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Securities and Exchange Commission

Washington, D.C. 20549
Form 10-K

/x/ Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996

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

Commission File Number: 0-14374

ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)

Delaware 52-1427553
- - ----------------------------------------------- ---------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

10400 Fernwood Road
Bethesda, Maryland 20817
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 301-380-2070

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

Not Applicable

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

Units of Limited Partnership Interest

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days: Yes___ No___ (Not Applicable. On August 25, 1992, the
Registrant filed an application for relief from the reporting requirements of
the Securities Exchange Act of 1934 pursuant to Section 12(h) thereof. Because
of the pendency of such application, the Registrant was not required to, and did
not make, any filings pursuant to the Securities Exchange Act of 1934 from
October 23, 1989 until the application was voluntarily withdrawn on November 10,
1997.

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

Documents Incorporated by Reference
None

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TABLE OF CONTENTS

PAGE NO.
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PART I

Item 1. Business.............................................................. 1

Item 2. Property.............................................................. 5

Item 3. Legal Proceedings..................................................... 6

Item 4. Submission of Matters to a Vote of Security Holders................... 6

PART II

Item 5. Market For The Partnership's Limited Partnership Units
and Related Security Holder Matters................................... 7

Item 6. Selected Financial Data............................................... 8

Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 9

Item 8. Financial Statements and Supplementary Data........................... 13

Item 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.............................................. 27

PART III

Item 10. Directors and Executive Officers...................................... 27

Item 11. Management Remuneration and Transactions.............................. 28

Item 12. Security Ownership of Certain Beneficial Owners and Management........ 28

Item 13. Certain Relationships and Related Transactions........................ 29

PART IV

Item 14. Exhibits, Supplemental Financial Statement Schedules
and Reports on Form 8-K............................................... 32

PART I

ITEM 1. BUSINESS

Description of the Partnership

Atlanta Marriott Marquis Limited Partnership (the "Partnership"), a Delaware
limited partnership, was formed on May 28, 1985 (the "Closing Date") (i) to
acquire an 80% general partnership interest in the Ivy Street Hotel Limited
Partnership ("Ivy"), a partnership between John C. Portman, Jr. ("Portman") and
Host Marriott Corporation ("Host Marriott") that was formed to develop, own and
operate the 1,671 room Atlanta Marriott Marquis Hotel (the "Hotel"), and (ii)
purchase from Ivy the parcel of land (the "Land") on which the Hotel is located.

The sole general partner of the Partnership, with a 1% interest, is Marriott
Marquis Corporation (the "General Partner"), a wholly-owned subsidiary of Host
Marriott.

On October 8, 1993, Marriott Corporation's operations were divided into two
separate companies: Host Marriott and Marriott International, Inc. ("MII"). On
December 29, 1995, Host Marriott's operations were divided into two separate
companies: Host Marriott which continued the business of owning lodging
properties and Host Marriott Services Corporation which continued the business
of concession operations at airports and toll roads. Host Marriott, when used
herein in reference to a period or date prior to October 8, 1993, means Marriott
Corporation as it existed prior to its division.

The Partnership is engaged solely in the business of owning and operating the
Hotel and, therefore, is engaged in one industry segment. The principal offices
of the Partnership are located at 10400 Fernwood Road, Bethesda, Maryland 20817.

The Hotel is operated as part of the MII full-service hotel system and is
managed by MII under a long-term management agreement. The Hotel has the right
to use the Marriott name pursuant to the management agreement and, if this
management agreement is terminated, the Partnership will lose the right for all
purposes. See Item 13, "Certain Relationships and Related Transactions."

The Hotel is among the premier hotels in its market and caters primarily to the
group/convention and association business segment. The Partnership has no plans
to acquire any new properties or sell its existing Hotel. See "Competition"
below and Item 2, "Property."

Historically, the Partnership's financing needs have been funded through loan
agreements with independent financial institutions. See "Mortgage Debt
Financing" below.

Organization of the Partnership

On the Closing Date, 530 Class A limited partnership interests of $100,000 per
Unit ("Unit") were sold in a private placement. The General Partner made a
capital contribution of $536,000 on May 28, 1985 for its 1% general partnership
interest. In addition, the General Partner acquired a Class B limited
partnership interest without making any additional capital contribution.

The Partnership purchased its 80% general partnership interest in Ivy from Host
Marriott for a total price of $28.8 million. The Partnership also acquired the
Land from Ivy for $10 million in a separate transaction. The Partnership
subsequently leased the Land to Ivy under a 99-year lease with rentals based
primarily on Hotel sales.

Mortgage Debt Financing

As of December 31, 1996, the Partnership's mortgage debt consists of a
$215,574,000 nonrecourse mortgage note of Ivy (the "Mortgage Debt"). Interest
accrues on the Mortgage Debt at a fixed rate of 10.3%. Interest only is payable
semiannually in arrears. The cash payment rate is 10.17% until maturity on July
10, 1997. The difference between the cash payment rate and the accrual rate
("Deferred Interest") is added to the balance of the Mortgage Debt. The
cumulative Deferred Interest added to the Mortgage Debt totalled $16.5 million
and $14.7 million at December 31, 1996 and 1995, respectively. The Mortgage Debt
was funded with the proceeds of a secured note offering. The notes consist of
$159 million of Senior Secured Notes and $40 million of Subordinated Secured
Notes. In addition, the Mortgage Debt was issued at a discount of $2.5 million
which was amortized as interest expense through March 24, 1991.

The General Partner is currently attempting to refinance the Mortgage Debt which
matures on July 10, 1997. In conjunction with the refinancing, the Partnership
is expected to incur significant refinancing costs which will be funded from
Partnership cash reserves of approximately $4.6 million as of December 31, 1996.
The refinanced debt will likely require significant amortization of principal in
addition to interest; the Partnership's debt service payments are currently for
interest only. There can be no assurance that a successful refinancing will be
achieved. Failure to refinance the debt could lead to a foreclosure of the
Hotel.

The Mortgage Debt is currently supported by certain guarantees provided by Host
Marriott. Host Marriott has agreed to advance up to $50 million to cover
interest and principal shortfalls (respectively, the "Interest Guarantee" and
the "Principal Guarantee") on the Mortgage Debt. Should cash flow from
operations be insufficient to fully fund interest due, $20 million is available
under the Interest Guarantee through loan maturity. The $30 million Principal
Guarantee is available at maturity or in case of a sale, refinancing or
acceleration of the principal amount of the underlying notes resulting from an
Event of Default, as defined and deficiency in proceeds. To the extent the
Interest Guarantee is not used, it becomes available as an additional Principal
Guarantee. There are no amounts outstanding under either the Interest Guarantee
or the Principal Guarantee. No amounts have been funded under the Principal
Guarantee.

Host Marriott had guaranteed up to $33 million of the original debt (the
"Original Debt Service Guarantee" and the "Commitment") under which Host
Marriott was obligated to make certain required debt service payments and
restore any cash flow deficits to the extent that Partnership cash flow, as
defined, was insufficient. Pursuant to the terms of the Mortgage Debt, the
Commitment was modified to fund only certain furniture, fixtures and equipment
expenditures and ground rent shortfalls. Any interest, principal or guarantee
loans made at a time when the Commitment has not been fully funded shall reduce,
dollar for dollar, but not below zero, the remaining unfunded amount of the
Commitment. Advances under the Principal Guarantee, Interest Guarantee and
Original Debt Service Guarantee and Commitment up to cumulative fundings of $33
million do not bear interest. Amounts advanced in excess of $33 million accrue
interest at 1% over the prime rate. As of December 31, 1996 and 1995, the
Partnership had $20.1 million due to Host Marriott under the Commitment.

On March 24, 1994, the note holders of the Mortgage Debt voted to accept MII as
a back-up guarantor and on December 21, 1994, the agreement was finalized. MII,
as back-up guarantor, will be required to perform the obligations under the
Interest Guarantee and the Principal Guarantee in the event that Host Marriott
fails to do so.

Material Contracts

Hotel Management Agreement

Ivy entered into a long-term hotel management agreement (the "Agreement") with
MII to manage the Hotel as part of the MII full-service hotel system. The
Agreement has an initial term expiring on May 28, 2010. Ivy or MII has the
option to renew the Agreement for five additional 10-year terms. MII is entitled
to compensation for its services in the form of a base management fee equal to
3% of gross sales. In addition, MII is entitled to an incentive management fee
equal to 50% of assumed net cash flow of the Hotel, as defined. For additional
information, see Item 13, "Certain Relationships and Related Transactions."

Land Lease

On the Closing Date, the Partnership acquired the Land on which the Hotel is
located from Ivy for $10 million. The Partnership has leased the Land back to
Ivy for a period of 99 years. For additional information, see Item 13, "Certain
Relationships and Related Transactions."

Competition

Downtown Atlanta has a unique market condition in that transient demand
parallels group demand. A large percentage of business transient is actually
convention attendees making reservations outside group blocks. Because of this,
Atlanta has not experienced the demand increases associated with the lodging
industry overall. Although rooms supply growth in the luxury and upscale
segments is forecasted to be limited, significant growth in the budget and
mid-priced hotel segment in Atlanta has had a strong impact on demand as the
convention attendee will move freely between the upscale and mid-priced
segments.

MII believes that by emphasizing management and personnel development and
maintaining a competitive price structure, the Hotel's share of the market will
be maintained or increased. The inclusion of the Hotel within the nationwide MII
full-service hotel system provides advantages of name recognition, centralized
reservations and advertising, system-wide marketing and promotion, centralized
purchasing and training and support services. Additional competitive information
is set forth in Item 2, "Property," with respect to the Hotel.

Conflicts of Interest

Because Host Marriott and its affiliates own and/or operate hotels other than
the Hotel owned by the Partnership, potential conflicts of interest exist. With
respect to these potential conflicts of interest, Host Marriott and its
affiliates retain a free right to compete with the Hotel, including the right to
develop competing hotels now and in the future, in addition to those existing
hotels which may compete directly or indirectly.

Under Delaware law, the General Partner has unlimited liability for obligations
of the Partnership, unless those obligations are, by contract, without recourse
to the partners thereof. Since the General Partner is entitled to manage and
control the business and operations of the Partnership, and because certain
actions taken by the General Partner or the Partnership could expose the General
Partner or its parent, Host Marriott, 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.

Policies with Respect to Conflicts of Interest

It is the policy of the General Partner that the Partnership's relationship with
the General Partner, any of its affiliates or persons employed by the General
Partner are conducted on terms which are fair to the Partnership and which are
commercially reasonable. Agreements and relationships involving the General
Partner or its affiliates and the Partnership are on terms consistent with the
terms on which the General Partner or its affiliates have dealt with unrelated
partners.

The Partnership Agreement provides that agreements, contracts or arrangements
between the Partnership and the General Partner or any of its affiliates, other
than arrangements for rendering legal, tax, accounting, financial, engineering,
and procurement services to the Partnership by the General Partner or its
affiliates, will be on commercially reasonable terms and will be subject to the
following conditions:

(a) the General Partner or any affiliate must be actively engaged in the
business of rendering such services or selling or leasing such goods,
independently of its dealings with the Partnership and as an ordinary
ongoing business or must enter into and engage in such business with
Marriott system hotels or hotel owners generally and not exclusively with
the Partnership;

(b) any such agreement, contract or arrangement must be fair to the
Partnership, and reflect commercially reasonable terms and shall be
embodied in a written contract which precisely describes the subject
matter thereof and all compensation to be paid therefor;

(c) no rebates or give-ups may be received by the General Partner or any
affiliate, nor may the General Partner or any affiliate participate in any
reciprocal business arrangements which would have the effect of
circumventing any of the provisions of the Partnership Agreement;

(d) no such agreement, contract or arrangement as to which the limited
partners had previously given approval may be amended in such 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 certain of its affiliates); and

(e) any such agreement, contract or arrangement which relates to or secures
any funds advanced or loaned to the Partnership by the General Partner or
any affiliate must reflect commercially reasonable terms.

Employees

Neither the General Partner nor the Partnership has any employees. Host Marriott
provides the services of certain employees (including the General Partner's
executive officers) of Host Marriott to the Partnership and the General Partner.
The Partnership and the General Partner anticipate that each of the executive
officers of the General Partner will generally devote a sufficient portion of
his or her time to the business of the Partnership. However, each of such
executive officers also will devote a significant portion of his or her time to
the business of Host Marriott and its other affiliates. No officer or director
of the General Partner or employee of Host Marriott devotes a significant
percentage of time to Partnership matters. To the extent that any officer,
director or employee does devote time to the Partnership, the General Partner or
Host Marriott, as applicable, is entitled to reimbursement for the cost of
providing such services. See Item 11, "Management Remuneration and
Transactions", for information regarding payments made to Host Marriott or its
subsidiaries for the cost of providing administrative services to the
Partnership. The Hotel is staffed by employees of MII.

ITEM 2. PROPERTY

The Hotel

Location

The Atlanta Marriott Marquis is a full-service Marriott hotel. It is located on
approximately 3.6 acres of land in the heart of downtown Atlanta. The Hotel is
in the Peachtree Center area of Atlanta's central business district and occupies
most of the block that is bordered by Baker Street to the north, Courtland
Street to the east, Harris Street to the south, and Peachtree Center Avenue to
the west.

Description

The Hotel opened on July 1, 1985. The 1,671 room Hotel includes 70 suites and
contains over 122,000 square feet of meeting and exhibition space and five
restaurants and lounges. Recreational facilities include a complimentary health
club, an indoor/outdoor swimming pool, hydro-therapy pool, sundeck, steam room
and sauna, a rub-down area and a game room. The Hotel features a spectacular
50-story atrium that soars to an enormous rooftop skylight.

Guest Room Renovations and Replacements

In 1991, the Hotel underwent a $6.8 million refurbishment which focused on
carpeting, bedspreads, upholstery, drapes and other similar items ("Softgoods").
In 1997, the Hotel will begin a $7.0 million refurbishment of approximately half
its guest rooms which will include the replacement of the Softgoods and also the
dressers, chairs, beds and other furniture ("Casegoods"). The refurbishment of
the remaining rooms will be provided for in conjunction with the refinancing of
the Mortgage Debt or will be provided for with future years' contributions to
the property improvement fund. Also in 1997 the facade repair project will be
started which will entail a repair of the entire facade of the building. The
project is expected to cost between $4.5 million and $11.0 million and will be
funded by the Partnership pursuant to the terms of the management agreement. The
project will be completed during 1998.

Competition

The primary competition for the Hotel comes from the following four first-class
hotels in downtown Atlanta: (i) the 1,278 room Hyatt Regency Atlanta Hotel, (ii)
the 1,222 room Hilton Atlanta & Towers Hotel, (iii) the 1,068 room Westin
Peachtree Plaza Hotel and (iv) the 747 room Radisson Hotel Atlanta.

These four competitors contain an aggregate of approximately 4,315 rooms and
332,000 square feet of meeting space. In addition, other hotels in the Atlanta
area compete with the Hotel; however, these differ from the Atlanta Marquis
Hotel in terms of size, room rates, facilities, amenities and services offered,
market orientation and/or location. As a major convention facility, the Hotel
also competes with similar facilities throughout the country.

ITEM 3. LEGAL PROCEEDINGS

Neither the Partnership, Ivy nor the Hotel is presently subject to any material
litigation nor, to the General Partner's knowledge, is any material litigation
threatened against the Partnership or the Hotel, other than 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 the business,
financial condition or results of operations of the Partnership.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the limited partners in 1996 or in prior
years.

PART II

ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP UNITS
AND RELATED SECURITY HOLDER MATTERS

There is currently no established public trading market for the Units and it is
not anticipated that a public market for the Units will develop. 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. As of December
31, 1996, there were 755 holders of record of the 530 Units.

In accordance with Section 4.06 and 4.09 of the Partnership Agreement, cash
available for distribution will be distributed for each fiscal year
semi-annually to the partners as follows:

(i) through December 31, 1990, 1% to the General Partner and 99% to the
Class A limited partners;

(ii) beginning in 1991, and continuing until the Class A limited partners and
the General Partner have received cumulative distributions of sale
proceeds, refinancing proceeds or proceeds from the sale of the Land
other than in connection with the sale of the Hotel equal to their
capital contributions, 1% to the General Partner, 80% to the Class A
limited partners and 19% to the Class B limited partner; provided,
however, that if the distributions made pursuant to this clause (ii) are
not sufficient in any Fiscal Year to provide the General Partner and the
Class A limited partners with an amount of cash available for
distribution equal to an annual noncumulative 10% return on their
capital contribution, the distribution to the Class B limited partner
shall be reduced to the extent necessary to provide the General Partner
and the Class A limited partners with such an amount; and

(iii) thereafter, 1% to the General Partner, 65% to the Class A limited
partners and 34% to the Class B limited partner.

Cash available for distribution means, with respect to any fiscal period, the
revenues of the Partnership from all sources during such fiscal period less (i)
all cash expenditures of the Partnership during such fiscal period, including,
without limitation, debt service, and any investor services fees, and (ii) such
reserves as may be determined by the General Partner, in its sole discretion, to
be necessary to provide for the foreseeable needs of the Partnership, but shall
not include sale proceeds, refinancing proceeds or the sale of the Land other
than in connection with the sale of the Hotel.

Since inception, the Partnership has distributed a total of $16,128,724 from
operations (consisting primarily of ground rent paid by Ivy to the Partnership)
as follows: $161,414 to the General Partner and $15,967,310 to the Limited
Partners ($30,127 per limited partner Unit). In addition, as a result of the
guarantees furnished by Host Marriott (formerly Marriott Corporation) in
connection with the 1990 refinancing, income tax regulations issued since the
formation of the Partnership require certain tax deductions previously allocable
to the limited partners to be allocated instead to the General Partner. To
compensate limited partners for lost value as a result of this reallocation, the
limited partners have been paid a total of $4,570,720 ($8,624 per limited
partner Unit) including a May 1997 distribution of $150,520 ($284 per limited
partner Unit) by the General Partner. These contributions were intended to
compensate the limited partners for lost value as a result of this reallocation
of tax losses.

On October 31, 1995, the Partnership made an interim distribution solely from
ground rent paid to the Partnership of $1,664,950 as follows: $16,650 to the
General Partner and $1,648,300 to the limited

partners ($3,110 per Unit). On April 15, 1996, the Partnership made a final
distribution solely from 1995 ground rent paid to the Partnership of $814,810 as
follows: $8,150 to the General Partner and $806,660 to the limited partners
($1,522 per Unit).

On October 31, 1994, the Partnership made an interim distribution solely from
ground rent paid to the Partnership of $1,111,930 as follows: $11,120 to the
General Partner and $1,100,810 to the limited partners ($2,077 per Unit). On
April 17, 1995, the Partnership made a final distribution solely from 1994
ground rent paid to the Partnership of $683,110 as follows: $6,830 to the
General Partner and $676,280 to the limited partners ($1,276 per Unit).

Future cash distributions will be dependent upon the outcome of the debt
refinancing. No distributions of sale proceeds, refinancing proceeds or proceeds
from the sale of the Land have been made since inception.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data presents historical operating information
for the Partnership for each of the five years ended December 31, 1996 (in
thousands, except per Unit amounts):

1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------

Hotel revenues*.............................. $ 38,654 $ 34,831 $ 32,201 $ 29,563 $ 26,441
============ ============ ============ ============ ============

Net income (loss)............................ $ 2,543 $ (413) $ (3,073) $ (5,935) $ (9,020)
============ ============ ============ ============ ============

Net income (loss) per limited partner
Unit (530 Units)......................... $ 4,751 $ (772) $ (5,740) $ (11,087) $ (16,849)
============ ============ ============ ============ ============

Total assets................................. $ 181,508 $ 175,963 $ 179,821 $ 186,138 $ 188,534
============ ============ ============ ============ ============

Total liabilities............................ $ 239,047 $ 235,226 $ 236,324 $ 237,679 $ 232,543
============ ============ ============ ============ ============

Cash distributions per limited partner
Unit (530 Units)......................... $ -- $ 4,632 $ 3,353 $ 3,235 $ 2,949
============ ============ ============ ============ ============

Payment due to Reallocation of
Tax Losses................................... $ 284 $ 0 $ 0 $ 844 $ 1,411
============ ============ ============ ============ ============

* Hotel revenues represent house profit of Ivy's Hotel since Ivy has
delegated substantially all of the operating decisions related to the
generation of house profit of the Hotel to the Manager. House profit
reflects hotel operating results which flow to Ivy as property owner and
represents gross Hotel sales less property-level expenses, excluding
depreciation and amortization, base and incentive management fees,
property taxes, equipment rent and certain other costs, which are
disclosed separately in the consolidated statement of operations.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

CAPITAL RESOURCES AND LIQUIDITY

The Partnership's financing needs have been historically funded through loan
agreements with independent financial institutions. The General Partner believes
that the Partnership's ability to continue to conduct its operations in the
ordinary course of business is contingent upon the General Partner's ability to
successfully refinance the Partnership's Mortgage Debt.

Mortgage Debt

As of December 31, 1996, the Atlanta Marriott Marquis Limited Partnership (the
"Partnership") debt consists of a $215,574,000 nonrecourse mortgage note (the
"Mortgage Debt"). Interest accrues on the Mortgage Debt at a fixed rate of 10.3%
and interest only is paid semiannually in arrears. The cash payment rate on the
Mortgage Debt is 10.17% until maturity on July 10, 1997. The difference between
the cash payment rate and the accrual rate ("Deferred Interest") is added to the
balance of the Mortgage Debt. Deferred Interest added to the Mortgage Debt
totalled $16.5 million and $14.7 million at December 31, 1996 and 1995,
respectively. The Mortgage Debt was funded with the proceeds of a secured note
offering. The Notes consist of $159 million of Senior Secured Notes and $40
million of Subordinated Secured Notes. In addition, the Mortgage Debt was issued
at a discount of $2.5 million which has been fully amortized.

The Partnership's mortgage debt matures on July 10, 1997 with approximately $217
million due at that time. The General Partner is continuing its efforts to
refinance the Mortgage Debt upon maturity and expects to enter into a commitment
from a prospective lender during the upcoming weeks. Based on the General
Partner's experience with recent partnership refinancings, the refinanced debt
will likely require significant amortization of principal in addition to
interest; the Partnership's debt service payments are currently for interest
only. It is difficult to predict the term, but the General Partner anticipates
the refinanced term will be for approximately seven to fifteen years with an
interest rate of Treasuries plus 2-3% and require principal amortization over a
20 or 25 year schedule. In addition, it is likely that the refinanced mortgage
debt may be split into two tranches: one "senior" tranche which would be secured
by the assets of the Hotel and a "junior" tranche which would be secured only by
Partnership equity and therefore carry a significantly higher interest rate.
Alternatives being considered for the funding of the "junior" tranche include
either a preferred equity infusion or a participating loan. The combination of
these two factors is expected to result in an increased annual debt service
obligation when compared to the existing Mortgage Debt. There can be no
assurance that a successful refinancing will be achieved. Failure to refinance
the Mortgage Debt could lead to a foreclosure of the Hotel.

The Mortgage Debt is currently supported by certain guarantees provided by Host
Marriott. Host Marriott has agreed to advance up to $50 million to cover
interest and principal shortfalls (respectively, the "Interest Guarantee" and
"Principal Guarantee"). Should cash flow from operations be insufficient to fund
fully interest due, $20 million is available under the Interest Guarantee
through loan maturity. The $30 million Principal Guarantee is available at
maturity or in case of a sale, refinancing or acceleration of the principal
amount of the underlying notes resulting from an Event of Default. To the extent
the Interest Guarantee is not used, it becomes available as a Principal
Guarantee. There are no amounts outstanding under either the Interest Guarantee
or the Principal Guarantee. On March 24, 1994, the note holders voted to accept
Marriott International, Inc. ("MII") as a back-up guarantor and effective
December 21, 1994, the agreement was finalized. MII, as back-up guarantor, will
be required to perform the obligations under the guarantees in the unlikely
event that Host Marriott fails to do so.

Host Marriott had guaranteed up to $33 million of the original debt (the
"Commitment") under which Host Marriott was obligated to make certain required
debt service payments and restore any cash flow deficits to the extent that
Partnership Cash Flow, as defined, was insufficient. Pursuant to the terms of
the Mortgage Debt, the Commitment was modified to fund only furniture, fixtures
and equipment expenditures and ground rent shortfalls. Any interest, principal
or guarantee loans made at a time when the Commitment has not been fully funded
shall reduce, dollar for dollar, but not below zero, the remaining unfunded
amount of the Commitment. Advances under the Principal Guarantee, Interest
Guarantee and Commitment (the "Host Marriott Guarantee") up to the cumulative
funding of $33 million do not bear interest. Amounts advanced in excess of $33
million accrue interest at 1% over the prime rate. As of December 31, 1996 and
1995, $20.1 million was outstanding under the Commitment. There were no
Commitment repayments made in 1996 as all cash flow was reserved in anticipation
of the upcoming refinancing.

Principal Sources and Uses of Cash

The Partnership's principal source of cash is cash from Hotel operations. Its
principal uses of cash are to pay debt service on the Partnership's Mortgage
Debt, to make guarantee repayments, to fund the property improvement fund and to
make distributions to the partners. Cash provided from Hotel operations was $9.9
million, $10.1 million, and $5.6 million for the years ended December 31, 1996,
1995 and 1994, respectively. The Partnership paid $20.4 million, $20.4 million
and $19.7 million of interest on the Mortgage Debt for the years ended December
31, 1996, 1995, and 1994, respectively. No guarantee repayments to Host Marriott
were made in 1996. The Partnership made guarantee repayments of $3.5 million and
$2.7 million for the years ended December 31, 1995 and 1994, respectively.
Contributions to the property improvement fund for the years ended December 31,
1996, 1995, and 1994, were $4.1 million, $3.3 million, and $3.0 million,
respectively. Distributions to partners were $800,000 in 1996, $2.3 million in
1995 and $1.9 million in 1994.

In 1996, the General Partner established a reserve in anticipation of the costs
which will be incurred to refinance the Mortgage Debt. Though these costs are
not currently estimable, based on the General Partner's experience with other
partnerships, they are expected to be substantial. These costs include lender
property appraisals, legal expenses, bank fees, environmental studies and other
transaction costs. The reserve is being funded from 1996 ground rent paid to the
Partnership, as well as any 1997 ground rent received up to debt maturity. In
addition, Ivy is also reserving all cash flow in excess of ground rent for owner
funded capital needs of the Hotel. The 1996 capital expenditure budget
identified approximately $3.5 million of capital expenditure projects which are
to funded by the Partnership pursuant to the terms of the management agreement.
Any cash held in excess of the actual costs of these projects will be reserved
to provide for additional financing costs. As of December 31, 1996, the reserve
for refinancing costs totals $4.6 million, while the reserve for the capital
needs of the Hotel is approximately $3.5 million. Based upon current forecasts,
the reserves established will be sufficient to cover the estimated refinancing
costs as well as the expected capital needs of the Hotel.

Property Improvement Fund

The Partnership is required to maintain the Hotel in good repair and condition.
The management agreement provides for the establishment of a property
improvement fund to cover the cost of non-routine repairs and maintenance and
renewals and replacements to the Hotel's property and equipment. Contributions
to the fund for 1994 through June of 1995 were 4% of Hotel gross sales and
increased to 5% thereafter. Currently, the funds available in the property
improvement fund are sufficient for the scheduled $7.0 million rooms
refurbishment for approximately half of the Hotel's rooms. However, the reserve
is not sufficient to fund a refurbishment for the remaining rooms. The General
Partner expects that the funds for the refurbishment of the remaining rooms will
be provided for in conjunction with the refinancing of the Mortgage Debt or will
be provided for with future years' contributions to the property improvement
fund.

RESULTS OF OPERATIONS

1996 Compared to 1995:

Hotel Revenues. Hotel revenues for 1996 increased 11% to $38.7 million from
$34.8 million in 1995. The increase in revenues is the result of a 9% increase
in REVPAR. REVPAR increased due to a 14% increase in average room rate to
approximately $130 partially offset by a 3.7 percentage point decrease in
average occupancy to the high-60's. The decline in average occupancy is
primarily due to a significant decline in occupancy throughout the Atlanta
market in the months prior to and subsequent to the Olympic Games. While there
were many benefits to the media focus on the city, the coverage of the
preparation for the Olympic Games also acted as a deterrent to many potential
visitors as people avoided the city believing it to be in a perpetual state of
construction. However, the Hotel was able to more than offset this decline by
maximizing its average room rate during the Games. During the 17-day Centennial
Olympic Games, the Hotel hosted the "Olympic Family" which was comprised of the
International Olympic Committee, the Atlanta Committee for the Olympic Games and
federations from each of the participating countries.

No new full-service hotels opened in the Atlanta market in 1996 and none are
expected to open in 1997. However, during 1996 three limited service hotels
opened representing approximately 600 additional rooms. As these hotels target a
significantly different market segment, this new supply is not expected to have
a significant impact on the Hotel's revenues. However, the Hotel may experience
some decline in the transient business segment. Hotel management is optimistic
about the coming year as the Hotel will look to improve the overall guest
experience at the Hotel through a renewed commitment to customer service. In
addition, the Hotel will begin a $7.0 million rooms refurbishment of
approximately half of the Hotel's rooms in the latter part of the year. In 1997
Hotel management will look to increase occupancy by employing a number of new
marketing efforts including a quarterly mailing targeting group meeting
planners, as well as a direct mail campaign to transient customers highlighting
the Hotel features that would enhance their overall experience.

Depreciation. Depreciation decreased $1.1 million, or 16%, in 1996 when compared
to 1995 due to a portion of the Hotel's furniture and equipment becoming fully
depreciated in 1995.

Incentive Management Fees. In 1996, $2.0 million of incentive management fees
were earned as compared to $1.0 million earned in 1995. The increase in
incentive management fees earned was the result of improved Hotel operating
results resulting in certain cash flow priorities having been met.

Equipment Rent and Other. Equipment rent and other increased $460,000 due to the
inclusion of a property tax credit in 1995 results which did not occur in 1996.

Net Income (Loss). In 1996, the Partnership had net income of $2.5 million, an
increase of $2.9 million over 1995's net loss of $400,000. This increase was
primarily due to higher Hotel revenues.

1995 Compared to 1994:

Hotel Revenues. Hotel revenues for 1995 increased to $34.8 million from $32.2
million in 1994. The increase in revenues is primarily the result of a 3%
increase in REVPAR combined with a $1.3 million increase in food and beverage
profits. REVPAR increased due to a 6% increase in average room rate to
approximately $115 partially offset by a 1.8 percentage point decrease in
occupancy to the low-70's. Food and beverage profit margins increased 3.4
percentage points due to a large increase in catering sales, a reduction in
labor costs, and a shift in banquet sales from lower margin outside banquet
sales to higher margin in-house banquet sales.

Depreciation. Depreciation decreased $.9 million, or 11%, in 1995 when compared
to 1994 due to a portion of the Hotel's furniture and equipment becoming fully
depreciated in 1994.

Incentive Management Fees. In 1995, $1.0 million of incentive management fees
were earned as compared with no incentive management fees earned in 1994. The
increase in incentive management fees earned was the result of improved Hotel
operating results resulting in certain cash flow priorities having been met.

Net Income (Loss). In 1995, the Partnership had a net loss of $.4 million, a
decrease of $2.6 million over 1994's net loss of $3.0 million. This decrease was
primarily due to higher Hotel revenues.

Inflation

The rate of inflation has been relatively low and accordingly, has not had a
significant impact on the Partnership's operating results. However, the Hotel's
room rates and occupancy levels are sensitive to inflation. MII is generally
able to pass through increased costs to customers through higher room rates.
Forward-Looking Statements

Certain matters discussed herein are forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995 and as such may involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of the Partnership to be different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Although the Partnership, believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
attained. The Partnership undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements that may be made to
reflect any future events or circumstances.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index Page
----- ----

Report of Independent Public Accountants........................... 14

Consolidated Statement of Operations............................... 15

Consolidated Balance Sheet......................................... 16

Consolidated Statement of Changes in Partners' Deficit............. 17

Consolidated Statement of Cash Flows............................... 18

Notes to Consolidated Financial Statements......................... 19

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

- - --------------------------------------------------------------------------------

TO THE PARTNERS OF ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP:

We have audited the accompanying consolidated balance sheet of Atlanta Marriott
Marquis Limited Partnership (a Delaware limited partnership) and Ivy Street
Hotel Limited Partnership, its majority-owned subsidiary partnership, as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, changes in partners' deficit and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements and the
schedule referred to below are the responsibility of the General Partner's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Atlanta Marriott
Marquis Limited Partnership and subsidiary as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 6 to the
financial statements, the Partnership's mortgage debt matures on July 10, 1997.
This raises substantial doubt about its ability to continue as a going concern.
The Partnership's plans in regard to this matter are also described in Note 6.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index at Item
14(a)(2) (Schedule III Real Estate and Accumulated Depreciation) is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Washington, D.C.
March 28, 1997
(except for the matter discussed in Note 9, as to which the date is August 15,
1997)

CONSOLIDATED STATEMENT OF OPERATIONS

Atlanta Marriott Marquis Limited Partnership and Subsidiary
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands, except per Unit amounts)
- - --------------------------------------------------------------------------------

1996 1995 1994
---------- ---------- ----------

REVENUES
Hotel (Note 3)..................................................... $ 38,654 $ 34,831 $ 32,201
Interest income.................................................... 651 529 349
---------- ---------- -----------
39,305 35,360 32,550
---------- ---------- -----------

OPERATING COSTS AND EXPENSES
Interest........................................................... 22,890 22,712 22,493
Depreciation....................................................... 5,525 6,608 7,464
Property taxes..................................................... 2,858 2,692 2,784
Base management fee................................................ 2,654 2,435 2,337
Incentive management fee........................................... 2,018 969 --
Equipment rent and other........................................... 817 357 545
---------- ---------- -----------
36,762 35,773 35,623
---------- ---------- -----------

NET INCOME (LOSS)..................................................... $ 2,543 $ (413) $ (3,073)
========== ========== ===========

ALLOCATION OF NET INCOME (LOSS)
General Partner..................................................... $ 25 $ (4) $ (31)
Limited Partners.................................................... 2,518 (409) (3,042)
---------- ---------- -----------
$ 2,543 $ (413) $ (3,073)
========== ========== ===========
NET INCOME (LOSS) PER LIMITED PARTNER UNIT
(530 Units).............................................................$ 4,751 $ (772) $ (5,740)
========== ========== ===========

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

CONSOLIDATED BALANCE SHEET

Atlanta Marriott Marquis Limited Partnership and Subsidiary
December 31, 1996 and 1995
(in thousands)
- - --------------------------------------------------------------------------------

1996 1995
---------- -------

ASSETS
Property and equipment, net................................................... $ 162,111 $ 164,194
Amounts held by Marriott International, Inc................................... 3,490 874
Working capital and supplies held by Marriott International, Inc.............. 2,900 2,900
Property improvement fund..................................................... 6,864 5,822
Deferred financing costs, net of accumulated amortization..................... 542 1,163
Cash and cash equivalents..................................................... 5,601 1,010
---------- -----------

$ 181,508 $ 175,963
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
LIABILITIES
Mortgage debt.............................................................. $ 215,574 $ 213,743
Due to Host Marriott under Original Debt Service Guarantee and Commitment.. 20,134 20,134
Due to Marriott International, Inc......................................... 3,030 1,064
Accounts payable and accrued expenses...................................... 309 285
---------- -----------

Total Liabilities........................................................ 239,047 235,226
---------- -----------

PARTNERS' DEFICIT
General Partner
Capital contributions.................................................... 536 536
Capital distributions.................................................... (165) (157)
Cumulative net losses.................................................... (885) (910)
---------- -----------

(514) (531)
---------- -----------
Limited Partners
Capital contributions, net of offering costs of $6,430................... 46,570 46,570
Capital distributions.................................................... (15,982) (15,171)
Cumulative net losses.................................................... (87,613) (90,131)
---------- -----------

(57,025) (58,732)
---------- -----------

Total Partners' Deficit.................................................. (57,539) (59,263)
---------- -----------

$ 181,508 $ 175,963
========== ===========

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

CONSOLIDATED STATEMENT OF CHANGES IN
PARTNERS' DEFICIT

Atlanta Marriott Marquis Limited Partnership and Subsidiary
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands)
- - --------------------------------------------------------------------------------

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

Balance, December 31, 1993.......................................... $ (454) $ (51,087) $ (51,541)

Capital distributions............................................ (19) (1,870) (1,889)

Net loss......................................................... (31) (3,042) (3,073)
---------- ----------- -----------

Balance, December 31, 1994.......................................... (504) (55,999) (56,503)

Capital distributions............................................ (23) (2,324) (2,347)

Net loss......................................................... (4) (409) (413)
---------- ----------- -----------

Balance, December 31, 1995.......................................... (531) (58,732) (59,263)

Capital distributions............................................ (8) (811) (819)

Net income....................................................... 25 2,518 2,543
---------- ----------- -----------

Balance, December 31, 1996.......................................... $ (514) $ (57,025) $ (57,539)
========== =========== ===========

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

CONSOLIDATED STATEMENT OF CASH FLOWS

1996 1995 1994
------------ ----------- ------------

OPERATING ACTIVITIES
Net income (loss)................................................... $ 2,543 $ (413) $ (3,073)
Noncash items:
Depreciation .................................................... 5,525 6,608 7,464
Deferred interest................................................ 1,831 1,654 2,765
Amortization of financing costs as interest...................... 621 619 633
(Gain) loss on disposition of assets............................. (1) 64 (3)
Changes in operating accounts:
Accounts payable and accrued expenses............................ 24 (178) (1,207)
Due from Marriott International, Inc............................. (2,616) 782 (764)
Due to Marriott International, Inc............................... 1,966 926 (213)
------------ ----------- ------------

Cash provided by operating activities........................ 9,893 10,062 5,602
------------ ----------- ------------

INVESTING ACTIVITIES
Additions to property and equipment, net............................ (3,444) (2,643) (1,531)
Change in property improvement fund................................. (1,039) (1,097) (1,568)
------------ ----------- ------------

Cash used in investing activities............................ (4,483) (3,740) (3,099)
------------ ----------- ------------

FINANCING ACTIVITIES
Capital distributions............................................... (819) (2,347) (1,889)
Repayments under Original Debt Service Guarantee and Commitment -- (3,500) (2,700)
------------ ----------- ------------

Cash used in financing activities............................ (819) (5,847) (4,589)
------------ ----------- ------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... 4,591 475 (2,086)

CASH AND CASH EQUIVALENTS at beginning of year......................... 1,010 535 2,621
------------ ----------- ------------

CASH AND CASH EQUIVALENTS at end of year............................... $ 5,601 $ 1,010 $ 535
============ =========== ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for mortgage interest..................................... $ 20,438 $ 20,438 $ 19,706
============ =========== ============

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Atlanta Marriott Marquis Limited Partnership and Subsidiary
December 31, 1996 and 1995
- - --------------------------------------------------------------------------------

NOTE 1. THE PARTNERSHIP

Description of the Partnership

Atlanta Marriott Marquis Limited Partnership (the "Partnership"), a Delaware
limited partnership, was formed on May 28, 1985 (the "Closing Date"), to (i)
acquire an 80% general partnership interest in the Ivy Street Hotel Limited
Partnership ("Ivy"), a partnership between John C. Portman, Jr. ("Portman") and
Host Marriott Corporation ("Host Marriott") that was formed to develop, own and
operate the 1,671-room Atlanta Marriott Marquis Hotel (the "Hotel"), and (ii)
purchase from Ivy the parcel of land (the "Land") on which the Hotel is located.
The sole general partner of the Partnership, with a 1% interest, is Marriott
Marquis Corporation (the "General Partner"), a wholly owned direct subsidiary of
Host Marriott. On December 29, 1995, Host Marriott's operations were divided
into two separate companies: Host Marriott and Host Marriott Services
Corporation. Marriott International, Inc. serves as the Manager of the Hotel
(the "Manager").

Partnership Allocations and Distributions

Ivy generally allocates operating income, gains and losses, deductions and cash
available for distribution, 80% to the Partnership and 20% to Portman. However,
the first $1 million plus 3% of annual gross room sales of annual cash available
for distribution from Ivy was paid to the Partnership through December 31, 1994.
Thereafter, an amount equal to 5% of annual gross room sales will be paid to the
Partnership from annual cash available for distribution from Ivy unless Ivy
exercises its option to repurchase the Land.

During 1990, the Partnership determined that the probability of collecting the
minority interest receivable from Portman was remote. Thus, the Partnership
wrote off this receivable which totaled $3,542,000 and began recording 100% of
the losses of Ivy. In future years, if the Partnership records income, 100% of
the income will be allocated to the Partnership until such excess income
allocated to the Partnership equals the excess losses previously recorded by the
Partnership. Thereafter, any income would be allocated 80% to the Partnership
and 20% to Portman. As of December 31, 1996 and 1995, excess losses recognized
by the Partnership were $50,000 and $581,000, respectively. Partnership net
losses, as defined, are generally allocated as follows:

(i) through December 31, 1990, 1% to the General Partner and 99% to the Class
A limited partners;

(ii) beginning in 1991 and continuing until the Class A limited partners and
the General Partner have received sale or refinancing proceeds ("Capital
Receipts") equal to their total cumulative capital contributions
("Original Capital"), 1% to the General Partner, 80% to the Class A
limited partners and 19% to the Class B limited partner; and

(iii) thereafter, 1% to the General Partner, 65% to the Class A limited
partners and 34% to the Class B limited partner.

These allocations may be subject to certain special allocations of net profit or
net loss to the General Partner required by Federal income tax regulations.

Cash Available for Distribution, as defined, generally will be distributed
semi-annually as follows:

(i) through December 31, 1990, 1% to the General Partner and 99% to the Class
A limited partners;

(ii) beginning in 1991, and continuing until the Class A limited partners and
the General Partner have received distributions of Capital Receipts equal
to their Original Capital, 1% to the General Partner, 80% to the Class A
limited partners and 19% to the Class B limited partner; and

(iii) thereafter, 1% to the General Partner, 65% to the Class A limited
partners and 34% to the Class B limited partner. However, until the
General Partner and the Class A limited partners have received a return
of their Original Capital through distributions of Capital Receipts, the
Class B limited partner will subordinate its cash distributions to an
annual non-cumulative 10% return on Original Capital to the General
Partner and the Class A limited partners.

Net profits, as defined, generally are allocated in the same ratio as Cash
Available for Distribution. Excess net profits will then be applied to offset
prior net losses in excess of the partners' remaining invested capital.
Notwithstanding the above allocations, the Partnership Agreement provides for
specific allocation to the partners of gain realized and proceeds received by
the Partnership upon sale, condemnation or other disposition of the Hotel or
assets of the Partnership. In addition, the Partnership Agreement provides for
specific allocations of any excess refinancing or land sale proceeds.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The Partnership's records are maintained on the accrual basis of accounting and
its fiscal year coincides with the calendar year. The Partnership's financial
statements consolidate the financial statements of Ivy, its majority-owned
subsidiary partnership. All material intercompany transactions, including the
land lease between the Partnership and Ivy described in Note 8, have been
eliminated.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

Revenues and Expenses

Hotel revenues represent house profit of Ivy's Hotel since Ivy has delegated
substantially all of the operating decisions related to the generation of house
profit of the Hotel to the Manager. House profit reflects hotel operating
results which flow to Ivy as property owner and represents gross Hotel sales
less property-level expenses, excluding depreciation and amortization, base and
incentive management fees, property taxes, equipment rent and certain other
costs, which are disclosed separately in the consolidated statement of
operations.

Property and Equipment

Property and equipment is recorded at cost which includes interest, rent and
real estate taxes incurred during development. Ivy sold the Land to the
Partnership for $2.6 million less than its carrying value. This amount is being
amortized over the life of the lease (99 years). Depreciation is computed using
the straight-line method over the following estimated useful lives of the
assets, less a 10% residual value on the original building costs:

Building and improvements 50 years
Furniture and equipment 3 to 20 years

All land, property and equipment is pledged as security for the mortgage debt
described in Note 6.

The Partnership assesses impairment of its real estate property based on whether
estimated undiscounted future cash flows for the property will be less than its
net book value. If the property is impaired, its basis is adjusted to fair
market value.

Deferred Financing Costs

Financing costs incurred in connection with obtaining the mortgage debt have
been deferred and are being amortized using the straight-line method, which
approximates the effective interest rate method, over three to ten years.
Accumulated amortization of the deferred financing costs totaled $4,090,000 and
$3,469,000 at December 31, 1996 and 1995, respectively.

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.

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 its profits and losses to the individual partners.
There are significant differences between the net income/loss reported in these
financial statements and the net income/loss determined for income tax purposes.
These differences are due primarily to the use, for tax purposes, of accelerated
depreciation methods and shorter depreciable lives for the assets, the timing of
the recognition of incentive management fee expense and the treatment of the
minority interest receivable for income tax purposes. As a result of these
differences, the excess of the tax basis in net Partnership liabilities and the
net liabilities reported in the accompanying financial statements is $72,111,000
and $67,967,000 as of December 31, 1996 and 1995, respectively.

Reclassification

Certain prior year amounts have been reclassified to conform with current year
presentation.

New Statement of Financial Accounting Standards

In the first quarter of 1996, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Adoption of SFAS
No. 121 did not have an effect on its financial statements.

NOTE 3. REVENUES

Revenues consist of Hotel operating results for the three years ended December
31 (in thousands):

1996 1995 1994
----------- ----------- -----------

HOTEL SALES
Rooms........................................................ $ 56,115 $ 50,515 $ 48,982
Food and beverage............................................ 25,968 25,379 23,920
Other........................................................ 6,381 5,277 4,987
----------- ----------- -----------
88,464 81,171 77,889
----------- ----------- -----------
HOTEL EXPENSES
Departmental direct costs
Rooms...................................................... 11,508 10,821 11,156
Food and beverage......................................... 18,003 17,289 17,092
Other hotel operating expenses............................... 20,299 18,230 17,440
----------- ----------- -----------
49,810 46,340 45,688
----------- ----------- -----------
REVENUES........................................................ $ 38,654 $ 34,831 $ 32,201
=========== =========== ===========

NOTE 4. PROPERTY AND EQUIPMENT

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

1996 1995
----------- -----------

Leased land acquisition costs and land.......... $ 12,617 $ 12,617
Building and improvements....................... 182,597 181,806
Furniture and equipment......................... 34,142 33,457
----------- -----------
229,356 227,880
----------- -----------

Less accumulated depreciation................... (67,245) (63,686)
----------- -----------

$ 162,111 $ 164,194
=========== ===========

NOTE 5. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of financial instruments are shown below. The fair
values of financial instruments not included in this table are estimated to be
equal to their carrying amounts:

As of December 31, 1996 As of December 31, 1995
---------------------------- -------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- --------- -------- ---------
(in thousands) (in thousands)

Mortgage debt $ 215,574 $ 215,574 $ 213,743 $ 213,743
Due to Host Marriott under Original Debt
Service Guarantee and Commitment $ 20,134 $ 14,300 $ 20,134 $ 7,114
Incentive management fees due to
Marriott International, Inc. $ 2,987 $ -- $ 969 $ 208

The estimated fair value of the mortgage debt is based on the expected future
debt service payments discounted at estimated market rates adjusted for the
presence of the Principal and Interest Guarantees, as defined in Note 6. The
Host Marriott liability and the incentive management fees due are valued based
on the expected future payments from operating cash flow discounted at
risk-adjusted rates.

NOTE 6. MORTGAGE DEBT

As of December 31, 1996, the Partnership's mortgage debt consists of a
$215,574,000 nonrecourse mortgage note of Ivy (the "Mortgage Debt"). Interest
accrues on the Mortgage Debt at a fixed rate of 10.3%. Interest only is payable
semi-annually in arrears. The cash payment rate is 10.17% until maturity on July
10, 1997. The difference between the cash payment rate and the accrual rate
("Deferred Interest") is added to the balance of the Mortgage Debt. The
cumulative Deferred Interest added to the Mortgage Debt totaled $16.5 million
and $14.7 million at December 31, 1996 and 1995, respectively. The Mortgage Debt
was funded with the proceeds of a secured note offering. The Notes consist of
$159 million of Senior Secured Notes and $40 million of Subordinated Secured
Notes. In addition, the Mortgage Debt was issued at a discount of $2.5 million
which was amortized as interest expense through March 24, 1991.

The General Partner is currently attempting to refinance the Mortgage Debt which
matures on July 10, 1997. In conjunction with the refinancing, the Partnership
is expected to incur significant refinancing costs which will be funded from
Partnership cash reserves. The refinanced debt will likely require significant
amortization of principal in addition to interest; the Partnership's debt
service payments are currently for interest only. There can be no assurance that
a successful refinancing will be achieved. Failure to refinance the debt could
lead to a foreclosure of the Hotel.

The Mortgage Debt is supported by certain guarantees provided by Host Marriott.
Host Marriott has agreed to advance up to $50 million to cover interest and
principal shortfalls (respectively, the "Interest Guarantee" and the "Principal
Guarantee") on the Mortgage Debt. Should cash flow from operations be
insufficient to fully fund interest due, $20 million is available under the
Interest Guarantee through loan maturity. The $30 million Principal Guarantee is
available at maturity or in case of a sale, refinancing or acceleration of the
principal amount of the underlying notes resulting from an Event of Default, as
defined. To the extent the Interest Guarantee is not used, it becomes available
as an additional Principal Guarantee. There are no amounts outstanding under
either the Interest Guarantee or the Principal Guarantee. No amounts have been
funded under the Principal Guarantee.

On March 24, 1994, the note holders of the Mortgage Debt voted to accept the
Manager as a back-up guarantor and on December 21, 1994, the agreement was
finalized. The Manager, as back-up guarantor, will be required to perform the
obligations under the guarantees in the event that Host Marriott fails to do so.

NOTE 7. HOTEL MANAGEMENT AGREEMENT

Ivy entered into a hotel management agreement (the "Agreement") with the Manager
to manage the Hotel for a term of 25 years, renewable at Ivy's or the Manager's
option for five additional 10-year terms. The Manager is entitled to
compensation for its services in the form of a base management fee equal to 3%
of gross sales. Base management fees paid in 1996, 1995 and 1994 were
$2,654,000, $2,435,000 and $2,337,000, respectively.

In addition, the Manager earns an incentive management fee equal to 50% of
assumed net cash flow of the Hotel, as defined. However, once total cumulative
incentive management fees reach an amount equal to or greater than 20% of total
cumulative Hotel profit, as defined, the Manager will earn an incentive
management fee equal to the average of (i) 50% of assumed net cash flow and (ii)
20% of Hotel profit. The incentive management fee is paid out of cash flow
available for incentive management fee, as defined, and is subordinated to the
Mortgage Debt, guarantee repayments and rent under the Land lease. Any incentive
management fees earned but not paid will be deferred without interest and paid
out of the first cash flow available for the incentive management fee. As of
December 31, 1996 and 1995, $2,018,000 and $969,000, respectively, in incentive
management fees have been earned. Through December 31, 1996, no incentive
management fees have ever been paid. Deferred incentive management fees for the
years ended December 31, 1996 and 1995 were $2,987,000 and $969,000,
respectively, and are included in Due to Marriott International, Inc. in the
accompanying financial statements. Payment of such deferred fees is not expected
to occur in the near-term.

Pursuant to the terms of the Agreement, the Manager is required to furnish the
Hotel with certain services ("Chain Services") which are generally provided on a
central or regional basis to all domestic full-service hotels managed, owned or
leased by the Manager or its subsidiaries. Chain Services include central
training, advertising and promotion, a national reservation system, computerized
payroll and accounting services and such additional services as needed which may
be more efficiently performed on a centralized basis. Costs and expenses
incurred in providing such services are allocated among all hotels in the
Marriott full-service hotel system. In addition, the Hotel also participates in
the Manager's Honored Guest Awards Program ("HGA"). The cost of this program is
charged to all hotels in the Marriott full-service hotel system. The total
amount of Chain Services and HGA costs allocated to the Hotel was $2,685,000 in
1996, $2,431,000 in 1995 and $2,202,000 in 1994.

Pursuant to the terms of the Agreement, the Partnership is required to provide
the Manager with working capital and supplies to meet the operating needs of the
Hotel. The Manager converts cash provided 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 but
owned by Ivy. Upon termination of the Agreement, the working capital and
supplies will be returned to the Partnership. The individual components of
working capital and supplies controlled by the Manager are not reflected in the
Partnership's balance sheet. As of December 31, 1996 and 1995, $3,077,000 has
been provided to the Manager for working capital and supplies which is reflected
as working capital and supplies held by Marriott International, Inc. in the
accompanying financial statements. The supplies provided to the Manager are
recorded at their estimated net realizable value. At December 31, 1996 and 1995,
accumulated amortization related to the revaluation of these supplies totaled
$177,000.

The Partnership is required to maintain the Hotel in good repair and condition.
Pursuant to the Agreement, annual contributions to a property improvement fund
provide for the replacement of furniture, fixtures and equipment. Annual
contributions to the fund equalled 4% of gross Hotel sales through June 1995 and
are 5% thereafter. Total contributions to the property improvement fund for the
years ended December 31, 1996, 1995, and 1994 were $4,122,000, $3,302,000 and
$2,954,000, respectively.

NOTE 8. LAND LEASE

On the Closing Date, the Partnership acquired the Land on which the Hotel is
located from Ivy for $10 million. The Partnership has leased the Land to Ivy for
a period of 99 years. Through 1994, Ivy paid annual rent equal to $1 million
plus 3% of annual gross room sales from the Hotel in excess of $20 million, up
to a maximum of $2.5 million. Beginning January 1, 1995, annual rental increased
to 5% of annual gross room sales from the Hotel. Ivy has an option to repurchase
the Land at any time through 1999. Through 1995, the option price was $25
million and for the ensuing four years the option price will be adjusted for
changes in the Consumer Price Index. At December 31, 1996, the option price was
$25,825,000. Total rentals under the lease, which were eliminated in
consolidation, were $2,806,000 in 1996, $2,526,000 in 1995 and $1,869,000 in
1994.

NOTE 9. SUBSEQUENT EVENT

On July 10, 1997 (the "Extension Date"), the Partnership and Ivy entered into a
letter agreement (the "Letter Agreement") which effectively extends the maturity
of the Mortgage Debt until February 2, 1998 (the "New Maturity Date"). On the
Extension Date, the Partnership and Ivy were required to pay $17,590,000
representing the Deferred Interest on the Mortgage Debt in addition to the
scheduled interest payment due of $10,119,000. As a result, the Mortgage Debt
balance outstanding was reduced to $199,000,000. The payment of the Deferred
Interest was funded from $7,200,000 of Ivy cash reserves and $10,390,000 drawn
pursuant to a Host Marriott interest guarantee (the "Interest Guarantee"). Host
Marriott had agreed to advance up to $50,000,000 to cover interest and principal
shortfalls. Should cash flow from operations be insufficient to fund fully
interest due, $20,000,000 was available under the Interest Guarantee through
loan maturity. The remaining $30,000,000 was available under the Principal
Guarantee. Prior to the payment of Deferred Interest in the amount of
$10,390,000 on July 10, 1997, there were no amounts outstanding under either the
Principal Guarantee or the Interest Guarantee. In conjunction with the
extension, Host Marriott reaffirmed its obligations pursuant to these guarantees
through the New Maturity Date. The Principal Guarantee is available at maturity
or in case of a sale, refinancing or acceleration of the principal amount of the
underlying Notes resulting from an Event of Default. To the extent the Interest
Guarantee is not used, it becomes available as a Principal Guarantee. The
General Partner estimates that a sale of the Hotel would generate sufficient
proceeds to repay the maturing Mortgage Debt, outstanding advances from Host
Marriott and cover transaction costs; therefore, no advances under the
guarantees would be required.

During the term of the Letter Agreement, the Mortgage Debt continues to be
nonrecourse, and will accrue interest at 12.3% per annum with interest payments
due on January 10 and February 2, 1998. Additionally, all funds remitted by the
Manager during the term of the extension will be held by the Partnership for the
benefit of the lender. In conjunction with the Letter Agreement, Ivy paid an
extension fee of $500,000 as well as approximately $410,000 representing costs
and expenses related to the transaction. It is expected that cash flow from
operations will provide adequate funds to meet the scheduled interest payments.
The General Partner is continuing its efforts to refinance the Mortgage Debt
upon or prior to the New Maturity Date and expects to enter into a commitment
with a prospective lender during the upcoming weeks.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

The Partnership has no directors or officers. The business policy making
functions of the Partnership are carried out through the directors and executive
officers of Marriott Marquis Corporation, the General Partner, who are listed
below:

Age at
Name Current Position December 31, 1996
- - -------------------------- ---------------------------------------------- -----------------

Bruce F. Stemerman President and Director 41
Robert E. Parsons, Jr. Director 41
Christopher G. Townsend Vice President, Director and Assistant Secretary 49
Patricia K. Brady Vice President and Chief Accounting Officer 35
Bruce D. Wardinski Treasurer 36

Business Experience

Bruce F. Stemerman was elected President of the General Partner in June 1997. He
has been a Director General Partner since October 1993 and was Chief Accounting
Officer of the General Partner, as well as Vice President--Finance from October
1993 to June 1997. Mr. Stemerman joined Host Marriott Corporation in 1989 as
Director--Partnership Services. He was promoted to Vice President--Lodging
Partnerships in 1994 and became Senior Vice President--Asset Management in 1996.
Prior to joining Host Marriott, Mr. Stemerman spent ten years with Price
Waterhouse. He also serves as a director and an officer of numerous Host
Marriott subsidiaries.

Robert E. Parsons, Jr. was elected Director of the General Partner in September
1988. Mr. Parsons joined Host Marriott's Corporate Financial Planning staff in
1981, was made Director-Project Finance of Host Marriott's Treasury Department
in 1984, and in 1986 he was made Vice President-Project Finance of Host
Marriott's Treasury Department. He was made Assistant Treasurer of Host Marriott
in 1988. Mr. Parsons was named Senior Vice President and Treasurer of Host
Marriott in 1993. He was named Executive Vice President and Chief Financial
Officer of Host Marriott in October 1995. Mr. Parsons also serves as a director
and an officer of numerous Host Marriott subsidiaries.

Christopher G. Townsend has been Vice President, Director and Assistant
Secretary of the General Partner since May 1987. Mr. Townsend joined Host
Marriott's Law Department in 1982 as a Senior Attorney. In 1984, Mr. Townsend
was made Assistant Secretary of Host Marriott and in 1986 was made Assistant
General Counsel. In 1993, he was made Senior Vice President, Corporate Secretary
and Deputy General Counsel of Host Marriott. In January 1997, Mr. Townsend was
named General Counsel of Host Marriott. He also serves as a director and an
officer of numerous Host Marriott subsidiaries.

Patricia K. Brady was appointed to Vice President and Chief Accounting Officer
of the General Partner on October 10, 1996. Ms. Brady joined Host Marriott in
1989 as Assistant Manager--Partnership Services. She was promoted to Manager in
1990 and to Director--Asset Management in June 1996. Ms. Brady also serves as an
officer of numerous Host Marriott subsidiaries.

Bruce D. Wardinski was elected Treasurer of the General Partner in 1996. Mr.
Wardinski joined Host Marriott in 1987 as a Senior Financial Analyst of
Financial Planning & Analysis, and was named Manager in June 1988. He was
appointed Director, Financial Planning & Analysis in 1989, Director of Project
Finance in January 1990, Senior Director of Project Finance in June 1993, Vice
President, Project Finance in June 1994, and Senior Vice President of
International Development in October 1995. In June 1996, Mr. Wardinski was named
Senior Vice President and Treasurer of Host Marriott. He also serves as an
officer of numerous Host Marriott subsidiaries.

ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS

As noted in Item 10 above, the Partnership has no directors or officers nor does
it have any employees. Under the Partnership Agreement, however, the General
Partner has the exclusive right to conduct the business and affairs of the
Partnership subject only to the management agreement described in Items 1 and
13. The General Partner is required to devote to the Partnership such time as
may be necessary for the proper performance of its duties, but the officers and
the directors of the General Partner are not required to devote their full time
to the performance of such duties. No officer or director of the General Partner
or employee of Host Marriott devotes a significant percentage of time to
Partnership matters. To the extent that any officer or director does devote time
to the Partnership, the General Partner 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 the General Partner. For the fiscal years
ending December 31, 1996, 1995 and 1994, administrative expenses reimbursed to
the General Partner totaled $65,000, $84,000 and $125,000, respectively for the
cost of providing all administrative and other services as General Partner. For
information regarding all payments made by the Partnership to Host Marriott and
subsidiaries, see Item 13 "Certain Relationships and Related Transactions."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of December 31, 1996, no person owned of record, or to the Partnership's
knowledge owned beneficially, more than 5% of the total number of Units. The
General Partner owns a total of 1.5 Units representing a 0.3% limited
partnership interest in the Partnership and Class B limited partnership interest
representing a 19% - 34% limited partnership interest in the Partnership after
payment of priority items.

There are no Units owned by the executive officers and directors of the General
Partner, as a group.

The officers and directors of MII, as a group, own a total of 2.5 Units
representing a 0.5% limited partnership interest in the Partnership.

There are no Units owned by individuals who are directors of both the General
Partner and MII.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Hotel Management Agreement

Ivy entered into a hotel management agreement (the "Agreement") with MII to
manage the Hotel for a term of 25 years, renewable at Ivy's or MII's option for
five additional 10-year terms. MII is entitled to compensation for its services
in the form of a base management fee equal to 3% of gross sales. Base management
fees paid in 1996, 1995 and 1994 were $2,654,000, $2,435,000 and $2,337,000,
respectively.

In addition, MII earns an incentive management fee equal to 50% of assumed net
cash flow of the Hotel, as defined. However, once total cumulative incentive
management fees reach an amount equal to or greater than 20% of total cumulative
Hotel profit, as defined, MII will earn an incentive management fee equal to the
average of (i) 50% of assumed net cash flow and (ii) 20% of Hotel profit. The
incentive management fee is paid out of cash flow available for incentive
management fee, as defined, and is subordinated to the Mortgage Debt, guarantee
repayments and rent under the Land lease. Any incentive management fees earned
but not paid will be deferred without interest and paid out of the first cash
flow available for the incentive management fee. As of December 31, 1996 and
1995, $2,018,000 and $969,000, respectively, in incentive management fees have
been earned. Through December 31, 1996, no incentive management fees have been
paid. Deferred incentive management fees for the years ended December 31, 1996
and 1995 were $2,987,000 and $969,000, respectively. Payment of such deferred
fees is not expected to occur in the near-term.

Pursuant to the terms of the Agreement, MII is required to furnish the Hotel
with certain services ("Chain Services") which are generally provided on a
central or regional basis to all domestic full-service hotels managed, owned or
leased by MII or its subsidiaries. Chain Services include central training,
advertising and promotion, a national reservation system, computerized payroll
and accounting services and such additional services as needed which may be more
efficiently performed on a centralized basis. Costs and expenses incurred in
providing such services are allocated among all hotels in the MII full-service
hotel system. In addition, the Hotel also participates in MII's Honored Guest
Awards Program ("HGA"). The cost of this program is charged to all hotels in the
MII full-service hotel system. The total amount of Chain Services and HGA costs
allocated to the Hotel was $2,685,000 in 1996, $2,431,000 in 1995 and $2,202,000
in 1994.

Pursuant to the terms of the Agreement, Ivy is required to provide MII with
working capital and supplies to meet the operating needs of the Hotel. MII
converts cash advanced by Ivy into other forms of working capital consisting
primarily of operating cash, inventories, and trade receivables and payables
which are maintained and controlled by MII. Upon termination of the Agreement,
the working capital and supplies will be returned to Ivy. The individual
components of working capital and supplies controlled by MII are not reflected
in the consolidated balance sheet of the Partnership. As of December 31, 1996
and 1995, $3,077,000 has been advanced to MII for working capital and supplies.
At December 31, 1996 and 1995, accumulated amortization related to the
revaluation of these supplies totaled $177,000.

Ivy is required to maintain the Hotel in good repair and condition. Pursuant to
the Agreement, annual contributions to a property improvement fund provide for
the replacement of furniture, fixtures and equipment. Annual contributions to
the fund equaled 4% of gross Hotel sales through June 1995 and are 5%
thereafter. Total contributions to the property improvement fund for the years
ended December 31, 1996, 1995 and 1994 were $4,122,000, $3,302,000 and
$2,954,000, respectively.

The Agreement provides that Ivy may sell the Hotel at any time and any partner
of the owner shall have the right to sell or assign all or a portion of their
interest in the owner. Any sale will be subject to the Agreement. In the event
of a bona fide written offer for the sale of the Hotel to a competitor of MII or
the sale of all or a portion of a partner's interest in Ivy to a competitor, MII
may either (i) purchase the Hotel at the same price and upon the same terms and
conditions, or (ii) consent to such sale and assignment of the Agreement.

Ivy and/or MII have the right to terminate the Agreement under the following
conditions: (I) if either party breaches any term, covenant or condition thereof
and fails to commence to cure the breach within 30 days of notice and thereafter
fails to diligently pursue all efforts necessary to effect such cure; and (ii)
upon certain events of insolvency and bankruptcy with respect to MII or the
Hotel. Ivy shall have the right to terminate the Agreement (i) after the first
six years of its term upon not less than 60 days prior notice to MII if the
Minimum Performance Standards are not met; provided, however, (a) MII shall have
the right to cure such default by tendering a certified check within said 60 day
period for an amount which shall be sufficient, when added to Hotel Profit for
the immediately preceding three fiscal years prior to the fiscal year for the
date of the notice of default, to bring the amount for said three-year period
within the limits of the Minimum Performance Standards and (b) that one-third of
any payment made pursuant to the foregoing provision shall be deemed to have
been added to Hotel Profit for each of said three fiscal years for the purpose
of determining whether the Minimum Performance Standards have been achieved in
succeeding fiscal years; (ii) upon not less than 60 days prior notice if MII
breaches its agreement with regard to the Non-Competition Area as set forth in
the Agreement; and (iii) upon 15 days prior notice if (a) the Investor
Partnership fails to meet its obligations under the Agreement for all or part of
its capital contributions to Ivy, or (b) MII fails to comply with its Payment
Obligation.

In addition, the Agreement may, under certain circumstances, be terminated upon
damage, destruction or condemnation of the Hotel. If the Hotel is damaged or
destroyed, MII may terminate the Agreement if Ivy fails to undertake repair work
within 180 days, and diligently complete the work in the time agreed to by MII
and Ivy, unless the reason for such failure is beyond the control of Ivy. Ivy
has the responsibility to repair damage from a condemnation or a casualty as its
own expense. However, Ivy may terminate the Agreement if (i) the Hotel is
damaged or destroyed to such an extent that the cost of repairs or restorations
exceeds 30% of the full replacement cost of the Hotel, (ii) the food and
beverage facilities are rendered unusable for the last 18 months of the initial
or any renewal term, or (iii) the number of guest rooms rendered unusable
exceeds a certain percentage ranging from 10% to 30% depending on the number of
years left in the term. If the Hotel is condemned, the Agreement will terminate
(a) unless only a part of the Hotel is condemned and the remainder can be
operated as a first-class convention hotel or (b) the proceeds of a condemnation
are not made available to Ivy by the Lenders.

The Hotel will continue to be managed by MII under the Management Agreement.
Although the Management Agreement has a 25-year initial term, MII has agreed to
renegotiate the terms of the Management Agreement prior to the repayment of the
Mortgage Debt. Ivy Street entered into the Management Agreement at the time of
the original offering of Units in 1985 at which time MII was a subsidiary of
Host Marriott as described above. Although the General Partner believes that the
Management Agreement is fair to Ivy Street and reflects commercially reasonable
terms, the General Partner has made no independent investigation as to whether
the Management Agreement was on terms at least as favorable as those that would
have been obtained from a third party.

Land Lease

On the Closing Date, the Partnership acquired the Land on which the Hotel is
located from Ivy for $10

million. The Partnership has leased the Land to Ivy for a period of 99 years.
Through 1994, Ivy paid annual rent equal to $1 million plus 3% of annual gross
room sales from the Hotel in excess of $20 million, up to a maximum of $2.5
million. Beginning January 1, 1995, annual rental increased to 5% of annual
gross room sales from the Hotel. Ivy has an option to repurchase the Land at any
time through 1999. Through 1995, the option price was $25 million and for the
ensuing four years the option price will be adjusted for changes in the Consumer
Price Index. At December 31, 1996, the option price was $25,825,000. Total
rentals under the lease, eliminated in consolidation, were $2,806,000 in 1996,
$2,526,000 in 1995 and $1,869,000 in 1994.

Payments to Host Marriott, MII and their Subsidiaries

The following table sets forth amounts paid by the Partnership to Host Marriott,
MII and their subsidiaries for the years ended December 31, 1996, 1995 and 1994
(in thousands). The table also includes accrued but unpaid incentive management
fees:

1996 1995 1994
--------- --------- -------

Payments to Host Marriott and subsidiaries:
Administrative expenses................................ $ 65 $ 84 $ 125
Cash distributions..................................... 10 30 19
--------- --------- ---------
$ 75 $ 114 $ 144
========= ========= =========
Payments to MII and subsidiaries:
Base management fee.................................... $ 2,654 $ 2,435 $ 2,337
Chain Services and HGA costs........................... 2,685 2,431 2,202
--------- --------- ---------
$ 5,339 $ 4,866 $ 4,539
========= ========= =========

PART IV

ITEM 14. EXHIBITS, SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K

(a) List of Documents Filed as Part of This Report

(1) Financial Statements
All financial statements of the registrant as set forth under Item 8
of this Report on Form 10-K.

(2) Financial Statement Schedules
The following financial information is filed herewith on the pages
indicated.

III. Real Estate and Accumulated Depreciation

All other schedules are omitted because they are not applicable or the required
information is included in the consolidated financial statements or notes
thereto.

(3) Exhibits

Exhibit
Number Description
- - -------------- ----------------------------------------------------------- ---------------

10.1 Secured Note made by Ivy Street Hotel Limited Partnership
to Marriott/Portman Finance Corporation dated as of July
10, 1990 for $199,000,000

10.2 Deed To Secure Debt, Security Agreement and Assignment of
Leases and Rents from Ivy Street Hotel Limited Partnership
and Atlanta Marriott Marquis Limited Partnership, as
Grantors to Marriott/Portman Finance Corporation, as
Grantee dated as of July 10, 1990

10.3 Principal Guaranty by and between Host Marriott Corporation
(formerly Marriott Corporation), as Guarantor,
Marriott/Portman Finance Corporation, as Issuer, and
NationsBank of Georgia, National Association (formerly
known as The Citizens and Southern National Bank), as
Collateral Trustee, Senior Trustee and Subordinated
Trustee, dated as of July 10, 1990

10.4 Interest/Principal Guaranty by and between Host Marriott
Corporation (formerly Marriott Corporation), as Guarantor,
Marriott/Portman Finance Corporation, as Issuer, and
NationsBank of Georgia, National Association (formerly
known as The Citizens and Southern National Bank), as
Collateral Trustee, Senior Trustee and Subordinated
Trustee, dated as of July 10, 1990

10.5 First Amendment to Restated and Amended Hotel Management
Agreement dated as of July 10, 1990

10.6 Management Agreement betweeen Ivy Street Hotel Limited
Partnership and Marriott Hotels, Inc. dated May 10, 1985
(incorporated by reference to Exhibit 10.a to Form 10 dated
March 31, 1986)

10.7 Land Purchase Agreement between Ivy Street Hotel Limited
Partnership, Seller and Atlanta Marriott Marquis Limited
Partnership, Purchaser dated as of May 28, 1985
(incorporated by reference to Exhibit 2.b to Form 10 filed
March 31, 1986)

10.8 Atlanta Marriott Marquis Hotel Ground Lease between Atlanta
Marriott Marquis Limited Partnership, Landlord and Ivy
Street Hotel Limited Partnership, Tenant dated as of May
28, 1985 (incorporated by reference to Exhibit 10.b to Form
10 filed March 31, 1986)

27 Financial Data Schedule

(b) REPORTS ON FORM 8-K

No reports on Form 8-K were filed during 1996.

SCHEDULE III

ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996

Gross Amount at December 31, 1996
---------------------------------------------------------
(in thousands)
Initial Costs
--------------------------
Subsequent
Buildings & Costs Buildings &
Encumbrances Land Improvements Capitalized Land Improvements Total
------------ ----------- ------------- ------------ ---------- ------------- -------------

Atlanta Marriott Marquis
Atlanta, GA $ 215,574 $ 12,565 $ 177,852 $ 4,797 $ 12,617 $ 182,597 $ 195,214
============= =========== ============= ============ ========== ============= =============

Date of
Accumulated Complettion Date Depreciation
Depreciation Construction Acquired Life
------------ ------------ -------- ----

Atlanta Marriott Marquis
Atlanta, GA $ 39,982 1985 1985 50 years

1994 1995 1996
------------ ------------ -----------
(in thousands)

Notes:
(a) Reconciliation of Real Estate:
Balance at beginning of year............................. $ 193,765 $ 194,117 $ 194,423
Capital expenditures................................. 352 306 815
Dispositions......................................... -- -- (24)
------------ ------------- ------------
Balance at end of year................................... $ 194,117 $ 194,423 $ 195,214
============ ============= ============
(b) Reconciliation of Accumulated Depreciation:
Balance at beginning of year.............................. $ 28,833 $ 32,518 $ 36,258
Depreciation and amortization......................... 3,685 3,740 3,748
Dispositions and other ............................... -- -- (24)
------------ ------------- ------------
Balance at end of year.................................... $ 32,518 $ 36,258 $ 39,982
============ ============= ============

(c) The aggregate cost of land, buildings and improvements for Federal income
tax purposes was approximately $229,369 at December 31, 1996.

(d) The Hotel is pledged as collateral for the Partnership's mortgage debt of
$215.6 million as of December 31, 1996.

SIGNATURE

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized, on November 10, 1997.

ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP

By: MARRIOTT MARQUIS CORPORATION
General Partner

By: /s/ Patricia K. Brady
-------------------------------------------
Patricia K. Brady
Vice President and Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on November 10, 1997.

Signature Title
- - --------- -----

MARRIOTT MARQUIS CORPORATION

/s/ Bruce F. Stemerman
- - ----------------------------- President and Director
Bruce F. Stemerman

/s/ Christopher G. Townsend
- - ----------------------------- Vice President, Director and Assistant
Christopher G. Townsend Secretary

/s/ Bruce D. Wardinski
- - ----------------------------- Treasurer
Bruce D. Wardinski