Acquisition Fever: Hilton Partners With CNL, Charlesbank With Winston, To Pursue Deals

NEW YORK— It appears as if 2002 is ending with a bang and 2003 is priming up to be a year for plenty of activity in the hotel merger and acquisition arena with Hilton forming a partnership with CNL Hospitality Corp. and Winston Hotels and Charlesbank forming alliances to launch a buying spree. First, Hilton and CNL unveiled a partnership acquiring two hotels. On Dec. 24, the alliance completed the acquisition of the 500-room Doubletree Hotel at Lincoln Centre in Dallas, and the 428-room Sheraton El Conquistador Resort and Country Club in Tucson, AZ. The total price for the two hotels was $121 million. Both properties will be converted into the Hilton brand with CNL owning a majority interest in the partnership. For its part, Hilton will operate the properties under long-term management agreements and retain a minority interest. The two companies have also executed a non-binding letter of intent to acquire five additional hotels, including one that is owned by and would be contributed by Hilton, and one that would be contributed by CNL. The total capitalization of the partnership is approximately $400 million. Meanwhile, Charlesbank Capital Partners, Boston, said it has formed an investment venture to acquire more than $100 million of hotel assets with Winston Hotels, Raleigh, NC. The new venture will target limited-service, upscale extended-stay and small, full-service branded hotels in secondary and primary markets, according to the company. From a joint venture earlier this year that already acquired two properties, Winston said it intends to contribute the properties at their cost to the investment program. One of the properties is a vacant building in suburban Cleveland, which will be converted to a 113-room Courtyard By Marriott. It is scheduled to open during the first quarter of 2003. The second property is a 102-room Fairfield Inn By Marriott in Des Moines, Iowa. Charlesbank will provide 85% of the total equity for each deal, while Winston will provide the remaining 15%. The two companies expect they will be able to source debt financing for 65% of the all-in cost of projects that they purchase together.