CapStar Hotels - Acquisitions

The disciplined, opportunistic acquisition of hotels is a key component of CapStar's growth strategy. CapStar seeks to buy first-class, full-service hotels with 200 to 500 rooms, located in strongly growing urban markets where barriers to new construction are high. The company also acquires destination resorts.

Within the upscale category, CapStar prefers hotels built within the past 15 years and those that are in compliance with ADA requirements, environmental and life safety standards. However, as an all-cash buyer, and one with the resources to fund capital improvements, CapStar will review all acquisition candidates.

In most cases, the company focuses on hotels which have turnaround potential -- properties that may need a significant infusion of capital to upgrade or those that may benefit from a change in flag. Prior to acquisition, CapStar develops detailed proprietary operating and marketing plans to determine the long-term viability of a project. When evaluating the turnaround possiblities of any hotel, CapStar places special emphasis on the growth potential of the local market.

Following a timely review of an acquisition candidate, CapStar has the flexibility and entrepreneurial philosophy to respond quickly and creatively. CapStar can structure a deal to provide the seller with the greatest advantages from a cash and tax viewpoint by using any combination of cash, stock or operating partnership units to finance acquisitions.

Market Criteria:	Urban and resort markets throughout the U.S. and Canada with a strong economic base and high barriers to entry for new hotel supply growth.
Hotel Criteria:	Although there is no "formula," CapStar typically looks at first-class, full-service hotels, with 200 to 500 rooms, often with substantial meeting facilities. The hotels must be located in markets with multiple demand generators.
Potential Performance Improvement:	CapStar focuses on the acquisition of underperforming hotels where intensive management, marketing and selective capital improvements can increase revenue and cash flow.