CHICAGO— If Blackstone Real Estate Advisors’ $740 million purchase of Homestead Village from Security Capital Group here proved anything, it was that it’s still possible to pull together a major transaction involving a large equity player putting up a significant sum of money while bringing third-party financing into play. The deal saw Security Capital reap a host of considerations, not the least of which being $480 million in cash. Additionally, Blackstone assumed $145 million in Homestead Village liabilities, and also issued to Security Capital a five-year, $115 million note carrying an initial coupon of 12% that is slated to increase by 100 basis points annually. Net cash proceeds from the transaction— excluding the five-year note and after factoring in transaction costs— are expected to result in a gain to Security Capital of approximately $462 million. In line with this acquisition, Gary DeLapp has been named president/CEO for BRE/Homestead Village LLC— a move that would seem to indicate Blackstone has some definite operating and performance plans in mind for its newest lodging industry asset. On the surface, Security Capital’s divestment of Homestead Village is in itself not a shock to the industry, nor does it come as a surprise that Blackstone would pick up this portfolio of 111 new-build, suburban-market properties. After all, the move is in keeping with Security Capital’s business mantra of enjoying sole or high-percentage ownership of its real-estate assets, shedding those undertakings that don’t satisfactorily fit the company’s prescribed scenario. Moreover, as other astute market-watchers— such as Jones Lang LaSalle Hotels’ Managing Director/CEO Arthur Adler— maintain, Blackstone is widely recognized as a particularly opportunistic cross-segment as well as cross-border buyer. As such, Adler said it’s logical that the chance to pick up this group of primarily roadside, extended-stay hotels and their collectively strong operating margin would prove most appealing to the New York City-based real-estate organization, especially at a time when it could expect to pay what would essentially be a rock-bottom price. Blackstone and Adler are not the only ones who recognize the worth of extended-stay properties. As recently noted by the Highland Group, a well-positioned observer of this segment of the lodging market, extended-stay hotels continue to show greater resilience to adverse economic conditions and cutbacks in travel than does the overall hotel arena. As reported by the Atlanta, GA-based analysts, while overall hotel demand declined 2.2% during the first three quarters of 2001 compared to the same period in 2000, extended-stay demand increased 4% vis-a-vis those comparable periods. Additionally, the Highland Group claimed extended-stay hotels also increased RevPAR over the course of the same timeframe, while overall industry RevPAR diminished by more than 4%. Of course, just as the nearly three-quarter-billion-dollar transaction would seem to provide evidence of the perceived value of extended-stay facilities and their “no-frills service levels” which many feel are tailor-made for difficult economic/operating environments, so it would appear that a number of other questions are brought to the fore. While openly admiring the fact that “a deal of such magnitude got done” in the face of less-than-optimum market conditions, Adler nonetheless openly wondered why Security Capital would choose such a seller-unfriendly time to divest itself of what— for all intents and purposes— is an attractive asset. However, in response to how Security Capital came out financially in this deal, a spokesperson for the organization contended that the company “essentially broke even.” In terms of a line of questioning Adler would pose to Blackstone, he said some of the points he would like to see addressed include: • Where does Blackstone see the upside to this acquisition? • Does the buyer already have an exit strategy mapped