Westin Hotels LTD Partnership (YYNIA) 10-Q 2006 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2006

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: 0-15097

WESTIN HOTELS LIMITED PARTNERSHIP

(Exact name of Registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

91-1328985

(I.R.S. employer identification no.)

1111 Westchester Avenue

White Plains, NY 10604

(Address of principal executive offices, including zip code)

1-800-323-5888

(Registrant’s telephone number, including area code)

There is no public market for Units of limited partnership interests in the Westin Hotels Limited Partnership.

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.  Yes þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer” inRule 12b-2 of the Exchange Act. Large accelerated filer o     Accelerated filer o     Non-Accelerated filer þ     

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

Indicate the number of shares (units) outstanding of each of the issuer’s classes of common stock (units), as of the latest practicable date (applicable only to corporate issuers).

135,600 limited partnership Units issued and outstanding as of November 8, 2006.

TABLE OF CONTENTS

			Page
	PART I.	FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements:
		Consolidated Balance Sheets		2
		Consolidated Statements of Operations		3
		Consolidated Statement of Partners’ Capital (Deficit)		4
		Consolidated Condensed Statements of Cash Flows		5
		Notes to Consolidated Financial Statements...		6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		8
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		9
	Item 4.	Controls and Procedures		9
	PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings		10
	Item 5.	Other Information		11
	Item 6.	Exhibits		11
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

WESTIN HOTELS LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(In thousands, except Unit data)

	September 30,			December 31,
	2006			2005
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,965		$	9,578
Accounts receivable, net of allowance for doubtful accounts of $0 and $25		—			—
	$	5,965		$	9,578
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Current liabilities:
Accrued expenses	$	425		$	2,574
Total liabilities		425			2,574
Minority interests		5,490			5,488
Commitments and contingencies
Partners’ capital (deficit):
General Partner		(472	)		(457	)
Limited Partners (135,600 Units issued and outstanding)		522			1,973
Total Partners’ capital		50			1,516
	$	5,965		$	9,578

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

2

WESTIN HOTELS LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except Unit and per Unit data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Operating revenues:
Rooms	$	—		$	—		$	—		$	1,122
Food and beverage		—			—			—			200
Other operating departments		—			—			—			334
Total operating revenues		—			—			—			1,656
Operating expenses:
Rooms		—			—			—			573
Food and beverage		—			—			—			401
Other operating departments		—			—			—			41
Administrative and general		212			3,978			1,667			6,757
Related party management fees		—			—			—			270
Advertising and business promotion		—			—			—			137
Property maintenance and energy		—			—			—			216
Local taxes, insurance and rent		—			—			(3	)		271
Total operating expenses		212			3,978			1,664			8,666
Operating loss		(212	)		(3,978	)		(1,664	)		(7,010	)
Other income (expense):
Interest income, net of interest expense of $0, $124, $0 and $565		78			124			255			514
Gain (loss) on sale of the Michigan Avenue		—			28			(55	)		81,758
(Loss) income before minority interests		(134	)		(3,826	)		(1,464	)		75,262
Minority interests in net (income) loss		(1	)		78		��	(2	)		(721	)
Net (loss) income	$	(135	)	$	(3,748	)	$	(1,466	)	$	74,541
Net (loss) income per Unit (135,600 Units issued and outstanding)	$	(1.00	)	$	(27.64	)	$	(10.81	)	$	549.71

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

3

WESTIN HOTELS LIMITED PARTNER

CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL (DEFICIT)

(In thousands)

(Unaudited)

	General			Limited
	Partner			Partners			Total
Balance at December 31, 2005	$	(457	)	$	1,973		$	1,516
Net loss		(15	)		(1,451	)		(1,466	)
Balance at September 30, 2006	$	(472	)	$	522		$	50

The accompanying notes are an integral part of this consolidated financial statement.

4

WESTIN HOTELS LIMITED PARTNERSHIP

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2006			2005
Operating Activities
Net (loss) income	$	(1,466	)	$	74,541
Loss (gain) on sale of the Michigan Avenue		55			(81,758	)
Other adjustments to net income		2			1,183
Changes in working capital:
Accounts receivable		—			1,731
Inventories		—			15
Prepaid expenses and other current assets		—			175
Trade and other accounts payable		—			(545	)
Deferred incentive management fees to General Partner and affiliates		—			(12,614	)
Accrued expenses and other current liabilities		(2,204	)		(194	)
Net cash used in operating activities		(3,613	)		(17,466	)
Investing Activities
Additions to property and equipment		—			(545	)
Proceeds from the sale of the Michigan Avenue, net		—			128,452
Decrease in restricted cash		—			3,908
Decrease in other assets		—			2
Net cash provided by investing activities		—			131,817
Financing Activities
Cash distributions		—			(108,480	)
Repayment of long-term obligations		—			(29,251	)
Net cash used in financing activities		—			(137,731	)
Net decrease in cash and cash equivalents		(3,613	)		(23,380	)
Cash and cash equivalents — beginning of period		9,578			37,795
Cash and cash equivalents — end of period	$	5,965		$	14,415
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest	$	—		$	6,606

The accompanying notes are an integral part of this consolidated financial statement.

5

WESTIN HOTELS LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.   Basis of Presentation

The accompanying consolidated financial statements include the accounts of Westin Hotels Limited Partnership, a Delaware limited partnership (the “Partnership”), and its primary subsidiary limited partnership, The Westin Chicago Limited Partnership (the “Chicago Partnership”). Until January 26, 2005, the Chicago Partnership owned and operated The Westin Michigan Avenue, Chicago in downtown Chicago, Illinois (the “Michigan Avenue” or the “Hotel”). All significant intercompany transactions and accounts have been eliminated. Since the Hotel, which was the Partnership’s only operating asset, was sold on January 26, 2005, the operations were not presented as discontinued operations.

The consolidated financial statements and related information for the periods ended September 30, 2006 and 2005 are unaudited. In the opinion of Westin Realty Corp., the general partner of the Partnership (“General Partner” or “Westin Realty”), all adjustments necessary for a fair presentation of the results of these interim periods have been included.

Note 2.   Significant Accounting Policies

Recently Issued Accounting Standards.  There were various accounting standards and interpretations issued during 2005 and 2006, none of which are expected to have a material impact, if any, on the Partnership’s consolidated financial position, operations or cash flows.

Note 3.   Sale of the Michigan Avenue

In accordance with the Amended and Restated Agreement of Limited Partnership of the Partnership (the “Partnership Agreement”), on January 26, 2005, upon receiving consent of a majority of the limited partners and the satisfaction of certain other closing conditions, the sale of the Michigan Avenue to JER Partners Acquisitions III, LLC (“JER Acquisitions”) was completed. The sale proceeds of $137 million were utilized to repay the mortgage loan, the subordinated note due to the General Partner, deferred incentive management fees related to the Michigan Avenue, and costs and expenses related to the sale. These payments and a capital expenditure credit totaled approximately $50 million. Approximately $87 million of proceeds remaining from the sale of the Michigan Avenue plus approximately $21 million in Partnership cash on hand, or $800 per unit, was distributed to the limited partners in February 2005. The remaining cash of the Partnership is being retained in order to satisfy ongoing operating costs of the partnerships until they are liquidated and the Partnership’s and the Chicago Partnership’s future liabilities, including contingent liabilities and expenses.

Note 4.   Commitments and Contingencies

Litigation.  On April 28, 2006, the American Arbitration Association of Seattle, Washington issued the unanimous Final Award (the “Final Award”) of the three-member arbitration panel (the “Panel”) with respect to the arbitration proceeding initiated by the General Partner and the Partnership (the “Claimants”) on October 14, 2004 (the “Kalmia Arbitration”) against Kalmia Investors, LLC (“Kalmia”). As previously disclosed, Kalmia asserted certain counterclaims against the Claimants and third-party claims against Starwood Hotels & Resorts Worldwide, Inc., 909 North Michigan Avenue Corporation, the Westin Chicago Limited Partnership, the Westin St. Francis Limited Partnership and the St. Francis Hotel Corporation (collectively, the “Third-Party Respondents”) in the Kalmia Arbitration.

Pursuant to the Final Award, with respect to Kalmia’s counterclaims and third-party claims of misconduct by the Claimants and Third-Party Respondents, including claims of breach of fiduciary duty, breach of contract, fraud, negligent misrepresentation and conversion, the Panel found that Kalmia lacked standing to recover on its own behalf for derivative claims alleging injuries suffered on account of lost hotel revenues or lost hotel sales proceeds, and that Kalmia only had standing to assert direct claims arising under the Partnership Agreement. The Panel further found that Kalmia failed to carry its burden of proving misconduct by the Claimants and Third-Party Respondents violative of any contractual, fiduciary or other legal duty owed to Kalmia by those parties and denied all of the

6

claims for relief asserted in Kalmia’s counterclaims and third-party claims, including Kalmia’s request for a total award of approximately $65 million. The Panel dismissed all such claims for relief with prejudice as to each Claimant and Third-Party Respondent.

Also pursuant to the Final Award, the Panel denied the Claimants’ claims of relief, namely (1) recovery of $200,000 in compensatory damages by reason of an alleged breach by Kalmia of the arbitration provision of the Partnership Agreement; and (2) an award of the reasonable attorneys’ fees and litigation expenses incurred by Claimants and Third-Party Respondents in the Kalmia Arbitration.

On or about May 19, 2005, Ralph Silver and Warren Heller, two limited partners of the Partnership, filed a demand for arbitration on their own behalf, and on behalf of a putative class consisting of all the limited partners of the Partnership, against the Partnership, the General Partner, Starwood Hotels & Resorts Worldwide, Inc., The Westin St. Francis Limited Partnership, and The St. Francis Hotel Corporation. The demand is general with respect to the allegations asserted against those parties, but generally alleges breach of fiduciary and contractual duties through the inflation of expenses charged to the hotels owned by the Partnership and managed by Starwood and other improper conduct. The arbitration is in its very early stages. The preliminary hearing with the panel occurred on October 11, 2005, and scheduling matters were discussed at that time.

On October 28, 2005, Ralph Silver and Warren Heller (together “Claimants”) filed their Statement of Claims asserting claims for (1) breach of fiduciary duties, (2) breach of the Partnership Agreement or inducing such breach, (3) breach of the Westin Chicago Limited Partnership Agreement or inducing such breach, (4) breach of the Westin St. Francis Limited Partnership Agreement or inducing such breach, (5) breach of the hotel management agreements or inducing such breaches and (6) an accounting. On November 4, 2005, the General Partner, Starwood Hotels & Resorts Worldwide, Inc., 909 North Michigan Avenue Corporation and The St. Francis Hotel Corporation (together, the “Respondents”) and the Partnership, the Chicago Partnership and the St. Francis Limited Partnership (together, the “Nominal Respondents”) served an Answer and Affirmative Defenses to Claimants’ Statement of Claims.

On November 11, 2005, the Claimants filed a motion for class certification to which the Respondents and Nominal Respondents filed their response on January 9, 2006. Following a hearing on June 21, 2006, the arbitration panel entered an order dated June 29, 2006, ruling “that the matter is appropriate for class action treatment,” but reserving the issue of “whether, in view of an award by another panel of arbitrators, Kalmia should be included or excluded from the class. . .” On July 7, 2006, the Respondents and Nominal Respondents filed their Memorandum in Support of the Exclusion of Kalmia from the Class. On July 21, 2006, Kalmia filed its Memorandum in Opposition to Respondents’ Motion to Exclude Kalmia from the Class. On July 28, 2006, the Respondents and Nominal Respondents filed their Reply Memorandum in Support of the Exclusion of Kalmia from the Class. The panel conducted a hearing on the issue of Kalmia’s exclusion from or inclusion in the class on August 16, 2006, which resulted in the parties’ submission of additional briefing. On October 16, 2006, the panel issued three separate orders: (1) an order excluding Kalmia from the class, based upon the fact that “Kalmia asserted identical claims in a separate, non-class arbitration brought against the same Respondents that was adjudicated on the merits to a final award” and, thus, “that Kalmia is barred by principles of res judicata from being a member of the class in this arbitration;” (2) an order certifying “a nationwide class consisting of all the current limited partners of the Westin Hotels Limited Partnership with the exception of Kalmia Investors, LLC, Respondents herein, and any person, firm, trust, corporation or other entity affiliated with any of the Respondents;” and (3) an order setting a pretrial schedule in the class arbitration. Pursuant to the panel’s class certification order, Respondents will be mailing a Notice of Pendency of Class Arbitration to the WHLP limited partners by November 15, 2006.

The Respondents deny the allegations in the class arbitration and intend to vigorously defend themselves in the proceeding. An estimate of possible loss or range of loss, if any, cannot reasonably be made at this time.

Note 5.   Further Information

Reference is made to “Notes to Consolidated Financial Statements” contained in the Partnership’sForm 10-K filed for the year ended December 31, 2005 for information regarding significant accounting policies, Partnership organization, accrued expenses, long-term obligations, the employee benefit plan, operating leases, commitments and contingencies and related party transactions. The consolidated financial statements should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.

7

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This report includes “forward-looking” statements, as that term is defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission (the “SEC”) in its rules, regulations and releases. Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions or strategies regarding the future. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those disclosed as risks in other reports filed by us with the SEC, including those described in Part I of our most recently filed Annual Report onForm 10-K. Except as required by law, we disclaim any obligation to review or update these forward-looking statements to reflect events or circumstances as they occur.

General

Sale of the Michigan Avenue.  The Partnership Agreement obligated the General Partner to review opportunities to sell the Michigan Avenue or to refinance indebtedness secured by the Michigan Avenue, beginning in 1994, and to use best efforts to complete a sale or refinancing transaction by the end of 2001.

In February 2001, after the completion of significant renovations of the Michigan Avenue, the General Partner, on behalf of the Partnership, retained Jones Lang LaSalle Hotels (“JLL”), a nationally recognized broker, to market the Michigan Avenue for sale. After the terrorist attacks in New York City, Washington, D.C. and Pennsylvania on September 11, 2001 (the “September 11 Attacks”), however, bidders on the Michigan Avenue indicated they would only be willing to purchase the Hotel at a significant discount to the value they had placed on the Hotel prior to the September 11 Attacks. Based on the unstable and depressed hotel real estate market resulting from the September 11 Attacks and weakened general worldwide economic environment, the General Partner did not believe that it was in the best interest of the limited partners to sell the Michigan Avenue in late 2001 or 2002.

In mid-2002, the General Partner also engaged JLL to assist in exploring a refinancing of the Partnership’s debt and directed JLL to focus its efforts towards pursuing refinancing alternatives. After a several month process it was determined that the debt could not be refinanced on an economical basis.

From July 2003 until January 2004, several parties (including an affiliate of the General Partner) made tender offers for varying numbers of units of limited partnership interests (the “Units”). The tender offers ranged from a low price of $525 per Unit to a high price of $735 per Unit. The General Partner expressed no opinion, made no recommendation and remained neutral with respect to each tender offer.

In May 2004, the General Partner engaged JLL to, once again, market the Michigan Avenue and commenced the formal marketing in June 2004. The General Partner solicited bids from interested parties and selected a bidder to negotiate with on an exclusive basis. As a result of that process, on October 18, 2004, the Chicago Partnership signed the Purchase and Sale Agreement (the “Purchase Agreement”) to sell the Michigan Avenue to JER Acquisitions for $137 million in cash, subject to certain purchase price adjustments. On December 7, 2004, the Partnership received the consent of a majority of its limited partners to the sale of the Michigan Avenue to JER Acquisitions. On January 26, 2005, the Chicago Partnership completed the sale of the Michigan Avenue to JER Acquisitions.

On February 25, 2005, an initial distribution of $800 per Unit was made to the limited partners. As of September 30, 2006, approximately $5,965,000 is being retained in order to satisfy ongoing operating costs of the partnerships until they are liquidated and the Partnership’s and the Chicago Partnership’s future liabilities, including contingent liabilities and expenses.

Because the Partnership has material liabilities, including contingent liabilities and expenses, that the General Partner is not able to reasonably estimate, the commencement of the process to dissolve and liquidate the Partnership will be deferred until the General Partner is able to satisfy all known and quantifiable liabilities and make a reasonable estimate of the maximum amount that could be owed with respect to unquantifiable liabilities of the Partnership.

8

Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and costs and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those relating to revenue recognition and costs and expenses during the reporting period.

We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions and conditions.

As discussed above, the Michigan Avenue, the Partnership’s only operating asset, was sold on January 26, 2005. A discussion regarding the Partnership’s results of operations for the third quarter of 2006 as compared to the third quarter of 2005 has been omitted because the discussion and comparisons would not be meaningful. During the three and nine months ended September 30, 2006, the Company had administrative and general costs of $212,000 and $1,667,000, primarily related to legal fees.

Liquidity and Capital Resources

On January 26, 2005, the Michigan Avenue was sold to JER Acquisitions for cash of approximately $137 million. The cash received at closing was reduced by a credit to JER Acquisitions of $6,836,000 that related to the capital expenditure reserve and other adjustments provided by the purchase agreement relating to the transaction. In connection with the sale of the Hotel, a payment of $17,645,000 was made to the Teacher Retirement System of Texas to pay off the mortgage loan and payments of $11,606,000 and $12,438,000 were made to affiliates of Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”) in connection with the repayment of the subordinated loan to the General Partner and deferred incentive management fees, respectively. The Partnership no longer has any third party indebtedness. On February 25, 2005, an aggregate distribution of $108,480,000, or $800 per Unit, was made to limited partners of the Partnership.

As of September 30, 2006, we had cash and cash equivalents of approximately $5,965,000. This cash balance includes approximately $425,000 of liabilities that have been incurred and are to be satisfied by the Partnership, plus an additional $5,540,000 which has been retained to satisfy ongoing operating costs that the Partnership expects to incur until the partnerships are liquidated and to satisfy the Partnership’s and the Chicago Partnership’s future liabilities, including contingent liabilities and expenses.

See “General” above for information regarding the sale of the Hotel.

Item 3.   Qualitative and Quantitative Disclosures about Market Risk.

There were no material changes to the information provided in Item 7A in our Annual Report onForm 10-K regarding the Partnership’s market risk.

Item 4.   Controls and Procedures.

We conducted an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2006. Based on this evaluation, the Principal Executive Officer and Principal Accounting Officer concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be included in our SEC reports. There has been no change in our internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

9

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings.

On April 28, 2006, the American Arbitration Association of Seattle, Washington issued the unanimous Final Award (the “Final Award”) of the three-member arbitration panel (the “Panel”) with respect to the arbitration proceeding initiated by the General Partner and the Partnership (the “Claimants”) on October 14, 2004 (the “Kalmia Arbitration”) against Kalmia Investors, LLC (“Kalmia”). As previously disclosed, Kalmia asserted certain counterclaims against the Claimants and third-party claims against Starwood Hotels & Resorts Worldwide, Inc., 909 North Michigan Avenue Corporation, the Westin Chicago Limited Partnership, the Westin St. Francis Limited Partnership and the St. Francis Hotel Corporation (collectively, the “Third-Party Respondents”) in the Kalmia Arbitration.

Pursuant to the Final Award, with respect to Kalmia’s counterclaims and third-party claims of misconduct by the Claimants and Third-Party Respondents, including claims of breach of fiduciary duty, breach of contract, fraud, negligent misrepresentation and conversion, the Panel found that Kalmia lacked standing to recover on its own behalf for derivative claims alleging injuries suffered on account of lost hotel revenues or lost hotel sales proceeds, and that Kalmia only had standing to assert direct claims arising under the Partnership Agreement. The Panel further found that Kalmia failed to carry its burden of proving misconduct by the Claimants and Third-Party Respondents violative of any contractual, fiduciary or other legal duty owed to Kalmia by those parties and denied all of the claims for relief asserted in Kalmia’s counterclaims and third-party claims, including Kalmia’s request for a total award of approximately $65 million. The Panel dismissed all such claims for relief with prejudice as to each Claimant and Third-Party Respondent.

Also pursuant to the Final Award, the Panel denied the Claimants’ claims of relief, namely (1) recovery of $200,000 in compensatory damages by reason of an alleged breach by Kalmia of the arbitration provision of the Partnership Agreement; and (2) an award of the reasonable attorneys’ fees and litigation expenses incurred by Claimants and Third-Party Respondents in the Kalmia Arbitration.

On or about May 19, 2005, Ralph Silver and Warren Heller, two limited partners of the Partnership, filed a demand for arbitration on their own behalf, and on behalf of a putative class consisting of all the limited partners of the Partnership, against the Partnership, the General Partner, Starwood Hotels & Resorts Worldwide, Inc., The Westin St. Francis Limited Partnership, and The St. Francis Hotel Corporation. The demand is general with respect to the allegations asserted against those parties, but generally alleges breach of fiduciary and contractual duties through the inflation of expenses charged to the hotels owned by the Partnership and managed by Starwood and other improper conduct. The arbitration is in its very early stages. The preliminary hearing with the panel occurred on October 11, 2005, and scheduling matters were discussed at that time.

On October 28, 2005, Ralph Silver and Warren Heller (together “Claimants”) filed their Statement of Claims asserting (1) breach of fiduciary duties, (2) breach of the Partnership Agreement or inducing such breach, (3) breach of the Westin Chicago Limited Partnership Agreement or inducing such breach, (4) breach of the Westin St. Francis Limited Partnership Agreement or inducing such breach, (5) breach of the hotel management agreements or inducing such breaches and (6) an accounting. On November 4, 2005, the General Partner, Starwood Hotels & Resorts Worldwide, Inc., 909 North Michigan Avenue Corporation and the St. Francis Hotel Corporation (together, the “Respondents”) and the Partnership, the Chicago Partnership and the St. Francis Limited Partnership (together, the “Nominal Respondents”) served an Answer and Affirmative Defenses to Claimants’ Statement of Claims.

On November 11, 2005, the Claimants filed a motion for class certification to which the Respondents and Nominal Respondents filed their response on January 9, 2006. Following a hearing on June 21, 2006, the arbitration panel entered an order dated June 29, 2006, ruling “that the matter is appropriate for class action treatment,” but reserving the issue of “whether, in view of an award by another panel of arbitrators, Kalmia should be included or excluded from the class. . .” On July 7, 2006, the Respondents and Nominal Respondents filed their Memorandum in Support of the Exclusion of Kalmia from the Class. On July 21, 2006, Kalmia filed its Memorandum in Opposition to Respondents’ Motion to Exclude Kalmia from the Class. On July 28, 2006, the Respondents and Nominal Respondents filed their Reply Memorandum in Support of the Exclusion of Kalmia from the Class. The panel conducted a hearing on the issue of Kalmia’s exclusion from or inclusion in the class on August 16, 2006, which resulted in the parties’ submission of additional briefing. On October 16, 2006, the panel issued three separate orders: (1) an order excluding Kalmia from the class, based upon the fact that “Kalmia asserted identical claims in a

10

separate, non-class arbitration brought against the same Respondents that was adjudicated on the merits to a final award” and, thus, “that Kalmia is barred by principles of res judicata from being a member of the class in this arbitration;” (2) an order certifying “a nationwide class consisting of all the current limited partners of the Westin Hotels Limited Partnership with the exception of Kalmia Investors, LLC, Respondents herein, and any person, firm, trust, corporation or other entity affiliated with any of the Respondents;” and (3) an order setting a pretrial schedule in the class arbitration. Pursuant to the panel’s class certification order, Respondents will be mailing a Notice of Pendency of Class Arbitration to the WHLP limited partners by November 15, 2006.

The Respondents deny the allegations in the class arbitration and intend to vigorously defend themselves in the proceeding. An estimate of possible loss or range of loss, if any, cannot reasonably be made at this time.

Item 5.  Other Information.

Affiliate Transactions

We reimbursed the General Partner for third-party general and administrative expenses incurred on our behalf, primarily for legal fees, totaling approximately $191,000 during the third quarter of 2006.

Investor Relations

The Partnership’s investor relations function is handled by Phoenix American Financial Services, Inc. at 2401 Kerner Boulevard, San Rafael, CA94901-5529. The toll-free number for Phoenix American Financial Services, Inc. is1-800-323-5888.

Unit Sales

In 2006 there have been no sales of Units.

Appointment of New Officer

On November 8, 2006, Thomas M. Smith was appointed as President of Westin Realty Corp., the General Partner of the Company. Mr. Smith is Senior Vice President, Real Estate Group, of Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”). Mr. Smith has held various positions with Starwood since July of 1998. Mr. Smith replaced Mr. Darnall, who resigned from Starwood on October 15, 2006.

Item 6.  Exhibits.

31.1	Certification Pursuant toRule 13a-14 under the Securities Exchange Act of 1934 — Principal Executive Officer(1)
31.2	Certification Pursuant toRule 13a-14 under the Securities Exchange Act of 1934 — Principal Accounting Officer(1)
32.1	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Principal Executive(1)
32.2	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Principal Accounting Officer(1)

(1)   Filed herewith.

11

SIGNATURES

Pursuant to the requirements 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.

WESTIN HOTELS LIMITED PARTNERSHIP
(a Delaware limited partnership)

By:  WESTIN REALTY CORP.,

Its sole General Partner

By:  /s/  Thomas M. Smith

Thomas M. Smith

President, Assistant Secretary, and Principal
Executive Officer

By:  /s/  Alan M. Schnaid

Alan M. Schnaid

Vice President, Principal Accounting Officer

Date: November 13, 2006

12

INDEX TO EXHIBITS

31.1	Certification Pursuant toRule 13a-14 under the Securities Exchange Act of 1934 — Principal Executive Officer(1)
31.2	Certification Pursuant toRule 13a-14 under the Securities Exchange Act of 1934 — Principal Accounting Officer(1)
32.1	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Principal Executive(1)
32.2	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Principal Accounting Officer(1)

(1)   Filed herewith.

13