The La Quinta Companies also announced the authorization of up to $20 million in periodic open market and privately negotiated share repurchases of La Quinta equity securities.

New Corporate Structure

After careful review and on the advice of its advisors, La Quinta has elected to forego its "grandfathered'' paired share REIT status and convert to a C-Corporation with a REIT subsidiary.  Federal tax legislation adopted over the past several years has severely restricted the activities of "grandfathered'' paired share REITs, limiting La Quinta's ability to grow its lodging business through the construction of additional lodging properties, the franchising of the La Quinta® brand and the acquisition of other lodging properties and brands. In addition, without restructuring, the Companies will be unable to continue to qualify as a REIT in the future. With the sale of healthcare assets and the generation of hotel royalty fees, La Quinta's non-qualified REIT income would eventually exceed the limits allowed for REITs. This would result in a loss of REIT status, which would likely occur within the next 12 to 18 months.

The Companies will reorganize to avoid the restrictions that the "grandfathered'' paired share REIT structure imposes and to allow La Quinta Properties to continue to qualify as a REIT. The new corporate structure will be achieved through a tax-free merger in which the REIT will become a subsidiary of the Corporation. The proposed transaction is the result of La Quinta's review of its financial, legal and tax structure. In the restructuring, the following will occur: 

• The REIT's common stock will be converted (on a one-for-one basis) into newly-created, non-voting Class B common stock, which will be owned directly by shareholders;
• The REIT will issue a newly-created, voting Class A common stock, which will be owned entirely by the Corporation; and,
• The Corporation's common stock will continue to be owned directly by its shareholders.  However, the Corporation's common stock will now be paired with the REIT's new Class B common stock, similar to the pairin arrangement with the REIT's current common stock.

The Companies have structured this transaction to maintain La Quinta Properties' tax-efficient REIT status while eliminating the restrictions imposed on the ``grandfathered'' paired share structure. By issuing the Class B shares, the Companies will be able to meet minimum ownership requirements to continue qualifying as a REIT. Furthermore, the Class B shares permit shareholders to continue to have a direct equity interest in the REIT after the restructuring and to receive dividends distributed by the REIT in the future as more fully described below. Shareholders' overall tax basis will not change as a result of the transaction.

After restructuring, La Quinta will no longer be subject to the "grandfathered'' paired share restrictions and may pursue its growth initiatives while maintaining REIT status for La Quinta Properties. Furthermore, in connection with the restructuring, a portion of the REIT's interests in the La Quinta® brand will be acquired tax-free by the Corporation, reducing the amount of non-qualified income attributed to the REIT that otherwise would result in loss of REIT status.

Francis W. (``Butch'') Cash, President and Chief Executive Officer, said, "Today's lodging environment is extremely challenging.  Industry RevPAR for the third quarter is expected to decline between 10% and 15%. La Quinta's third quarter RevPAR declined approximately 8%, and we currently expect lodging EBITDA to decline between 8% and 12%. While current industry conditions are difficult, we must not only focus on today but also on the future in making decisions that impact the Companies.''

"This restructuring is about our future,'' continued Mr. Cash. "We have taken a very deliberate approach in evaluating our current structure and various alternatives. We believe the limitations of the existing structure restrict us from making good, long-term value-enhancing business decisions. The new structure resolves the limitations of the ''grandfathered" paired share structure in a proactive manner, allowing us to keep our real estate in the REIT vehicle, grow the Companies, and increase shareholder value.''

"Our greatest assets as a company lie, not only in the physical real estate, but in our people and the value of the La Quinta® brand,'' said Mr. Cash. "This new structure will allow us to unlock the value of those assets. Our long-term strategy is to grow our lodging business through franchising, management contracts, new development, and acquisitions. This new structure gives us the platform on which to execute that strategy.''

The new corporate structure will allow La Quinta to capture a number of benefits, including its ability to: 

• Own, operate and brand newly acquired hotels;
• Expand its lodging franchising program;
• Pay dividends directly to shareholders on a tax-efficient basis;
• Maintain the tax deductibility of the preferred dividends;
• Maximize the value of its existing net operating loss carry-forwards (``NOLs''); and
• Continue to align shareholder interest in ownership and management of its real estate holdings. 

The restructuring does not alter the terms or conditions of the Companies' preferred stock or debt obligations. The Companies' preferred stock dividends will continue to be paid by the REIT. The Companies' notes payable and other corporate debt will continue to be held by the REIT. The REIT and the Corporation will continue to be obligors of the Companies' bank credit facility. Because the restructuring does not impact the Companies' debt securities, it is only subject to shareholder approval. The Companies expect to present the restructuring to shareholders for their approval in early 2002.

Commenting on the proposed restructuring, Clive D. Bode, Chairman of the Boards and special advisor to certain members of the Bass Family of Fort Worth, Texas, said, "The restructuring resolves the problems La Quinta faced in maintaining its paired share REIT structure. Furthermore, it positions La Quinta to take advantage of future growth opportunities that will exist in its lodging business and help create value. It is our intention to vote our shares, which represent nearly ten percent ownership in La Quinta, in favor of the transaction.''

Dividend Policy

The Companies do not expect to pay dividends on the REIT Class B common stock until after the Companies' NOLs have been utilized. The REIT and the Corporation have combined NOLs of approximately $250 million. Holders of the Class B common stock will be entitled to a preferential dividend, if common stock dividends are declared, of approximately $15 million (or $0.10 per share) per year, payable quarterly beginning in 2005.

Share Repurchase Program

The Boards of Directors have also approved a share repurchase program, authorizing the Companies to repurchase up to $20 million of the Companies' equity securities. The program is designed to allow the Companies to take advantage of opportunities that exist from time to time to purchase the Companies' common and preferred stock at attractive prices in the open market and privately negotiated transactions.

David L. Rea, Executive Vice President, Chief Financial Officer and Treasurer, stated, ``We sold approximately $95 million of healthcare assets during the third quarter, reducing our net debt to approximately $950 million at the end of the quarter. Given our success at improving our balance sheet and strengthening our business, we believe our stock represents an attractive investment opportunity. Our share repurchase program will allow us to further enhance shareholder value. With cash-on-hand of approximately $140 million at September 30, 2001 and no current borrowings under the Companies' $225 million revolving line of credit, we have the capacity to commence a share buyback, pay 2001 and 2002 debt maturities of $92 million, and deploy capital for future growth.''

The Companies have established a toll-free number (877-777-6560) for investors to call and request copies of public filings and press releases. In addition, investors can call this toll-free number and reach our Investor Relations Department to ask questions and the Companies will respond to investor inquiries based on publicly available information.

The Companies have also established a special page dedicated to the restructuring on the La Quinta website, www.laquinta.com, in the Investor Relations section. Investors can access documents related to the restructuring, including an investor presentation, as well as other information about La Quinta, at this site as those documents become available.

About The La Quinta Companies
The La Quinta Companies (NYSE: LQI), headquartered in Dallas, Texas, consist of La Quinta Properties, Inc., a real estate investment trust, and La Quinta Corporation. La Quinta owns, operates or franchises over 300 La Quinta® Inns and La Quinta® Inn & Suites in 30 states. The Companies' real estate holdings also include assisted living and other healthcare facilities. 

Certain matters discussed herein may constitute "forward-looking statements'' within the meaning of the Private Securities Litigation
Reform Act of 1995.