Host Funding Inc. Announces Operating Results.

DALLAS--(BUSINESS WIRE)--Aug. 14, 1997--Host Funding Inc. (ASE:HFD) announced its operating results for the second quarter and six months ended June 30, 1997, and the second quarter and six months ended June 30, 1996.

Funds from operations (FFO) for the second quarter increased to $235,468, up from $214,824 in 1996, and increased to $339,015 for the first six months of 1997, up 210 percent from the $161,022 reported last year. Funds from operations per share for the three and six months ended June 30, 1997, were 15 cents and 22 cents, compared with 1996 amounts of 17 cents and 16 cents.

Actual 1997 revenues for the respective periods were $1,065,312 and $1,874,400, a significant increase over 1996 actual revenues of $419,695 and $665,102. Actual 1997 fully diluted earnings per share for the respective periods showed a net loss of 7 cents and 23 cents per share, compared with 1996 actual earnings per share of 11 cents and 5 cents.

Funds from operations were calculated by adding depreciation, amortization and a one-time charge to net income or net loss.

The increase in revenues and funds from operations can be attributed principally to additional operating revenues received from acquisitions properties, as well as previously owned properties.

1997 pro forma revenues for the quarter and six months ended June 30, 1997, were $1,065,312 and $1,937,255, compared with 1996 pro forma revenues of $1,028,435 and $1,976,444. Pro forma 1997 earnings per share of (7 cents) and (15 cents) compared with pro forma 1996 earnings per share of (5 cents) and (12 cents).

Funds from operations on a pro forma basis for the respective periods were $286,834 and $440,859 for 1997 and $330,237 and $480,048 for 1996. Pro forma FFO per share was 19 cents and 29 cents for 1997 and 22 cents and 31 cents for 1996.

The slight reduction in pro forma revenues was caused primarily by the temporary suspension of operations of the company's Sleep Inn property located in Tallahassee, Fla., due to recently discovered structural defects.

Host Funding has negotiated an agreement in principal to sell this property back to the previous owner at Host's original acquisition cost with no significant gain or loss expected. The charge against earnings is management's conservative estimate of closing and miscellaneous costs relating to this sale.

Host Funding also Thursday announced that it did not elect to qualify as a REIT during the 1996 tax year, but that it plans to elect REIT status during the 1997 tax year. The company has a net deferred tax asset under SFAS 109, "Accounting for Income Taxes," thus will have no taxable income for 1996.

Michael McNulty, president of Host Funding, stated "we have more than doubled our room count over the last year and are currently positioned to make even more dramatic progress in the near term." McNulty further commented, "Host is currently evaluating acquisition opportunities either directly or in partnership with current owners comprising over 1,800 rooms with an aggregate value in excess of $130 million.

"Due diligence has commenced on a number of the properties designated for acquisitions. Host would acquire these properties, subject to operating leases, through a combination of common stock, preferred stock, assumption of debt and cash. This represents the continued implementation of the company's acquisition strategy to include both limited and full service properties in its portfolio, and developing relationships in a multiple tenant environment."

Host Funding is focused on the acquisition and repositioning of mid-priced commercial hotels. The company strategy for growth is centered upon the consolidation of several small regional hotel chains with one operating flag and entity. -0-

Except for historical information contained herein, this document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks and uncertainties that may cause the company's actual results or outcomes to be materially different from those anticipated and discussed herein.

Important factors that the company believes might cause such differences are discussed in the cautionary statements accompanying the forward-looking statements in the company's filings with the Securities and Exchange Commission. In assessing forward-looking statements contained herein, readers are urged to read carefully all cautionary statements contained in the company's filings with the Securities and Exchange Commission. -0-

                 Host Funding Inc. Quarterly Results
             Condensed Consolidated Statement of Operations
                            (Unaudited)

                            Actual                  Actual
                         Three Months             Six Months
                        Ended June 30,           Ended June 30,
                        1997      1996            1997      1996

Revenues             $1,065,312  $419,695     $1,674,400  $665,102
Expenses              1,121,038   276,348      2,168,991   611,494
Income Before Taxes    ($55,726) $143,347      ($294,592)  $53,608
Estimated Loss Related
 to Property Sale      ($50,000)                ($50,000)
Provision for Income
 Taxes                        0         0              0         0
Net Income            ($105,726) $143,347      ($344,592)  $53,608

Funds from Operations  $235,468  $214,824       $339,015  $161,022
Cash Available for
 Distribution          $202,025  $182,756       $210,794  $193,090
Net Income Per Share      ($.07)    $0.11         ($0.23)    $0.05
Funds from Operations
 Per Share                $0.15     $0.17          $0.22     $0.16
Cash Available for
 Distribution Per Share   $0.13     $0.14          $0.14     $0.20
Weighted Average
 Shares Outstanding   1,522,042 1,289,571      1,518,067   988,129

-0-
                         Pro forma                  Pro forma
                        Three Months                Six Months
                        Ended June 30,            Ended June 30,
                        1997      1996            1997        1996

Revenues             $1,065,312 $1,028,435     $1,937,256 $1,976,444
Expenses             $1,121,038 $1,055,590      2,111,180  2,111,180
Income Before Taxes    ($55,726)  ($27,155)     ($173,925) ($134,736)
Estimated Loss Related
 to Property Sale      ($50,000)  ($50,000)      ($50,000)  ($50,000)
Provision for Income
 Taxes
Net Income            ($105,726)   $77,155      ($223,925) ($184,736)

Funds from Operations  $286,834   $330,237       $440,859   $480,048
Cash Available for
 Distribution          $110,067   $149,519       $104,755   $139,261
Net Income Per Share      ($.07)    ($0.05)        ($0.15)    ($0.12)
Funds from Operations
 Per Share                $0.19      $0.22          $0.29      $0.31
Cash Available for
 Distribution Per Share   $0.07      $0.10          $0.07      $0.09
Weighted Average
 Shares Outstanding   1,635,583  1,635,583      1,535,583  1,535,683

-0-

Consolidated Balance Sheets (Unaudited)

                                     June 30,      Dec. 31,
                                       1997          1996

Hotel Property Investments, at Cost  $23,920,607  $19,013,510
Cash                                     281,587      347,645
Other Assets                           2,144,476    1,074,420

Total Assets                         $26,346,670  $20,435,575

Long-Term Debt                       $21,691,557  $15,500,000
Notes Payable                             25,000            0
Other Liabilities                        704,280      232,160
Shareholders' Equity (Deficit)         3,925,833    4,703,395

Total Liabilities and Shareholders'
 Equity (Deficit)                    $26,346,670  $20,435,575

CONTACT: Host Funding Inc., Dallas

Michael McNulty/Bona Allen, 214/750-0760

Bill Birdsall, 970/749-6162