RALEIGH, N.C.—(BUSINESS WIRE)—July 1, 2002—Winston Hotels, Inc. (NYSE: WXH), a real estate investment trust (REIT) that owns premium limited-service, upscale extended-stay and full-service hotels, today announced that through its wholly owned taxable REIT subsidiary, Barclay Hospitality Services Inc., it has acquired the leasehold interests for 47 of its hotels from MeriStar Hotels & Resorts (NYSE: MMH) for $17 million.

Thirty-nine of the 47 properties will continue to be operated by MeriStar, the nation`s largest independent hotel management company, under five-year management contracts that are terminable after the first anniversary. Of the remaining eight properties, seven will continue to be managed by Interstate Management and Investment Corporation, headquartered in Columbia, S.C., and one by Hilton Hotels Corporation.

The ability of a hotel REIT to lease its own properties through a taxable REIT subsidiary was made possible by the REIT Modernization Act, as long as the taxable REIT subsidiary lessee retains independent third-party management. Thirty-six of the 47 leases originally were sold to a predecessor company of MeriStar in 1997 by Winston Hospitality, Inc.

“Through the purchase of the leases from MeriStar, we have aligned our ownership interests more closely with the financial interests of our operator, and we now equally are focused on bottom-line profitability,” said Jim Rosenberg, president and chief operating officer of Winston Hotels. “The new structure allows us greater flexibility and enables us to exercise greater control over the daily operation of our hotels.”

John Emery, MeriStar president and chief operating officer, noted that the transaction allows both companies to better create a consistent business strategy for the hotels. “We also share similar business philosophies with Winston and have enjoyed a mutually beneficial relationship, which we look forward to expanding,” he said.

Raleigh, North Carolina-based Winston Hotels, Inc., is a real estate investment trust specializing in the development, acquisition, repositioning and active asset management of premium limited-service, upscale extended-stay and full-service hotels, with a portfolio increasingly weighted toward the leading brands in the lodging industry`s upscale segment. The company currently owns or is invested in 54 hotels with 7,399 rooms in 16 states, which includes: 47 wholly-owned properties with 6,456 rooms; a 49 percent ownership interest in three joint venture hotels with 453 rooms; a 50 percent ownership interest in two joint venture hotels with 215 rooms; and a mezzanine financing interest in two hotels with 275 rooms. For more information about Winston Hotels, visit the Winston Hotels Web site, www.winstonhotels.com.

In addition to historical information, this press release contains forward-looking statements. The statements are based on current expectations, estimates and projections about the industry and markets in which Winston Hotels operates, as well as management`s beliefs and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which may cause the company`s actual results, performance, achievements pursuant to its disposition and acquisition programs and its other activities to be materially different from the results, plans or expectations expressed or implied by such statements. For more details, please refer to the company`s SEC filings, including its most recent annual report on Form 10-K.

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