Winston Hotels, Inc. (NYSE: WXH), a real estate investment trust (REIT) and owner of premium limited-service, upscale extended-stay and full-service hotels, today announced it has formed a 50/50 joint venture with Hall Financial Group to provide financing to convert a historic office building in Baltimore`s Inner Harbor, into a 116-room Hampton Inn & Suites.

The joint venture will provide a $3.5 million mezzanine loan to project owner, 131 East Redwood, LLC. The all-in cost of the project is estimated to be approximately $19 million and take about 14 months to complete.

“This transaction allows us to utilize one of our primary growth strategies, mezzanine financing,” said Joe Green, chief financial officer. “We continue to seek acquisition and mezzanine financing opportunities through joint venture partnerships, such as this one with Hall Financial.

“This site is in the heart of Baltimore`s vibrant Inner Harbor, which attracts guests from a variety of demand generators. The Hampton Inn & Suites will be one of the only mid-market, limited service brands in the district, and we believe will secure an immediate leadership position,” said Bob Winston, chief executive officer.

“Winston was very creative in helping us put this complex transaction together,” said Shaffin Jetha, principal of the developer, Focus Development, which is in the business of utilizing tax credits to restore historic buildings. “Their persistence, support and new ideas helped us overcome the obstacles in today`s difficult financing environment.”

“By partnering with an experienced hotel group in this loan, we have even greater confidence about the ultimate success of this project,” said Don Braun, president of Hall Financial Group. “We will continue to look at additional opportunities to work with Winston in the future.”

Hall Financial Group is a value-oriented investment company with diversified interests in the United States and Europe. Founded in 1968 by chairman Craig Hall, the company`s contrarian, counter-cyclical strategy is executed through direct investments and hands-on management, and through opportunistic alliances with smart, entrepreneurial partners.

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 53 hotels with 7,273 rooms in 16 states, which includes: 46 wholly-owned properties with 6,330 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 reader can identify these statements by use of words like “may,” “will,” “believe,” “expect,” “project,” “anticipate,” “estimate,” or “continue” or similar expressions. These statements represent the Company`s judgment and are subject to risks and uncertainties that could cause actual operating results to differ materially from those expressed or implied in the forward looking statements including, but not limited to, changes in general economic conditions, lower occupancy rates, lower average daily rates, development risks including risk of construction delay, cost overruns, occupancy and other governmental permits, zoning, the increase of development costs in connection with projects that are not pursued to completion, the risk of non-payment of mezzanine loans, or the failure to make additional mezzanine debt investments and investments in distressed hotel opportunities. Other risks are discussed in the Company`s filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K for the year ended December 31, 2001, Quarterly Reports on Form 10-Q and its other periodic reports.

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