EQI Financing Partnership I, L.P. Downgraded by Fitch Ratings.

Business Editors

CHICAGO--(BUSINESS WIRE)--Sept. 16, 2003

The following classes of EQI Financing Partnership I, L.P.'s commercial mortgage bonds, series 1997-1, are downgraded and removed from Rating Watch Negative by Fitch Ratings.

-- $50.6 million class B bonds to 'A-' from 'A';

-- $10 million class C bonds to 'BB' from 'BBB-'.

The class B and class C bonds were placed on Rating Watch Negative effective July 28, 2003, following the receipt and analysis of fiscal year-end 2002 financial information. In addition, Fitch affirms the $4.5 million class A bonds at 'AAA'. The rating actions follow Fitch's annual review of the transaction, which closed in February 1997.

The bonds are secured by cross-collateralized and cross-defaulted first mortgages on twenty hotel properties consisting of sixteen Hampton Inns, two Holiday Inns, one Residence Inn and one Comfort Inn. As of the August 2003 distribution date, the overall balance of the bonds has been reduced by approximately 26%, to $65.1 million from $88 million at issuance. The properties are owned by the issuer, a bankruptcy remote special-purpose entity (SPE) and a wholly owned subsidiary of Equity Inns, Inc., a publicly traded real estate investment trust (REIT).

The downgrades are primarily attributable to the continued declining performance of the portfolio. Fitch stressed net cash flow (NCF) has been decreasing each year since 1998 and the trailing twelve month (TTM) June 30, 2003 stressed NCF is down 35% from issuance. The corresponding Fitch stressed debt service coverage ratio (DSCR) for the pool, based on a refinance constant of 10.48% and Fitch's stressed TTM June 30, 2003 NCF, decreased to 1.46x from a 1.65x at issuance. The decline in performance is generally attributed to increased competition and the impact of the current economic conditions on the properties.

Fitch recognizes that the hotel industry has been hit especially hard by the events of Sept. 11, 2001 and the subsequent economic downturn, and factored these circumstances into its analysis. However, because the pool's performance had already been in decline, these factors had an even bigger impact on the subject pool.

While the previous release of three properties, at a prepayment price of 125% of the allocated loan balances, and amortization have benefited the pool at the top, the continued declining overall performance of the collateral has placed stress on the lower rated classes.

Fitch will continue to monitor the financial performance of the pool for further declines and should performance continue to weaken, the ratings may need to be reviewed.