Winston Hotels Inc. Reports Income Tax Treatment for 2005 Common and Preferred Stock Shares

Business Wire, Feb 6, 2006

RALEIGH, N.C. -- Winston Hotels, Inc. (NYSE: WXH) reported in a press release the income tax treatment for 2005 distributions to holders of its common stock and preferred stock. The January 24, 2006 press release contained an error. The corrected release is set forth below in its entirety.

Subsequent to January 24, 2006, Winston Hotels, Inc. determined that its 2005 earnings and profits were higher than originally reported. The increase results in full taxability for all of the March, June and September 2005 common and preferred stock distributions.

In addition, a portion of the preferred distribution declared in December 2005 but paid in January 2006 was paid out of Winston Hotels, Inc.'s 2005 earnings and profits. Pursuant to Internal Revenue Code Section 857(b)(9), these distributions are required to be included in the taxpayer's 2005 taxable income. The remaining amount of the preferred distribution paid in January 2006 will be subject to taxation in 2006. Therefore, the corrected common and preferred distributions, as recalculated below, are taxable to shareholders in 2005.

The corrected release reads:

WINSTON HOTELS INC. REPORTS INCOME TAX TREATMENT FOR 2005 COMMON AND PREFERRED STOCK SHARES

Winston Hotels, Inc. (NYSE: WXH), today announced that the income tax treatment for the 2005 Common Stock distributions for Winston Hotels, Inc., (CUSIP #97563A 10 2) traded under the ticker symbol WXH is as follows:

Dividends                   Long-Term
Declaration  Record    Payment  Paid Per  Ordinary Return of Capital
   Date       Date      Date      Share    Income   Capital    Gain
----------------------------------------------------------------------
   3/10/05    3/31/05  4/15/05      $0.15    $0.15    $0.00     $0.00
----------------------------------------------------------------------
   6/13/05    6/30/05  7/15/05      $0.15    $0.15    $0.00     $0.00
----------------------------------------------------------------------
   9/21/05    9/30/05 10/14/05      $0.15    $0.15    $0.00     $0.00
----------------------------------------------------------------------
                             Total: $0.45    $0.45    $0.00     $0.00
                        Percentage:   100%     100%       0%        0%

The Company also announced that the income tax treatment for the 2005 Series B Preferred Stock distributions for Winston Hotels, Inc., (CUSIP #97563A 30 0) traded under the ticker symbol WXH PrB is as follows:

Long-
                                 Dividends                      Term
 Declaration   Record   Payment  Paid Per   Ordinary Return of Capital
    Date        Date     Date       Share    Income   Capital   Gain
----------------------------------------------------------------------
     3/10/05   3/31/05  4/15/05     $0.50     $0.50    $0.00   $0.00
----------------------------------------------------------------------
     6/13/05   6/30/05  7/15/05     $0.50     $0.50    $0.00   $0.00
----------------------------------------------------------------------
     9/21/05   9/30/05 10/14/05     $0.50     $0.50    $0.00   $0.00
----------------------------------------------------------------------
    12/12/05  12/30/05 01/16/06     $0.36     $0.36    $0.00   $0.00
----------------------------------------------------------------------
                             Total: $1.86    $1.86    $0.00   $0.00
                        Percentage:   100%     100%       0%      0%

The company did not incur any foreign taxes.

About the Company

Raleigh, North Carolina-based Winston Hotels, Inc. is a real estate investment trust specializing in the development, acquisition, and repositioning of, and provision of subordinated financing to, premium limited-service, upscale extended-stay and full-service hotels, with a portfolio increasingly weighted toward the leading brands in the lodging industry's upscale segment. The Company currently owns or is invested in 56 hotel properties in 17 states having an aggregate of 7,668 rooms. This includes 49 wholly owned properties with an aggregate of 6,720 rooms, a 60 percent ownership interest in a joint-venture that owns one hotel with 138 rooms; a 49 percent ownership interest in a joint venture that owns one hotel with 118 rooms, a 48.78 percent ownership interest in a joint venture that owns one hotel with 147 rooms, and a 13.05 percent ownership interest in a joint venture that owns four hotels with an aggregate of 545 rooms. The Company also currently has loans outstanding to owners of 14 hotels with an aggregate of 3,337 rooms. These loans total $38.1 million. The company does not hold an ownership interest in any of the hotels for which it has provided financing. For more information about Winston Hotels, Inc. visit the company's Web site at www.winstonhotels.com.