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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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POST-EFFECTIVE

AMENDMENT NO. 1
TO
FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(g) of the Securities Exchange Act of 1934

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FAIRFIELD INN BY MARRIOTT
LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)

Delaware 52-1638296
(State of Organization) (I.R.S. Employer Identification Number)
10400 Fernwood Road
Bethesda, Maryland 20817
(Address of principal executive offices) (Zip Code)

Registrant's telephone number including area code:

(301) 380-9000

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

None

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

LIMITED PARTNERSHIP INTERESTS
(Title of Class)

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FORWARD-LOOKING STATEMENTS

In addition to historical information, this contains forward-looking
statements within the meaning of the federal securities law. Forward-looking
statements include information relating to our intent, belief or current
expectations, primarily, but not exclusively, with respect to:

. economic outlook

. capital expenditures

. cost reductions

. cash flow

. operating performance

. financing activities

. our tax status or

. related industry developments, including trends affecting our business,
financial condition and results of operations.

We intend to identify forward-looking statements in this registration
statement by using words or phrases such as "anticipate," "believe,"
"estimate," "expect," "intend," "may be," "objective," "plan," "predict,"
"project" and "will be" and similar words or phrases (or the negative thereof).

The forward-looking information involves important risks and uncertainties
that could cause our actual results, performance or achievements to differ
materially from our anticipated results, performance or achievements expressed
or implied by such forward-looking statements. These risks and uncertainties
include, but are not limited to:

. our inability to meet our debt service obligations out of operating cash
flow and the need to use our reserves (including our supplemental debt
service reserve maintained in connection with our current mortgage debt)
to fund seasonal shortfalls in funds available for debt service

. we have exhausted our supplemental debt service reserve and are required
to replenish it from future excess cash flow, if any

. our limited cash reserves and inability to raise additional capital

. the continued impact of new supply in the markets our Inns are located

. the need for capital expenditures to make our properties competitive and
satisfy standards for comparable lodging facilities and the possibility
of termination of the management agreement for the properties if we are
unable to make such capital expenditures

. national and local economic and business conditions that will affect,
among other things, demand for products and services at our Inns, the
level of room rates and occupancy that can be achieved by our properties,
the availability and terms of financing, and the level of development of
competing lodging facilities

. our ability to compete effectively in areas such as access, location,
quality of accommodations and room rate structures

. changes in travel patterns, taxes and government regulations which
influence or determine wages, prices, construction procedures and costs

. government approvals, actions and initiatives, including the need for
compliance with environmental and safety requirements, and changes in
laws and regulations or the interpretation thereof, and

. other factors discussed under the headings "Declining Operations; Capital
Shortfall" in Item 1 and "Liquidity and Capital Resources" in the section
of Item 2 entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Although we believe the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, we cannot assure you that
such expectations will be attained or that any deviations will not be material.
We disclaim any obligation or undertaking to disseminate to you any updates or
revisions to any forward-looking statement contained in this registration
statement to reflect any change in our expectations or any changes in events,
conditions or circumstances on which any statement is based.

ITEM 1. BUSINESS

General

Fairfield Inn by Marriott Limited Partnership, a Delaware limited
partnership, was formed on August 23, 1989 to acquire, own and operate 50
Fairfield Inn by Marriott properties, which compete in the economy segment of
the lodging industry. We lease the land underlying 32 of our Inns from Marriott
International, Inc. and some of its affiliates. Our 50 Inns are located in
sixteen states. The properties are managed by Fairfield FMC Corporation, a
wholly owned subsidiary of Marriott International, as part of the Fairfield Inn
by Marriott system under a long-term management agreement.

Between November 17, 1989 and July 31, 1990, we sold 83,337 units of limited
partnership interests in a registered public offering for $1,000 per unit. Our
general partner, at that time, Marriott FIBM One Corporation, contributed $0.8
million for a 1% general partner interest and $1.1 million to assist in
establishing our initial working capital reserve at $1.5 million, as required
in the partnership agreement. In addition, our general partner purchased units
equal to a 10% limited partner interest at the closing of our offering. The
remaining 90% limited partnership interest was acquired by unrelated parties.

Our current general partner is FIBM One LLC, a Delaware limited liability
company, and its principal executive office is located at 10400 Fernwood Road,
Bethesda, Maryland 20817. The telephone number of our general partner is (301)
380-9000. The individuals making investment decisions for the Partnership are
Robert E. Parsons, Jr. and W. Edward Walter.

Declining Operations; Capital Shortfall

Our Inns have experienced a substantial decline in operating results over
the past several years. Since 1996, our annual revenues have declined each
year, from $97.4 million in 1996 to $91.5 million in 2000. Our operating profit
has declined over the same period from a $17.3 million operating profit in 1996
to a $2.8 million operating loss in 2000. This trend has continued into the
first quarter of 2001. Inn revenues for the first quarter 2001 were down over
$1 million or 6.7% from the prior year quarter. Operating profit was up
$259,000 over the prior year quarter due to a non-recurring reimbursement of
$656,000 paid for equipment not purchased and related depreciation expense
resulting from our writedown of assets. We do not expect that operations will
improve during the remainder of the year and therefore believe that we will see
further declines in both revenue and operating profit. The decline in Inn
operations is primarily due to increased competition, over-supply of limited
service hotels in the markets where our Inns operate, the deferral of capital
improvements needed to make our Inns more competitive in their marketplaces
because of a lack of funds, and a slowdown in the economy resulting in a
softness in the lodging industry as a whole. Forecasts provided by the manager
indicate that our operating cash flow will be insufficient to cover debt
service during 2001. The current estimated shortfall before ground rent
deferrals is approximately $2 to $3 million for 2001. During first quarter
2001, operating cash flow was insufficient to cover debt service. The shortfall
was funded from partnership cash, amounts in various debt service reserves and,
as permitted under the partnership's ground lease agreements, and deferral of a
portion of the ground rent. The partnership deferred $310,000 of ground rent in
the first quarter of 2001. We estimate that the total amount of ground rent
that we will defer for 2001 is approximately $1.2 million. The partnership
believes it has sufficient cash to fund the debt service shortfall for 2001 by
the deferral of ground rent and the use of partnership cash and amounts in
certain debt service reserves. We currently estimate that the net decrease in
partnership cash accounts and debt service reserves will be approximately $1 to
$2 million in 2001.

In light of the age of our Inns, which range from 11 to 14 years, major
capital expenditures will be required over the next several years to remain
competitive in the markets where we operate and to satisfy brand standards,
required by our management agreement. These capital expenditures include room
refurbishments planned for 22 of our Inns over the next several years and the
replacement of roofs and facades. The capital expenditure needs for the next
two years for our Inns are estimated to total approximately $36 million.

These expenditures will exceed our available funds. Based upon information
provided by the manager, the estimated capital shortfall in funds available for
capital improvements is expected to be $15 million to $20 million. We currently
are pursuing a plan that, if approved by limited partners and various third
parties, will result in the investment of additional capital in the partnership
to address this capital shortfall. See "--Restructuring Plan below." Until we
reach a resolution concerning funding of the capital expenditure shortfall, the
discretionary capital expenditures exceeding the amount available in our
property improvement fund will be deferred.

Under the management agreement, if the manager determines that our Inns are
not satisfactorily maintained as Fairfield Inn by Marriott properties due to
insufficient capital improvements, the manager may terminate its management of
those Inns which fail to meet brand standards. We recently received a notice
from the manager stating that our failure to fund the shortfall in funds
available for replacements of furniture, fixtures and equipment constitutes a
default under the management agreement and asserting a right to terminate the
management agreement in the future if the alleged default is not cured. We have
notified the manager that, based on our review of the management agreement, the
failure to fund this shortfall does not constitute a default and that they do
not have the right to terminate the management agreement at this time because
they did not send a notice within the time period specified under the
management agreement. If the capital shortfall is not satisfactorily resolved,
however, the manager may have the right to terminate the management agreement
and our right to use the Fairfield Inn by Marriott brand as early as the first
quarter 2002. If the management agreement were terminated and we lost the right
to use the Fairfield Inn by Marriott brand, we would need to replace the
manager with another nationally recognized hotel operator and become part of a
comparable, nationally recognized hotel system in order to continue to comply
with the obligations under our loan documents. If we are unable to retain
another nationally recognized manager, or even if we retain another nationally
recognized manager but are unable to meet our debt service obligations, such
events could significantly impair our revenues and our cash flow, and result in
a default under our loan agreement.

For further discussion of our results of operations, shortfall of capital,
and liquidity situation, as well as efforts being undertaken to address these
problems, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Item 2 below.

Restructuring Plan

Our general partner has developed a restructuring plan for the partnership
that is intended to address the partnership's continued decline in operating
results and provide up to $23 million of additional capital. The restructuring
plan contemplates the following:

. a new management group, which will include a new general partner for the
partnership, the principals of which have extensive experience in
partnership and property management, and a new hotel manager for the Inns
with extensive experience in managing limited service hotels similar to
those that we own;

. the opportunity for all of our limited partners to participate in a new
unsecured loan to the partnership and the commitment of an affiliate of
the new general partner to provide that portion not funded by limited
partners;

. a new franchise agreement with Marriott International on terms which
include the ability to sell up to five Inns without incurring termination
fees; and

. a ground lease amendment providing for the reduction of the ground rent
payable by the partnership, substantially more favorable terms with
respect to the partnership's right to purchase the land underlying 32
Inns and cancellation of the partnership's obligation to pay all unpaid
deferred ground rent which could be as much as $2.3 million by the end of
2001.

If the restructuring plan is approved and implemented, the partnership
intends to make a distribution to limited partners of a portion of the funds
currently being held as cash reserves by the partnership. Limited partners will
have the option of retaining the distribution or applying the distribution
towards their participation in the new loan. It is currently estimated by the
general partner that the amount of the distribution will be approximately $25
per partnership unit. The partnership expects to be able to make this
distribution upon consummation of the restructuring plan because of the
investment of new capital into the partnership at that time.

Our general partner has entered into an agreement with AP-Fairfield GP, LLC,
which is affiliated with Apollo Real Estate Advisors, L.P. and Winthrop
Financial Associates, under which our general partner has agreed to withdraw as
general partner and AP-Fairfield would be admitted as our new general partner.
The substitution of the general partner and the new financing described above
each require the approval of our limited partners. In addition, the
substitution of the general partner, the new loan and various other aspects of
the restructuring plan require the approval or consent of the partnership's
mortgage lender. The franchise agreement and ground lease amendment are subject
to completion of negotiations with Marriott International.

Our general partner filed preliminary consent solicitation materials with
the SEC relating to the restructuring plan, which contains additional
information regarding the restructuring plan and expects to mail a consent
solicitation statement to limited partners in July, if negotiations of the
terms of the restructuring plan are satisfactorily concluded.

There can be no assurance that the restructuring plan will be implemented
or, if it is implemented, that it will reverse our declining operating results.

Competition

The United States lodging industry is segmented into full service and
limited service properties. Our Inns are included within the limited service
segment and directly compete in the sub-segment of mid-scale properties without
food and beverage facilities. This segment is highly competitive and includes
many name brands including Comfort Inn and Suites, Holiday Inn Express, Hampton
Inn and Suites, La Quinta Inn and Suites, Sleep Inn, Country Inn and Suites,
Candlewood Hotels and Wingate Inns. Competition is based primarily on the level
of service, quality of accommodations, convenience of locations and room rates.
Full service hotels generally offer restaurant and lounge facilities and
meeting space, as well as a wide range of services and amenities. Hotels within
our competitive set generally offer basic guest room accommodations with
limited or no services and amenities.

Based on data by Smith Travel Research, supply in this sub-segment increased
significantly in the late 1990's, growing at rates in excess of 11% annually,
which exceeded demand growth for each year during the period from 1995 through
1999 by as much as 300 basis points. Additionally, the supply growth rate is
projected to continue to grow at 5-6% annually for the next three years, which
will increase the competitive pressure on our properties. These new products
frequently reflect updated designs and features, which increases the need to
make capital expenditures at our Inns in order for them to compete effectively.
In addition to competing brands, customers compare our Inns to other Fairfield
Inn by Marriott properties. The Fairfield by Marriott brand currently consists
of 450 hotels, of which we own 50, within the United States, and continues to
grow, with 50 hotel openings and construction of an additional 35 inns expected
to commence in 2001, according to our manager. Our Inns, which are 11 to 14
years old, struggle to compete with newer Fairfield Inn properties, which
benefit from design enhancements and a more contemporary feel, as well as other
limited service properties in the marketplaces where we operate.

The inclusion of our inns within the nationwide Fairfield Inn by Marriott
hotel system provides advantages of name, recognition, and centralized
reservations and advertising, system-wide marketing and promotion, centralized
purchasing and training and support services. As economy hotels, our inns
compete with limited service hotels in their respective markets by providing
streamlined services and amenities at prices that are significantly lower than
those available at full service hotels.

Reorganization of Our General Partner

In 1998, Host Marriott Corporation, the parent of our former general
partner, reorganized its business operations in order to qualify as a real
estate investment trust effective as of January 1, 1999. We refer to that
reorganization as the REIT conversion. In connection with the REIT conversion,
Host Marriott contributed substantially all of its hotel assets to a newly-
formed partnership, Host Marriott, L.P., or Host LP.

In connection with the REIT conversion, our previous general partner,
Marriott FIBM One Corporation, merged into FIBM One LLC, a newly formed
Delaware single member limited liability company which then became our general
partner.

FIBM One LLC has three classes of member interests: a Class A 1% managing
economic interest owned by Host LP and a Class B 98% non-managing economic
interest and Class C 1% non-managing interest each owned by Rockledge and its
subsidiaries.

Management Agreement

Our Inns are managed by Fairfield FMC Corporation, a wholly owned subsidiary
of Marriott International, as part of the Fairfield Inn by Marriott hotel
system under a long-term management agreement which has an initial term ending
December 31, 2019. The manager can renew the management agreement, at its
option, as to one or more of our Inns for up to four additional 10-year terms
plus one five-year term.

The manager is paid a base management fee equal to 2% of gross Inn revenues
and a Fairfield Inn system fee equal to 3% of gross Inn revenues. In addition,
the manager is entitled to an incentive management fee equal to 15% of
"operating profit," as defined in the management agreement, increasing to 20%
after our Inns have achieved total operating profit during any 12 month period
equal to or greater than $33.9 million. For the year ended December 31, 2000,
operating profit was less than $33.9 million. The incentive management fee with
respect to each Inn is payable out of 50% of cash flow from operations
remaining after payment of ground rent, debt service, administrative expenses
and the owner's priority return, as defined in the management agreement.

According to the terms of the management agreement, incentive management
fees earned through 1992 were waived by the manager, as cash flow available for
incentive management fees, as defined in the management agreement, was
insufficient to pay those fees. Incentive management fees earned after 1992
accrue and are payable as outlined above or from capital receipts, as defined
in the management agreement. To the extent there are insufficient funds
remaining after payment of debt service and other obligations, incentive
management fees earned by the manager are deferred. As of December 31, 1999,
cumulative deferred incentive management fees totaled $23.5 million. In
connection with the class action litigation settlement agreement, the manager
waived payment of all deferred fees as of December 31, 1999. See "--Litigation
Settlement" below. As of March 23, 2001 and December 31, 2000, there were $3.3
million and $2.8 million, respectively of deferred incentive management fees.

The manager is required to furnish specific chain services to our Inns,
which services are furnished generally on a central or regional basis to all
Inns in the Fairfield Inn by Marriott hotel system that are owned, leased, or
managed by Marriott International and its subsidiaries. Costs and expenses
incurred in providing such services are allocated among all domestic Fairfield
Inn by Marriott hotels managed, owned or leased by Marriott International or
its subsidiaries. The costs and expenses are allocated among all Inns based on
the gross revenues of each Inn.

Beginning in 1997, our Inns participate in Marriott International's Marriott
Rewards Program ("MRP"). The cost of this program is charged to all hotels in
the full-service, Residence Inn by Marriott, Courtyard by Marriott and
Fairfield Inn by Marriott systems based upon the MRP revenues at each hotel or
Inn. The total amounts of chain services and MRP costs allocated to us for the
years ended December 31, 2000, 1999 and 1998 were $1.7 million, $1.8 million
and $1.6 million, respectively. For the first quarters 2001 and 2000 these fees
were $339,000 and $380,000, respectively.

In addition, the manager maintains a marketing fund to pay the costs
associated with specified system-wide advertising, marketing, sales,
promotional and public relations materials and programs. Each Inn within the
system contributes approximately 2.4% of gross Inn revenues to the marketing
fund. For the years ended December 31, 2000, 1999 and 1998, we contributed $2.5
million, $2.3 million and, $2.4 million, respectively, to the marketing fund.
For the first quarters 2001 and 2000, we contributed $467,000 and $479,000,
respectively, to the marketing fund.

Pursuant to the terms of the management agreement, we are required to
provide the manager with working capital to meet the operating needs of our
Inns. This working capital earns no interest and remains our property
throughout the term of the management agreement. We are required to furnish,
upon request of the manager, any additional funds necessary to satisfy the
needs of our Inns as their operations may require from time to time. Upon
termination of the management agreement, the manager will return to us any
remaining working capital. Working capital as of March 23, 2001 and December
31, 2000 was $1.0 million. If the management agreement is terminated, we may
have to pay costs associated with such termination out of the remaining working
capital we receive from the manager.

The management agreement provides for the establishment of a property
improvement fund for the Inns to cover the cost of:

. specified non-routine repairs and maintenance to our Inns which are
normally capitalized; and

. replacements and renewals to our Inns' property and improvements.

Contributions to the property improvement fund are based upon a percentage
of gross revenues of each Inn equal to 7%. If the manager determines that 7%
exceeds the amount needed for making capital expenditures, then the manager can
adjust the incentive management fee calculation to exclude as a deduction in
calculating incentive management fees up to one percentage point of
contributions to the property improvement fund. If the contributions to the
property improvement fund are inadequate to pay for capital improvements
required to maintain brand standards at our Inns, we are required to provide
additional funds. As described above, the manager has determined that there are
substantial capital improvements required over the next several years at our
Inns and we do not expect to have sufficient funds to meet these needs in our
property improvement fund. Furthermore, the manager has notified us that our
failure to contribute enough funds for anticipated shortfalls constitutes a
default under the management agreement. We have notified the manager that we
disagree with the manager's determination that there is a default under the
management agreement. We are continuing to address our capital expenditure
shortfall issues. See "--Restructuring Plan" above.

The management agreement provides that we may terminate the management
agreement and remove the manager if, after December 1995, specified minimum
operating results are not achieved. The manager may, however, prevent
termination by paying to us an amount as is necessary to achieve the specified
minimum operating results.

Ground Leases

The land on which 32 of our Inns are located is leased from Marriott
International or its affiliates. The leases expire on November 30, 2088 and
provide that we will pay annual rents equal to the greater of a specified
minimum rent for each property or a percentage rent based on gross revenues of
the Inn operated on the land. The minimum rents are adjusted annually based on
changes in the Consumer Price Index. The percentage rent, which also varies
from property to property, is fixed at predetermined percentages of gross
revenues that increase over time.

In connection with our 1997 refinancing, beginning in 1997 and continuing
until the mortgage debt is repaid, the payment of rental expense exceeding 3%
of gross revenues from our 32 leased Inns in the aggregate will be deferred in
any year that cash flow is less than the regularly scheduled principal and
interest payments on the mortgage debt. The deferred ground rent payment
remains our obligation and is payable thereafter to the extent that there is
cash available after the payment of debt service and other obligations as
required by agreements with the manager and the lender. At December 31, 2000,
an aggregate of $1.1 million of ground rent was deferred, and as of March 23,
2001 an additional $310,000 had been deferred bringing the aggregate total to
$1.4 million.

Under the leases, we pay all costs, expenses, taxes and assessments relating
to our Inns and the underlying land, including real estate taxes. Each ground
lease provides that we have a first right of refusal in the event the
applicable ground lessor decides to sell the leased premises. Upon expiration
or termination of a land lease, title to the applicable Inn and all
improvements reverts to the ground lessor.

Mortgage Debt

We have $152.4 million of mortgage debt. The mortgage debt is non-recourse,
bears interest at a fixed rate of 8.40% and requires monthly payments of
principal and interest based upon a 20-year amortization schedule for a 10-year
term expiring January 11, 2007. Thereafter, until the final maturity date of
January 11, 2017, interest is payable at an adjusted rate, as defined, and all
excess cash flow is applied toward principal amortization. The mortgage debt is
secured by first mortgages on all of our Inns, the land on which they are
located, or an assignment of our interest under the ground leases, including
ownership interest in all improvements thereon, fixtures and personal property
related thereto.

The partnership's mortgage lender, Nomura Asset Capital Corporation,
securitized the loan through the issuance and sale of commercial mortgage
backed securities backed by mortgages on a total of 71 properties. Our Inns
represent 50 of the 71 properties and approximately 33% of the principal amount
of the certificates. We previously reported to the limited partners that, as a
result of our decline in operating performance, Fitch IBCA, a major credit
rating agency, downgraded the two lowest classes of the CMBS on September 2,
1999. On May 23, 2000, Fitch IBCA once again downgraded the two lowest classes
of the CMBS due to our continued decline in operating performance. The
downgrade of these securities has no effect on the current terms of our
mortgage debt, although it would impair our ability to obtain new funding from
other sources.

In November 2000, Pacific Mutual Life Insurance Company ("PacLife"), engaged
to service the loan on behalf of the securities holders, notified our general
partner that it has declared the loan a "specially serviced mortgage loan" to
be managed by Clarion Partners LLC, a special servicer appointed by PacLife. We
have agreed to pay the special servicer up to $250,000 in fees and to reimburse
the special servicer for up to $150,000 in expenses incurred in connection with
the proposed loan restructuring. We are currently seeking approval of the
special servicer for the restructuring plan described above.

Employees

We have no employees; however, Host LP provides the services of some of its
employees, including the executive officers of our general partner, to perform
administrative and other services for us. We and our general partner anticipate
that each executive officer of our general partner will generally devote a
sufficient portion of his time to our business; however, each of such executive
officers also will devote a significant portion of his time to the business of
Host LP and its other affiliates. We reimburse our general partner or Host LP
for the cost of providing such services. See Item 6, "Executive Compensation,"
for information regarding payments made to our general partner for the cost of
providing administrative and other services to us.

Prior Efforts to Sell Inns or Partnership Interests

Our partnership agreement provides that the general partner will, from time
to time, consider whether or not, in its reasonable judgment, it would be in
the best interests of the partnership to sell all or a portion of the Inns. In
addition, the partnership agreement provides that, if all of the Inns have not
been sold prior to 2001, then, subject to the terms of the management agreement
and loan agreement, the general partner will use reasonable best efforts to
sell the remaining Inns, in one or more transactions, as it determines
appropriate in its reasonable judgment. In mid-1998, the general partner
engaged an investment banking firm to assist us in an effort to sell our Inns
or find a buyer for the limited partners' interests in the partnership and
thereby provide liquidity to limited partners. The general partner received
only a few indications of interest and none of them was on terms that would
have resulted in proceeds for our limited partners. Based on this prior
experience, the continuing decline in operating results and deteriorating
financial condition described above, and the need for approximately $36 million
in capital expenditures over the next two years to maintain brand standards,
the general partner does not believe that it is currently feasible to sell the
Inns or find a buyer for the limited partners' interests at a price that would
result in proceeds for limited partners.

Litigation Settlement

On March 16, 1998, limited partners in several partnerships sponsored by
Host Marriott Corporation, filed a lawsuit, styled Robert M. Haas, Sr. and
Irwin Randolph Joint Tenants, et al. v. Marriott International, Inc., et al.,
Case No. CI-04092, in the 57th Judicial District Court of Bexar County, Texas
against Marriott International, Inc., Host Marriott, various of their
subsidiaries (including the general partners of the partnerships set forth
below), J.W. Marriott, Jr., Stephen Rushmore, and Hospitality Valuation
Services, Inc. (collectively, the "Defendants"). The lawsuit related to the
following limited partnerships: Courtyard by Marriott Limited Partnership,
Courtyard by Marriott II Limited Partnership, Marriott Residence Inn Limited
Partnership, Marriott Residence Inn II Limited Partnership, Fairfield Inn by
Marriott Limited Partnership, Desert Springs Marriott Limited Partnership, and
Atlanta Marriott Marquis Limited Partnership (collectively, the
"Partnerships"). The plaintiffs alleged that the Defendants conspired to sell
hotels to the Partnerships for inflated prices and that they charged the
Partnerships excessive management fees to operate the Partnerships' hotels. The
plaintiffs further alleged that the Defendants committed fraud, breached
fiduciary duties, and violated the provisions of various contracts. The
plaintiffs sought unspecified damages. The Defendants, which did not include
the Partnerships, maintained that there was no truth to the plaintiffs'
allegations and that the lawsuit was totally devoid of merit.

In September 2000, our general partner, Marriott International and other
defendants settled this lawsuit filed by limited partners of seven limited
partnerships, including our limited partners. The terms of the settlement
required that the defendants make cash payments to our limited partners of
approximately $152 per unit in full satisfaction of the litigation and a
release of all claims. In addition, the manager agreed to forgive $23.5 million
of deferred incentive management fees payable by us. The incentive management
fees forgiven represent fees deferred since 1992, net of approximately $5.4
million of cash payments made to the manager for incentive fees earned from
1992 through 1996. No incentive management fees have been paid related to
operations for 1997 through 2000. Accordingly, while the expense has had the
effect of decreasing net income and earnings per partnership unit each year,
there has been no cash flow effect other than the aforementioned payments in
1992 through 1996. Additionally, the forgiveness of the debt by the manager has
no cash flow effect on the partnership.

The discussion of the settlement in this registration statement is qualified
in its entirety by the terms of the actual settlement agreement and the court-
approved notice previously sent to our limited partners.

ITEM 2. FINANCIAL INFORMATION

Selected Financial Data

The following table presents selected historical financial data for each of
the five years in the period ended December 31, 2000, which data has been
derived from our audited financial statements for those years and the unaudited
historical financial data for the twelve weeks ended March 23, 2001 and March
24, 2000 (the "First Quarters 2001 and 2000"). You should read the following
selected financial data together with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our audited and unaudited
financial statements included in this registration statement.

Selected Financial Data
(in thousands, except per unit amounts and ratio data)

First Quarter Fiscal Year
------------------ ------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
(unaudited)
------------------

Income Statement Data:
Revenues................ $ 18,785 $ 19,413 $ 91,478 $ 93,084 $ 94,370 $ 95,721 $ 97,441
Operating profit
(loss)................. 368 109 (2,848) 3,885 (522) 11,963 17,316
Net income (loss)....... (2,394) (2,728) 8,709 (8,552) (12,999) (1,411) 1,420
Net income (loss) per
limited partner unit
(83,337 Units)......... (28) (32) 103 (102) (154) (17) 17
Balance Sheet Data:
Total assets............ $143,994 $159,557 $147,082 $163,574 $173,064 $185,503 $184,992
Total liabilities....... 159,717 184,323 160,411 185,612 186,550 185,990 183,226
Other Data (unaudited):
Cash distributions per
limited partner unit
(83,337 Units)......... -- -- -- -- -- 10 100
Ratio of earnings to
fixed charges.......... -- -- -- -- -- -- 1.1x
Deficiency of earnings
to fixed charges....... $ 2,394 $ 2,728 $14,774 $ 8,552 $12,999 $ 1,411 --

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

General

We are the owners of 50 limited service Inns, which are operated as part of
the Fairfield Inn by Marriott system, and managed by Fairfield FMC Corporation.

During the period from 1998 through 2000, our revenues declined from $94.4
million to $91.5 million. Our revenues are primarily a function of room
revenues generated per available room or "RevPAR." RevPAR, represents the
combination of the average daily room rate charged and the average daily
occupancy achieved and is a commonly used indicator of hotel performance.
During the period from 1998 through 2000, our combined RevPAR decreased
approximately 3% from $37.79 to $36.76.

Our operating costs and expenses are, to a great extent, fixed. Therefore,
we derive substantial operating leverage from increases in revenue. Operating
leverage is offset primarily by certain variable expenses, including base and
incentive management fees which are calculated based on Inn sales.

The table below presents performance information for our Inns for the
indicated periods:

First Year ended December
Quarters 31,
--------------- ------------------------
2001 2000 2000 1999 1998
------ ------ ------ ------ ------

Number of properties............... 50 50 50 50 50
Number of rooms.................... 6,676 6,676 6,676 6,676 6,676
Average daily rate................. $53.68 $51.62 $54.06 $52.35 $51.28
Occupancy.......................... 59.0% 64.9% 68.0% 71.1% 73.7%
RevPAR............................. $31.69 $33.50 $36.76 $37.22 $37.79
% RevPAR change.................... (5.4%) -- (1.2%) (1.5%) --

Results of Operations

The following discussion and analysis addresses results of operations for
the three years ended December 31, 2000 and the first quarters ended March 23,
2001 and March 24, 2000, respectively, and should be read together with the
"Selected Financial Data" and our historical financial statements and related
notes included in this registration statement.

2000 compared to 1999

Rooms Revenues. Rooms revenues decreased $1.3 million, or approximately
1.5%, to $89.3 million in 2000 from $90.7 million in 1999, reflecting a 3.1
percentage point decrease in average occupancy to 68.0% partially offset by the
$1.71 increase in average rate to $54.06. The decrease in average occupancy was
primarily the result of increased competition in the economy segment. In 2000,
total Inn revenues decreased $1.6 million, or 1.8%, to $91.5 million when
compared to 1999.

Operating Expense: Operating expenses increased $5.1 million, or 5.7%, to
$94.3 million when compared to 1999. The individual components are discussed
below.

Rooms Costs: In 2000, rooms costs decreased $0.6 million, or 2.1%, to
$27.9 million when compared to 1999. The overall decrease in controllable
room costs is a result of the occupancy decreases at the Inns. These
decreases were partially offset by an increase in the reservation costs due
to the implementation of the Guestview reservation system in 2000.

Selling, Administrative and other. Selling, administrative and other
expenses increased by $0.8 million in 2000 to $27.7 million, or a 3.0%
increase when compared to 1999. The increase in expenses was due to an
increase in labor costs, repairs and maintenance expenses.

Loss on impairment of long-lived assets. In 2000, we recorded impairment
of long-lived assets of $8.1 million related to our Inns located in Johnson
City, Tennessee, Raleigh and Charlotte Airport, North Carolina, and
Columbus North, Ohio. We recorded an impairment charge of $2.8 million in
1999 related to our Inns located in Lansing, Illinois and Charlotte-
Northeast, North Carolina.

Operating Profit (Loss). As a result of the changes in revenues and
operating expenses discussed above, operating profit decreased by $6.7 million,
resulting in an operating loss of $2.8 million for 2000, when compared to an
operating profit of $3.9 million in 1999.

Interest Expense. Interest expense decreased by $0.3 million to $13.2
million in 2000 when compared to 1999. This decrease is due to the payment of
$4.3 million of principal on the mortgage debt.

Loss Before Extraordinary Item. We generated a loss before extraordinary
item of $14.8 million in 2000 compared to a net loss of $8.6 million in 1999.
This increased loss is primarily due to the decrease in revenues coupled with
the increase in operating expenses discussed above.

Extraordinary Gain. In connection with the class action litigation
settlement agreement that became effective in 2000, Fairfield FMC Corporation,
the manager of all our Inns, waived $23.5 million of deferred incentive
management fees.

Net Income (Loss). Net income for 2000 was $8.7 million compared to a net
loss of $8.6 million for 1999. The increase is primarily due to the $23.5
million of deferred management fees waived in 2000 offset by slightly lower
revenues and increases in operating expenses.

1999 compared to 1998

Rooms Revenues. Rooms revenues decreased $0.9 million, or approximately
1.0%, to $90.7 million in 1999 from $91.5 million in 1998 reflecting the 2.6
percentage point decrease in average occupancy to 71.1% partially offset by the
slight increase in average rate to $52.35. The decrease in average occupancy
was primarily the result of increased competition in the economy segment. In
1999, Inn revenues decreased $1.3 million, or 1.4%, to $93.1 million when
compared to 1998.

Operating Expenses: Operating expenses decreased $5.7 million, or 6.0%, to
$89.2 million when compared to 1998. The individual components are discussed
below.

Rooms Costs: In 1999, rooms costs increased $1.3 million, or 4.8%, to
$28.5 million when compared to 1998. The overall increase in room costs is
due to an increase in salary and benefits.

Selling, administrative and other. Selling, administrative and other
expenses increased by $1.0 million in 1999 to $26.9 million, or a 4.1%
increase when compared to 1998. The increase in expenses was due to an
increase in labor costs, repairs and maintenance expenses and chain
services.

Incentive management fees. Incentive management fees decreased $0.9
million in 1999 when compared to 1998 due to the addition of $2.4 million
to the property improvement fund in 1999 by us to cover capital
expenditures that exceeded the amount in the property improvement fund.
This amount was treated as a deduction in calculating incentive management
fees in 1999 under the terms of the management agreement.

Loss on impairment of long-lived assets. We recorded an impairment of
long-lived assets of $2.8 million in 1999 related to our Inns in Lansing,
Illinois and Charlotte-Northeast, North Carolina and $9.5 million in 1998
related to our Inns in Buena Park, California; Atlanta Airport, Georgia;
Montgomery, Alabama; and Orlando South, Florida.

Operating Profit (Loss). As a result of the changes in revenues and
operating expenses discussed above, our operating loss in 1998 of $0.5 million
increased to an operating profit of $3.9 million in 1999.

Interest Expense. Interest expense decreased $0.3 million to $13.5 million
in 1999 when compared to 1998. This decrease is due to the payment of principal
on the mortgage debt.

Net Loss. We generated a net loss of $8.6 million in 1999 compared to a net
loss of $13.0 million in 1998. This decrease is primarily due to the loss
associated with an impairment of long-lived assets of approximately $9.5
million in 1998 compared to $2.8 million in 1999 related to the Inns discussed
above partially offset by the further decline in Inn revenues in 1999.

First quarter 2001 compared to first quarter 2000

Rooms Revenues. Rooms revenues decreased $1.0 million, or approximately 5.3%
to $17.8 million for first quarter 2001 from $18.8 million for the same period
in 2000, reflecting a 5.9% decrease in occupancy to 59%, partially offset by
the $2.06 increase in average rate to $53.68. The decrease in average occupancy
was primarily the result of increased competition in the economy segment, the
deferral of capital improvements needed to make our Inns more competitive in
their marketplaces because of the lack of funds and the slowdown in the economy
resulting in a softness in the lodging industry as a whole. During the first
quarter of 2001, total Inn revenues decreased $1.3 million, or 6.7%, to $18.1
million when compared to first quarter 2000.

Total Revenues. Total revenues decreased $628,000, or 3.2%, to $18.8 million
for first quarter 2001 from $19.4 million in first quarter 2000. The decrease
is due to the decline in rooms revenues described above. This is offset by
other revenues of $656,000 in first quarter 2001. The other revenues represent
a reimbursement of funds previously paid by the partnership to On Command Video
to reserve for television equipment upgrades. On Command Video determined that
the equipment upgrades were no longer necessary and the funds were subsequently
reimbursed to the partnership during the first quarter of 2001.

Operating expenses. Operating expenses declined during the first quarter of
2001 by $0.9 million or 4.7% to $18.4 million when compared to first quarter
2000. The decline is due to a decline in property-level expenses associated
with the decline in occupancy. Also, depreciation expense decreased by $731,000
due to property impairments recognized.

Operating profit. Operating profit for the first quarter of 2001 increased
by $259,000 to $368,000 when compared to first quarter 2000. The increase is
due primarily to the non-recurring reimbursement described above and the
decrease in depreciation expense resulting from the impairment charges
recorded. Without these two items, operating profit for the first quarter of
2000 would have decreased by approximately $1,384,000 as compared to the same
period in 2000. We expect to see continuing declines in revenues and operating
profit during the remainder of the year.

Interest Expense. Interest expense decreased $185,000 to $2.9 million in
first quarter 2001 when compared to first quarter 2000. This decrease is due to
the payment of principal on the mortgage debt.

Net loss. Our net loss decreased to $2.4 million in first quarter 2001 as
compared to a net loss of $2.7 million in first quarter 2000. This decrease is
due primarily to the increase in other revenues offset by the decrease in
operations discussed above.

Liquidity and Capital Resources

Adequate liquidity and capital are critical to our ability to continue as a
going concern. We have experienced declining operations in each year since
1996. As a result, cash flow from operations has declined from $19.4 million in
1997 to $10.5 million in 2000. This trend continued during the first quarter of
2001. During this period, we have faced increasing needs to make capital
improvements to our Inns to enable them to compete more effectively in their
markets and to satisfy standards for the Fairfield Inn brand, as required by
the management agreement. Our general partner is attempting to address the
decline in operating cash flow and need for additional capital through various
avenues, as described

below. We believe that there is sufficient liquidity, including the
availability of cash reserves to fund operations and meet debt service for the
current year. There can be no assurance that we will be able to reverse the
decline in operations or obtain additional financing.

Principal Sources and Uses of Cash

Our principal source of cash is cash from operations. Our principal uses of
cash are to make debt service payments, fund the property improvement fund and
maintain required reserves.

Cash provided by operations was $10.5 million in 2000, $16.4 million in 1999
and $16.5 million in 1998. For the first quarters 2001 and 2000, cash provided
by operations was $443,000 and cash used in operations was $1.5 million,
respectively. The decrease from 1999 to 2000 is primarily attributable to the
decline in property level operating results and a decrease in the amount of
restricted cash made available for investing and financing activities.

Cash used in investing activities was $8.3 million, $12.7 million and $10.5
million in 2000, 1999 and 1998, respectively. For the first quarters 2001 and
2000, cash used in investing activities was $1.7 million in each quarter. Our
cash investing activities primarily consisted of contributions to the property
improvement fund and capital expenditures for improvements to our Inns.

Cash used in financing activities was $4.6 million, $2.3 million and $4.8
million in 2000, 1999 and 1998, respectively. Cash used in financing activities
was $0.9 million and $1.3 million for the first quarters 2001 and 2000,
respectively. Our financing activities consisted of repayment of the mortgage
debt and changes to the restricted cash reserves.

Liquidity Concerns and Capital Shortfalls

Operating Income in 2001 May be Inadequate to Fund Debt Service. Forecasts
provided by our manager indicate that our operating cash flow is likely to be
insufficient to cover debt service during 2001. The current estimated shortfall
before any ground rent deferrals is approximately $1 to $2 million for 2001,
but due to seasonality, it may fluctuate by quarter. We expect to fund this
shortfall from partnership cash (which totals approximately $12.0 million,
including approximately $4.6 million held in lender reserve accounts at March
23, 2001) and, as permitted under the ground lease documents, from deferral of
a portion of ground rent expense. Based upon current estimates, the ground rent
deferral could provide approximately $1.2 million of additional cash flow in
2001. We deferred $1.1 million of ground rent during 2000 and $310,000 in the
first quarter 2001. This deferred amount is a liability of the partnership.
Through reserves held by our lender, partnership cash, deferral of ground rent
and property cash flow, we expect to meet our debt service requirements during
2001.

Shortfall in Funds Available for Capital Expenditures. In light of the age
of our Inns, which range from 11 to 14 years, major capital expenditures will
be required over the next several years in an effort to remain competitive in
the markets where we operate and to satisfy brand standards required by our
management agreement. These capital expenditures include room refurbishments
planned for 22 of our Inns over the next several years and the replacement of
roofs, facades, carpets, wall vinyl and furniture. The capital expenditure
needs for our Inns for the next two years are estimated to total approximately
$36 million.

The cost of future capital expenditures for our Inns is estimated to exceed
our available funds. Our property improvement fund became insufficient to meet
anticipated capital expenditures in 1999 and continued to be insufficient
through the first quarter 2001. To address this shortfall, we deposited an
additional $2.4 million into the property improvement fund during 1999 from our
partnership cash beyond the required contributions. In addition, the
contribution rate to the property improvement fund was increased to 7% of gross
sales for 1997 and thereafter. For the years ended December 31, 2000, 1999 and
1998, we contributed $6.0 million, $6.5 million and $6.6 million, respectively,
and $1.3 million and $1.4 million for the first quarters 2001 and 2000,
respectively to the property improvement fund.

We expect to continue to have inadequate funds in our property improvement
fund for the capital expenditures that the manager believes are necessary for
our Inns to satisfy the standards of quality under the management agreement for
Inns in the Fairfield Inn system. Based upon information provided by the
manager, the estimated capital expenditure shortfall is expected to be $15 to
$20 million. Until we reach a resolution concerning funding of the capital
expenditure shortfall, the capital expenditures exceeding the amount available
in the property improvement fund will be deferred.

The manager has notified us that it believes our failure to fund the capital
shortfall constitutes a default under the management agreement, giving it the
right to terminate the management agreement if we do not provide it with
additional funds to cure the shortfall. We have notified the manager that we
disagree with the manager's determination that there is a default under the
management agreement. As discussed under "-- Restructuring Plan" under Item 1,
our general partner has developed a plan to address the capital expenditure
needs of our Inns but we cannot assure you the plan will be implemented, or, if
implemented, that it will satisfy our needs for additional capital. If these
issues are not resolved, the manager may have termination rights under the
management agreement in the future. If the manager were to terminate the
management agreement, the loss of brand affiliation could significantly impair
our revenues, our cash flow, and the value of our Inns, and there can be no
assurance that we would be able to retain another manager on satisfactory
terms, if at all. Moreover, termination of the management agreement by the
manager would be a default under our loan agreement if the partnership were
unable to retain another manager satisfactory to the lender.

Quantitative and Qualitative Disclosures about Market Risk

We do not have market risk with respect to interest rates, foreign currency
exchanges or other market rate or price risks, and we do not hold any financial
instruments for trading purposes. As of December 31, 2000, all of our debt has
a fixed interest rate.

Inflation

The rate of inflation has been relatively low in the past three years. The
manager is generally able to pass through increased costs to customers through
higher room rates and prices.

Seasonality

Demand, and thus room occupancy, is affected by seasonality. For most of our
Inns, demand is higher in the spring and summer months (March through October)
than during the remainder of the year.

ITEM 3. PROPERTIES

Our portfolio consists of 50 Fairfield Inn by Marriott properties as of May
25, 2001. Our Inns, which range in age between 11 and 14 years, are
geographically diversified among 16 states.

The following table presents the location and number of rooms for each of
our Inns. All of our properties are managed by an affiliate of Marriott
International. The land on which our Inns are located is either owned by us or
leased under a long-term agreement. See footnote 1.

Number of
Location of Inn Rooms
--------------- ---------

Alabama
Birmingham--Homewood(1)....................................... 132
Montgomery.................................................... 133
California
Los Angeles--Buena Park(1).................................... 135
Los Angeles-- Placentia....................................... 135
Florida
Gainesville(1)................................................ 135
Miami--West(1)................................................ 135
Orlando--International Drive(1)............................... 135
Orlando--South(1)............................................. 132
Georgia
Atlanta--Airport(1)........................................... 132
Atlanta--Gwinnett Mall........................................ 135
Atlanta--Northlake(1)......................................... 133
Atlanta--Northwest(1)......................................... 130
Atlanta--Peachtree Corners.................................... 135
Atlanta--Southlake............................................ 134
Atlanta--Savannah(1).......................................... 135
Iowa
Des Moines--West(1)........................................... 135
Illinois
Bloomington--Normal(1)........................................ 128
Chicago--Lansing(1)........................................... 135
Peoria........................................................ 135
Rockford...................................................... 135
Indiana
Indianapolis--Castleton(1).................................... 132
Indianapolis--College Park.................................... 132
Kansas
Kansas City--Merriam.......................................... 135
Kansas City--Overland Park.................................... 134
Michigan
Detroit--Airport(1)........................................... 133
Detroit--Auburn Hills(1)...................................... 134
Detroit--Madison Heights(1)................................... 134
Detroit--Warren(1)............................................ 132
Detroit--West (Canton)(1)..................................... 133
Kalamazoo(1).................................................. 133
Missouri
St. Louis--Hazelwood.......................................... 135

Number of
Location of Inn Rooms
--------------- ---------

North Carolina
Charlotte--Airport(1)......................................... 135
Charlotte--Northeast(1)....................................... 133
Durham(1)..................................................... 135
Fayetteville(1)............................................... 135
Greensboro(1)................................................. 135
Raleigh--Northeast(1)......................................... 132
Wilmington.................................................... 134
Ohio
Cleveland--Airport............................................ 135
Columbus--North(1)............................................ 135
Dayton--North(1).............................................. 135
Toledo--Holland............................................... 134
South Carolina
Florence...................................................... 135
Greenville.................................................... 132
Hilton Head(1)................................................ 120
Tennessee
Johnson City(1)............................................... 132
Virginia
Hampton....................................................... 134
Virginia Beach(1)............................................. 134
Wisconsin
Madison(1).................................................... 135
Milwaukee--Brookfield......................................... 135
-----
TOTAL....................................................... 6,676
=====

- --------
(1) The land on which the Inn is located is leased by us from Marriott
International under a long-term lease agreement.

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth each person that, to our knowledge,
beneficially owned more than 5% of the total number of limited partner units as
of May 25, 2001. No units are owned by executive officers or managers of our
general partner.

Name and address of Number of Percent of
beneficial owner units total units
------------------- --------- -----------

AP-Fairfield LP, LLC 18,379(1) 22%
5 Cambridge Center
9th Floor
Cambridge, MA 02142

- --------
(1) Includes 10,000 units held of record by Nihon Building Project USA, Inc.
and 8,379 units held of record by our general partner, as to all of which
units transfers to AP-Fairfield LP, LLC made during the second quarter of
2001 will become effective as of June 16, 2001 in accordance with our
partnership agreement.

Pursuant to the agreement between our general partner and AP-Fairfield GP,
LLC described under Item 1 under the heading "Restructuring Plan," a change of
control of the partnership will occur if the withdrawal of our current general
partner and the substitution of AP-Fairfield GP, LLC as the new general partner
is approved by a majority vote of our limited partners and by certain third
parties.

ITEM 5. MANAGERS AND EXECUTIVE OFFICERS

FIBM One LLC, our general partner, was organized in Delaware in 1998 as a
single member limited liability company and is a subsidiary of Host LP. Our
general partner was organized solely for the purpose of acting as our general
partner.

We have no directors, managers, officers or employees. Our business policy
making functions are carried out through the managers and executive officers of
our general partner, who are listed below:

Name Age Principal Position
---- --- ------------------

Robert E. Parsons, Jr. .. 45 Executive Vice President and Chief Financial
Officer
W. Edward Walter......... 45 Executive Vice President and Treasurer

Robert E. Parsons, Jr. joined Host Marriott's Corporate Financial Planning
staff in 1981 and was made Assistant Treasurer in 1988. In 1993, Mr. Parsons
was elected Senior Vice President and Treasurer of Host Marriott, and in 1995,
he was elected Executive Vice President and Chief Financial Officer of Host
Marriott. He is also an Executive Vice President and Chief Financial Officer of
Host LP and serves as a director, manager and officer of numerous Host Marriott
subsidiaries. Mr. Parsons does not have an employment agreement with the
Partnership.

W. Edward Walter joined Host Marriott in 1996 as Senior Vice President for
Acquisitions, and was elected Treasurer in 1998, and Executive Vice President
in May 2000. He is also Executive Vice President and Treasurer of Host LP and
serves as director, manager and officer of numerous Host Marriott subsidiaries.
Prior to joining Host Marriott, Mr. Walter was a partner with Trammell Crow
Residential Company and President of Bailey Capital Corporation, a real estate
firm focusing on tax-exempt real estate investments. Mr. Walter does not have
an employment agreement with the Partnership.

ITEM 6. EXECUTIVE COMPENSATION

Our general partner is required to devote to us such time as may be
necessary for the proper performance of its duties, but the officers and the
managers of our general partner are not required to devote their full time to
our matters. To the extent that any officer or manager of our general partner
or employee of Host Marriott devotes time to us, our general partner or Host
Marriott, as the case may be, is entitled to reimbursement for the cost of
providing such services. Any such costs may include a charge for overhead, but
without a profit to our general partner. For the first quarters 2001 and 2000
and for the fiscal years ended December 31, 2000, 1999 and 1998, administrative
expenses reimbursed by us to our general partner totaled $0, $0, $549,000,
$136,000 and $215,000, respectively.

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We are a party to an ongoing management agreement with Marriott
International pursuant to which our Inns are managed by Fairfield FMC
Corporation, a wholly owned subsidiary of Marriott International.

Prior to October 8, 1993, Marriott International was a wholly owned
subsidiary of Host Marriott, which was then named Marriott Corporation. On
October 8, 1993, Marriott Corporation's operations were divided into two
separate companies, Host Marriott and Marriott International. Marriott
International now conducts its management business as a separate publicly-
traded company and is not a parent or subsidiary of Host Marriott, although the
two corporations have various business and other relationships.

A full description of the management agreement can be found under "Item 1.
Business."

The following table provides the significant expenses payable to Marriott
International and affiliates for the first quarters 2001 and 2000, and the
years ended December 31, 2000, 1999 and 1998 (in thousands):

First Quarter Year ended December 31,
------------- -----------------------
2001 2000 2000 1999 1998
------ ------ ------- ------- -------

Fairfield Inn system fee............ $ 544 $ 582 $ 2,744 $ 2,792 $ 2,831
Ground rent......................... 676 396 2,977 2,872 2,863
Reservation Costs................... 640 705 3,031 2,494 2,084
Marketing fund contribution......... 467 479 2,526 2,262 2,359
Incentive management fee............ 416 529 2,849 2,775 3,640
Base management fee................. 363 388 1,830 1,862 1,887
Chain services allocation........... 339 380 1,691 1,773 1,600
------ ------ ------- ------- -------
Total............................. $3,445 $3,459 $17,648 $16,830 $17,264
====== ====== ======= ======= =======

ITEM 8. LEGAL PROCEEDINGS

We are involved in routine litigation and administrative proceedings arising
in the ordinary course of business, some of which are expected to be covered by
liability insurance and which collectively are not expected to have a material
adverse effect on our business, financial condition or results of operations.

ITEM 9. MARKET FOR AND DISTRIBUTIONS ON LIMITED PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS

There is currently no public market for the units. Transfers of Units are
limited to the first day of a fiscal quarter, and are subject to approval by
the general partner and certain other restrictions described in Item 11,
"Description of Registrant's Securities to be Registered." As of March 12,
2001, there were 2,720 holders of record of the 83,337 units.

There were no cash distribution to our limited partners during 1998, 1999 or
2000. Our ability to make cash distributions to our limited partners in the
future is subject to limitations contained in our partnership agreement that
are described in Item 11, "Description of Registrant's Securities to be
Registered--Distributions and Allocations." In addition, we are making payments
to reserves established by the lender, as described in Item 1, "Business
Declining Operations," and Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
that limit the funds available for cash distributions.

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES

None within the past three years.

ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED

The 83,337 units of limited partnership interests to be registered represent
a 99% interest in us. Our general partner holds the remaining 1% interest.

The following description is a summary of the material provisions of the
partnership agreement. It does not restate the partnership agreement in its
entirety. We urge you to read the partnership agreement in its entirety as it,
not this description, defines the rights of limited partners. A copy of the
partnership agreement is filed as an exhibit to this Amendment No. 1 to Form
10. Capitalized terms used in this section for which no definition is provided
is defined in the partnership agreement.

Authority of the General Partner

Under the partnership agreement, the general partner has broad management
discretion over our business and with regard to the operation of our Inns. No
limited partner may take any part in the conduct or control of our business.
The authority of the general partner is limited in specified respects.

The partnership agreement provides that, if all of the Inns have not been
sold prior to 2001, then, subject to the terms of the management agreement and
loan agreement, the general partner will use reasonable best efforts to sell
the remaining Inns, in one or more transactions, as it determines appropriate
in its reasonable judgment. As discussed above, the prior efforts to sell the
Inns or the equity interests in the partnership were unsuccessful and, in light
of the current financial condition of the partnership, the general partner does
not believe that a sale could be effected that would be in the best interests
of limited partners.

Without the consent of all of the limited partners, the general partner does
not have the authority, on our behalf, to:

(1) do any act in contravention of the partnership agreement;

(2) except as otherwise provided in the partnership agreement, do any
act which would make it impossible to carry on our ordinary business;

(3) confess a judgment in an amount in excess of $100,000 against us;

(4) convert our property to its own use, or possess or assign any
rights in specific partnership property for other than a partnership
purpose;

(5) admit a person as either a general partner or a limited partner
except as otherwise provided in the partnership agreement;

(6) perform any act that would subject any limited partner to liability
as a general partner in any jurisdiction or to any other liability except
as provided in the Delaware Revised Uniform Limited Partnership Act (the
"Delaware Act") or the partnership agreement; or

(7) list, recognize or facilitate the trading of Units on any
"established securities market," within the meaning of the Internal Revenue
Code of 1986, as amended, or create for the Units a "secondary market"
within the meaning of the Code, or the substantial equivalent thereof, or
permit, recognize or facilitate trading of Units on any such market, or
permit any of its affiliates to take such actions, if, as a result thereof,
we would be taxed for federal income tax purposes as an association taxable
as a corporation.

Without the approval of limited partners holding a majority of the Units,
the general partner does not have the authority, on our behalf, to:

(1) cause us to acquire an interest in other hotel properties or in
other assets not reasonably related to the conduct of our business;

(2) sell any of the Inns to the general partner or any affiliate unless
specified procedures, including giving notice to the limited partners,
obtaining independent appraisals of the Inn or Inns to be sold, paying cash
for the Inns, and not paying any real estate commissions in connection with
the sale, are followed;

(3) effect any amendment to any agreement, contract or arrangement with
the general partner or any of its affiliates which would reduce the
responsibilities or duties of the general partners or would increase the
compensation payable to the general partner or any of its affiliates or
which would otherwise adversely affect the rights of or benefits to the
limited partners;

(4) incur debt except as set forth in the partnership agreement;

(5) agree to the addition of transient guest rooms at any Inn unless
the Inn has had an average occupancy rate of at least 70% for a consecutive
period of at least 12 months immediately prior to commencement of
construction of the addition;

(6) make any election to continue beyond our term, discontinue or
dissolve us;

(7) voluntarily withdraw as a general partner;

(8) cause us to incur any debt in excess of $250,000 unless such debt
was entirely "qualified nonrecourse financing" within the meaning of the
Code;

(9) cause us to merge or consolidate with any other entity;

(10) accept the substitution of more than five Inns under the purchase
agreement, sell, lease or otherwise dispose of, directly or indirectly, in
one transaction or a series of related transactions, the greater of 15 Inns
or a number of Inns where original purchase price exceeds 30% of the total
purchase price for the Inns or sell, lease or otherwise dispose of any Inns
except in accordance with paragraph (2) above;

(11) cause us to sell all or substantially all of our assets, except
upon dissolution and liquidation in accordance with the partnership
agreement; or

(12) cause us to incur any debt that would result in refinancing
proceeds being distributed to the partners, unless such refinancing
proceeds are distributed to the partners in the same taxable year in which
we incurred such liability.

Restrictions on Assignments of Units

A limited partner generally has the right to assign a Unit to another person
or entity, subject to specified conditions and restrictions. An assignment of a
Unit is subject to the following restrictions:

(1) assignments will only be given effect on the first day of the next
fiscal quarter;

(2) no assignment may be made if, when added to all other prior
assignments and transfers of interests in us within the preceding 12
months, such assignment would cause us, in the opinion of our legal
counsel, to be considered to have been terminated within the meaning of
section 708 of the Code;

(3) the general partner may prohibit any assignment that, in the
opinion of our legal counsel, would require the filing of a registration
statement under the Securities Act of 1933 or otherwise would violate any
federal or state securities laws or regulations (including investor
suitability standards) applicable to us or the Units;

(4) no assignment may be made that would result in either the assignor
or the assignee owning at least a fraction of a Unit but less than five
Units, except for assignments by gift, inheritance or family dissolution or
assignments to affiliates of the assignor;

(5) no transfer, assignment or negotiation may be made if, in the
opinion of our legal counsel, it would result in us being treated as an
association taxable as a corporation for federal income tax purposes;

(6) no transfer may be made if such transfer is effectuated through an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of section 7704 of the Code;

(7) no assignment may be made if, in the opinion of our legal counsel,
it would preclude us from either obtaining or retaining a liquor beverage
license for any of our Inns;

(8) no assignment may be made unless the transferee agrees in writing
that it will not, directly or indirectly, create for the Units or
facilitate the trading of the Units on a "secondary market (or the
substantial equivalent thereof)" within the meaning of section 7704 of the
Code;

(9) no assignment or transfer may be made and any such purported
transfer will be void ab initio if, as a result of such transfer, we would
be unable to satisfy at least one of the "safe harbors" set forth in IRS
Notice 88-75 within the meaning of section 7704 of the Code, unless we have
received a favorable IRS ruling or opinion of legal counsel to the effect
that such transfer will not result in us being classified as a "publicly
traded partnership" within the meaning of section 7704 of the Code;

(10) no assignment may be made to any person who is not a "United States
person" within the meaning of section 7701(a)(30) of the Code;

(11) no assignment may be made to any person generally exempt from
federal income tax under section 501 of the Code or otherwise, without the
approval of the general partner;

(12) no transfer or assignment may be made unless the proposed assignee
has provided the general partner the required information under the
partnership agreement and any other information reasonably requested by the
general partner; or

(13) no assignment may be made to any person who is related to any of
our outside lenders whose loan is nonrecourse debt, as defined.

The general partner is also authorized to impose any other restrictions on
the transfer of Units to the extent that it, in the exercise of its reasonable
discretion and based upon the advice of our counsel, determines such further
limitations are necessary or advisable to protect us from being considered a
publicly traded partnership within the meaning of the Code.

We will not recognize for any purpose any assignment of any Units unless:

(1) an instrument is executed making such assignment, signed by both the
assignor and the assignee, and a duly executed application for assignment
and admission as substituted limited partner is executed indicating the
written acceptance by the assignee of all the terms and provisions of the
partnership agreement; and

(2) the general partner has determined that such as assignment is
permitted under the partnership agreement.

No assignee of a limited partner's Units will be entitled to become a
substituted limited partner unless:

(1) the general partner gives its written consent, which consent may be
withheld in its absolute discretion;

(2) the transferring limited partner and the assignee have executed
instruments that the general partner deems necessary or desirable to effect
such admission;

(3) the assignee has accepted, adopted and approved in writing all of
the terms of the partnership agreement and executed a power of attorney
similar to the power of attorney granted in the partnership agreement; and

(4) the assignee pays all reasonable expenses incurred in connection
with its admission as a substituted limited partner.

An assignee only becomes a substituted limited partner when the general
partner has reflected the admission of such person as a limited partner in our
books and records, which will be done once each fiscal quarter.

Any person who is the assignee of any of the Units of a limited partner,
but who does not become a substituted limited partner is entitled to all the
rights of an assignee of a limited partner interest under the Delaware Act,
including the right to receive distributions from us and the share of net
profits, net losses, gain, loss and recapture income attributable to the Units
assigned to the person, but shall not be deemed to be a holder of Units for
any other purpose under the partnership agreement.

Amendments

Amendments to the partnership agreement may be made by the general partner
with the consent of the limited partners holding a majority of the outstanding
Units, excluding those Units held by the general partner or its affiliates in
the case of matters on which the general partner or any of its affiliates has
an interest. No amendment to the partnership agreement may be made, however,
without the approval of all of the limited partners which would:

(1) convert a limited partner's interest into a general partner's
interest;

(2) adversely affect the liability of a limited partner;

(3) alter the interest of a partner in net profits, net losses, gain,
loss or distributions of cash available for distribution or capital
receipts or reduce the percentage of partners which is required to consent
to any action under the partnership agreement;

(4) limit in any manner the liability of the general partner as provided
in the partnership agreement;

(5) permit the general partner to take any action otherwise prohibited
by the partnership agreement without the consent of all of the limited
partners;

(6) cause us to be taxed for federal income tax purposes as an
association taxable as a corporation; or

(7) reduce the percentage of Units required to approve any amendment to
the partnership agreement.

The general partner may make an amendment to the partnership agreement,
without the consent of the limited partners, if such amendment is necessary
solely to clarify the provisions of the partnership agreement so long as such
amendment does not adversely affect the rights of the limited partners under
the partnership agreement.

Meetings and Voting

The limited partners cannot participate in our management or control or our
business. The partnership agreement, however, extends to the limited partners
the right under some specified conditions to vote on or approve some
partnership matters. Any action that is required or permitted to be taken by
the limited partners may be taken either at a meeting of the limited partners
or without a meeting if approvals in writing setting forth the action so taken
are signed by limited partners owning not less than the minimum number of
Units that would be necessary to authorize or take such action at a meeting at
which all of the limited partners were present and voted. Meetings of the
limited partners may be called by the general partner and must be called by
the general partner upon receipt of a request in writing signed by holders of
10% or more of the Units held by the limited partners. Limited partners may
vote either in person or by proxy at meetings. Limited partners holding more
than 50% of the total number of all outstanding Units constitute a quorum at a
meeting of the limited partners. Matters submitted to the limited partners for
determination will be determined by the affirmative vote of the limited
partners holding a majority of the outstanding Units, excluding those Units
held by the general partner and its affiliates, except that a unanimous vote
of the limited partners will be required for specified actions referred to
above.

The partnership agreement does not provide for annual meetings of the
limited partners and none have been held, nor does the general partner
anticipate calling such meetings.

Conflicts of Interest

Because Host Marriott and its affiliates own hotels other than those owned
by us, potential conflicts of interest exist. With respect to these potential
conflicts of interest, Host Marriott and its affiliates may compete with our
Inns to the extent that they develop or invest in competing hotels. In
addition, Host Marriott, by virtue of the hotels in which it currently is
invested, may already compete directly or indirectly with our Inns.

Under Delaware law, a general partner has liability for a partnership's
obligations to the extent that the partnership's assets are insufficient to
satisfy the obligations, unless those obligations are, by contract, without
recourse to the partners of a limited partnership. Since our general partner
is entitled to manage and control our business and operations, and because
specified actions taken by our general partner or us could expose our general
partner to liability that is not shared by the limited partners (for example,
tort liability or environmental liability), this control could lead to a
conflict of interest. Under Delaware law, our general partner has a fiduciary
duty to us and is required to exercise good faith and loyalty in all its
dealings with respect to our affairs.

Policies with Respect to Conflicts of Interest

Our general partner has a policy that our relationship with it or any
affiliate, or persons employed by it are conducted on terms which are fair to
us and which are commercially reasonable. Agreements and relationships
involving our general partner or its affiliates and us are on terms consistent
with the terms on which our general partner or its affiliates have dealt with
unrelated parties.

Our partnership agreement provides that agreements, contracts or
arrangements between us and our general partner, other than arrangements on
commercially reasonable terms for rendering legal, tax, accounting, financial,
engineering and procurement services to us by our general partner or its
affiliates, will be subject to the following conditions:

(1) the services, goods or materials must be reasonably necessary to the
operation of our business;

(2) the general partner or any affiliate must have the ability to render
such services or to sell or lease such goods or materials and must have
been previously engaged in the business of rendering such services or
selling or leasing such goods or materials as an ordinary and ongoing
business;

(3) any such agreement, contract or arrangement must be fair to us and
reflect commercially reasonable terms and conditions that are as favorable
to us as we could obtain from unaffiliated third parties, must provide for
compensation to the general partner or its affiliate equal to the lesser of
actual cost or 90% of the competitive price that would be charged for such
services, goods or materials and must be contained in a written contract
which precisely describes the subject matter thereof and all compensation
to be paid therefor;

(4) neither the general partner nor any affiliate may participate in any
reciprocal business arrangements which would have the effect of
circumventing any of the provisions of our partnership agreement;

(5) no such agreement, contract or arrangement as to which the limited
partners had previously given approval may be amended in a manner as to
increase the fees or other compensation payable to the general partner or
any affiliate or to decrease the responsibilities or duties of the general
partner or any affiliate in the absence of the consent of the limited
partners holding a majority of the units, excluding those units held by the
general partner or its affiliates;

(6) any such agreement, contract or arrangement which relates to or
secures any funds advanced or loaned to us by the general partner or any
affiliate must reflect commercially reasonable terms and conditions that
are as favorable to us as we could obtain from unaffiliated third parties
or banks and no prepayment charge or penalty may be required on any loan or
advance; and

(7) any such agreement, contract or arrangement which relates to the
performance of services or the sale or lease of goods or materials, other
than the management agreement, must contain a clause allowing termination
without penalty on 60 days' notice.

(8) with respect to architectural and engineering services for our Inns,
the general partner or any affiliate rendering such services must have the
ability to render such services and must have been previously engaged in
the business of rendering such services as an ordinary and ongoing
business, must

reflect commercially reasonable terms and provide for compensation at 90%
of the competitive price for such services, the terms must be contained in
a written contract which precisely describes the services to be provided
and the compensation to be paid for such services and if the total cost of
any single improvement to any Inn exceeds $250,000 and the general partner
or any affiliate has rendered architectural or engineering services in
connection with that improvement, we must obtain an appraisal, at the
general partner's expense, to determine the fair market value of such
improvement and we will only be required to reimburse the general partner
or its affiliates for such costs of performing the services to the extent
of such fair market value; and

(9) we will not reimburse the general partner or its affiliates for the
actual cost of services for which it gets paid a separate fee.

Distributions and Allocations

Partnership allocations and distributions are generally made as follows:

Cash available for distribution for each fiscal year is to be distributed
quarterly as follows:

(1) until the partners have received, with respect to such fiscal year,
an amount equal to the partners' preferred distribution (10% of original
cash contributions reduced by cumulative distributions of net refinancing
and sales proceeds), 99% to the limited partners and 1% to the general
partner;

(2) if the partners have received aggregate cumulative distributions of
net refinancing and sales proceeds equal to 50% of their original capital
contributions, 99% to the limited partners and 1% to the general partner;

(3) if the partners have received aggregate cumulative distributions of
net refinancing and sales proceeds equal to 100% of their original capital
contributions, 90% to the limited partners and 10% to the general partner;
and

(4) if the partners have received aggregate cumulative distributions of
capital receipts greater than 100% of their original capital contributions,
80% to the limited partners and 20% to the general partner.

Refinancing proceeds and sale proceeds from the sale or other disposition of
less than substantially all of our assets are to be distributed

(1) until the partners have received the then outstanding partners' 12%
preferred distribution, as defined, 99% to the limited partners and 1% to
the general partner;

(2) until the partners have received cumulative distributions of net
refinancing and sales proceeds equal to 100% of their original capital
contributions, 1% to the general partner and 99% to the limited partners;
and

(3) thereafter, 80% to the limited partners and 20% to the general
partner.

Sale proceeds from the sale of substantially all of our assets will be
distributed to the partners pro-rata in accordance with their capital account
balances as adjusted to take into account gain or loss resulting from such
sale.

Net profits for each fiscal year generally will be allocated in the same
manner in which cash available for distribution is distributed. Net losses for
each fiscal year generally will be allocated 99% to the limited partners and 1%
to the general partner.

Gain recognized by us generally will be allocated in the following order of
priority:

(1) to those partners whose capital accounts have negative balances in
the ratio of such negative balances until such negative balances are
brought to zero;

(2) to the limited partners up to the amount necessary to bring the
aggregate of their capital account balances to an amount equal to 99% of
the partners' 12% preferred distribution plus their net invested capital,
as defined, and to the general partner in the amount necessary to bring its
capital account balance to an amount equal to 1% of the partners' 12%
preferred distribution plus its net invested capital; and

(3) thereafter, any remaining gain will be allocated among the partners
so that the ratio of (A) the aggregate balance in the capital accounts of
the limited partners in excess of 99% of the partners' 12% preferred
distribution plus their net invested capital to (B) the balance in the
general partners' capital account in excess of 1% of the partners' 12%
preferred distribution plus its net invested capital, is 80 to 20.

For financial reporting purposes, profits and losses are allocated among the
partners based on their stated interests in cash available for distribution.

Upon our dissolution, the general partner will liquidate our assets. The
proceeds of such liquidation shall be applied and distributed in the following
order of priority:

(1) to the payment of the expenses of the liquidation,

(2) to the payment of debt and other liabilities;

(3) to the payment of any loans or advances that may have been made by
any of the partners to us; and

(4) to the general partner and limited partners in proportion to the net
balances in their respective capital accounts.

Other Matters

If at any time any agreement pursuant to which operating management of any
of our Inns is vested in the general partner or an affiliate of the general
partner provides that we have a right to terminate such agreement as a result
of the failure of the operation of such Inn to attain economic objectives, as
specifically defined, the limited partners, without the consent of the general
partner, may, upon the affirmative vote of the holders of a majority of the
Units, take action to exercise our right to terminate such agreements.

The limited partners may also, by a vote of the holders of a majority of the
Units, remove the general partner, but only if a new general partner is
elected. Notwithstanding the foregoing, however, such a removal of the general
partner or the manager, if exercised, would be an event of default under the
mortgage debt, and would permit the lender or its assignee to accelerate the
maturity of the loan, unless it is exercised with the consent of the lender or
its assignee.

The partnership agreement provides that limited partners will not be
personally liable for the losses of the partnership beyond the amount committed
by them to the capital of the partnership. In the event that we are unable
otherwise to meet our obligations, the limited partners might, under applicable
law, be obligated under some circumstances to return distributions previously
received by them, with interest, to the extent such distributions constituted a
return of the capital contributions at the time when creditors had valid claims
outstanding against us.

ITEM 12. INDEMNIFICATION OF MANAGERS AND OFFICERS

Except as specifically provided in the Delaware Act, the general partner is
liable for our obligations in the same manner as a partner would be liable in a
partnership without limited partners to persons other than the partnership and
the other partners. Generally speaking, any such partner is fully liable for
any and all of the debts or other obligations of the partnership as and to the
extent the partnership is either unable or fails to meet such obligations.
Thus, the assets of the general partner may be reached by our creditors to
satisfy our obligations or other liabilities, other than non-recourse
liabilities, to the extent our assets are insufficient to satisfy such
obligations or liabilities.

The Delaware Act provides that: "Subject to such standards and restrictions,
if any, as set forth in its partnership agreement, a limited partnership may,
and shall have the power to, indemnify and hold harmless any partner or other
person from and against any and all claims and demands whatsoever." The
partnership agreement provides that the general partner and its affiliates who
perform services for the partnership on behalf of the general partner (within
the scope of its authority as the general partner of the partnership) will not
be liable to the partnership or the limited partners for liabilities, costs and
expenses incurred as a result of any act or omission of the general partner or
such person provided:

(1) such acts or omissions were determined by the general partner or
such person, in good faith, to be in our best interests;

(2) such acts or omissions were within the general partner's scope of
authority granted by the partnership agreement, by law or by the limited
partners in accordance with the partnership agreement; and

(3) the conduct of the general partner or such person did not constitute
negligence, fraud, misconduct or breach of fiduciary duty to us or any
partner.

The partnership agreement also provides that the general partner and such
persons will be indemnified out of partnership assets against any loss,
liability or expense arising out of any act or omission so long as the general
partner or such persons has satisfied the requirements of clauses (1), (2) and
(3) above. We, however, may indemnify the general partner or any other person
for losses, costs and expenses incurred in successfully defending or settling
claims arising out of alleged securities laws violations only if certain
specific additional requirements are met. The partnership agreement provides
that any indemnification obligation shall be paid solely out of our assets.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to partners and controlling persons of the registrant
pursuant to the foregoing provisions or otherwise, we have been advised that,
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid in the successful defense or any action, suit or proceeding) is asserted
against us by such a person in connection with the securities registered
hereby, and if the Securities and Exchange Commission is still of the same
opinion, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

ITEM 13. FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

Page
----

Report of Independent Public Accountants................................. F-2

Balance Sheets as of December 31, 2000 and 1999.......................... F-3

Statements of Operations for the fiscal years ended December 31, 2000,
1999 and 1998........................................................... F-4

Statements of Changes in Partners' Capital for the fiscal years ended
December 31, 2000, 1999 and 1998........................................ F-5

Statements of Cash Flows for the fiscal years ended December 31, 2000,
1999 and 1998........................................................... F-6

Notes to Financial Statements............................................ F-7

Condensed Balance Sheet as of March 23, 2001 (Unaudited)................. F-16

Condensed Statements of Operations for the twelve weeks ended March 23,
2001 and March 24, 2000 (Unaudited)..................................... F-17

Condensed Statements of Cash Flows for the twelve weeks ended March 23,
2001 and March 24, 2000 (Unaudited)..................................... F-18

Notes to Condensed Financial Statements.................................. F-19

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE PARTNERS OF FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP:

We have audited the accompanying balance sheet of Fairfield Inn by Marriott
Limited Partnership (a Delaware limited partnership) as of December 31, 2000
and 1999, and the related statements of operations, changes in partners'
capital (deficit) and cash flows for the three years in the period ended
December 31, 2000. These financial statements are the responsibility of the
General Partner's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the 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 financial position of Fairfield Inn by Marriott
Limited Partnership as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for the three years in the period ended December
31, 2000, in conformity with accounting principles generally accepted in the
United States.

Arthur Andersen LLP

Vienna, Virginia
April 5, 2001

F-2

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

BALANCE SHEETS
December 31, 2000 and 1999
(in thousands)

2000 1999
-------- --------

ASSETS
Property and equipment, net... $122,013 $136,937
Deferred financing costs, net
of accumulated amortization.. 2,937 3,424
Due from Marriott
International, Inc. and
affiliates................... 1,215 1,285
Property improvement fund..... 5,489 3,886
Restricted cash............... 7,726 7,981
Cash and cash equivalents..... 7,702 10,061
-------- --------
Total assets............ $147,082 $163,574
======== ========

LIABILITIES AND PARTNERS'
DEFICIT
LIABILITIES
Mortgage debt............... $153,569 $157,897
Due to Marriott
International, Inc. and
affiliates................. 3,931 24,529
Accounts payable and accrued
liabilities................ 2,911 3,186
-------- --------
Total liabilities....... 160,411 185,612
-------- --------
PARTNERS' DEFICIT
General Partner
Capital contribution...... 813 813
Capital distributions..... (517) (517)
Cumulative net losses..... (379) (466)
-------- --------
(83) (170)
-------- --------
Limited Partners
Capital contributions..... 75,479 75,479
Capital distributions..... (51,270) (51,270)
Cumulative net losses..... (37,455) (46,077)
-------- --------
(13,246) (21,868)
-------- --------
Total partners'
deficit................ (13,329) (22,038)
-------- --------
$147,082 $163,574
======== ========

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

F-3

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS
Fiscal years ended December 31, 2000, 1999 and 1998
(in thousands, except Unit and per Unit amounts)

2000 1999 1998
-------- -------- --------

REVENUES
Rooms......................................... $ 89,308 $ 90,653 $ 91,546
Other......................................... 2,170 2,431 2,824
-------- -------- --------
Total revenues.............................. 91,478 93,084 94,370
-------- -------- --------
OPERATING EXPENSES
Rooms......................................... 27,894 28,481 27,191
Other department costs and expenses........... 1,670 1,597 1,604
Selling, administrative and other............. 27,701 26,907 25,851
Depreciation.................................. 13,463 14,413 14,990
Property taxes................................ 3,886 3,749 3,702
Fairfield Inn system fee...................... 2,744 2,792 2,831
Incentive management fee...................... 2,849 2,775 3,640
Ground rent................................... 2,964 2,742 2,646
Base management fee........................... 1,830 1,862 1,887
Insurance and other........................... 1,198 1,038 1,053
Loss on impairment of long-lived assets (Note
2)........................................... 8,127 2,843 9,497
-------- -------- --------
Total operating expenses.................... 94,326 89,199 94,892
-------- -------- --------
OPERATING PROFIT (LOSS)......................... (2,848) 3,885 (522)
Interest expense.............................. (13,238) (13,528) (13,792)
Interest income............................... 1,312 1,091 1,315
-------- -------- --------
LOSS BEFORE EXTRAORDINARY ITEM.................. (14,774) (8,552) (12,999)
EXTRAORDINARY ITEM
Gain on the forgiveness of incentive
management fees.............................. 23,483 -- --
-------- -------- --------
NET INCOME (LOSS)............................... $ 8,709 $ (8,552) $(12,999)
======== ======== ========
ALLOCATION OF NET INCOME (LOSS)
General Partner............................... $ 87 $ (86) $ (130)
Limited Partners.............................. 8,622 (8,466) (12,869)
-------- -------- --------
$ 8,709 $ (8,552) $(12,999)
======== ======== ========
NET INCOME (LOSS) PER LIMITED PARTNER UNIT
(83,337 UNITS)................................. $ 103 $ (102) $ (154)
======== ======== ========

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

F-4

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
Fiscal years ended December 31, 2000, 1999 and 1998
(in thousands)

General Limited
Partner Partners Total
------- -------- --------

Balance, December 31, 1997......................... $ 46 $ (533) $ (487)
Net loss......................................... (130) (12,869) (12,999)
----- -------- --------
Balance, December 31, 1998......................... (84) (13,402) (13,486)
Net loss......................................... (86) (8,466) (8,552)
----- -------- --------
Balance, December 31, 1999......................... (170) (21,868) (22,038)
Net income....................................... 87 8,622 8,709
----- -------- --------
Balance, December 31, 2000......................... $ (83) $(13,246) $(13,329)
===== ======== ========

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

F-5

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS
Fiscal years ended December 31, 2000, 1999 and 1998
(in thousands)

2000 1999 1998
-------- ------- --------

OPERATING ACTIVITIES
Net income (loss)............................... $ 8,709 $(8,552) $(12,999)
Extraordinary gain on the forgiveness of
incentive management fees...................... (23,483) -- --
Depreciation.................................... 13,463 14,413 14,990
Deferral of incentive management fee............ 2,849 2,775 3,640
Amortization of deferred financing costs as
interest expense............................... 487 486 486
Amortization of mortgage debt premium........... (350) (350) (350)
Loss on disposition of equipment................ 16 28 --
Loss on impairment of long-lived assets......... 8,127 2,843 9,497
Changes in operating accounts:
Due to/from Marriott International, Inc. and
affiliates................................... 106 823 1,083
Accounts payable and accrued liabilities...... (335) 776 910
Change in restricted reserves................. 913 3,119 (734)
-------- ------- --------
Cash provided by operations................. 10,502 16,361 16,523
-------- ------- --------
INVESTING ACTIVITIES
Additions to property and equipment............. (6,682) (8,973) (14,438)
Change in property improvement fund............. (1,603) (3,678) 3,907
-------- ------- --------
Cash used in investing activities........... (8,285) (12,651) (10,531)
-------- ------- --------
FINANCING ACTIVITIES
Repayment of mortgage debt...................... (3,978) (3,689) (3,390)
Change in restricted reserves................... (598) 1,386 (1,387)
-------- ------- --------
Cash used in financing activities........... (4,576) (2,303) (4,777)
-------- ------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.. (2,359) 1,407 1,215
CASH AND CASH EQUIVALENTS at beginning of year.... 10,061 8,654 7,439
-------- ------- --------
CASH AND CASH EQUIVALENTS at end of year.......... $ 7,702 $10,061 $ 8,654
======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for mortgage interest................. $ 13,121 $13,409 $ 13,710
======== ======= ========

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

F-6

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999

NOTE 1. THE PARTNERSHIP

Description of the Partnership

Fairfield Inn by Marriott Limited Partnership (the "Partnership"), a
Delaware limited partnership, was formed on August 23, 1989, to operate 50
Fairfield Inn by Marriott properties (the "Inns") located in sixteen states.
The Partnership leases the land underlying 32 of the Inns from Marriott
International, Inc. ("MII") and certain of its affiliates (the "Land Leases").
Of the Partnership's 50 Inns, seven are located in each of Georgia and North
Carolina; six in Michigan; four in each of Florida, Illinois, and Ohio; and
three or less in each of ten other states. The Inns are managed by Fairfield
FMC Corporation (the "Manager"), a wholly-owned subsidiary of MII, as part of
the Fairfield Inn by Marriott hotel system under a long-term management
agreement. The Inns represent all of the revenues and expenses on the
accompanying statements of operations. The Partnership considers the Inns to
represent a single business segment due to the autonomous nature of each of the
Inns. Each Inn is similarly constructed, has a similar number of rooms and is
operated under the same brand name. The Inns are evaluated collectively by
Partnership management without regard to geographic location and operate in
similar markets.

Inn operations commenced on July 31, 1990 (the "Closing Date") after 83,337
limited partnership interests (the "Units") were sold in a public offering for
$1,000 per Unit. Marriott FIBM One Corporation ("FIBM One") contributed
$841,788 for a 1% general partnership interest and $1.1 million to establish
the initial working capital reserve of the Partnership at $1.5 million. In
addition, FIBM One had a 10% limited partnership interest while the remaining
90% of the limited partnership interest is owned by outside parties.

On December 29, 1998, Host Marriott Corporation ("Host Marriott"), the
parent of FIBM One announced that it had completed substantially all the steps
necessary to qualify as a real estate investment trust ("REIT") under the
applicable Federal income tax laws beginning January 1, 1999 (the "REIT
Conversion"). Subsequent to the REIT Conversion, Host Marriott is referred to
as Host REIT. In connection with the REIT Conversion, Host REIT contributed
substantially all of its hotel assets to a newly-formed partnership, Host
Marriott L.P. ("Host LP").

In connection with Host Marriott's REIT conversion, the following steps
occurred. Host Marriott formed FIBM One LLC, having three classes of member
interests (Class A--1% economic interest, managing; Class B--98% economic
interest, non-managing; Class C--1% economic interest, non-managing). FIBM One
merged with and into FIBM One LLC on December 24, 1998. On December 28, 1998,
Host Marriott contributed its entire interest in FIBM One LLC to Host LP, which
on December 30, 1998, contributed its 98% Class B and 1% Class C interests in
FIBM One LLC to Rockledge Hotel Properties, Inc. ("Rockledge"), a non-
controlled subsidiary, in which Host LP has a 95% economic non-voting interest.

Partnership Allocations and Distributions

Partnership allocations and distributions are generally made as follows:

a. Cash available for distribution for each fiscal year will be distributed
quarterly as follows: (i) 99% to the limited partners and 1% to the General
Partner (collectively, the "Partners") until the Partners have received, with
respect to such fiscal year, an amount equal to the Partners' Preferred
Distribution (10% of the excess of original cash contributions over cumulative
distributions of net refinancing and sales proceeds ("Capital Receipts") on an
annualized basis); (ii) remaining cash available for distribution will be
distributed as follows, depending on the amount of Capital Receipts previously
distributed:

1) 99% to the limited partners and 1% to the General Partner, if the
Partners have received aggregate cumulative distributions of Capital
Receipts of less than 50% of their original capital contributions; or

F-7

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

2) 90% to the limited partners and 10% to the General Partner, if the
Partners have received aggregate cumulative distributions of Capital
Receipts equal to or greater than 50% but less than 100% of their original
capital contributions; or

3) 80% to the limited partners and 20% to the General Partner, if the
Partners have received aggregate cumulative distributions of Capital
Receipts equal to 100% or more of their original capital contributions.

b. Refinancing proceeds and sale proceeds from the sale or other disposition
of less than substantially all of the assets of the Partnership will be
distributed (i) 99% to the limited partners and 1% to the General Partner until
the Partners have received the then outstanding Partners' 12% Preferred
Distribution, as defined, and cumulative distributions of Capital Receipts
equal to 100% of their original capital contributions; and (ii) thereafter, 80%
to the limited partners and 20% to the General Partner.

c. Sale proceeds from the sale of substantially all of the assets of the
Partnership will be distributed to the Partners pro-rata in accordance with
their capital account balances as adjusted to take into account gain or loss
resulting from such sale.

d. Net profits for each fiscal year generally will be allocated in the same
manner in which cash available for distribution is distributed. Net losses for
each fiscal year generally will be allocated 99% to the limited partners and 1%
to the General Partner.

e. Gains recognized by the Partnership generally will be allocated in the
following order of priority: (i) to those Partners whose capital accounts have
negative balances until such negative balances are brought to zero; (ii) to all
Partners up to the amount necessary to bring the Partners' capital account
balances to an amount equal to their pro-rata share of the Partners' 12%
Preferred Distribution, as defined, plus their Net Invested Capital, as
defined; and (iii) thereafter, 80% to the limited partners and 20% to the
General Partner.

f. For financial reporting purposes, profits and losses are allocated among
the Partners based on their stated interests in cash available for
distribution.

Liquidity and Financing Requirements

Adequate liquidity and capital are critical to the ability of the
Partnership to continue as a going concern. The Partnership has experienced
declining operations during the last four years. If operations in 2001 are
consistent with the results from 2000 and the budgeted operations for 2001, the
Partnership will have adequate cash flow to meet debt service during the year.
However, if operating results decline in 2001 the Partnership may not have
sufficient cash flow from current operations to make the required debt service
payments. In the event operations decline, the Partnership has the following
options in order to provide debt service funding. The Partnership can defer the
payment of ground rental expense exceeding 3% of gross revenues from the
32 leased Inns. The deferral becomes the obligation of the Partnership and is
payable thereafter to the extent that there is cash available after the payment
of debt service. The Partnership also has cash reserves to fund debt service.
However, depending on actual operating results, the reserves could be
diminished significantly. By virtue of subordinated ground rent and cash
reserves, the Partnership believes it will have sufficient cash to fund debt
service in 2001.

The lack of available funds from operations over the past several years has
also delayed room refurbishments at the Inns. Based upon information provided
by the Manager, the estimated capital expenditure shortfall in available funds
is expected to be $15 million to $20 million. With the cost of the capital
expenditures reaching these levels, the cost does now, and will continue to,
exceed the Partnership's available funds. We currently are pursuing a plan
that, if approved by limited partners and various third parties, will result in
the investment of additional capital in the partnership to address this capital
shortfall. Until we reach a

F-8

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

resolution concerning funding of the capital expenditure shortfall, the
discretionary capital expenditures exceeding the amount available in our
property improvement fund will be deferred. The shortfall relates to scheduled
room refurbishments at the Inns as well as certain planned improvements to
other areas of the Partnership's Inns. Given the age of the properties, major
renovations are required, including the replacement of roofs, facades,
carpets, wall vinyl and furniture. Some of these capital expenditures are
required by the management agreement in order to satisfactorily maintain the
Partnership Inns as Fairfield Inn properties.

The General Partner is working with the Manager to address the capital
expenditure needs of the Inns. Under the management agreement, if the Manager
determines that the Partnership Inns are not satisfactorily maintained as
Fairfield Inn properties due to insufficient capital improvements, the Manager
may terminate the agreement. The Partnership recently received a notice from
the Manager stating that the Partnership's failure to fund the shortfall in
funds available for replacements of furniture, fixtures and equipment
constitutes a default under the management agreement and asserting a right to
terminate the management agreement in the future if the alleged default is not
cured. The Partnership notified the Manager that, based on the Partnership's
review of the management agreement, the failure to fund this shortfall does
not constitute a default and that they do not have the right to terminate the
management agreement at this time because they did not send a notice within
the time period specified under the management agreement. Accordingly because
there is no existing default, the Partnership has not developed a plan to
address this issue. If the capital shortfall is not satisfactorily resolved,
however, the Manager may have the right to terminate the management agreement
and the Partnership's right to use the Fairfield Inn by Marriott brand as
early as the first quarter of 2002. The Partnership currently does not have a
plan in place to catch up the shortfall. If the management agreement were
terminated and the Partnership lost the right to use the Fairfield Inn by
Marriott brand, the Partnership would need to replace the Manager with another
nationally recognized hotel operator and become part of a comparable
nationally recognized hotel system in order to comply with the obligations
under the Partnership loan documents. The Partnership is developing a
restructuring plan that includes seeking a buyer of its general partner
interest who will invest new funds into the Partnership.

For the years ended December 31, 2000, 1999 and 1998, the Partnership
contributed $5,987,000, $6,516,000 and $6,606,000, respectively, to the
property improvement fund. However, the Partnership's property improvement
fund became insufficient beginning in 1999. Therefore, in both 2000 and 1999
the Partnership deposited $2.4 million to the property improvement fund to
cover the capital expenditure shortfall. The shortfall is primarily due to
room refurbishments which are planned for a majority of the Partnership's Inns
in the next several years. Therefore, no cash is expected to be available for
distribution to the partners in 2001.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The Partnership records are maintained on the accrual basis of accounting
and its fiscal year coincides with the calendar year.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity 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 revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over

F-9

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

the estimated useful lives of the assets which is, generally 30 years for
building, leasehold and land improvements, and 4 to 10 years for furniture and
equipment. The Partnership records depreciation using the modified accelerated
cost recovery system for income tax purposes. All property and equipment is
pledged as security for the refinanced mortgage debt.

The Partnership assesses impairment of its real estate properties based on
whether estimated undiscounted future cash flows from such properties will be
less than their net book value. If a property is impaired, its basis is
adjusted to its estimated fair value. The Partnership's policy for measuring
the fair value of impaired properties is to calculate the estimated present
value of the future cash flows used to determine whether an impairment exists.
The discount rate used is based on our estimate of discount rates reflected in
prices paid for similar assets. In 1998 and 1999, the Inns located in Atlanta
Airport, Georgia; Montgomery, Alabama; Orlando, Florida; Buena Park,
California; Lansing, Illinois and Charlotte-Northeast, North Carolina
experienced declining cash flows, primarily due to additional competition in
their local markets. In 2000, Inns located in Johnson City, Tennessee, Raleigh
and Charlotte Airport, North Carolina, and Columbus North, Ohio also
experienced declining cash flows due to additional competition in their local
markets. As a result, during 2000, 1999 and 1998, the Partnership concluded
that these Inns were impaired and adjusted their basis to their estimated fair
market value. The Partnership recorded an impairment charge of $8,127,000 in
2000, $2,843,000 in 1999 and $9,497,000 in 1998.

Deferred Financing Costs

Deferred financing costs represent the costs incurred in connection with the
mortgage debt refinancing and are amortized over the term of the Mortgage Debt.
The Partnership incurred $4,864,000 of financing costs in connection with the
Mortgage Debt. The financing costs are being amortized using the straight-line
method, which approximates the effective interest method, over the ten year
term of the Mortgage Debt. At December 31, 2000 and 1999, accumulated
amortization of deferred financing costs totaled $1,927,000 and $1,440,000,
respectively.

Restricted Cash

The Partnership was required to establish certain reserves pursuant to the
terms of the mortgage debt. These are fully discussed in Footnote 5.

Cash and Cash Equivalents

The Partnership considers all highly liquid investments with a maturity of
three months or less at date of purchase to be cash equivalents.

Revenues

Revenue from operation of the Partnership's hotels is recognized when the
services are provided.

Ground Rent

The Land Leases include scheduled increases in minimum rents per property.
These scheduled rent increases, which are included in minimum lease payments,
are being recognized by the Partnership on a straight-line basis over the 99
year term of the leases. The adjustment included in ground rent expense and Due
to Marriott International, Inc. and affiliates to reflect minimum lease
payments on a straight-line basis was a decrease of $12,000 for the year ended
December 31, 2000 and $218,000 for each of the years ended December 31, 1999
and 1998. Deferred straight-line ground rent as of December 31, 1999 was
$12,000. At year end 2000, all deferred straight-line ground rent had been
recognized.

F-10

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In addition, ground rent exceeding 3% of gross revenues of $1,082,000 and
$1,034,000 was deferred at December 31, 2000 and 1999, respectively. For a
full discussion see Note 6.

Income Taxes

Provision for Federal and state income taxes has not been made in the
accompanying financial statements since the Partnership does not pay income
taxes, but rather, allocates profits and losses to the individual Partners.
Significant differences exist between the net loss for financial reporting
purposes and the net loss as reported in the Partnership's tax return.

Application of New Accounting Standards

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This standard
establishes accounting and reporting standards requiring that derivative
instruments (including certain derivative instruments imbedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement is effective for fiscal years
beginning after June 15, 2000. The Partnership has determined that there will
be no impact from the implementation of SFAS No. 133.

Reclassifications

Certain reclassifications were made to prior year financial statements to
conform to the 2000 presentation.

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following as of December 31 (in
thousands):

2000 1999
--------- ---------

Land and improvements................................ $ 14,873 $ 14,873
Building and leasehold improvements.................. 169,454 173,705
Furniture and equipment.............................. 74,374 74,714
Construction in progress............................. 3,077 2,403
--------- ---------
261,778 265,695
Less accumulated depreciation and amortization....... (139,765) (128,758)
--------- ---------
$ 122,013 $ 136,937
========= =========

NOTE 4. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of financial instruments not included in this table are
estimated to be equal to their carrying amounts (in thousands):

As of December 31, 2000 As of December 31, 1999
------------------------ ------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ------------ ----------- ------------

Mortgage debt............. $ 153,569 $ 135,033 $ 157,897 $ 130,888
Incentive management fee
due to Fairfield FMC
Corporation.............. $ 2,849 $ 194 $ 23,483 $ --

The estimated fair value of the mortgage debt obligation is based on the
expected future debt service payments discounted at estimated market rates.
Incentive management fee due to the Manager are valued based on the expected
future payments from operating cash flow discounted at estimated risk adjusted
rates. In connection with the litigation settlement agreement, the Manager
forgave $23.5 million of deferred incentive management fees payable as of
December 31, 2000 which is included as an extraordinary gain on the statement
of operations for 2000.

F-11

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 5. DEBT

Mortgage Debt

In 1997, the Partnership's mortgage debt was refinanced and increased to
$165.4 million. The mortgage debt is non-recourse, bears interest at a fixed
rate of 8.40% and requires monthly payments of principal and interest based
upon a 20-year amortization schedule for a 10-year term expiring January 11,
2007. Thereafter, until the final maturity date of January 11, 2017, interest
is payable at an adjusted rate, and all excess cash flow is applied toward
principal amortization. The lender securitized the loan through the issuance
and sale of commercial mortgage backed securities.

The mortgage premium of $3.5 million is being amortized based on a 20-year
amortization schedule for a 10-year term expiring January 11, 2007. Accumulated
amortization of the mortgage premium at December 31, 2000 and 1999 was
$1,387,000 and $1,037,000, respectively, resulting in an unamortized balance of
$2,113,000 and $2,463,000, respectively.

Principal amortization of the Mortgage Debt at December 31, 2000 is as
follows (in thousands):

2001............................................................. $ 4,369
2002............................................................. 4,756
2003............................................................. 5,177
2004............................................................. 5,602
2005............................................................. 6,132
Thereafter....................................................... 125,420
--------
151,456
Mortgage premium................................................. 3,500
Accumulated amortization of mortgage premium..................... (1,387)
--------
2,113
Total mortgage debt............................................ $153,569
========

The mortgage debt is secured by first mortgages on all of the Inns, the land
on which they are located, or an assignment of the Partnership's interest under
the Land Leases, including ownership interest in all improvements thereon,
fixtures and personal property related thereto.

Reserves

The Partnership was required by the lender or the manager to establish
various reserves for capital expenditures, working capital, debt service and
insurance needs.

The balances in those reserves as of December 31 are as follows (in
thousands):

2000 1999
------ ------

Debt service reserve........................................ $4,873 $4,275
Supplemental debt service reserve........................... 1,440 1,469
Working capital reserve..................................... 677 691
Taxes and insurance reserve................................. 300 241
Ground rent reserve......................................... 225 225
Condemnation reserve........................................ 211 201
Capital expenditure reserve................................. -- 879
------ ------
Total restricted cash..................................... $7,726 $7,981
====== ======

F-12

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Partnership established reserves totaling $3,899,000 for certain capital
expenditure which were completed as of December 31, 1999 and the remaining
balance of $879,000 was returned to the Partnership during first quarter 2000.
Additionally, the Partnership was required to deposit two months' debt service
payments, or $2,850,000, into a debt service reserve. The Partnership was also
required to establish a ground rent reserve, which is adjusted annually to
equal one month's anticipated ground rent. The Partnership's loan agreement
requires that if a single downgrade of MII's debt occurs, the Partnership is
required to contribute an additional month's debt service payment to the debt
service reserve which was fully funded in 1999 and over funded in 2000 by
$598,000 due to timing. In addition, pursuant to the terms of the mortgage debt
subsequent to a downgrade of MII's debt, the Partnership is required to
establish with the lender a separate escrow account for payments of insurance
premiums and real estate taxes (the "Tax and Insurance Escrow Reserve") for
each mortgaged property. During 1998, Orange County in Florida (the "County")
paid the Partnership $197,000 for a portion of the land in front of the Orlando
South Fairfield Inn in Orlando, Florida. The funds have been placed in an
escrow account and shown as the condemnation reserve pending the final
resolution on the value of the land taken by the County they will remain and
accrue interest.

In addition, the Partnership entered into a Working Capital Maintenance and
Supplemental Debt Service Agreement ("Agreement") with the Manager, effective
January 13, 1997. As part of this Agreement, the Partnership agreed to furnish
the Manager additional working capital to be deposited into a segregated
interest bearing account (the "Working Capital Reserve"). The Working Capital
Reserve is to be funded from Operating Profit, as defined, retained by or
distributed to the Partnership as such amounts become available, until the
Working Capital Reserve reaches $670,000. This Agreement also requires the
funding of another segregated account for debt service shortfalls (the
"Supplemental Debt Service Reserve"). This reserve is also to be funded out of
Operating Profit, as defined, retained or distributed to the Partnership as
such amounts become available, until the Supplemental Debt Service Reserve
reaches $1,425,000. Interest earned on these reserve accounts was transferred
to the Partnership during first quarter 2001.

NOTE 6. LAND LEASES

The land on which 32 of the Inns are located is leased from MII or its
affiliates. The Land Leases expire on November 30, 2088 and provide that the
Partnership will pay annual rents equal to the greater of a specified minimum
rent for each property or a percentage rent based on gross revenues of the Inn
operated thereon. The minimum rentals are adjusted at various anniversary dates
through 2000, as defined in the agreements. The minimum rentals are adjusted
annually for the remaining life of the leases based on changes in the Consumer
Price Index. The percentage rent, which also varies from property to property,
is fixed at predetermined percentages of gross revenues that increase over
time.

Minimum future rental payments during the term of the Land Leases as of
December 31, 2000 are as follows (in thousands):

Minimum
Lease Year Rental
---------- --------

2001.............................................................. $ 2,825
2002.............................................................. 2,825
2003.............................................................. 2,825
2004.............................................................. 2,825
2005.............................................................. 3,093
Thereafter........................................................ 539,827
--------
$554,220
========

F-13

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Total rental expense on the Land Leases was $2,965,000 for 2000, $2,742,000
for 1999 and $2,646,000 for 1998.

In connection with the refinancing, beginning in 1997 until the Mortgage
Debt is repaid, the payment of rental expense exceeding 3% of gross revenues
from the 32 leased Inns in the aggregate shall be deferred in any fiscal year
that cash flow is less than the regularly scheduled principal and interest
payments on the Mortgage Debt. The deferral shall then be payable in the
following year if cash flow is sufficient to pay the regularly scheduled
principal and interest payments for the Mortgage Debt. Ground rent payable to
MII and its affiliates at December 31, 2000 and 1999 was $1,082,000 and
$1,034,000, respectively, and is included in Due to Marriott International,
Inc. and affiliates on the accompanying balance sheet.

Under the leases, the Partnership pays all costs, expenses, taxes and
assessments relating to the Inns and the underlying land, including real estate
taxes. Each Land Lease provides that the Partnership has a first right of
refusal in the event the applicable ground lessor decides to sell the leased
premises. Upon expiration or termination of a Land Lease, title to the
applicable Inn and all improvements reverts to the ground lessor.

NOTE 7. MANAGEMENT AGREEMENT

The Partnership is a party to a long-term management agreement (the
"Management Agreement") with the Manager.

In conjunction with the 1997 mortgage refinancing, the initial term of the
Management Agreement was extended ten years to December 31, 2019. The Manager
has the option to renew the Management Agreement as to one or more of the Inns
at its option, for up to four additional 10-year terms plus one five-year term.
The Manager is paid a base management fee equal to 2% of gross Inn revenues and
a Fairfield Inn system fee equal to 3% of gross Inn revenues. In addition, the
Manager is entitled to an incentive management fee equal to 15% of Operating
Profit as defined, increasing to 20% after the Inns have achieved total
Operating Profit during any 12 month period equal to or greater than $33.9
million. As of December 31, 2000, operating profit did not exceed $33.9
million. The incentive management fee with respect to each Inn is payable out
of 50% of cash flow from operations remaining after payment of ground rent,
debt service, partnership administrative expenses and the owner's priority
return, as defined.

In accordance with the Management Agreement, incentive management fees
earned through 1992 were waived by the Manager. Incentive management fees
earned after 1992 accrue and are payable as outlined above or from Capital
Receipts. Due to the litigation settlement agreement (see Note 8), $23,483,000
of deferred incentive management fees were waived by the Manager in 2000. As a
result, the Partnership recognized an extraordinary gain for this amount in
2000. During 2000, 1999 and 1998, the Manager deferred $2,849,130, $2,775,000
and $3,640,000 of incentive management fees, respectively. Deferred incentive
management fees at December 31, 2000 and 1999 were $2,849,130 and $23,483,000,
respectively.

The Manager is required to furnish certain services ("Chain Services") which
are furnished generally on a central or regional basis to all managed or owned
Inns in the Fairfield Inn by Marriott hotel system. Costs and expenses incurred
in providing such services are allocated among all domestic Fairfield Inn by
Marriott hotels managed, owned or leased by MII or its subsidiaries, based upon
one or a combination of the following: (i) percent of revenues, (ii) total
number of hotel rooms, (iii) total number of reservations booked, and (iv)
total number of management employees. The Inns also participate in MII's
Marriott Rewards Program ("MRP"). The cost of this program is charged to all
hotels in the full-service, Residence Inn by Marriott, Courtyard by Marriott
and Fairfield Inn by Marriott systems based upon the MRP revenues at each
hotel. The total amount of chain services and MRP costs allocated to the
Partnership for the years ended December 31, 2000, 1999 and 1998 was
$1,691,000, $1,773,000 and $1,600,000, respectively. In addition, the Manager
maintains a marketing fund to pay the costs associated with certain system-wide
advertising, marketing, sales, promotional and public

F-14

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

relations materials and programs. Each Inn within the system contributes
approximately 2.4% of gross Inn revenues to the marketing fund. For the years
ended December 31, 2000, 1999 and 1998, the Partnership contributed $2,526,000,
$2,262,000 and $2,359,000, respectively, to the marketing fund.

Pursuant to the terms of the Management Agreement, the Partnership is
required to provide the Manager with working capital and supplies to meet the
operating needs of the Inns. The Manager converts cash advanced by the
Partnership into other forms of working capital consisting primarily of
operating cash, inventories, and trade receivables and payables which are
maintained and controlled by the Manager. This advance earns no interest and
remains the property of the Partnership throughout the term of the Management
Agreement. The Partnership is required to advance upon request of the Manager
any additional funds necessary to satisfy the needs of the Inns as their
operations may require from time to time. Upon termination of the Management
Agreement, the Manager will return to the Partnership any unused working
capital and supplies. The individual components of working capital and supplies
controlled by the Manager are not reflected in the Partnership's balance sheet.
At the inception of the Partnership, $1,000,000 was advanced to the Manager for
working capital and supplies which is included in Due from Marriott
International, Inc. and affiliates in the accompanying balance sheet.

The Management Agreement provides for the establishment of a property
improvement fund for the Inns to cover (a) the cost of certain non-routine
repairs and maintenance to the Inns which are normally capitalized; and (b) the
cost of replacements and renewals to the Inns' property and improvements.
Contributions to the property improvement fund are based on a percentage of
gross revenues of each Inn equal to 7%. During 2000, $416,000 of these
contributions were reallocated to pay for debt service. For the years ended
December 31, 2000, 1999 and 1998, the Partnership contributed $5,987,000,
$6,516,000, and $6,606,000, respectively, to the property improvement fund.
However, if the Manager determines 7% exceeds the amount needed for making
capital expenditures, then the Manager can adjust the incentive management fee
calculation to exclude as a deduction in calculating incentive management fees
up to one percentage point of contributions to the property improvement fund.
No adjustment was necessary for 2000. However, the Partnership's property
improvement fund became insufficient during 1999. Therefore, in 1999 the
Partnership deposited $2.4 million to the property improvement fund to cover
the capital expenditure shortfall. This amount was treated as a deduction in
calculating incentive management fees in 2000 under the terms of the Management
Agreement. The shortfall is primarily due to room refurbishments planned for a
majority of the Partnership's Inns over the next several years.

The Management Agreement provides that the Partnership may terminate the
Management Agreement and remove the Manager if, specified minimum operating
results are not achieved. The Manager may, however, prevent termination by
paying to the Partnership such amount as necessary to achieve the above
performance standard.

NOTE 8. LITIGATION

In March 2000, the Defendants entered into a settlement agreement with
counsel for the plaintiffs to resolve litigation in seven partnerships,
including the Partnership. Under the terms of the settlement, the Defendants
paid $18,809,103 in cash in exchange for dismissal of the litigation and a
complete release of all claims in October 2000. Each limited partner received
$152 per Unit. In addition to the Defendants' cash payments, the Manager
forgave $23,483,000 of deferred management fees.

F-15

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

CONDENSED BALANCE SHEET
(Unaudited, in thousands)

March 23,
2001
---------

ASSETS
Property and equipment, net........................................ $ 123,631
Other assets....................................................... 2,825
Due from Marriott International, Inc. and affiliates............... 2,684
Property improvement fund.......................................... 2,859
Restricted cash.................................................... 6,365
Cash and cash equivalents.......................................... 5,630
---------
Total assets..................................................... $ 143,994
=========
LIABILITIES AND PARTNERS' DEFICIT
LIABILITIES
Mortgage debt, net of mortgage premium............................. $ 152,388
Due to Marriott International, Inc. and affiliates................. 4,657
Accounts payable and accrued liabilities........................... 2,672
---------
Total liabilities................................................ 159,717
---------
PARTNERS' DEFICIT
General Partner.................................................... (105)
Limited Partners................................................... (15,618)
---------
Total Partners' Deficit.......................................... (15,723)
---------
$ 143,994
=========

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

F-16

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

CONDENSED STATEMENTS OF OPERATIONS
(Unaudited, in thousands)

Twelve Weeks Ended
March 23, March 24,
2001 2000
--------- ---------

REVENUES
Inn revenues
Rooms.................................................... $17,767 $18,778
Other.................................................... 362 635
------- -------
Total inn revenues..................................... 18,129 19,413
Other revenues............................................ 656 --
------- -------
18,785 19,413
------- -------
OPERATING EXPENSES
Rooms..................................................... 5,717 6,026
Other department costs and expenses....................... 287 428
Selling, administrative and other......................... 6,082 6,119
Depreciation and amortization............................. 2,666 3,397
Ground rent, taxes and other.............................. 2,342 1,835
Incentive management fee.................................. 416 529
Fairfield Inn system fee.................................. 544 582
Base management fee....................................... 363 388
------- -------
18,417 19,304
------- -------
OPERATING PROFIT........................................... 368 109
Interest expense.......................................... (2,919) (3,104)
Interest income........................................... 157 267
------- -------
NET LOSS................................................... $(2,394) $(2,728)
======= =======

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

F-17

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

Twelve Weeks Ended
March 23, March 24,
2001 2000
--------- ---------

OPERATING ACTIVITIES
Net loss................................................. $(2,394) $(2,728)
Depreciation............................................. 2,666 3,397
Amortization of deferred financing....................... 112 113
Amortization of mortgage debt premium.................... (80) (80)
Deferral of incentive management fee..................... 416 529
Working capital changes.................................. (277) (2,724)
------- -------
Cash provided by (used in) operating activities........ 443 (1,493)
------- -------
INVESTING ACTIVITIES
Additions to property and equipment...................... (4,284) (1,012)
Change in property improvement fund...................... 2,630 (1,596)
Change in restricted cash................................ -- 879
------- -------
Cash used in investing activities...................... (1,654) (1,729)
------- -------
FINANCING ACTIVITIES
Repayment of mortgage debt............................... (1,101) (981)
Change in restricted cash................................ 240 (353)
------- -------
Cash used in financing activities...................... (861) (1,334)
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS...................... (2,072) (4,556)
CASH AND CASH EQUIVALENTS, at beginning of period.......... 7,702 10,061
------- -------
CASH AND CASH EQUIVALENTS, at end of period................ $ 5,630 $ 5,505
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for mortgage interest.......................... $ 3,093 $ 3,294
======= =======

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

F-18

FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP

NOTE TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1.Organization

Fairfield Inn by Marriott Limited Partnership (the "Partnership"), a
Delaware limited partnership, was formed on August 23, 1989, to acquire, own
and operate 50 Fairfield Inn by Marriott properties (the "Inns") located in
sixteen states. The Partnership leases the land underlying 32 of the Inns from
Marriott International, Inc. ("MII") and certain of its affiliates (the "Land
Leases").

The Inns are managed by Fairfield FMC Corporation (the "Manager"), a wholly-
owned subsidiary of MII, as part of the Fairfield Inn by Marriott hotel system
under a long-term management agreement.

2.Summary of Significant Accounting Policies

The accompanying unaudited, condensed financial statements have been
prepared by the Partnership. Certain information and footnote disclosures
normally included in financial statements presented in accordance with
accounting principles generally accepted in the United States have been
condensed or omitted from the accompanying statements. The Partnership believes
the disclosures made are adequate to make the information presented not
misleading. However, the unaudited, condensed financial statements should be
read in conjunction with the Partnership's audited financial statements and
notes thereto for the year ended December 31, 2000.

In the opinion of the Partnership, the accompanying unaudited, condensed
financial statements reflect all normal and recurring adjustments necessary to
present fairly the financial position of the Partnership as of March 23, 2001
and the results of its operations and cash flows for the twelve weeks ended
March 23, 2001 and March 24, 2000. Interim results are not necessarily
indicative of full year performance because of seasonal and short-term
variations.

For financial reporting purposes, the net profits and net losses of the
Partnership are allocated 99% to the Limited Partners and 1% to the General
Partner. Significant differences exist between the net loss for financial
reporting purposes and the net income for Federal income tax purposes. These
differences are due primarily to the use for income tax purposes of accelerated
depreciation methods, shorter depreciable lives for the assets and straight-
line rent adjustments.

Certain reclassifications were made to the prior year financial statements
to conform to the current presentation.

F-19

ITEM 14. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS

(a) The financial statements filed as a part of this Post-Effective
Amendment No. 1 to Form 10 are listed in Item 13, "Financial Statements."

(b) Exhibits

*2.1 Amended and Restated Agreement of Limited Partnership of Fairfield
Inn by Marriott Limited Partnership by and among Marriott FIBM One
Corporation (General Partner), Christopher, G. Townsend
(Organizational Limited Partner), and those persons who become
Limited Partners (Limited Partners) dated July 31, 1990.

*2.2 First Amendment to Amended and Restated Agreement of Limited
Partnership dated as of December 28, 1998.

*10.1 Management Agreement by and between Fairfield Inn by Marriott Limited
Partnership (Owner) and Fairfield FMC Corporation (Management
Company) dated November 17, 1989.

*10.2 First Amendment to Management Agreement by and between Fairfield Inn
by Marriott Limited Partnership (Owner), Fairfield FMC Corporation
(Management Company) dated July 31, 1990.

*10.3 Second Amendment to Management Agreement by and between Fairfield Inn
by Marriott Limited Partnership (Owner) and Fairfield FMC Corporation
(Manager) dated January 13, 1997.

*10.4 Loan Agreement between Fairfield Inn by Marriott Limited Partnership
and Nomura Asset Capital Corporation dated January 13, 1997.

*10.5 Secured Promissory Note made by Fairfield Inn by Marriott Limited
Partnership (the "Maker") to Nomura Asset Capital Corporation (the
"Payee") dated January 13, 1997.

*10.6 Form of Ground Lease

12.1 Computation of Ratio of Earnings to Fixed Charges

- --------

* Previously filed.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on this 17th day
of July, 2001.

Fairfield Inn by Marriott Limited
Partnership

By: FIBM ONE LLC, its General
Partner

/s/ Robert E. Parsons, Jr.
By: _________________________________
Robert E. Parsons, Jr.
President and Secretary