EQI Financing Partnership I, L.P. Upgraded By Fitch.

Business Editors

NEW YORK--(BUSINESS WIRE)--April 6, 2001

EQI Financing Partnership I, L.P. commercial mortgage bonds, series 1997-1, $11.7 million class A bonds are upgraded to `AAA' from `AA' by Fitch.

In addition, the following bonds are affirmed: the $50.6 million class B bonds at `A' and the $10.0 million class C bonds at `BBB'. The rating actions follow Fitch's annual review of the transaction, which closed on Feb. 11, 1997.

The upgrade is primarily attributable to amortization and the release of two properties at a prepayment price of 125% of the allocated loan balance. The bonds are currently secured by cross-collateralized and cross-defaulted first mortgages on 21 hotel properties consisting of 17 Hampton Inns, two Holiday Inns, one Residence Inn and one Comfort Inn.

As of the March 2001 distribution date, the overall balance of the bonds has been reduced by approximately 18%, to $72.3 million from $88.0 million at closing. 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 Fitch adjusted net cash flow (NCF), based on the unaudited 2000 year-end financial statements, has decreased 6.7% since 1999 and 1.9% since closing. The corresponding Fitch stressed debt service coverage ratio (DSCR) for the pool, based on a refinance constant of 10.9% on the outstanding debt, increased to 1.79 times (x) from 1.59x at closing.

Of concern to Fitch is the continued downward trend in collateral performance. Since year-end 1997, the overall NCF of the remaining properties has declined 19%, primarily due to increased competition in most of the markets and higher expenses such as payroll, repairs and maintenance and marketing.

The 2000 RevPAR of $45.28 has increased slightly compared to the RevPAR at closing of $43.42 due to an increase in the ADR from $60.67 to $72.12, which was partially offset by the decline in occupancy from 71.5% to 62.8%.

As of Jan. 1, 2001, in connection with the REIT Modernization Act (RMA), Equity Inns terminated all leases between the issuer and the third party operator, Crossroads Hospitality. The new lessees, known as taxable REIT subsidiaries, are 100% indirectly owned by Equity Inns. The hotel franchises did not change.

Five of the remaining properties are no longer managed by Crossroads with four of these properties now managed by Hilton and one by Crestline. Over the next five years, all properties will `roll off' management agreements with Crossroads and will most likely be managed by either Hilton or Crestline.

Fitch views the RMA modifications as a credit positive primarily due to the borrower having greater control over the hotel's operations.

Fitch will continue to closely monitor the collateral performance as surveillance is ongoing.