Humphrey Hospitality, which leases and operates the REIT's 92 hotels in 19 Mid-Western and Eastern states, announced in late March that its rent must be cut or else it won't be able to continue operating the properties. Blaming economic conditions in several of its markets, Humphrey Hospitality Management reported a net loss of $2.4 million in 2000.

The company attributed the loss to both lower revenues and higher operating costs. On the revenue end, the company blamed increased competition in several markets and a drop in transient travel due to higher energy costs.

On the operating costs side, increased labor and utilities costs were blamed. The losses were expected to continue, according to the hotel managers.

The REIT's portfolio includes franchised hotels from Super 8, Comfort Inn/Comfort Suites, Hampton Inn, Holiday Inn Express, Wingate Inn, Best Western/Best Western Suites, Days Inn, and Shoney's Inn. It owns hotels in Arkansas, Illinois, Iowa, Kansas, Missouri, Nebraska, South Dakota, Texas, Pennsylvania, West Virginia, Virginia, Maryland, Delaware, Kentucky, Tennessee, North Carolina, Florida and Wisconsin.

Cohen & Steers will work with the REIT's newly appointed committee of independent directors to explore the trust's alternatives. REIT officials earlier said one of the options they are mulling is forming taxable REIT subsidiaries under the recently enacted REIT Modernization Act, which permits taxable subsidiaries of the REIT to lease its hotels and engage third-party management companies to manage the hotels.

Nother option being mulled is amending Humphrey Hospitality Management Inc.'s leases to reduce its rent, and still anothter is selling some of its hotels. The REIT also said it believes the losses could result in a "substantial decline" in its funds from operations and net income, and announced it could impact shareholder dividends.