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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q
- -----
X Quarterly Report Pursuant to Section 13 or 15(d) of
- ----- The Securities Exchange Act of 1934


For The Quarterly Period Ended
September 30, 2002 Commission File Number 01-12073


EQUITY INNS, INC.
(Exact Name of Registrant as Specified in its Charter)


Tennessee 62-1550848
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer)
Incorporation or Organization Identification No.)


7700 Wolf River Boulevard, Germantown, TN 38138
--------------------------------------------------
(Address of Principal Executive Office) (Zip Code)


(901) 754-7774
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)


Not Applicable
----------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)

Indicate by check mark whether the Registrant: (i) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

X Yes No
----- -----

The number of shares of the Registrant's Common Stock, $.01 par value,
outstanding on November 8, 2002 was 40,471,968.


1 of 29






EQUITY INNS, INC.

INDEX


PAGE

PART I. Financial Information

Item 1. Financial Statements


Condensed Consolidated Balance Sheets - September 30, 2002
(unaudited) and December 31, 2001 3

Condensed Consolidated Statements of Operations (unaudited) -
For the three and nine months ended September 30, 2002
and 2001 4

Condensed Consolidated Statements of Cash Flows (unaudited) -
For the nine months ended September 30, 2002 and 2001 5

Notes to Condensed Consolidated Financial Statements 7


Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13

Item 3. Quantitative and Qualitative Disclosures About
Market Risk 25

Item 4. Controls and Procedures 25


PART II. Other Information

Item 6. Exhibits and Reports on Form 8-K 26


2





PART I. Financial Information
Item 1. Financial Statements

EQUITY INNS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS





September 30, December 31,
2002 2001
------------ ------------
(unaudited)

ASSETS
Investment in hotel properties, net $730,617,922 $751,890,847
Cash and cash equivalents 7,140,432 4,358,787
Accounts receivable 5,612,734 2,534,208
Due from Lessees 162,265
Notes receivable 1,335,025 738,911
Deferred expenses, net 9,266,676 10,819,599
Deferred tax asset 8,164,000 3,452,000
Deposits and other assets 6,902,040 4,122,657
------------ ------------

Total assets $769,038,829 $778,079,274
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Debt $346,890,175 $384,165,875
Accounts payable and accrued expenses 31,086,389 22,224,994
Distributions payable 6,505,105 1,088,542
Interest rate swap 2,668,395 2,922,625
Minority interest in Partnership 8,998,001 9,511,897
------------ ------------

Total liabilities 396,148,065 419,913,933
------------ ------------

Commitments and contingencies

Shareholders' equity:

Preferred Stock, $.01 par value, 10,000,000 shares
authorized, 2,750,000 shares issued and outstanding 68,750,000 68,750,000
Common Stock, $.01 par value, 100,000,000
shares authorized, 41,217,386 and 37,591,622
shares issued and outstanding 412,174 375,916
Additional paid-in capital 445,773,189 418,351,351
Treasury stock, at cost, 747,600 shares (5,173,110) (5,173,110)
Unearned directors' and officers' compensation (690,085) (1,152,730)
Distributions in excess of net earnings (133,513,009) (120,063,461)
Accumulated other comprehensive income:
Unrealized loss on interest rate swap (2,668,395) (2,922,625)
------------ ------------

Total shareholders' equity 372,890,764 358,165,341
------------ ------------

Total liabilities and shareholders' equity $769,038,829 $778,079,274
============ ============



The accompanying notes are an integral
part of these condensed consolidated financial statements.

3





EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)




For the Three Months Ended For the Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
2002 2001 2002 2001
----------- ----------- ------------ ------------

Revenue
Hotel revenues $64,803,615 $53,005,229 $185,020,095 $155,548,490
Percentage lease revenues 5,471,566 16,927,028
Other income 246,325 469,234 753,539 1,605,451
----------- ----------- ------------ ------------
Total revenue 65,049,940 58,946,029 185,773,634 174,080,969
----------- ----------- ------------- ------------

Expenses
Hotel operating expenses 39,284,780 31,850,503 112,946,256 93,636,702
Real estate and personal property taxes 3,396,129 3,397,810 10,332,905 9,904,547
Depreciation and amortization 10,344,669 10,416,102 31,018,093 30,438,306
Amortization of loan costs 511,035 475,275 1,533,105 1,414,625
Interest 7,219,209 7,705,185 21,896,707 23,435,791
General and administrative expenses:
Stock-based or non-cash
compensation 173,438 243,327 517,674 731,232
Other general and administrative
expenses 1,439,213 1,338,832 4,263,790 3,717,874
Lease expense 431,395 216,848 1,091,679 852,172
----------- ----------- ------------ ------------
Total expenses 62,799,868 55,643,882 183,600,209 164,131,249
----------- ----------- ------------ ------------

Income before minority interest
and income taxes 2,250,072 3,302,147 2,173,425 9,949,720

Minority interest 63,798 83,829 58,776 235,159
----------- ----------- ------------ ------------

Income before income taxes 2,186,274 3,218,318 2,114,649 9,714,561

Income tax benefit 1,537,000 990,000 4,712,000 2,380,000
----------- ----------- ------------ ------------

Net income 3,723,274 4,208,318 6,826,649 12,094,561

Preferred stock dividends 1,632,813 1,632,813 4,898,439 4,898,439
----------- ----------- ------------ ------------

Net income applicable to
common shareholders $ 2,090,461 $ 2,575,505 $ 1,928,210 $ 7,196,122
=========== =========== ============ ============

Net income per common share -
basic and diluted $ .05 $ .07 $ .05 $ .20
=========== =========== ============ ============

Weighted average number of common
shares and units outstanding - diluted 41,666,057 38,039,992 40,540,551 38,034,295
=========== =========== ============ ============



The accompanying notes are an integral
part of these condensed consolidated financial statements.

4







EQUITY INNS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)



For the Nine Months Ended
September 30,
--------------------------------
2002 2001
----------- -----------

Cash flows from operating activities:
Net income $ 6,826,649 $12,094,561
Adjustments to net income provided by operating activities:
Depreciation and amortization 31,018,093 30,438,306
Amortization of loan costs 1,533,105 1,414,625
Amortization of unearned directors' and officers' compensation 448,065 673,857
Directors' stock-based compensation 68,351 57,374
Income tax benefit (4,712,000) (2,380,000)
Minority interest 58,776 235,159
Provision for doubtful accounts 25,000
Changes in assets and liabilities:
Accounts receivable (3,103,526) (4,052,212)
Due from Lessees 162,265 4,787,477
Notes receivable (596,114) (40,577)
Deposits and other assets (2,779,383) 1,203,648
Accounts payable and accrued expenses 5,203,674 11,924,662
Deferred lease revenue 2,806,696
----------- -----------
Net cash provided by operating activities 34,152,955 59,163,576
----------- -----------

Cash flows from investing activities:
Improvements and additions to hotel properties (5,483,646) (16,692,497)
Cash paid for franchise applications (116,601)
Proceeds from sale of hotel properties 851,000
----------- -----------
Net cash used in investing activities (5,600,247) (15,841,497)
----------- -----------

Cash flows from financing activities:
Gross proceeds from public offering of common stock 28,520,000
Payment of offering expenses (1,575,807)
Distributions paid (15,314,453) (33,407,101)
Cash paid for loan costs (125,103) (78,598)
Proceeds from borrowings 16,639,907 29,127,702
Payments on debt (53,915,607) (35,641,299)
----------- -----------
Net cash used in financing activities (25,771,063) (39,999,296)
----------- -----------

Net increase in cash 2,781,645 3,322,783
Cash and cash equivalents at beginning of period 4,358,787 793,127
---------- -----------

Cash and cash equivalents at end of period $ 7,140,432 $ 4,115,910
=========== ===========






The accompanying notes are an integral
part of these condensed consolidated financial
statements.

5





Supplemental disclosure of noncash investing and financing activities:

During January 2002, the Company issued to certain officers 51,704 shares of
common stock at $6.62 per share under the 1994 Stock Incentive Plan (the "1994
Plan") in lieu of cash as a performance bonus.

During the nine months ended September 30, 2002, the Company recorded $4 million
of investment in hotel properties and a liability related to the purchase of a
hotel property.

During the nine months ended September 30, 2002, 2,566 units of limited
partnership interest in the partnership ("Units") were redeemed for an identical
number of shares of common stock.

Additionally, during the nine months ended September 30, 2002, the Company
issued 2,264 shares of common stock at $6.62 per share, 875 shares of common
stock at $8.19 per share, 2,028 shares of common stock at $8.00 per share, 298
shares of common stock at $7.30 per share, 640 shares of common stock at $7.77
per share, 1,860 share of common stock at $8.05 per share, 89 shares of common
stock at $6.99 per share, 600 shares of common stock at $6.23, and 1,812 share
of common stock at $6.20 per share to its independent directors under the
Company's Directors Stock Incentive Plan (the "Directors Plan") in lieu of cash
compensation.

At September 30, 2002, $6,505,105 in distributions to common and preferred
shareholders and limited partners had been declared but not paid. The
distributions to preferred shareholders were paid on October 31, and the
distributions to common shareholders and limited partners were paid on November
1, 2002.

During January 2001, the Company issued to certain officers 39,722 shares of
common stock at $6.19 per share under the 1994 Plan in lieu of cash as a
performance bonus; and 31,820 shares of restricted common stock, valued at $6.19
per share, with restriction periods tied to employment ranging from three to
five years.

During the nine months ended September 30, 2001, 11,421 Units were redeemed for
an identical number of shares of common stock.

During the nine months ended September 30, 2001, the Company issued 2,420 shares
of common stock at $6.19 per share, 456 shares of common stock at $8.20 per
share, 1,912 shares of common stock at $7.83 per share, 512 shares of common
stock at $9.72 per share, 1,528 shares of common stock at $9.80 per share and
408 shares of common stock at $9.15 per share to its independent directors under
the Directors Plan in lieu of cash compensation.

At September 30, 2001, $9,509,977 in distributions to shareholders and limited
partners had been declared but not paid. The distributions were paid on November
1, 2001. At December 31, 2000, $9,490,283 in distributions to shareholders and
limited partners had been declared but not paid.

















The accompanying notes are an integral
part of these condensed consolidated financial statements.

6





EQUITY INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
-----------------------

1. Organization and Basis of Presentation

Equity Inns, Inc. (the "Company") was incorporated on November 24, 1993.
The Company is a self-administered real estate investment trust ("REIT")
for federal income tax purposes. The Company, through its wholly-owned
subsidiary, Equity Inns Trust (the "Trust"), is the sole general partner
of Equity Inns Partnership, L.P. (the "Partnership") and at September 30,
2002 owned an approximate 97.1% interest in the Partnership. The Company
was formed to acquire equity interests in hotel properties and at
September 30, 2002 owned, through the Partnership or its affiliates, 96
hotel properties with a total of 12,284 rooms in 34 states (the
"Hotels"). All 96 Hotels were leased to taxable REIT subsidiaries of the
Company (the "TRS Lessees").

The REIT Modernization Act of 1999 (the "RMA") amended the tax laws to
permit REITs, effective January 1, 2001, to lease hotels to a subsidiary
that qualifies as a taxable REIT subsidiary ("TRS"). Accordingly, the
Partnership's operating leases with subsidiaries of Interstate Hotels
Corporation ("Interstate") were terminated on January 1, 2001. Effective
January 1, 2001, the TRS Lessees, which have elected to be treated as TRS
entities for federal income tax purposes entered into leases for 77 hotel
properties with the Partnership or its affiliates, with terms
substantially identical to those of the prior leases with Interstate. On
January 1, 2002, the Partnership's operating leases with wholly-owned
subsidiaries (collectively, the "Prime Lessee") of Prime Hospitality
Corporation ("Prime") were terminated. Effective January 1, 2002, the TRS
Lessees entered into leases with the Partnership or its affiliates for 19
hotel properties, with terms substantially identical to those of the
prior leases with the Prime Lessee. Effective January 1, 2001, the rents
generated by the TRS Lessees are eliminated in consolidation. As a result
of these transactions, the Company's operating results reflect
property-level revenues and expenses rather than rental income from
third-party lessees with respect to all Hotels owned at January 1, 2002.
Therefore, the Company's consolidated results of operations with respect
to its 19 hotel properties previously leased to the Prime Lessee, from
the date of the aforementioned transactions, are not comparable to 2001
results.

Under the RMA, the TRS Lessees are required to enter into management
agreements with eligible independent contractors to manage the Hotels. On
January 1, 2001, the TRS Lessees entered into new management agreements
for 77 hotel properties as follows: Promus Hotels, Inc. ("Promus") for 20
Hotels; Crestline Hotels & Resorts, Inc. ("Crestline") for two Hotels;
and Crossroads Hospitality Company, L.L.C., an affiliate of Interstate
Hotels and Resorts ("CHC") for 55 Hotels. On January 1, 2002, the TRS
Lessees entered into new management agreements for the 19 AmeriSuites
Hotels with Prime's subsidiaries and one of the TRS Lessees also entered
into a new management agreement with Waterford Hotel Group, Inc.
("Waterford") for the Company's hotel in Burlington, Vermont.



7




EQUITY INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(unaudited)
-----------------------


1. Organization and Basis of Presentation, Continued

The management agreements with Prime's subsidiaries are structured to
guarantee the Company minimum net operating income at each of the 19
AmeriSuites hotels. In addition, the management agreements specify a net
operating income threshold for each of the 19 AmeriSuites hotels. As the
manager, the Prime subsidiaries can earn 25% of net operating income
above the threshold, to a maximum of 6.5% of gross revenues as their
management fee. If net operating income exceeds the level to require the
full 6.5% of gross revenue, the Prime subsidiaries may earn an additional
fee of 10% on any remaining net operating income. If a hotel fails to
generate net operating income sufficient to reach the threshold, Prime's
subsidiaries are required to contribute 25% of the shortfall in net
operating income to the Company. Management records such shortfall
contributions as revenue when all contingencies related to such amounts
have been resolved. The result of this policy is that shortfall
contributions, if any, are recorded annually by the Company in the fourth
quarter.

The TRS Lessees lease the Hotels from the Partnership and its affiliates
pursuant to leases (the "Percentage Leases") under which the rent due
under the Percentage Leases is the greater of base rent or percentage
rent, as defined in the Percentage Leases. Percentage rent varies by
lease and is calculated by multiplying fixed percentages by the total
amounts of room revenue and food and beverage revenue over specified
threshold amounts.

On March 28, 2002, the Company sold 3,565,000 shares of its common stock,
$.01 par value ("Common Stock") through an underwritten public offering.
The offering price was $8.00 per share, resulting in gross proceeds of
$28,520,000. The Company received approximately $27,000,000 after the
deduction of underwriter's discounts and offering expenses.

These unaudited condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC") and should be read in conjunction with
the financial statements and notes thereto of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31,
2001. The accompanying unaudited condensed consolidated financial
statements reflect, in the opinion of the Company's management, all
adjustments necessary for a fair presentation of the interim financial
statements. All such adjustments are of a normal and recurring nature.


8




EQUITY INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(unaudited)
-----------------------


2. Summary of Significant Accounting Policies

Concentrations of Credit Risk

The Company maintains cash balances with financial institutions with high
ratings. The Company has not experienced any losses with respect to bank
balances in excess of government-provided insurance.

Income Taxes

The provision for income taxes includes deferred income taxes which arise
from temporary differences between the tax basis of the TRS Lessees'
assets and liabilities and their reported amounts in the financial
statements. Deferred taxes are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to reverse.
Management establishes a valuation allowance when it believes it is
necessary to reduce the deferred tax asset to an amount that will more
likely than not be realized.

3. Net Income Per Common Share

A reconciliation of the numerator and denominator used in the basic
earnings per share computation to the numerator and denominator used in
the diluted earnings per share computation is presented below for the
three months ended September 30, 2002 and 2001.




For the Three Months Ended September 30,
2002 2001
------------------------------------------ --------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------

Net income applicable
to common
shareholders $2,090,461 40,469,973 $.05 $2,575,505 36,840,694 $.07
Dilutive effect of
potential conversion
of partnership units
and elimination of
minority interest 63,798 1,196,084 83,829 1,198,650
Dilutive effect of stock
options outstanding
using the treasury
stock method 648
---------- ---------- ----- ---------- ---------- ----

Net income applicable to
common shareholders-
diluted $2,154,259 41,666,057 $.05 $2,659,334 38,039,992 $.07
========== ========== ==== ========== ========== ====


9




EQUITY INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(unaudited)
-----------------------


3. Net Income Per Common Share, Continued





For the Nine Months Ended September 30,
2002 2001
----------------------------------------- --------------------------------------


Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------

Net income applicable
to common
shareholders $1,928,210 39,343,470 $.05 $7,196,122 36,830,108 $.20
Dilutive effect of
potential conversion
of partnership units
and elimination of
minority interest 58,776 1,197,081 235,159 1,203,555
Dilutive effect of stock
options outstanding
using the treasury
stock method 632
---------- ---------- ---- ---------- ---------- ----

Net income applicable
to common shareholders-
diluted $1,986,986 40,540,551 $.05 $7,431,281 38,034,295 $.20
========== ========== ==== ========== ========== ====


4. Declaration of Dividends

Through September 19, 2002, the Board declared a total of $.38 in
dividends on each share of common stock outstanding to shareholders of
record. The third quarter dividend of $.13 was paid on November 1, 2002.

5. Debt

The following details the Company's debt outstanding at September 30,
2002:



Interest Collateral
Rate Maturity # of Hotels
-------------- -------- -----------

Commercial Mortgage Bonds
Class A $ 8,944,279 6.83% Fixed Nov 2006
Class B 50,600,000 7.37% Fixed Dec 2015
Class C 10,000,000 7.58% Fixed Feb 2017
------------
69,544,279 21

Line of Credit 68,500,000 LIBOR plus Variable Oct 2003 28
Percentage

Mortgage 92,962,455 8.37% Fixed July 2009 19
Mortgage 68,130,227 8.25% Fixed Nov 2010 16
Mortgage 35,218,222 8.25% Fixed Nov 2010 8
Mortgage 3,013,863 8.50% Fixed Nov 2005 1
Mortgage 5,716,849 10.00% Fixed Sept 2005 1
Mortgage 3,804,280 8.57% Fixed Nov 2016 1
------------

$346,890,175
============



10




EQUITY INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(unaudited)
-----------------------


5. Debt, Continued

The Company's $125 million secured line of credit (the "Line of Credit")
bears interest at a variable rate of LIBOR plus 1.5%, 1.75%, 2.0%, 2.25%,
2.5%, 2.75% or 3.0% as determined by the Company's percentage of total
debt to earnings before interest, taxes, depreciation and amortization
("EBITDA"), as defined in the loan agreement for the Line of Credit (the
"Percentage"). The Percentage is reviewed quarterly and the interest rate
is adjusted as necessary. At September 30, 2002, the interest rate on the
Line of Credit was LIBOR (1.81% at September 30, 2002) plus 2.75%. An
annual fee of 0.55%, as determined by the Company's ratio of total
indebtedness to EBITDA, is paid quarterly on the unused portion of the
Line of Credit.

The Line of Credit contains various covenants including the maintenance
of a minimum net worth, minimum debt coverage and interest coverage
ratios, and total indebtedness limitations. On December 4, 2001, the
Company entered into an amendment of its Line of Credit. The amendment
revised certain covenant levels to provide greater financial and
operating flexibility through December 31, 2002. At September 30, 2002,
the Company was in compliance with all covenants contained in the Line of
Credit.

6. Interest Rate Swap Contract

Effective January 16, 2001, the Company entered into an interest rate
swap agreement with a financial institution on a notional principal
amount of $50 million. The agreement effectively fixes the interest rate
on the first $50 million of floating rate debt outstanding under the Line
of Credit at a rate of 6.4275% plus the Percentage. The change in the
fair value of this contract from inception to September 30, 2002, has
been reported in other comprehensive income.

7. Comprehensive Income

SFAS No. 130, "Reporting Comprehensive Income", requires the disclosure
of the components included in comprehensive income (loss). For the nine
months ended September 30, 2002, the Company's comprehensive income was
$7,080,879, comprised of a net income of $6,826,649 and the change in the
unrealized loss on its interest rate swap of $254,230.



11





EQUITY INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(unaudited)
-----------------------


8. Income Taxes

The Company's income tax benefit related to its TRS Lessee subsidiaries
consists of the following for the nine months ended September 30:

2002 2001
----------- -----------

Deferred:
Federal $(4,216,000) $(2,130,000)
State (496,000) (250,000)
----------- -----------

Total $(4,712,000) $(2,380,000)
=========== ===========

The TRS Lessees' net deferred tax asset of $8,164,000 is comprised of net
operating loss carry- forwards which expire beginning on December 31,
2021. The Company believes that the TRS Lessees will generate sufficient
future taxable income to realize this deferred tax asset in full.
Accordingly, no valuation allowance has been recorded at September 30,
2002.

9. Subsequent Events

Effective as of October 1, 2002, the Company entered into management
agreements with Waterford as to two of the Company's Residence Inn
hotels, located in Princeton, New Jersey and Tinton Falls, New Jersey,
which were previously managed by CHC.


12





Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations


BACKGROUND

Equity Inns, Inc. (the "Company") commenced operations on March 1, 1994 upon
completion of its initial public offering and the simultaneous acquisition of
eight Hampton Inn hotels with 995 rooms. The following chart summarizes
information regarding the Company's hotels at September 30, 2002:




Number of Number of
Franchise Affiliation Hotel Properties Rooms/Suites
--------------------- ---------------- ------------

Premium Limited Service Hotels:
Hampton Inn 48 6,030
Hampton Inn & Suites 1 125
Holiday Inn Express 1 101
Comfort Inn 2 245
-- ------
Sub-total 52 6,501
-- ------

All-Suite Hotels:
AmeriSuites 19 2,403

Premium Extended Stay Hotels:
Residence Inn 11 1,351
Homewood Suites 9 1,295
-- ------
Sub-total 20 2,646
-- ------

Full Service Hotels:
Holiday Inn 4 557
Comfort Inn 1 177
-- ------
Sub-total 5 734
-- ------

Total 96 12,284
== ======


Equity Inns Partnership, L.P., (the "Partnership") and its affiliates lease all
96 of the Company's hotels (the "Hotels") to wholly-owned taxable REIT
subsidiaries of the Company (the "TRS Lessees"). The Company, through its
wholly-owned subsidiary, Equity Inns Trust (the "Trust"), is the general partner
of the Partnership and at September 30, 2002 owned an approximate 97.1% interest
in the Partnership.




13





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


RESULTS OF OPERATIONS

During 2001, the Company's revenues primarily represented rental income from 19
hotels leased by subsidiaries (collectively, the "Prime Lessee") of Prime
Hospitality Corporation ("Prime") and hotel level revenues from 77 hotels leased
to the TRS Lessees and operated under management contracts. Upon the termination
of the percentage leases (the "Percentage Leases") with Prime, beginning in
January 2002, all of the Hotels were leased to the TRS Lessees and operated
under management contracts. Effective January 1, 2002, the Company's
consolidated results of operations reflect hotel- level revenues and operating
costs and expenses for all 96 Hotels and the TRS Lessees lease all 96 Hotels
from the Partnership and its affiliates under Percentage Leases. In order to
show comparability of the Company's results of operations, in addition to the
discussion of the historical results, we have also presented an unaudited recap
of the three and nine month periods ended September 30, 2002 and 2001.

Because of the significant changes to our corporate structure as a result of the
termination of the Prime leases effective January 1, 2002, management believes
that a discussion of our pro forma results for the 19 hotels which were subject
to third-party leases in 2001 is meaningful and relevant to an investor's
understanding of the Company's present and future operations. The pro forma
adjustments required to reflect the termination of the Prime leases are to
record hotel-level revenues and expenses and reduce historical rental income
with respect to the 19 properties.

The unaudited pro forma financial information does not purport to represent what
the Company's results of operations or financial condition would actually have
been if the transactions had in fact occurred at the beginning of 2001 or to
project our results of operations or financial condition for any future period.
The unaudited pro forma financial information is based upon available
information and upon assumptions and estimates that management believes are
reasonable under the circumstances.

Three Months Ended September 30, 2002 and 2001

Effective January 1, 2002, the Company leased all 96 Hotels to the TRS Lessees.
The rents generated by the Percentage Leases with the TRS Lessees have been
eliminated in consolidation, while the actual operating results of the Hotels
leased to the TRS Lessees have been included in the Company's financial
statements.

14





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued



RESULTS OF OPERATIONS, Continued

The following tables separately set forth a comparison of all the Hotels leased
to the TRS Lessees.




For the Three Months Ended
-------------------------------------------------------------------------------------------
Pro Forma Pro Forma
September 30, September 30, September 30, September 30, September 30, September 30,
2002 2001 2002 2001 2002 2001
------------- ------------- ------------- ------------- ------------- -------------
77 Hotels 19 Hotels (AmeriSuites) All Hotels
--------------------------- ----------------------------- -----------------------------


Hotel revenue $53,486,344 $53,005,229 $11,317,271 $12,004,169 $64,803,615 $65,009,398
Hotel operating
expenses 32,092,944 31,143,740 6,274,139 6,848,401 38,367,083 37,992,141
Management fees 1,156,414 706,763 (238,717) (438,154) 917,697 268,609
----------- ----------- ------------ ----------- ----------- -----------

Net operating
income $20,236,986 $21,154,726 $ 5,281,849 $ 5,593,922 $25,518,835 $26,748,648
=========== =========== =========== =========== =========== ===========


Pro forma numbers presented represent the Company's historical revenues and
expenses, adjusted as described by pro forma changes below.

Pro forma adjustments:

(a) Total revenue adjustments consist of the changes in historical revenue from
the elimination of historical percentage lease revenue and the addition of
historical hotel operating revenues.

(b) Total operating expense adjustments consist of: (i) the changes in
historical operating expense from the addition of historical hotel operating
expenses and the elimination of percentage lease expense for the 19 AmeriSuites
hotels; and (ii) the adjustments to record management fees at their new
contractual rates.

The decrease in pro forma hotel revenues is due primarily to a decrease in
telephone revenue of approximately $300,000, offset by a .2% increase in revenue
per available room ("REVPAR") for the Hotels owned by the Company throughout
both periods from $54.81 to $54.90.

On a historical basis, total revenue and total expenses increased $6,103,911 and
$7,155,986, respectively in 2002 over 2001, primarily as a result of reporting
hotel operating revenues and expenses in 2002 compared to reporting a
combination of hotel operating revenues and percentage lease revenues in 2001,
as a result of the aforementioned termination of the Prime leases on January 1,
2002. Hotel operating expenses, on a pro forma basis, increased by $374,942 due
primarily to increases in insurance premiums.


15





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


RESULTS OF OPERATIONS, Continued

Management fees, on a pro forma basis, increased by $649,088 due primarily to
increases in base management fees over the comparable period in 2001.

Other income decreased by $222,909, as compared to the same period of the prior
year, due primarily to (1) a decrease in the income received from the company
providing certain management services to the Company's joint venture partner,
GHII, LLC, and (2) a decrease in interest income due to a decline in rates
earned on temporary investments.

Real estate and personal property taxes remained relatively flat with the
comparable period in 2001.

Depreciation and amortization decreased slightly over the comparable period in
2001.

Interest expense decreased to $7.2 million from $7.7 million due primarily to a
decrease in average borrowings under the Company's line of credit from $377.6
million to $349.9 million.

General and administrative expenses increased by $30,492 from the comparable
period in 2001.

The income tax benefit for the three months ended September 30, 2002 and 2001
was generated by the net operating losses created by the TRS Lessees' operations
during each quarter.

Nine Months Ended September 30, 2002 and 2001

Effective January 1, 2002, the Company leased all 96 Hotels to the TRS Lessees.
The rents generated by the Percentage Leases with the TRS Lessees have been
eliminated in consolidation, while the actual operating results of the hotels
leased to the TRS Lessees have been included in the Company's financial
statements.



16





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


RESULTS OF OPERATIONS, Continued

The following tables separately set forth a comparison of all the Hotels leased
to the TRS Lessees.




For the Nine Months Ended
---------------------------------------------------------------------------------------------
Pro Forma Pro Forma
September 30, September 30, September 30, September 30, September 30, September 30,
2002 2001 2002 2001 2002 2001
------------- ------------- ------------- ------------- ------------ -------------
77 Hotels 19 Hotels (AmeriSuites) All Hotels
---------------------------- ---------------------------- -----------------------------

Hotel revenue $151,421,316 $155,548,490 $33,598,779 $36,935,824 $185,020,095 $192,484,314
Hotel operating
expenses 92,612,906 91,099,561 18,463,451 20,520,984 111,076,357 111,620,545
Management fees 3,742,307 2,537,141 (1,872,408) (1,519,518) 1,869,899 1,017,623
------------ ------------ ----------- ----------- ------------ ------------

Net operating
income $ 55,066,103 $ 61,911,788 $17,007,736 $17,934,358 $ 72,073,839 $ 79,846,146
============ ============ =========== ============ ============ ============


Pro forma numbers presented represent the Company's historical revenues and
expenses, adjusted as described by pro forma changes below.

Pro forma adjustments:

(a) Total revenue adjustments consist of the changes in historical revenue from
the elimination of historical percentage lease revenue and the addition of
historical hotel operating revenues.

(b) Total operating expense adjustments consist of: (i) the changes in
historical operating expense from the addition of historical hotel operating
expenses and the elimination of percentage lease expense for the 19 AmeriSuites
hotels; and (ii) the adjustments to record management fees at their new
contractual rates.

The decrease in pro forma hotel revenues is due primarily to a 3.4% decrease in
REVPAR for the Hotels owned by the Company throughout both periods from $54.60
to $52.75.

On a historical basis, total revenue and total expenses increased $11,692,665
and $19,468,960, respectively in 2002 over 2001, primarily as a result of
reporting hotel operating revenues and expenses in 2002, compared to reporting a
combination of hotel operating revenues and percentage lease revenues in 2001,
as a result of the aforementioned termination of the Prime leases on January 1,
2002. Hotel operating expenses, on a pro forma basis decreased by $544,188 due
primarily to a reduction in variable hotel expenses resulting from cost control
programs implemented by the Company's management companies, in response to the
weakened national economy and the dramatic national events that occurred on
September 11, 2001. These decreases have been offset, in part, by increases in
insurance premiums.

17





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


RESULTS OF OPERATIONS, Continued

Management fees, on a pro forma basis, increased by $852,276 due to increases in
base management fees over 2001.

Other income decreased by $851,912, as compared to the same period of the prior
year, due primarily to (1) a decrease in the income received from the company
providing certain management services to the Company's joint venture partner,
GHII, LLC, (2) a decrease in interest income due to a decline in rates earned on
temporary investments and a decrease in the amount of interest collected on
notes receivable, and (3) recognition in the prior period of income of
approximately $300,000 from the cancellation of certain hotel leases.

Real estate and personal property taxes increased by $428,358 from the
comparable period in 2001 due primarily to the completion of a successful appeal
in the second quarter of 2001 to the taxes due on the Company's Chicago Homewood
Suites hotel.

Depreciation and amortization increased over the comparable period in 2001 due
primarily to capitalized renovation costs at certain hotels.

Interest expense decreased to $21.9 million from $23.4 million due primarily to
a decrease in weighted average interest rates from 8.2% to 8.0% in 2002 and a
reduction in the average borrowings under the Company's line of credit from
$380.4 million to $364.2 million.

General and administrative expenses increased by $332,358 from the comparable
period in 2001.

The income tax benefit for the six months ended June 30, 2002 and 2001 was
generated by the net operating losses created by the TRS Lessees' operations
during each quarter.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal source of cash to meet its cash requirements, including
distributions to its shareholders, is its cash distributions from the
Partnership. The Partnership's, and therefore the Company's, principal source of
revenue is lease payments from the TRS Lessees, which are paid from the net
operating income of the hotels leased by the TRS Lessees. The Company's
liquidity, including its ability to make distributions to shareholders, is
dependent upon the cash flow from its hotels leased by the TRS Lessees.



18





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


LIQUIDITY AND CAPITAL RESOURCES, Continued

Cash and cash equivalents as of September 30, 2002 were $7,140,432, compared to
$4,358,787 at December 31, 2001. Additionally, all of the December 31, 2001
receivables due from the Prime Lessee were received prior to the filing of this
Quarterly Report on Form 10-Q. Net cash provided by operating activities for the
nine months ended September 30, 2002 was $34,152,955.

The Company intends to make additional investments in hotel properties over time
and may incur, or cause the Partnership to incur, indebtedness to make such
investments or to meet distribution requirements imposed on a REIT under the
Internal Revenue Code to the extent that working capital and cash flow from the
Company's investments are insufficient to make such distributions. The Company's
Board of Directors has adopted a debt limitation policy currently limiting
aggregate indebtedness to 45% of the Company's investment in hotel properties at
its cost. The Board of Directors can amend, modify or terminate the debt
limitation policy at any time, in its discretion, without shareholder approval.
The Company also may seek to sell selected hotels in its current portfolio.

On March 28, 2002, the Company sold 3,565,000 shares of common stock, $.01 par
value, through an underwritten public offering. The offering price was $8.00 per
share, resulting in gross proceeds of $28,520,000. The Company received
approximately $27,000,000 after the deduction of underwriter's discounts and
offering expenses. These proceeds were used to reduce the outstanding borrowings
under the Company's $125 million secured line of credit (the "Line of Credit").

At September 30, 2002, the Company had outstanding debt of approximately $346.9
million, including $68.5 million under its Line of Credit, leaving approximately
$50.9 million available for borrowings under the Line of Credit, after
consideration of outstanding letters of credit. The Company's consolidated
indebtedness was 37.4% of its investments in its hotels, at cost, at September
30, 2002.

The Line of Credit contains various covenants including the maintenance of a
minimum net worth, minimum debt coverage and interest coverage ratios, and total
indebtedness limitations. As a result of the events of September 11, 2001 and
the softening of the economic environment of the hospitality industry, the
Company has negotiated amendments to certain of its financial covenants
pertaining to the Line of Credit. At September 30, 2002, the Company was in
compliance with all covenants contained in the Line of Credit.

Effective January 16, 2001, the Company entered into an interest rate swap
agreement with a financial institution on a notional principal amount of $50
million. The agreement effectively fixes the interest rate on the first $50
million of floating rate debt at a rate of 6.4275%, plus the Percentage. The
swap agreement will expire in October 2003.


19





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


LIQUIDITY AND CAPITAL RESOURCES, Continued

During the nine months ended September 30, 2002, the Company invested
approximately $5.5 million to fund capital improvements to the Hotels, including
replacement of carpets, drapes, renovation of common areas and improvement of
hotel exteriors. In addition, the Company has committed to fund approximately
$4.3 million during the remainder of 2002 for capital improvements. The Company
intends to fund such improvements out of future cash from operations, present
cash balances and borrowings under its line of credit. Under certain of its loan
covenants, the Partnership is obligated to fund 4% of room revenues per quarter
on a cumulative basis, to a separate room renovation account for the ongoing
replacement or refurbishment of furniture, fixtures and equipment at the Hotels.

During the three months ended September 30, 2002, the Partnership declared
distributions in the aggregate of $5,416,563 to its partners, including the
Trust, of $.13 per unit of limited partnership interest ("Unit"), and the
Company declared distributions in the aggregate of $5,261,072, of $.13 per share
to its shareholders, with such distributions being paid on November 1, 2002.

The Company expects to meet its short-term liquidity requirements generally
through net cash provided by operations, existing cash balances and, if
necessary, short-term borrowing under the Line of Credit. The Company believes
that its net cash provided by operations will be adequate to fund both operating
requirements and payment of dividends to preferred and common shareholders that
are necessary to maintain the Company's REIT status based on current IRS
requirements.

The Company expects to meet its long-term liquidity requirements, such as
scheduled debt maturities and property acquisitions, through long-term secured
and unsecured borrowing, proceeds from the sale of certain of its hotel
properties, the issuance of additional equity securities of the Company, or, in
connection with acquisitions of hotel properties, issuance of Units. Under the
Partnership's agreement of limited partnership (the "Partnership Agreement"),
holders of Units have the right to require the Partnership to redeem their
Units. During the nine months ended September 30, 2002, 2,566 Units were
tendered for redemption. Under the Partnership Agreement, the Company has the
option to redeem Units tendered for redemption on a one-for-one basis for shares
of Common Stock or for an equivalent amount of cash. The Company anticipates
that it will continue to acquire any Units tendered for redemption in the
foreseeable future in exchange for shares of Common Stock and has agreed to
register such shares so as to be freely tradeable by the recipient.

FUNDS FROM OPERATIONS

Funds From Operations ("FFO") (as defined below) were $32,743,557 for the nine
months ended September 30, 2002, compared to $40,414,761 for the six months
ended September 30, 2001. The decrease is due primarily to a decrease in REVPAR
of 3.4% as compared to the same period last


20





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued

FUNDS FROM OPERATIONS, Continued

year, caused by the events of and stemming from September 11, 2001 and the
softening of the economic environment of the hospitality industry, reduced by
the income tax benefit attributable to the losses incurred by the TRS Lessees,
which are included in the Company's consolidated financial statements. The
Company considers FFO to be a key measure of a REIT's performance and believes
that FFO should be considered along with, but not as an alternative to, net
income and cash flows as a measure of the Company's operating performance and
liquidity.

Industry analysts generally consider FFO to be an appropriate measure of the
performance of an equity REIT. In accordance with the resolution adopted by the
Board of Governors of the National Association of Real Estate Investment Trusts
("NAREIT"), FFO represents net income (loss) (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from
sales of property, plus depreciation, and certain amortization. For the periods
presented, deferred lease revenue, depreciation and minority interest were the
only adjustments to net income for the determination of FFO. The Company's
computation of FFO may not be comparable to FFO reported by other REITs that do
not define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently from the Company. FFO should
not be considered an alternative to net income or other measurements under
generally accepted accounting principles as an indicator of operating
performance or to cash flows from operating, investing or financing activities
as a measure of liquidity. FFO does not reflect working capital changes, cash
expenditures for capital improvements or principal payments with respect to
indebtedness.

The following is a reconciliation of net income to Funds From Operations
(unaudited):




Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------

Net income $ 3,723,274 $ 4,208,318 $ 6,826,649 $12,094,561
Less:
Preferred stock dividends (1,632,813) (1,632,813) (4,898,439) (4,898,439)

Add:
Minority interest 63,798 83,829 58,776 235,159
Depreciation of buildings, furniture and
fixtures 10,257,495 10,328,928 30,756,571 30,176,784
Deferred lease revenue 370,725 2,806,696
----------- ----------- ----------- -----------


Funds From Operations $12,411,754 $13,358,987 $32,743,557 $40,414,761
=========== =========== =========== ===========

Weighted average number of outstanding shares
of Common Stock and Units of Partnership 41,666,057 38,039,992 40,540,551 38,034,295
=========== =========== =========== ===========



21





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


INFLATION

Operators of hotels, including any third-party managers retained by the TRS
Lessees, in general possess the ability to adjust room rates quickly. However,
competitive pressures, a slow economy and the continued effects of September 11,
2001 have limited and may in the future limit the ability of the third-party
managers retained by the TRS Lessees to raise room rates in response to
inflation.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's discussion and analysis of its financial condition and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
the Company's management to make estimates and judgments that affect the
reported amount of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities.

On an on-going basis, all estimates are evaluated by the Company's management,
including those related to bad debts, carrying value of investments in hotel
properties, income taxes, contingencies and litigation. All estimates are based
upon historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements:

o The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers and other borrowers to make
required payments. If the financial condition of its customers or other
borrowers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required.

o The Company records an impairment charge when it believes an investment in
hotels has been impaired, such that future undiscounted cash flows would not
recover the book basis of the investment in the hotel property. Future
adverse changes in market conditions or poor operating results of underlying
investments could result in losses or an inability to recover the carrying
value of the investments that may not be reflected in an investment's
carrying value, thereby possibly requiring an impairment charge in the
future.


22





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


CRITICAL ACCOUNTING POLICIES AND ESTIMATES, Continued

o The Company records a valuation allowance to reduce its deferred tax assets
to the amount that is more likely than not to be realized. The Company's
management has considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for a valuation
allowance. If management determines that the Company will not be able to
realize all or part of its net deferred tax asset in the future, an
adjustment to the deferred tax asset will be charged to income in the
periods such determination was made.

o The Company has obtained property and casualty insurance with loss limits
and coverages deemed reasonable by management (and as may be required by the
Company's lenders and franchisors). There can be no assurance that the
insurance obtained will fully protect the Company against insurable losses
(i.e., our losses may exceed our coverage limits), that the Company will not
incur losses from risks that are not insurable (i.e., losses from war, acts
of terrorism, riots, etc.) or that are not economically insurable, or that
current coverages will continue to be available at reasonable rates.
Moreover, we have been advised by our carriers that terrorism is now an
expressly excluded risk under our current "all-risk" property coverages,
which we believe previously would have insured our property against certain
damages from acts of terrorism. Several of our lenders have required, and
other of our lenders may require, that we carry terrorism-specific
insurance. We may not be able to obtain terrorism insurance, to obtain it
with policy limits and terms (including deductibles) that satisfy us or our
lenders, or to obtain it at an economically justifiable price. If we cannot
satisfy a lender's insurance requirements in any respect, including but not
limited to terrorism coverage, the lender could declare a default. Depending
on our access to capital, liquidity and the value of the properties securing
the affected loan in relation to the balance of the loan, a default could
have a material adverse affect on our results of operations and ability to
obtain future financing. Likewise, one or more large uninsured or
underinsured losses could have a material adverse affect on us. We currently
believe, given our discussions with participants in the insurance markets
(which are in flux and subject to frequent change), and the nature, physical
characteristics and locations of our assets, (a) that we have customary and
adequate coverages under our current insurance policies and (b) while there
are no assurances that we will be successful in renewing our insurance
policies and obtaining terrorism insurance on reasonably satisfactory terms.

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act"), including without
limitation, statements containing the words "believes", "estimates", "projects",
"anticipates", "expects" and words of similar import. Such forward-looking

23





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


FORWARD-LOOKING STATEMENTS, Continued

statements relate to future events and the future financial performance of the
Company, and involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from the results or achievement expressed or implied
by such forward-looking statements. Such risks and uncertainties include, but
are not limited to, the following: the ability of the Company to cope with
domestic economic and political disruption and Federal and state governmental
regulations or war, terrorism, states of emergency or similar activities
resulting from the terrorist attacks occurring on September 11, 2001; the
ability of the Company to successfully implement its operating strategy; changes
in economic cycles; competition from other hospitality companies; and changes in
the laws and government regulations applicable to the Company. Risk factors
relating to such forward-looking statements are contained from time to time in
the Company's filings with the SEC, including the Company's Current Report on
Form 8-K dated March 25, 2002 filed under the Exchange Act. The Company is not
obligated to update any such forward-looking statements or risk factors.


SEASONALITY

The hotel industry is seasonal in nature. The operations of the Company's hotels
historically reflect higher occupancy rates and average daily rate during the
second and third quarters. This seasonality can be expected to cause
fluctuations in the Company's quarterly operating income. To the extent that
cash flow from the hotels for a quarter is insufficient to fund all of the
distributions for such quarter, the Company may fund seasonal-related shortfalls
with available cash or borrowing under the Line of Credit.



24






Item 3. Quantitative and Qualitative Disclosures About Market Risk


The Company is exposed to certain financial market risks, the most predominant
of which is the fluctuation in interest rates. At September 30, 2002, the
Company's exposure to market risk for a change in interest rates is related
solely to its debt outstanding under the Line of Credit. Total debt outstanding
under the Line of Credit totaled $68.5 million at September 30, 2002. On January
16, 2001, the Company entered into an interest rate swap agreement with a
financial institution on a notional principal amount of $50 million. The
agreement effectively fixes the interest rate on the first $50 million of
floating rate debt at a rate of 6.4275% plus 1.5%, 1.75%, 2.0%, 2.25%, 2.5%,
2.75% or 3.0% as determined by the Percentage. The swap agreement will expire in
October 2003. Thus, at September 30, 2002, the Company had $18.5 million of
variable rate debt outstanding under the Line of Credit that was exposed to
fluctuations in the market rate of interest.

The Company's operating results are affected by changes in interest rates,
primarily as a result of its borrowings under the Line of Credit. If interest
rates increased by 25 basis points, the Company's interest expense for the nine
months ended September 30, 2002 would have increased by approximately $34,688,
based on balances outstanding during the period ended September 30, 2002.

Item 4. Controls and Procedures

The Company has established internal controls and procedures as defined in
Exchange Act Rules 13a- 14(c) and 15d-14(c). As of September 26, 2002, the
Company completed an evaluation of the effectiveness of the design and operation
of the Company's controls and procedures pursuant to such Exchange Act rules
under the supervision of and with the participation of the Company's management,
including Phillip H. McNeill, Sr., the Company's chief executive officer
("CEO"), and Donald H. Dempsey, the Company's chief financial officer ("CFO").
Based on that evaluation, the CEO and the CFO have concluded that the Company's
controls and procedures were effective as of September 26, 2002.

No significant changes in the Company's internal controls or in other factors
that could significantly affect these controls after September 26, 2002 have
occurred, and no corrective actions with regards to significant deficiencies and
material weaknesses were required.

25






PART II - OTHER INFORMATION



Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits -- No exhibits are filed with this Quarterly Report on Form
10-Q.

(b) Reports on Form 8-K -- During the period covered by this Quarterly
Report on Form 10-Q, the Company filed the following two (2) Current
Reports on Form 8-K:

(1) Current Report on Form 8-K dated August 8, 2002 and filed with
the SEC on August 9, 2002, reporting the issuance of a press
release reporting the Company's second quarter 2002 operating
results (no financial information required); and

(2) Current Report on Form 8-K dated August 12, 2002 and filed with
the SEC on August 12, 2002, reporting the certifications
required under Section 906 of the Sarbanes-Oxley Act of 2002 by
the Company's chief executive officer and chief financial
officer (no financial information required).






26





SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Equity Inns, Inc.



November 13, 2002 By: /s/Donald H. Dempsey
- ----------------- ------------------------------------------------
Date Donald H. Dempsey
Executive Vice President, Secretary, Treasurer,
and Chief Financial Officer (Principal Financial
and Accounting Officer)


CERTIFICATIONS

(a) CEO Certification

I, Phillip H. McNeill, Sr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Equity Inns, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report.

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

27





(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 13, 2002


/s/ Phillip H. McNeill, Sr.
---------------------------
Phillip H. McNeill, Sr.
Chairman of the Board and
Chief Executive Officer

(b) CFO Certification

I, Donald H. Dempsey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Equity Inns, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report.

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

28




4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 13, 2002


/s/Donald H. Dempsey
---------------------------
Donald H. Dempsey
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer


29