THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Highland Hospitality Corporation (HIH)

4/7/2006 Proxy Information

Transactions With Barceló Crestline Corporation

Bruce D. Wardinski, our Chairman of the Board, is also the President and Chief Executive Officer of Barceló Crestline. W. Reeder Glass has been designated by Barceló Crestline to serve on our Board. Mr. Glass is also a director of Barceló Crestline.

Purchase of Hotels

In December 2003, we acquired Barceló Crestline’s equity interest in Portsmouth Hotel Associates, LLC, which leases the Portsmouth Renaissance hotel and conference center, Sugar Land Hotel Associates, L.P., which owns the Sugar Land Marriott hotel, and A/H-BCC Virginia Beach Hotel, LLC, which owns the Hilton Garden Inn Virginia Beach Town Center hotel, in exchange for limited partnership units of Highland Hospitality, L.P. and the repayment of all outstanding debt on these hotel properties.

The 43,010 units issued to Barceló Crestline in exchange for its equity interests in Sugar Land Hotel Associates, L.P. had a value of $430,100, based on the initial public offering price of our common stock. The 142,688 units issued to Barceló Crestline in exchange for its interests in A/H-BCC Virginia Beach Hotel, LLC had a value of approximately $1.4 million, based on the initial public offering price of our common stock. The 344,152 units issued to Barceló Crestline in exchange for its equity interest in Portsmouth Hotel Associates, LLC had a value of approximately $3.4 million, based on the initial public offering price of our common stock.

We have also agreed to pay Barceló Crestline up to $1.8 million (in the form of units in our operating partnership, valued at the market price for our common stock at the time of payment as described below) as additional consideration for its interest in the Sugar Land Marriott hotel if the Sugar Land Marriott hotel exceeds certain agreed-upon operating results over the 36-month period following our acquisition of the hotel, allowing Barceló Crestline to potentially recoup its cash investment.

On February 4, 2005, the Company acquired the 196-room Sheraton Annapolis hotel in Annapolis, Maryland for approximately $18.4 million. The entity that sold the hotel is owned 33.3% by Barceló Corporación Empresarial, S.A. (“Barceló”), which is the parent company of Barceló Crestline.

Strategic Alliance Agreement

In December 2003, entered into a seven-year strategic alliance agreement with Barceló Crestline pursuant to which (i) Barceló purchased 1,250,000 shares of our common stock (having a value of $12.5 million based on the initial public offering price for our common stock) directly from us in a private transaction concurrently with the closing of our initial public offering at a price per share equal to the initial public offering price, less an amount equal to the underwriting discount, (ii) Barceló Crestline agreed to refer to us (on an exclusive basis) hotel acquisition opportunities in the United States presented to Barceló Crestline or its subsidiaries other than opportunities that relate to third party management arrangements offered to Barceló Crestline, (iii) unless a majority of our independent directors in good faith concludes for valid business reasons that another management company should manage a hotel owned by us, we agree to offer Barceló Crestline or its subsidiaries the right to manage hotel properties we acquire in the United States, unless the hotel is encumbered by a management agreement that would extend beyond the date of our acquisition of the hotel and a termination fee is payable to terminate the existing management agreement (unless Barceló Crestline pays such termination fee) and (iv) we agreed to grant Barceló Crestline the right to designate one nominee for election to our Board at each meeting of our stockholders at which directors are to be elected.

Management Agreements

A wholly owned subsidiary of Barceló Crestline has entered into management agreements with us to manage 13 of our properties. Each management agreement generally provides for a monthly base management fee of 2.0% to 3.5% of all gross revenues generated by the property that Barceló Crestline manages, plus an annual incentive management fee for each hotel equal to 15.0% of the amount by which operating profit for the hotel for the fiscal year exceeds 11.0% of our investment in the hotel, up to a total amount of combined base and incentive fees of 4.5% of gross revenues. During 2005, we paid Barceló Crestline approximately $3.2 million in management fees for these services.

As of December 31, 2005, the Barceló Tucancun Beach resort operated pursuant to management and consulting agreements with separate subsidiaries of Barceló. The initial term of the management agreement is five years and will be automatically extended for four successive five-year periods, unless terminated because of a default of the manager or the manager elects not to renew. Barceló receives a base management fee, and if the hotel meets and exceeds a certain performance threshold, an incentive management fee. The base management fee is 3% of total gross revenues from the hotel. The incentive management fee, if any, will be equal to 15% of the amount by which operating income for the fiscal year exceeds 12% of the Company’s capitalized investment in the hotel. Barceló will not be entitled to receive any incentive fee in any fiscal year in which the operating income of the hotel has not equaled at least 12% of the Company’s capitalized investment in the hotel. The management agreement places a cap on the total amount of combined base and incentive management fees paid to Barceló at 7.5% of gross revenues for each fiscal year.

The consulting agreement is coterminous with the management agreement; provided, however, that Barceló can terminate the consulting agreement upon 90 days notice. Pursuant to the consulting agreement, Barceló will provide consulting services with respect to the operation of the Barceló Tucancun Beach resort. The consulting fee will be based on the time spent by Barceló in providing such services and will be agreed upon by Barceló and the Company each year; provided, however, that the consulting fee paid to Barceló each year is not expected to exceed 15% of the total fees payable to Barceló that same year under the management agreement.

For the year ended December 31, 2005, the Company paid separate subsidiaries of Barceló approximately $0.2 million in management and consulting fees.

In November 2005, after Hurricane Wilma caused substantial wind and water damage to the Barceló Tucancun Beach resort, the Company entered into a restoration service agreement with a subsidiary of Barceló to manage the restoration of the resort and the settlement of claims with the Company’s insurance carrier.

Overhead and Cost-sharing Arrangement

Since our inception, we have had an overhead and cost-sharing arrangement with Barceló Crestline whereby we have shared Barceló Crestline’s office space and related furniture, fixtures and equipment and certain support services, including human resources and information technology functions, in exchange for a monthly reimbursement of the estimated value to us from this sharing arrangement. During 2005, we paid Barceló Crestline approximately $0.2 million under this arrangement.