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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

      þ     Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

                    For the Fiscal Year Ended December 31, 2004

OR

      o     Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

                    For the Transition Period from  to                     

Commission file number: 0-15097

WESTIN HOTELS LIMITED PARTNERSHIP

(Exact name of Registrant as specified in its charters)

Securities Registered Pursuant to Section 12(b) of the Act:     None

Securities Registered Pursuant to Section 12(g) of the Act:

Units of limited partnership interests

(Title of Class)

      There is no public market for Units of limited partnership interests in the Westin Hotels Limited Partnership.

      Indicate by check mark whether the Registrant (1) 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. Yes þ       No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

      Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o       No þ

      Indicate the number of shares (units) outstanding of each of the issuer’s classes of common stock (units), as of the latest practicable date (applicable only to corporate issuers).

      135,600 limited partnership units issued and outstanding as of March 23, 2005.

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TABLE OF CONTENTS

PART I

Forward-Looking Statements

      Certain statements contained in this report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this report, including, without limitation, the sections of Item 1, captioned “Business” and Item 7, captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Such forward-looking statements may include statements regarding the intent, belief or current expectations of Westin Hotels Limited Partnership (the “Partnership”) or The Westin Chicago Limited Partnership (the “Chicago Partnership”) or their respective general partners and their officers or directors with respect to the matters discussed in this report. All such forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those projected in the forward-looking statements, including, without limitation, the risks and uncertainties set forth below. The Partnership undertakes no obligation to publicly update or revise any forward-looking statements to reflect current or future events or circumstances.

Where you can find more information

      We file annual, quarterly and special reports and other information with the Securities and Exchange Commission (the “SEC”). Our SEC filings are available to the public over the Internet at the SEC’s web site at http://www.sec.gov. Our SEC filings are also available at http://www.starwood.com/corporate/investor-relations.html as soon as reasonably practicable after they are filed or furnished to the SEC. You may also read and copy any document we file with the SEC at its public reference rooms in Washington, D.C. Please call the SEC at (800) SEC-0330 for further information on the public reference rooms. You may also obtain a copy of our filings free of charge by calling our investor relations manager, Phoenix American Financial Services, Inc. (“Phoenix American”) at 1-800-323-5888.

Risks Relating to Satisfaction of Liabilities

      As of March 1, 2005, the Partnership maintained cash reserves of approximately $12 million to satisfy liabilities of the Partnership and its subsidiaries, including contingent liabilities. The Partnership’s contingent liabilities include possible claims for indemnification that it might be obligated to fund under the Purchase and Sale Agreement (the “Purchase Agreement”), dated as of October 18, 2004, between the Chicago Partnership and JER Partners Acquisition III, LLC (“JER Acquisitions”) pursuant to which JER Acquisitions acquired The Westin Michigan Avenue Chicago (the “Michigan Avenue” or the “Hotel”). In addition, the Partnership and Westin Realty Corp., the general partner of the Partnership (the “General Partner”), are currently involved in an arbitration proceeding with Kalmia Investors LLC (“Kalmia”), a limited partner of the Partnership that owns approximately 28.4% of the limited partnership units, which arbitration is being funded out of the Partnership’s cash reserves. At this time, the Partnership is unable to estimate the amount of funds, if any, that will be available for distribution to limited partners after satisfaction of the Partnership’s liabilities and the timing of any such distribution.

Risks Relating to Timing of Dissolution and Liquidation of Partnership

      The General Partner is unable to determine when it will dissolve and liquidate the Partnership because the Partnership has several material liabilities that the General Partner is not able to reasonably estimate. The process to dissolve and liquidate the Partnership will be deferred until the General Partner is able to satisfy all known and quantifiable liabilities and to make a reasonable estimate of the maximum amount that could be owed with respect to unquantifiable liabilities of the Partnership. It is possible that the process to dissolve and liquidate the Partnership could be delayed for an extended period because of the complexity involved in estimating its liabilities. Limited partners will receive Schedule K-1s from the Partnership through the calendar year in which the Partnership is dissolved and liquidated.

General Development of Business

      The Partnership and its primary subsidiary limited partnership, the Chicago Partnership, were formed on April 25, 1986. The Chicago Partnership owned and operated the Michigan Avenue through January 26, 2005 when the Michigan Avenue was sold to JER Acquisitions. The Michigan Avenue has been managed as part of the Westin hotel chain since 1964. As a result of the acquisition of Westin Hotel Company (“Westin”) by Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”) in 1998, the management agreement for the Michigan Avenue was assigned to 909 North Michigan Avenue Corporation (“909 Corp.”). A wholly owned subsidiary of Starwood continues to manage the Michigan Avenue following the sale to JER Acquisitions.

      Westin Realty Corp. is the sole general partner of the Partnership and 909 Corp. is the sole general partner of the Chicago Partnership. Since January 2, 1998, the General Partner has been a subsidiary of Starwood.

Financial Information about Industry Segments

      Until January 26, 2005, the Partnership, through the Chicago Partnership, was engaged solely in the business of owning and operating the Hotel and was, therefore, engaged in only one industry segment. At this time the Partnership has no active business operations.

Description of Business

      Until January 26, 2005, the Michigan Avenue was operated by a wholly owned subsidiary of Starwood on behalf of the Chicago Partnership as part of the full-service, upscale Westin hotel chain. Starwood owns, manages and franchises hotels throughout the world and the inclusion of the Hotel within its global system provided the benefits of name recognition, centralized reservations and advertising, system-wide marketing programs, centralized purchasing and training and support services. The hotel business in general is highly competitive. To the extent hotel capacity expands or demand for hotel accommodations decreases, competition will increase. The demand for particular accommodations and related services are subject to various factors, including, but not limited to, seasonal variance, changes in economic conditions, and changes in travel patterns and preferences (which may be affected by airline schedules, weather conditions or availability).

      As Starwood also owns, operates, manages and franchises hotels under the St. Regis®, The Luxury Collection®, Sheraton®, W® and Four Points® by Sheraton brands, including other hotels in the Chicago area, potential conflicts of interest may have existed when the Hotel was managed for the Chicago Partnership by an affiliate of Starwood.

      Neither the Partnership nor the Chicago Partnership had any employees when the Chicago Partnership owned the Hotel. During that time, administrative and Hotel personnel were employees of Starwood. The Hotel and the Chicago Partnership reimbursed Starwood for the costs of such employees. However, neither the Partnership nor the Chicago Partnership is now, or was when the Chicago Partnership owned the Hotel, directly responsible for the payment of executive compensation to the officers of the General Partners.

Competitive Conditions

      The Hotel competed for customers with other hotel properties in its geographic market. During the last five years a number of new hotels opened near the Michigan Avenue, substantially increasing the inventory of available rooms in the Chicago area. Many of the hotels that the Michigan Avenue competed against were newer and had larger and more modern facilities. In addition, some of the competitors have substantially greater marketing and financial resources than the Hotel.

      There is another Westin hotel located at the O’Hare International Airport near Chicago and another in close proximity to the financial district of downtown Chicago. The General Partner believed that neither was in direct competition with the Michigan Avenue and that their close proximity allowed for efficiencies in both staffing and productivity. Starwood also operates the Sheraton Chicago Hotel and Towers in Chicago, owns

four hotels in the downtown Chicago area and manages five other properties in the Chicago metropolitan area under management agreements. These properties were not considered to be primary competitors due to differences in their locations, orientations or facilities.

Mortgage Loans

      On August 21, 1986, a mortgage loan in the amount of $32,800,000 with respect to the Michigan Avenue was refinanced by Teacher Retirement System of Texas (the “Lender”). On June 2, 1994, the General Partner, on behalf of the Partnership, successfully completed a restructuring of the mortgage loan and entered into a restructuring agreement (“Restructuring Agreement”) with the Lender. On May 27, 1997, a second restructuring agreement modifying the existing mortgage loan on the Hotel was completed. The modifications to the mortgage loan consisted primarily of a reduction of the effective interest rate, an extension of the maturity date and revisions of prepayment penalties. The Partnership prepaid $5,000,000 on this mortgage loan on March 1, 2003 and an additional $5,000,000 on December 17, 2003. At December 31, 2004, the balance outstanding under the mortgage loan was $17,747,000. On January 26, 2005, in connection with the sale of the Michigan Avenue to JER Acquisitions, the balance on the mortgage loan was paid in full.

Insurance

      The Michigan Avenue was covered by comprehensive general liability insurance, fire and extended property insurance (including earthquake coverage), business interruption, workers’ compensation, employer’s liability insurance, terrorism and such other insurance as is customarily obtained for similar properties.

      The Michigan Avenue participated in Starwood’s insurance program, whereby general liability, property, casualty, workers’ compensation and other insurance coverage premiums are paid through Starwood primarily to Zurich American Insurance Group and Westel Insurance Company, the latter being a wholly owned subsidiary of Starwood. See Note 9 of the financial statements.

Environmental Matters

      The Partnership is subject to certain requirements and potential liabilities under various federal, state and local environmental laws, ordinances and regulations (“Environmental Laws”). For example, a current or previous owner or operator of real property may become liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Persons who arrange for the disposal or treatment of hazardous or toxic wastes may be liable for the costs of removal or remediation of such wastes at the treatment, storage or disposal facility, regardless of whether such facility is owned or operated by such person. The Hotel used certain substances and generated certain wastes that may be deemed hazardous or toxic under applicable Environmental Laws, and the Hotel from time to time incurred costs related to cleaning up contamination. Other Environmental Laws require abatement or removal of certain asbestos-containing materials (“ACMs”) (limited quantities of which may be present in various building materials such as spray-on insulation, floor coverings, ceiling coverings, tiles, decorative treatments and piping) in the event of damage or demolition, or certain renovations or remodeling. These laws also govern emissions of and exposure to asbestos fibers in the air. Environmental Laws also regulate polychlorinated biphenyls (“PCBs”), which may be present in electrical equipment. The Hotel may have had equipment containing chlorofluorocarbons (“CFCs”). The use of equipment containing CFCs also is regulated by Environmental Laws. In connection with the Partnership’s past ownership, operation and management of the Hotel, the Partnership could be held liable for costs of remedial or other action with respect to PCBs or CFCs.

      Environmental Laws are not the only source of environmental liability. Under the common law, owners and operators of real property may face liability for personal injury or property damage because of various environmental conditions such as alleged exposure to hazardous or toxic substances (including, but not limited to, ACMs, PCBs and CFCs), poor indoor air quality, radon or poor drinking water quality.

      The Purchase Agreement contains provisions providing that the Chicago Partnership will indemnify JER Acquisitions for certain environmental liabilities related to the operation of the Hotel prior to the closing of the sale.

Sale of the Michigan Avenue

      The Amended and Restated Agreement of Limited Partnership of the Partnership (the “Partnership Agreement”) obligated the General Partner to review opportunities to sell the Michigan Avenue or to refinance indebtedness secured by the Michigan Avenue, beginning in 1994, and to use best efforts to complete a sale or refinancing transaction by the end of 2001.

      In February 2001, after the completion of significant renovations of the Michigan Avenue, the General Partner, on behalf of the Partnership, retained Jones Lang LaSalle Hotels (“JLL”), a nationally recognized broker, to market the Michigan Avenue for sale. After the terrorist attacks in New York City, Washington, D.C. and Pennsylvania on September 11, 2001 (the “September 11 Attacks”), however, bidders on the Michigan Avenue indicated they would only be willing to purchase the Hotel at a significant discount to the value they had placed on the Hotel prior to the September 11 Attacks. Based on the unstable and depressed hotel real estate market resulting from the September 11 Attacks and weakened general worldwide economic environment, the General Partner did not believe that it was in the best interest of the limited partners to sell the Michigan Avenue in late 2001 or 2002.

      In mid-2002, the General Partner also engaged JLL to assist in exploring a refinancing of the Partnership’s debt and directed JLL to focus its efforts towards pursuing refinancing alternatives. After a several month process it was determined that the debt could not be refinanced on an economical basis.

      From July 2003 until January 2004, several parties (including an affiliate of the General Partner) made tender offers for varying numbers of units of limited partnership interests (the “Units”). The tender offers ranged from a low price of $525 per Unit to a high price of $735 per Unit. The General Partner expressed no opinion, made no recommendation and remained neutral with respect to each tender offer.

      In May 2004, the General Partner engaged JLL to, once again, market the Michigan Avenue and commenced the formal marketing in June 2004. The General Partner solicited bids from interested parties and selected a bidder to negotiate with on an exclusive basis. As a result of that process, on October 18, 2004, the Chicago Partnership signed the Purchase Agreement to sell the Michigan Avenue to JER Acquisitions for $137 million in cash, subject to certain purchase price adjustments. On December 7, 2004, the Partnership received the consent of a majority of its limited partners to the sale of the Michigan Avenue to JER Acquisitions. On January 26, 2005, the Chicago Partnership completed the sale of the Michigan Avenue to JER Acquisitions.

      On February 25, 2005, an initial distribution of $800 per Unit was made to the limited partners. As of March 1, 2005, an amount of approximately $12 million is being reserved in order to satisfy the Partnership’s and the Chicago Partnership’s liabilities, including contingent liabilities and expenses.

      Because the Partnership has material liabilities, including contingent liabilities, that the General Partner is not able to reasonably estimate, the commencement of the process to dissolve and liquidate the Partnership will be deferred until the General Partner is able to satisfy all known and quantifiable liabilities and make a reasonable estimate of the maximum amount that could be owed with respect to unquantifiable liabilities of the Partnership.

      Until January 26, 2005, the Partnership’s property consisted of the Michigan Avenue, a first-class hotel operating under the Westin name and located in a premier central, urban location, providing guests with convenient access to business districts, shopping areas and convention facilities.

Description

      The Michigan Avenue has 751 guest rooms (including 23 suites) and 19 meeting rooms. The Hotel has a fitness center and a business center, provides retail space for several specialty stores and a gift shop, and has an underground parking garage with 225 spaces. The Grill on the Alley, an upscale 300-seat restaurant and bar operated by Grill Concepts of California (“Grill Concepts”), opened in the Hotel in June 2000. Starwood owns approximately 12% of the outstanding common stock of Grill Concepts and has rights to acquire additional shares of Grill Concepts pursuant to a subscription agreement. An employee of Starwood serves on the Board of Directors of Grill Concepts.

Location

      The Michigan Avenue is located on a prime site in downtown Chicago at the north end of the famous “Magnificent Mile,” known for its first-class retail shopping, fine restaurants and cultural attractions. The Hancock Center is situated directly south of the Michigan Avenue, as is the Water Tower Place, offering a variety of shopping and entertainment possibilities. The Hotel is 18 miles from O’Hare International Airport and 12 miles from Midway Airport.

Capital Improvements

      In 2004, the Hotel spent $2,738,000 for capital expenditures. Of this amount, $835,000 was spent on renovations of the lobby and meeting rooms; $89,000 on cordless phones; $190,000 on new Heavenly Beds®; $30,000 on the installation of an emergency generator; $70,000 on a dishwasher; and $1,524,000 on various other projects such as engineering equipment upgrades and computers. For discussion regarding the funding of these capital expenditures, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

      Because of the nature of the hotel business, the Chicago Partnership was subject to various claims and legal actions incidental to the ordinary course of its operations during the time it owned the Hotel, including such matters as contract and lease disputes and complaints alleging personal injury, property damage and employment discrimination. In addition, the Chicago Partnership has agreed to indemnify JER Acquisitions for certain losses (including losses resulting from certain specified litigation and claims) pursuant to the Purchase Agreement. The General Partner believes that the outcome of any such pending claims or proceedings, individually or in the aggregate, will not have a material adverse effect upon the business, financial condition or results of operations of the Partnership.

      On October 14, 2004, the General Partner filed a demand for arbitration with the American Arbitration Association of Seattle, Washington (the “AAA”) (the method and location for resolving disputes provided for in the Partnership Agreement) seeking that the AAA resolve all disputes and claims regarding the propriety of Kalmia Investors LLC’s (“Kalmia”) request to inspect and copy confidential information of the Partnership and various third parties, the adequacy and sufficiency of the General Partner’s response thereto, and the General Partner’s compliance with its obligations related to Kalmia’s request and that response. In addition, the General Partner has sought that the AAA resolve all disputes, controversies and claims relating to the performance by the General Partner of its duties to Kalmia with respect to: (a) the marketing for sale, refinancing or sale of the Michigan Avenue and the Westin St. Francis Hotel and (b) the operation and management of the Michigan Avenue and the Westin St. Francis Hotel. On October 29, 2004, Westin Realty, joined by the Partnership, filed a Supplemental Demand for Arbitration. On February 9, 2005, the General Partner and the Partnership (collectively, “Claimants”) served an Amended Statement of Claims.

      On February 18, 2005, Kalmia served its Answer and Affirmative Defenses to the Amended Statement of Claims and, on December 10, 2004, Kalmia submitted certain counterclaims under protest to the arbitration, including claims of breach of fiduciary duty, breach of contract, fraud, negligent misrepresentation and conversion. On February 9, 2005, Kalmia served its Amended Counterclaims and Claims against Third-Party

Respondents Starwood, 909 Corp., the Chicago Partnership, the Partnership, The Westin St. Francis Limited Partnership, and The St. Francis Hotel Corporation. Kalmia asserts claims for: (1) breach of fiduciary duty, (2) breach of contract, (3) fraud, misrepresentation, and fraudulent concealment, (4) negligent misrepresentation, and (5) conversion. On February 18, 2005, the General Partner, the Partnership and Third-Party Respondents served an Answer and Affirmative Defenses to Kalmia’s Counterclaims and Claims against Third-Party Respondents. The General Partner and the Partnership deny Kalmia’s allegations of breach of contractual or other duties and intend to vigorously defend themselves in the arbitration.

      The arbitration hearing is scheduled to begin on September 19, 2005. Pursuant to the Partnership Agreement and upon the advice of counsel, the expenses incurred in connection with the arbitration are being paid out of the assets of the Partnership.

      On November 5, 2004, the Partnership commenced a consent solicitation of the limited partners with respect to the sale of the Michigan Avenue to JER Acquisitions. Pursuant to the terms of the consent solicitation, upon the receipt by the Partnership of the consent of limited partners holding a majority of the outstanding units, the General Partner, on behalf of the Partnership, granted its consent to the sale of the Michigan Avenue and the consent solicitation was terminated. Set forth below are the results of the consent solicitation.

PART II

Item 5. Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities.

      As of March 23, 2005, there were 3,988 holders of record of the 135,600 Units.

      There is no public market for the Units, and it is not anticipated that a public market for the Units will develop. The transfer of Units, or any interest therein, is subject to a variety of restrictions. Because the Partnership no longer has any active operations, the General Partner will institute a policy, effective April 1, 2005, that prohibits the sale, assignment, transfer or exchange of Units except for estate planning, gift and intra family transfers. Furthermore, the Partnership Agreement provides that limited partners may not transfer their interests in the Partnership if, in the opinion of the Partnership’s counsel, such transfers might violate the registration requirements of the Securities Act of 1933, as amended, or the laws of any other jurisdiction or agency applicable to the transfers, cause the Partnership to be regarded as an association taxable as a corporation, result in the dissolution or termination of the Partnership or result in the Chicago Partnership not being able to obtain or continue in effect any license permitting the service or sale of alcoholic beverages in the Hotel. The assignee must also meet certain other requirements set forth in the Partnership Agreement before it may be recognized as a substituted limited partner, including the payment of all reasonable expenses connected with the transfer of any interest. The limited partners or their representatives must furnish, as to voluntary transfers, sufficient information to counsel to permit the foregoing determination to be made.

      The following information reflects the Partnership’s records of the average and range of Unit sale prices to date as quoted in the limited partnership exchanges:

     As of March 23, 2005, the Partnership has pending Unit sale transfer requests totaling approximately 1,383 Units for the first quarter of 2005. During the last three quarters of 2004, the Partnership transferred a total of 16,149 Units. Because the Partnership limits the transfers during any twelve month period to 40% of the outstanding Units (54,240 Units), the Partnership will limit transfers processed to 38,091 Units during the first quarter of 2005.

      The following represents cash distributions made in 2004, 2003 and 2002:

      In addition, the Partnership distributed $800 per Unit to the limited partners on February 25, 2005 as an initial distribution of the proceeds from the sale of the Michigan Avenue to JER Acquisitions and cash reserves the Partnership had on hand.

      The Partnership’s investor relations function is handled by Phoenix American at 2401 Kerner Boulevard, San Rafael, CA 94901-5529. The toll-free number for Phoenix American is 1-800-323-5888.

      The following table sets forth selected financial information for the Partnership:

General

      Until the Hotel was sold in January 2005, the Hotel’s primary market focus was on business travelers, conventions and other groups. The Hotel’s business activities generally followed national economic trends. The level of tourist business is influenced by the general global economic environment and political climate and, to a lesser extent, by the strength of the U.S. dollar in relation to foreign currencies. The Michigan Avenue experienced seasonal trends, with the lowest occupancy levels occurring during the first quarter, followed by higher occupancies during the last three quarters of the year.

Results of Operations

      Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) discusses the Partnership’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and costs and expenses during the reporting periods.

      Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions and conditions.

      The Partnership believes the following to be its critical accounting policy:

      Revenue Recognition. The Michigan Avenue’s revenues were derived from its operations and included revenues from the rental of rooms, food and beverage sales, telephone usage and other service revenue. Revenue has been recognized when rooms are occupied and services have been performed.

      This section analyzes significant fluctuations in items affecting the consolidated statements of income for the years ended December 31, 2004, 2003 and 2002. On January 26, 2005 the Hotel was sold to JER Acquisitions.

2004 Compared with 2003

      The results of operations and key statistics below are for the Michigan Avenue only and do not include the costs related to Partnership administration.

     The Michigan Avenue had net income of approximately $6,261,000 in 2004, compared to $4,197,000 in 2003, which represents the majority of the results of the Partnership. The Michigan Avenue had operating profit of $7,552,000 for the year ended December 31, 2004, a 25.4% or $1,531,000 increase from 2003.

      The Michigan Avenue’s revenues were $46,493,000 for the year ended December 31, 2004 compared to $45,162,000 in 2003. The increase was primarily due to a 3.6% or $1,142,000 increase in rooms revenue for the year ended December 31, 2004 to $32,779,000 when compared to the prior year. REVPAR for 2004 increased 3.3% to $119.25 as compared to $115.41 in 2003. The Michigan Avenue reported an average daily room rate of $151.89 and occupancy of 78.5% in the year ended December 31, 2004 as compared to $149.78 and 77.1%, respectively, in 2003. The REVPAR and rooms revenue increases are due to increased occupancies primarily related to the return of several large city-wide conventions during 2004. Furthermore, in addition to the increase in group business, the occupancy increase is attributable to the increase in transient travelers in 2004. The slight increase in average daily rate is attributable to the increase in group business which allowed the hotel to leverage the rates and improve occupancy. The Michigan Avenue’s rooms department profit margin for 2004 was 76.3%, which is comparable to 2003.

      The Michigan Avenue’s food and beverage revenue of $9,824,000 for 2004 which is comparable to 2003. The Michigan Avenue’s food and beverage department profit margin for 2004 decreased 2.5 percentage points to 26.3% from 2003.

      Other operating departments had revenue of $3,890,000 for the year ended December 31, 2004, a $169,000 increase from 2003, primarily resulting from increased ancillary revenues experienced as a result of higher group business partially offset by fewer cancellation fees in 2004 when compared to 2003.

      The Michigan Avenue’s operating expenses for 2004 decreased 0.5% or $200,000 to $38,941,000. The decrease was primarily attributed to decreased incentive management fees and depreciation expenses offset by higher room and food and beverage costs associated with increased occupancies. Management fees (including incentive management fees) for the year ended December 31, 2004 decreased 5.5% or $261,000 in 2004 to $4,455,000 when compared to 2003 due to an increase in capital expenditures which is deducted from the Partnership Net Operating Cash Flow, as defined in the Partnership Agreement.

      In addition to the operating expenses related to the Michigan Avenue discussed above, the Partnership also incurred $3,012,000 and $1,901,000 of costs for the years ended December 31, 2004 and 2003, respectively, for investor relations, professional services and other fees which are included in the consolidated statements of income. The $1,111,000 increase in 2004 over the prior year is due to additional administrative legal and regulatory costs incurred in connection with responding to the tender offers made to limited partners during 2004 and litigation expenses.

2003 Compared with 2002

      The results of operations and key statistics below are for the Michigan Avenue only and do not include the costs related to Partnership administration.

      The Michigan Avenue had net income of approximately $4,197,000 in 2003, compared to $2,003,000 in 2002, which represents the majority of the results of the Partnership. The Michigan Avenue had operating profit of $6,021,000 for the year ended December 31, 2003, a $1,515,000 increase from 2002.

      The Michigan Avenue’s revenues were $45,162,000 for the year ended December 31, 2003 compared to $40,718,000 in 2002. The increase was primarily due to a 9.3% or $2,694,000 increase in rooms revenue for the year ended December 31, 2003 to $31,637,000 when compared to the prior year. REVPAR for 2003 was $115.41 as compared to $105.59 in 2002. The Michigan Avenue reported an average daily room rate of $149.78 and occupancy of 77.1% in the year ended December 31, 2003 as compared to $151.86 and 69.5%, respectively, in 2002. The REVPAR and rooms revenue increases were due to increased occupancies primarily related to the return of several large city-wide conventions during 2003. Furthermore, in addition to the increase in group business, the occupancy increase is attributable to the increase in transient travelers in 2003. The slight decrease in average daily rate is attributable to re-negotiated rates with several airline partners. The Michigan Avenue’s rooms department profit margin for 2003 was 76.7%, in line with 2002.

      The Michigan Avenue’s food and beverage revenue of $9,804,000 for 2003 represents a $1,644,000 or 20.1% increase compared to 2002. The increase is due primarily to the increased consumption associated with the increase in occupancy rates. The Michigan Avenue’s food and beverage department profit margin for 2003 increased 7.9 percentage points to 28.8% from 2002 due to the mix of revenues, which consisted primarily of high-margin banquet and catering services, as compared to the lower margin room service or coffee bar revenues.

      Other operating departments had revenue of $3,721,000 for the year ended December 31, 2003, a $106,000 increase from 2002, primarily resulting from decreased ancillary revenues experienced as a result of lower group business and fewer cancellation fees in 2003 when compared to 2002.

      The Michigan Avenue’s operating expenses for 2003 increased 8.1% or $2,929,000 to $39,141,000. The increase was primarily due to higher room costs associated with increased occupancy as well as increased management fees in accordance with the terms of the management agreement. Management fees for the year ended December 31, 2003 increased 14.3% over 2002 to $4,716,000 due to improved Partnership Net Operating Cash Flow, as defined in the Partnership Agreement.

      In addition to the operating expenses related to the Michigan Avenue discussed above, the Partnership also incurred $1,901,000 and $480,000 of costs for the years ended December 31, 2003 and 2002, respectively, for investor relations, professional services and other fees, which are included in the consolidated statements of income.

Liquidity and Capital Resources

      On January 26, 2005, the Michigan Avenue was sold to JER Acquisitions for cash of approximately $137,000,000. The cash received at closing was reduced by a credit to JER Acquisitions of $6,836,000 that related to the capital expenditure revenues and other adjustments provided by the Purchase Agreement. In connection with the sale of the Hotel, a payment of $17,645,000 was made to the Lender to payoff the mortgage loan and payments of $11,606,000 and $12,438,000 were made to affiliates of Starwood in connection with the repayment of the Subordinated Loan (as defined below) and deferred incentive management fees, respectively. The Partnership no longer has any third party indebtedness. On February 25, 2005, an aggregate distribution of $108,480,000, or $800 per Unit, was made to limited partners of the Partnership.

      As of December 31, 2004, the Partnership had cash and cash equivalents of approximately $37,795,000, a $4,437,000 increase from December 31, 2003. This increase is primarily due to increased revenue at the Hotel. During 2004, total net cash provided by operating activities was $14,703,000.

      In 2004, a total of $2,270,000 was deposited into the Furniture, Fixtures and Equipment (“FF&E”) Reserve Account as required by the Restructuring Agreement. At December 31, 2004, the balance in this account, together with interest of $25,000, was included in other assets in the accompanying consolidated balance sheet. The consolidated balance sheets also include a tax escrow account. At December 31, 2004, the balance in the tax escrow account, together with interest of $28,000, is restricted and included in cash and cash equivalents in the accompanying consolidated balance sheet.

      A total of $2,738,000 was spent for capital improvements in 2004 for the Michigan Avenue. Of this amount, $835,000 was spent on renovations of the lobby and meeting rooms; $89,000 on cordless phones; $190,000 on new Heavenly Beds®; $30,000 on the installation of an emergency generator; $70,000 on a dishwasher; and the remaining $1,524,000 on various other projects, such as engineering equipment upgrades and computers.

      Until January 26, 2005, the Chicago Partnership had a fee simple interest in the Hotel. The Michigan Avenue was encumbered by a mortgage held by the Lender to secure indebtedness. The effective interest rate on the indebtedness was 8.06% per annum through maturity. The mortgage required combined payments of principal and interest each quarter in arrears, in such amount as was necessary to repay the principal balance (together with interest at the fixed interest rate) based on a 25 year amortization schedule with a balloon payment on December 1, 2006. Annual payments of principal and interest on the mortgage were $3,093,000, payable in quarterly installments through December 1, 2006, at which time the remaining outstanding principal balance plus all accrued and unpaid interest was due and payable. Principal payments of $1,639,000 and interest payments of $1,684,000 were made on the mortgage during 2004.

      In conjunction with the restructuring of the Partnership’s mortgage loan in 1994, the General Partner loaned the Partnership $25 million to fund capital improvements to the Michigan Avenue and the St. Francis, of which $5 million was contributed to the Chicago Partnership for capital improvements for the Michigan

Avenue. This loan (the “Subordinated Loan”), was subordinate to the Partnership’s mortgage loan. The annual interest rate on the Subordinated Loan was the prime rate, plus 1%. The portion of the loan attributable to the St. Francis was repaid upon the sale of the St. Francis. At December 31, 2004, the outstanding balance on the Subordinated Loan totaled $11,555,000 (including $6,555,000 of accrued interest). Interest expense on this loan was $605,000, $546,000, and $572,000 in the years ended December 31, 2004, 2003 and 2002, respectively.

      The Partnership had the following contractual obligations outstanding as of December 31, 2004 (in thousands):

      As a result of the sale of the Hotel on January 26, 2005, the Partnership’s primary asset is cash which is invested in an interest-bearing money market account and, accordingly, the Partnership only has minimal exposure to market risk from financial instruments. At December 31, 2004, the Partnership was exposed to market risk on its financial instruments from changes in interest rates. The Partnership does not use financial instruments for trading or speculative purposes or to manage interest rate risk. At December 31, 2004, a hypothetical 1% change in interest rates would have resulted in an increase or decrease in interest expense of approximately $116,000.

      At December 31, 2004, the Partnership’s financial instruments consisted primarily of a variable rate note and fixed rate debt. The Partnership’s debt at December 31, 2004 consisted of a note payable to the General Partner and a mortgage loan.

      The following documents are filed as part of this report:

      Financial statement schedules are omitted for the reason that they are not required, are insignificant or because the required information is shown in the consolidated financial statements or notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To Westin Hotels Limited Partnership:

We have audited the accompanying consolidated balance sheets of the Westin Hotels Limited Partnership (the “Partnership”) (a Delaware limited partnership) as of December 31, 2004 and 2003, and the related consolidated statements of income, partners’ capital (deficit) and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Westin Hotels Limited Partnership as of December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

New York, New York

March 18, 2005

WESTIN HOTELS LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(In thousands, except Units)

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

WESTIN HOTELS LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except Unit data)

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

WESTIN HOTELS LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (DEFICIT)

(In thousands)

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

WESTIN HOTELS LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

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

WESTIN HOTELS LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      Basis of Presentation. The accompanying consolidated financial statements include the accounts of Westin Hotels Limited Partnership, a Delaware limited partnership (the “Partnership”), and its primary subsidiary limited partnership, The Westin Chicago Limited Partnership (the “Chicago Partnership”). Until January 26, 2005, the Chicago Partnership owned and operated The Westin Michigan Avenue, Chicago in downtown Chicago, Illinois (the “Michigan Avenue” or the “Hotel”). All significant intercompany transactions and accounts have been eliminated. Since the Partnership’s only asset was sold on January 26, 2005, the operations were not presented as discontinued operations.

      Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

      Cash and Cash Equivalents and Restricted Cash. Cash and cash equivalents consist of short-term investments purchased with original maturities of three months or less. Restricted cash consists of amounts deposited in interest-bearing money market accounts restricted by a Partnership lender (see Note 5). The Partnership’s carrying amount approximates the fair value of cash and cash equivalents and restricted cash due to the short-term nature of these instruments.

      Inventories. Inventories consist of food and beverage stock items, as well as linens, china, glass, silver, utensils and guest room items (“Par Inventories”). The food and beverage inventory items are recorded at the lower of cost (first in, first out) or market. Significant purchases of Par Inventories are recorded at purchased cost and amortized to 50% of their cost over 36 months. Normal replacement purchases are expensed as incurred. Par Inventories are classified as a component of property and equipment.

      Property and Equipment. Depreciation of property and equipment is provided on the straight-line method over the assets’ estimated useful lives as follows:

      Maintenance and repairs, including the cost of minor replacements, are charged to property maintenance expense accounts. Costs of additions and improvements to property are capitalized in property and equipment accounts.

      In the event that facts and circumstances indicate that the cost of property and equipment may be impaired, an evaluation of recoverability would be performed. This evaluation would include the comparison of the future estimated undiscounted cash flows associated with the assets to the carrying amount of these assets to determine if a write-down to fair value is required.

      Revenue Recognition. The Partnership’s revenues were primarily derived from hotel operations, including the rental of rooms and food and beverage sales. Generally, revenues were recognized when the services had been rendered.

      Income Taxes. The Partnership does not record any provision for federal and state income taxes in its consolidated financial statements. All items of income, gain, loss, deduction or credit for federal and state income tax purposes are allocated to the partners of the Partnership for inclusion in their individual income tax

WESTIN HOTELS LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

returns. The reported amounts of the Partnership’s net assets and liabilities exceeded the related tax bases by approximately $12,132,000 and $14,002,000 at December 31, 2004 and 2003, respectively.

      Concentration of Credit Risk. Financial instruments which potentially subjected the Hotel to a concentration of credit risk consisted principally of accounts receivable. Concentration of credit risk with respect to accounts receivable was limited due to the wide variety of customers and industries to which the Hotel’s services are sold, as well as the dispersion of customers across many geographic areas. Additionally, the Hotel performed ongoing credit evaluations of their customers’ financial condition and maintained allowances for potential credit losses.

      Impact of Recently Issued Accounting Standards. There were various accounting standards and interpretations issued during 2004, none of which are expected to have a material impact on the Partnership’s financial position, operations or cash flows.

      The Partnership was formed on April 25, 1986 to invest in hotel properties by acquiring limited partnership interests in the Chicago Partnership and the St. Francis Limited Partnership (the “St. Francis Partnership”).

      Westin Realty Corp. (“Westin Realty”), formerly a wholly owned subsidiary of Westin Hotel Company (“Westin”), now a wholly owned subsidiary of Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), is the sole general partner of the Partnership (the “General Partner”) and subject to the Partnership Agreement. On August 28, 1986, Westin Realty acquired all of the limited partnership interests in the Chicago Partnership (which represented 91.62% of the then fair value of the Chicago Partnership’s net assets) and contributed these interests (and other interests which have subsequently been sold) to the Partnership in exchange for all of the limited partnership interests in the Partnership. Westin Realty then sold these limited partnership interests in a public offering. The remaining 8.38% interest in the Chicago Partnership was retained by the predecessor owners, subsidiaries of Westin.

      On January 2, 1998, Starwood completed the acquisition of Westin Hotels & Resorts Worldwide, Inc. (“Westin Worldwide”) (the “Westin Acquisition”). Westin Realty and 909 North Michigan Avenue Corporation (“909 Corp.”), each formerly wholly owned subsidiaries of Westin Worldwide, are now wholly owned subsidiaries of Starwood. The Westin Acquisition did not change the structure of the general partners’ and limited partners’ ownership interest in either the Partnership or the Chicago Partnership.

      The Chicago Partnership’s profits and losses, subject to certain contractual adjustments, are generally allocated 99% to the Partnership and 1% to minority interests. Partnership profits and losses are further allocated 99% to the limited partners and 1% to the General Partner, with the exception of depreciation expense, which is allocated 92.55% to the limited partners and 7.45% to the General Partner. Because of the allocation of depreciation expense, the General Partner’s share of profits and losses since inception is a net loss, resulting in a deficit balance in the General Partner capital account. The Partnership Agreement specifies that if a deficit balance exists after liquidation of both of the Chicago Partnership’s and the St. Francis Partnership’s assets, the General Partner would be obligated to contribute cash to the Partnership equal to the lesser of (i) the deficit balance in such capital account, or (ii) 1.01% of the capital contributions of the limited partners reduced by all capital contributions of the General Partner.

      Except for the following restrictions outlined in the mortgage loan restructuring agreement completed in June 1994 (hereinafter this agreement and any amendments to it are referred to as the “Restructuring Agreement”), Net Cash Flow of the Partnership, as defined in the Partnership Agreement, is distributed first to the limited partners until certain preferential distributions are achieved and then allocated to both the general partners and limited partners depending on factors related to the source of the Net Cash Flow and cash distributions as specified in the Partnership Agreement. The Restructuring Agreement permitted

WESTIN HOTELS LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

distributions beginning in 1997 once the Hotel had achieved certain performance levels in the three years prior to 1997. Aggregate distributions of $3,645,000 were made to the limited partners in each of the years ended December 31, 2004, 2003 and 2002.

      In accordance with the Partnership Agreement, on January 26, 2005, upon receiving consent of a majority of the limited partners and the satisfaction of certain other closing conditions, the sale of the Michigan Avenue to JER Partners Acquisitions III, LLC (“JER Acquisitions”) was completed. The sale proceeds of $137 million were utilized to repay the mortgage loan, the Subordinated Note due to the General Partner, deferred incentive management fees related to the Michigan Avenue, and costs and expenses related to the sale. These payments and a capital expenditure credit totaled approximately $50 million. Approximately $87 million of proceeds remaining from the sale of the Michigan Avenue plus approximately $21 million in Partnership cash, or $800 per unit, was distributed to the limited partners in February 2005. As of March 1, 2005, an amount of approximately $12 million is being reserved in order to satisfy the Partnerships and the Chicago Partnership’s liabilities, including contingent liabilities and expenses.

      Accrued expenses include the following at December 31 (In thousands):

      Long-term obligations include the following at December 31 (In thousands):

      On May 27, 1997, the existing mortgage loan on the Hotel was restructured pursuant to the Restructuring Agreement between The Teacher Retirement System of Texas, the Partnership, the Chicago Partnership, 909 Corp. (general partner of the Chicago Partnership) and Westin Realty.

      The Restructuring Agreement provided for an extension of the maturity date for the Hotel’s existing mortgage loan from August 31, 2001 to November 30, 2006. The restructuring resulted in a decrease in the effective interest rate on the mortgage loan from 8.55% per annum to 8.06% per annum from the date of the Restructuring Agreement through maturity.

      Through November 30, 1999, the restructured loan required the payment of interest only each quarter in arrears. From December 1, 1999 to November 30, 2006, the loan required combined payments of principal and interest each quarter in arrears, in such amount necessary to repay the principal balance of the note

WESTIN HOTELS LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(together with interest at the fixed interest rate) on the basis of a 25-year amortization schedule. On March 1, 2003, the Partnership prepaid $5,000,000 on this mortgage loan, and an additional $5,000,000 on December 17, 2003. On January 26, 2005, in connection with the sale of the Michigan Avenue, the entire balance was paid off.

      As required by the Restructuring Agreement, deposits to the Furniture, Fixtures and Equipment Reserve Accounts (the “FF&E Reserve Accounts”) for 2004 and 2003 totaled $2,270,000 and $2,229,000, respectively. FF&E Reserve Accounts are included in other assets in the accompanying balance sheets. Interest earned on the FF&E Reserve Accounts was $25,000, $15,000 and $43,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

      As required by the Restructuring Agreement, $3,463,000 and $3,488,000 was deposited to tax escrow accounts in 2004 and 2003, respectively. These accounts are used to pay real and personal property taxes as they become due. The tax escrow accounts are included in cash and cash equivalents in the accompanying consolidated balance sheets.

      For debt based on prime rates, fair value approximates carrying value due to the variable nature of interest rates. For fixed rate debt, fair value is determined based on discounted cash flows for the debt at a rate deemed reasonable for the type of debt and prevailing market conditions and, if appropriate, the length to maturity for the debt. The carrying values of the Partnership’s mortgage loan and subordinated note approximate fair values, due to the interest rates being based on prime or in line with market rates.

      The Chicago Partnership participates in a 401(k) plan (the “Plan”) sponsored by Starwood, an affiliate of the General Partner. The Plan allows for voluntary contributions by employees that meet certain age and service requirements. Each participant may contribute on a pretax basis between 1% and 18% of his or her compensation to the Plan. The Plan also contains additional provisions for matching and/or profit sharing contributions, both of which are based on a portion of a participant’s eligible compensation. The amount of expense for matching contributions totaled $77,000 in 2004, $68,000 in 2003, and $64,000 in 2002.

      The Chicago Partnership rented various property and equipment under operating leases.

      Rental expense for operating leases, including short-term leases, was $52,000, $63,000 and $89,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

      The Chicago Partnership also rented restaurant, gift shop and retail space to third-party vendors under operating leases. Minimum annual rental income under the operating leases in effect at December 31, 2004 are as follows:

      Rental income from operating leases, including contingent rental income, was $2,018,000, $2,007,000, and $1,923,000 for the years ended December 31, 2004, 2003 and 2002, respectively. The operating leases were assigned to JER Acquisitions in connection with the sale of the Michigan Avenue.

WESTIN HOTELS LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Because of the nature of the hotel business, the Chicago Partnership was subject to various claims and legal actions incidental to the ordinary course of its operations, including such matters as contract and lease disputes and complaints alleging personal injury, property damage and employment discrimination. The General Partner believes that the outcome of any such pending claims, individually or in the aggregate, will not have a material adverse effect upon the business, financial condition or results of operations of the Partnership.

      On October 14, 2004, the General Partner filed a demand for arbitration with the American Arbitration Association of Seattle, Washington (the “AAA”) (the method and location for resolving disputes provided for in the Partnership Agreement) seeking that the AAA resolve all disputes and claims regarding the propriety of Kalmia Investors LLC’s (“Kalmia”) request to inspect and copy confidential information of the Partnership and various third parties, the adequacy and sufficiency of the General Partner’s response thereto, and the General Partner’s compliance with its obligations related to Kalmia’s request and that response. In addition, the General Partner has sought that the AAA resolve all disputes, controversies and claims relating to the performance by the General Partner of its duties to Kalmia with respect to: (a) the marketing for sale, refinancing or sale of the Michigan Avenue and the Westin St. Francis Hotel and (b) the operation and management of the Michigan Avenue and the Westin St. Francis Hotel. On October 29, 2004, Westin Realty, joined by the Partnership, filed a Supplemental Demand for Arbitration. On February 9, 2005, the General Partner and the Partnership (collectively, “Claimants”) served an Amended Statement of Claims.

      On February 18, 2005, Kalmia served its Answer and Affirmative Defenses to the Amended Statement of Claims and, on December 10, 2004, Kalmia submitted certain counterclaims under protest to the arbitration, including claims of breach of fiduciary duty, breach of contract, fraud, negligent misrepresentation and conversion. On February 9, 2005, Kalmia served its Amended Counterclaims and Claims against Third-Party Respondents Starwood Hotels & Resorts Worldwide, Inc. 909 North Michigan Avenue Corporation, Westin Chicago Limited Partnership, The Westin St. Francis Limited Partnership, and The St. Francis Hotel Corporation. Kalmia asserts claims for: (1) breach of fiduciary duty, (2) breach of contract, (3) fraud, misrepresentation, and fraudulent concealment, (4) negligent misrepresentation, and (5) conversion. On February 18, 2005, the General Partner, the Partnership and Third-Party Respondents served an Answer and Affirmative Defenses to Kalmia’s Counterclaims and Claims against Third-Party Respondents. The General Partner and the Partnership deny Kalmia’s allegations of breach of contractual or other duties and intend to vigorously defend themselves in the arbitration.

      The arbitration hearing is scheduled to begin on September 19, 2005. Pursuant to the Partnership Agreement and upon the advice of counsel, the expenses incurred in connection with the arbitration are being paid out of the assets of the Partnership.

      In accordance with the Partnership Agreement, the Partnership reimburses the General Partner for expenses in connection with management and administration of the Partnership. These reimbursements totaled approximately $1,150,000, $1,200,000 and $467,000 in the years ended December 31, 2004, 2003 and 2002, respectively.

      The General Partner’s officers and directors and the officers and directors of the Chicago Partnership are full-time senior or executive-level employees of Starwood. In addition, the Michigan Avenue is managed by 909 Corp., a wholly owned subsidiary of Starwood. All the activities of the General Partner and 909 Corp. are carried out by Starwood employees, since neither the General Partner nor 909 Corp. have any employees of its own.

WESTIN HOTELS LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The directors and officers of the General Partner, in their capacities as Starwood employees and directors and officers of a wholly owned subsidiary of Starwood, owe fiduciary duties to Starwood in its capacity as the sole stockholder of the General Partner. The directors and officers of the General Partner and the General Partner, however, also have fiduciary duties to the Partnership and the limited partners that may conflict with their fiduciary duties to Starwood.

      Although they are not members of the Board of Directors of the General Partner, the Chief Financial Officer, the General Counsel and the President of the Real Estate Group of Starwood each hold positions with the General Partner and 909 Corp. The former Chief Financial Officer of Starwood was a member of the Board of Directors of the General Partner until October 19, 2001.

      Each director and the President of the General Partner is a full-time, senior or executive-level employee of Starwood. Each has received salary and bonuses from Starwood in amounts commensurate with his level of skill and experience and comparable to similarly situated employees in the industry. Each has received grants of options and restricted stock of Starwood in each of the past two years and is also eligible to participate in Starwood’s benefit plans. Moreover, neither the Partnership nor the Chicago Partnership is responsible for the payment of any executive compensation to the officers and directors of the general partners.

      The Michigan Avenue is operated as part of the Westin international system of hotels pursuant to a management agreement (as amended from time to time, the “Management Agreement”) initially entered into on August 21, 1986 among the General Partner, the Partnership, 909 Corp., the Chicago Partnership, as the owner of the Michigan Avenue, and the Westin Hotel Company, as hotel manager. When Starwood acquired the Westin Hotel Company in 1998, the Westin Hotel Company was merged into one of Starwood’s affiliates and the Westin Hotel Company assigned the Management Agreement to 909 Corp. The Management Agreement does not terminate until 2026 without the consent of all parties, absent a breach or a default by a party or the occurrence of certain extraordinary events specified in the agreement, which generally relate to the bankruptcy or insolvency of the Partnership or 909 Corp.

      Contemporaneously with the execution of the definitive agreement to sell the Michigan Avenue to JER Acquisitions, JER/ WMA, LLC, a Delaware limited liability company (“JER Owner”), and 909 Corp., as manager of the Michigan Avenue, entered into the Fourth Amendment (the “Amendment”) to the Management Agreement of the Michigan Avenue on October 18, 2004, whereby 909 Corp. will continue to manage the Michigan Avenue under the Management Agreement.

      Prior to the Amendment, the Management Agreement provided that a base management fee equal to 3.5% of annual gross revenues of the Michigan Avenue would be payable by the Chicago Partnership to the hotel manager out of cash flow from the operations of the Michigan Avenue. The fee was payable prior to the distribution of cash to the partners of the Chicago Partnership, including the Partnership as the sole limited partner of the Chicago Partnership. Base management fees earned by 909 Corp. were approximately $1,628,000 in the year ended December 31, 2004, and $1,581,000 and $1,426,000 in the years ended December 31, 2003 and December 31, 2002, respectively. As amended, the Management Agreement now provides that JER Owner will pay 909 Corp. a base management fee equal to 3.5% of annual gross revenues of the Michigan Avenue paid monthly based on the monthly gross revenue of the Michigan Avenue. This fee is payable prior to the distribution of cash to JER Owner.

      Also prior to the Amendment, the Management Agreement provided for an incentive management fee, which was equal to 20% of the net operating cash flow (as defined in the Management Agreement) of the Partnership. Payment of the incentive management fee in any year depended on the amount of distributable net cash flow of the Partnership and was subordinated to the payment to the limited partners of a preferred distribution of cash flow. Unpaid incentive management fees were deferred and did not accrue interest. Incentive management fees totaled approximately $2,827,000 in the year ended December 31, 2004, and $3,135,000 and $2,700,000 in the years ended December 31, 2003 and December 31, 2002, respectively. As

WESTIN HOTELS LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

amended, the Management Agreement now provides that JER Owner will pay 909 Corp. an incentive management fee equal to 20% of the net operating cash flow (as defined in the Amendment) of the Michigan Avenue.

      Prior to the Amendment, incentive management fee payments were subordinate to the unitholders’ receipt of certain preferential returns. The 2004 incentive management fees and all previous years’ deferred incentive management fees were paid in the first quarter of 2005 in conjunction with the sale of the Michigan Avenue. Deferred incentive management fees were paid from the proceeds of the sale of the Michigan Avenue to JER Acquisitions.

      The Chicago Partnership paid marketing fees to Starwood and its affiliates totaling approximately $734,000 in the year ended December 31, 2004, and $677,000 and $611,000 in the years ended December 31, 2003 and December 31, 2002, respectively. Additionally, the Partnership paid Starwood affiliates approximately $2,205,000, $2,045,000 and $1,856,000 in 2004, 2003 and 2002, respectively, for services provided by Starwood affiliates primarily in connection with systems support, reservations, advertising, property and workers’ compensation insurance which payments include premiums paid to Westel Insurance Company, a wholly owned subsidiary of Starwood.

      In 1994, the General Partner made a loan to the Partnership for the purpose of making capital improvements to the Michigan Avenue through a capital contribution to the Chicago Partnership, which were the direct owners of the Michigan Avenue. This loan was subordinate to the Partnership’s mortgage loan. This loan included $5 million in principal to fund capital improvements to the Michigan Avenue. Interest has accrued at the annual rate equal to the prime rate quoted by Bank of America plus 1%. The principal and accrued interest were paid in full to the General Partner upon the closing of the sale of the Michigan Avenue to JER Acquisitions from the net proceeds of the sale in accordance with the Partnership Agreement, which was $11,606,000.

      Pursuant to the Partnership Agreement, the General Partner is generally allocated 1% of the Partnership’s taxable income and loss. In addition, 909 Corp., an affiliate of the General Partner, is generally allocated 1% of the Chicago Partnership’s taxable income and loss.

      The General Partner was reimbursed for third-party general and administrative expenses incurred on the Partnership’s behalf totaling approximately $1,150,000, $1,200,000, and $467,000 in the years ended December 31, 2004, 2003 and 2002, respectively, primarily for investor relations expenses and costs incurred in connection with various tender offers and legal fees.

      In June 2000, the Michigan Avenue transferred the operations of its restaurant, The Grill on the Alley, to Grill Concepts of California (“Grill Concepts”). Starwood made an equity investment in Grill Concepts in the third quarter of 2001 and currently owns 12% of the outstanding common stock of Grill Concepts and has rights to acquire additional shares of Grill Concepts pursuant to a subscription agreement. An employee of Starwood also serves on the Board of Directors of Grill Concepts. Grill Concepts operates The Grill on the Alley pursuant to a ten-year operating lease which expires in 2008. Rental revenues to the Partnership from Grill Concepts under the operating lease for the restaurant were $271,000 in the year ended December 31, 2004, and $289,000 and $238,000 in the years ended December 31, 2003 and December 31, 2002, respectively.

      In the fourth quarter of 2003, Starwood and WHLP Acquisition LLC (“WHLP Acquisition”) commenced a tender offer to acquire all of the outstanding Units. The purchase price ultimately offered by Starwood and WHLP Acquisition in the tender offer was $735 per Unit. On February 23, 2004, Starwood and WHLP Acquisition announced that their tender offer had expired on February 20, 2004. As of December 31, 2004, 33,838 Units were transferred to WHLP Acquisition pursuant to the tender offer. Contemporaneously with the execution of the Purchase Agreement on October 18, 2004, Starwood and WHLP Acquisition entered into a Voting Agreement with JER Acquisitions whereby Starwood and WHLP Acquisition agreed to grant their consent to the sale of the Michigan Avenue to JER Acquisitions.

WESTIN HOTELS LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Summarized quarterly financial data is as follows:

      Not applicable.

      The General Partner’s management conducted an evaluation, under the supervision and with the participation of the Partnership’s Principal Executive Officer and Principal Accounting Officer, of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures as of December 31, 2004. Based on this evaluation, the Principal Executive Officer and Principal Accounting Officer concluded that the Partnership’s disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be included in the Partnership’s SEC reports. There have been no changes in the Partnership’s internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

      Not applicable.

PART III

      The Partnership and the Chicago Partnership have no directors or officers. Business policy-making functions of the Partnership and the Chicago Partnership are carried out through the directors and officers of their respective general partners.

      Westin Realty’s directors and executive officers and their current positions are as follows:

      Theodore W. Darnall and Alan M. Schnaid assumed their current positions in September 1998. Tom Smith assumed his current position in October 2001.

      Theodore Darnall has been the President of Starwood’s Real Estate Group since August 2002. From July 1999 to August 2002, he was the President of Starwood’s North America Group. From April 1998 to July 1999, Mr. Darnall was Executive Vice President, North American Division for Starwood. Mr. Darnall was also Executive Vice President and Chief Operating Officer of Starwood Lodging Corporation (a predecessor Starwood company) between April 1996 and April 1998.

      Alan M. Schnaid currently serves as a Vice President, Principal Accounting Officer and Director. Mr. Schnaid has been Senior Vice President, Corporate Controller of Starwood since 1998. Mr. Schnaid has been with Starwood since August 1994 and has previously served as Assistant Corporate Controller and Vice President, Corporate Controller.

      Tom Smith currently serves as a Director. He is Senior Vice President, Real Estate Group, of Starwood. Mr. Smith has held various positions with Starwood since July 1998. Before joining Starwood, he was a Managing Director of CIGNA Real Estate Investment Corporation for eleven years.

      The following persons are directors and/or officers of 909 Corp. as indicated:

Corporate Governance

      The General Partner does not have a separately-designated standing audit committee. However, the entire Board of Directors of the General Partner acts as the General Partner’s audit committee as specified in section 3(a)(58)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board of Directors of the General Partner has determined that Alan M. Schnaid is the audit committee financial expert, as defined by applicable federal securities laws. The Board of Directors of the General Partner has determined that Mr. Schnaid is not “independent,” as defined by applicable federal securities laws and the Listing Requirements of the New York Stock Exchange, Inc.

      The Partnership has a Finance Code of Ethics applicable to its Principal Executive Officer, Principal Accounting Officer and persons performing similar functions. The text of this code of ethics may be found on Starwood’s website at http://www.starwood.com/corporate/investor-relations.html. Amendments to and waivers from the Finance Code of Ethics that require disclosure under applicable SEC rules will be posted on the Starwood website. You may obtain a free copy of this code in print by contacting our investor relations manager, Phoenix American, at 1-800-323-5888.

      As noted in Item 10 above, neither the Partnership nor the Chicago Partnership has any directors, officers or other employees. However, under the respective limited partnership agreements for the Partnership and the Chicago Partnership, Westin Realty, as General Partner of the Partnership, is responsible for the administration and management of the Partnership and 909 Corp., as general partner of the Chicago Partnership, is responsible for the administration and management of the Chicago Partnership. The general partners, however, receive no fees for providing these services to the Partnership and the Chicago Partnership. Moreover, neither the Partnership nor the Chicago Partnership is responsible for the payment of any executive compensation to the officers of the general partners.

      The following tables show the number of Units “beneficially owned” by all persons known to the Partnership to be the beneficial owners of more than 5% of the outstanding Units at December 31, 2004. The information in the tables is based upon information provided by each of the Schedules 13D filed with the SEC by each of the beneficial owners of more than 5% of the outstanding Units.

      Theodore W. Darnall, Alan M. Schnaid and Tom Smith serve as officers and/or directors of Westin Realty and as principal officers of Starwood. The Partnership has engaged various subsidiaries of Starwood to provide services to the Hotels. See Note 9 of the Notes to Consolidated Financial Statements included under Item 8, “Financial Statements and Supplementary Data.”

Summary of Auditor’s Fees for 2004 and 2003

      Audit Fees. Ernst & Young LLP’s fees for the Partnership’s annual audit were $75,000 in 2004 and $68,000 in 2003.

      Audit-Related Fees. Ernst & Young LLP did not have any audit-related fees in 2004 or 2003.

      Tax Fees. Ernst & Young LLP did not have any fees related to tax compliance, tax advice, and tax planning services for the Partnership in 2004 or in 2003.

      All Other Fees. Ernst & Young LLP had $6,000 in other fees in 2004.

Pre-Approval Policies and Procedures

      The Board of Directors of the General Partner, acting as the Partnership’s audit committee as specified in section 3(a)(58)(B) of the Exchange Act, has adopted a policy requiring pre-approval by the committee of all services (audit and non-audit) to be provided to the Partnership by its independent auditors. In accordance with that policy, the Board of Directors has given its approval for the provision of audit services by Ernst & Young LLP for fiscal 2005. All other services must be specifically pre-approved by the full Board of Directors of the General Partner or by a designated member of the Board of Directors of the General Partner who has been delegated the authority to pre-approve the provision of services.

PART IV

(a) 1.     Financial Statements.

      The following documents are filed as part of this report:

(a) 2.     Financial Statement Schedules.

      Financial statement schedules are omitted for the reason that they are not required, are insignificant or because the required information is shown in the consolidated financial statements or notes thereto.

(a) 3.     Exhibits.

(b) Reports on Form 8-K

      During the fourth quarter of 2004, the Partnership filed the following Current Report on Form 8-K:

(c) See Item 15(a)(3) of this report.

SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) 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 on March 28, 2005.

SIGNATURES (cont.)

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

INDEX TO EXHIBITS