RALEIGH, N.C. - Oct. 15, 2003 -- Winston Hotels, Inc. (NYSE: WXH - News), a real estate investment trust (REIT) and owner of premium limited-service, upscale extended-stay and full-service hotels, today announced that it plans to expand the scope of its hotel real estate lending business as evidence of a hotel industry recovery continues to mount. In addition, the company provided updates on its two other key growth strategies: acquisitions and improving hotel operations.

"With the completion of our recent follow-on stock offering, we believe that we are well-positioned to take advantage of the expected recovery in the hotel industry and the economy," said Bob Winston, the company's CEO. "We believe that we have weathered the last couple of years well and now have the structure and financial resources in place to pursue aggressively our strategies for growth and to move the company forward."

Winston and Joe Green, the company's CFO, provided an update on the Company's three primary avenues of growth: 

1. subordinated debt financing, 
2. selected acquisitions, and 
3. improved operating performance at the company's owned hotels.

"The company now has approximately $51 million in available funds from our latest equity offering, including the underwriters' recent exercise of the 787,500 common share overallotment option," Green said. "We plan to use a portion of these funds to expand our financing program, concentrating on originating and acquiring subordinated hotel debt. We intend to focus on subordinated hotel loans, targeting the debt piece between 60 percent and 85 percent of the project's value, hotels with 100 to 425 rooms and loan amounts that we expect to range between $1 million and $15 million. We also intend to underwrite and acquire other subordinated mortgage investments, such as Collateralized Mortgage-Backed Securities (CMBS) loans. We expect to be able to invest in a mix of subordinated loans ranging from CMBS-related assets to one-off originations of loans designed to acquire, develop, refinance and reposition hotels."

Green believes that the hotel industry currently has insufficient capital available to finance acquisitions, refinance hotels as current debt matures, and finance major renovations and new development, due to current restrictive underwriting policies of first mortgage lenders. "First-mortgage lenders today are more conservative than historic norms, generally providing only about 60 percent of the value of the project," he said. "Owner/developers usually don't want to commit 40 percent equity to a project and generally are willing to pay higher rates to obtain the capital bridge between a 60 percent loan-to-value financing and their equity."

Industry observers have forecasted that the hotel industry is near or at the bottom of the hotel real estate cycle, Green noted. "Historically, this is a time when leading developers and owners begin to increase their activity. We believe that our extensive background in hotel development and redevelopment gives us a competitive advantage in locating and underwriting projects that have high return potential with reasonable risks," he said.

"We provide an important financial component in helping transactions come to fruition," he commented. "We are seeing an increase in financing activity and have an active pipeline."

Acquisition Program--

The company has acquired three hotels in its $100 million joint venture with Charlesbank Capital Partners, LLC (Charlesbank), which was formed to acquire hotels with upside potential through value-added programs, and has approximately 70 percent of the fund available to pursue additional acquisitions. "Our first two properties have completed a major repositioning and are generating positive returns," he said. 

"We just closed on our third hotel acquisition, a Best Western in the Houston Medical Center area, which we plan to convert to a Marriott Springhill Suites with Concord Hospitality Enterprises Company, who is both a minority partner in and operator of the three properties. We are pleased with the opportunities that are being presented to us for acquisition by our Charlesbank joint venture, of which the company owns 15 percent and Charlesbank 85 percent."

Improving Operations at Existing Hotels--

"Acquiring our leases a year ago was a major step in more closely aligning our ownership interest with our hotel operators, as it now permits us to work directly with property management companies and develop strong relationships," Winston said. "We have consolidated 41 of the company's 50 hotels under Alliance Hospitality, an independent management company headquartered in Raleigh. We are very excited about our new direction with Alliance and believe that it will produce positive results for our shareholders."

Winston noted that the company's portfolio generally maintains a revenue per available room (RevPAR) premium over its competitors. "We believe that as the economy recovers, we are well positioned to achieve higher rates of growth in average daily rate and occupancy than our competitors in their respective markets."

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 50 hotels with an aggregate of 6,999 rooms in 16 states, which includes: 44 wholly owned properties with an aggregate of 6,141 rooms; a 49 percent ownership interest in two joint venture hotels with an aggregate of 296 rooms; a 57.65 percent ownership interest in one joint venture hotel with 157 rooms; and a 13.05 percent ownership interest in three joint venture hotels with an aggregate of 405 rooms. The company also has issued mezzanine loans to owners of three hotels with an aggregate of 391 rooms. The company does not hold an ownership interest in any of the hotels for which it has provided mezzanine financing.

In addition to historical information, this press release contains forward-looking statements.