thereon at the Default Rate) shall be added to the Indebtedness. Lender shall not, by the fact of approving, disapproving, accepting, preventing, obtaining or failing to obtain any insurance, incur any liability for or with respect to the amount of insurance carried, the form or legal sufficiency of insurance contracts, solvency of insurance companies, or payment or defense of lawsuits, and Borrower hereby expressly assumes full responsibility therefor and all liability, if any, with respect to such matters. Borrower agrees that any replacement insurance policy required hereunder shall not include any so called “terrorist exclusion” or similar exclusion or exception to insurance coverage relating to the acts of terrorist groups or individuals.

6.1.14 Separate Insurance . Borrower shall not take out separate insurance contributing in the event of loss with that required to be maintained pursuant to this Section 6.1 unless such insurance complies with this Section 6.1 .

6.1.15 Blanket Policies . The insurance coverage required under this Section 6.1 may be effected under a blanket policy or policies covering the Property and other properties and assets not constituting a part of the Property; provided that any such blanket policy shall otherwise provide the same protection as would a separate policy insuring only the Property. Borrower shall deliver to Lender documentation reasonably acceptable to Lender setting forth (a) the number of properties covered by such policy, (b) the location by city (if available, otherwise, county) and state of the properties, (c) the average square footage of the properties (or the aggregate square footage), (d) a brief description of the typical construction type included in the blanket policy and (e) such other information as Lender may reasonably request.

6.2 Condemnation and Insurance Proceeds .

6.2.1 Notification . Borrower shall promptly notify Lender in writing upon obtaining knowledge of (a) the institution of any proceedings relating to any Taking (whether material or immaterial) of, or (b) the occurrence of any casualty, damage or injury to, the Property or any portion thereof, the restoration of which is estimated by Borrower in good faith to cost more than the Casualty Amount. In addition, each such notice shall set forth such good faith estimate of the cost of repairing or restoring such casualty, damage, injury or Taking in reasonable detail if the same is then available and, if not, as soon thereafter as it can reasonably be provided.

6.2.2 Proceeds . In the event of any Taking of or any casualty or other damage or injury to the Property, Borrower’s right, title and interest in and to all compensation, awards, proceeds, damages, claims, insurance recoveries, causes and rights of action (whether accrued prior to or after the date hereof) and payments which Borrower may receive or to which Borrower may become entitled with respect to the Property or any part thereof other than payments received in connection with any liability or loss of rental value or business interruption insurance (collectively, “ Proceeds ”), in connection with any such Taking of, or casualty or other damage or injury to, the Property or any part thereof are hereby assigned by Borrower to Lender and, except as otherwise herein provided, shall be paid to the Lender. Borrower shall, in good faith and in a commercially reasonable manner, file and prosecute the adjustment, compromise or settlement of any claim for Proceeds and, subject to Borrower’s right to receive the direct payment of any Proceeds as herein provided, will cause the same to be paid directly to Lender to be held and applied in accordance with the provisions of this Agreement. Except upon the occurrence and during the continuance of a Monetary Default or an Event of Default, Borrower may settle any insurance claim with respect to Proceeds which does not exceed the Casualty Amount. Whether or not a Monetary Default or an Event of Default shall have occurred and be continuing, Lender shall have the right to approve, such approval not to be unreasonably withheld, any settlement which might result in any Proceeds in excess of the Casualty Amount and Borrower shall deliver or cause to be delivered to Lender all instruments reasonably requested by Lender to permit such approval. Borrower shall pay all reasonable out-of-pocket costs, fees and expenses reasonably incurred by Lender (including all reasonable attorneys’ fees and expenses, the reasonable fees of insurance experts and adjusters and reasonable costs incurred in any litigation or arbitration), and interest thereon at the Default Rate to the extent not paid within 10 Business Days after delivery of a request for reimbursement by Lender, in connection with the settlement of any claim for Proceeds and seeking and obtaining of any payment on account thereof in accordance with the foregoing provisions. If any Proceeds are

received by Borrower and may be retained by Borrower pursuant to this Section 6.2 , such Proceeds shall, until the completion of the related Work, be held in trust for Lender and shall be segregated from other funds of Borrower to be used to pay for the cost of the Work in accordance with the terms hereof, and in the event such Proceeds exceed the Casualty Amount, such Proceeds shall be forthwith paid directly to and held by Lender in the Proceeds Reserve Account in trust for Borrower, in each case to be applied or disbursed in accordance with this Section 6.2 . If an Event of Default shall have occurred and be continuing, or if Borrower fails to file and/or prosecute any insurance claim for a period of 15 Business Days following Borrower’s receipt of written notice from Lender, Borrower hereby irrevocably empowers Lender, in the name of Borrower as its true and lawful attorney-in-fact, to file and prosecute such claim (including settlement thereof) with counsel satisfactory to Lender and to collect and to make receipt for any such payment, all at Borrower’s expense (including payment of interest at the Default Rate for any amounts advanced by Lender pursuant to this Section 6.2 ). Notwithstanding anything to the contrary set forth in this Agreement, however, and excluding situations requiring prepayment of the Note, to the extent any Proceeds (either singly or when aggregated with all other then unapplied Proceeds with respect to the Property) do not exceed the Casualty Amount, such Proceeds are to be paid directly to Borrower to be applied to restoration of the Property in accordance with the terms hereof (except that Proceeds paid in respect of the insurance described in Section 6.1.4 shall be deposited directly to the Holding Account as revenue of the Property).

6.2.3 Lender to Take Proceeds . If (a) the Proceeds shall equal or exceed the Principal Amount, (b) a Monetary Default or an Event of Default shall have occurred and be continuing, (c) a Total Loss with respect to the Property shall have occurred, (d) the Work is not capable of being completed before the earlier to occur of the date which is six months prior to the earlier of the Maturity Date and the date on which the business interruption insurance carried by Borrower with respect to the Property shall expire (the “ Cut-Off Date ”), unless on or prior to the Cut-Off Date the Borrower (i) shall deliver to the Lender and there shall remain in effect a binding written offer, subject only to customary conditions, of an Approved Bank or such other financial institution or investment bank reasonably satisfactory to Lender duly authorized to originate loans secured by real property located in the State for a loan from such Approved Bank or such other financial institution or investment bank to the Borrower in a principal amount of not less than the then Principal Amount and which shall, in the Lender’s reasonable judgment, enable the Borrower to refinance the Loan prior to the Maturity Date and (ii) if a Securitization shall have occurred, shall obtain a Rating Agency Confirmation, (e) the Property is not capable of being restored substantially to its condition prior to such Taking or casualty and such incapacity shall have a Material Adverse Effect, (f) the Tenant under the Operating Lease shall have delivered written notice to Borrower terminating the Operating Lease as a result of such Taking or casualty to the Property or (g) Lender determines that upon the completion of the restoration, the gross cash flow and the net cash flow of the Property will not be restored to a level sufficient to cover all carrying costs and operating expenses of the Property, including, without limitation, achieving an Assumed Debt Service Coverage of at least 1.2 to 1.0, which coverage ratio shall be determined by Lender in its sole and absolute discretion; then in any such case, all Proceeds shall be paid over to Lender (if not paid directly to Lender) and any Proceeds remaining after reimbursement of Lender’s or its agent’s reasonable out-of-pocket costs and expenses actually incurred in connection with recovery of any such Proceeds (including, without limitation, reasonable out-of-pocket administrative costs and inspection fees) shall be applied by

Lender to prepay the Note in accordance with the provisions of the Loan Documents, and the balance, if any shall be paid (A) to any Mezzanine Lender to be applied pursuant to the terms of the Mezzanine Loan Agreement, or (B) if none, to the Borrower.

6.2.4 Borrower to Restore .

(a) Promptly after the occurrence of any damage or destruction to all or any portion of the Property or a Taking of a portion of the Property, Borrower shall commence and diligently prosecute, or cause to be commenced and diligently prosecuted, to completion, subject to Excusable Delays, the repair, restoration and rebuilding of the Property (in the case of a partial Taking, to the extent it is capable of being restored) so damaged, destroyed or remaining after such Taking in full compliance with all material Legal Requirements and free and clear of any and all Liens except Permitted Encumbrances (such repair, restoration and rebuilding are sometimes hereinafter collectively referred to as the “ Work ”). The plans and specifications shall require that the Work be done in a first-class workmanlike manner at least equivalent to the quality and character prior to the damage or destruction ( provided , however , that in the case of a partial Taking, the Property restoration shall be done to the extent reasonably practicable after taking into account the consequences of such partial Taking), so that upon completion thereof, the Property shall be at least equal in value and general utility to the Property prior to the damage or destruction; it being understood, however, that Borrower shall not be obligated to restore the Property to the precise condition of the Property prior to any partial Taking of, or casualty or other damage or injury to, the Property, if the Work actually performed, if any, or failed to be performed, shall have no Material Adverse Effect on the value of the Property from the value that the Property would have had if the same had been restored to its condition immediately prior to such Taking or casualty. Subject to Borrower’s rights pursuant to Section 2.3.3 to cause the Property to be released from the Lien of the Security Instrument, Borrower shall be obligated to restore the Property suffering a casualty or which has been subject to a partial Taking in accordance with the provisions of this Section 6.2 at Borrower’s sole cost and expense whether or not the Proceeds shall be sufficient, provided that, if applicable, the Proceeds shall be made available to Borrower by Lender in accordance with this Agreement.

(b) If Proceeds are not required to be applied toward payment of the Indebtedness pursuant to the terms hereof, then Lender shall make the Proceeds which it is holding pursuant to the terms hereof (after payment of any reasonable out-of-pocket expenses actually incurred by Lender in connection with the collection thereof plus interest thereon at the Default Rate (from the date advanced through the date of reimbursement) to the extent the same are not paid within 10 Business Days after request for reimbursement by Lender) available to Borrower for payment of or reimbursement of Borrower’s or the applicable Tenant’s expenses incurred with respect to the Work, upon the terms and subject to the conditions set forth in paragraphs (i), (ii) and (iii) below and in Section 6.2.5 :

(i) at the time of loss or damage or at any time thereafter while Borrower is holding any portion of the Proceeds, there shall be no continuing Monetary Default or Event of Default;

(ii) if, at any time, the estimated cost of the Work (as estimated by the Independent Architect referred to in clause (iii) below) shall exceed the Proceeds (a

“ Deficiency ”) and for so long as a Deficiency shall exist, Lender shall not be required to make any Proceeds disbursement to Borrower unless Borrower (within a reasonable period of time after receipt of such estimate), at its election, either deposits with or delivers to Lender (A) Cash and Cash Equivalents or a Letter or Letters of Credit in an amount equal to the estimated cost of the Work less the Proceeds available, or (B) such other evidence of Borrower’s ability to meet such excess costs and which is satisfactory to Lender and, following a Securitization, the Rating Agencies;

(iii) Each of Lender and the Independent Architect shall have reasonably approved the plans and specifications for the Work and any change orders in connection with such plans and specifications; and

(iv) Lender shall, within a reasonable period of time prior to request for initial disbursement, be furnished with an estimate of the cost of the Work accompanied by an Independent Architect’s certification as to such costs and appropriate plans and specifications for the Work. Borrower shall restore all Improvements such that when they are fully restored and/or repaired, such Improvements and their contemplated use fully comply with all applicable Legal Requirements including zoning, environmental and building laws, codes, ordinances and regulations.

6.2.5 Disbursement of Proceeds .

(a) Disbursements of the Proceeds in Cash or Cash Equivalents to Borrower hereunder shall be made from time to time (but not more frequently than once in any month) by Lender but only for so long as no Monetary Default or Event of Default shall have occurred and be continuing, as the Work progresses upon receipt by Lender of (i) an Officer’s Certificate dated not more than 10 Business Days prior to the application for such payment, requesting such payment or reimbursement and describing the Work performed that is the subject of such request, the parties that performed such Work and the actual cost thereof, and also certifying that such Work and materials are or, upon disbursement of the payment requested to the parties entitled thereto, will be free and clear of Liens other than Permitted Encumbrances, (ii) evidence reasonably satisfactory to Lender that (A) all materials installed and work and labor performed in connection with such Work have been paid for in full (or will be fully paid with the proceeds so disbursed) and (B) there exists no notices of pendency, stop orders, mechanic’s liens or notices of intention to file same (unless the same is required by State law as a condition to the payment of a contractor) or any liens or encumbrances of any nature whatsoever on the Property arising out of the Work which have not been either fully bonded to the satisfaction of Lender or discharged of record or in the alternative, fully insured to the satisfaction of Lender by the Title Company that issued the Title Policy and (iii) an Independent Architect’s certificate certifying performance of the Work together with an estimate of the cost to complete the Work. No payment made prior to the final completion of the Work, as certified by the Independent Architect, except for payment made to contractors whose Work shall have been fully completed and from which final lien waivers have been received, shall exceed 90% of the value of the Work performed and materials furnished and incorporated into the Improvements from time to time, and at all times the undisbursed balance of said Proceeds together with all amounts deposited, bonded, guaranteed or otherwise provided for pursuant to Section 6.2.4(b) above, shall be at least sufficient to pay for the estimated cost of completion of the Work; final payment of all Proceeds

remaining with Lender shall be made upon receipt by Lender of a certification by an Independent Architect, as to the completion of the Work substantially in accordance with the submitted plans and specifications, final lien releases, and the filing of a notice of completion and the expiration of the period provided under the law of the State for the filing of mechanics’ and materialmens’ liens which are entitled to priority as to other creditors, encumbrances and purchasers, as certified pursuant to an Officer’s Certificate, and delivery of a certificate of occupancy with respect to the Work, or, if not applicable, an Officer’s Certificate to the effect that a certificate of occupancy is not required.

(b) If, after the Work is completed in accordance with the provisions hereof and Lender receives evidence that all costs of completion have been paid, there are excess Proceeds, Lender shall (i) if an Event of Default shall have occurred and be continuing, apply such excess Proceeds with respect to the Taking of or casualty to the Property to the payment or prepayment of all or any portion of the Indebtedness secured hereby without penalty or premium and any balance thereof, shall be paid over to paid (A) to the holders of any Mezzanine Loan and holder of any New Mezzanine Loan (in such order of priority as shall be set forth in any separate agreement between such holders and Lender, and absent such agreement, in the order determined by Lender), and (B) if none, to the Borrower, and (ii) so long as a Lockbox Event has not occurred and is continuing, pay the excess Proceeds with respect to the Taking of or casualty to the Property (A) to the holders of any Mezzanine Loan and holder of any New Mezzanine Loan (in such order of priority as shall be set forth in any separate agreement between such holders and Lender, and absent such agreement, in the order determined by Lender), and (B) if none, to the Borrower.

VII. IMPOSITIONS, OTHER CHARGES, LIENS AND OTHER ITEMS

7.1 Borrower to Pay Impositions and Other Charges . Borrower shall pay all Impositions now or hereafter levied or assessed or imposed against the Property or any part thereof prior to the imposition of any interest, charges or expenses for the non-payment thereof and shall pay all Other Charges on or before the date they become delinquent or late charges may be imposed thereon. To the extent not expressly identified in the Annual Budget, Borrower shall deliver to Lender annually, no later than 15 Business Days after the first day of each Fiscal Year, and shall update as new information is received, a schedule describing all Impositions, payable or estimated to be payable during such Fiscal Year attributable to or affecting the Property or Borrower. Subject to Borrower’s right of contest set forth in Section 7.3 , as set forth in the next two sentences and provided that there are sufficient funds available in the Tax Reserve Account, Lender, on behalf of Borrower, shall pay all Real Estate Taxes and Other Charges which are attributable to or affect the Property or Borrower, prior to the date such Real Estate Taxes or Other Charges shall become delinquent or late charges may be imposed thereon, directly to the applicable taxing authority with respect thereto. Lender shall, or Lender shall direct the Cash Management Bank to, pay to the taxing authority such amounts to the extent funds in the Tax Reserve Account are sufficient to pay such Real Estate Taxes and Other Charges. Nothing contained in this Agreement or the Security Instrument shall be construed to require Borrower to pay any tax, assessment, levy or charge imposed on Lender in the nature of a franchise, capital levy, estate, inheritance, succession, income or net revenue tax.

7.2 No Liens . Subject to its right of contest set forth in Section 7.3 , Borrower shall at all times keep, or cause to be kept, the Property free from all Liens (other than Permitted Encumbrances) and shall pay when due and payable (or bond over) all claims and demands of mechanics, materialmen, laborers and others which, if unpaid, might result in or permit the creation of a Lien on the Property or any portion thereof and shall in any event cause the prompt, full and unconditional discharge of all Liens imposed on or against the Property or any portion thereof within 45 days after receiving written notice of the filing (whether from Lender, the lienor or any other Person) thereof. Borrower shall do or cause to be done, at the sole cost of Borrower, everything reasonably necessary to fully preserve the first priority of the Lien of the Security Instrument against the Property, subject to the Permitted Encumbrances. Upon the occurrence and during the continuance of an Event of Default with respect to its Obligations as set forth in this Article VII , Lender may (but shall not be obligated to) make such payment or discharge such Lien, and Borrower shall reimburse Lender on demand for all such advances pursuant to Section 19.12 (together with interest thereon at the Default Rate).

7.3 Contest . Nothing contained herein shall be deemed to require Borrower to pay, or cause to be paid, any Imposition, Permitted Debt or to satisfy any Lien, or to comply with any Legal Requirement or Insurance Requirement, so long as Borrower is in good faith, and by proper legal proceedings, where appropriate, diligently contesting the validity, amount or application thereof, provided that in each case, at the time of the commencement of any such action or proceeding, and during the pendency of such action or proceeding (a) no Event of Default shall exist and be continuing hereunder, (b) Borrower shall keep Lender informed of the status of such contest at reasonable intervals, (c) if Borrower is not providing security as provided in clause (d) below, adequate reserves with respect thereto are maintained on Borrower’s books in accordance with GAAP or in the Tax Reserve Account or Insurance Reserve Account, as applicable, (e) either such contest operates to suspend collection or enforcement as the case may be, of the contested Imposition, Lien or Legal Requirement and such contest is maintained and prosecuted continuously and with diligence or the Imposition or Lien is bonded, (f) in the case of any Insurance Requirement, the failure of Borrower to comply therewith shall not impair the validity of any insurance required to be maintained by Borrower under Article VI or the right to full payment of any claims thereunder, and (g) in the case of Impositions, Permitted Debt and Liens which are not bonded in excess of $2,000,000 individually, or in the aggregate, during such contest, Borrower, shall deposit with or deliver to Lender either Cash and Cash Equivalents or a Letter or Letters of Credit in an amount equal to 125% of (i) the amount of Borrower’s obligations being contested plus (ii) any additional interest, charge, or penalty arising from such contest. Notwithstanding the foregoing, the creation of any such reserves or the furnishing of any bond or other security, Borrower promptly shall comply with any contested Legal Requirement or Insurance Requirement or shall pay any contested Imposition or Lien, and compliance therewith or payment thereof shall not be deferred, if, at any time the Property or any portion thereof shall be, in Lender’s reasonable judgment, in imminent danger of being forfeited or lost or Lender is likely to be subject to civil or criminal damages as a result thereof. If such action or proceeding is terminated or discontinued adversely to Borrower, Borrower shall deliver to Lender reasonable evidence of Borrower’s compliance with such contested Imposition, Lien, Legal Requirements or Insurance Requirements, as the case may be.

VIII. TRANSFERS, INDEBTEDNESS AND SUBORDINATE LIENS

8.1 Restrictions on Transfers .

8.1.1 General . Borrower acknowledges that Lender has examined and relied on the experience of Borrower, General Partner, their respective members, principals and beneficial owners in owning and operating properties and other assets such as the Property in agreeing to make the Loan, and will continue to rely on Borrower’s ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Indebtedness. Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property so as to ensure that, should Borrower default in the repayment of the Indebtedness, Lender can recover the Indebtedness by a sale of the Property.

8.1.2 Restriction . Unless such action is expressly permitted by the provisions of this Article VIII , Borrower shall not, and shall not permit any other Person holding any direct or indirect ownership interest in Borrower or the Property to, except with the prior written consent of Lender, (a) Transfer all or any part of the Property (other than as provided in Section 5.1.24 above or Section 8.8 below), (b) incur any Debt other than Permitted Debt or Permitted Encumbrances, or (c) Transfer any equity interests in Borrower, General Partner or both other than in connection with the exercise of remedies by the holder of any Mezzanine Loan or New Mezzanine Loan.

8.2 Sale of Building Equipment . Borrower may Transfer or dispose of Building Equipment which is being replaced or which is no longer necessary in connection with the operation of the Property free from the Lien of the Security Instrument provided that such Transfer or disposal will not have a Material Adverse Effect on the value of the Property taken as a whole, will not materially impair the utility of the Property, and will not result in a reduction or abatement of, or right of offset against, the Rents payable under any Lease, in either case as a result thereof, and provided further that any new Building Equipment acquired by Borrower (and not so disposed of) shall be subject to the Lien of the Security Instrument. Lender shall, from time to time, upon receipt of an Officer’s Certificate requesting the same and confirming satisfaction of the conditions set forth above, execute a written instrument in form reasonably satisfactory to Lender to confirm that such Building Equipment which is to be, or has been, sold or disposed of is free from the Lien of the Security Instrument.

8.3 Immaterial Transfers and Easements, etc Borrower may, without the consent of Lender, (a) make immaterial Transfers of portions of the Property to Governmental Authorities for dedication or public use (subject to the provisions of Section 6.2 ) or, portions of the Property to third parties for the purpose of erecting and operating additional structures whose use is integrated with the use of the Property, and (b) grant easements, restrictions, covenants, reservations and rights of way (or modifications thereto) in the ordinary course of business for access, water and sewer lines, telephone and telegraph lines, electric lines or other utilities or for other similar purposes, provided that no such Transfer, conveyance or encumbrance set forth in the foregoing clauses (a) and (b) shall materially impair the utility and operation of the Property or have a Material Adverse Effect on the value of the Property taken as a whole. In connection with any Transfer permitted pursuant to this Section 8.3 , Lender shall execute and deliver any instrument reasonably necessary or appropriate, in the case of the Transfers referred to in clause

(a) above, to release the portion of the Property affected by such Taking or such Transfer from the Lien of the Security Instrument or, in the case of clause (b) above, to subordinate the Lien of the Security Instrument to such easements, restrictions, covenants, reservations and rights of way or other similar grants upon receipt by Lender of:

(i) 30 days prior written notice thereof;

(ii) a copy of the instrument or instruments of Transfer;

(iii) an Officer’s Certificate stating (A) with respect to any Transfer, the consideration, if any, being paid for the Transfer and (B) that such Transfer does not materially impair the utility and operation of the Property, materially reduce the value of the Property or have a Material Adverse Effect; and

(iv) reimbursement of all of Lender’s reasonable costs and expenses incurred in connection with such Transfer (for the avoidance of any doubt, no fees of any nature shall be assessed by Lender in connection with this Section 8.3 ).

8.4 Indebtedness .

8.4.1 Prohibition . Borrower shall not incur, create or assume any Debt or incur any liabilities without the consent of Lender; provided , however , that if no Event of Default shall have occurred and be continuing, Borrower may, without the consent of Lender, incur, create or assume Permitted Debt.

8.4.2 Preferred Equity . Except for the period following Lender’s delivery of written notice of its intent to Securitize all or any portion of the Loan (and until the closing or Lender’s abandonment of such Securitization), at any time following the Closing Date, Borrower and Tenant shall each have the right to issue a single class of limited partnership interests or stock, as applicable, having a preferred right of payment over other limited partnership interests or stock, as applicable (such limited partnership interests or stock, the “ Preferred Equity ”); provided that each of the following conditions is satisfied: (a) such Preferred Equity is not evidenced by a note and has no characteristics that would constitute indebtedness for borrowed money; (b) has a maturity or redemption date that extends at least one year after the Maturity Date; and (c) is otherwise on terms and in a structure satisfactory to Lender.

8.4.3 Additional Mezzanine Loan . Except for the period following Lender’s delivery of written notice of its intent to Securitize all or any portion of the Loan (and until the closing or Lender’s abandonment of such Securitization), at any time following the Closing Date Borrower may incur additional Debt (each, a “ Mezzanine Loan ”) in the form of one more additional mezzanine loans; provided that each of the following conditions is satisfied to Lender’s reasonable satisfaction:

(a) Borrower gives Lender at least 30 days prior written notice of the closing of such Mezzanine Loan, which notice shall specify the anticipated closing date, the terms for the Mezzanine Loan (including principal amount, payment terms, maturity date, description of the collateral) and reasonably identify the expected holders of the Mezzanine Loan;

(b) Borrower delivers an Officer’s Certificate to Lender (accompanied by reasonable supporting calculations and documentation) demonstrating that the Operating Income (after giving effect to the incremental incentive fee payable to Manager under the Management Agreement following the loss of the First Owner’s Priority (as defined in the Management Agreement)) on a trailing 12-month basis is not less than $14,500,000;

(c) Borrower delivers an Officer’s Certificate to Lender (accompanied by reasonable supporting calculations and documentation) demonstrating that the aggregate amount of the Mezzanine Loan plus the Principal Amount of the Loan plus the amount of any New Mezzanine Loan plus the amount of any Preferred Equity, does not, in the aggregate, result in a “Loan-to-Value” ratio greater than 65.0%;

(d) Borrower has delivered to Lender true and complete copies of all loan documents (and any so called “Eagle 9” or “UCCPlus” insurance policy) to be executed and delivered in connection with such Mezzanine Loan, and the terms and conditions thereof are commercially reasonable in Lender’s opinion, and following a Securitization, the opinion of the Rating Agencies, including providing for a maturity date that is co-terminus with the Maturity Date;

(e) Borrower has delivered to Lender true and complete copies of the organizational documents for each special purpose, bankruptcy remote entity created to be a borrower under such Mezzanine Loan (each, a “ Mezzanine Borrower ”), each Mezzanine Borrower and its organizational documents shall demonstrate that such entity is a Single Purpose Entity, and the organizational documents of Borrower and General Partner (and if in existence, any Mezzanine Borrower or New Mezzanine Borrower) shall be amended and modified as necessary or required to reflect the formation of such Mezzanine Borrower;

(f) prior to the closing of the Mezzanine Loan, Borrower shall execute and deliver such amendments to the Loan Documents (and any documents evidencing the New Mezzanine Loan, if any) as are necessary or advisable in connection with the creation of such Mezzanine Loan or as may be reasonably be required by Lender or, following a Securitization, any Rating Agency, in each case, in form and substance reasonably satisfactory to Lender and the Rating Agencies, as applicable;

(g) prior to the closing of the Mezzanine Loan, Borrower shall deliver to Lender opinions of legal counsel with respect to due execution, authority and enforceability of documents evidencing the Mezzanine Loan, and any amendments of the Loan Documents and documents evidencing the New Mezzanine Loan, if any, and a substantive non-consolidation opinion with respect to the Mezzanine Loan, each as reasonably acceptable to Lender and, following a Securitization, the Rating Agencies.

(h) Borrower delivers an Officer’s Certificate to Lender (accompanied by reasonable supporting calculations and documentation) demonstrating that the holders of the Mezzanine Loan are each (i) a Qualified Institutional Holder or (ii) an Affiliate of Borrower if (A) the entire direct and indirect interest (economic or otherwise) of Borrower, General Partner, Tenant, Guarantor, Parent and each of their respective Affiliates in the Property (other than, in each case, as holder of such Mezzanine Loan) was subject to a Transfer effected in accordance

with Section 8.5.2 or Section 8.7 hereof, and (B) such Mezzanine Loan was originated in connection with the Transfer described in clause (A);

(i) On or prior to the closing of the Mezzanine Loan, the holders thereof have executed and delivered an intercreditor agreement with Lender in form and substance acceptable to Lender and, following any Securitization, the Rating Agencies;

(j) on the closing date of the Mezzanine Loan, no event of Default or Lockbox Event has occurred and is continuing;

(k) following a Securitization, Borrower shall have delivered a Rating Agency Confirmation; and

(l) Borrower shall pay all of Lender’s fees, costs and expenses, including, without limitation, reasonable attorneys’ fees and costs, actually incurred by Lender in connection with the foregoing.

8.5 Permitted Equity Transfers .

8.5.1 Less than 49% . A Transfer (but not a pledge or encumbrance) of no more than 49% (in the aggregate of all Transfers) of the direct or indirect equity interests in Borrower, General Partner or both shall be permitted without Lender’s consent, provided (a) Lender receives 30 days’ prior written notice thereof, (b) such Transfer does not result in a change of Control of Borrower or General Partner, (c) immediately prior to such Transfer, no Event of Default shall have occurred and be continuing, (d) a Qualified Manager shall continue to manage the Property after such Transfer, (e) such Transfer is either to one or more Affiliates of Borrower and/or Qualified Transferees, (f) prior to such Transfer, Lender receives all documentation and opinion letters reasonably required by Lender, including, but not limited to, an Additional Non-Consolidation Opinion in a form reasonably satisfactory to Lender, and (g) Borrower shall pay all of Lender’s fees, costs and expenses, including, without limitation, reasonable attorneys’ fees and costs, actually incurred by Lender in connection with such Transfer.

8.5.2 More than 49% . A Transfer (but not a pledge or encumbrance) of more than 49% (in the aggregate of all Transfers) of the direct or indirect equity interests in Borrower, General Partner or both shall be permitted without Lender’s consent; provided Borrower satisfies the requirements of (a) Section 8.5.1(a) , (c) , (d) , (e) , (f) and (g) above, and (b) if the Loan is the subject of a Securitization, delivery to Lender of a Rating Agency Confirmation. Transfers (but not a pledge or encumbrance) of more than 49% (in the aggregate of all Transfers) of the equity interests in Borrower, General Partner or both to Persons who are neither Affiliates of Borrower nor Qualified Transferees shall require (A) Lender’s prior written consent, (B) if the Loan is the subject of a Securitization, the delivery to Lender of a Rating Agency Confirmation, (C) Borrower’s satisfaction with the requirements of Section 8.5.1(a) , (c) , (d) , (f) and (g) above. Transfers (including a pledge or encumbrance) of more than 49% (in the aggregate of all Transfers) of the equity interests in Borrower, General Partner or both effected in connection with the origination of a Mezzanine Loan or New Mezzanine Loan in accordance with the terms of this Agreement shall not require the consent of Lender under this Section 8.5.2 ; provided that

the foregoing shall not eliminate or otherwise reduce Lender’s rights elsewhere set forth in the Loan Documents with respect to such Mezzanine Loan or New Mezzanine Loan.

8.5.3 Exceptions . Anything in this Article VIII to the contrary notwithstanding, there shall be no restriction on any Transfers, issuances, repurchases, conversions or redemptions of (a) the capital stock of Parent, (b) the limited partnership interests of Guarantor (or the general or limited partners of Guarantor), (c) any pledge or encumbrance of any capital stock or limited partnership interests of Parent, Guarantor, Tenant or Ashford TRS Corporation, a Delaware corporation, as applicable, in connection with any corporate level financing of Parent or Guarantor or (d) in connection with a Transfer resulting from the enforcement of remedies by any holder of the New Mezzanine Loan or Mezzanine Loan, as applicable.

8.6 Deliveries to Lender . Not less than 30 days prior to the closing of any transaction subject to the provisions of this Article VIII , Borrower shall deliver to Lender an Officer’s Certificate describing the proposed transaction and stating that such transaction is permitted by this Article VIII , together with any appraisal or other documents upon which such Officer’s Certificate is based. In addition, Borrower shall provide Lender with copies of executed deeds or other similar closing documents within 10 Business Days after such closing.

8.7 Loan Assumption . In connection with any Transfer of the Property for which Lender’s consent has been obtained pursuant to the provisions of this Article VIII , which consent shall be granted or denied in Lender’s sole and absolute discretion, Borrower shall have the right to request Lender’s consent, which consent shall not be unreasonably withheld, to the assumption of the Loan by the purchaser of the Property; provided that in connection with a Transfer of Borrower’s fee interest in the Property to a Qualified Transferee or any Transfer effected in accordance with Section 8.5.2 hereof, Lender’s consent shall not be required for either the assumption of the Loan or such Transfer of Borrower’s fee interest in the Property. Any such assumption of the Loan shall be conditioned upon, among other things, (a) if after a Securitization, the delivery of a Rating Agency Confirmation, (b) the delivery of financial information, including, without limitation, financial statements, for such purchaser and the direct and indirect owners such purchaser, (c) the delivery of evidence that the purchaser is a Single Purpose Entity, (d) the execution and delivery of all documentation reasonably requested by Lender, (e) the delivery of Opinions of Counsel requested by Lender, including, without limitation, a Non-Consolidation Opinion with respect to the purchaser and other entities identified by Lender or, if after a Securitization, requested by the Rating Agencies and opinions with respect to the valid formation, due authority and good standing of the purchaser and any additional pledgors and the continued enforceability of the Loan Documents and any other matters requested by Lender, (f) the delivery of an endorsement to the Title Policy in form and substance acceptable to Lender, insuring the lien of the Security Instrument, as assumed, subject only to the Permitted Encumbrances, (g) the payment of an assumption fee equal to one half of one percent (0.5%) of the Principal Amount, and (h) the payment of all of Lender’s fees, costs and expenses, including, without limitation, reasonable attorneys’ fees and costs, actually incurred by Lender in connection with such assumption.

8.8 Leases .

8.8.1 New Leases and Lease Modifications . Except as provided in Section 5.1.24 above, Borrower shall not (a) following the Closing Date, enter into or consent to the execution and deliver of any Lease to the extent consent of Borrower or Tenant is required under the Management Agreement or (b) consent to the extent consent of Borrower or Tenant is required under the Management Agreement to the assignment, amendment or modification of any Lease (unless required to do so by the terms of such Lease) (any such action referred to in clauses (a) and (b) being referred to herein as a “ Lease Action ”) without the prior written consent of Lender, which consent shall not be unreasonably withheld, delayed or conditioned. Any Lease Action for which Lender’s consent was not obtained shall be void ab initio . Any Lease Action that requires Lender’s consent shall be delivered to Lender for approval not less than 10 Business Days prior to the effective date of such proposed Lease Action. If Lender fails to approve or object to the proposed Lease Action within such 10-Business Day period, then Borrower shall send a second notice for approval of such Lease Action to Lender containing a legend clearly marked in bold face type, underlined, in all capital letters “ REQUEST DEEMED APPROVED IF NO RESPONSE WITHIN 10 BUSINESS DAYS ”. If Lender shall fail to respond to such second request prior to the expiration of such second 10-Business Day period, then Lender shall be deemed to have approved the proposed Lease Action. Upon the execution of the proposed Lease or the assignment, amendment or modification thereof, as applicable, Borrower shall deliver to Lender an executed copy of proposed Lease or the assignment, amendment or modification thereof. In all cases, the proposed Lease or the assignment, amendment or modification shall be subordinate in all respects to the Lien of the Security Instrument. If requested by Lender, Borrower shall (and shall cause the tenant under such Lease) to execute, deliver and acknowledge a separate agreement evidencing the subordination of such Lease to the Lien of the Security Instrument.

8.8.2 Security Deposits . All security or other deposits of tenants under any Lease, including the Tenant under the Operating Lease (such security or other deposits, the “ Security Deposits ”), to the extent in the possession or control of Borrower, and Operating Lease shall be treated as trust funds and shall not be commingled with any other funds of Borrower, and such deposits shall be deposited, upon receipt of the same by Borrower in a separate trust account maintained by Borrower expressly for such purpose. Within five Business Days after written request by Lender, Borrower shall furnish to Lender reasonably satisfactory evidence of compliance with this Section 8.8.2 , together with a statement of all amounts deposited pursuant to any Lease or the Operating Lease (identifying the amount and Person on whose behalf such amounts are held) and the location and account number of the account in which such security deposits are held.

IX. INTENTIONALLY OMITTED

X. MAINTENANCE OF PROPERTY; ALTERATIONS

10.1 Maintenance of Property . Borrower shall keep and maintain, or cause to be kept and maintained, the Property and every part thereof in good condition and repair, subject to ordinary wear and tear, and, subject to Excusable Delays and the provisions of this Agreement with respect to damage or destruction caused by casualty events or Takings, shall not permit or

commit any waste, impairment, or deterioration of any portion of the Property in any material respect. Borrower further covenants to do all other acts which from the character or use of the Property may be reasonably necessary to protect the security hereof, the specific enumerations herein not excluding the general. Borrower shall not remove or demolish, and shall not permit any Person to remove or demolish, any Improvement on the Property except as the same may be necessary in connection with an Alteration or a restoration in connection with a Taking or casualty, or as otherwise expressly permitted herein, in each case in accordance with the terms and conditions hereof.

10.2 Conditions to Alteration . Provided that no Event of Default shall have occurred and be continuing hereunder, Borrower shall have the right, without Lender’s consent, to undertake any alteration, improvement, demolition or removal of the Property or any portion thereof (any such alteration, improvement, demolition or removal, an “ Alteration ”) so long as (a) Borrower provides Lender with prior written notice of the Alteration if it constitutes a Material Alteration, and (b) such Alteration is undertaken in accordance with the applicable provisions of this Agreement and the other Loan Documents, is not prohibited by any relevant REAs and the Operating Lease and shall not, upon completion, have a Material Adverse Effect on the value, use or operation of the Property taken as a whole or otherwise. Any Material Alteration shall be conducted under the supervision of an Independent Architect and, in connection with any Material Alteration, Borrower shall deliver to Lender, for information purposes only and not for approval by Lender, the detailed plans and specifications and cost estimates therefor, prepared by such Independent Architect, as well as an Officer’s Certificate stating that such Alteration will involve an estimated cost of not more than the Threshold Amount for Alterations at the Property. Such plans and specifications may be revised at any time and from time to time by such Independent Architect; provided that material revisions of such plans and specifications are filed with Lender, for information purposes only. All work done in connection with any Alteration shall be performed with due diligence in a good and workmanlike manner, all materials used in connection with any Alteration shall not be less than the standard of quality of the materials currently used at the Property and all materials used shall be in accordance with all applicable material Legal Requirements and Insurance Requirements.

10.3 Costs of Alteration . Notwithstanding anything to the contrary contained in this Article X , no Material Alteration or Alteration which when aggregated with all other Alterations (other than Material Alterations) then being undertaken by Borrower exceeds the Threshold Amount, shall be performed by or on behalf of Borrower unless Borrower shall have delivered to Lender (a) Cash and Cash Equivalents and/or a Letter of Credit as security in an amount not less than the estimated cost of the Material Alteration or the Alterations minus the Threshold Amount (as set forth in the Independent Architect’s written estimate referred to above), or (b) a completion guaranty, in form and substance acceptable to Lender, from a credit-worthy Person reasonably acceptable to Lender (it being agreed that Guarantor shall be an acceptable guarantor so long as at such time Guarantor’s net worth equals or exceeds five times the anticipated aggregate cost of such Material Alteration). Any Cash and Cash Equivalents and/or a Letter of Credit delivered as such security shall be reduced on any given date (but no more frequently than monthly) to the Independent Architect’s written estimate of the cost to complete the Material Alteration or the Alterations (including any retainage), free and clear of Liens, other than Permitted Encumbrances. Costs which are subject to retainage (which in no event shall be less than 5% in the aggregate) shall be treated as due and payable and unpaid from the date they

would be due and payable but for their characterization as subject to retainage. In the event that any Material Alteration or Alteration shall be made in conjunction with any restoration with respect to which Borrower shall be entitled to withdraw Proceeds pursuant to Section 6.2 , the amount of the Cash and Cash Equivalents and/or Letter of Credit to be furnished pursuant hereto need not exceed the aggregate cost of such restoration and such Material Alteration or Alteration (as estimated by the Independent Architect), less the sum of the amount of any Proceeds which Borrower may be entitled to withdraw pursuant to Section 6.2 and which are held by Lender in accordance with Section 6.2 . Payment or reimbursement of Borrower’s expenses incurred with respect to any Material Alteration or any such Alteration shall be accomplished upon the terms and conditions specified in Section 6.2 .

At any time after substantial completion of any Material Alteration or any such Alteration in respect of which Cash and Cash Equivalents and/or a Letter of Credit is deposited pursuant hereto, the whole balance of any Cash and Cash Equivalents so deposited by Borrower with Lender and then remaining on deposit (together with earnings thereon), as well as all retainage, may be withdrawn by Borrower and shall be paid by Lender to Borrower, and any other Cash and Cash Equivalents and/or a Letter of Credit so deposited or delivered shall, to the extent it has not been called upon, reduced or theretofore released, be released to Borrower, within 10 days after receipt by Lender of an application for such withdrawal and/or release together with an Officer’s Certificate, and signed also (as to the following clause (a)) by the Independent Architect, setting forth in substance as follows:

(a) that the Material Alteration or Alteration in respect of which such Cash and Cash Equivalents and/or a Letter of Credit was deposited has been substantially completed in all material respects substantially in accordance with any plans and specifications therefor previously filed with Lender under Section 10.2 and that, if applicable, a certificate of occupancy has been issued with respect to such Material Alteration or Alteration by the relevant Governmental Authority or, if not applicable, that a certificate of occupancy is not required; and

(b) that to the knowledge of the certifying Person all amounts which Borrower is or may become liable to pay in respect of such Material Alteration or Alteration through the date of the certification have been paid in full or adequately provided for or are being contested in accordance with Section 7.3 and that lien waivers have been obtained from the general contractor and major subcontractors performing such Material Alterations or Alterations (or such waivers are not customary and reasonably obtainable by prudent managers in the area where the Property is located).

XI. BOOKS AND RECORDS, FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION

11.1 Books and Records . Borrower shall keep and maintain on a fiscal year basis proper books and records separate from any other Person, in which accurate and complete entries shall be made of all dealings or transactions of or in relation to the Note, the Property and the business and affairs of Borrower relating to the Property which shall reflect all items of income and expense in connection with the operation on an individual basis of the Property and in connection with any services, equipment or furnishings provided in connection with the operation of the Property, in accordance with GAAP. Lender and its authorized representatives

shall have the right at reasonable times and upon reasonable notice to examine the books and records of Borrower relating to the operation of the Property and to make such copies or extracts thereof as Lender may reasonably require.

11.2 Financial Statements .

11.2.1 Quarterly Reports . Not later than 45 days following the end of each fiscal quarter, Borrower shall deliver to Lender unaudited financial statements for the Property, internally prepared on a GAAP basis including a balance sheet and profit and loss statement as of the end of such quarter and for the corresponding quarter of the previous year, a statement of Net Operating Income for such quarter, and a comparison of the year to date results with (a) the results for the same period of the previous year, and (b) the Annual Budget for such period and the Fiscal Year. Such statements for each quarter shall be accompanied by an Officer’s Certificate certifying to the best of the signer’s knowledge, (i) that such statements fairly represent the financial condition and results of operations of for the Property, (ii) that as of the date of such Officer’s Certificate, no Default is known (after due inquiry) to exist under this Agreement, the Note or any other Loan Document or, if so, specifying the nature and status of each such Default and the action then being taken by Borrower or proposed to be taken to remedy such Default, and (iii) that as of the date of each Officer’s Certificate, no litigation exists involving the Property in which the amount involved is $500,000 (in the aggregate) or more in which all or substantially all of the potential liability is not covered by insurance, or, if so, specifying such litigation and the actions being taking in relation thereto. Such financial statements shall contain such other information as shall be reasonably requested by Lender for purposes of calculations to be made by Lender pursuant to the terms hereof.

11.2.2 Annual Reports . Not later than 90 days after the end of each Fiscal Year, Borrower shall deliver to Lender unaudited (or if a Securitization has occurred, audited if requested by Lender) financial statements for the Property certified by an Independent Accountant in accordance with GAAP, including a balance sheet as of the end of such Fiscal Year, a statement of Net Operating Income for such Fiscal Year, and stating in comparative form the figures for the previous Fiscal Year and the Annual Budget for such Fiscal Year, as well copies of all federal income tax returns to be filed (or evidence of extension of such tax returns, and promptly upon filing such returns, copies shall be provided to Lender). Such annual financial statements shall also be accompanied by an Officer’s Certificate in the form required pursuant to Section 11.2.1 .

11.2.3 Capital Expenditures Summaries . Borrower shall, within 90 days after the end of each Fiscal Year, deliver to Lender an annual summary of any and all capital expenditures made at the Property during the prior 12 month period.

11.2.4 Management Agreement . Borrower shall deliver to Lender, within 10 Business Days of the receipt thereof by Borrower or Tenant, a copy of all reports, notices or other documents prepared or provided by Manager pursuant to the Management Agreement, including, without limitation, the Annual Budget and any inspection reports.

11.2.5 Annual Budget . Borrower shall deliver to Lender the Annual Budget for Lender’s approval (a) with respect to the Property, within five Business Day following receipt of

the initial draft of such Annual Budget from Manager, and (b) with respect to Borrower and Tenant, if different than the Annual Budget prepared by Manager, at least 60 days prior to the end of each Fiscal Year. With respect to the Annual Budget for the Property, Lender shall be deemed to have approved such portions of the Annual Budget that neither Borrower nor Tenant nor any of their respective Affiliates have any right to approve or disapprove under the terms of the Management Agreement. Upon the occurrence and during the continuation of a Lockbox Event, Lender shall have the right to require (and Borrower shall use commercially reasonable efforts to cause Manager to prepare and provide) quarterly updates to the Annual Budget, which quarterly updates shall (i) with respect to the Property, shall be subject to Lender’s approval (which approval shall be in Lender’s sole and absolute discretion) except as to those portions of the update thereto that neither Borrower nor or Tenant nor any of their respective Affiliates have a right to approve or disapprove under the terms of the Management Agreement and (ii) with respect to the Borrower and Tenant (if different than the Annual Budget prepared by Manager), be subject to Lender’s approval (which approval shall be in Lender’s sole and absolute discretion). Neither Borrower nor Tenant nor any of their respective Affiliates shall, to the extent permitted or required by the Management Agreement, (A) consent to a change or modification (or fail to object to a change or modification) in the Annual Budget prepared by Manager that has been approved by Lender, or (B) change or modify any Annual Budget otherwise prepared with respect to Borrower or Tenant that has been approved by Lender, in each case, without the prior written consent of Lender.

11.2.6 Other Information . Borrower shall, promptly after written request by Lender or, if a Securitization shall have occurred, the Rating Agencies, furnish or cause to be furnished to Lender, in such manner and in such detail as may be reasonably requested by Lender, such reasonable additional information as may be reasonably requested with respect to the Property, Borrower, General Partner, Tenant or Guarantor.

XII. ENVIRONMENTAL MATTERS

12.1 Representations . Borrower hereby represents and warrants that except as set forth in the environmental reports and studies obtained by, or delivered by or on behalf of Borrower to, Lender (the “ Environmental Reports ”), (a) Borrower has not engaged in or permitted any operations or activities upon, or any use or occupancy of the Property, or any portion thereof, for the purpose of or in any way involving the handling, manufacture, treatment, storage, use, generation, release, discharge, refining, dumping or disposal of any Hazardous Materials on, under, in or about the Property, or transported any Hazardous Materials to, from or across the Property, except in all cases in material compliance with Environmental Laws and only in the course of legitimate business operations at the Property; (b) no tenant (including Tenant), occupant (including Tenant and Manager) or user of the Property, or any other Person has engaged in or permitted any operations or activities upon, or any use or occupancy of the Property, or any portion thereof, for the purpose of or in any material way involving the handling, manufacture, treatment, storage, use, generation, release, discharge, refining, dumping or disposal of any Hazardous Materials on, in or about the Property, or transported any Hazardous Materials to, from or across the Property, except in all cases in material compliance with Environmental Laws and only in the course of legitimate business operations at the Property; (c) no Hazardous Materials are presently constructed, deposited, stored, or otherwise located on, under, in or about the Property except in material compliance with Environmental

Laws; (d) no Hazardous Materials have migrated from the Property upon or beneath other properties which would reasonably be expected to result in material liability for Borrower; and (e) no Hazardous Materials have migrated or threaten to migrate from other properties upon, about or beneath the Property which would reasonably be expected to result in material liability for Borrower.

12.2 Compliance with Environmental Laws . Subject to Borrower’s right to contest under Section 7.3 , Borrower covenants and agrees with Lender that it shall comply with all Environmental Laws. If at any time during the continuance of the Lien of the Security Instrument, a Governmental Authority having jurisdiction over the Property requires remedial action to correct the presence of Hazardous Materials in, around, or under the Property (an “ Environmental Event ”), Borrower shall deliver prompt notice of the occurrence of such Environmental Event to Lender. Within 30 days after Borrower has knowledge of the occurrence of an Environmental Event, Borrower shall deliver to Lender an Officer’s Certificate (an “ Environmental Certificate ”) explaining the Environmental Event in reasonable detail and setting forth the proposed remedial action, if any. Borrower shall promptly provide Lender with copies of all notices which allege or identify any actual or potential violation or noncompliance received by or prepared by or for Borrower in connection with any Environmental Law. For purposes of this paragraph, the term “notice” shall mean any summons, citation, directive, order, claim, pleading, letter, application, filing, report, findings, declarations or other materials pertinent to compliance of the Property and Borrower with such Environmental Laws. If the Security Instrument is foreclosed, Borrower shall deliver the Property in compliance with all applicable Environmental Laws.

12.3 Environmental Reports . Upon the occurrence and during the continuance of an Environmental Event with respect to the Property or an Event of Default, Lender shall have the right to have its consultants perform a comprehensive environmental audit of the Property. Such audit shall be conducted by an environmental consultant chosen by Lender and may include a visual survey, a record review, an area reconnaissance assessing the presence of hazardous or toxic waste or substances, PCBs or storage tanks at the Property, an asbestos survey of the Property, which may include random sampling of the Improvements and air quality testing, and such further site assessments as Lender may reasonably require due to the results obtained from the foregoing. Borrower grants Lender, its agents, consultants and contractors the right to enter the Property as reasonable or appropriate (and upon reasonable prior notice) for the circumstances for the purposes of performing such studies and the reasonable cost of such studies shall be due and payable by Borrower to Lender upon demand and shall be secured by the Lien of the Security Instrument. Lender shall not unreasonably interfere with, and Lender shall direct the environmental consultant to use its commercially reasonable efforts not to hinder, Borrower’s or any Tenant’s, other occupant’s or Manager’s operations upon the Property when conducting such audit, sampling or inspections. By undertaking any of the measures identified in and pursuant to this Section 12.3 , Lender shall not be deemed to be exercising any control over the operations of Borrower or the handling of any environmental matter or hazardous wastes or substances of Borrower for purposes of incurring or being subject to liability therefor.

12.4 Environmental Indemnification . Borrower shall protect, indemnify, save, defend, and hold harmless the Indemnified Parties from and against any and all liability, loss, damage, actions, causes of action, costs or expenses whatsoever (including reasonable attorneys’ fees and

expenses) and any and all claims, suits and judgments which any Indemnified Party may suffer, as a result of or with respect to: (a) any Environmental Claim relating to or arising from the Property; (b) the violation of any Environmental Law in connection with the Property; (c) any release, spill, or the presence of any Hazardous Materials affecting the Property; and (d) the presence at, in, on or under, or the release, escape, seepage, leakage, discharge or migration at or from, the Property of any Hazardous Materials, whether or not such condition was known or unknown to Borrower; provided that, in each case, Borrower shall be relieved of its obligation under this subsection if any of the matters referred to in clauses (a) through (d) above are the result of the gross negligence or willful misconduct of any of the Indemnified Parties or did not occur (but need not have been discovered) prior to (i) the foreclosure of the Security Instrument, or (ii) the delivery by Borrower to Lender or its designee of a deed-in-lieu of foreclosure with respect to the Property. If any such action or other proceeding shall be brought against Lender, upon written notice from Borrower to Lender (given reasonably promptly following Lender’s notice to Borrower of such action or proceeding), Borrower shall be entitled to assume the defense thereof, at Borrower’s expense, with counsel reasonably acceptable to Lender; provided , however , Lender may, at its own expense, retain separate counsel to participate in such defense, but such participation shall not be deemed to give Lender a right to control such defense, which right Borrower expressly retains. Notwithstanding the foregoing, each Indemnified Party shall have the right to employ separate counsel at Borrower’s expense if, in the reasonable opinion of legal counsel, a conflict or potential conflict exists between the Indemnified Party and Borrower that would make such separate representation advisable.

12.5 Recourse Nature of Certain Indemnifications . Notwithstanding anything to the contrary provided in this Agreement or in any other Loan Document, the indemnification provided in Section 12.4 shall be fully recourse to Borrower and shall be independent of, and shall survive, the discharge of the Indebtedness, the release of the Lien created by the Security Instrument, and/or the conveyance of title to the Property to Lender or any purchaser or designee in connection with a foreclosure of the Security Instrument or conveyance in lieu of foreclosure for a period equal to the applicable statue of limitations established by the applicable Legal Requirements. Each provision of this Agreement, including any provision that purports to establish its own relative priority over any or all other provisions of this Agreement, is deemed to be expressly subject to this Section 12.5 ; it being intended, however, that the relative priority, if any, of each such provision over any or all other provisions of this Agreement, other than this Section 12.5 hereof, remain unmodified.

XIII. DEFEASANCE

13.1 Generally . From and after the expiration of the Defeasance Lockout Period and provided that all of the conditions set forth in this Article XIII are complied with, Lender hereby agrees that Borrower shall have the right to obtain a release of the Lien of the Security Instrument and the other Loan Documents (other than the Defeasance Note and the Lien of the Defeasance Security Agreement on the collateral secured thereby) on the Property upon at least 60 days’ prior written notice (such release, after satisfaction of the other provisions of this Article XIII , a “ Defeasance ”):

13.1.1 Defeasance Note . The execution and delivery of a defeasance note (the “ Defeasance Note ”), in substitution for the Note and in form and substance reasonably

acceptable to Lender, dated as of the date of the Defeasance (which must be on a Business Day), payable to Lender, in an amount equal to the Defeasance Collateral Requirement;

13.1.2 Defeasance Security Agreement . The execution and delivery of a security agreement (the “ Defeasance Security Agreement ”), in form and substance reasonably acceptable to Lender, dated as of the date of the Defeasance (which must be on a Business Day), in favor of Lender, pursuant to which Lender is granted a perfected first priority security interest in the Defeasance Collateral to secure the Defeasance Note;

13.1.3 Defeasance Assumption Agreement . The execution and delivery of appropriate and reasonable agreements and/or instruments, each in form and substance reasonably acceptable to Lender, pursuant to which the obligations and liabilities of Borrower under the Defeasance Note and the Defeasance Security Agreement are assumed by a new entity (the “ Substitute Borrower ”) which satisfies all of the Single Purpose Entity requirements;

13.1.4 Substitute Borrower Organizational Documents . The organizational documents of the Substitute Borrower shall be satisfactory to Lender and the Rating Agencies, shall satisfy all Rating Agency requirements and shall demonstrate that such Substitute Borrower satisfies all of the Single Purpose Entity requirements.

13.1.5 Release Documents . The execution and delivery by Borrower of the release documents referenced in Section 13.4 if Borrower is a party thereto;

13.1.6 Other Conditions . Satisfaction of the conditions set forth in Section 13.2 ; and

13.1.7 No Event of Default . No Event of Default shall have occurred and be continuing other than any Event of Default which shall be cured as a result of such defeasance.

13.2 Defeasance Collateral . Borrower shall deposit the Defeasance Collateral in accordance with this Section 13.2.2 into the Defeasance Collateral Account. Defeasance shall be permitted at such time as all of the following events shall have occurred:

13.2.1 Establishment of Account . The Defeasance Collateral Account shall have been established pursuant to Section 13.5 ;

13.2.2 Delivery of Defeasance Collateral . Borrower shall have delivered, or caused to have been delivered to Lender, the Defeasance Collateral for deposit into the Defeasance Collateral Account such that it will satisfy the Defeasance Collateral Requirement at the time of delivery and all such Defeasance Collateral, if in registered form, shall be registered in the name of Lender or its nominee (and, if registered in nominee name endorsed to Lender or in blank) and, if issued in book-entry form, the name of Lender or its nominee shall appear as the owner of such securities on the books of the Federal Reserve Bank or other party maintaining such book-entry system;

13.2.3 Grant of Lien . Borrower shall have executed and delivered the Defeasance Security Agreement and granted, or caused to have been granted, to Lender a valid and perfected first priority security interest in the Defeasance Collateral and all proceeds thereof;

13.2.4 Officer’s Certificate . Borrower shall have delivered or caused to be delivered to Lender an Officer’s Certificate, dated as of the date of such delivery, that (a) sets forth the aggregate face amount or unpaid principal amount, interest rate and maturity of all such Defeasance Collateral, a copy of the transaction journal, if any, or such other notification, if any, published by or on behalf of the Federal Reserve Bank or other party maintaining a book-entry system advising that Lender or its nominee is the owner of such securities issued in book-entry form and (b) states that:

(i) Borrower (or the Substitute Borrower) owns the Defeasance Collateral being delivered to Lender free and clear of any and all Liens, security interests or other encumbrances (other than the Defeasance Security Agreement), and has not assigned any interest or participation therein (or, if any such interest or participation has been assigned, it has been released), and Borrower has full power and authority to pledge such Defeasance Collateral to Lender;

(ii) such Defeasance Collateral consists solely of Defeasance Eligible Investments;

(iii) such Defeasance Collateral satisfies the Defeasance Collateral Requirement, determined as of the date of delivery; and

(iv) the information required by Section 13.2.4(a) which is set forth in the schedule attached to such Officer’s Certificate is correct and complete in all material respects as of the date of delivery (such schedule, which shall be attached to and form a part of such Officer’s Certificate, shall demonstrate satisfaction of the requirement set forth in clause Section 13.2.4(ii) , in a form reasonably acceptable to Lender);

(v) Borrower shall have delivered or caused to be delivered to Lender a Rating Agency Confirmation and such other documents and certificates as Lender may reasonably request, including Opinions of Counsel, in connection with demonstrating that Borrower has satisfied the provisions of this Section 13.2 , including, but not limited to, an Opinion of Counsel stating, among other things, that (A) Lender has a perfected first priority security interest in the Defeasance Collateral and that the Defeasance Security Agreement is enforceable in accordance with its terms and (B) if applicable, that any trust formed as a REMIC pursuant to a Securitization will not fail to maintain its status as a REMIC as a result of such Defeasance; and

(vi) Borrower shall have delivered to Lender a certificate of an Independent Accountant certifying that the Defeasance Collateral will generate monthly amounts which satisfy the Defeasance Collateral Requirement.

13.3 Sufficiency of Defeasance Collateral . For purposes of determining whether the Defeasance Collateral on deposit in the Defeasance Collateral Account satisfies the Defeasance Collateral Requirements, there shall be included only payments of principal and predetermined and certain income thereon (as reasonably determined by Lender and agreed to by Borrower without regard to any reinvestment of such amounts) that will occur on a stated date for a stated payment on or before the dates when such amounts may be required to be applied to pay the

interest and/or outstanding principal balance of on the Defeasance Note (and/or any substitute notes, as applicable) when due.

13.4 Lender Release . Upon the delivery of Defeasance Collateral in accordance with Section 13.2 and the satisfaction of all other conditions provided for in this Article IX , Lender shall enter into appropriate release and termination documents as if a payment in full of the Indebtedness hereunder (except as to the Defeasance Note and Defeasance Security Agreement) had occurred, together with such documentation as may be reasonably requested by Borrower to notify third parties thereof and substitute note documentation, and Lender will return to Borrower any Letters of Credit or other collateral or security held by Lender in connection with the Loan (other than the Defeasance Collateral), and in connection with the return of any Letters of Credit, shall execute a written statement (without any representation, warranty or indemnity by Lender) to the financial institution issuing such Letter of Credit that such instrument is surrendered for cancellation.

13.5 Defeasance Collateral Account . On or before the date on which Borrower delivers Defeasance Collateral to Lender pursuant to Section 13.2 , Borrower shall open at any Approved Bank (or other bank subject to the next sentence hereof) at the time and acting as custodian for Lender, a defeasance collateral account (the “ Defeasance Collateral Account ”) which shall at all times be an Eligible Account, in which Borrower shall grant to Lender or reconfirm the grant to Lender of a security interest. The Defeasance Collateral Account shall contain (a) all Defeasance Collateral delivered by Borrower pursuant to Section 13.2 , (b) all payments received on Defeasance Collateral held in the Defeasance Collateral Account and (c) all income or other gains from investment of moneys or other property deposited in the Defeasance Collateral Account. All such amounts, including all income from the investment or reinvestment thereof, shall be held by Lender, subject to withdrawal by Lender for the purposes set forth in this Article IX . Borrower (or the Substitute Borrower) shall be the owner of the Defeasance Collateral Account and shall report all income accrued on Defeasance Collateral for federal, state and local income tax purposes in its income tax return.

13.6 Payments . Lender shall withdraw, draw on or collect and apply the amounts that are on deposit in the Defeasance Collateral Account to pay when due the principal and all installments of interest and principal on the Defeasance Note. Funds and other property in the Defeasance Collateral Account shall not be commingled with any other monies or property of Borrower (or the Substitute Borrower) or any Affiliate of Borrower (or the Substitute Borrower). Lender shall not in any way be held liable by reason of any insufficiency in the Defeasance Collateral Account.

13.7 Loan Document Amendments . If required, Borrower and Lender shall enter into any appropriate amendments to the Loan Documents necessitated by a Defeasance, such amendments to be in form and substance reasonably acceptable to both Borrower and Lender.

13.8 Lender’s Costs Borrower shall pay all of Lender’s reasonable costs incurred in connection with any Defeasance, including reasonable attorneys’ fees and costs.

XIV. SECURITIZATION AND PARTICIPATION

14.1 Sale of Note and Securitization . At the request of Lender and, to the extent not already required to be provided by Borrower under this Agreement, Borrower shall use reasonable efforts to satisfy the market standards which may be reasonably required in the marketplace or by the Rating Agencies in connection with the sale of the Note or participation therein as part of the securitization (such sale and/or securitization, the “ Securitization ”) of rated single or multi-class securities (the “ Securities ”) secured by or evidencing ownership interests in the Note, this Agreement and the other Loan Documents, including using reasonable efforts to do (or cause to be done) the following (but Borrower shall not in any event be required to incur, suffer or accept (except to a de minimis extent)) (I) any lesser rights or greater obligations than as currently set forth in the Loan Documents and (II) except as set forth in this Article XIV , any expense or any liability:

(a) Provided Information . (i) Provide, at the sole expense of the holder of the Note, such financial and other information (but not projections) with respect to the Property, Borrower, General Partner, Tenant, Guarantor, Parent and Manager to the extent such information is reasonably available to Borrower, (ii) provide, at the sole expense of the holder of the Note, business plans (but not projections) and budgets relating to the Property, to the extent prepared by or on behalf of Borrower and (iii) cooperate with the holder of the Note (and its representatives) in obtaining, at the sole expense of the holder of the Note, such site inspection, appraisals, market studies, environmental reviews and reports, engineering reports and other due diligence investigations of the Property, as may be reasonably requested by the holder of the Note or reasonably requested by the Rating Agencies (all information provided pursuant to this Section 14.1 together with all other information heretofore provided to Lender in connection with the Loan, as such may be updated, at Lender’s request, in connection with a Securitization, or hereafter provided to Lender in connection with the Loan or a Securitization, being herein collectively called the “ Provided Information ”);

(b) Opinions of Counsel . Use reasonable efforts to cause to be rendered such customary updates or customary modifications to the Opinions of Counsel delivered at the closing of the Loan as may be reasonably requested by the holder of the Note or the Rating Agencies in connection with the Securitization. Borrower’s failure to use reasonable efforts to deliver or cause to be delivered the opinion updates or modifications required hereby within 20 Business Days after written request therefor shall constitute an “Event of Default” hereunder. To the extent any of the foregoing Opinions of Counsel were required to be delivered in connection with the closing of the Loan, any update thereof shall be without cost to Borrower. Any such Opinions of Counsel that Borrower is reasonably required to cause to be delivered in connection with a Securitization other than those delivered at the original Loan closing, shall be delivered at no cost and expense to Borrower (other than administrative costs and expenses of Borrower) (it being agreed that Borrower shall be obligated to deliver an Opinion of Counsel with respect to “10b-5” matters as such matters relate to the Loan);

(c) Modifications to Loan Documents . Without cost to the Borrower, execute such amendments to the Security Instrument and Loan Documents as may be reasonably requested by Lender or the Rating Agencies in order to achieve the required rating or to effect the Securitization (including, without limitation, modifying the Payment Date, as defined in the

Note, to a date other than as originally set forth in the Note), provided , that nothing contained in this Section 14.1.3 shall result in (i) any material adverse change in the initial economics contemplated by the Security Instrument or the Loan Documents (unless Borrower is made whole by the holder of Note), (ii) any adverse operational changes to the Property or Borrower, or (iii) Borrower having (except to a de minimis extent) any lesser rights or greater obligations than currently set forth in the Loan Documents; and

(d) Cooperation with Rating Agencies . Borrower shall, at Lender’s expense, (i) at Lender’s request, meet with representatives of the Rating Agencies at reasonable times to discuss the business and operations of the Property, and (ii) cooperate with the reasonable requests of the Rating Agencies in connection with the Property. Until the Obligations are paid in full, Borrower shall, if requested by Lender, provide the Rating Agencies with all financial reports required by this Agreement and such other information as they shall reasonably request, including copies of any default notices or other material notices delivered to and received from Lender hereunder, to enable them to continuously monitor the creditworthiness of Borrower and to permit an annual surveillance of the implied credit rating of the Securities.

14.2 Securitization Financial Statements .

(a) Borrower acknowledges that all financial information delivered by Borrower to Lender pursuant to Article XI may, at Lender’s option, be delivered to the Rating Agencies.

(b) If requested by Lender, Borrower shall, at no cost and expense to Borrower (other than administrative costs and expenses of Borrower), provide Lender, promptly upon request, with any financial statements, or financial, statistical or operating information, as Lender shall determine to be required pursuant to Regulation AB under the Securities Act or the Exchange Act or other applicable Legal Requirements in connection with any private placement memorandum, prospectus or other disclosure documents or any filing pursuant to the Exchange Act in connection with the Securitization or as shall otherwise be reasonably requested by Lender.

14.3 Securitization Indemnification .

14.3.1 Disclosure Documents . Borrower understands that certain of the Provided Information may be included in disclosure documents in connection with the Securitization, including a prospectus, private placement memorandum, collateral term sheet or a public registration statement (each, a “ Disclosure Document ”) and may also be included in filings with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the “ Securities Act ”) or the Securities and Exchange Act of 1934, as amended (the “ Exchange Act ”), or provided or made available to investors or prospective investors in the Securities, the Rating Agencies, and service providers relating to the Securitization. In the event that the Disclosure Document is required to be revised prior to the sale of all Securities, upon request, Borrower shall reasonably cooperate with the holder of the Note in updating the Provided Information for inclusion or summary in the Disclosure Document by providing all current

information pertaining to Borrower and the Property reasonably requested by Lender and available to Borrower.

14.3.2 Indemnification Certificate . In connection with each applicable Disclosure Document, Borrower agrees to provide, at Lender’s reasonable request, an indemnification certificate (at no material cost to Borrower):

(a) certifying that Borrower has carefully examined those portions of such memorandum or prospectus, as applicable, reasonably designated in writing by Lender for Borrower’s review pertaining to the Property, Borrower, General Partner, Guarantor, Tenant, Parent, the Loan and/or the Provided Information and insofar as such sections or portions thereof specifically pertain to the Property, Borrower, General Partner, Guarantor, Tenant, Parent, the Loan and/or the Provided Information (such portions, the “ Relevant Portions ”), the Relevant Portions do not (except to the extent specified by Borrower, if Borrower does not agree with the statements therein), as of the date of such certificate, to Borrower’s knowledge, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.

(b) indemnifying Lender and the Affiliates of Deutsche Bank Securities, Inc. (collectively, “ DBS ”) that have prepared the Disclosure Document relating to the Securitization, each of its directors, each of its officers who have signed the Disclosure Document and each person or entity who controls DBS within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “ DBS Group ”), and DBS, together with the DBS Group, each of their respective directors and each person who controls DBS or the DBS Group, within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act (collectively, the “ Underwriter Group ”) for any actual, out-of-pocket losses, third party claims, damages (excluding lost profits, diminution in value and other consequential damages) or liabilities arising out of third party claims (the “ Liabilities ”) to which any member of the Underwriter Group may become subject to the extent such Liabilities are based (in whole or in part) upon any untrue statement of any material fact contained in the Relevant Portions and in the Provided Information or are based (in whole or in part) upon the omission by Borrower to state therein a material fact required to be stated in the Relevant Portions in order to make the statements in the Relevant Portions in light of the circumstances under which they were made, not misleading (except that (i) Borrower’s obligation to indemnify in respect of any information contained in a Disclosure Document that is derived in part from information provided by Borrower or any Affiliate of Borrower and in part from information provided by others unrelated to or not employed by Borrower shall be limited to any untrue statement or omission of material fact therein known to Borrower that results directly from an error in any information provided (or which should have been provided) by Borrower and (ii) Borrower shall have no responsibility for the failure of any member of the Underwriting Group to accurately transcribe written information supplied by Borrower or to include such portions of the Provided Information). The indemnity contained in the indemnification certificate will be in addition to any liability which Borrower may otherwise have.

(c) The indemnification certificate shall provide that Borrower’s liability under clauses (a) and (b) of the indemnification certificate shall be limited to Liabilities based (in whole or in part) upon any such untrue statement or omission made in a Disclosure

Document in reliance upon and in conformity with information furnished to Lender by, or furnished at the direction and on behalf of, Borrower in connection with the preparation of those portions of the relevant Disclosure Document pertaining to the Property, Borrower, General Partner, Guarantor, Tenant, Parent, or the Loan, including financial statements of Borrower and operating statements with respect to the Property.

(d) The indemnification certificate shall also provide that promptly after receipt by an indemnified party of notice of the commencement of any action covered by the indemnification certificate, such indemnified party will notify the indemnifying party in writing of the commencement thereof, but the omission to so notify the indemnifying party will not relieve the indemnifying party from any liability which the indemnifying party may have to any indemnified party thereunder except to the extent that failure to notify causes prejudice to the indemnifying party. In the event that any action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled, jointly with any other indemnifying party, to participate therein and, to the extent that it (or they) may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. After such notice from the indemnifying party to such indemnified party of its assumption of such defense, the indemnifying party shall not be liable for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof; provided , however , if an indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there are any legal defenses available to it that are different from or in conflict with those available to the indemnifying party, or indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties at the expense of the indemnifying party.

(e) The indemnification certificate shall also provide that in order to provide for just and equitable contribution in circumstances in which the indemnity provided for therein is for any reason held to be unenforceable by an indemnified party in respect of any actual, out-of-pocket losses, claims, damages or liabilities relating to third party claims (or action in respect thereof) referred to therein which would otherwise be indemnifiable thereunder, the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such actual, out of pocket losses, third party claims, damages or liabilities (or action in respect thereof) (but excluding damages for lost profits, diminution in value of the Property and consequential damages); provided , however , that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution for Liabilities arising therefrom from any person who was not guilty of such fraudulent misrepresentation. In determining the amount of contribution to which the respective parties are entitled, the following factors shall be considered: (i) the DBS Group’s and Borrower’s relative knowledge and access to information concerning the matter with respect to which the claim was asserted; (ii) the opportunity to correct and prevent any statement or omission; (iii) the limited responsibilities and obligations of Borrower as specified herein; and (iv) any other equitable considerations appropriate in the circumstances.

14.4 Retention of Servicer . Lender reserves the right to retain, and from time to time discharge and replace, the Servicer. Lender shall pay the standard monthly servicing fee of the Servicer. Except for the monthly servicing fee to be paid by Lender, Borrower shall pay any fees and expenses of the Servicer and any reasonable third-party fees and expenses, including, without limitation, special servicing fees, work-out fees and reasonable attorneys fees and disbursements, in connection with a prepayment, release of the Property, assumption or modification of the Loan, special servicing or work-out of the Loan or enforcement of the Loan Documents.

XV. ASSIGNMENTS AND PARTICIPATIONS

15.1 Assignment and Acceptance .

(a) Subject to Section 15.1(b) below, Lender may assign to one or more Persons all or a portion of Lender’s rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of the Note); provided that the parties to each such assignment shall execute and deliver to Lender (or if designated by Lender, Servicer), on behalf of Borrower (“ Registrar ”), for its acceptance and recording in the Register, an Assignment and Acceptance. Borrower will not be required in connection with any such assignment to incur, suffer or accept (i) any lesser rights or greater obligations than as currently set forth in the Loan Documents or (ii) any expense or any liability in connection with such Assignment and Acceptance. In addition, subject to Section 15.1(b) below, Lender may participate to one or more Persons all or any portion of its rights and obligations under this Agreement and the other Loan Documents (including without limitation, all or a portion of the Note) utilizing such documentation to evidence such participation and the parties’ respective rights thereunder as Lender, in its sole discretion, shall elect.

(b) Section 15.1(a) above notwithstanding, Lender (as named on the first page of this Agreement and not any successor or assign thereof) agrees that except in connection with a Securitization by Lender (as named on the first page of this Agreement and not any successor or assign thereof), Lender (as named on the first page of this Agreement and not any successor or assign thereof) shall use good faith efforts to exclude from any sale or syndication of Lender’s rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of the Note) those Persons identified on Schedule II .

15.2 Effect of Assignment and Acceptance . Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (a) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of Lender, as the case may be, hereunder and such assignee shall be deemed to have assumed such rights and obligations, and (b) Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement and the other Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of Lender’s rights and obligations under this Agreement and the other Loan Documents, Lender shall cease to be a party hereto) accruing from and after the effective date of

the Assignment and Acceptance, except with respect to (i) any payments made by Borrower to Lender pursuant to the terms of the Loan Documents after the effective date of the Assignment and Acceptance and (ii) any letter of credit, cash deposit or other deposits or security (other than the Lien of the Security Instrument and the other Loan Documents) delivered to or for the benefit of or deposited with German American Capital Corporation, as Lender, for which German American Capital Corporation shall remain responsible for the proper disposition thereof until such items are delivered to a party who is qualified as an Approved Bank and agrees to hold the same in accordance with the terms and provisions of the agreement pursuant to which such items were deposited.

15.3 Content . By executing and delivering an Assignment and Acceptance, Lender and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (a) other than as provided in such Assignment and Acceptance, Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, this Agreement or any other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (b) Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance or observance by Borrower of any of its obligations under any Loan Documents or any other instrument or document furnished pursuant thereto; (c) such assignee confirms that it has received a copy of this Agreement, together with copies of such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (d) such assignee will, independently and without reliance upon Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents; (e) such assignee appoints and authorizes Lender to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to Lender by the terms hereof together with such powers and discretion as are reasonably incidental thereto; and (f) such assignee agrees that it will perform, in accordance with their terms, all of the obligations which by the terms of this Agreement and the other Loan Documents are required to be performed by Lender.

15.4 Register . Registrar shall maintain a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of Lender and each assignee pursuant to this Article XV and the Principal Amount of the Loan owing to each such assignee from time to time (the “ Register ”). The entries in the Register shall, with respect to such assignees, be conclusive and binding for all purposes, absent manifest error. The Register shall be available for inspection by Lender, Borrower or any assignee of Lender pursuant to this Article XV at any reasonable time and from time to time upon reasonable prior written notice.

15.5 Substitute Notes . Upon its receipt of an Assignment and Acceptance executed by an assignee, together with any Note or Notes subject to such assignment, Registrar shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit M hereto, (a) accept such Assignment and Acceptance, (b) record the information contained therein

in the Register, and (c) give prompt written notice thereof to Borrower. Within five Business Days after its receipt of such notice, Borrower, at Lender’s expense, shall execute and deliver to Lender in exchange and substitution for the surrendered Note or Notes a new Note to the order of such assignee in an amount equal to the portion of the Loan assigned to it and a new Note to the order of Lender in an amount equal to the portion of the Loan retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate then outstanding principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the Note (modified, however, to the extent necessary so as not to impose duplicative or increased obligations on Borrower and to delete obligations previously satisfied by Borrower). Notwithstanding the provisions of this Article XV , Borrower shall not be responsible or liable for any additional taxes, reserves, adjustments or other costs and expenses that are related to, or arise as a result of, any transfer of the Loan or any interest or participation therein that arise solely and exclusively from the transfer of the Loan or any interest or participation therein or from the execution of the new Note contemplated by this Section 15.5 , including, without limitation, any mortgage tax. Lender and/or the assignees, as the case may be, shall from time to time designate one agent through which Borrower shall request all approvals and consents required or contemplated by this Agreement and on whose statements Borrower may rely.

15.6 Participations .

(a) Lender and each assignee pursuant to this Article XV may sell participations to one or more Persons (other than Borrower or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of the Note held by it); provided , however , that (i) such assignee’s obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such assignee shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such assignee shall remain the holder of any such Note for all purposes of this Agreement and the other Loan Documents, and (iv) Borrower, Lender and the assignees pursuant to this Article XV shall continue to deal solely and directly with such assignee in connection with such assignee’s rights and obligations under this Agreement and the other Loan Documents. In the event that more than one party comprises Lender, Lender shall designate one party to act on the behalf of all parties comprising Lender in providing approvals and all other necessary consents under the Loan Documents and on whose statements Borrower may rely.

(b) Section 15.6(a) above notwithstanding, Lender (as named on the first page of this Agreement and not any successor or assign thereof) agrees to shall use good faith efforts to exclude from any sale or syndication of participation rights by (as named on the first page of this Agreement and not any successor or assign thereof) pursuant to Section 15.6(a) above to those Persons identified on Schedule II .

15.7 Disclosure of Information . Any assignee pursuant to this Article XV may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Article XV , disclose to the assignee or participant or proposed assignee or participant, any information relating to Borrower furnished to such assignee by or on behalf of Borrower; provided , however , that, prior to any such disclosure, the assignee or participant or

proposed assignee or participant shall agree in writing for the benefit of Borrower to preserve the confidentiality of any confidential information received by it.

15.8 Security Interest in Favor of Federal Reserve Bank . Notwithstanding any other provision set forth in this Agreement or any other Loan Document, any assignee pursuant to this Article XV may at any time create a security interest in all or any portion of its rights under this Agreement or the other Loan Documents (including, without limitation, the amounts owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System.

XVI. RESERVE ACCOUNTS

16.1 Tax Reserve Account .

16.1.1 General . Borrower shall, or shall cause Manager to, deposit into the Holding Account an amount equal to (a) one-twelfth of the annual Real Estate Taxes that Lender reasonably estimates, based on the most recent tax bill for the Property, will be payable during the next ensuing 12 months in order to accumulate with Lender sufficient funds to pay all such Real Estate Taxes at least 30 days prior to the imposition of any interest, charges or expenses for the non-payment thereof and (b) one-twelfth of the annual Other Charges that Lender reasonably estimates will be payable during the next ensuing 12 months (said monthly amounts in (a) and (b) above hereinafter called the “ Monthly Tax Reserve Amount ”, and the aggregate amount of funds held in the Tax Reserve Account being the “ Tax Reserve Amount ”).

16.1.2 Disbursement . Lender will, in accordance with Section 3.1.6 hereof, instruct the Cash Management Bank to transfer from the Holding Account the Monthly Tax Reserve Amount to the Tax Reserve Account. Lender will apply the Tax Reserve Amount to payments of Real Estate Taxes and Other Charges required to be made by Borrower pursuant to Article V , Article VII and under the Security Instrument, subject to Borrower’s right to contest Impositions in accordance with Section 7.3 above. In making any payment relating to the Tax Reserve Account, Lender may do so according to any bill, statement or estimate procured from the appropriate public office, without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof. If the amount of funds in the Tax Reserve Account shall exceed the amounts due for Real Estate Taxes and Other Charges pursuant to Article V and Article VII , Lender shall credit such excess against future payments to be made to the Tax Reserve Account. If at any time Lender reasonably determines that the Tax Reserve Amount is not or will not be sufficient to pay Real Estate Taxes and Other Charges by the dates set forth above, Lender shall notify Borrower of such determination and Borrower shall increase its monthly payments to Lender by the amount that Lender reasonably estimates is sufficient to make up the deficiency at least 30 days prior to the imposition of any interest, charges or expenses for the non-payment of such Real Estate Taxes or Other Charges. Upon payment of such Real Estate Taxes and Other Charges, Lender shall reassess the amount necessary to be deposited in the Tax Reserve Account for the succeeding period, which calculation shall take into account any excess amounts remaining in the Tax Reserve Account.

16.2 Insurance Reserve Account .

16.2.1 General . Unless Borrower shall have delivered evidence satisfactory to Lender that the coverage required by Article VI is maintained for the benefit of Borrower by Manager or Guarantor (and evidence of the payment in full of the associated premiums prior to the expiration of any existing coverage), Borrower shall deposit (or cause Manager to deposit) into the Holding Account an amount equal to one-twelfth of the insurance premiums that Lender reasonably estimates, based on the most recent bill, will be payable for the renewal of the coverage afforded by the insurance policies upon the expiration thereof in order to accumulate with Lender sufficient funds to pay all such insurance premiums at least 30 days prior to the expiration of the policies required to be maintained by Borrower pursuant to the terms hereof (said monthly amounts hereinafter called the “ Monthly Insurance Reserve Amount ,” and the aggregate amount of funds held in the Insurance Reserve Account being the “ Insurance Reserve Amount ”).

16.2.2 Disbursement . Lender will, in accordance with Section 3.1.6 hereof, instruct the Cash Management Bank to transfer from the Holding Account the Monthly Insurance Reserve Amount, if any, to the Insurance Reserve Account. Lender will apply the Insurance Reserve Amount to payments of insurance premiums required to be made by Borrower pursuant to Article VI and under the Security Instrument. In making any payment relating to the Insurance Reserve Account, Lender may do so according to any bill, statement or estimate procured from the insurer or agent, without inquiry into the accuracy of such bill, statement or estimate or into the validity thereof. If the amount of funds in the Insurance Reserve Account shall exceed the amounts due for insurance premiums pursuant to Article VI , Lender shall credit such excess against future payments to be made to the Insurance Reserve Account. If at any time Lender reasonably determines that the Insurance Reserve Amount is not or will not be sufficient to pay insurance premiums by the dates set forth above, Lender shall notify Borrower of such determination and Borrower shall increase its monthly payments to Lender by the amount that Lender reasonably estimates is sufficient to make up the deficiency at least 30 days prior to expiration of the applicable insurance policies. Upon payment of such insurance premiums, Lender shall reassess the amount necessary to be deposited in the Insurance Reserve Account for the succeeding period, which calculation shall take into account any excess amounts remaining in the Insurance Reserve Account.

16.3 FF&E Reserve Account .

16.3.1 General . Borrower shall, or shall cause Manager to, deposit into the Holding Account an amount equal to five percent of prior calendar months Operating Income (said monthly amounts hereinafter called the “ Monthly FF&E Reserve Amount ”, and the aggregate amount of funds held in the Tax Reserve Account being the “ FF&E Reserve Amount ”); provided so long as Manager is depositing or otherwise remitting the Monthly FF&E Reserve Amount to the FF&E Holding Account, Borrower shall not be required to, nor shall Borrower be required to cause Manager to, deposit the Monthly FF&E Reserve Amount into the Holding Account.

16.3.2 Disbursement . Lender will, in accordance with Section 3.1.6 hereof, instruct the Cash Management Bank to transfer from the Holding Account the Monthly FF&E

Reserve Amount to the FF&E Reserve Account. Provided no Event of Default has occurred and is continuing, Lender shall make disbursements (but no more frequently than one each calendar month and, other than any final disbursement, the total amount of any request shall not be less than $25,000) from the FF&E Reserve Account (but not in an amount more than the FF&E Reserve Amount on deposit from time to time) to reimburse Borrower or Manager or to provide funds to Borrower or Manager for the acquisition or replacement of FF&E. Lender shall, within 10 Business Days after a written request from Borrower or Manager (and Borrower hereby authorizes Lender to disburse funds pursuant to this Section 16.3 based on instructions from Manager) and satisfaction of the requirements set forth in this Section 16.3 disburse to Borrower or Manager, as applicable, amounts from the FF&E Reserve Account necessary to pay for the actual costs associated with the acquisition or replacement of any FF&E. Each request for disbursement from the FF&E Reserve Account shall be in a form reasonably acceptable to Lender, and which shall, at a minimum, specify the specific items (which may be general categories) for which the disbursement is requested, and the estimated cost for each item of FF&E purchased. Each request for disbursement shall be delivered at least 10 Business Days prior to the date of the requested disbursement and shall include, if applicable, copies of invoices and either (a) evidence satisfactory to Lender of payment of all such amounts or (b) evidence satisfactory to Lender that such amounts will be paid by such disbursement.

XVII. DEFAULTS

17.1 Event of Default .

(a) Each of the following events shall constitute an event of default hereunder (an “ Event of Default ”):

(i) if (A) the Indebtedness is not paid in full on the Maturity Date, (B) any regularly scheduled monthly payment of interest due under the Note is not paid in full on the applicable Payment Date, (C) any prepayment of principal due under this Agreement or the Note is not paid when due, (D) the Liquidated Damages Amount is not paid on the date required by this Agreement or any other Loan Document, (E) any deposit to the Holding Account is not made on the required deposit date therefore and such payment is not made within three Business Days following Notice by Lender; (F) Borrower or Tenant, or any Person on behalf of Borrower or Tenant (other than Lender) (I) delivers instructions to Manager contrary to or inconsistent with the instructions set forth on Exhibit A , or (II) repudiates the payment subordination provided by Tenant for the benefit of Lender in Exhibit A , or (G) except as to any amount included in (A), (B), (C), (D) (E) and/or (F) of this clause (i), any other amount payable pursuant to this Agreement, the Note or any other Loan Document is not paid in full when due and payable in accordance with the provisions of the applicable Loan Document, with such failure continuing for 10 Business Days after Lender delivers written notice thereof to Borrower;

(ii) subject to Borrower’s right to contest as set forth in Section 7.3 , if any of the Impositions or Other Charges are not paid prior to the imposition of any interest, penalty, charge or expense for the non-payment thereof;

(iii) if the insurance policies required by Article VI are not kept in full force and effect, or if certificates of insurance are not delivered to Lender in accordance with Article VI ;

(iv) if, except as permitted pursuant to Article VIII or as may otherwise be effected with the prior written consent of Lender, (A) any Transfer of any direct or indirect legal, beneficial or equitable interest in all or any portion of the Property, (B) any Transfer of any direct or indirect interest in Borrower, General Partner, Guarantor or any other SPE Entity, (C) any Lien or encumbrance on all or any portion of the Property other than Permitted Encumbrances, (D) any pledge, hypothecation, creation of a security interest in or other encumbrance of any direct or indirect interests in Borrower, General Partner, Guarantor or any SPE Entity or (E) the filing of a declaration of condominium with respect to the Property;

(v) if any, representation or warranty made by Borrower herein or by Borrower, Guarantor or any Affiliate of Borrower in any other Loan Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished to Lender shall have been false or misleading in any material respect as of the date the representation or warranty was made, and, if such breach is reasonably susceptible to cure, such breach is not cured within 30 days following written notice from Lender;

(vi) if Borrower, General Partner any SPE Entity or any Guarantor shall make an assignment for the benefit of creditors;

(vii) if a receiver, liquidator or trustee shall be appointed for Borrower, General Partner, any SPE Entity or any Guarantor or if Borrower, General Partner, any SPE Entity or any Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower, General Partner, any SPE Entity or any Guarantor, or if any proceeding for the dissolution or liquidation of Borrower, General Partner, any SPE Entity or any Guarantor shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower, General Partner, any SPE Entity or any Guarantor upon the same not being discharged, stayed or dismissed within 90 days;

(viii) if Borrower, General Partner, any SPE Entity or any Guarantor, as applicable, attempts to assign its rights under this Agreement or any of the other Loan Documents or any interest herein or therein in contravention of the Loan Documents;

(ix) with respect to any term, covenant or provision set forth herein (other than the other subsections of this Section 17.l ) which specifically contains a notice requirement or grace period, if Borrower, any SPE Entity or any Guarantor shall be in default under such term, covenant or condition after the giving of such notice or the expiration of such grace period;

(x) if any of the assumptions contained in the Non-Consolidation Opinion, in any Additional Non-Consolidation Opinion or in any other non-consolidation opinion delivered to Lender in connection with the Loan, or in any other non-

100

consolidation delivered subsequent to the closing of the Loan, is or shall become untrue in any material respect and such untruth is reasonably expected to result in a ruling in favor of substantial consolidation of Borrower;

(xi) if Borrower shall fail to comply with any covenants set forth in Section 5.1.4 , Section 5.2.9 or Section 5.2.20 and such failure is reasonably expected to result in a ruling in favor of substantial consolidation of Borrower;

(xii) except as provided clause (xi) above, if Borrower shall fail to comply in any material respect (to the extent such covenant is not qualified by materiality) or any respect (to the extent such covenant is qualified by materiality) with any covenants set forth in Article V or Section XI with such failure continuing for 15 Business Days after Lender delivers written notice thereof to Borrower;

(xiii) if Borrower shall fail to comply in any material respect (to the extent such covenant is not qualified by materiality) or any respect (to the extent such covenant is qualified by materiality) with any covenants set forth in Section 4 or Section 3(d) or Section 8 of the Security Instrument with such failure continuing for 15 Business Days after Lender delivers written notice thereof to Borrower;

(xiv) [intentionally omitted];

(xv) if this Agreement or any other Loan Document or any Lien granted hereunder or thereunder, in whole or in part, shall terminate or shall cease to be effective or shall cease to be a legally valid, binding and enforceable obligation of Borrower or any Guarantor, or any Lien securing the Indebtedness shall, in whole or in part, cease to be a perfected first priority Lien, subject to the Permitted Encumbrances (except in any of the foregoing cases in accordance with the terms hereof or under any other Loan Document or by reason of any affirmative act of Lender);

(xvi) if the Management Agreement is terminated and a Qualified Manager is not appointed as a replacement manager pursuant to the provisions of Section 5.2.14 within 60 days after such termination;

(xvii) except as expressly permitted pursuant to Section 8.3 hereof, if Borrower or any other Person grants any easement, covenant or restriction (other than the Permitted Encumbrances) over the Property;

(xviii) subject to the terms of Section 7.3 hereof, if Borrower shall default beyond the expiration of any applicable cure period under any existing easement, covenant or restriction which affects the Property, the default of which shall have a Material Adverse Effect;

(xix) if Borrower shall continue to be in Default under any of the other terms, covenants or conditions of this Agreement or of any Loan Document not specified in subsections (i) to (xviii) above, for 30 days after written notice from Lender; provided , however , that if such Default is susceptible of cure but cannot reasonably be cured within such 30-day period and provided further that Borrower shall have commenced to cure such Default within

101

such 30-day period and thereafter diligently proceeds to cure the same, such 30-day period shall be extended for such time as is reasonably necessary for Borrower in the exercise of due diligence to cure such Default, such additional period not to exceed 90 days.

(b) Subject to the terms of Article XVIII , unless waived in writing by Lender, upon the occurrence and during the continuance of an Event of Default Lender may, without notice or demand, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in equity, take such action that Lender deems advisable to protect and enforce its rights against Borrower and in the Property, including, without limitation, (i) declaring immediately due and payable the entire Principal Amount together with interest thereon and all other sums due by Borrower under the Loan Documents, (ii) collecting interest on the Principal Amount at the Default Rate whether or not Lender elects to accelerate the Note and (iii) enforcing or availing itself of any or all rights or remedies set forth in the Loan Documents against Borrower and the Property, including, without limitation, all rights or remedies available at law or in equity; and upon any Event of Default described above, the Indebtedness and all other obligations of Borrower hereunder and under the other Loan Documents shall immediately and automatically become due and payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding. The foregoing provisions shall not be construed as a waiver by Lender of its right to pursue any other remedies available to it under this Agreement, the Security Instrument or any other Loan Document. Any payment hereunder may be enforced and recovered in whole or in part at such time by one or more of the remedies provided to Lender in the Loan Documents.

17.2 Remedies .

(a) Subject to the terms of Article XVIII , unless waived in writing by Lender, upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Indebtedness shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Property. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, Borrower agrees that if an Event of Default is continuing (i) Lender shall not be subject to any one action or election of remedies law or rule and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against the Property and the Security Instrument has been foreclosed, sold and/or otherwise realized upon in satisfaction of the Indebtedness or the Indebtedness has been paid in full.

102

(b) Upon the occurrence and during the continuance of an Event of Default, with respect to the Account Collateral, the Lender may:

(i) without notice to Borrower, except as required by law, and at any time or from time to time, charge, set-off and otherwise apply all or any part of the Account Collateral against the Obligations, Operating Expenses and/or Capital Expenditures for the Property or any part thereof;

(ii) in Lender’s sole discretion, at any time and from time to time, exercise any and all rights and remedies available to it under this Agreement, and/or as a secured party under the UCC;

(iii) demand, collect, take possession of or receipt for, settle, compromise, adjust, sue for, foreclose or realize upon the Account Collateral (or any portion thereof) as Lender may determine in its sole discretion; and

(iv) take all other actions provided in, or contemplated by, this Agreement.

(c) With respect to Borrower, the Account Collateral and the Property, nothing contained herein or in any other Loan Document shall be construed as requiring Lender to resort to the entire Property for the satisfaction of any of the Indebtedness, and Lender may seek satisfaction out of the Property or any part thereof, in its absolute discretion in respect of the Indebtedness. In addition, Lender shall have the right from time to time to partially foreclose this Agreement and the Security Instrument in any manner and for any amounts secured by this Agreement or the Security Instrument then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal or interest, Lender may foreclose this Agreement and the Security Instrument to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose this Agreement and the Security Instrument to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by this Agreement or the Security Instrument as Lender may elect. Notwithstanding one or more partial foreclosures, the Property shall remain subject to this Agreement and the Security Instrument to secure payment of sums secured by this Agreement and the Security Instrument and not previously recovered.

17.3 Remedies Cumulative; Waivers . Subject to the terms of Article XVIII , the rights, powers and remedies of Lender under this Agreement and the Security Instrument shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender’s rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender’s sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as

103

may be deemed expedient. A waiver of one Default or Event of Default with respect to Borrower or any Guarantor shall not be construed to be a waiver of any subsequent Default or Event of Default by Borrower or any Guarantor or to impair any remedy, right or power consequent thereon.

17.4 Costs of Collection . In the event that after an Event of Default: (a) the Note or any of the Loan Documents is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding; (b) an attorney is retained to represent Lender in any bankruptcy, reorganization, receivership, or other proceedings affecting creditors’ rights and involving a claim under the Note or any of the Loan Documents; or (c) an attorney is retained to protect or enforce the lien or any of the terms of this Agreement, the Security Instrument or any of the Loan Documents; then Borrower shall pay to Lender all reasonable attorney’s fees, costs and expenses actually incurred in connection therewith, including costs of appeal, together with interest on any judgment obtained by Lender at the Default Rate.

XVIII. SPECIAL PROVISIONS

18.1 Exculpation .

18.1.1 Exculpated Parties . Except as set forth in this Section 18.1 , the Recourse Guaranty and the Environmental Indemnity, no personal liability shall be asserted, sought or obtained by Lender or enforceable against (a) Borrower, Parent or Guarantor, (b) any Affiliate of Borrower, (c) any Person owning, directly or indirectly, any legal or beneficial interest in Borrower or any Affiliate of Borrower or (d) any direct or indirect partner, member, principal, officer, Controlling Person, beneficiary, trustee, advisor, shareholder, employee, agent, Affiliate or director of any Persons described in clauses (a) through (d) above (collectively, the “ Exculpated Parties ”) and none of the Exculpated Parties shall have any personal liability (whether by suit deficiency judgment or otherwise) in respect of the Obligations, this Agreement, the Security Instrument, the Note, the Property or any other Loan Document, or the making, issuance or transfer thereof, all such liability, if any, being expressly waived by Lender. The foregoing limitation shall not in any way limit or affect Lender’s right to any of the following and Lender shall not be deemed to have waived any of the following:

(i) Foreclosure of the lien of this Agreement and the Security Instrument in accordance with the terms and provisions set forth herein and in the Security Instrument;

(ii) Action against any other security at any time given to secure the payment of the Note and the other Obligations;

(iii) Exercise of any other remedy set forth in this Agreement or in any other Loan Document which is not inconsistent with the terms of this Section 18.1 ;

(iv) Any right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Indebtedness secured by this Agreement and the Security Instrument or to require that all collateral shall continue to secure all of the Indebtedness owing to Lender in accordance with the Loan Documents; or

104

(v) The liability of any given Exculpated Party with respect to any separate written guaranty or agreement given by any such Exculpated Party in connection with the Loan (including, without limitation, the Recourse Guaranty and the Environmental Indemnity).

18.1.2 Carveouts From Non-Recourse Limitations . Notwithstanding the foregoing or anything in this Agreement or any of the Loan Documents to the contrary, there shall at no time be any limitation on Borrower’s or any Guarantor’s liability for the payment (without duplication), in accordance with the terms of this Agreement, the Note, the Security Instrument and the other Loan Documents, to Lender of:

(a) any loss, damage, cost or expense incurred by or on behalf of Lender by reason of the fraudulent acts of or intentional misrepresentations by Borrower, Guarantor or any Affiliate of Borrower or Guarantor;

(b) any loss, damage, cost or expense incurred by or on behalf of Lender by reason of misapplication or misappropriation by Borrower, General Partner, Tenant or any of their respective Affiliates of Proceeds, Rents, Security Deposits and any other funds due to Lender under the Loan Documents (including issues, profits and/or income thereon), in each case, to the extent the same have not been applied toward payment of the Indebtedness, or used for the repair or replacement of the Property in accordance with the provisions of this Agreement; provided that in such case the measure of damages shall not be less than the amount of the funds so misapplied or misappropriated;

(c) any loss, damage, cost or expense incurred by or on behalf of Lender by reason of forfeiture of the Property or Account Collateral due to criminal activity of Borrower or Guarantor;

(d) any loss, damage, cost or expense incurred by or on behalf of Lender by reason of (i) the physical waste to the Property, or (ii) the failure of Borrower to comply with the Section 5.1.24 above;

(e) any loss, damage, cost or expense incurred by or on behalf of Lender by reason of the wrongful removal or destruction of the Property or Account Collateral, by Borrower, General Partner Tenant or any of their respective Affiliates or damage to the Property caused by willful misconduct or gross negligence of Borrower, General Partner, Tenant or any of their respective Affiliates;

(f) any loss, damage, cost or expense incurred by or on behalf of Lender by reason of the failure to pay Operating Expenses (including charges for labor and materials) that results in Liens on the Property or Account Collateral when there is sufficient Operating Income to cover such Operating Expenses;

(g) any loss, damage, cost or expense incurred by or on behalf of Lender by reason of the failure to pay Impositions that results in Liens on the Property or Account Collateral when there is sufficient Operating Income to cover such Impositions;

105

(h) any loss, damage, cost or expense incurred by or on behalf of Lender by reason of all or any part of the Property or the Account Collateral being encumbered by a Lien (other than this Agreement and any other Loan Document) in violation of the Loan Documents when there is sufficient Operating Income to discharge such Lien;

(i) any loss, damage, cost or expense incurred by or on behalf of Lender by reason of the failure of Borrower to comply with any of the provisions of Article XII ;

(j) any loss, damage, cost or expense incurred by or on behalf of Lender by reason of the misapplication or misappropriation by Manager of the amounts or other property credited from time to time to the FF&E Holding Account (including issues, profits and/or income thereon), to the extent the same have not been used for the repair or replacement of the Property or FF&E in accordance with the provisions of this Agreement or the Management Agreement; provided that (i) in such case the measure of damages shall not be less than the amount of the funds so misapplied or misappropriated, and (ii) the terms of this Section 18.1.2(j) shall become void from and after the date Borrower and Tenant deliver to Lender (A) a fully executed Control Agreement granting to and perfecting in favor of Lender a first priority security interest in the FF&E Holding Account, and (B) such Opinion of Counsel and other documents or instruments as Lender shall then reasonable request, in each case, in form and substance acceptable to Lender;

(k) the entire amount of the Indebtedness and all liabilities, obligations, losses, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees, causes of action, suits, claims, demands and adjustments of any nature or description whatsoever) which may at any time be imposed upon, incurred by or awarded against Lender, in the event (and arising out of such circumstances) that (i) Borrower Transfers the Property, or there is a Transfer of the equity interests in Borrower, General Partner or any other SPE Entity in violation of Article VIII (other than as consented to by Lender in writing); (ii) the Property directly or indirectly is used to secure Debt (other than Permitted Debt) obtained by or for the benefit of Borrower in violation of the Loan Documents or otherwise without the consent of Lender, (iii) an involuntary case is commenced against Borrower under the Bankruptcy Code with the collusion of Borrower, Guarantor, Tenant or any of their respective Affiliates, (iv) Borrower commences a voluntary case under the Bankruptcy Code or an order for relief is entered with respect to the Borrower under the Bankruptcy Code through the actions of the Borrower, Guarantor or any of their respective Affiliates at a time when the Borrower is able to pay its debts as they become due unless Borrower and Guarantor shall have received an opinion of independent counsel that the General Partner of Borrower has a fiduciary duty to seek such an order for relief, (v) Borrower, Guarantor or any of their respective Affiliates raise any defense, counterclaim and/or allegation (other than good faith defenses, counterclaims or allegations, in each case, as determined by the finder of facts in such matter) in the exercise of any remedies by Lender under the Loan Documents, (vi) any breach of the Singe Purpose Entity provisions of this Agreement and other Loan Documents, in each case, that is reasonably expected to result in a ruling in favor of substantive consolidation of Borrower, or (vii) Borrower or Tenant, or any Person on behalf of Borrower or Tenant (other than Lender) (I) delivers instructions to Manager contrary to or inconsistent with the instructions set forth on Exhibit A , or (II) repudiates the payment subordination provided by Tenant for the benefit of Lender in Exhibit A (other than with the prior written consent of Lender); and

106

(l) reasonable costs of enforcement and collection (including, reasonable attorney’s fees and expenses) incurred by Lender in connection with any of the foregoing clauses (a) through (k).

XIX. MISCELLANEOUS

19.1 Survival . This Agreement and all covenants, indemnifications, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as all or any of the Indebtedness is outstanding and unpaid unless a longer period is expressly set forth herein or in the other Loan Documents. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party. All covenants, promises and agreements in this Agreement, by or on behalf of Borrower, shall inure to the benefit of the successors and assigns of Lender. If Borrower consists of more than one person, the obligations and liabilities of each such person hereunder and under the other Loan Documents shall be joint and several.

19.2 Lender’s Discretion . Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive.

19.3 Governing Law .

(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER’S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE

107

CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT:

CORPORATION SERVICE COMPANY
80 STATE STREET
ALBANY, NEW YORK 12207-2543

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

19.4 Modification, Waiver in Writing . No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, or of the Note, or of any other Loan Document, or consent to any departure therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought (and, if a Securitization shall have occurred, a Rating Agency Confirmation is obtained), and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to or demand on Borrower shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.

19.5 Delay Not a Waiver . Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right

108

either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.

19.6 Notices . All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) certified or registered United States mail, postage prepaid, return receipt requested, (b) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery or (c) telecopier (with answer back acknowledged), addressed as follows (or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section):


If to Lender:		German American Capital Corporation
		60 Wall Street, 10th floor
		New York, New York 10005
		Attention: William Mott and General Counsel
		Telecopy No.: (212) 737-4489
		Confirmation No.: (212) 250-3606

With a copy to:		Skadden, Arps, Slate, Meagher & Flom LLP
		Four Times Square
		New York, New York 10036
		Attention: Harvey R. Uris, Esq.
		Telecopy No.: (917) 777-2212
		Confirmation No.: (212) 735-3000

If to Borrower:		Ashford Crystal Gateway, LP
		c/o Ashford Hospitality Trust, Inc.
		14185 Dallas Parkway, Suite 1100
		Dallas, Texas 75254
		Attn: General Counsel
		Telecopy No.: (972) 490-9207
		Confirmation No.: (972) 778-9207

With a copy to:		Andrews & Kurth, LLP
		1717 Main Street, Suite 3700
		Dallas, Texas 75201
		Attn: Brigitte Kimichik, Esq.
		Telecopy No.: (214) 659-9605
		Confirmation No.: (214) 659-4441

All notices, elections, requests and demands under this Agreement shall be effective and deemed received upon the earliest of (i) the actual receipt of the same by personal delivery or otherwise, (ii) one (1) Business Day after being deposited with a nationally recognized overnight courier service as required above, (iii) three Business Days after being deposited in the United States mail as required above or (iv) on the day sent if sent by facsimile with confirmation on or before

109

5:00 p.m. New York time on any Business Day or on the next Business Day if so delivered after 5:00 p.m. New York time or on any day other than a Business Day. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given as herein required shall be deemed to be receipt of the notice, election, request, or demand sent.

19.7 TRIAL BY JURY . BORROWER AND ALL PERSONS CLAIMING BY, THROUGH OR UNDER IT, HEREBY EXPRESSLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT, THE SECURITY INSTRUMENT, THE NOTE OR ANY OTHER LOAN DOCUMENT, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, THE SECURITY INSTRUMENT, THE NOTE OR ANY OTHER LOAN DOCUMENT (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND BORROWER HEREBY AGREES AND CONSENTS THAT AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT HERETO TO THE WAIVER OF ANY RIGHT TO TRIAL BY JURY. BORROWER ACKNOWLEDGES THAT IT HAS CONSULTED WITH LEGAL COUNSEL REGARDING THE MEANING OF THIS WAIVER AND ACKNOWLEDGES THAT THIS WAIVER IS AN ESSENTIAL INDUCEMENT FOR THE MAKING OF THE LOAN. THIS WAIVER SHALL SURVIVE THE REPAYMENT OF THE LOAN.

19.8 Headings . The Article and/or Section headings and the Table of Contents in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

19.9 Severability . 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.

19.10 Preferences . To the extent Borrower makes a payment or payments to Lender, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender.

110

19.11 Waiver of Notice . Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Lender to Borrower.

19.12 Expenses; Indemnity

(a) Except as otherwise expressly provided in the Loan Documents, Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse, Lender upon receipt of written notice from Lender for all reasonable costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by Lender in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby and all the costs of furnishing all opinions by counsel for Borrower (including without limitation any opinions requested by Lender pursuant to this Agreement); (ii) [intentionally omitted]; (iii) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents and any other documents or matters as required herein or under the other Loan Documents; (iv) securing Borrower’s compliance with any requests made pursuant to the provisions of this Agreement; (v) the filing and recording fees and expenses, mortgage recording taxes, title insurance and reasonable fees and expenses of counsel for providing to Lender all required legal opinions, and other similar expenses incurred in creating and perfecting the Lien in favor of Lender pursuant to this Agreement and the other Loan Documents; (vi) enforcing or preserving any rights, in response to third party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrower, this Agreement, the other Loan Documents, the Property, or any other security given for the Loan; (vii) enforcing any obligations of or collecting any payments due from Borrower under this Agreement, the other Loan Documents or with respect to the Property or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a work-out or of any insolvency or bankruptcy proceedings and (viii) procuring insurance policies pursuant to Section 6.1.11 ; provided , however , that Borrower shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Lender. Any cost and expenses due and payable to Lender may be paid from any amounts in the Holding Account.

(b) Borrower shall protect, indemnify and save harmless Lender, and all officers, directors, stockholders, members, partners, employees, agents, successors and assigns thereof (collectively, the “ Indemnified Parties ”) from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including all reasonable attorneys’ fees and expenses actually incurred) imposed upon or incurred by or asserted against the Indemnified Parties or the Property or any part of its interest therein, by reason of the occurrence or existence of any of the following (to the extent Proceeds payable on account of the following shall be inadequate; it being understood that in no event will the

111

Indemnified Parties be required to actually pay or incur any costs or expenses as a condition to the effectiveness of the foregoing indemnity) prior to (i) the acceptance by Lender or its designee of a deed-in-lieu of foreclosure with respect to the Property, or (ii) an Indemnified Party or its designee taking possession or control of the Property or (iii) the foreclosure of the Security Instrument, except to the extent caused by the actual willful misconduct or gross negligence of the Indemnified Parties (other than such willful misconduct or gross negligence imputed to the Indemnified Parties because of their interest in the Property): (1) ownership of Borrower’s interest in the Property, or any interest therein, or receipt of any Rents or other sum therefrom, (2) any accident, injury to or death of any persons or loss of or damage to property occurring on or about the Property or any Appurtenances thereto, (3) any design, construction, operation, repair, maintenance, use, non-use or condition of the Property or Appurtenances thereto, including claims or penalties arising from violation of any Legal Requirement or Insurance Requirement, as well as any claim based on any patent or latent defect, whether or not discoverable by Lender, any claim the insurance as to which is inadequate, and any Environmental Claim, (4) any Default under this Agreement or any of the other Loan Documents or any failure on the part of Borrower to perform or comply with any of the terms of any Lease or REA within the applicable notice or grace periods, (5) any performance of any labor or services or the furnishing of any materials or other property in respect of the Property or any part thereof, (6) any negligence or tortious act or omission on the part of Borrower or any of its agents, contractors, servants, employees, sublessees, licensees or invitees, (7) any contest referred to in Section 7.3 hereof, (8) any obligation or undertaking relating to the performance or discharge of any of the terms, covenants and conditions of the landlord contained in the Leases, or (9) the presence at, in or under the Property or the Improvements of any Hazardous Materials in violation of any Environmental Law. Any amounts the Indemnified Parties are legally entitled to receive under this Section which are not paid within 30 days after written demand therefor by the Indemnified Parties or Lender, setting forth in reasonable detail the amount of such demand and the basis therefor, shall bear interest from the date of demand at the Default Rate, and shall, together with such interest, be part of the Indebtedness and secured by the Security Instrument. In case any action, suit or proceeding is brought against the Indemnified Parties by reason of any such occurrence, Borrower shall at Borrower’s expense resist and defend such action, suit or proceeding or will cause the same to be resisted and defended by counsel at Borrower’s reasonable expense for the insurer of the liability or by counsel designated by Borrower (unless reasonably disapproved by Lender promptly after Lender has been notified of such counsel); provided , however , that nothing herein shall compromise the right of Lender (or any Indemnified Party) to appoint its own counsel at Borrower’s expense for its defense with respect to any action which in its reasonable opinion presents a conflict or potential conflict between Lender and Borrower that would make such separate representation advisable; provided further that if Lender shall have appointed separate counsel pursuant to the foregoing, Borrower shall not be responsible for the expense of additional separate counsel of any Indemnified Party unless in the reasonable opinion of Lender a conflict or potential conflict exists between such Indemnified Party and Lender. So long as Borrower is resisting and defending such action, suit or proceeding as provided above in a prudent and commercially reasonable manner, Lender and the Indemnified Parties shall not be entitled to settle such action, suit or proceeding without Borrower’s consent which shall not be unreasonably withheld or delayed, and claim the benefit of this Section 19.12 with respect to such action, suit or proceeding and Lender agrees that it will not settle any such action, suit or proceeding without the consent of Borrower; provided ,

112

however , that if Borrower is not diligently defending such action, suit or proceeding in a prudent and commercially reasonable manner as provided above, and Lender has provided Borrower with 30 days’ prior written notice, or shorter period if mandated by the requirements of applicable law, and opportunity to correct such determination, Lender may settle such action, suit or proceeding and claim the benefit of this Section 19.12 with respect to settlement of such action, suit or proceeding. Any Indemnified Party will give Borrower prompt notice after such Indemnified Party obtains actual knowledge of any potential claim by such Indemnified Party for indemnification hereunder. The Indemnified Parties shall not settle or compromise any action, proceeding or claim as to which it is indemnified hereunder without notice to Borrower.

19.13 Exhibits and Schedules Incorporated . The Exhibits and Schedules annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.

19.14 Offsets, Counterclaims and Defenses . Any assignee of Lender’s interest in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which Borrower may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.

19.15 Liability of Assignees of Lender . No assignee of Lender shall have any personal liability, directly or indirectly, under or in connection with this Agreement or any other Loan Document or any amendment or amendments hereto made at any time or times, heretofore or hereafter, any different than the liability of Lender hereunder. In addition, no assignee shall have at any time or times hereafter any personal liability, directly or indirectly, under or in connection with or secured by any agreement, lease, instrument, encumbrance, claim or right affecting or relating to the Property or to which the Property is now or hereafter subject any different than the liability of Lender hereunder. The limitation of liability provided in this Section 19.15 is (a) in addition to, and not in limitation of, any limitation of liability applicable to the assignee provided by law or by any other contract, agreement or instrument, and (b) shall not apply to any assignee’s gross negligence or willful misconduct.

19.16 No Joint Venture or Partnership; No Third Party Beneficiaries .

(a) Borrower and Lender intend that the relationships created hereunder and under the other Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor to grant Lender any interest in the Property other than that of mortgagee, beneficiary or lender.

(b) This Agreement and the other Loan Documents are solely for the benefit of Lender and Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained

113

herein or therein. All conditions to the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the benefit of Lender and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make the Loan in the absence of strict compliance with any or all thereof and no other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it advisable or desirable to do so.

19.17 Publicity . All news releases, publicity or advertising by Borrower or its Affiliates through any media intended to reach the general public which refers to the Loan Documents or the financing evidenced by the Loan Documents, to Lender, or any of its Affiliates shall be subject to the prior written approval of Lender, which approval shall not be unreasonably withheld.

19.18 Waiver of Marshalling of Assets . To the fullest extent permitted by law, Borrower, for itself and its successors and assigns, waives all rights to a marshalling of the assets of Borrower, Borrower’s partners and others with interests in Borrower and of the Property, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the Property for the collection of the Indebtedness without any prior or different resort for collection or of the right of Lender to the payment of the Indebtedness out of the net proceeds of the Property in preference to every other claimant whatsoever.

19.19 Waiver of Counterclaim and other Actions . Borrower hereby expressly and unconditionally waives, in connection with any suit, action or proceeding brought by Lender on this Agreement, the Note, the Security Instrument or any Loan Document, any and every right it may have to (a) interpose any counterclaim therein (other than a counterclaim which can only be asserted in the suit, action or proceeding brought by Lender on this Agreement, the Note, the Security Instrument or any Loan Document and cannot be maintained in a separate action) and (b) have any such suit, action or proceeding consolidated with any other or separate suit, action or proceeding.

19.20 Conflict; Construction of Documents; Reliance . In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control. The parties hereto acknowledge that they were represented by competent counsel in connection with the negotiation, drafting and execution of the Loan Documents and that such Loan Documents shall not be subject to the principle of construing their meaning against the party which drafted same. Borrower acknowledges that, with respect to the Loan, Borrower shall rely solely on its own judgment and advisors in entering into the Loan without relying in any manner on any statements, representations or recommendations of Lender or any parent, subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation whatsoever in the exercise of any rights or remedies available to it under any of the Loan Documents or any other agreements or instruments which govern the Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of Lender of any equity interest any of them may acquire in Borrower, and Borrower hereby irrevocably waives the right to raise any defense or take any action on the basis of the foregoing with respect to Lender’s exercise of any such

114

rights or remedies. Borrower acknowledges that Lender engages in the business of real estate financings and other real estate transactions and investments which may be viewed as adverse to or competitive with the business of Borrower or its Affiliates.

19.21 Prior Agreements . This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written, are superseded by the terms of this Agreement and the other Loan Documents and unless specifically set forth in a writing contemporaneous herewith the terms, conditions and provisions of any and all such prior agreements do not survive execution of this Agreement.

19.22 Counterparts . This Agreement may be executed in multiple counterparts (whether facsimile, original, portable document format or otherwise), each of which shall constitute an original, but all of which shall constitute one document.

[NO FURTHER TEXT ON THIS PAGE]

115

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.


BORROWER: ASHFORD CRYSTAL GATEWAY LP , a Delaware limited partnership
By:	Ashford Crystal Gateway GP LLC, a Delaware limited liability company, its general partner
By:	/s/ David Brooks
	Name:	David Brooks
	Title:	Vice President

[Marriott Crystal Gateway Loan Agreement Signature Page — Borrower]


LENDER: GERMAN AMERICAN CAPITAL CORPORATION , a Maryland corporation
By:	/s/ Kelly A. Carter
	Name:	Kelly A. Carter
	Title:	Vice President


By:	/s/ William C. Mott Jr.
	Name:	William C. Mott Jr.
	Title:	Managing Director

[Marriott Crystal Gateway Loan Agreement Signature Page — Lender]


LENDER: GERMAN AMERICAN CAPITAL CORPORATION , a Maryland corporation
By:	/s/ Kelly A. Carter
	Name:	Kelly A. Carter
	Title:	Vice President


By:	/s/ William C. Mott Jr.
	Name:	William C. Mott Jr.
	Title:	Managing Director

[Loan and Security Agreement-Signature Page]

Solely for purposes of the indemnity
set forth in Section 5.1.25 above

GUARANTOR:

ASHFORD HOSPITALITY LIMITED
PARTNERSHIP , a Delaware limited
partnership



By:	Ashford GP General Partner LLC, a
	Delaware limited liability company,
	its general partner


By:	/s/ David Brooks
	Name:	David Brooks
	Title:	Vice President

[Marriott Crystal Gateway Loan Agreement Signature Page — Guarantor]

SCHEDULE I
Qualified Institutional Holder Requirements

(a) an insurance company, bank, savings and loan association, investment bank, trust company, commercial credit corporation, pension plan, pension fund, pension fund advisory firm, mutual fund, real estate advisory firm, real estate investment trust or governmental entity or plan,

(b) an investment company, money management firm or a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, which regularly engages in the business of making or owning investments of types similar to the Loan,

(d) any entity Controlled by any of the entities described in clause (a), (b) or (c) above, provided that such entity described in clause (a), (b) or (c) above satisfies the Minimum Equity Threshold and Minimum Total Assets Threshold requirements specified below;

(e) a Qualified Trustee, or single purpose bankruptcy remote entity which contemporaneously pledges its interest in the Loan, in connection with the creation of collateralized debt obligations (“ CDO ”) secured by, or a financing through an “owner trust” of, such interest (any of the foregoing, a “ CDO Securitization Vehicle ”), provided that (1) one or more classes of securities issued by such CDO Securitization Vehicle is initially rated at least investment grade by each of the S&P and Moody’s, or (2) the CDO Asset Manager and, if applicable, each Intervening Trust Vehicle that is not administered and managed by a CDO Asset Manager which is a Qualified Transferee, are each a Qualified Transferee under clauses (a), (b), or (c) of this definition,

(f) a Qualified Trustee in connection with a CMBS securitization of an interest in the Loan (a “ CMBS Securitization Vehicle ”), so long as (A) the special servicer of such Securitization Vehicle has the Required Special Servicer Rating (and, if it fails to maintain such requirement, shall be replaced within thirty days) and (B) the entire “controlling class” of such CMBS Securitization Vehicle is held by one or more entities that are otherwise Qualified Transferees under clauses (a), (b), (c) or (d) of this definition;

(g) an investment fund, limited liability company, limited partnership or general partnership where a Permitted Fund Manager or an entity that is otherwise a Qualified Transferee under clauses (a), (b), (c) or (d) of this definition acts as the general partner, managing member or fund manager and at least 50% of the equity interests in such investment vehicle are owned, directly or indirectly, by one or more entities that are otherwise Qualified Transferees under clause (a), (b), (c) or (d) of this definition; or

Schedule I - 1

(h) any party Controlled, Controlling or under common Control with the assigning Lender;

provided in each case of clauses (a), (b) or (c) of this definition that such party has (except with respect to a pension advisory firm or similar fiduciary) capital/statutory surplus or shareholders’ equity not less than the Minimum Equity Threshold and total assets not less than the Minimum Total Assets Threshold (in name or under management), and is regularly engaged in the business of making or owning commercial real estate loans or commercial loans similar to the Loan; or any entity Controlling, Controlled by or under common Control with (in each case, as defined below) any of the entities described in clauses (a), (b) or (c) above.

For purposes of this Schedule I only, the following terms shall have the meanings ascribed to the below:

(i) “ CDO Asset Manager ” with respect to any CDO Securitization Vehicle, shall mean the entity which is responsible for managing or administering the applicable interest in the Loan as an underlying asset of such CDO Securitization Vehicle or, if applicable, as an asset of any Intervening Trust Vehicle (including, without limitation, the right to exercise any consent and control rights available to the holder of such interest in the Loan).

(ii) “ CDO Securitization Vehicle ” has the meaning provided in the definition of Qualified Transferee.

(iii) “ CDO ” has the meaning provided in the definition of Qualified Transferee.

(iv) “ Control ” means the ownership, directly or indirectly, in the aggregate of more than 50% of the beneficial ownership interests of an entity and the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity, whether through the ability to exercise voting power, by contract or otherwise (“ Controlled ” and “ Controlling ” have meanings correlative thereto).

(v) “ Intervening Trust Vehicle ” means, with respect to any CDO Securitization Vehicle, a trust vehicle or entity which holds the applicable portion of the Loan as collateral securing (in whole or in part) any obligation or security held by such CDO Securitization Vehicle as collateral for the CDO.

(vi) “ Mezzanine Loan ” shall have the meaning set forth in the Agreement to which this Schedule I is attached.

(vii) “ Minimum Equity Threshold ” means $250,000,000.

(viii) “ Minimum Total Assets Threshold ” means $600,000,000.

(ix) “ Permitted Fund Manager ” means any Person that on the date of determination is (A) a nationally recognized manager of investment funds investing in debt or equity interests relating to commercial real estate, (B) investing through a fund with

committed capital of at least $250,000,000 and (C) not subject to a bankruptcy or similar proceeding.

(x) “ Preferred Equity ” shall have the meaning set forth in the Agreement to which this Schedule I is attached.

(xi) “ Qualified Trustee ” means (A) a corporation, national bank, national banking association or a trust company, organized and doing business under the laws of any state or the United States of America, authorized under such laws to exercise corporate trust powers and to accept the trust conferred, having a combined capital and surplus of at least $100,000,000 and subject to supervision or examination by federal or state authority, (B) an institution insured by the Federal Deposit Insurance Corporation or (C) an institution whose long term senior unsecured debt is rated either of the then in effect top two rating categories of each of the Rating Agencies.

(xii) “ Required Special Servicer Rating ” means (A) a rating of “CSS1” in the case of Fitch, (B) on the S&P list of approved special servicers in the case of S&P and (C) in the case of Moody’s, such special servicer is acting as special servicer in a commercial mortgage loan securitization that was rated by Moody’s within the 12 month period prior to the date of determination, and Moody’s has not downgraded or withdrawn the then current rating on any class of commercial mortgage securities or placed any class of commercial mortgage securities on watch citing the continuation of such special servicer as special servicer of such commercial mortgage securities.

SCHEDULE II
Restricted Party List

Real Estate Investment Trusts, brands and direct competitors of Parent, and each of their respective Affiliates

Schedule II - 1

SCHEDULE III
Litigation

None

Schedule III - 1

SCHEDULE IV
REAs

Easement granted to the County Board of Arlington County, Virginia, dated August 12, 1969, recorded September 23, 1969, in Deed Book 1711, page 306, for public street and utilities. NOTE : Deed of Partial Vacation and Relocation of Easement dated October 3, 1980, and recorded January 29, 1981, in Deed Book 2033, page 619.

Certificate dated December 26, 1972, and recorded January 12, 1973, in Deed Book 1808, page 44, and Order recorded in Deed Book 1878, page 524, evidences that taking of the following:

	(a)		Easement to construct, reconstruct, alter, operate and maintain a public street or highway, including any necessary appurtenances thereof, drainage and/or utilities and cut and/or fill slopes, retaining wall footings and piles as detailed therein.

	(b)		Any and all easements of access, light or air incident to the land abutting said Limited Access Highway Rt 595, any ramps, loops or connection at or with intersection highways, pursuant to Article 4, Chapter 1, Title 33.1 of the Code of Virginia, 1950, as amended.

Certificate dated December 21, 1972, and recorded January 12, 1973, in Deed Book 1808, page 48, and Order recorded in Deed Book 1877, page 716, evidences the taking of the following:

	(a)		Easement to construct, reconstruct, alter, operate and maintain in public street or highway, including any necessary appurtenances thereof, drainage and/or utilities and cut and/or fill slopes as detailed herein.

	(b)		Any and all easements of access, light or air incident to the land abutting said Limited Access Highway Rt 595, any ramps, loops or connection at or with intersection highways, pursuant to Article 4, Chapter 1, Title 33.1 of the Code of Virginia, 1950, as amended.

Certificate dated December 27, 1972, and recorded January 12, 1973, in Deed Book 1808, page 51, and Order recorded in Deed Book 1877, page 716, evidences the taking of the following:

	(a)		Easement to construct, reconstruct, alter, operate and maintain a public street or highway, including any necessary appurtenances thereof, drainage and/or utilities, retaining wall footings and piles and cut necessary and cut and/or fill slopes as detailed therein.

	(b)		Any and all easements of access, light or air incident to the land abutting said Limited Access Highway Rt 595, any ramps, loops or connection at or with intersection highways, pursuant to Article 4, chapter 1, Title 33.1 of the Code of Virginia, 1950, as amended.

Schedule IV - 1

Certificate dated December 21, 1972, and recorded January 12, 1973, in Deed Book 1808, page 58, and Order recorded in deed Book 1877, page 716, evidences the taking of the following:

	(a)		Easement to construct, reconstruct, alter, operate and maintain a public street or highway, including any necessary appurtenances thereof, drainage and/or utilities retaining wall footings and piles and cut and/or fill slopes as detailed therein.

	(b)		Any and all easements of access, light or air incident to the land abutting said Limited Access Highway Rt 595, any ramps, loops or connection at or with intersection highways, pursuant to Article 4, Chapter 1, Title 33.1 of the Code of Virginia, 1950 as amended.

Certificate dated December 20, 1972, and recorded January 12, 1973, in Deed Book 1808, page 62, and Order recorded in Deed Book 1877, page 716, evidences the taking of the following:

	(a)		Easement to construct, reconstruct, alter, operate and maintain a public street or highway, including any necessary appurtenances thereof, drainage and /or utilities and cut and/or fill slopes, retaining wall footings and piles as detailed therein.

	(b)		Any and all easements of access, light or air incident to the land abutting said Limited Access Highway Rt 595, any ramps, loops or connection at or with intersection highways, pursuant to Article 4, Chapter 1, Title 33.1 of the Code of Virginia, 1950, as amended.

Certificate dated January 3, 1973, and recorded January 22, 1973, in Deed Book 1808, page 512, and Order recorded in Deed Book 1877, page 716, evidences the taking of the following:

	(a)		Easement to construct, reconstruct, alter, operate and maintain a public street or highway, including any necessary appurtenances thereof, drainage and/or utilities and cut and/or fill slopes, as detailed therein.

	(b)		Any and all easements of access, light or air incident to the land abutting said Limited Access Highway Rt 595, any ramps, loops or connection at or with intersection highways, pursuant to Article 4, Chapter 1, Title 33.1 of the Code of Virginia, 1950, as amended.

Easement granted to Washington Metropolitan Area Transit Authority recorded August 21 1973, in Deed Book 1834, page 554, to construct, operate and maintain an underground rapid rail transit structure and facilities and public utilities together with appurtenances and rights as partly shown on the Survey.

Easement granted to the County Board of Arlington County, Virginia, dated September 19, 1980, recorded October 7, 1980, in Deed Book 2023, page 1730, to provide an underground access easement for emergency vehicles to parking spaces such as fire

Schedule IV - 2

fighting equipment, rescue and ambulance and police vehicles together with appurtenances and rights as detailed therein.

10.

Deed of Easement between Washington Metropolitan Area Transit Authority and EADS Associates, a Virginia limited partnership, dated December 8, 1980, and recorded December 22, 1980, Deed Book 2030, page 1375, as partly shown on the Survey.

11.

Easement granted to Virginia Electric and Power Company dated January 29, 1982, recorded June 14, 1982, in Deed Book 2063, page 1379, to construct, operate and maintain underground conduits and cables together with appurtenances and rights as shown on the Survey.

12.

Easement granted to the County Board of Arlington County, Virginia, dated July 3, 1986, recorded August 27, 1986, in Deed Book 2231, page 1330, for public street and utility purposes as shown on the Survey.

13.

Terms, duties, conditions, easements, obligations and/or provisions of Easement Agreement by and between EADS Condominium Corporation, a Virginia corporation, and EADS Associates, a Virginia limited partnership, dated August 28, 1986, and recorded September 2 1986, in Deed Book 2232, page 1307, for reciprocal access, utilities, and encroachments as detailed therein; see instrument for particulars.

14.

Terms, duties, conditions, obligations and/or provisions contained in Agreement by and between EADS Associates and the Commonwealth of Virginia, acting by and through the State Highway and Transportation Commissioner, dated May 14, 1981, unrecorded.

Schedule IV - 3

EXHIBIT A

IRREVOCABLE DIRECTION LETTER

[see attached]

Exhibit A - 1

IRREVOCABLE DIRECTION LETTER

October 29, 2010

VIA FACSIMILE AND FEDERAL EXPRESS

Marriott Hotel Services, Inc.
c/o Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Law Department 52/923 — Hotel Operations
Phone: (301)380-9555
Fax: (301)380-6727

Ladies and Gentlemen:

Reference is made to that certain Management Agreement between Marriott Hotel Services, Inc. (together with its successors and permitted assigns, “Manager”) and Ashford Gateway TRS Corporation (together with its successors and permitted assigns, “Tenant”) dated as of July 13, 2006, as amended by that certain (a) side letter dated July 13, 2006, (b) First Amendment dated July 17, 2007, (c) side letter dated September 26, 2008, (d) Second Amendment dated February 20, 2009, (e) Third Amendment dated December , 2009, and (f) side letter dated April 6, 2010 (collectively as amended, the “Management Agreement”). Reference is also made to that certain (x) Owner Agreement, among Ashford Crystal Gateway LP, as landlord (together with its successors and permitted assigns, “Landlord”), Owner, as tenant, and Manager, as manager dated July 13, 2006 (as modified and amended from time to time, the “Owner Agreement”), and (y) the Real Estate and Personal Property Taxes Agreement dated as of February 20, 2009, among Manager, Landlord and Tenant, as amended by the First Amendment date the date hereof (the “Tax Escrow Agreement”).

German American Capital Corporation, a Maryland corporation (together with its successors and assigns, “Lender”) has entered into a financing transaction with Landlord, pursuant to which Lender has made a $105,000,000 mortgage loan (“Loan”) to and for the benefit of Landlord. The Loan is evidenced by, inter alia , that certain Loan and Security Agreement dated the date hereof between Lender and Landlord (as amended, restated, replaced, supplemented or otherwise modified from time to time, the “Loan Agreement”). As security for the obligations of Landlord under such financing transaction, (i) Landlord has granted to Lender a first lien and security interest in its realty, inventory, accounts and its tangible and intangible personal property, including, with limitation all rights of Landlord under, in and to the Management Agreement and Owner Agreement, and (ii) Tenant has collaterally assigned to Lender all of its rights under the Management Agreement, Owner Agreement and Tax Escrow Agreement, in each case, including the right to receive all amounts payable to Tenant or Landlord under the Management Agreement, Owner Agreement or Tax Escrow Agreement. As a material inducement to Lender providing such financing to the Landlord, Lender has required that Landlord and Tenant obtain Manager’s agreement to the provisions of this Payment Direction Letter.

Accordingly, Manager hereby agrees with Landlord, Tenant and Lender as follows:

(i) With respect to all amounts due or otherwise payable to Tenant or Landlord pursuant to or otherwise with respect to the Management Agreement or Owner’s Agreement, Manager is instructed to, and shall, make all such payments due on and after the date of this Payment Direction Letter directly to the account listed on Exhibit A , or such other account as may be specified from time to time by Lender (the “ Collection Account "').

(ii) With respect to all amounts due or otherwise payable to Tenant pursuant to or otherwise with respect to the Tax Escrow Agreement, Manager is instructed to, and shall, make all such payments due on and after the date of this Payment Direction Letter directly to the Collection Account.

(iii) Without limiting the terms of clauses (i) and (ii) above, Tenant agrees that Tenant’s right to receive any and all payments or other sums due to Tenant under the Management Agreement, Owner’s Agreement or Tax Escrow Agreement is, and from and after the date hereof shall be, subordinated to the payment in full of the Loan and other Indebtedness (as defined in the Loan Agreement) due to the Lender. If following the occurrence and during the continuation of an Event of Default (as defined in the Loan Agreement) Tenant receives any sums under or on account of the Management Agreement, Owner’s Agreement or Tax Escrow Agreement for whatever reason or from whatever source, then Tenant shall hold such sums in trust for the benefit of Lender, and shall, within one Business Day following receipt of the same, pay and deliver (or cause to be paid or delivered) such sums directly to Lender.

(iv) All payments under the Management Agreement or the Owner’s Agreement shall be made by Manager to the Collection Account and to no other account, in accordance with the terms of the Management Agreement and the Subordination, Non- Disturbance and Attornment Agreement of even date herewith, executed by Lender, Landlord, Tenant and Manager, unless and until Manager receives written notification from an officer of Lender.

(v) Without the prior written consent of Lender, each of Tenant and Landlord agree that it shall not terminate, amend, revoke or modify this Payment Direction Letter in any manner or direct or cause the Manager to pay any amount in any manner other than as provided specifically in this Payment Direction Letter. Lender, and not Manager, shall be responsible for enforcement of the Landlord’s and Tenant’s agreement not to terminate, amend, revoke or modify this Payment Direction Letter or direct or cause the Manager to pay any amount other than as provided specifically herein.

(vi) The provisions of this Payment Direction Letter cannot be modified or rescinded without Lender’s prior written consent. The signatures of Manager, Tenant and Landlord set forth below indicates their agreement with the terms hereof.

This Payment Direction Letter shall be governed by, construed in accordance with and enforced under the laws of the State of New York without references to its choice of law provisions, and without the aid of any custom, canon or rule requiring construction against the draftsman. This Payment Direction Letter may be signed in two or more counterparts (whether

facsimile, original, portable document format or otherwise), each of which shall constitute an original and together shall constitute one and the same instrument. Lender is an express third party beneficiary the terms, conditions and covenants set forth in this Payment Direction Letter.

[REMAINDER OF PAGE BLANK]

If the foregoing is acceptable to Landlord, Tenant, Manager and Lender, please acknowledge your agreement and acceptance of this Payment Direction Letter by duly signing and promptly returning a copy of this Payment Direction Letter.


LANDLORD: ASHFORD CRYSTAL GATEWAY LP, a Delaware limited partnership

By:	Ashford Crystal Gateway GP LLC, a Delaware limited liability company, its general partner

By:	/s/ David Brooks
	Name:	David Brooks
	Title:	Vice President

OWNER: ASHFORD GATEWAY TRS CORPORATION, a Delaware corporation
By:	/s/ David Kimichik
	Name:	David Kimichik
	Title:	President

[ Irrevocable direction Letter-signature Page ]


LENDER: GERMAN AMERICAN CAPITAL CORPORATION, a Maryland corporation
By:	/s/ Kelly a. Carter
	Name:	Kelly a. Carter
	Title:	Vice President


By:	/s/ William C. Mott Jr
	Name:	William C. Mott Jr.
	Title:	Managing Director

[ Irrevocable direction Letter-signature Page ]


	LENDER: GERMAN AMERICAN CAPITAL CORPORATION, a Maryland corporation
	By:
		Name:
		Title:


	By:
		Name:
		Title:


Accepted this 29 ^th day of October, 2010 MARRIOTT HOTEL SERVICES, INC. a Delaware corporation
By:	/s/ Horace E. Jordon
	Name:	Horace E. Jordon
	Title:	Vice President

Marriott Crystal Gateway Irrevocable Payment Direction Letter — Borrower/Tenant/Manager/Lender

EXHIBIT A TO
PAYMENT DIRECTION LETTER


BANK:		Deutsche Bank Trust Company Americas
ABA NUMBER:		021001033
ACCOUNT NUMBER:		01-419-647
REFERENCE:		PORT S62698.1 HOLDING ACCOUNT
ATTENTION:		Anabelle Roa

Exhibit A

EXHIBIT B
BORROWER ORGANIZATIONAL STRUCTURE
[see attached]

Exhibit B-1

EXHIBIT C
INTENTIONALLY OMITTED

Exhibit C-1

EXHIBIT D
CERTIFICATE OF INDEPENDENT MANAGER/MEMBER/DIRECTOR

THE UNDERSIGNED,____________________, hereby certifies as follows:

1. I have been elected to serve as an independent member/manager/director and independent member/manager/director of _________, a ________ limited liability company/corporation (the “ Company ”). [The Company’s sole purpose is to serve as __________________ (the “Borrower”)].

2. I am aware that under its Limited Liability Company Agreement/Articles of Incorporation and By Laws, the Company is required to have at least two so-called [“ Independent Managers ” and “ Independent Members “][“ Independent Directors ”].

3. I hereby certify that I am aware of the definition of and requirement for [Independent Managers and Independent Members][Independent Directors] as set forth in the [Limited Liability Company Agreement][Articles of Incorporation and By Laws] of the Company, including but not limited to, the requirement that when voting on a matter put to the vote of[ the membership or board of managers][board of directors], that notwithstanding that the Company [or the Borrower] may be insolvent, an Independent Manager/Independent Director shall, to the extent permitted by law, take into account the interest of the creditors of the Company [and the Borrower] as well as the interest of the Company [and the Borrower]. As an [Independent Manager and Independent Member][Independent Director] of the Company, I will vote in accordance with my fiduciary duties under applicable law.

4. I hereby certify that I meet the requirements of [an Independent Manager and Independent Member as set forth in the Operating Agreement] [an Independent Director as set forth in the Articles of Incorporation and the By Laws].

5. I certify that, subject to my fiduciary duties as an[ Independent Manager and Independent Member][Independent Director], it is my intention as a so-called [“Independent Manager” and “Independent Member"][“Independent Director"] to take into account, to the extent permitted by law, the interest of all creditors of the Company [and the Borrower] as well as the Company [and the Borrower] in fulfilling my duties as an [Independent Manager and Independent Member][Independent Director] of the Company.

6. I understand that German American Capital Corporation and its successors, participants, transferees and assigns, will rely on this Certificate in conjunction with loans to be made to the Borrower.

Executed as of this ___ day of _________, 200__.




	Print Name:

Exhibit D-1

EXHIBIT E
ARTICLE 8 “OPT IN” LANGUAGE

Section _. Shares and Share Certificates

a.		Shares . A [Member’s limited liability company interest in the Company] [Partner’s limited partnership interest in the Partnership] shall be represented by the Shares issued to such [Member by the Company][Partner of the Partnership] . All of a [Member’s][Partner’s] Shares, in the aggregate, represent such [Member’s][Partner’s] entire [Partner by the Partnership] [limited liability company interest in the Company [limited partnership interest in the Partnership]. The [Member][Partner] hereby agrees that its interest in the [Company][Partnership] and in its Shares shall for all purposes be personal property. A [Member] [Partner] has no interest in specific [Company][Partnership] property. “ Share ” means a [limited liability company interest][limited partnership interest] in the [Company][Partnership] held by a [Member][Partner].

b.		Share Certificates .

	i.		Upon the issuance of Shares to any [Member][Partner] in accordance with the provisions of this Agreement, the [Company][Partnership] shall issue one or more Share Certificates in the name of such [Member][Partner]. Each such Share Certificate shall be denominated in terms of the number of Shares evidenced by such Share Certificate and shall be signed by the [Member][Partner] on behalf of the [Company][Partnership]. “ Share Certificate ” means a non-negotiable certificate issued by the [Company][Partnership] substantially in the form of Schedule hereto, which evidences the ownership of one or more Shares. Each Share Certificate shall bear the following legend: “This certificate evidences an interest in _______________________ and shall be a security interest for purposes of Article 8 of the Uniform Commercial Code of the State of Delaware and the Uniform Commercial Code of any other Jurisdiction.” This provision shall not be amended, and no such purported amendment to this provision shall be effective until all outstanding certificates have been surrendered for cancellation.

	ii.		The [Company][Partnership] shall issue a new Share Certificate in place of any Share Certificate previously issued if the holder of the Shares represented by such Share Certificate, as reflected on the books and records of the [Company][Partnership].

	(1)		makes proof by affidavit, in form and substance satisfactory to the [Company][Partnership], that such previously issued Share Certificate has been lost, stolen or destroyed.

	(2)		requests the issuance of a new Share Certificate before the [Company][Partnership] has notice that such previously issued Share Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;

Exhibit E-1

	(3)		if requested by the [Company][Partnership], delivers to the [Company][Partnership] a bond, in form and substance satisfactory to the [Company][Partnership], with such surety or sureties as the [Company][Partnership] may direct, to indemnify the [Company][Partnership] against any claim that may be made on account of the alleged loss, destruction or theft of the previously issued Share Certificate; and

	(4)		satisfies any other reasonable requirements imposed by the [Company][Partnership].

iii.

Subject to the restrictions set forth in [describe Loan Agreement/Mezzanine Loan Agreement restrictions] upon a [Member’s][Partner’s]’s Transfer in accordance with the provisions of this Agreement of any or all Shares represented by a Share Certificate, the Transferee of such Shares shall deliver such Share Certificate to the [Company][Partnership] for cancellation, and the [Company][Partnership] shall thereupon issue a new Share Certificate to such Transferee for the number of Shares being Transferred and, if applicable, cause to be issued to such [Member][Partner] a new Share Certificate for that number of Shares that were represented by the canceled Share Certificate and that are not being Transferred. “ Transfer ” means, with respect to any Shares, and when used as a verb, to sell or assign such Shares, and, when used as a noun, shall have a meaning that correlates to the foregoing. “ Transferee ” means an assignee or transferee. “ Transferor ” means the Person making a Transfer.

Free Transferability . Except as limited by the [describe Loan Agreement/Mezzanine Loan Agreement restrictions], to the fullest extent permitted by the Act, any [Member][Partner] may, at any time or from time to time, without the consent of any other Person, Transfer, pledge or encumber any or all of its Shares. Subject to the restrictions of the [describe Loan Agreement/Mezzanine Loan Agreement restrictions], the Transferee of any Shares shall be admitted to the [Company][Partnership] as a substitute member of the [Company][Partnership] on the effective date of such Transfer upon (i) such Transferee’s written acceptance of the terms and provisions of this Agreement and its written assumption of the obligations hereunder of the Transferor of such Shares, which shall be evidenced by such Transferee’s execution and delivery to the [Company][Partnership] of an Application for Transfer of Shares on the reverse side of the Share Certificate representing the Shares being transferred, and (ii) the recording of such Transferee’s name as a Substitute [Member][Partner] on the books and records of the [Company][Partnership]. Any Transfer of any Shares pursuant to this Section __ shall be effective as of the later of (i) the close of business on the day on which such Transfer occurs, or (ii) the effective date and time of such Transfer that is designated in the Application for Transfer of Shares delivered by the Transferee to the [Company][Partnership].

Exhibit E-2

EXHIBIT 21.1

SUBSIDIARIES OF ASHFORD HOSPITALITY TRUST, INC.


		Jurisdiction of
		Incorporation/
Subsidiaries		Organization

Ashford Hospitality Trust, Inc.		Maryland
9181-3543 Quebec Inc.		Delaware
AH Hotel GP LLC		Delaware
AH Hotel Partners LP		Delaware
AH Tenant Corporation		Delaware
ARHM – ND, L.P.		Delaware
ARHM North Dallas – GP, LLC		Delaware
Annapolis Maryland Hotel Limited Partnership		Delaware
Annapolis Hotel GP LLC		Delaware
Ashford 1031 GP LLC		Delaware
Ashford Alpharetta Limited Partnership		Delaware
Ashford Anaheim GP LLC		Delaware
Ashford Anaheim LP		Delaware
Ashford Anchorage GP LLC		Delaware
Ashford Anchorage LP		Delaware
Ashford Atlanta Buckhead LP		Delaware
Ashford Atlantic Perimeter LP		Delaware
Ashford Atlantic Beach LP		Delaware
Ashford Austin LP		Delaware
Ashford Basking Ridge LP		Delaware
Ashford Birmingham LP		Delaware
Ashford Bloomington LP		Delaware
Ashford Bridgewater Hotel Partnership, LP		Delaware
Ashford Bucks County LLC		Delaware
Ashford Buena Vista LP		Delaware
Ashford Buford I LP		Delaware
Ashford Buford II LP		Delaware
Ashford BWI Airport LP		Delaware
Ashford Canada Trust		Delaware
Ashford Centerville Limited Partnership		Delaware
Ashford Charlotte Limited Partnership		Delaware
Ashford Chicago O’Hare GP LLC		Delaware
Ashford Chicago O’Hare LP		Delaware
Ashford CM GP LLC		Delaware
Ashford CM Partners LP		Delaware
Ashford Columbus LP		Delaware
Ashford Coral Gables LP		Delaware
Ashford Credit Holding LLC		Delaware
Ashford Crystal City GP LLC		Delaware
Ashford Crystal City Limited Partnership		Delaware
Ashford Crystal City Partners LP		Delaware
Ashford Crystal Gateway GP LLC		Delaware
Ashford Crystal Gateway LP		Delaware
Ashford Dallas LP		Delaware
Ashford Dearborn GP LLC		Delaware
Ashford Dulles LP		Delaware
Ashford Durham I LLC		Delaware
Ashford Durham II LLC		Delaware
Ashford Edison LP		Delaware
Ashford Evansville I LP		Delaware


		Jurisdiction of
		Incorporation/
Subsidiaries		Organization

Ashford Evansville III LP		Delaware
Ashford Falls Church Limited Partnership		Delaware
Ashford Flagstaff LP		Delaware
Ashford Ft. Lauderdale Weston I LLC		Delaware
Ashford Ft. Lauderdale Weston II LLC		Delaware
Ashford Ft. Lauderdale Weston III LLC		Delaware
Ashford Gaithersburg Limited Partnership		Delaware
Ashford Gateway TRS Corporation		Delaware
Ashford GCH Beverage, Inc.		Delaware
Ashford Hawthorne LP		Delaware
Ashford HHC LLC		Delaware
Ashford HHC II LLC		Delaware
Ashford HHC III LLC		Delaware
Ashford HHC Partners LP		Delaware
Ashford HHC Partners II LP		Delaware
Ashford HHC Partners III LP		Delaware
Ashford GCH Beverage, Inc.		Delaware
Ashford Holtsville LP		Delaware
Ashford Hospitality Finance Albuquerque General Partner LLC		Delaware
Ashford Hospitality Finance Albuquerque LP		Delaware
Ashford Hospitality Finance California General Partner LLC		Delaware
Ashford Hospitality Finance General Partner LLC		Delaware
Ashford Hospitality Finance LP		Delaware
Ashford Hospitality Finance La Jolla LP		Delaware
Ashford Hospitality Limited Partnership (“Ashford OP”)		Delaware
Ashford Hospitality Servicing LLC		Delaware
Ashford IHC, LLC		Delaware
Ashford IHC Partners LP		Delaware
Ashford Investment Management GP LLC		Delaware
Ashford Investment Management LP		Delaware
Ashford Irvine Spectrum Foothill Ranch Limited Partnership		Delaware
Ashford Jacksonville I LP		Delaware
Ashford Jacksonville II LP		Delaware
Ashford Jacksonville III GP LLC		Delaware
Ashford Jacksonville III LP		Delaware
Ashford Jacksonville IV GP LLC		Delaware
Ashford Jacksonville IV LP		Delaware
Ashford Kansas City LP		Delaware
Ashford Kennesaw I LP		Delaware
Ashford Kennesaw II LP		Delaware
Ashford Las Vegas LP		Delaware
Ashford Laundry LLC		Delaware
Ashford Lawrenceville LP		Delaware
Ashford Lee Vista GP LLC		Delaware
Ashford Lee Vista Partners LP		Delaware
Ashford LLB C-Hotel Management, LP		Delaware
Ashford LLB F-Inn Management LP		Delaware
Ashford LLB SHS Management LP		Delaware
Ashford LMND LLC		Delaware
Ashford Louisville LP		Delaware
Ashford LV Hughes Center LP		Delaware
Ashford Manhattan Beach LP		Delaware
Ashford Market Center LP		Delaware
Ashford Mezz Borrower LLC		Delaware
Ashford Minneapolis Airport GP LLC		Delaware


		Jurisdiction of
		Incorporation/
Subsidiaries		Organization

Ashford Minneapolis Airport LP		Delaware
Ashford Mira Mesa San Diego Limited Partnership		Delaware
Ashford Mobile LP		Delaware
Ashford MV San Diego GP LLC		Delaware
Ashford MV San Diego LP		Delaware
Ashford Newark LP		Delaware
Ashford Oakland LP		Delaware
Ashford OP General Partner LLC		Delaware
Ashford OP Limited Partner LLC		Delaware
Ashford Orlando Sea World Limited Partnership		Delaware
Ashford Overland Park Limited Partnership		Delaware
Ashford PH GP LLC		Delaware
Ashford PH Partners LP		Delaware
Ashford Philadelphia Annex LLC		Delaware
Ashford Philly GP LLC		Delaware
Ashford Philly LP		Delaware
Ashford Phoenix Airport LP		Delaware
Ashford Plano-C LP		Delaware
Ashford Plano-M LP		Delaware
Ashford Plano-R LP		Delaware
Ashford Plymouth Meeting LP		Delaware
Ashford Pool I GP LLC		Delaware
Ashford Pool II GP LLC		Delaware
Ashford Properties General Partner LLC		Delaware
Ashford Properties General Partner Sub I LLC		Delaware
Ashford Raleigh Limited Partnership		Delaware
Ashford Richmond LP		Delaware
Ashford Ruby Palm Desert I Limited Partnership		Delaware
Ashford Salt Lake Limited Partnership		Delaware
Ashford San Francisco GP LLC		Delaware
Ashford San Francisco LP		Delaware
Ashford San Francisco II LP		Delaware
Ashford San Jose LP		Delaware
Ashford Santa Clara GP LLC		Delaware
Ashford Santa Clara Partners LP		Delaware
Ashford Santa Fe LP		Delaware
Ashford Sapphire Acquisition LLC		Delaware
Ashford Sapphire GP LLC		Delaware
Ashford Sapphire I GP LLC		Delaware
Ashford Sapphire II GP LLC		Delaware
Ashford Sapphire III GP LLC		Delaware
Ashford Sapphire V GP LLC		Delaware
Ashford Sapphire VI GP LLC		Delaware
Ashford Sapphire VII GP LLC		Delaware
Ashford Sapphire Junior Holder I LLC		Delaware
Ashford Sapphire Junior Holder II LLC		Delaware
Ashford Sapphire Junior Mezz I LLC		Delaware
Ashford Sapphire Junior Mezz II LLC		Delaware
Ashford Sapphire Senior Mezz I LLC		Delaware
Ashford Sapphire Senior Mezz II LLC		Delaware
Ashford Scottsdale LP		Delaware
Ashford Seattle Downtown LP		Delaware
Ashford Seattle Waterfront LP		Delaware
Ashford Senior General Partner LLC		Delaware
Ashford Senior General Partner I LLC		Delaware


		Jurisdiction of
		Incorporation/
Subsidiaries		Organization

Ashford Senior General Partner II LLC		Delaware
Ashford Senior General Partner III LLC		Delaware
Ashford Senior General Partner IV LLC		Delaware
Ashford Syracuse LP		Delaware
Ashford Tampa International Hotel LP		Delaware
Ashford Terre Haute LP		Delaware
Ashford Tipton Lakes LP		Delaware
Ashford Torrance LP		Delaware
Ashford TRS Anaheim LLC		Delaware
Ashford TRS Canada Corporation		Delaware
Ashford TRS Chicago LLC		Delaware
Ashford TRS CM LLC		Delaware
Ashford TRS Corporation		Delaware
Ashford TRS Crystal City LLC		Delaware
Ashford TRS III LLC		Delaware
Ashford TRS V LLC		Delaware
Ashford TRS VI Corporation		Delaware
Ashford TRS Jacksonville III LLC		Delaware
Ashford TRS Jacksonville IV LLC		Delaware
Ashford TRS Lee Vista LLC		Delaware
Ashford TRS Lessee LLC		Delaware
Ashford TRS Lessee I LLC		Delaware
Ashford TRS Lessee II LLC		Delaware
Ashford TRS Lessee III LLC		Delaware
Ashford TRS Lessee IV LLC		Delaware
Ashford TRS Nickel LLC		Delaware
Ashford TRS PH LLC		Delaware
Ashford TRS Pool I LLC		Delaware
Ashford TRS Pool II LLC		Delaware
Ashford TRS San Francisco LLC		Delaware
Ashford TRS Sapphire GP LLC		Delaware
Ashford TRS Sapphire LLC		Delaware
Ashford TRS Sapphire I LLC		Delaware
Ashford TRS Sapphire II LLC		Delaware
Ashford TRS Sapphire III LLC		Delaware
Ashford TRS Sapphire V LLC		Delaware
Ashford TRS Sapphire VI LLC		Delaware
Ashford TRS Sapphire VII LLC		Delaware
Ashford TRS Santa Clara LLC		Delaware
Ashford TRS Walnut Creek GP LLC		Delaware
Ashford TRS Walnut Creek LP		Delaware
Austin Embassy Beverage, Inc.		Delaware
Bucks County Member LLC		Delaware
CHH Capital Hotel GP LLC		Delaware
CHH Capital Hotel Partners LP		Delaware
CHH Capital Tenant Corp.		Delaware
CHH Crystal City Hotel GP, LLC		Delaware
CHH Crystal City Hotel LP		Delaware
CHH Dallas Parent, LLC		Delaware
CHH Dallas Partnership LP		Delaware
CHH III Tenant Parent Corp.		Delaware
CHH Lee Vista Hotel GP, LLC		Delaware
CHH Lee Vista Hotel LP		Delaware
CHH Rye Town Hotel GP LLC		Delaware
CHH Rye Town Hotel LP		Delaware


		Jurisdiction of
		Incorporation/
Subsidiaries		Organization

CHH Santa Clara Hotel GP LLC		Delaware
CHH Santa Clara Hotel LP		Delaware
CHH Torrey Pines Hotel GP LLC		Delaware
CHH Torrey Pines Hotel Partners LP		Delaware
CHH Torrey Pines Tenant Corp.		Delaware
CHH Tucson Parent LLC		Delaware
CHH Tucson Partnership LP		Delaware
CIH Galleria Parent LLC		Delaware
CM Hotel GP LLC		Delaware
CM Hotel Partners LP		Delaware
Commack New York Hotel Limited Partnership		Delaware
Coral Gables Florida Hotel Limited Partnership		Delaware
Crystal City Tenant Corp.		Delaware
CY-CIH Manchester Parent LLC		Delaware
CY Manchester Hotel Partners LP		Delaware
CY Manchester Tenant Corporation		Delaware
DLC 2 Tree Tenant Corp.		Delaware
Dearborn Hotel Partners LP		Delaware
Dearborn Tenant Corp.		Delaware
EC Tenant Corp.		Delaware
FL/NY GP LLC		Delaware
Galleria Hotel Partners, LP		Delaware
Galleria Tenant Corporation		Delaware
Hyannis Massachusetts Hotel Limited Partnership		Delaware
Key West Florida Hotel Limited Partnership		Delaware
Key West Hotel GP LLC		Delaware
Lee Vista Tenant Corp.		Delaware
Minnetonka Hotel GP LLC		Delaware
Minnetonka Minnesota Hotel Limited Partnership		Delaware
New Beverly Hills GP LLC		Delaware
New Beverly Hills Hotel Limited Partnership		Delaware
New Clear Lake GP LLC		Delaware
New Clear Lake Hotel Limited Partnership		Delaware
New Fort Tower I GP LLC		Delaware
New Fort Tower I Hotel Limited Partnership		Delaware
New Fort Tower II GP LLC		Delaware
New Fort Tower II Hotel Limited Partnership		Delaware
New Houston GP LLC		Delaware
New Houston Hotel Limited Partnership		Delaware
New Indianapolis Airport Hotel Limited Partnership		Delaware
New Indianapolis Downtown GP LLC		Delaware
New Indianapolis Downtown Hotel Limited Partnership		Delaware
Palm Beach Florida Hotel and Office Building Limited Partnership		Delaware
Palm Beach GP LLC		Delaware
PH Hotel GP LLC		Delaware
PH Hotel Partners LP		Delaware
PIM Ashford Mezz 4 LLC		Delaware
PIM Ashford Subsidiary I LLC		Delaware
PIM Ashford Subsidiary II LLC		Delaware
PIM Ashford Venture I LLC		Delaware
REDUS SH ND, LLC		Delaware
RFS SPE 2000 LLC		Delaware
RI-CIH Manchester Parent LLC		Delaware
RI Manchester Hotel Partners LP		Delaware
RI Manchester Tenant Corporation		Delaware


		Jurisdiction of
		Incorporation/
Subsidiaries		Organization

Ruby Senior General Partner I LLC		Delaware
Ruby Senior General Partner II LLC		Delaware
Ruby Senior General Partner III LLC		Delaware
Rye Town Tenant Corp.		Delaware
Santa Clara Tenant Corp.		Delaware
South Yarmouth Massachusetts Hotel Limited Partnership		Delaware
St. Petersburg Florida Hotel Limited Partnership		Delaware
St Petersburg GP LLC		Delaware
Westbury New York Hotel Limited Partnership		Delaware

Exhibit 21.2

SPE ENTITIES LIST

Annapolis Maryland Hotel Limited Partnership

Ashford Alpharetta Limited Partnership

Ashford Anchorage LP

Ashford Atlanta Buckhead LP

Ashford Atlantic Beach LP

Ashford Austin LP

Ashford Basking Ridge LP

Ashford Bloomington LP

Ashford Bridgewater Hotel Partnership, LP

Ashford Bucks County LLC

Ashford Buena Vista LP

Ashford Buford I LP

Ashford Buford II LP

Ashford BWI Airport LP

Ashford Centerville Limited Partnership

Ashford Charlotte Limited Partnership

Ashford CM Partners LP

Ashford Columbus LP

Ashford Coral Gables LP

Ashford Crystal City Partners LP

Ashford Crystal City Limited Partnership

Ashford Crystal Gateway LP

Ashford Dallas LP

Ashford Dulles LP

Ashford Durham I LLC

Ashford Durham II LLC

Ashford Edison LP

Ashford Evansville I LP

Ashford Evansville III LP

Ashford Falls Church Limited Partnership

Ashford Flagstaff LP

Ashford Irvine Spectrum Foothill Ranch Limited Partnership

Ashford Ft. Lauderdale Weston I LLC

Ashford Ft. Lauderdale Weston II LLC

Ashford Ft. Lauderdale Weston III LLC

Ashford Gaithersburg Limited Partnership

Ashford Gateway TRS Corporation

Ashford Hawthorne LP

Ashford Jacksonville I LP

Ashford Jacksonville II LP

Ashford LLB SHS Management, LP

Ashford Jacksonville IV LP

Ashford Kennesaw I LP

Ashford Kennesaw II LP

Ashford LLB C-Hotel Management, LP

SPE ENTITIES LIST

Ashford LLB F-Inn Management, LP

Ashford Las Vegas LP

Ashford Lawrenceville LP

Ashford Lee Vista Partners LP

Ashford Louisville LP

Ashford LV Hughes Center LP

Ashford Manhattan Beach LP

Ashford Market Center LP

Ashford Minneapolis Airport LP

Ashford Mira Mesa San Diego Limited Partnership

Ashford MV San Diego LP

Ashford Mobile LP

Ashford Newark LP

Ashford Oakland LP

Ashford Orlando Sea World Limited Partnership

Ashford Overland Park Limited Partnership

Ashford Philadelphia Annex, LLC

Ashford Philly LP

Ashford Phoenix Airport LP

Ashford PH Partners LP

Ashford Plano-C LP

Ashford Plano-M LP

Ashford Plano-R LP

Ashford Plymouth Meeting LP

Ashford Raleigh Limited Partnership

Ashford Richmond LP

Ashford Ruby Palm Desert I Limited Partnership

Ashford Salt Lake Limited Partnership

Ashford San Francisco LP

Ashford San Francisco II LP

Ashford San Jose LP

Ashford Santa Clara Partners LP

Ashford Santa Fe LP

Ashford Scottsdale LP

Ashford Seattle Downtown LP

Ashford Seattle Waterfront LP

Ashford Syracuse LP

Ashford Tampa International Hotel Partnership, LP

Ashford Terre Haute LP

Ashford Tipton Lakes LP

Ashford Walnut Creek LP

Bucks County Member LLC

CHH Capital Hotel Partners LP

CHH Torrey Pines Hotel Partners LP

CHH Tucson Partnership, LP

CY Manchester Hotel Partners, LP

Dearborn Hotel Partners LP

Galleria Hotel Partners, LP

Key West Florida Hotel Limited Partnership

Minnetonka Minnesota Hotel Limited Partnership

New Beverly Hills Hotel Limited Partnership

SPE ENTITIES LIST

New Clear Lake Hotel Limited Partnership

New Fort Tower I Hotel Limited Partnership

New Houston Hotel Limited Partnership

New Indianapolis Downtown Hotel Limited Partnership

Palm Beach Florida Hotel and Office Building Limited Partnership

St. Petersburg Florida Hotel Limited Partnership

Ashford Sapphire GP LLC

Ashford Sapphire I GP LLC

Ashford Sapphire II GP LLC

Ashford Sapphire III GP LLC

Ashford Sapphire V GP LLC

Ashford Sapphire VI GP LLC

Ashford Sapphire VII GP LLC

Ashford Sapphire Junior Holder I LLC

Ashford Sapphire Junior Holder II LLC

Ashford Sapphire Junior Mezz I LLC

Ashford Sapphire Junior Mezz II LLC

Ashford Sapphire Senior Mezz I LLC

Ashford Sapphire Senior Mezz II LLC

Ashford TRS CM LLC

Ashford TRS Crystal City LLC

Ashford TRS Jacksonville IV LLC

Ashford TRS Lee Vista LLC

Ashford TRS Lessee I LLC

Ashford TRS Lessee II LLC

Ashford TRS Lessee III LLC

Ashford TRS Lessee IV LLC

Ashford TRS Nickel LLC

Ashford TRS PH LLC

Ashford TRS Pool I LLC

Ashford TRS Pool II LLC

Ashford TRS San Francisco LLC

Ashford TRS Santa Clara LLC

Ashford TRS Sapphire GP LLC

Ashford TRS Sapphire LLC

Ashford TRS Sapphire I LLC

Ashford TRS Sapphire II LLC

Ashford TRS Sapphire III LLC

Ashford TRS Sapphire V LLC

Ashford TRS Sapphire VI LLC

Ashford TRS Sapphire VII LLC

CHH Capital Tenant Corp.

CHH Torrey Pines Tenant Corp.

CY Manchester Tenant Corporation

Dearborn Tenant Corp.

EC Tenant Corp.

Galleria Tenant Corporation

Annapolis Hotel GP LLC

Ashford Anchorage GP LLC

Ashford CM GP LLC

Ashford Crystal City GP LLC

SPE ENTITIES LIST

Ashford Crystal Gateway GP LLC

Ashford Dearborn GP LLC

Ashford Jacksonville IV GP LLC

Ashford Lee Vista GP LLC

Ashford Minneapolis Airport GP LLC

Ashford MV San Diego GP LLC

Ashford Philly GP LLC

Ashford PH GP LLC

Ashford Pool I GP LLC

Ashford Pool II GP LLC

Ashford San Francisco GP LLC

Ashford Santa Clara GP LLC

Ashford Senior General Partner I LLC

Ashford Senior General Partner II LLC

Ashford Senior General Partner III LLC

Ashford Senior General Partner IV LLC

Ashford Walnut Creek GP LLC

CHH Capital Hotel GP LLC

CHH Torrey Pines Hotel GP LLC

CHH Tucson Parent LLC

CIH Galleria Parent LLC

CY-CIH Manchester Parent LLC

Key West Hotel GP LLC

Minnetonka Hotel GP LLC

New Beverly Hills GP LLC

New Clear Lake GP LLC

New Fort Tower I GP LLC

New Houston GP LLC

New Indianapolis Downtown Hotel GP LLC

Palm Beach GP LLC

St. Petersburg GP LLC

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Forms S-3 No. 333-118746, No. 333-124105, No. 333-125423, No. 333-126821, and No. 333-162750 and Forms S-8 No. 333-132440 and No. 333-164428) of Ashford Hospitality Trust, Inc., and in the related Prospectuses of our reports dated March 4, 2011, with respect to the consolidated financial statements and schedules of Ashford Hospitality Trust, Inc. and subsidiaries, and the effectiveness of internal control over financial reporting of Ashford Hospitality Trust, Inc. and subsidiaries, included in this Annual Report (Form 10-K) for the year ended December 31, 2010.

/s/ Ernst & Young LLP

Dallas, Texas

March 4, 2011

EXHIBIT 31.1

CERTIFICATION

I, Monty J. Bennett, certify that:


1.	I have reviewed this annual report on Form 10-K of Ashford Hospitality Trust, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:


	(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


	(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


	(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


	(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


	(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 4, 2011

/s/ MONTY J. BENNETT

Monty J. Bennett

Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

I, David J. Kimichik, certify that:


1.	I have reviewed this annual report on Form 10-K of Ashford Hospitality Trust, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:


	(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


	(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


	(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


	(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


	(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 4, 2011

/s/ DAVID J. KIMICHIK

David J. Kimichik

Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Ashford Hospitality Trust, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Monty J. Bennett, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


	(1)	The Report fully complies with the requirements of Section 13(a) or 5(d) of the Securities Exchange Act of 1934, as amended; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 4, 2011

/s/ MONTY J. BENNETT

Monty J. Bennett

Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Ashford Hospitality Trust, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Kimichik, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


	(1)	The Report fully complies with the requirements of Section 13(a) or 5(d) of the Securities Exchange Act of 1934, as amended; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 4, 2011

/s/ DAVID J. KIMICHIK

David J. Kimichik

Chief Financial Officer