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									  FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS’ REPORT

   THE GATEWAY HOTELS,
    ST. LOUIS, MISSOURI

  DECEMBER 31, 2007 AND 2006
                  The Gateway Hotels, St. Louis, Missouri

                         TABLE OF CONTENTS


                                                            PAGE


INDEPENDENT AUDITORS’ REPORT                                   3


FINANCIAL STATEMENTS


     BALANCE SHEETS                                            5


     STATEMENTS OF OPERATIONS                                  6


     STATEMENTS OF ACCUMULATED EARNINGS                        7


     STATEMENTS OF CASH FLOWS                                  8


     NOTES TO FINANCIAL STATEMENTS                             9
                            INDEPENDENT AUDITORS’ REPORT


To the Members
The Gateway Hotels, St. Louis Missouri

        We have audited the accompanying balance sheet of The Gateway Hotels, St. Louis,
Missouri (the Hotels)(a wholly owned component of Gateway Hotel Partners, L.L.C. (GHP) and
Gateway Tower Partners, L.L.C. (GTP), collectively the Companies), as of December 31, 2007,
and the related statement of operations, accumulated earnings, and cash flow for the year then
ended. These financial statements are the responsibility of the Companies’ management. Our
responsibility is to express an opinion on these financial statements based on our audit. The
financial statements of The Gateway Hotels, St. Louis, Missouri as of December 31, 2006, were
audited by other auditors whose report dated April 27, 2007 expressed an unqualified opinion on
those statements.

        We conducted our audit in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

       In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the Hotels as of December 31, 2007, and the results of its
operations, the changes in accumulated earnings, and its cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of America.

        The accompanying financial statements have been prepared assuming that the Hotels will
continue as going concerns. As discussed in Note 1 to the financial statements, the Hotels are
the primary source of funds to meet the debt service obligations of the Companies, and the
current operating results continue to fall short of the debt service obligations. As a result, the
Hotels, as a component of the Companies, are economically dependent on GHP and GTP and
their members, and there is no assurance that GHP and GTP and their members will continue to
provide economic support. These factors, among others, indicate that the Hotels may be unable
to continue as going concerns for a reasonable period of time. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.




                                              -3-
       The accompanying affiliated component financial statements have been prepared from
the separate records maintained for the Hotels and may not necessarily be indicative of
conditions that would have existed or the results of operations if the Hotels had been operated as
an unaffiliated component. Portions of certain accounts and transactions applicable to the
Companies as a whole have been excluded.




Skokie, Illinois
April 25, 2008




                                              -4-
                               The Gateway Hotels, St. Louis Missouri

                                       BALANCE SHEETS

                                    December 31, 2007 and 2006


                                              ASSETS

                                                                      2007            2006
CURRENT ASSETS
 Cash and cash equivalents                                     $      3,062,026   $   2,730,902
 Accounts receivable (net of allowance for doubtful
   accounts of $56,758 and $55,626, respectively)                     1,934,074       2,374,081
 Accounts receivable - affiliate                                            -            40,718
 Inventories                                                             85,308         124,706
 Prepaid expenses                                                       240,261         246,097

   Total current assets                                               5,321,669       5,516,504

 Fixed assets, net of accumulated depreciation
   of $432,881 and $338,998, respectively                              130,275         224,157

   Total assets                                                $      5,451,944   $   5,740,661

                       LIABILITIES AND ACCUMULATED EARNINGS

CURRENT LIABILITIES
 Accounts payable and accrued liabilities                      $      2,728,504   $   2,632,270
 Accounts payable - affiliate                                           504,038             -
 Current portion of capital leases                                       25,209         114,584

   Total current liabilities                                          3,257,751       2,746,854

CAPITAL LEASES                                                               -          25,209

   Total liabilities                                                  3,257,751       2,772,063

ACCUMULATED EARNINGS                                                  2,194,193       2,968,598

   Total liabilities and accumulated earnings                  $      5,451,944   $   5,740,661



                                  See notes to financial statements

                                                -5-
                         The Gateway Hotels, St. Louis Missouri

                           STATEMENTS OF OPERATIONS

                        Years ended December 31, 2007 and 2006


                                                                   2007            2006
REVENUE
 Rooms                                                    $ 31,609,404        $ 31,467,496
 Food and beverage                                          17,646,263          17,335,633
 Telephone                                                     456,920             461,947
 Other                                                         901,160           2,164,719

    Total revenue                                                50,613,747       51,429,795

OPERATING COSTS AND EXPENSES
 Department direct expenses:
   Rooms                                                          8,959,007        8,732,367
   Food and beverage                                             14,397,875       14,177,153
   Telephone                                                        469,102          624,526
   Other                                                            329,589        1,278,371
 General and administrative                                       4,526,288        4,698,613
 Sales and marketing                                              4,102,559        4,787,526
 Utilities                                                        2,124,926        2,075,750
 Repairs and maintenance                                          2,866,774        2,610,281
 Depreciation                                                        93,882           93,882
 Management fee                                                   1,507,175        1,480,714
 Interest expense                                                     7,365           17,513
 Other                                                            4,118,333        4,568,439

    Total operating costs and expenses                           43,502,875       45,145,135

NET INCOME                                                $       7,110,872   $    6,284,660




                             See notes to financial statements

                                           -6-
                           The Gateway Hotels, St. Louis Missouri

                    STATEMENTS OF ACCUMULATED EARNINGS

                           Years ended December 31, 2007 and 2006


Balance, January 1, 2006                                            $     912,500

 Transfer to Trustee of the Companies                                   (4,228,562)

 Net income                                                             6,284,660

Balance, December 31, 2006                                              2,968,598

 Transfer to Trustee of the Companies                                   (7,885,277)

 Net income                                                             7,110,872

Balance, December 31, 2007                                          $   2,194,193




                               See notes to financial statements

                                             -7-
                           The Gateway Hotels, St. Louis Missouri

                             STATEMENTS OF CASH FLOWS

                          Years ended December 31, 2007 and 2006


                                                                    2007              2006
CASH FLOWS FROM OPERATING ACTIVITES:
 Net income                                                  $     7,110,872     $   6,284,660
 Adjustments to reconcile net income to net cash
 provided by operating activities:
   Depreciation                                                       93,882            93,882
   Changes in assets and liabilites:
    Accounts receivable                                              440,007         (1,260,051)
    Accounts receivable - affiliate                                   40,718            (40,718)
    Inventories                                                       39,398             (4,889)
    Prepaid expenses                                                   5,836             22,096
    Accounts payable and accrued liabilities                          96,234            206,631
    Accounts payable - affiliate                                           -           (307,417)

     Net cash provided by operating activities                     7,826,947         4,994,194

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on capital leases                                         (114,584)         (125,873)
  Change in intercompany accounts payable                                   -        (1,910,004)
  Transfer to Trustee of the Companies                             (7,885,277)       (4,228,562)
  Advances from affiliate                                             504,038                 -

     Net cash used in financing activities                         (7,495,823)       (6,264,439)

     NET INCREASE (DECREASE) IN CASH AND
      CASH EQUIVALENTS                                               331,124         (1,270,245)

     CASH AND CASH EQUIVALENTS -
      BEGINNING OF YEAR                                            2,730,902         4,001,147

     CASH AND CASH EQUIVALENTS -
      END OF YEAR                                            $     3,062,026     $   2,730,902




                               See notes to financial statements

                                             -8-
                           The Gateway Hotels, St. Louis Missouri

                          NOTES TO FINANCIAL STATEMENTS

                                 December 31, 2007 and 2006


NOTE 1 - ORGANIZATION AND GOING CONCERN

  Gateway Hotel Partners, L.L.C. (GHP) and Gateway Tower Partners, L.L.C. (GTP)
  (collectively referred to as the Companies) were formed on October 16, 2000, to construct,
  rehabilitate and operate The Gateway Hotels (the Hotels) in St. Louis, Missouri.

  The Hotels consist of two hotels: a 918-room convention headquarters hotel (the Grand
  Hotel) and a 165-room all-suites hotel (the Suites Hotel). The Hotels are located in
  downtown St. Louis, with the Suites Hotel located across the street from the Grand Hotel.
  The Suites Hotel, which was constructed as a certified historical structure, began operations
  on April 1, 2002. The Grand Hotel, which was constructed as a certified historical structure
  and a new high-rise tower, received its certificate of occupancy on December 31, 2002, and
  began operations on February 15, 2003. For cost saving purposes, effective December 2006,
  the operations and financial reporting of the Hotels were consolidated into reporting for the
  Grand Hotel.

  The Hotels are a component of the Companies and only include the accounts and transactions
  necessary to the daily operations of the hotels. Accordingly, the Hotels’ financial statements
  do not include balances related to the construction and financing of the Hotels (e.g., restricted
  cash, fixed assets, long-term debt). In addition, operating supplies and other items purchased
  with the Companies’ long-term debt proceeds have been excluded.

  Funds generated from or used for hotel operations are periodically transferred between the
  Hotels and the Companies, creating intercompany assets and liabilities on the Hotels’
  financial statements, if such amounts are expected to be repaid. Otherwise, such transactions
  are treated as transfers to or from the Trustee of the Companies in the Statements of
  Members’ Equity (Deficit).

  The accompanying financial statements were prepared assuming that the Hotels will continue
  as going concerns, which contemplates the realization of assets and the satisfaction of
  liabilities. The Hotels are the primary source of funds to meet the debt service obligations of
  the Companies, and the current operating results continue to fall short of the debt service
  obligations. As a result, the Hotels, as a component of the Companies, are economically
  dependent on GHP, GTP and their members, and there is not assurance that GHP, GTP and
  their members will continue to provide economic support. These reasonable factors, among
  others, indicate that the Hotels may be unable to continue as going concerns for a reasonable



                                              -9-
                          The Gateway Hotels, St. Louis Missouri

                 NOTES TO FINANCIAL STATEMENTS - CONTINUED

                                December 31, 2007 and 2006


  period of time. The Hotels may receive economic support from GHP, GTP and their
  members, as necessary, to cover operating deficits as they may occur.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Cash and Cash Equivalents

  For purposes of the statements of cash flows, all highly liquid debt instruments purchased
  with an original maturity of three months or less are considered to be cash equivalents.

  Fixed Assets

  Fixed assets are recorded at cost and consist of assets purchased under capital leases (see
  note 3). Depreciation is computed using the straight-line method over the estimated life of
  four or seven years.

  Repairs and Maintenance

  Repairs and maintenance costs are charged to expense as incurred.

  Inventories

  Inventories consist principally of food and beverage and are stated at the lower of costs (as
  determined on a first-in, first-out basis) or market value.

  Income Taxes

  No provision or benefit for income taxes has been included in these financial statements
  since taxable income or loss passes through to, and is reportable by, the members
  individually.

  Accounts Receivable and Bad Debts

  Accounts receivable are reported net of an allowance for doubtful accounts. Management’s
  estimate of the allowance is based on historical collection experience and a review of the
  current status of accounts receivable. It is reasonably possible that management’s estimate of
  the allowance will change.


                                            - 10 -
                         The Gateway Hotels, St. Louis Missouri

               NOTES TO FINANCIAL STATEMENTS - CONTINUED

                               December 31, 2007 and 2006


Impairment of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets,” the Companies review
their hotel properties for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. If the fair value is less than the
carrying amount of the asset, an impairment loss is recognized for the difference. No
impairment loss has been recognized during the years ended December 31, 2007 and 2006.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results could differ
from those estimates.

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (FASB) issued SFAS No. 157, “Fair Value
Measurements”. SFAS 157 defines fair value, establishes a framework for measuring fair
value in accounting principles generally accepted in the United States of America, and
expands disclosures about fair value measurements. SFAS 157 does not require any new fair
value measurements; however, it will apply under other accounting pronouncements that
would require or permit fair value measurements. In December 2007, the FASB issued a
proposed staff position that would delay the effective date of SFAS 157 for all non financial
assets and liabilities except for those recognized or disclosed at least annually. Except for the
proposed delay for nonfinancial assets and liabilities, SFAS 157 is effective for fiscal years
beginning after December 15, 2007 and interim periods within such years. The Companies
will adopt SFAS 157 as of January 1, 2008, as required. The Companies are currently
evaluating the new standard. However, adoption of SFAS 157 is not expected to have a
material effect on the Hotels’ combined financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities”. SFAS 159 allows entities to choose, at specified election
dates, to measure financial instruments (financial assets and liabilities) at fair value (the Fair


                                            - 11 -
                           The Gateway Hotels, St. Louis Missouri

                 NOTES TO FINANCIAL STATEMENTS - CONTINUED

                                December 31, 2007 and 2006


  Value Option). The election is made on an instrument-by-instrument basis and is
  irrevocable. If the Fair Value Option is elected for an instrument, SFAS 159 specifies that all
  subsequent changes in fair value for that instrument be reported in earnings. SFAS 159 is
  effective as of the beginning of the first fiscal year that begins after November 15, 2007. The
  Companies will not apply the Fair Value Option to any of the Hotels’ existing financial
  assets or liabilities.

NOTE 3 - CAPITAL LEASES

  The Companies (lessee) have entered into various capital leases for the purchase of
  televisions and certain equipment to be used in and paid for from the Hotels’ operations. The
  leases have terms of four or seven years and have been capitalized using an interest rate of
  7.2% or 11.0% per annum. At December 31, 2007 and 2006, fixed assets of $130,275 and
  $224,157 (net of accumulated depreciation of $432,881 and $338,998, respectively), were
  recorded related to the capital leases.

  Future minimum rental amounts for capital leases subsequent to December 31, 2007 are as
  follows:
                December 31, 2008                          $      25,614

                   Total minimum lease payments                        25,614

                   Amount representing interest                           (405)

                   Present value of minimum lease payments             25,209

                   Less current portion                                (25,209)

                   Future minimum obligation                   $             -

NOTE 4 - MANAGEMENT AGREEMENT

  The Hotels have an agreement with Renaissance Hotel Management Company (the Hotel
  Manager) to operate the Suites Hotel as the Renaissance St. Louis Suites and the Grand Hotel
  as the Renaissance Grand. Under the terms of the agreement, the Hotel Manager receives a
  base management fee equal to 3% of gross revenue, as defined. During 2007 and 2006,
  management fees incurred were $1,507,175 and $1,480,714, respectively. During 2007 and


                                            - 12 -
                           The Gateway Hotels, St. Louis Missouri

                 NOTES TO FINANCIAL STATEMENTS - CONTINUED

                                December 31, 2007 and 2006


  2006, management fees paid were $1,479,590 and $1,491,296, respectively. As of December
  31, 2007 and 2006, management fees payable were $69,652 and $42,067, respectively, and
  are included in accounts payable - affiliate and accounts receivable - affiliate, respectively.

  According to the management agreement, the Hotel Manager is entitled to a noncumulative,
  annual incentive management fee equal to 25% of available cash flow as defined by the
  management agreement. During 2007 and 2006, no incentive management fees were
  incurred.

NOTE 5 - RELATED PARTY TRANSACTIONS

  At December 31, 2007 and 2006, accounts payable - affiliate and accounts receivable –
  affiliate represents amounts to be paid to an affiliate of the Hotel Manager for reimbursement
  of expenses paid on behalf of the Hotels and amounts to be received from an affiliate of the
  Hotel Manager for expenses paid on behalf of the Hotel Manager, respectively.

NOTE 6 - OPERATING LEASES

  The Hotels leased certain equipment under a non-cancelable lease that provide for rental
  payments based on minimum rental rates. The lease has a term of four year and expires in
  April 2008. Future minimum rental amounts from non-cancelable operating leases as of
  December 31, 2007 are as follows:

                 Year ending December 31, 2008                $        3,996

NOTE 7 - COMMITMENTS AND CONTINGENCIES

  The Hotels are periodically involved in various legal actions and claims that arise in the
  normal course of business, the resolution of which, in the opinion of management, should not
  have a material adverse effect on the Hotels’ financial position, results of operations or cash
  flows.




                                            - 13 -
                          The Gateway Hotels, St. Louis Missouri

                NOTES TO FINANCIAL STATEMENTS - CONTINUED

                               December 31, 2007 and 2006


NOTE 8 - CONCENTRATION OF CREDIT RISK

  The Companies maintain their cash accounts with UMB Bank, N.A. and Bank of America,
  N.A. Cash balances are insured by the Federal Deposit Insurance Corporation up to
  $100,000. As of December 31, 2007, the uninsured portion of the cash balances held at the
  banks was $981,844 and $152,121, respectively.

NOTE 9 - GOING CONCERN BASIS OF ACCOUNTING

  The Companies have and continue to experience significant operating losses and cash flow
  difficulties. The Members have advanced substantial amounts of working capital.
  Management is taking measures to improve the operations. If these measures are not
  successful, and the Members do not fund operating deficits, the project may face foreclosure
  action. Members would need to fund operating cash flow deficits to be able to operate and
  meet the obligations in the normal course of business.




                                           - 14 -

								
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